Commodity team motivation and performance

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Journal of Purchasing & Supply Management 14 (2008) 15–27

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Commodity team motivation and performance

Linda Englysta,�, Frances Jørgensenb, John Johansena, Ole S. Mikkelsenc

aCenter for Industrial Production, Aalborg University, Fibigerstraede 16, 9200 Aalborg East, DenmarkbAarhus School of Business, Aarhus University, Haslegaardsvej 10, Aarhus 8210, Denmark

cMads Clausen Department, University of Southern Denmark, Alsion, 6400 Sønderborg, Denmark

Received 7 August 2007; received in revised form 24 January 2008; accepted 24 January 2008

Abstract

In this article, an in-depth single case study is presented in order to explore and discuss the functioning of commodity teams in a global

sourcing context. Specifically, the study aimed at identifying factors that may influence team members’ motivation to participate in

activities that create opportunities for synergy and coordination of purchasing. In the teams studied, motivation appeared to be

influenced to some degree by a number of factors, including rewards, leadership behaviours, goal setting, and the career goals of the

commodity team members. In some cases, inconsistencies between these factors and the objectives of the commodity teams were

associated with lower performance. The paper contributes theoretically by providing a rich description of how commodity teams

function, and to practice by bringing attention to a number of managerial issues that should be considered when implementing

commodity teams.

r 2008 Elsevier Ltd. All rights reserved.

Keywords: Commodity teams; Group purchasing organisation; Global sourcing

1. Introduction

As competition becomes more intense, and companiesare specialising in their supply chain, companies seeksynergies especially in their overall global purchasing effortacross business units (Rozemeijer et al., 2003). For anylarge multinational organisation, purchasing creates acentral and continuing concern, as the organisation hasto ensure that its various business units act so as to achievecorporate-wide synergies. The specialisation of worldwidestrategic business units requires an advanced purchasingsystem to bind them together into an operational whole(Cray, 1984). The organisation needs to maintain anintegrated purchasing system that emphasises the value ofshared interest and helps leverage synergies, while grantingeach business unit the necessary flexibility to adapt to theirparticular environments. The potential for sourcing glob-ally, reducing the supplier base, consolidating purchasing

e front matter r 2008 Elsevier Ltd. All rights reserved.

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ing author.

esses: [email protected] (L. Englyst), [email protected]

[email protected] (J. Johansen).

volume, and bundling negotiation power are some of thebenefits that are clearly prioritised in companies today.However, leveraging synergies in global purchasing is

not a straightforward task and encompasses far more thanjust centralising the purchasing function. One needs abalanced approach which takes into consideration the needfor having problem-solving capabilities close to whereproblems occur, cost containment in each profit centre, andclose relationships with suppliers (Gadde and Hakansson,1994). In a small or single-site firm, purchasing power andknowledge is concentrated in proximity to production,sales, and product development activities. In a larger ormore diversified company, obtaining advantages of aconcentrated and cross-functional effort simultaneously isnot physically possible. Trade-offs may be necessaryregarding whether to have centralised purchasing activitiesfor purposes of synergy within purchasing, or to decen-tralise activities for purposes of cross-functional synergies.A decentralised structure is generally attractive to con-glomerates that have a business unit structure where eachunit produces products that are unique or markedlydifferent from those of other units. On the other hand, a

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ARTICLE IN PRESSL. Englyst et al. / Journal of Purchasing & Supply Management 14 (2008) 15–2716

centralised structure is preferable where several businessunits buy the same or similar goods, which are of strategicimportance to them (Van Weele, 2005). In other words,organisational design is largely dependent on the potentialproduct-related synergies. Most companies organise pur-chasing and sourcing activities in some centralisation/decentralisation hybrid. Furthermore, to increase oppor-tunities for creating synergy within purchasing andsourcing, and to aid in coordination of the variety ofactivities involved, companies may choose to adopt whatare referred to as commodity teams (e.g. Trent, 2004).Essentially, a commodity team is a centrally coordinatedteam that develops and implements company-wide strate-gies for a given commodity. The term commodity is usednot to focus on low-value or low-risk items, but to indicatethat there is some level of basic standard, market ormaterial homogeneity to enable pooling and negotiationacross business units. While Monczka and Trent (1998)concluded that the number of purchasing groups organisedby commodity would continue to decrease gradually, Trent(2004) found that it was still amongst the most commonways of organising in medium–large firms.

