Performance factors in virtual and colocated teams

NUMÉRO 2008/02 Performance factors in virtual and colocated teams Pascal Langevin Professeur de contrôle de gestion UPR Economie, Finance, Gestion EMLYON Mai 2008 www.em-lyon.com

Performance factors in virtual and colocated teams Abstract An extensive literature presents teams as a solution well suited to the new global and rapidly changing environment of the 21 st century. However, the literature also indicates that the organization of teams, especially virtual teams, is not exempt from difficulties and suggests that certain conditions for success be implemented. This paper presents the empirical results of a study analyzing the conditions for success of virtual teams. Using survey data from 329 team members, the results show that trust and clear objectives are the two main conditions for success for virtual as well as colocated teams. The other performance factors differ depending on the type of teams and on the performance measurement used. These results have interesting implications for the implementing of control mechanisms in team-based organizations. Keywords Team; Virtual; Performance; Control Résumé Une littérature abondante présente les équipes comme une solution pour faire face à l'environnement global et turbulent du 21 ème siècle. Toutefois, la littérature indique également que l'organisation en équipes, en particulier en équipes virtuelles, n'est pas sans poser des difficultés et que certaines conditions de réussite doivent être réunies. Ce papier présente les résultats d'une étude empirique des facteurs de succès des équipes virtuelles. Se basant sur les réponses au questionnaire de 329 membres d'équipes, les résultats montrent que la confiance et la clarté des objectifs sont les deux principales conditions de succès des firmes, tant virtuelles que locales. Les autres facteurs de performance diffèrent selon le type d'équipe et le critère de performance utilisé. Ces résultats ont des implications sur la mise en place de mécanismes de contrôle dans les organisations en équipes. Mots-clés Equipe; Virtuel; Performance; Contrôle 2

INTRODUCTION An extensive literature presents teams as one of the organizational solutions suited to deal with the unstable, complex, and uncertain new environment. Globalization itself finds an answer with the development of virtual teams whose members use information and communication technology to work at a distance, across space, time and organization boundaries. However, the literature also indicates that the organization of teams, especially virtual teams, raises new issues and new difficulties and suggests that certain conditions for success need to be met. This study explores the influence of these success factors on performance, comparing virtual teams with colocated teams. Based on survey data from 329 managers working in teams, the results show, first, that the type of team has little effect on performance. Virtuality neither increases nor decreases performance. However, the findings indicate that virtual teams and colocated teams do not achieve performance in the same way. Whereas trust between team members and clarity of the team s objectives are, for both virtual teams and colocated teams, the most important performance factors, other factors are less important and vary depending on types of teams and on the way performance is measured. Lastly, performance is not related to group-based evaluation and reward systems. This paper is organized as follows. The first section reviews the literature on teams, which covers their definition, their characteristics, and the conditions necessary to their effective performance. The general hypothesis concludes this first section. The second section presents the research method and the results. The conclusion provides a discussion and suggestions for future research. LITERATURE Definition and characteristics of teams A team is a group of socially identified individuals who are both interdependent and co-responsible and who have been brought together to carry out an activity. The team is socially identified in so far as it is perceived by its members and by others as a social entity integrated within a wider social system (the firm, for example) with which it interacts. The members depend on one another to achieve the task they have been set and they share the responsibility for the results obtained. This interdependence is particularly important and the teams often display a combination of competencies, experiences and diverse material and immaterial resources (Cohen and Bailey 1997; Guzzo and Dickson 1996; Hackman 1990). The increase in the use of high-performance information and communication technologies allows for working relationships at a distance. Thus the team becomes virtual, or remote, when its members can use information and communication technology to function across the usual spatial, temporal and organizational boundaries (Gibson and Cohen 2003; Duarte and Snyder 2001; Lipnack and Stamps 3

