Improving performance through Cross Function Teams

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Singer Sri Lanka started its operation in 1872 in Sri Lanka and is a Company that has grown over the years into a benchmark entity in Sri Lanka in terms of popularity, modernity and reach. Singer today is synonymous with quality, wide reach, and wide product range across diverse lines and wide appeal to consumers across the entire spectrum of buying power.

With its inception through the sewing machine, Singer's product portfolio has diversified to encompass a highly successful multi-brand strategy combining products of top world marques with the company's own products across a range of household, industrial and financial categories. Over the years Singer structure has strengthen immensely to incorporate with the strategies formulated to face the changers in the environment. Singer has 38 different brands in its portfolio and has a sharp penetration level covering the width and depth of the consumer segments. Singer has joined hands with world's leading appliance manufactures such as Hitachi, Samsung, Galanz, TCL, Philips, etc…and it allows them to bring down the world's latest technology into the country.

Singer has moved to multi channel strategy to cater to the different market segments. It has identified and divided its customer base into different categories based on their purchasing power, level of education, standard of living, brand loyalty, etc. different channels are there to cater for these different customer groups, which have shown in the figure 1.1.

As a multinational company it's not easy to manage 38 different brands through nine channels with more than 300 outlets, whereas very special attention is needed to improve the channel performance while maintaining the brand equity as well. So for that, company need the contribution of all managers, irrespective of whether they are working in Marketing, Sales, Production, Finance, Human Resources, etc.

Figure 1.1: Multi Channel Strategy

Source: Singer (Sri Lanka) PLC Annual report - 2007

CHAPTER 2

Typical Ways of Managing an Organization

Here we are trying to understand the conventional ways of managing an organization by analyzing the usual management strategies singer had used in their past (without generalizing the theme) with the possible drawbacks of that system.

Management structure of Singer (Sri Lanka) is fairly bigger compared to an organization in the same dimension. Also as explained earlier it has evolved with the expansion of the brands and channels. From the surface level the structure looks functional. Functional structure in definition is a "grouping of positions into departments based on similar skills, expertise, work activities and resources use" (Daft, 2009, p.293)

However depends on the nature of operation different divisions have different structures in terms of both divisional and functional. Definition of the divisional structure: "departments are grouped together based on organizational outputs" (Daft, 2009, p.293)

As a result of above combination (which is shown in the table 2.1) we could identify that Singer Sri Lanka's has a "HYBRID" structure.

Table 2.1

Department

Structure

Nature of Divisional Structure

Finance

Functional/Divisional

Geographical

Human Resources

Functional/Divisional

Geographical

Commercial

Functional

Marketing

Divisional

Product/Geographical

Sales

Divisional

Geographical

IT

Functional

Service

Functional/Divisional

Geographical

Hybrid structure is accomplished by combining the characteristics of both functional and divisional structures. It can take advantage of both forms of structures and avoid some of their weaknesses.

Though it's fairly and successfully combined, there are many shortcomings in the structure as well. Mainly the structure has a vertical approach and hardly any horizontal connection. Vertical structures focus on functional objectives than the corporate goals of the organization that creates a major communication gap between the functions and division. Singer (Sri Lanka) had used to practice this vertical approaching system (managing is inline with the hierarchy and the formal structure of the organization) in so many years until they had identified the critical weaknesses in the system.

These weaknesses were often evident in Singer between several departments when they were trying to go behind the individual departmental objectives by just forgetting the overall company objectives. Following example will explain the drawbacks of that system in general and how it affect to the overall company performance.

Eg: When Organizing Marketing Promotion, the following case was very often happening in previous system between marketing and finance division. This was not simply because of the different between their departmental objectives, but the failure of understanding the others functions.

When Brand manger needs to plan an attractive promotion in the Christmas season with a large spending, the finance management focuses more on historical figures and if the sales are very low in the last three months they tend to cut down the budget accordingly. Then marketing has to alter their plan and to stick with the given resources. Ultimate result could be another unsuccessful campaign with an enormous waste.

It would be a different scenario, if links were created and clear communication was visible in the two departments. Marketing would communicate with the finance division as to the current situation of the company and at the same time Finance would realize the dynamics in the market. This communication lacking has always been there in previous system and it was difficult to eliminate those problems as well.

CHAPTER 3

The Concept of Cross Functional Teams

3.1 Background Issues:

As discussed Singer (Sri Lanka) had vertical Hybrid structure and inter-department communication gaps often arise.

Also to face the turbulent environment, the structure needed to be "more flexible", "team supported" and "empowered".

To obtain the optimum results in the diversification strategy with minimum resources and waste, Singer needed to develop horizontal team structure.