Thus, the concept of commodity teams encompasses thesame opportunities and challenges inherent to teams usedin other contexts (e.g. new product development teams).However to date, there are no in-depth empirical studiesfound in the literature that describe the functioning of suchcommodity teams, the opportunities they provide nor thechallenges they face. The overall objective of this paper isto begin to explore the concept and practice of commodityteams, with particular interest on identifying factors thatmay encourage or restrict opportunities for creating thesynergy for which the commodity teams are designed.

In the following sections of the paper, a brief introduc-tion to the concept of commodity teams is presented.Thereafter, the paper provides a review of the work teamliterature considered relevant to understanding the func-tioning of commodity teams.

2. Commodity teams

Daft (2004) argues that sourcing activities across productlines and business units of a diversified company are likelyto be relatively independent. They are only interdependentdue to the potential synergies, not due to any sequential orreciprocal dependencies. There is not necessarily any flowof work between units, and units are only interdependentdue to a sense of corporate linkage and responsibility,where the success of each unit contributes to the success ofthe whole organisation (Daft, 2004). In spite of the verylow degree of interdependence, there has been a tendencytowards more and more coordination of purchasingactivities (Van Weele, 2005). The degree of coordinationtends to increase, but the frequency of pure centralisation isdescending (Fearon and Leenders, 1995). Coordinationand pursuit of synergies is taking place even between unitswhere no corporate interdependence or sense of corporate

responsibility exists, as companies engage in buyingconsortia. This pursuit indicates that expected synergiesare substantial, but also means that it is essential to ensuremutual benefit. Essig (2000) argued that parasite relation-ships or relationships where only one party benefits do notsuffice in purchasing consortia. Within a company,imbalances may be tolerated due to the sense of corporateresponsibility, but the situation is not far from that of aconsortium, as business unit managers are primarilyresponsible for own financial results (Van Weele, 2005).Trent (2004) reviewed organisational design features

across a large number of the US companies, and revealedthat a formal separation of strategic and tactical pro-curement, supply activities, personnel, positions, andstructure was not common. In most companies, strategicand tactical activities appear not to be separated, butmaintained in proximity with internal customers. Thischoice is logical in light of interdependencies in relation toproduct development and daily operations (Daft, 2004),but offers some challenges for the achievement of synergiesacross business units. To accommodate such challenges,many companies appear to make use of centrally coordi-nated commodity teams that develop and implementcompany-wide supply strategies (Faes et al., 2000; Fearonand Leenders, 1995).Commodity teams provide one example of a coordina-

tion or pooling structure within a larger firm, typicallymultinational and consisting of a number of individualbusiness units. Pooling structures are invisible in mostorganisation charts, as they build upon the existinghierarchy or line organisation, but join people togetherin, for example, teams and committees, or distributeresponsibilities through lead buyer assignments. A centra-lised coordinator, on the other hand, is likely to appear onformal charts, and have people dedicated to tasks ofcoordination and corporate purchasing (Cavinato, 1992;Van Weele, 2005).A commodity team generally consists of purchasing

professionals alone, but joins actors across business unitsor operational units with the objective of improving theleverage of the company in order to reduce overallmaterials cost and/or to improve the service obtained fromoutside suppliers (Van Weele, 2005). Members of a com-modity team are often assigned only part time, and areexpected to support team assignments along with respon-sibilities within the local units, which they represent.However, other constellations are also possible. Fig. 1shows teams segmented across two variables, namely timeframe of the teams’ assignment and the personal timecommitment of each member. This figure relates tosourcing teams in general, and is therefore applicable alsoto the particular type of sourcing team referred to as acommodity team. Commodity teams generally have acontinuous assignment pursued by part time members,but might also have dedicated full-time resources andmight be able to draw on additional project resources forlimited periods of time.

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Members move from project toproject

Members assigned permanentlyto a cross-functional sourcingteam with evolving or changingresponsibilities

Continuous support of teamassignments in addition toregular responsibilities

Members most likely report toboth a functional area and theteam

Members support a specific teamassignment or project in additionto regular job responsibilities

Team usually disbands aftercompleting project or assignment

Time frame

Personal commitment

Full time

Part time

ContinuousFinite

Fig. 1. Segmenting sourcing teams by commitment and time frame (adopted from Trent, 1998).

