The Importance Of Crossfunctional Relationships To Firms


The collaboration of marketing and operation as functional areas is critical to the success of any business and plays the vale adding area in the organisation. Existing research has not shown sufficient methods for the improvisation of this situation outside large corporation or manufacturing sector.(Niall Piercy, 2010). For any organisation, successful and continued operation in a competitive marketplace will be ultimately determined by how well it makes and sells, what it determines to make and sell. (McIntosh, 1986). This requires an analysis of the customer place, an analysis of what the company can effectively produce and how to marry the two areas under an integrated business strategy, that is operational, and delivers high quality products and services (Wind and Robertson,1983)

Ideally, a firm should take an integrative or crossfunctional perspective in developing its strategy, with each function explicitly focused on improving the firm's overall market responsiveness. Achieving this type of perspective involves more than just acknowledging these cross-functional linkages and their importance. However, no systematic effort has been made to incorporate this perspective into a formal framework for developing strategy.(Lim and Reid,1992)

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This proposal seeks to address the shortcoming, and also investigate mechanisms to support better cross functional relationships in small-medium enterprise. A cross comparison would be conducted to identify the key themes and approaches that provide for and support good cross-functional relationships. Three key methods proposed as sources of positive marketing operations relationships : i) manipulation of the pay/rewards system, ii) clear strategy and strategic leaderships and iii) an explicit focus on bringing people together.( Niall Piercy, 2010).

Objectives :-

There are several objectives for this proposal research. The main objective is to get the reasons for the faulty or not so good relationships between marketing and operations amongst firms. We also need to focus on how would this relationships affect the firms performances and what would be the key measures or proposed measures to improve the performance and relationships.

After some research it has been found out that there are certain ways which can be used to improve the relationships though it can't be guaranteed. These include : the importance for SMEs that their organisational leader be their key force behind all integration efforts in the company, he needs to be charismatic and enthusiastic. At a personal and professional level their actions supported specific strategic integration goals and structural-cultural manipulations that supported better crossfunctional relationships. By reaching out at every level of organisation, the leader makes explicit expectations of each department and also in the need to coordinate.

At the top level of each company, they would need to focus on the long term gains and plans rather than short term plans. The directors need to co-ordinate and have a long term viewpoint for the company. Manipulation of organisational culture through communication and cross-functional exchanges, coupled with supportive reward systems and explicit strategic level support further improved relationships. Communication should be very important to support good working relationships. The companies' specific policies or important information should be conveyed across the organisation.

Literature review :-

In the modern company it is possible to identify two "value adding" areas of the business- marketing and operations. All areas of the business are required (hr, finance) to support value creation but only marketing and operations directly add value. (Drucker,1954, Porter,1985). It is these two areas that constitute the basic task of any business- they form the interface between the producing organisation and the purchasing person or group through sale and delivery of products and services .Operations adds value to the company by helping transforming the input resources. Marketing adds value by identifying different customer needs, demands and their dislikes, which therefore helps in determining what the product or service should be like to serve the customer. The failure of marketing and operational functions to work together is one of the largest problems facing the modern companies.

Shortened product life cycles, technological advancements in products and processes, globalization of markets, consumerism, and the rapidity of change have only exacerbated the perceived need to link marketing and manufacturing strategies. Indeed, the normative perspective today is that interfunctional cooperation and communication are essential antecedents of business success. (Bates et al., 1995; Giffi et al., 1990; Hauser and Clausing, 1988; Hausman and Montgomery, 1986, 1993, 1997; Moorman, 1995; Papke-Shields and

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Malhotra, 2001).

The formation and fulfilment of any such strategy is dependent upon expert internal and external analysis- such analysis is best done by those trained tools, techniques and operations of the area they are considering.(Piercy,2007) Marketing and operations are grouped separately because they have different responsibilities, with marketing targeting customers, identifying requirements and establishing product and volume requirements while manufacturing manages capacity, facilities, technology and quality control.( St. John and Rue,1991) It is the functional areas of marketing and operations that are therefore primarily responsible for fulfilling organisational goals or strategies, forming core activity of any organisation.(Nie and Young,1997; Porter 1985)

Surprisingly, discussions of marketing have only recently begun to examine the linkages between marketing and other functional areas in a firm. In developing a strategy, marketing has typically viewed the interface between it and other functional areas from a unilateral perspective. In other words, marketing tends to be concerned only with whether the other functions in the firm can meet its demands.

