The Business Case for Collaboration
Updated: Oct 9
Smart collaboration generates profits, loyalty, talent and innovation. So what are you waiting for?
By Heidi Gardner
Smart collaboration takes time. But it generates higher profits, inspires greater customer loyalty, helps attract and retain the best talent, and delivers greater innovation when specialists collaborate across silos.
Organisations today face a serious conundrum. They and their customers increasingly face complex business problems – everything from regulatory compliance to cybersecurity – that only teams of multidisciplinary experts can tackle. Yet, most of the required subject-matter experts are distributed across different internal departments and offices, creating organisational silos that are often reinforced by profit and loss structures, distance and differing micro-cultures. Collaborating across these silos typically feels costly, risky and inefficient, despite being essential for delivering integrated solutions. When they do it right – that is, integrate their knowledge effectively and efficiently to form unified solutions – I call it smart collaboration.
If you think collaboration is a soft skill, think again. For more than a decade, I have examined smart collaboration among organisational leaders while on the faculty at Harvard Business School and now at Harvard Law School. My research is based on millions of data records collected across multiple organisations, as well as statistical analyses, case studies, survey results and in-depth interviews. Both quantitative and qualitative findings reveal that smart collaboration makes organisations more productive and more profitable. In this article, I’ll outline the benefits and outcomes of smart collaboration, explain why individuals and organisations may resist, and offer suggestions on exactly how to achieve it in your organisation. Let’s dive in.
Benefits and outcomes off smart collaboration
Collaboration is a significant driver of both financial and people-related benefits for organisations. Yet, smart collaboration – as I define it – can be a painful endeavour to tackle. As such, it’s critical to address what I call “getting through the pain barrier” in the graph below.
At the outset of collaborative efforts, the costs – both actual and perceived – almost always outweigh the benefits and the gap can be significant. Take the plunge, and hang in there. As people develop networks and learn the routines associated with collaboration, the costs drop. And over time, the benefits (outlined below) start to accumulate. The trend lines eventually cross, as collaboration becomes the new normal, and your business will get better and better. Organisations that foster smart collaboration across business units and geographies earn higher margins, inspire greater customer loyalty, attract and retain the best talent and gain a competitive edge.
The financial incentives to collaborate are impressive. On average, when product development specialists teamed up across three different business units, revenue from their customers was 160 per cent higher than the sum of their individual sales in the prior year. Profits climbed even faster. Why? They were able to offer more holistic solutions to more vexing problems, and the "owner" of those troubles was a higher-up executive with more spending power. Customers valued the integrated, sophisticated answers and were willing to pay. As the chief financial officer of one Fortune 100 company told me, “Margins rise with complexity.”
The more departments serving a customer, the longer that customer remains with the organisation, even if the lead salesperson changes. The relationship is even stronger when multi-expert teams span business units and when they serve multiple contacts within the customer’s organisation. Consider the risk of losing a customer when one of your key salespeople departs: results show that probability drops from 72 per cent to 10 per cent if the account is served by a pair of co-leaders, rather than a solo account handler.
Not only that, but collaboration produces more innovative outcomes – that is, solutions that are both novel and useful and which therefore lead to long-term benefits for customers. Getting employees to collaborate across units makes it easier to spread and leverage technology and other kinds of investments, because adoption jumps once people understand how those tools are used elsewhere. Collaboration also increases employee engagement, which translates into tangible financial rewards of talent retention and productivity, in turn generating stronger commercial outcomes. Innovation differentiates an organisation from the pack, generating higher profits in the near term and more sustainable competitive advantage in the long term.
The pushback against collaboration
Considering the benefits collaboration offers, why do rational people resist? As compelling as this evidence is, it’s no secret that an organisation’s structure, compensation systems, and cultures often seem to favour individual contributors rather than team players.
“Considering the benefits collaboration offers, why do rational people resist?”
Distrust of colleagues is another root cause, including concerns that co-workers won’t uphold high enough levels of quality and responsiveness. Every organisation seems to have some doomsday story like, “I spent decades building a deep client relationship, but the first time I took Joe along he screwed up and we were kicked out for good.” In some organisations, lack of interpersonal trust is even more pressing; some employees worry that a co-worker might deliberately undermine a special customer relationship or take undue credit for success.