L. Englyst et al. / Journal of Purchasing & Supply Management 14 (2008) 15–27 17

Typical assignments of commodity teams are to establishand pursue cost-reduction strategies, to evaluate and selectsuppliers, and to support sourcing for selected items(Guinipero and Vogt, 1997). These assignments are relatedto economies of scale. Further synergies can however beachieved due to economics of information and learning andeconomics of process (Faes et al., 2000), as well asinnovative problem solving. Economies of informationand learning result from knowledge and informationsharing, whereas economies of process result from stan-dardisation of, for example, benchmarking and sourcingprocedures, joint training and development; economies ofscale are the product of pooling volumes to enforcepurchasing power and reducing the number of globalsuppliers.

In order for commodity teams to provide an organisa-tion with cost reduction and sourcing opportunities, theteam itself must function effectively. In Section 3, a briefreview of literature relevant to understanding teameffectiveness in a more general sense (i.e. not necessarilyrelated to commodity teams) is presented.

3. Team effectiveness

Teams occur more often than not in today’s organisa-tions and there appears to be little doubt that their usewill continue to grow (Trent, 2003). Organisations chooseteam structures because, when effective, they may offernumerous advantages, including increased opportunitiesfor innovation (Goodall, 1990), increased flexibility andquality due to greater breadth and depth of knowledgeand skills, and greater willingness to take risks (Rothwell,1992). Teams are especially appropriate for developingcomplex solutions that involve numerous functions ordisciplines and multiple stakeholders (Trent, 1998).

On the other hand, establishing and maintaining effec-tive teams can be quite challenging for organisations, asboth individual and group issues must be addressed. Thischallenge is often seen in relation to compensation and

reward systems that are used to motivate employees,because the same types of incentives that appeal toindividuals may hinder teamwork (Clark, 2003). Further,when rewards are based on functional activities, as withtraditional compensation systems, teams may actually bepenalised for efforts that enhance collaboration andinnovation (Sarin and Mahajan, 2001). Bullock and Lawler(1984) emphasised the importance of developing paypolicies that directly link team effort and performance toincrease the likelihood of team success, as the team’ssuccess functions as a powerful motivator of futureindividual and team behaviour. Moreover, rewards serveas a form of performance feedback to the teams, indicatingto them that they are achieving the organisational goalsand objectives, which in turn is also highly motivating(Trent, 1998).The difficulty here for organisations is that defining and

measuring team success may not be as straightforward aswhen measuring individual performance. For instance,expectancy theory (Vroom, 1964) proposes that individualswill be motivated to exert effort when they feel those effortswill be rewarded appropriately. If performance measuresare misaligned, both the goals and efforts will be reduced(Pagell et al., 1996). When performance is measured at theindividual level, the link between effort and performancemay be relatively clear. However, when performance ismeasured for a team comprised of individuals exertingvarying levels of effort or with different levels of skill andexperience, this link may become much less obvious andthus less motivating. If the team believes that one or twomembers of the team are responsible for the team’s failureto receive rewards for high performance, motivation fallsand conflict may arise (Clark, 2003). Furthermore,compensation and rewards pit teams within an organisa-tion against one another, as detrimental forms of competi-tion can reduce motivation for teams and cause internalconflict within the company (Druckman and Bjork, 1994).The type of leadership that is appropriate and effective

for teams may also differ significantly from that used with


individuals; according to Zenger (1994), teams with poorlyequipped leaders are highly susceptible to failure. Trent(1998) also reported a strong relationship between teamleader effectiveness and team effectiveness. Teams shouldbe given some degree of autonomy and decision-makingauthority (Hackman, 1987), which may confuse the role ofthe traditional manager/leader within the organisation.Monzcka and Trent (1993) suggested that teams withhigher decision-making authority regarding internal groupprocess issues tend to accomplish their performanceobjectives; thus it may be preferable for the leader toassume more of an advisor or coaching role when the teamsis dealing with such matters. This does not in any waymean that the role of the team leader is obsolete once teamsare functioning with some degree of autonomy. The leaderis still critical in a number of ways. For instance, while ateam is likely to be more motivated to exert effort toachieve performance goals for which they have participatedin setting (Hackman, 1987), the team leader can beinstrumental in linking team goals to the organisationalstrategy.

In addition, the team leader should be in a position toensure an appropriate team composition. As alreadystated, motivation and performance may suffer if some ofthe team members perceive an inequality with respect toindividual contribution from either differences in effort orknowledge and skills. According to Hackman (1987), allteam members should have experience and be knowledge-able about the task to be performed, possess goodinterpersonal skills, have the capacity to assume a broadorganisational perspective, and be willing and able tocommit time and resources to the team. The team leadershould also be in a position to support selection of tasksappropriate for the team. Trent (1998) explained that whentask difficulty, complexity, and meaningfulness are com-patible with the team’s resources, the team is likely to bemotivated to exert effort because they feel challenged butalso capable of succeeding.