1997, 2000; Snow et al. 1999). The members of a virtual team can work together while remaining geographically separated, or even in different countries, in which case they make up a global virtual team. Since they also use means of deferred communication, such as voice mail, they can work at different times; this of course is the norm when they are in different time zones. Lastly, they may belong to different organizations, this being the usual case in virtual organizations (Galbraith 1998; Miles and Snow 1986; Snow et al. 1999; Voss 1996). As Mohrman et al. (1995) point out, several authors have demonstrated how a team organization is better able to respond to the different pressures arising from the environment. This is why crossfunctional teams are considered to be one of the facets of best practice in a quality management approach (Juran 1989). They provide the organizational basis for business re-engineering processes (Hammer and Champy 1993) and, at the same time, enable needs linked to aspects of time management and life cycle such as deadlines and time-to-market to be met (Myer 1993). They foster innovation and organizational learning skills (Kanter 1983; Senge 1990). And finally, they are founded on transversal and lateral organizations (Galbraith 1993, 1994), which make management and information processes more effective (Drucker 1988) and reduce vertical and hierarchical coordination costs. In addition, virtual teams enable companies to access the global labor market and to hire or retain skilled, though remote, employees and/or external experts. They also provide the opportunity to manage around the clock projects, where projects are transferred between teams located around the world (Apgar IV 1998; Cohen and Mankin 1998; Lipnack and Stamps 2000; McDermott et al. 1998; Townsend et al. 1998). Thus, as the integration and differentiation mechanisms necessary for firms to confront the environment (Lawrence and Lorsch 1967), teams can clearly enhance performance. Performance consists of three dimensions in the literature (Hackman 1990; Mohrman et al. 1995). The first measures the team s effectiveness, in other words the extent to which the team achieves its objectives and serves its direct, internal or external, customers. The second dimension is the degree to which the team improves the ability of members to work together in the future. The third refers to the increased satisfaction that members get from working in a team. However, implementing teams is not easy. Collective decisions may take longer than individual decisions. Trying to find a compromise between the members can lead to insufficiently clear-cut decisions. Coordination between the different members within the teams, and the teams themselves within the organization, can prove costly and difficult (Dunphy and Bryant 1996; Sinclair 1992). Lastly, certain authors suggest that, far from being the source of well-being for their members, teams may well generate conflict, pressure, tension and stress, leading to an increase in the rate of absenteeism, turnover and accidents (Cordery et al. 1991; Wall et al. 1986). In short, teams are a mechanism of organizational control (Lowe and Chua 1983) as they enable organizations to reach their performance goals within a given environment. But at the same time, in order to be effective, teams also need to be controlled through what many authors call performance factors or conditions for success (Cohen and Bailey 1997; Hackman 1990; Mohrman et al. 1995; Wageman 1997), which I examine in this study. 4

Factors of team performance To identify the performance factors affecting the success of teams, many authors use the inputprocess-output model as their basis. This model considers that successful team performance (output) is obtained by effective internal functioning processes and the internal social interactions of the team (process), which themselves depend on the initial external conditions characterizing the team and its task (input) (Campion et al. 1993, 1996; Cohen and Bailey 1997; Guzzo and Dickson 1996; Stewart et al. 1999). Other authors move away from this model but retain a similar logic (Hackman 1990; Mohrman et al. 1992; Shea and Guzzo 1987). Finally, others present team success factors without integrating them within a specific framework (Mohrman et al. 1995; Sundstrom 1999; Wageman 1997, Wellins et al. 1994). I take this latter approach to present the principal success factors identified by research. Eight factors can be identified. Group composition 1 is a recurring factor in studies on the conditions affecting team performance. Performance improves when the size of the team is satisfactory and when members combine the appropriate technical, as well as relational, knowledge, skills, and abilities (KSAs). In addition to teamwork skills (e.g., managing conflicts), competencies specific to virtual teams can also be found such as, for example, the ability to communicate at a distance or the capacity to work in isolation (Blackburn et al. 2003; Duarte and Snyder 2001). The make up of the team is determined firstly by the selection of its members when it is initially set up (Klimoski and Zukin 1999; Stevens and Campion 1999) and secondly by the subsequent training of its members (Stevens and Yarish 1999). Task design and team functioning essentially concern the degree of autonomy given to the team and the level of interdependence between its members. Autonomy fosters the participation and the motivation of its members (Cohen and Bailey 1997; Cohen and Ledford 1994; Kirkman and Rosen 1999). Interdependence leads to cooperation and facilitates learning (Wageman 1995). This factor also encompasses the working procedures and norms of behavior within the team (Hackman 1990). The clarity of the team s mission and goals and the responsibilities and objectives of each of its members reinforce the latter s commitment (Gibson and Cohen 2003; Wellins and al. 1994). Wageman (1997) highlights the impact of clearly determined goals. The means by which the goals are achieved, however, should be left to the discretion of the team. The performance measurement and feedback system enables the team to manage its own performance (Mohrman et al. 1992, 1995). This system also encourages the team to develop cohesion by reinforcing autonomy and the responsibility felt by its members (Jones and Moffett III, 1999). In the firms studied by Wellins et al. (1994), the team members participation in performance appraisal was shown to foster continual improvement. The members themselves tend to demand feedback from the other members and from clients who are either internal or external to their team. At the same time, Scott and Tiessen (1999) found that the effectiveness of teams increased with the use of more comprehensive and a wider variety of performance indicators. This aspect is reinforced when the members participate in defining their own performance standards. 1 Items in bold characters correspond to the main success factors found in the literature. Underlined items are those used in this empirical study. 5

