Virtual teams

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Summary of the article.
What the key points of the article.
What are the top three items you feel are important?
According the article, what management strategies work best for virtual teams? Do you agree with these strategies? Disagree?
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SUMMER 2009

V O L . 5 0 N O. 4

SMR322

Frank Siebdrat, Martin Hoegl and Holger Ernst

How to Manage
Virtual Teams

R E P R2015.
INT NUMBER
This document is authorized for use only in Leadership and Teams by Dev Team from July 2012 to January

50412

M A N A G I N G C O L L A B O R AT I O N

AU S T R I A

CZECH REPUBLIC

UNITED KINGDOM

I S R A E L

WALLDORF, GERMANY
Large multinational corporations like
SAP must frequently assemble teams
of people who work at different geographic sites. What?s the best way to
manage such dispersed groups?

How to Manage
VirtualTeams

Dispersed teams can actually outperform groups that are
colocated. To succeed, however, virtual collaboration must
be managed in specific ways.
BY FRANK SIEBDRAT, MARTIN HOEGL AND HOLGER ERNST

TEAMS ARE THE typical building blocks of an organization: They provide companies with
the means to combine the various skills, talents and perspectives of a group of individuals to achieve
corporate goals. In the past, managers used to colocate team members because of the high levels of
interdependencies that are inherent in group work. Recently, though, more and more companies
are beginning to organize projects over distance, with teams increasingly consisting of people who
are based in dispersed geographical locations, come from different cultural backgrounds, speak
different languages and were raised in different countries with different value systems.
Over the past 10 years, various studies have investigated the differences in performance of colocated and dispersed teams, quietly assuming that members of the latter never meet in person and
members of the former work together in the same office throughout a project. But dispersion is not
COURTESY OF SAP

THE LEADING
QUESTION

What do
managers
need to know
about virtual
teams?
FINDINGS
The overall effect
of dispersion
(people working
at different sites)
is not necessarily
detrimental but
rather depends
on a team?s taskrelated processes,
including those
that help coordinate work and
ensure that each
member is contributing fully.
Even small levels
of dispersion can
substantially affect
team performance.
When assembling
a virtual team,
managers should
carefully consider
the social skills and
self-sufficiency of the
potential members.

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only a matter of degree; it is also a matter of kind.
Most teams are dispersed on some level. They can be
spatially separated (from ?across the hall? to ?scattered worldwide?), temporally separated (spanning
different time zones), configurationally uneven (for
example, five members in one location and two in
another) and culturally diverse. And as past research
has repeatedly shown, even the smallest degrees of
dispersion, such as working on different floors in
the same building, can greatly affect the quality of
collaboration.1 In our own study, we have investigated the performance of 80 software development
teams with varying levels of dispersion, including
those with members in different cities, countries or
continents. (See ?About the Research.?) Such geographically distributed teams have commonly been
referred to as ?virtual? teams,2 but that label is some-

ABOUT THE RESEARCH
We studied 80 software development teams from 28 labs worldwide (including labs
in Brazil, China, Denmark, France, Germany, India and the United States). The labs
varied in size (employing between 20 and 5,500 software developers), and each
team contained up to nine members. Our research included those software development projects that were completed within 12 months prior to data collection. A
total of 392 managers, team leaders and team members participated in the study,
and data from multiple respondents were used to ensure the validity of results and
to overcome common method bias.
To measure geographic distribution, we used the descriptions provided by team
leaders to identify each member?s office location. We then calculated a dispersion
index taking into account the following factors: (1) miles between team members,
(2) time zone difference, (3) number of locations per team, (4) percentage of isolated
team members and (5) unevenness of membership across sites. To assess team
performance, managers were asked to evaluate the teams with respect to effectiveness (in terms of product quality, reliability, usability, customer satisfaction and so on)
and efficiency (in terms of adherence to preset budget and schedule constraints).

thing of a misnomer, because these groups are very
real with respect to the work they can accomplish.
We found that virtual teams offer tremendous opportunities despite their greater managerial
challenges. In fact, with the appropriate processes in
place, dispersed teams can significantly outperform
their colocated counterparts.