The team leader role may also represent an importantlever for the team in acquiring access to necessary resourcessuch as training and development and the time to completetasks and projects. Time constraints as well and lack ofother resources have been shown to have a detrimental im-pact on team motivation and performance, partly becausethe team perceives lacking resources as a sign of lowmanagement commitment (Monzcka and Trent, 1994).Another valuable resource that effective leaders canprovide for teams, and especially teams involved in cross-functional projects, is access to external contacts (e.g.customers, suppliers, other departments, or divisions).Trent (1998) discovered that cross-functional sourcingteams working collaboratively with suppliers tend tooutperform and be more satisfied than teams workingwithout this external contact.

Commodity teams are often subject to some kind ofcorporate leadership, as they may be formed, sponsored orsupported by a corporate buying centre or corporate

purchasing committee. Transformational leadership beha-viours in the central unit have been found to positivelyaffect team orientation and performance (Hult andNichols, 1999). Transformational leadership is facilitativeand focuses on mutual needs, aspirations and values, andaims to raise the awareness of the importance and value ofdesired outcomes. In an international sample, inspira-tional/transformational leadership was found particularlysignificant in positively affecting team orientation. Trans-actional leadership is more focused on ‘‘getting thingsdone’’, and is generally more effective in a centralisedpurchasing process or where the frequency of interactionbetween central and local units is high (Hult and Ferrell,1997).In addition to needing effective leadership, the appro-

priate competencies to complete required tasks within ateam structure and goals and rewards that are well-alignedwith performance measures and strategic goals, teamsshould have a sense of team identity and cohesion in orderto perform successfully as a team (Cartwright and Zander,1968; Katz and Kahn, 1978; Mullen and Cooper, 1994).Both cohesion and team identity keep teams together andcommitted to the tasks at hand because the team membersfeel a sense of responsibility to support the individual teammembers and the team as a whole (Mullen and Cooper,1994; Ellemers et al., 1999). Cohesiveness and team identityare derived from a shared, clear understanding of theteam’s purpose and mission and why these are central tothe organisation. Further, research has demonstrated apositive relationship between team empowerment and teamperformance (e.g. Hyatt and Ruddy, 1997; Kirkman andRosen, 1999). Team empowerment, which is conceptuallybased on Hackman and Oldman’s (1980) job character-istics model, is an increased task motivation due to teammembers’ collective psychological and cognitive assessmentof the tasks for which the team is expected to fulfil(Kirkman and Rosen, 2000). Empowerment is experiencedby the team according to four dimensions: potency, whichis the group’s shared belief in its capacity to be effective,meaningfulness, or the degree to which members achieveintrinsic rewards for completing the tasks; autonomy,where the team perceives itself as having decision-makingfreedom; and impact, which relates to whether the teamfeels tasks have organisational significance (Kirkman andRosen, 1997). Interestingly, the actual level of formalauthority within the team does not seem to be critical forteam empowerment, only that the team feels that together,they can succeed at tasks that contribute to the success oftheir organisation.Some of the theory reviewed above has been derived

from investigations within purchasing, while a large part isbased on research in other contexts, but is assumed to havewide applicability. In summary, the reviewed theorysuggests that there are a number of factors that mayinfluence team effectiveness such as leadership behaviourand effectiveness, compensation and rewards systems,performance measurement and feedback, resource and

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task compatibility, and access to resources. Furthermore,the literature proposes that team cohesion and identity maybe intermediary constructs that are influenced by the levelof team empowerment. Although no causal relationshipsare assumed, a recurring theme in the team literaturepresented here is that these factors seem to impact the teammembers’ motivation to perform and to perform as a team.It is therefore important to identify and understand thefactors that influence team members’ motivation andmotivation to perform as a group, if commodity teamsare to be implemented for the purpose of increasingopportunities for synergy and coordination of purchasingtasks. In Section 4 of this paper, the research approachused to conduct a case study aimed at exploring thefunctioning of commodity teams is described.

4. Methods

The overall objective of the study described in this paperis to explore the functioning of commodity teams. Ofparticular interest is identification of organisational and/orteam characteristics that may influence commodity teamsas they perform their purchasing and sourcing tasks.Further, on the basis of the literature previously presented,the study focuses on factors that may enhance or restrictmotivation of commodity team members’ to perform as ateam, thus providing opportunities for creating synergiesand improved coordination of purchasing activities. Theresearch question underpinning the study can thus beformulated as the following:

Which factors influence commodity team members’motivation to perform effectively as a team that seeksto create synergies and improve coordination ofpurchasing tasks?