The organizational context concerns the support mechanisms provided by the organization to enable the team to function effectively. These include all the resources which foster the working conditions and the environment of the team, e.g. information systems, communication technologies, training facilities, budget, available resources, premises. (Wineman and Serrato 1999). Information and communication systems are critical in virtual teams since they are the main device of cooperation within the group (Bikson et al. 1999; Kostner 2001; Mittleman and Briggs 1999). Among the means provided by the organization to support the team, the reward system has been widely mentioned. Various authors have indicated that group-based evaluation and reward systems incite team members to work in a more cooperative way (Barker 1993; Drake et al. 1999; Lawler 2003; Mohrman et al. 1995; Scott and Tiessen 1999; Wageman and Baker 1997). The team spirit, atmosphere, and trust that develop within a team increase the motivation and effectiveness of its members (Jones and George 1998). Mutual trust is critical in virtual teams because distance limits other modes of social control (Gibson and Manuel 2003; Jarvenpaa and Leidner 1999). Trust also leads to potency or self-efficacy, namely the team s belief in its ability to be successful. The team s conviction that it is able to reach its goals further reinforces the motivation and effectiveness of each individual member (Campion et al. 1993, 1996; Gibson 1999; Guzzo and Dickson 1996; Shea and Guzzo 1987). Lastly, the leader s role is also shown to be crucial in many studies. The leader is, in effect, the one who selects the members, defines the responsibilities and, by his or her managerial competencies and style of leadership, creates the group dynamics which allows the team spirit to develop (Hackman 1990; Manz and Sims 1984; Stewart and Manz 1995; Sundstrom 1999; Wageman 1997, 2001; Wellins et al. 1994; Zaccaro and Marks 1999). The leader also plays an important role as the interface between the organization and the team in terms of protecting the latter and obtaining resources (Ancona and Caldwell 1992). The literature reviewed above is based on a variety of sources: academic or manager-oriented, theoretical or empirical, descriptions of best practices or analysis of data collected through surveys or experiments. While one can observe a consensus regarding the main categories of performance factors, detailed items may differ from one study to another. Moreover, the relationship between these performance factors and the actual performance achieved is not often investigated, especially for virtual teams. Lastly, on this specific aspect, no comparisons have been made between virtual and colocated teams until now. In conclusion, the aim of this study is to test whether performance factors are indeed related to performance actually achieved by teams. In other words, the study aims to test the following general hypothesis: H: Performance of teams is positively related to each performance factor identified. Since the literature provides a lot of conditions for performance, it is first necessary to analyze and to organize these variables into a reduced number of homogeneous factors. Based on these first results it will be possible to break the above general hypothesis up into more specific hypotheses. 6

RESEARCH METHOD Survey I collected the data by questionnaire using an Excel document sent by e-mail. The attached message specified that the questionnaire was only addressed to people working in teams. I defined team, however, in relatively general terms so as to exclude as few people as possible. For example, I included in the target population work-teams belonging to functional departments. The respondents filed the questionnaire directly on line and sent it back by e-mail. It was divided into six sections. The first part concerned the characteristics of the respondent (e.g., function, age) and of the company (e.g., turnover, nationality, sector). The second section identified the features of the team for which the respondent answered the questionnaire (e.g., number of members, lifespan, characteristics of the members). The third section investigated whether the performance factors listed in the literature existed in the team concerned. The fourth part asked the respondent to evaluate the performance of his/her team. Questions about strategy and environment formed the fifth section. Lastly, the sixth part asked the respondents to assess the importance of eight success factors taken from the literature in the success of a team like theirs. I administered a pre-test questionnaire to eight people, comprising managers and teachers, which led to certain questions being made more specific. I sent the questionnaire to 4593 people, in two mailings. Out of the 360 questionnaires returned (a response rate of 7.8%), 329 were used in this study. 198 correspond to virtual teams and 131 concern colocated teams. The initial research population was taken from the alumni directory of a French business school. Respondents may be either team leaders or team members. To ensure that the responses would be based on a certain degree of experience, only those with more than two years work experience were contacted. In addition, to retain coherence in the population, non-profit organizations were excluded. Descriptive statistics The firms in the sample have sales of between 300,000 and 181 billion euros, with an average of 11.3 billion. The average sales are higher for virtual teams (13.2) than for colocated teams (8.9). In the same way, the average company headcount is 46,000 for virtual team respondents, as against 38,200 for colocated team respondents. These differences in size are not significant, however. The organizational structure is relatively diverse with 32% of firms organized by function, 37% by division (products or geographical sector) and 30% by matrix structure. The matrix structure is significantly more frequent in virtual team companies (38% against 18%). This is consistent with the fact that teams are implemented to deal with the new environment, which indeed, according to respondents, 7