There is an interdependency between the marketing and operational areas- operations is dependent on marketing for information on the volume and variety of products and services to be delivered; equally marketing depends on operations for information on the pricing, development, introduction and fulfilment of the product and services.(Hutt and Speh 1984, Keener 1960, St. John and Rue 1991). Cross-functional collaboration and two-way information sharing is critical for the correct alignment of the market demands and operational capabilities. (Kotler,1972,1977) For instance, without understanding the limits of operations ability to handle complexity, too many variants maybe demanded and production will struggle to complete orders. The need to co-operate to match marketing understanding with operational ability is not just a reactive process to ensure that feasible products are specified but an ongoing process where marketing may create expectations in customers that cannot be delivered in practice. The expectations created in customers by marketing and what can operationally be delivered must be congruent. The marketing department would require an analysis of the customer place and their needs. But creating expectations without sufficient quality to back up the stated claims may damage the market position of the company through customer dissatisfaction, complaints and defection to competing organisations. (Kordupleski, Rust and Zahorik, 1993; Brown and Swartz 1989; Zeithmal et al., 1990). This would pose as a danger that only with the external position of the company be damaged but that internal relationships between marketing and operations will be further damaged as blame is apportioned, political infighting ensues and a decreased likelihood of future co-operation between functions that are needed to ensure expectations are correctly matched to operational ability. (Day,1994a, Piercy, 2003). Ultimately, the marketing-operations interface has a major impact on the quality, cost and speed with which a company can bring products and services to the marketplace. (Sawhney and Piper, 2002).

Despite the prima facie importance of working together, one function's strategy, directed at bolstering its role or solving its own area's problems, is often at odds with the strategies of other functional areas. As external environments become more volatile and internal resources become more scarce, anecdotal evidence increasingly points to one important conclusion: Executive parlays gravitating toward a single functional orientation, such as marketing or manufacturing, frequently evoke a significant inability of functions to work together. This lack of harmony engenders interfunctional conflict, which is believed by some to lead to less-than-optimal business performance (Hayes and Wheelwright, 1984; Hill, 1989).

Despite the theoretical and normative prescriptions, the literature that specifically addresses the antecedents and consequences of manufacturing and marketing interface harmony in implementation is scant. Manufacturing and marketing interface harmony has been under-emphasized in marketing strategy research and is absent in manufacturing strategy research. Although there is some evidence suggesting that marketing and manufacturing should work together, there has been little, if any, inductive research into the mediating influence (or lack thereof) of interfunctional harmony and manufacturing and marketing morale on business performance in the context of manufacturing and marketing strategy (Parente, 1998).

In practice there is often conflict between the groups. ( Crittenden 1992, Nie and Young 1997). Research has suggested some common causes of conflict: mutually exclusive reward systems, different backgrounds and experiences of personnel, the nature of functional separation and political game playing. Operational areas tend to be evaluated and rewarded based on their ability to save cost, while marketing is rewarded for sales growth.(Shapiro 1977, Malhotra and Sharma2002). A broad literature review has been conducted across marketing and operational journals as well as those in the general business area. From this review we conclude six key causes of the underlying conflicts between the marketing and operations. They are : conflicting rewarding systems, different background and different philosophies, functional separations, politics and resource allocation, management failure and academic failure.

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The different backgrounds of people in each department also create difficulty. Without shared, common experiences or an understanding of the role of those in other functions, cross-functional working is unlikely.( Lancaster 1995, Berry et al 1995). To work together, good inter-personal relationships, aligned reward systems and a common language for communication will be necessary for good relationships between functions. (Swamidass et al 2001, Crittenden 1992, Ellinger 2000)

Spoken a lot about the problems, we now need to focus on the cross-functional improvements. A disparate literature exists regarding cross-functional integration spanning the management, organisational behaviour, operations management and marketing communities. Across these areas, certain key themes emerge :

Strategy and strategic leadership

Communication and cross-functional working

Reward systems.

Strategy and strategic leadership -

The strategy of an organisation is the guiding force for all organisational action (Schoemaker 1992, Oswald et al 1994, Burgelman 1983). The leader plays a key role in creating and managing organisational norms and cultural artifacts that influence how employees behave. (Martin et al 2009). A clear strategy can integrate the different agendas of different functions in the business, providing a focus on the overall aims of the company rather than just functional targets (Sweeney 1994, Shapiro 1977). Involving marketing and operational areas in strategy setting ensures that the strategy is feasible and realistic, based on the capabilities and constraints of each function, avoiding potential mismatches in this area. (Liam and Reid 1992, Walters 1999, Ellinger et la 2000). Strategic vision set at top of the company must be communicated down the organisation by the leader. The best strategy is of no use if nobody agrees with it or supports it. Thus it is the responsibility of the leader to ensure all the members of the organisation support and work towards the strategic goals of the company. (Littlefield 2004). The leader is the key role, who is passionate and always driving forward the business. The close connection between all members of the organisation and the leader is important in making staff and directors feel part of a larger-whole rather than a functional unit. This sense of shared destiny stands apart to the department-based culture seen in many organisations.