In order to explore the functioning of commodity teamsat an in-depth level, a single case study design was chosen.Although a single case study does not allow for general-isations based on findings, this research design provides theopportunity to develop a richer picture of how commodityteams function in practice that would not be possiblethrough, for example, a large-scale survey (Yin, 2002;Flyvbjerg, 2006). Still, it would be difficult to begin to draweven tentative conclusions by examining only one com-modity team, even if data collection were extended overlonger periods of time. Thus, this study includes acomparative analysis of several commodity teams withinone organisation. A distinct advantage of this type ofcomparative analysis is that the organisational context isfixed for all of the teams from and for which data arecollected. A brief description of the company is providedbelow for transparency of contextual factors.

Owing to the desire to capture a rich descriptive pictureof the teams functioning that includes identification offactors that may influence the team members’ motivationto perform as a team, a series of semi-structured, open-ended interviews were conducted. Motivation to perform

as a team, as well as the factors which potentiallycontributed to or restricted motivation, are thus based onthe subjective evaluations of the commodity team membersthemselves and key persons associated with the commodityteams. Quantitative data derived from annual statusreports are also included as a measure of the teams’operational performance. In the following, the procedurefor conducting the interviews and using the interview datato conduct the analysis presented later is outlined.

4.1. Case company background

The case company is one of the largest industrialcompanies in Denmark, employing more than 18,500people worldwide. The company was, until 1971, char-acterised as a flat and centralised organisation with a highdegree of formalisation. In 1971, it was split up in threeproduct groups with a set of common corporate functions,among these a central purchasing department. In order toincrease competitiveness, the company further decentra-lised in the late 1980s, when purchasing was decentralisedas well. All purchasing activities and responsibilities ofsourcing raw materials and semi-manufactured goods weredeployed to today’s business units. The idea behind thisdecentralisation was to have the sourcing decisions closerto the internal customers and thereby obtain betteradoption to local conditions.According to management, the informal network among

purchasing people across business units worked well inthe early 1990s, despite the formal separation. However,due to job changes, new people employed and theacquisition of new companies, the potential volumeadvantages became more and more arbitrary over time,with suppliers exploiting the lack of internal coordination.In order to counteract this negative development a centralpurchasing committee (CPC) was established. The CPCconsists of a purchasing director from each of the 12business units in the company, and is chaired by a memberof the executive committee. The CPC is authorised fromtop management to be the internal forum for developingcorporate purchasing strategies. Due to the size of thecommittee, however, the practical work on goals, strategy,and follows up is in the hands of the vice chairman and asmall development and support office, which has beenestablished to coordinate and further develop grouppurchasing.In 1997, the CPC established a set of cross-divisional

commodity teams with the task of coordinating thesourcing of chosen material groups. The company poolingcurrently includes nine commodity teams steered by theCPC. Together, they account for more than 75% ofcorporate direct expenditures on BOM material. In otherwords, the team tasks and responsibilities have highfinancial impact. The teams are authorised to decide onthe group commodity sourcing strategy, e.g. on preferredsuppliers, supply base optimisation, etc. The implementa-tion as well as the day-to-day interaction with suppliers,


however, is executed in the business units and at the localsites.

The commodity teams are staffed with part timeresources from the local business units. It is voluntary forthe business units to participate in the team’s work, but thebusiness units must in principle, follow team decisions.Therefore, business units with a high purchasing budget ina given commodity group are encouraged to participate inthe team’s work.

Normally, the teams have 4–10 members. Each team isorganised with a manager, lead buyer(s) and members. It isthe responsibility of the manager to staff the team withsufficient people, and only purchasers are members of theteam. The team manager is a member of the CPC, and isalso a director of purchasing within a business unit. This isto secure the link to and commitment from localpurchasing management. The manager is typically fromthe business unit, which has the highest expenditure in acommodity group, or he has specific knowledge of thecommodity area in question. The lead buyers are respon-sible for the commercial issues and the agreementswith suppliers on a group level, and members are re-sponsible for the local implementation of commoditystrategies. The overall belief is that being member of ateam should be seen as a lever to improve the results oflocal business units.

