Is Collaboration Destroying Value at Your Company?

Collaboration is good, and more collaboration is better, right? Wrong, says Morten T. Hansen in this month's Harvard Business Review. Managers sometimes forget that collaboration is a means to an end, he says. The end is business value, and not all collaboration produces it; in fact, some collaboration can actually destroy value.

Hansen is a professor at the University of California, Berkeley, and author of Collaboration: How Leaders Avoid the Traps, Create Unity and Reap Big Results (Harvard Business Press, May 2009). He talked with Kathleen Melymuka about how to spot destructive collaboration.

Your article seems heretical. How can internal collaboration be counterproductive?

People engage in cross-unit projects that turn out to cost more than the value they produce. Sometimes they drank the Kool-Aid that collaboration is great and we must do more, and they start collaborating on projects that have marginal value to begin with.

You say that managers shouldn't be asking, "How can we get people to collaborate more?" What should they ask?

"How can we instill the right kind of collaboration so we increase results?" The consequence of asking the second question is that you also ask, "When should we not do it?"

The goal of collaboration is not collaboration; it's results. It follows that to master collaboration is to know when not to do it.

You say the way to answer that new question is to calculate the collaboration premium -- or penalty. What is that, and how do I calculate it?

You need to know three things: First, what is the cash flow from this project if we execute it very well?

Second is opportunity costs: What can we not do because we are doing this? What do we have to forgo because of limited resources, and what is the cash flow from that?

The third thing is difficult to calculate: What is the collaboration cost? If we can't agree on everything, we'll run into problems. How much will they deduct from the rosy estimate of cash flow from the project?

You subtract the second two from the first, and suddenly, it may not be looking like a rosy estimate anymore. If you're looking at a negative number, it's questionable whether you should do this project.

You write that people overestimate the expected financial return for a collaboration project. Why?

There is a natural optimism in management, and that drives a lot of it. They're often overshooting.

Why do some people underestimate opportunity costs?

When companies preach this mantra that collaboration is good and more collaboration is better, then managers are looking for collaboration projects. But they should be looking for the best projects, and some may not be collaboration projects at all.

What are some of the overlooked costs of collaboration?

These are the costs incurred in working across units--problems like disagreeing over objectives, having conflicting goals. Or there is hoarding: People don't want to share information or customers. You have to spend time sorting it all out, and that leads to delays and cost overruns.

What role does IT play in this whole collaboration universe?

When collaboration costs are high in a company, it becomes difficult to have a net collaboration premium. IT puts in place knowledge management databases, videoconferencing systems, online social networking--electronic tools that are really collaboration tools.

If the cost of collaboration goes down a lot, then you will see the value shoot up.

But collaboration tools cannot work alone. Many times, the problem is motivational. You have silos and incentives not to collaborate, so people are unwilling to open up to people in another unit.

If IT has great collaboration tools, it won't help a bit if the people don't want to collaborate. I have often seen companies launch these online tools without solving the underlying management problems.

But if you change incentives so that if you don't collaborate, you don't get promoted, you don't get your bonus, and then you say, "We're also going to give you these great tools that allow you to collaborate better," then you have a winning combination.

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