Cross-functional teams are a sort of an evergreen buzzword in business circles – the notion pops up here and there, and every 4-5 years there’s a fad when management seniors experiment with building them. Their benefits are manifold – from better communication and efficiency to faster response to challenges and improved team culture. However, you can’t simply go and construct such a team – there are nuances to look at. Here, we use Lionwood’s own experience working in cross-functional teams to dissect the topic and share some best practices.
What Is a Cross-Functional Team?
A cross-functional team is one that unites seemingly unlikely companions around a single goal or project. We typically think of business workflows as collaboration between different departments (R&D, marketing, finance, business development, etc.), where the teams are within those departments: a programmer is teamed with other programmers, while some may be working on different projects, an accountant is in the accounting team, and so on. But a cross-functional team is essentially getting all those very different specialists together in the same team that transcends their original departments.
This is kind of like the Fellowship of the Ring: you’ve got an elf, a dwarf, two humans, a wizard and four hobbits working together and bringing their different perspectives to the common table to fulfill their quest. Since the different people needed for the project have different expertise and background, they can address the “friction points” quite better and early on – something that would require more communication in the traditional model.
There are countless advantages of this approach (and we have an entire section about them just below), so according to Deloitte, 78% of leading organizations claim cross-functional collaboration as a crucial success factor. When well-managed, such teams can demonstrate about 20% higher performance, and McKinsey reports that organizations with this approach. But what do cross-functional teams look like in practice?
Examples
Here are just three examples of how cross-functional teams emerge – importantly, cross-functionality is not only a software- or tech-related approach, and is applicable to multiple industries.
- Example #1. Suppose there’s an FMCG company planning to launch a new eco-friendly product. They want everyone to be on the same page to minimize risks and make everything perfect from everyone’s point of view, so their team will include R&D scientists, supply chain experts, marketing professionals, sustainability officers, and financial analysts. In this way, if R&D wants to use components that are hard to get, logistics specialists will know (they’re just next to them on board), while marketers will already have time to ponder on how to communicate. Discussions are, of course, welcome.
- Example #2. A software company is developing a mobile app. In this case, the team includes software developers, UI/UX designers, product managers, marketing specialists, and customer support representatives. Whenever there’s a discrepancy between what each of the members of the team wants, they simply discuss it and waste no time in the process. Developers and designers collaborate to create the product, while product managers ensure the project stays on schedule and meets business goals. The marketing team develops strategies to promote the app, and customer support members provide insights on user needs and post-launch service plans.
- Example #3. Now there’s an Agile team of “tech people”, but with different roles: developers, QAs, project managers, product owners, business analysts, etc. In fact, this is a common Agile practice, because such teams enable iterative development with quick feedback loops, ensuring that products are adaptable to user feedback and changing market conditions. The collaborative nature of these teams accelerates development cycles and results in higher-quality software releases.
Types of Cross-Functional Collaboration
So how do these sorts of teams come together, and what types are there? The main distinction to be made is whether they are meant to be like that normally, or are created on an ad hoc basis. The latter type, the project-focused teams, are actually the “ancestor” type here: when there’s a particular project like launching a new product or updating software, etc. that requires quick input and collaboration between specialists of different profiles. This is how cross-functional teams were probably invented back in the pyramid-building age; normally, they then disband after the project is nailed.
On the other hand, some wanted to try and work in this way all the time. This is where permanent cross-functional teams (now commonly labeled as “hubs” or “pods”) originate. The goal is continuous collaboration and ongoing initiatives like strategic planning or continuous improvement. Creating them out of the blue can be tricky, though.
The other types are derivative: for example, on the senior level, there can be cross-functional leadership teams (heads of different departments trying to mitigate the fact that the said departments typically think about the department goals, and not the company’s). Again, on the senior and expert level, there can be innovation teams, bringing together the recognized “idea generators” from various departments, as well as key decision makers. Finally, Agile teams are mostly cross-functional by the very definition of Agile as a methodology.
Benefits of Cross-Functional Teams
Now, we’ve promised a list of benefits that make organizations adopt cross-functional (or connected) teams in the first place. The most important ones are as follows:
#1. Cross-functional teams are faster and more creative problem solvers.
Inspiration usually comes from unlikely sources, since the human brain can best switch from cliches when contemplating an unusual perspective, as opposed to the routine. Very often, there are problems that a particular specialist can’t even predict without an outside view – and when there’s a person with an entirely different viewpoint on board, it’s easier to generate ideas or pinpoint potential issues. This is how diversity of thought helps think outside of the box, while easier communication facilitates quick issue resolution or prevention.
#2. People think about the actual goal, and not about the department goals.
Let’s face it: in a traditional setting, a department is more motivated to think about their success within the company than the success of a particular project or company in general. Cross-functional teams reverse this: now everyone is interested in the success of the project at hand, since team solidarity is at the intersection of what’s deemed good in terms of each member’s perspective. In fact, a study by Harvard Business Review claims that organizations with effective cross-functional teams reported a 15% higher level of strategic alignment.
#3. There’s less clutter and back-and-forth emailing, so efficiency increases.