At the end of 2000 extra focus was set on thecoordination, as the CPC, in dialogue with top manage-ment, set some ambitious goals and strategies. The maingoals to be attained between 2001 and 2003 (inclusive) were5% annual price reductions, and a 75% reduction ofsuppliers at the corporate level. The price development wasmeasured by the development of annual average price ofeach specific item, and team performance was evaluated byweighting the price development of each item-by-itemvolume. The CPC vice chairman and the commodity teammanagers together broke down the goals for each team,focusing on performance across business units. In order tostress the focus on the cross business unit cooperation, topmanagement implemented a bonus, which was directlyrelated to the goals. In this way, the business units hadthe opportunity to honour members of the corporate

Table 1

Overview of interviewed persons, teams, and business units

Person ID 1 2 3 4 5 6

Casting M M

Plastics LB

Non-ferrous M

Packaging

Steel M/LB (LB) M/LB M

Pressed parts CPC

Turned parts

Electronics M

EMS LB

Business unit A A B(C) C D D

team structure by paying the bonus earned through theteamwork.

4.2. Data collection

The qualitative data presented in this paper were derivedfrom a series of 14 multiple-researcher interviews with keysenior purchasing professionals, conducted in 2003–2004.Interviewees were selected such as to represent differentcommodity teams, different geographical locations, anddifferent business units. The commodity teams includecasting, plastics, non-ferrous, packaging materials, steel,pressed parts, turned parts, electronics, and electromecha-nical systems. However, only six teams have beensufficiently represented to be subject of analysis, and twoof these were found to be functioning as one, meaning thatfive teams are included in the analysis. The interviews havebeen summarised in Table 1 below. Most interviewees,including a former employee, were seniors in the commod-ity team context, while a few were new commodity teammembers and lead buyers.Interviewees range from commodity team members to

lead buyers, commodity team managers and members ofthe company executive purchasing committee. All com-modity team managers, marked CPC in Table 1, are part ofthe CPC, LB indicates team leadbuyership, and Mindicates team membership. When there are two personsfrom the same business unit, there is a manager–employeerelationship. For example, person 7 reports to person 8,and person 5 reports to person 6. Person number 3 haspreviously been employed in business unit C, where he waslead buyer in the steel team, but is now lead buyer ofelectronics with base in business unit B.Two to three researchers participated in each interview,

which generally lasted approximately an hour and wasguided by an interview framework that was based looselyon the factors related to team motivation and teameffectiveness identified in the literature and presentedpreviously in the paper. Specifically, this involved askingthe interviewed persons to describe the commodity team-work in his own terms, and to gain a subjective evaluationof team motivation and performance as they related to

7 8 9 10 11 12 13 14

M M

CPC M

CPC LB

CPC

CPC

LB CPC M

M CPC M

E E F F G H I J


leadership, compensation, resources, and characteristics ofthe team in which the individual belonged. Below, asummary of the more general responses to the open-endedquestions concerning the overall functioning of theteams is presented. Data relevant to the analysis of factorsspecifically influencing team motivation are discussedlater.

To supplement the subjective evaluation made by teammembers, annual status reports linked directly to teamgoals were obtained from the director of the centralpurchasing support office. These were also the reports onwhich annual team bonus was awarded.

In Section 4.3 of this paper, the individual commodityteams included in the study are described in detail.

4.3. The electronics team—components and EMS

The commodity teams for electronics and electromecha-nical systems share the same team manager and workclosely together. In fact, the team manager sees the two asone team, but with a lead buyer for components and a leadbuyer for electro mechanical systems. The lead buyersdescribe positive synergy between the two groups withinthe team, particularly because the component lead buyeroffers valuable insights for the purchasing of electrome-chanical systems concerning component cost develop-ments. Also, a member states that volume consolidationin the electronics commodity team is one of the largestsuccess stories he has seen.

The lead buyers represent the largest business units interms of purchasing volume/budget, and the lead buyersboth explained that they have succeeded in aligning teamgoals with goals and interests in their business units. Both,independently of each other, reported that they did notdistinguish between their tasks in the divisional andcorporate setting. One explains that he leads an electronicspurchasing team in the business unit, and that the wholeteam acts as a corporate team. Therefore, the corporatecommodity team effectively has access to many resources,and the smaller business units (in terms of electronicscomponent purchasing) benefit from the negotiations madehere. The lead buyers expressed that the commodityteamwork did not really increase their workload, and theyboth benefited personally from the work. One of the leadbuyers said that he valued the leadership and personalprofiling, and the other supplemented in saying that theglobal/corporate perspective was part of the reason why hetook a job in the company in the first place.