is fairly changeable: innovation is frequent 2 (mean = 3.9), the environment unstable (mean = 3.7) and competition intense (mean = 4.4). In addition, the respondents consider that customer expectations and competitor s actions are fairly unpredictable (mean = 3.2 for both). Apart from competition, which is perceived as more intense in virtual teams, there are no significant differences between the two types of teams. The area of activity of the firms in the sample is essentially international (82% for virtual teams, 72% for colocated teams), rather than regional or national (18% for virtual teams against 28% for colocated teams). Thus, virtual teams belong to more international companies. The most frequent sectors of activity are industry (29%) and business services (30% are non financial services and 14% are financial services). This distribution is the same in the two types of teams. Lastly, for both types of teams, the companies in the sample follow strategies of differentiation rather than cost leadership. Concerning the respondents, 76% work in France. They are a little older in virtual teams than in colocated teams: 45% are under 30 while 55% are over 30 years old (63% and 37% respectively in colocated teams). These figures seem to confirm that greater experience is necessary to work in virtual teams, as the literature often indicates. Lastly, the commercial/sales/marketing function is the most highly represented, accounting for 35% of the respondents, followed by management and strategy functions (14%), and financial management (12%). Industrial and logistic functions (5%), personnel (4%) and organization (2%) were less well represented. While this distribution of functions corresponds to the origin of the source population, it is certainly not representative of the population of managers as a whole. It does not differ depending on the type of teams. Based on questions adapted from Duarte and Snyder (2001), Table 1 contrasts characteristics of virtual teams to those of colocated teams. The differences observed concern the characteristics of team members. Compared to colocated teams, virtual team members come from several functions, belong to several organizations, and represent customers or suppliers of the firm. As a consequence, they report to different supervisors. In the sample, virtual teams often correspond to project teams. Hence, they have a shorter lifespan and are composed of members who are temporary (i.e., they join and leave the team depending on the project phase) and who do not work full time for one single team. Lastly, and always with regard to colocated teams, members represent more than two nationalities and work with an 8-hour time-lag at least. Teams in the sample are thus global teams, spread over several continents. Maybe this is the reason why they are also larger than colocated teams. In conclusion, virtual teams are significantly different from colocated teams on a number of criteria. These preliminary findings support the relevance of addressing the issue of their respective performance factors. 2 All means are calculated on a scale of 1 to 5. 8

Table 1: Profiles of teams and members in the sample The team includes members who VT a LT b N c Khi-2 Level d are from more than one function YES 88.4% 67.2% NO 11.6% 32.8% 329 22.11 0.000 are from more than one organization YES 44.7% 9.9% NO 55.3% 90.1% 328 44.57 0.000 represent customers or suppliers YES 45.9% 16.9% NO 54.1% 83.1% 324 28.97 0.000 are from more than two nationalities YES 46.9% 24.4% NO 53.1% 75.6% 325 19.80 0.000 work with an 8-hour time-lag at least YES 19.5% 5.4% NO 80.5% 94.6% 325 13.00 0.000 have a range of skills and experience YES 96.0% 90.7% NO 4.0% 9.3% 327 3.77 0.061 have the team leader as their sole supervisor YES 28.4% 64.6% NO 71.6% 35.4% 327 41.89 0.000 participate temporarily in the team mission depending YES 81.1% 55.7% on needs or phases NO 18.9% 44.3% 327 24.57 0.000 spend more than 80% of their work time for the team YES 42.5% 62.3% NO 57.5% 37.7% 323 12.21 0.001 The area of activity is essentially regional or national 17.8% 27.9% international 82.2% 72.1% 326 4.71 0.039 The organizational structure is matrix 38.0% 18.4% non matrix 62.0% 81.6% 317 13.81 0.000 The number of members is 2 to 10 58.1% 74.0% greater than 10 41.9% 26.0% 329 8.77 0.003 The team lifespan is 1 5 years long 65.5% 46.2% more than 5 years long 34.5% 53.8% 327 12.00 0.001 The type of the team is project-team 49.5% 30.5% other 50.5% 69.5% 329 11.64 0.001 The respondent is under 30 years old 45.5% 63.4% over 30 years old 54.5% 36.6% 329 10.14 0.002 a: VT: virtual teams; b: LT: colocated teams; c: number of observations; d: significance level of the Khi-square test. RESULTS This section presents the results starting with the comparison of the performance achieved by the teams from the sample. The performance factors which affect these teams will then be analyzed and synthesized through factor analysis. The factor scores will then be used as independent variables in the subsequent regression analyses to explain the performance achieved. 9