Lastly, collaboration takes time. The financial rewards of collaboration that lead to new customer deals accrue slowly over time. But most of the costs and risks, such as locating an expert and assessing whether she’s trustworthy, available and conflict-free, are borne right away. Fortunately, as professionals gain more experience with collaboration, the costs tend to fall because people discover how to collaborate more efficiently and effectively as they construct a set of reliable collaborators. How-ever, many professionals give up before reaching the point where the investment pays off, which creates a negative feedback loop that reinforces the perception that “collaboration wasn’t worthwhile.”
How to foster collaboration in your organisation
The key benefits and outcomes of collaboration outlined above may have implied that collaboration automatically generated these benefits, but in fact, it’s only excellent collaboration that ensures them. If leaders simply call together a team and divvy up the work in a “the sum equals the total of the parts” way, the benefits are far from assured. You can increase the odds that your organisation’s leaders are equipped and willing to lead their collaborative efforts in ways that generate the maximum returns. How?
Create an organisation-wide approach for effective project launches. McKinsey, for example, has a format in which a leader is expected to kick off every new project by briefing the team on the project objectives, and then clearly discussing how each person’s piece fits into the bigger picture. Teams also spend some time getting to know each other’s work styles, strengths, and development areas. This step is essential for aligning members’ goals, helping them know where to turn with questions (which avoids the leader becoming the sole-source bottleneck), and allowing them to see how their specialty contributes to a bigger solution. Develop a template, train managers on how to use it, then give the system teeth: withhold their expense code until they actually conduct the project launch.
Facilitate personal within-team interactions. People won’t build relationships or feel the benefit of peer support unless they have the opportunity to interact during collaboration. Provide a travel budget that allows members some face-to-face time together – ideally, early in the project, when they need to establish trust. Throughout and at the end of the project, a modest celebration fund will encourage teams to focus on their wins. These interactions enhance members’ sense of pride and accomplishment, boost firm morale, and build the "glue" that is the essence of a collaborative culture. “People won’t build relationships or feel the benefit of peer support unless they have the opportunity to interact during collaboration.”
Embed explicit learning processes. Taking a cue from elite military units, the best team leaders use the time right before the celebration event to conduct a short after-action review (AAR) to boost team members’ learning from both mistakes and successes. AAR is a form of group reflection; participants review what was intended, what actually happened, why it happened, and what was learned. Critically, the intent is to learn rather than blame, and to prompt the sort of reflection that makes learning possible. As a leader, you should model this behaviour, and hold your partners accountable for doing it, too.
Provide a technology platform that makes it easy for collaborators to see each other’s work-in-progress, and to share knowledge about the project. This transparency helps foster a sense of common purpose by giving participants a deeper understanding of the issue and how various pieces intersect; it also aids learning as participants get exposure to others’ ways of thinking – not simply their end results.
Showcase collaboration. Distribute "latest wins" to highlight big and little cross-departmental success stories via email bursts.
Stage 20-minute "road show" presentations to allow employees to highlight their expertise and potential cross-practice collaborative opportunities.
The time is now. Smart collaboration is an investment that takes time to generate returns.
The evidence is clear that those benefits do accrue for the individual professional, their organisations and their customers when experts collaborate across silos to tackle sophisticated issues. Of course, doing it "smart" requires strong leadership, sustained efforts, and strong commitment from managers at all levels to collaborate with colleagues. The money and energy your firm puts into fostering high-level collaboration will almost certainly pay you back many times over. Now is the time to learn smart collaboration – before it’s too late.
Dr. Heidi Gardner is a distinguished fellow at Harvard Law School’s Center on the Legal Profession, a lecturer on Law, and faculty chair of the school’s Accelerated Leadership Programme. Previously she was a professor at Harvard Business School. Her research, teaching, speaking and consulting focus on leadership and collaboration in professional service firms, and her book Smart Collaboration: How Professionals and Their Firms Succeed by Breaking Down Silos has just been published by Harvard Business Press. Previously with McKinsey & Company, and as a Fulbright Scholar, Dr. Gardner has lived and worked on four continents.