Research from the Project Management Institute (PMI) shows that projects run by cross-functional teams are completed up to 30% faster due to improved workflow integration and real-time collaboration. This is understandable: while in the traditional paradigm, a particular cross-department collaboration point would require setting up meetings, creating memos and email chains, a cross-functional team can identify issues on the spot and resolve them in the “hey mate, have a look here” fashion.
#4. People are challenged to engage more (which is good for skill development).
Being able to learn from colleagues in other departments is a nice opportunity to become less of a cog in the machine and more of a valued specialist who knows what they’re doing. According to a 2022 Gallup poll, employees who regularly work in diverse teams report being 35% more engaged at work, since the very environment they’re exposed to is more stimulating and presents fresh perspectives.
How to Set Up a Cross Functional Team
Creating an effective cross-functional team requires careful planning and strategic execution. Trusted companies and management practices offer guidance on how to set up these teams for success. Here is a checklist of essential points to consider when organizing a cross-functional team:
- Start with the WHY. That is, define clear objectives and goals that will speak not just to you but to the other members of the team. This is important to ensure there is real alignment, otherwise the people will revert to their usual department chores.
- Select the right team members (and look at the soft skills, too). Some people are more disposed towards working in cross-functional teams, so it’s a good idea to observe who’s done so in previous spontaneous project crews. They should also have something to bring to the table: skills, perspectives, experience, etc. and be willing to do so.
- Find influencers and leaders (don’t just appoint them). There needs to be someone who can coordinate efforts, manage conflicts, and generally keep everyone in focus. Plus, people who are influencers in their respective departments can then propagate the best practices and findings within them.
- Keep an eye on possible overlapping responsibilities. This happens, this is normal, but this isn’t to be tolerated. It’s best to have each member’s role defined so that everything works in a streamlined way.
- Offer adequate communication channels. This includes more than just chats, but also some single source of truth for project information and a toolkit for transparency.
- Set measurable KPIs.
- Consider the team culture as the derivative of the individuals. Some types of people just can’t work together, and a cross-functional team is about closer collaboration, so the psychology of the team really depends on how the different types interact.
Above all, cross-functional teams should be nurtured and not constructed from scratch or by decree. This checklist mostly focuses on this general notion and how it translates into different aspects. If these conditions aren’t met, the common pitfalls are to be expected.
Challenges and Pitfalls
There’s a bit of trivia that’s been quoted over and over again, namely that 75% of cross-functional teams are dysfunctional. Even the Fellowship of the Ring only lasted for several dozens of pages. Not that the idea is bad – something went wrong when the team was created. What are the common problems, then?
One of them happens when an organization decides to tinker with permanent cross-functionality and mandate it “from above”. The truth is, senior management may not always have a full picture of what the workflows look like from within, so the team is devoid of clear purpose – it’s just a motley crew of people who have no clear goals to work towards and simply hang out there.
Another common challenge is when the members of the cross-functional team are in constant conflict between their priorities within this team, on the one hand, and their department goals, on the other. These competing priorities, in turn, lead to conflicts and slow down progress.
Communication breakdowns are another frequent pitfall; without clear channels and protocols, team members may struggle to stay informed and aligned, impacting collaboration.
Lack of leadership or unclear roles can also derail a team. Without a strong leader to guide the team and clarify responsibilities, members might duplicate efforts or overlook critical tasks. Cultural differences between departments can create friction, as each function may have unique working styles and terminologies, complicating coordination.
Cross-Functional Teams in Outsource Software Development
So far, we’ve looked at what cross-functional teams yield within one company, as if their benefits are only contained within the organization. In reality, though, there is a large area where cross-functional teams are beneficial for multiple partnering businesses, and it is software outsourcing.
First of all, if you outsource software development to a company that works in cross-functional teams, you can expect faster delivery and better understanding simply because there’s less red tape in the process. This is what we can call a fully outsourced cross-functional team, and it’s offered by companies who specialize in particular project types or industries and have already accumulated expertise in those domains.
There are also hybrid models, where outsourced experts integrate with an in-house team, or client-side specialists are part of the mainly-outsourced team (e.g. niche experts). Scenarios in which cross-functional outsourced teams excel include projects that require specialized expertise unavailable internally, such as developing a complex mobile app or scaling up development capacity quickly for a time-sensitive release. These teams can operate across different time zones, providing near-continuous progress and fast iteration cycles.
Conclusions
Cross-functional teams are great if you know how to work with them. The main thing is, they thrive when the culture is right for fostering cross-functional collaboration, and when there’s a clear goal that people work towards. This is why in the best of cases, they grow more or less organically; once the culture is there, you can shuffle around and get the positive result.
In software projects, it’s now a nice practice to establish hybrid cross-functional teams with the software development services provider, who has likely worked in Agile ways and already has the experience. Not only does it lead to better efficiency and faster time to launch, but the best practices can then be adopted further in the client company when needed. Lionwood has long practiced this approach, especially with the projects in our core areas of work, and we are happy to offer our collaboration and the power of our own cross-functional teams for your project.