A comparison of performance achieved by virtual teams and colocated teams Several authors (Gibson and Cohen 2003; Hackman 1990; Mohrman et al. 1995) consider that team performance consists of three dimensions. The first is the extent to which the team achieves its objectives. The second is the degree to which members improve their capability to work together in the future. The third dimension is the level of satisfaction that members get from working in a team. I used these three dimensions in the study, together with the satisfaction of internal or external direct customers of the team. More specifically, I asked respondents to assess the performance achieved by their team on a 5-point scale compared to other teams, with regard to these four dimensions. This method calls for two comments, which constitute the limitations of this study. First, data are based on a self-rated performance. Second, performance is measured at the team level not at the company level and does not indicate whether the team contributes to the organizational effectiveness. Table 2 gives statistics of these four variables for the full sample, for the colocated teams, and for the virtual teams. Results show that scores are high on all dimensions of performance (means = 3.80 to 4.08). Note that there are no significant differences in performance between colocated teams and virtual teams (t-test of comparison of means). Virtuality in itself neither boosts nor decreases performance but is implemented simply as the reaction to contingencies imposed on the firm (e.g., a global environment). I did not control for contingency variables at this stage since the objective of the paper is not to compare performance between teams, but to analyze their conditions for success. This is done in the next section. Table 2: Performance of teams in the sample Full sample Virtual teams Colocated teams mean S.D. mean S.D. mean S.D. Signif. level a Achievement of objectives 4.05 0.805 4.08 0.793 4.03 0.829 0.624 Satisfaction of customers 4.02 0.704 4.01 0.701 4.04 0.709 0.717 Ability to work together in the future 3.87 0.947 3.92 0.869 3.80 1.043 0.290 Satisfaction of members 3.93 0.908 3.97 0.844 3.85 1.001 0.251 a : significance levels of t-tests of comparison of means between colocated and virtual teams Performance factors in the sample This section presents the performance factors that exist in the sample teams. The literature indicates many conditions for the effectiveness of teams, virtual or not. To deal with this large number of variables and to reduce the size of the questionnaire, I selected 18 items on the basis of their significance or frequency in the studies reviewed. The questionnaire asked respondents to indicate, on a 5-point scale, their degree of agreement as to the presence in their team of each of the 18 performance factors. A high score indicates a strong 10

presence of the corresponding performance factor in the functioning of the team. Table 3 reports descriptive statistics for the entire sample, for colocated teams, and for virtual teams. The last column contains the significance level of the t-test of comparison of means between colocated teams and virtual teams. Table 3 shows that the teams in the sample meet most of the conditions mentioned for success. The following items seem particularly important (high mean associated to a low standard deviation): clear objectives and efforts to be implemented to achieve them; material conditions; the leader s role in the achievement of the team s performance; and trust among members. Conversely, group-based evaluation and reward systems, formal working procedures, and training facilities obtain relatively low scores or high standard deviations. Both types of teams obtain high and low scores on the same items as the whole sample, but virtual teams also score high on interdependence and on the selection of members based on their technical competencies. Significant differences can be observed between virtual teams and colocated teams on several variables. Relative to colocated teams, members in virtual teams are selected more for their technical competencies and depend more on each other to get the job done. Thus, the geographical dispersion seems to reinforce group cohesion rather than increasing individualism. This may be explained by the role of companies which, according to the data, offer more training facilities and demonstrate a more developed teamwork culture. Table 3: Performance factors of teams in the sample Full sample Virtual teams Colocated teams mean S.D. mean S.D. mean S.D. Signif. level a Clarity of the team s mission 4.19 0.911 4.18 0.911 4.21 0.926 0.783 Clarity of the efforts to be implemented 3.95 0.977 3.98 0.984 3.93 0.933 0.656 Satisfying material conditions 3.95 1.006 3.95 0.973 3.95 1.062 0.944 Interdependence between members 3.88 1.115 4.01 1.064 3.71 1.148 0.015 Autonomy 3.88 1.013 3.88 0.960 3.91 1.093 0.786 Leader s role in the performance 3.83 0.970 3.86 0.942 3.78 1.027 0.458 Trust between members 3.72 0.970 3.70 0.936 3.76 1.022 0.535 Selection based on technical competencies 3.70 1.064 3.87 0.989 3.47 1.125 0.001 Teamwork culture 3.66 1.249 3.79 1.184 3.49 1.312 0.040 Clarity of members individual objectives 3.63 1.248 3.72 1.224 3.52 1.283 0.161 Appropriate number of members 3.63 1.152 3.59 1.193 3.68 1.108 0.482 Feedback provided on a regular basis 3.42 1.199 3.38 1.122 3.49 1.294 0.457 Selection based on relational competencies 3.23 1.230 3.20 1.222 3.27 1.247 0.586 Participation within the team 3.19 1.176 3.21 1.160 3.18 1.199 0.783 Group-based performance evaluation 2.94 1.265 3.04 1.248 2.76 1.280 0.054 Training facilities 2.89 1.411 3.05 1.445 2.68 1.340 0.023 Formal working procedures 2.69 1.127 2.73 1.145 2.65 1.106 0.496 Group-based rewards 2.46 1.341 2.43 1.292 2.53 1.413 0.508 a : significance levels of t-tests of comparison of means between colocated and virtual teams 11