The Bright and Dark Sides
of Dispersion
A team?s level of dispersion is neither preordained
nor fixed; rather, it is an organizational design parameter that companies can set and adjust. When
making such decisions, managers should take into

consideration the various pluses and minuses of separation. (See ?The Pros and Cons of Dispersion.?)
Not surprisingly, several studies have found that
collaboration across distance is more difficult than
in a colocated environment. Potential issues include
difficulties in communication and coordination,
reduced trust, and an increased inability to establish a common ground. In contrast, proximity tends
to promote more frequent communication and the
development of closer and more positive interpersonal relationships. Indeed, the regular physical
presence of coworkers improves people?s feelings of
familiarity and fondness, and frequent informal interactions serve to strengthen social ties. Conversely,
physical distance decreases closeness and affinity,
which then leads to a greater potential for conflict.
Distance also brings with it other issues, such as
team members having to negotiate multiple time
zones and requiring them to reorganize their workdays to accommodate others? schedules. In such
situations, frustration and confusion can ensue, especially if coworkers are regularly unavailable for
discussion or clarification of task-related issues.
On the other hand, dispersion potentially has
substantial advantages. First, in order to accomplish increasingly complex activities such as
research and development, companies (particularly larger ones like IBM, General Electric or SAP)
tend to cluster their competencies in different centers of excellence, which are often scattered
geographically although part of an international
corporate network of operations. SAP Aktiengesellschaft, for instance, has its global headquarters
in Walldorf, Germany, but has built up large R&D
centers in India, China, Israel and the United States
in order to reduce costs and leverage their global
know-how in software engineering. Within each of
these competence centers, the depth of expertise
tends to be very strong, while the diversity of functional backgrounds is relatively weak because of
specialization. Managers can take advantage of this
organizational structure by assembling employees
from different locations in such networks to create
a team that can optimally integrate the different
pools of expertise to perform a particular task.3
Second, companies can take advantage of the
increased heterogeneity that is inherent in the nature of dispersed teams. Virtual teams tend to

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incorporate higher levels of structural and demographic diversity than do colocated teams, and
both types of diversity can be highly beneficial.4
Structural diversity is a direct consequence of having team members from multiple locations
associated with different business units and reporting to different managers. Such diversity can
be highly valuable for teams, because it exposes
members to heterogeneous sources of work experience, feedback and networking opportunities.5
In addition, virtual team members are often diverse in nationality. Although such diversity may
complicate team dynamics, it can also enhance the
overall problem-solving capacity of the group by
bringing more vantage points to bear on a particular project.6

Performance of Dispersed vs.
Colocated Teams
Most past studies have found that dispersion hurts
performance.7 Often, dispersed teams fail to perform important processes effectively and are
therefore unable to realize their potential. But
given the fact that virtual teams have become an
increasing reality for many companies, it behooves
managers to understand how to maximize the
benefits of dispersion while minimizing its disadvantages. Thus, our research investigated two
fundamental questions: (1) When do virtual teams
outperform colocated ones? and (2) how should
companies manage dispersed teams? To answer
these questions, we studied software development
teams from 28 different labs in countries including Brazil, China, Denmark, France, Germany,
India and the United States. From that broad survey, we found that the key drivers of performance
are certain crucial team processes that, for example, help co ordinate wor k and facilitate
communication among members. In fact, we
found that virtual teams with such processes can
outperform their colocated counterparts, and that
was true even for colocated teams with the same
high levels of those processes.
In general, team processes can be classified into
two categories: task-related ? including those that
help ensure each member is contributing fully; and
socio-emotional ? including those that increase
the cohesion of the group. Our study found that

THE PROS AND CONS OF DISPERSION
Virtual teams provide a number of benefits but incur certain costs.
Companies need to manage them in specific ways that take advantage of the opportunities while minimizing the liabilities.