Members of the team like to mention the previous teammanager, who was apparently a very visible and strongleader. The current team manager says he believes in thecommodity team structure, but is unaware of targets andmisses strategic orientation and leadership from the CPC.The team manager introduced a meeting schedule wherethe whole team of about ten persons meets five times ayear, and the team manager and lead buyers meet anadditional five times. Furthermore, one lead buyer reports

to the team manager also in the business unit, and this allmeans that the level of feedback is very high.

4.4. Casting

The casting team admits that it has a poor history interms of projects and obtained synergies. One member ofthis team says there is no synergy; another says that to himit is no real organisation, but just a series of meetings. Theyclaim that team cohesion and team identity are low, as aremotivation and efforts to work as a team.The team manager and lead buyer are from the same

business unit, which accounts for approximately 80% ofthe corporate expenditure of cast iron. This business unitbuys relatively few item numbers in great volumes. Theother business units represented in the team are in theopposite situation, buying a wide range of items in lowvolume. One member explained that many of these itemscannot be obtained from the large suppliers to thedominating business unit, which makes pooling impossible.More than one member of the team is of the opinion thatsynergies should be sought amongst the smaller businessunits, excluding the now leading business unit. In fact,volume consolidation on cast items is beginning to beorganised outside of the commodity team.The team meets quarterly and has little if any contact in

between meetings due to geographical distance. The levelof feedback is thus relatively low, and one member argued,‘‘a lead buyer must bring you something—a newsletterwould be the least’’. Several members of the team call fortargets and leadership, which they feel should have comefrom the CPC.

4.5. Plastics

The commodity team dealing with plastics is con-cerned both with sourcing of plastics granulate and withsourcing of component manufacturing. The case companyis itself a plastics component manufacturer, and thereforesources granulate both for own production and supplierproduction.The plastics team has achieved price reductions both

concerning granulate and component sourcing. On thegranulate side, price reductions are a result of scalesynergies as purchasing volumes were pooled. Plasticsteam members report that volume pooling on a corporatescale has been beneficial to the extent that the purchaserswould have pooled volume whether there was a commodityteam or not. However, pooling was not realised withoutdifficulties, as it meant that granulate specification neededto be changed for a range of products. Product develop-ment departments were involved, tests were made and newprocessing tools designed. The plastic team found greatdifficulty in having the project prioritised by the localdevelopment departments, and members asked if productdevelopment should somehow be obliged to or rewardedfor taking part in the teamwork. The selection of preferred


suppliers and standard granulate types seems key to avoidfuture projects of this type, and team members say thatthey feel obliged to use preferred vendors in new productdevelopment projects.

Concerning components, the case company is a largecustomer relative to its suppliers. Several team membersreport that it therefore makes a difference to selectpreferred suppliers and negotiate with a corporate mandateeven when no actual volume is transferred from onesupplier to another. The effect is mainly psychological,they say. It is relatively easy to switch suppliers as the casecompany specifies and sources the plastic granulate andtypically specifies/designs and owns processing tools.However, actually doing this has not been deemednecessary as price reductions were achieved withoutswitching suppliers, and thus without incurring additionallogistics costs.

The team manager thinks the teams has functionedextremely well and achieved a great deal. However, theteam appears somewhat drained by the granulate projectand is still struggling with the establishment of a preferredvendor list. The manager has also faced a lot of changes inpersonnel. One person left the team because ‘‘everybodywent their own way’’ and another left the companyentirely. The team manager needs a lot of resources inthe team now, but this message seems to have comethrough with the contradictory result that the businessunits have drawn their most experienced purchasers out,and sent new, young purchasers in. The team therefore hasa resource problem. In the opinion of the team manager,the team is furthermore burdened with administrativework, which is, in his words, killing teamwork. The teammanager and lead buyer, who represent the largest businessunit in terms of purchased volume, find that it is somewhatcontradictory that they have to create the savings for thesmaller business units, who do not want to do the work.

4.6. Steel

As in the casting team, the steel team has also faced thesituation that a dominating business unit purchases a highvolume on a few item numbers, whereas the others buy alarger range of items in low volume. Therefore, teamdecisions are not enforced or complied with. The teammanager and members expressed that the value of the teamlies in knowledge exchange concerning the steel market.The team also values joint training programs initiated bythe CPC, but members question the value of the team, andone calls the corporate purchasing organisation a shadoworganisation.