3.2 Horizontal Team Structure:

Fig 3.1: Horizontal Team Structure

Functional Functional with interdepartmental Divisional Horizontal

Structure Task forces, Integrators Structure Teams

Strategic Goals:

Differentiation, Innovation, Flexibility Strategic Goals:

Cost Leadership, efficiency, stability

Strategic

Goals

Source: Daft "The new era of management" 2006 (South-Western)

3.3 Concept of Cross Functional Teams as a Solution

If we relate this concept in Figure 3.1 to Singer, we can adopt the "Cross Functional Team Concept" as a prominent ingredient to bridge the gap between Strategy and structure. In groping we can consider the category basis and have a well balanced cross functional team to drive the category to long term results. Composition of a horizontal team should be base on the contribution of the category to the overall success.

CHAPTER 4

How Cross Functional Teams Function in Organizations

New combination of strategy and structure will result in superior results long term.

Fig 4.1: Long Term Profitability through Strategic Changes

4.1 Role of Cross Functional Teams [CFT]

Cross Functional Teams are consisting of appropriate number of members according to the contribution of the category. Each member should empower to handle his own function according the CFT plan.

It is the responsibility of all CFT members to manage business units for growth of the organization as a serious commitment. This is one of the few areas of our work life, where cross functional disciplines come into play and all functional areas can stimulate growth collectively as "Teams" by their divisional contribution towards a common goal and share in the joy and inspiration that success will bring to the company.

Company needs all CFT members to be involved in making the business successful in each and every year. Each Business Unit will select a coordinator who should be responsible for setting up regular meetings, releasing minutes promptly and following up on program management.

4.2 Common Characteristics of CFT

CFT heads must meet and discuss about the overall progress frequently and report to the cooperate management.

Initial step should be to identify the correct people to correct CFT and have the best mixture with the leadership of cooperate management.

With effective strategy and dedicated member of CFT's will drive the process toward the desired results.

Most importantly it'll enable the origination to attract strategic customers and helps to build up a local customer base.

It also allows CFT's to inter change the customer (mainly corporate customers) and will result a sustainable market share for all the CFT's.

Ultimately it enables to harvest long term results for the entire organization

Internal Focus

Control of process

Customer focus culture

Continuous improvement

Communication

Competitive Strategy

Offering choice

High quality

Wide distribution

Commitment to improvement:

· Key Management

Supervision

· Cross-department teams

· Work teams

· Individual action

CFT Head

Alignment

Structure:

· Flexibility

· Adaptability

· Empowerment

· Innovation

· Team support

Improved organization long term results

Improved unit

Performance

Fig 4.2: How Cross Functional Teams Functioning

4.3 Key Performance Indicators for CFT's

Revenue

% Gross Margin

Absolute Gross Margin

Model / Product Line up Management (filling voids)

Management of Obsolescence

A & P Productivity (Advertising and Promotion)

Technology Management

Supply Chain Management

4.4 Key Concerns of CFT's Related to Business Entity

Here we are considering Singer (Sri Lanka) as a business model to explain key concerns of CFT.

Competitor pricing is relevant to success. If price of Singer is higher than the price of competitor, it will lose its revenue and market share.

CFT's who manage gross margins operate better than those who look only for revenue. Higher gross margin categories also earn higher revenue.

Entry point pricing is very relevant as new entrants come into the market at low end of pricing and temporarily gain market share and this is ceaseless with brand 'B' replacing 'A' and so on.

Obsolescence need to be sorted out promptly. CFT's who do not manage obsolescence will end up being hit by 2 charges. - Provision for obsolescence and Interest Cost.

Need to focus on 'above the line advertising'. When products/models are not advertised adequately for some period, such products tend to move away from the customer's sight and get replaced by other products without notice.

There seems to be a lack of market intelligence among CFT's to grasp the dynamics of market changes, developments, consumer behavior, and savings, etc.

Eg. 1 - Need to own a water filter in rural & suburban homes due to contamination of water was not picked up by market intelligence, but by accident.

Eg. 2 - Gradual replacement of the paddy thresher by the combined harvester has yet to strike home as a relevant change in consumer behavior.

This leads to conclusion that the company should be more alert on the interactions going on in the market place and the dynamics of change.

CHAPTER 5

Achieving Excellence Through Cross Functional Teams

Cross Functional Teams including Brand Managers should concentrate on working out a model as to 'How do we get there?', 'When do we get there?'. By supporting company to achieve its overall objectives, there are some other main responsibility areas which CFT's are focusing on. Followings are kind of a important ways to drive the company to achieve its goals.

5.1 Implement the Open Communication and Informal Culture:

It's better if there is a free flow of information among all level of managers and the staff. Organizations can implement this culture through CFT's, which is more flexible and also easier to take quicker action to changes needed to keep up in the business world.

