A cross-functional team, in business, is a group of people working toward a common goal and consisting of people with different functional expertise. It could include people from the finance, marketing, operations, and human resources departments. Typically it also includes employees from all levels of the organization. It may also be populated by members from outside the organization (in particular, from suppliers, key customers, or consultants).
These teams are often self-directed. That is, they are given broad objectives, but not specific directives. Decision making within a team is usually based on consensus.
The growth of self-directed cross-functional teams has influenced the decision-making process and organizational structures. Although strategic, tactical, and operational decisions need to be made under every type of organizational structure, new procedures are being developed that work best with teams.
1) Less unidirectional - Up until recently, decision making flowed in one direction. Overall corporate level objectives were the drivers of strategic business unit (SBU) objectives, and these in turn, were the drivers of functional level objectives. Today, organizational structures are flatter, companies are less diversified, and functional departments are becoming less discrete. This trend is seen in the rise of the self-directed teams. Intra-team dynamics tends to be multi-directional rather than hierarchical. Consensus is created within the team through an interactive process. Also the directives given to the team tend to be more general and less prescribed.
2) Greater scope of information - Cross-functional teams require a wide range of information to reach their decisions. They need to draw on information from all parts of the company’s information base. This includes information from all functional departments. System integration is important because it makes all information accessible through a single interface.
3) Greater depth of information - Cross functional teams require information from all levels of management. The teams may have been formed to make primarily strategic decisions, tactical decisions, or operational decisions, but they will require all three types of information. Almost all self-directed teams will need information that has traditionally been used in strategic, tactical, and operational decisions. For example, new product development has traditionally been seen as a tactical procedure. It gets strategic direction from top management, and uses operational departments like engineering and marketing to perform it’s task. But a new product development team would consist of people from the operational departments and often someone from top management.
In many cases, the team would make unstructured strategic decisions like what markets to compete in, what new production technologies to invest in, and what return on investment is required; tactical decisions like whether to build a prototype, whether to concept test, whether to test market, and how many to produce; and structured operational decisions like production scheduling, inventory purchases, and media flightings. In other cases, the team would be limited to tactical and operational decisions. In either case it would need information associated with all three levels.
4) Greater range of users - Cross functional teams consist of people from many parts of the firm. Information must be presented in a way that all users understand. It is no longer the case that only engineers use technical data and only accountants use financial data and only human resources personnel use HR data. There are no middle managers to combine, sort, and prioritize the data. Technical, financial, marketing, and all other types of information must be presented in a way that can be understood by all members of the cross-functional team. This involves reducing the amount of specialized jargon, sorting information based on importance, hiding complex statistical procedures from the users, giving interpretations of results, and providing clear explanations of difficult concepts. Slicing and dicing techniques are useful in providing different views of the information to different users. Data visualization systems are useful in presenting complex results in an intuitive manner.
5) Less teleological - Since Peter Drucker’s “Management by Objectives” business decision making has been thoroughly goal oriented. Decision making generally, and strategic thinking in particular, has been viewed as a multi-stage process that starts with an assessment of the current situation, determines objectives, then determines how to reach these objectives. Management by objectives took this basic scheme and applied it to virtually all significant decisions. Today many firms are opting for a less structured, more interactive approach. One way of implementing this is to use self-directed cross-functional teams. The hope is that these teams will develop strategies that will re-define industries and create new “best practices”. It is felt that mere incremental improvements are not good enough. These cross functional teams, using unstructured techniques and searching for revolutionary competitive advantages, require information systems that are more interactive, more flexible, and capable of dealing with fuzzy logic. Artificial intelligence holds out the promise of one day being useful in this regard.
Organizational consequences of cross-functional teams
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