In order to analyze the influence these performance factors have on the performance achieved by the team in the sample, the number of variables was reduced using a principal component analysis with a Varimax rotation. In the first tests, trust and leader s role were poorly represented. They were removed from the factor analysis and kept as single items in the subsequent analyses. The final analysis yielded six components (with eigen values greater than one), which explained 58% of the total variance (see Table 4). The first axis consists of factors related to the clarity and monitoring of the job. It was named visibility because it enables the team members to know where they stand and where they are going. The second axis corresponds to the facilities and support that the organization offers to facilitate working in teams and was named organizational context. The third component has to do with the internal functioning of the team. The fourth axis comprises the two types of selection of the team members and is called selection of members. The fifth axis represents the group-based evaluation and reward systems and is named group-based rewards. Finally, the sixth component is composed simply of the interdependence variable and is named accordingly. Table 4: Results of the principal component analysis on performance factors Principal components 1 2 3 4 5 6 Cumulative percentage of variance 13% 24% 34% 43% 51% 58% Clarity of the team s mission.713.051.356.002.000 -.104 Clarity of the efforts to be implemented.747.080.072.119 -.074.067 Clarity of members individual objectives.595 -.069 -.238.351.008.264 Feedback provided on a regular basis.598.308.135 -.019.260 -.062 Training facilities.034.781.029.203.029 -.003 Teamwork culture.034.683.099.249.033.198 Formal working procedures.317.494 -.186 -.202.241 -.362 Satisfying material conditions.230.450.193 -.193 -.128.203 Autonomy.188 -.076.631.113.092.066 Participation within the team.030.033.619.326.266 -.108 Appropriate number of members.037.250.603 -.074 -.087.085 Selection based on technical competencies.127.134.238.607 -.122.069 Selection based on relational competencies.076.128.017.731.194 -.191 Group-based rewards.200.041 -.095.262.631.241 Group-based performance evaluation -.098.002.219 -.091.798 -.022 Interdependence between members.051.201.054 -.126.154.814 The six performance factors obtained are consistent with those mentioned in the literature, apart from some differences: items that usually make up the group composition dimension are spread over other axes: number of members is part of the internal functioning axis and members competencies load on the selection of members axis. Interdependence forms an isolated factor, which is consistent with the importance given to this dimension by several authors (Campion et al. 1993, 1996; Wageman 1995). 12

The six principal components have been kept as new variables. Eight performance factors are therefore used in the study: six taken from the factor analysis plus the two variables ( trust and leader s role ) that were kept aside. To ensure homogeneity among variables, the latter two were standardized as were the four performance dimensions. The correlations in Table 5 show that explanatory variables are correlated 3, suggesting the existence of a multi-collinearity problem. In fact, all variance inflation factors (VIF) of the forthcoming regression coefficients are lower than 1.5, which is well below the value of 5 suggested by Studenmund (2001). This reduced number of performance factors now allows us to investigate their relationship with the performance achieved by teams. 3 With the exception, of course, of the factor axes, which are orthogonal. 13