Communication and cross-functional working -

Research has focused on knowledge exchange as the key antecedent of cross-functional harmony, improving the understanding within each function of the priorities and goals of the other as being key to collaboration. (Lancaster 1995, Calantone et al 2002). Communication between different functional groups improves relationships. Both formal exchanges and informal networking are important. (De Burca et al 2004, Liam and Reid 1992). Communications can be improved by workshops, group sessions or developing formal procedures and approaches. (Crittenden et al 1993). One such approach can be physically bringing people together in the organisation.( Shapiro 1977). Also transferring people across functions for limited times, use of missed career paths might help in overcoming the functional boundary issues (De Burca et al 2004, Crittenden et al 1993). Job rotation has been suggested as a meaningful way to improve knowledge sharing across functions. Chief executives should try and create a friendly and almost familiar atmosphere. A friendly relationship between senior managers and directors send out a powerful signal to staff that this would be the way the company expects the functional groups to behave. The chief executive, director of marketing and director of operations should all work as a single unit, meet and share information formally and informally on daily basis. Sometimes increased interaction between the two groups, in a small space, with limited resources , can however lead to political arguments. This is where the powerful personality of the chief exec. plays a key in resolving disputes. The exchange of staff at the director and manager level between marketing and operations can also be important in creating good working relationships.

Rewards System -

The use of performance based rewards to motivate employees to increase efforts in absolute levels, or by better aligning their behaviour relative to organisational goals, is long established in the management literature. (Williams and Luthan 1992, Turner 2006 ulrich et al 2009). Rewards can include both direct financial reward and broader measures of esteem. (Nelson 1999,O'Reilly 1989). Non-monetary rewards (such as public recognition in person, or in company newsletters etc.) can just be as powerful in shaping behaviour as employees seek recognition and esteem from their jobs.(Kovach 1995, Nelson 1999, Martin et al 2009) Amending systems to ensure each function have congruent goals and rewarding cross-functional working, could be useful for improving marketing-operation relationships.( Shapiro 1977, Souder and Chakrobarti 1978, Crittenden et al 1993). In SMEs , limited resources could make the use of financial reward system problematic. (Gilmore et al 1999, 2001, Spillan and Parnell 2006), while the limited nature of the human resource management decreases the likelihood of such proactive control of performance systems. ( Tocher and Rutherford 2009)

Most SMEs would have a small senior management team of 6-8 at the board level. Each director having a significant share holding in the company, providing a powerful encouragement for them to see beyond narrow functional goals and are a motivating force to get them to work together behind the long run strategy of the company rather than pursue short term cost reductions or sales push. Functional level targets and goals will always be necessary to monitor the efficiency of each functional department, whether its operational cost reduction or marketing led sales growth. As we know that the SMEs have less resources to invest in the reward systems, training or in gathering external customer satisfaction data could be done. Reward systems should be changed from solely departmentally based to include company-wide performance, thus no additional financial burden would be incurred. The use of internal newsletters and meetings to recognise performance also carry minimal cost.

Most of the above methods stated are suggestions and not exact and completely right measures as they would work in some SMEs and might not work in some, depending on their situation of the marketplace etc.

Methodology -

The methodology and the approach for the marketing and operation relationship would be asking the people themselves getting survey done and filled by managers and heads of marketing and operations from over 60 SMEs and analysing the data. The surveys would be done in any industry and any field , manufacturing, service or trading. The analysis would involve the use of SPSS software which is very helpful in making comparisons with different kind of results and also links between the results could be found out by the analysis.

The survey would include 100 questions and the same set of questions would be provided to both the managers. They would have to rate an answer from 1 to 5 with 1 being least and 5 being best. The questions would be based on a validated survey which will be provided by the project supervisor as part of an ongoing research project.

The outcome of the analysis would as of now be unknown as this is a research study based on the survey results of 60 SMEs. So only after the availability of the results of the surveys could we predict the outcome. The comparisons can be made between the different industries and also intra industry comparisons and we can get good results as to how the actual managers think and work in accordance with the cross functional relations.

The study, research and analysis would be spread over a 4 months period. The first two months would be basically used in the collection of the survey questionnaires from the different firms and get them answered as quickly as possible. The 3rd month would be the time when the analysis on the survey results would be made and the different conclusions and results can be drawn from it then. The last month would involve in the completion of the theory, i.e. the literature review and other parts. Throughout the dissertation period, I will be in constant communication with my supervisor for his guidance. This is the time span, which I have planned, which though, might change according to the situation and surveys.

Conclusion -

Many companies are continuing to struggle with how to organise the operation of their business to ensure customer satisfaction and profitability. Improving marketing -operations relationships is difficult but it is not impossible. There are ways to improve the relations which would affect the firms profitability and performance. The managers need to have a solid strategy to drive the business forward, to involve all the areas of the business in strategy formation and to communicate this strategy down to all levels of the organisation. This would improve the staff understanding of their roles and provide a unifying focus which would sit above the individual functional goals. The reward systems should support the integration rather than individual goals of cost reduction or sales growth. This study and research would be necessary and important for the firm's performance. The cross functional relations are directly connected to the firm's profitability and performance, thus we need to focus on them. The research which would be conducted would be very valuable because, it could be used by companies in future for studying and improvement. Thus the main outcome of this research would show us how we could improve the firm's performance based on the changes made in the cross functional integrations and relations. The improvements in the relationships would have a direct effect on the firm's profitability.