Opportunities

? Heterogeneous
knowledge resources
? Utilization of cost
advantages
? Access to diverse skills
and experience
? Knowledge about
diverse markets
? ?Follow the sun?
working

Liabilities

? Language differences
? Cultural
incompatibilities
? Difficulties establishing
?common ground?
? Fewer synchronous
face-to-face
interactions
? Good teamwork more
difficult to achieve

those processes that are directly task-related are the
most critical for the performance of dispersed
teams. Specifically, virtual teams that had processes
that increased the levels of mutual support, member effort, work coordination, balance of member
contributions and task-related communications
consistently outperformed other teams with lower
levels. (See ?The Importance of Task-Related Processes,? p. 67.) Moreover, dispersed teams that had
high levels of task-related processes were notably
able to outperform colocated teams with similar
levels of those same processes despite the physical
separation of their members. In other words, the
overall effect of dispersion is not necessarily detrimental but rather depends on the quality of a
team?s task-related processes. That said, dispersion
carries significant risks: Those teams with poor
task-related processes suffered heavily with increased dispersion. The bottom line is that the
quality of task-related processes appears to be a significant factor in deciding whether dispersion
becomes a liability or an opportunity.
Beyond task-related processes, organizations
must also ensure that team members commit to the
overall group goals, identify with the team and actively support a team spirit. In other words,
social-emotional processes are important too. Especially in teams with physically dispersed members,
interpersonal differences are a greater threat to the
team?s social stability because of the greater difficulty
in resolving conflicts across geographic boundaries.
Such difficulties can, in turn, demotivate members
from contributing fully, thus jeopardizing team

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performance. Social processes that increase team
cohesion, identification and informal communication can prevent that by helping to establish and
maintain interpersonal bonds that enable a group
to better cope with conflicts. In our study, we found
that social processes were able to boost the performance of virtual as well as colocated teams. We had
no indication, however, that virtual teams with
favorable socio-emotional processes outperformed
colocated teams with similar levels of the same processes. Our belief is that, although socio-emotional
processes were not a differentiating factor, they likely
facilitated more task-related processes (and hence
indirectly enhanced the performance of virtual
teams) through, for instance, increased knowledge
transfer and better resolution of team conflicts.

The Dos and Don?ts of
Managing Dispersion
To boost the performance of its teams, a company
needs to implement the appropriate mechanisms
for boosting both socio-emotional and task-related
processes. Particularly for virtual teams, managers
need to pay special attention to task-related processes that will capitalize on the specialized
knowledge and expertise of such groups. The following key lessons can help companies maximize
the performance of their virtual teams:

SMALL DISTANCES MATTER
In general, team performance tends to drop with increasing member dispersion. But
sometimes even a low level of dispersion (namely, members working on different
floors in the same building) can have a surprisingly large effect, especially with respect
to a team?s efficiency.
High
Effectiveness

Team
Performance

Efficiency

Low

Same
Floor

Same
Building

Same
Site

Same Same
Same Different
City Country Continent Continent

Dispersion

Don?t underestimate the significance of small
distances. Our research shows that performance is

noticeably lower for teams with people located in
the same building but on different floors when
compared with teams where all members are on the
same floor. (See ?Small Distances Matter.?) This
was true regarding both effectiveness (that is, the
quality of team output) and efficiency (in terms of
time and cost). Interestingly, teams with members
in the same building but on different floors also
performed worse than teams with greater degrees
of dispersion, including those that had members
spread across a city, country or even continent. In
fact, the only teams that fared worse were the intercontinental teams, with a significantly higher level
of intercultural diversity and temporal dispersion
(spanning many time zones).
At first glance, those results might seem odd, but
consider. Teams with members in the same building,
albeit on different floors, do not usually consider
themselves as being dispersed and, hence, may easily
underestimate the barriers to collaboration deriving
from, for instance, having to climb a flight of stairs to
meet a teammate face to face. In contrast, groups that
are dispersed across a country or continent are more
aware of their situation and may make extra efforts to
improve such vital processes as task-related communication and coordination. One manager of a
leading worldwide software company in our study
stated that team leaders regularly underestimate
the significance of small distances. They tend to
treat team members located on different floors or in
an adjacent building as being in direct proximity,
failing to acknowledge the negative effects of even
such comparatively small distances. A team leader
from the same company commented that sometimes ?colocated? teams spread across his laboratory
use electronic communication technologies such as
e-mail, telephone and voicemail just as much as
globally dispersed teams do ? a sign that people
might be allowing short physical distances to become
larger obstacles than they should. To prevent that
from happening, companies such as Cisco Systems,
BMW and Corning have designed their office layouts to maximize interpersonal interactions. At
Cisco Systems Inc.?s sites in Germany, for example,
only three people have their own individual offices.
All of the other 850 employees work in an open-space