Table 5: Pearson correlations among variables 1 2 3 4 5 6 7 8 9 10 11 12 1 Achievement of objectives 1.661**.373**.412**.399**.201**.331**.205**.182**.178** -.058.130* 2 Satisfaction of customers.661** 1.362**.437**.389**.219**.312**.126*.149**.306**.021.189** 3 Ability to work together in the future.373**.362** 1.663**.480**.261**.298**.222**.187**.179**.118*.191** 4 Satisfaction of members.412**.437**.663** 1.612**.240**.359**.282**.288**.275**.120*.058 5 Trust between members.399**.389**.480**.612** 1.207**.282**.270**.242**.243**.071 -.011 6 Leader s role in the performance.201**.219**.261**.240**.207** 1.188**.180**.087.101.045.019 7 Visibility.331**.312**.298**.359**.282**.188** 1.000.000.000.000.000 8 Organizational context.205**.126*.222**.282**.270**.180**.000 1.000.000.000.000 9 Internal functioning.182**.149**.187**.288**.242**.087.000.000 1.000.000.000 10 Selection of members.178**.306**.179**.275**.243**.101.000.000.000 1.000.000 11 Group-based rewards -.058.021.118*.120*.071.045.000.000.000.000 1.000 12 Interdependence.130*.189**.191**.058 -.011.019.000.000.000.000.000 1 ** indicate statistical significance at the p<0.01 level (two-tailed test). * indicate statistical significance at the p<0.05 level (two-tailed test). 14

Test of hypotheses: The influence of performance factors on performance achieved The general hypothesis assumes that team performance is related to performance factors. Since there are four measures of team performance and eight performance factors, the general hypothesis can be broken up into four specific hypotheses of the following form: H i : P i = a i + b F + ε j ij j i where: P i is the performance measured by variable i, i =1 to,4; P 1 : Achievement of objectives P 2 : Satisfaction of customers P 3 : Ability to work together in the future P 4 : Satisfaction of team members F j is performance factor j, j = 1 to 8; F 1 : Trust between members F 2 : Leader's role F 3 : Visibility F 4 : Organizational context F 5 : Internal functioning of the team F 6 : Selection of members F 7 : Group-based rewards F 8 : Interdependence a i is the intercept in each regression; b ij are regression coefficient of each performance factor j in regression i; ε i is the error term in regression i I used multiple regressions to test these hypotheses. Each of the four dependent variables was regressed on the eight independent variables. Each regression was done twice, once for virtual teams and once for colocated teams, giving eight regressions in total. Table 6 reports the regression results for these eight models. All regression models are significant (p<0.01), with adjusted R 2 in a range of 25% to 62%. Thus, all hypotheses are supported when one considers the model as a whole. In other words, performance is explained by a combination of the performance factors. However, a closer look at the regression models gives interesting results regarding the weight of each performance factor. Table 6 shows that trust is the only variable whose coefficient is statistically significant in all models, followed by visibility whose coefficient is significant in seven models out of eight. Conversely, the 15

coefficient for group-based reward is significant only once. Results for each performance measure are detailed below. Table 6: Regression Results for performance as a function of performance factors Independent variables: performance factors Achievement of objectives Dependent variables: performance measures Satisfaction of customers Ability to work together in the future Satisfaction of members VT CLT VT CLT VT CLT VT CLT Trust between members 0.199** 0.225* 0.239** 0.190* 0.266** 0.437** 0.333** 0.538** Leader s role -0.141* 0.350** -0.060 0.302** 0.196** 0.039 0.100-0.085 Visibility 0.321** 0.258** 0.227** 0.272** 0.182** 0.142 0.232** 0.243** Organizational context 0.164* 0.018 0.039 0.054 0.162* 0.031 0.199** 0.159* Internal functioning 0.211** -0.018 0.126 0.000 0.084 0.102 0.192** 0.213** Selection of members 0.148* 0.090 0.242** 0.243** 0.093 0.032 0.114* 0.196** Group-based rewards -0.103 0.053 0.102 0.043 0.043 0.154* 0.087 0.049 Interdependence 0.082 0.212** 0.220** 0.129* 0.184** 0.209** 0.074 0.015 adjusted R 2 0.299 0.357 0.251 0.367 0.32 0.326 0.431 0.623 F 11.250** 9.599** 8.763** 9.751** 12.103** 8.361** 18.814** 25.813** N 192 124 185 121 189 122 188 120 Regression coefficients. Intercept terms are not reported. VT: virtual teams; CLT: colocated teams ** significant at the p<0.01 level (two-tailed test). * significant at the p<0.05 level (two-tailed test). Achievement of objectives. In virtual teams, when performance is measured by the extent to which the team achieves its objectives, visibility is the most important factor, followed by internal functioning and trust. The organizational context and selection play a role too, but to a lesser extent. Note that the coefficient for the leader s role is significantly negative. This is a surprising finding, considering the importance given to the leader s competencies in the literature, particularly in virtual teams where s/he is often the only link between remote members. In colocated teams, the opposite result is found. It is the leader s role which is the most important factor, before visibility, interdependence, and trust. Satisfaction of customers When performance is measured by the satisfaction of direct customers, selection, trust, visibility, and interdependence are the key factors of success in virtual teams. Again in colocated teams, the leader plays the most important role, before visibility, selection, and trust. 16