5.2 Promote Doing Research on Business Matters:

Most successful companies in all over the world are not scared to try things or doing researches. Again, the open communication and informal culture is also supporting to this in a bigger way. CFT member are always supportive to others to do or try out something new and if anything goes wrong the entire team will get the responsibility for that.

5.3 More and More Closer to the Customer:

Successful companies have a passion about the customer, usually applicable to reliability, product and service quality. Working as a CFT provide necessary facilities and eagerness to treat customers well and the group then works more toward the customer orientation, which lead to success of the entire business.

5.4 Promote to Do Innovations:

If all CFT members can be more flexible and supportive of the creative process, then it will be successful in the long run. Coming up with new ideas to optimize business opportunities available or to save cost by doing tasks differently from the past. (Method changes)

5.5 Enhance Productivity through People Intervention:

Any organization should develop a people base culture and consider everyone's idea in the organization for the overall success of the company. This will eventually increase productivity and CFT is a good place to start as well.

5.6 Simple Form, Lean Staff:

To be more flexible when dealing with fast changing conditions; the failure may be not because of an issue with the best practices but an issue with the execution. Company needs to be efficient in the fundamentals, more innovative in all aspects and should be fast responsive to threats. This is also a main idea behind the formation of CFT's.

5.7 Category Driven, Rather than Channel Driven:

Eg: Members of Television CFT have to look after the TV operation at Singer Mega as other channels. So their total sale from that category is matter, not through which channel it comes from.

5.8 Empower Employees:

Through CFT's organization is providing a greater authority for company staff to make decisions even at the field level. This will create the mindset of all employees that they are also important part of making company wide decisions.

5.9 Development & Succession of Staff:

In a broader way it is a responsibility of CFT for setting a succession plan to develop the next level in all management categories by allowing them to participate for the meetings time to time.

5.10 Maximize Department Productivity:

CFT's can support this in a numerous ways by optimizing available staff, using Department sub committees to overcome bottlenecks and problems, by helping other Departments and getting the help from the other Departments to solve common problems.

5.11 Enhancing Internal Controls:

Companies are aware that some departments (In Singer - specially marketing) have lost heavily due to malpractices and misfeasance by neglecting internal controls (despite having a full scale internal audit). So CFT's suggest and change the methods/procedures/ rules time to time to enhance the internal controls in the organization.

5.12 Cost Improvement:

It is inferred that every large company has a wastage element of 10 to 15% of total cost. CFT's can give their input by focusing on eliminate this wastage while not affecting operations by ad-hoc cost cuts which may be detrimental to the business.

5.13 Adding new Goods & Services:

Adding successful new products to the portfolio, which will be compatible with the existing business, is also a collective responsibility of CFT's.

CHAPTER 6

Way Forward - Beyond the Excellence

Andy Grove, the legendary former Chairman of Intel, has the following views on cross functionality and it is worth reading him in this context:

"Always assume its your responsibility - By that he means to take on a job even if it wasn't yours" - That's a general thought, but it creates specific action and works across almost any situation, from picking up garbage on the floor to a new product idea - If you automatically assume its your responsibility and do something about it that makes the company better. Those who recognize that are the ones who end up being most successful".

Organizational performance, strategies, rules, alone with practices only will not help to develop that kind of higher inspiration among the people who are working in the organization. It should need some sort of professionalism and real need from the top management starting from the CEO of the company and penetrate to the most bottom layer through all levels of the organizational structure. To achieve superior performance through the concept of CFT is a kind of a developing inherent quality of the employees rather than implementing another controlling mechanism by the organization. So in a very broader way this can lead towards to achieve a cultural change in an organization by enhancing the motivation, courage, enthusiasm of all the employees with positive attitudes.

Further to achieve the outstanding performance by CFT's, apart from the responsibilities highlighted in the previous chapter, it is essential to do the frequent 'gap analysis' where necessary to place the 'icing on the cake' on;

improving gross margins

filling up model voids

improving quality

reduce obsolete and non moving inventory

So the continuous focusing towards the company's operations and the real interest of the management is the key factors which determine whether the company can go an extra mile or in other words whether the company is able to drive beyond the excellence.

CONCLUSION

As per our analysis carried out, it is evident that the structure plays an important role in contribution towards the long term performances and sustainability of the organization. As explained in the forgoing discussion Singer (Sri Lanka), more serious issues faced with the former structure resulted in a communication gaps between the different functional departments. This is very common for the most of the industries in Sri Lanka and the majority is operating to achieve their individual departmental objectives without thinking the company objectives as a whole.

Changes in structure to a more matrix based structure (by implementing the CFT strategy) enable and encourage clear communication as well as responsibility. Therefore this change would facilitate to perform and enable better control system, ultimately reflecting the better bottom line profitability of the organization.

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