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environment that provides ample opportunities for
?hall talks? and other informal interactions.
Emphasize teamwork skills. Clearly, one of the
key reasons for organizing a dispersed team is to draw
on the superior knowledge that resides in remote locations. But many companies make the mistake of
staffing such teams primarily (if not solely) on the
basis of people?s expertise and availability. Instead,
managers must also consider social skills ? a major
prerequisite for good teamwork ? as a much more
pivotal part of the catalog of requirements. In other
words, it?s unrealistic to bring together individuals
from different locations with the expectation that
they will automatically know how to collaborate in a
virtual environment. Groups with increasing levels of
dispersion are also progressively more dependent on
their level of teamwork, specifically, their ability to
perform key processes such as mutual support, communication and coordination. In order for virtual
teams to achieve their greater potential (and take advantage of their functional and structural diversity),
members must first and foremost be able to establish
a basis for the effective exchange of their varying capabilities ? all of which requires teamwork-related
skills as a critical ingredient. Otherwise, the virtual
team could very likely perform worse than a colocated group. Thus, managers need to consider
teamwork skills as a necessary attribute when selecting the members of a virtual team.
Promote self-leadership across the team. Be-

yond social skills, managers need to ensure that
dispersed teams have broad-based leadership capabilities. When a group is closely colocated, an
individual leader can more easily detect any deficiencies in teamwork and address them with a
hands-on managerial style. An interpersonal conflict, for example, might be resolved by talking in
person with the different parties in an informal setting. Such an approach is largely nonexistent in
virtual teams. Geographic dispersion and cultural
diversity make it difficult for any individual leader
to ensure that the team is functioning effectively.
Even though the advanced use of the latest information and communications technologies can help,
they are no magical panacea for managing people
across countries and time zones. ?We are often not

THE IMPORTANCE OF
TASK-RELATED PROCESSES
Teams with a high level of task-related processes (such as
those that help ensure each member is contributing fully)
outperform teams with a low level. The difference becomes
particularly acute the more dispersed the team is. Moreover,
virtual teams with high levels of task processes are able to
outperform colocated teams with similar levels of those same
processes despite the physical separation of their members.
That is, the overall effect of dispersion can be beneficial, depending on the quality of a team?s task-related processes.

High

Task Processes
High

Team
Performance
Task Processes
Low
Low

Low
(e.g., Same
Floor)

Dispersion

High
(e.g., Different
Continent)

able to overcome the cultural problems,? admits one
team leader in the study. ?And only very experienced
team leaders can handle these challenges and lead
these teams to success.? For a virtual team to succeed, members generally need to be aware of the
difficulties of dispersed collaboration and find effective ways to overcome those obstacles on their
own. This highlights the need for people to be more
self-sufficient in how they manage their own work
because the team leader is less in a position to help.
Consequently, companies that are serious about virtual collaboration must target their HR efforts not
only at designated team leaders but also at team
members so that those individuals can develop the
skills necessary to work in a virtual setting.
Provide for face-to-face meetings. Periodic face-

to-face meetings of dispersed team members can
be particularly effective for initiating and maintaining key social processes that will encourage
informal communication, team identification and
cohesion. A project kick-off meeting, for example,
can be used to bring everyone together in one location for several days so that people can develop a
shared understanding of the task at hand and begin
to identify with the team. These processes, in turn,