In summary, in both cases where performance is assessed by the ability of the team to fulfill its mission i.e., the achievement of objectives and/or the satisfaction of customers one can observe different approaches in the two types of teams. Whereas the performance of colocated teams depends critically on the leaders skills, the performance of virtual teams is based on the clarity of objectives and means and on the members ability to work together, which is obtained through trust and appropriate selection. The difference regarding the leader s role may come from the fact that, in the sample, virtual teams are often composed of members reporting to several supervisors. This may alleviate the perceived importance of the team leader. On the other hand, the leader in colocated teams is often the sole supervisor, who sets objectives and provides feedback to the members, and whose role is thus certainly more visible. Ability to work together in the future When performance is measured by the capability of members to work together in the future, it is not surprising to find that trust and interdependence are among the most important factors. Here, visibility does not play any role in colocated teams, but is still critical in virtual teams. Curiously, the leader is now important in virtual teams but no longer in colocated teams. Note also that it is in colocated teams that group-based rewards have their sole significant coefficient. Satisfaction of members Lastly, when performance is measured by the satisfaction members get from working in a team, the same factors are found to be important in both types of teams, trust and visibility ranking first once again. Not surprisingly, the team s internal functioning, the organizational context, and the fact of working with colleagues who have been correctly selected based on their technical as well as their relational competencies contribute to the satisfaction of members. On the other hand, neither the leader nor the rewards are deemed important for the satisfaction of members. CONCLUSION This study examines the factors explaining the performance of virtual and colocated teams. Results suggest that virtual teams have characteristics that differ significantly from those of colocated teams. They correspond more often to global, cross-functional project teams which operate in an international and matrix environment. These features do not make them perform better than colocated teams which cope with a different environment where virtuality is not necessary. To be effective, teams combine performance factors, among which trust and clarity of objectives rank first, whatever the types of teams and however performance is measured. The importance of the other performance factors depends on the type of teams and on the performance measures used, with the exception of group-based rewards, which are relatively insignificant in the sample and do not seem to have any influence on the performance achieved. This result is not consistent with the literature that 17

presents group-based rewards as a critical factor of team performance (Lawler 2003; Scott and Tiessen 1999). Further research is necessary to examine this issue. Of course, this study has limitations. First, the people interviewed were all managers, coming from the same business school, so cultural biases could have influenced the results. The fact that the literature has considered many different populations (e.g., workers) may in turn have yielded different results. This study should be extended to include other populations to test the robustness of the results. In addition, the study does not sort teams according to their mission. Yet, the literature has shown that, for example, project teams, management teams, and work teams behave differently. Virtuality is only one dimension of differentiation. It would be interesting to analyze the effects of other dimensions as well. Other limitations exist at the survey instrument level. In order to increase the response rate, the questionnaire was shortened and the number of questions was low compared to the numerous items mentioned in the literature. Although the results of the principal component analysis are consistent with the main performance factors found in the literature, it was not possible to build fully satisfactory indexes. The variables used in the study may not correspond totally to the factors presented in the literature. Moreover, performance was self-rated by respondents and this may explain the high scores found in the results. However, this method is often used in the literature and makes comparisons possible. Measuring the organizational effectiveness of teams, that is their contribution to the achievement of the overall objectives of the organization, would certainly be more relevant, but also more difficult to carry out in a survey. Despite these limitations, this study contributes to a better understanding of the way teams perform. To my knowledge, empirical studies comparing the conditions for success of virtual teams versus colocated teams have not been conducted to date. While trust and clarity of objectives remain the most important performance factors in both types of teams, differences do exist regarding the other factors. This study contributes also to a better understanding of what types of control systems might work or not. To maintain teams and members under control, organizations must implement control mechanisms. Many authors have tried to characterize different control modes. Most often, two main control strategies are described which further split into three control modes. For example, Eisenhardt (1985) considers that one control strategy can be accomplished through performance evaluation while the other can be achieved by aligning organizational members' interests through selection, training, and socialization. These two strategies can then be split into the three well known Output-Behavior- Clan (Ouchi 1979) or Result-Action-Personnel (Merchant 1982) control modes. This study seems to indicate that result control mechanisms may not be totally appropriate for teams or, at least, not sufficient. Although clear objectives are still important, performance evaluation and rewards play a weak role. On the other hand, personnel or social control mechanisms such as trust and members selection are of the utmost importance. Since many companies plan to become team-based organizations, they may have to consider changing their traditional result-control system into one which will be more adequate. 18

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