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will support task collaboration during the project.
The time and expense necessary to provide such
opportunities for face-to-face interactions then become an investment that can lead to large returns if
the virtual team is able to take full advantage of its
diverse expertise and heterogeneity. Companies
should also remember that informal interactions
can be just as important as formal ones ? if not
more so. One experienced team leader in the study,
for instance, asserted that projects should include
one essential initial step: ?to go out for a beer with
all team members in order to establish a common
ground before starting the collaboration.?
Foster a ?global culture.? Our research suggests

that a global mind-set, in which people see themselves
as part of an international network, helps provide an
environment that is conducive to dispersed teams.
Accordingly, managers and team members need to
recognize and frame their company as such, communicating the international nature of the organization?s
operations and markets. Various human resource
strategies can help foster that mind-set, including
temporary staff assignments at foreign locations and
inter-cultural training. Nestl?, General Electric, IBM
and SAP ? all known for the global reach of their
business activities ? provide good examples of how
to actively foster a global employee mind-set. Managers at Nestl? S.A., for instance, are expected to move
to another country every three or four years so that
they can learn about the specifics of each of those
markets and develop a global mind-set from their
experiences. Such practices advance the development of diversity-friendly attitudes and the ability
to work in different contexts, which in turn help
employees cope with the challenges of distance
when working on virtual teams. At General Electric
Co., a steering committee oversees the company?s
global R&D efforts, and employees are assigned to
different locations worldwide in order to facilitate
the development of an informal network across all
four main R&D sites in the United States, China,
Germany and India.
CONVENTIONAL WISDOM SUGGESTS that the per-

formance of teams suffers with increasing levels of
dispersion. Because of that, managers have typically viewed dispersion as a liability rather than an

opportunity. But dispersion can provide substantial benefits if companies can take advantage of the
diversity and varied expertise of team members at
different locations. In fact, our research shows that
virtual teams can outperform their colocated counterparts when they are set up and managed in the
right way. In other words, a company can?t just assemble a dispersed team of top-notch talent and
hope for the best; it also needs to ensure that the
group has the necessary socio-emotional and taskrelated processes in place. Only then can virtual
teams effectively integrate dispersed knowledge to
take advantage of their cultural and structural diversity, thereby avoiding some of the drawbacks of
dispersion while reaping its benefits.
Frank Siebdrat is a consultant at the Boston Consulting Group in Munich, Germany. Martin Hoegl is a
professor and holds the Chair of Leadership and
Human Resource Management at the WHU-Otto
Beisheim School of Management in Vallendar, Germany. Holger Ernst is a professor and holds the
Chair of Technology and Innovation Management at
the WHU-Otto Beisheim School of Management.
Comment on this article or contact the authors at
smrfeedback@mit.edu.

REFERENCES
1. See, for example, T.J. Allen, ?Managing the Flow of
Technology? (Cambridge, Massachusetts: MIT Press,
1977).
2. J. Santos, Y. Doz and P. Williamson, ?Is Your Innovation
Process Global?? MIT Sloan Management Review, 45
(summer 2004): 31-37.
3. S.D. Eppinger and A.R. Chitkara, ?The New Practice of
Global Product Development,? MIT Sloan Management
Review 47 (summer 2006): 22-30.
4. J.N. Cummings, ?Work Groups, Structural Diversity
and Knowledge Sharing in a Global Organization,? Management Science 50, issue 3 (2004): 352-364; and D. van
Knippenberg and M.C. Schippers, ?Work Group Diversity,? Annual Review of Psychology 58 (2007): 515-541.
5. J.N. Cummings, ?Work Groups,? Management Science 50, no. 3 (2004): 352-364.
6. D.C. Hambrick, S.C. Davison, S.A. Snell and C.C. Snow,
?When Groups Consist of Multiple Nationalities: Towards
a New Understanding of the Implications,? Organization
Studies 19, no. 2 (1998): 181-205.
7. M. Hoegl and L. Proserpio, ?Team Member Proximity
and Teamwork in Innovative Projects,? Research Policy
33, no. 8 (2004): 1153-1165.
Reprint 50412.
Copyright ? Massachusetts Institute of Technology, 2009.
All rights reserved.

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