The team has met every 3 months. The team has severallead buyers who report on the market situation at themeetings. Also, projects were discussed in terms ofprogress, problems, and expected savings. The team hasmembers from across Europe, but meetings are usuallyheld in Northern Germany/Southern Denmark. Thismeans that members and business units from, for example

southern Europe, spend the largest costs in terms of timeand money, and one does state that it is not alwaysworthwhile to go. Further, a team member explained thattasks in the team differ largely from tasks in the businessunits, meaning that goals differ and are even in opposition,and that resource conflicts arise.

4.7. Non-ferrous

This commodity team has met once or twice each year.The team has two lead buyers with no synergy betweentheir item groups of copper wire, copper band, and brassrods. The lead buyer of brass rods represents a businessunit, which buys approximately 90% of the corporatevolume on these items. The remaining 10% are purchasedby one other business unit, and the lead buyer feels that hewould cooperate with the purchaser in this business unitwhether there was a team or not. The purchasers of bothbusiness units follow the copper market closely, andindividually lock their raw material prices when favour-able. Each business unit returns material to the compo-nents suppliers, and they each have a pile of material forreprocessing at the supplier sites. As each business unitmust account for their own material, the suppliers needs tomaintain two piles and two customer accounts. Thereprocessing price has however been negotiated collec-tively. In a joint effort, the number of suppliers has alsobeen reduced from 5 to 3, and the logistics have beenimproved.The same lead buyer is responsible for the purchasing of

copper band, where a couple of other business units alsorequire material. Here, the total volume is insignificant, yetthe lead buyer believes that there is a psychological effect ofcorporate purchasing, which might yield some benefit withthe suppliers. He says that negotiations are very timeconsuming relative to the actual benefit of a joint process,and that in his opinion, the alignment of specifications,procedures, etc. take too much time. The three businessunits requiring copper band are approximately equal inexpenditures, and the commodity team manager believesthat this item group has achieved good synergies. There arejoint supplier agreements, and the team members indicate asense of duty with respect to using the preferred suppliers.The members also express that learning and knowledgesharing has been valuable, but do not really feel that theteam is a necessary construct, and that some of the work isinefficient.

5. Analysis

As suggested by the literature reviewed previously inthe paper, a number of organisational and/or team charac-teristics may influence team members’ motivation toperform and to perform as a team. These factors havebeen summarised and then used to construct a simpleframework to be used in conducting a comparative analysisof the teams, based on the team members’ own subjective


evaluations. Specifically, the factors that were analysed foreach of the teams included leadership behaviours andeffectiveness, compensation and benefits, resource and taskcompatibility, and team characteristics. Interview datarelated to these factors were first coded and then comparedacross the teams (see Table 2). In addition, responses to theopen ended questions are included in the analysis, as areperformance data for the teams that was derived fromannual status reports obtained from the director of thecentral purchasing support office.

Table 2

Summary and comparison of team motivation factors and characteristics

Electronics Casting Plastics

Leadership

behaviour and

effectiveness

(+) Effective and

visible lead buyers

and manager

(�) Little if any

contact between

meetings

(�) Cen

committ

much po

too little(�) Lack of central

leadership and

strategic orientation

(�) Missing targets

and leadership from

central committee

Compensation

and reward

systems

(+) High frequency

of meetings, and level

of feedback.

(+) Collective

reward system

(+) Co

reward

(+) Collective

rewards

(�) Travel expenses

and time not

compensated

Resource and

task

compatibility

(+) Willingness and

ability to commit

resources and fulfil

team assignments

(+) Appropriate

skills to meet tasks

(�) Lac

availabi

to ensur

team co

(+) Good alignment

with BU tasks

(�) Lac

commitm

technolo

departm

Team

characteristics

(+) Sense of

potency/success,

meaningfulness and

synergies

(�) Low cohesion

and identity, and

limited achieved

synergies

(�) Dec

in the ca

effective

(+) Lead buyers

empowered through

formal mandate

(�) Fragmentation

based on obstacles

for joint goal

achievement

(�) Tar

with lim

impact

(+) High cohesion

and identity

(+) Bel

of corpo

negotiat

(+) Ma

empowe

formal m

Table 3

Commodity team operational performance

Electronics Casting

2003 On target On target

2004 Above target On target

2005 On target Below target

5.1. Team performance

Analysis of the data summarised in Tables 2 and 3suggests that the electronics team worked very well, andwas successful both in terms of operational performanceand motivation to work on a corporate level. Butperformance and motivation do not necessarily gotogether. In the non-ferrous team, there was no relation-ship between performance and motivation, as the team wasperforming very well in 2003 while the team motivation

Steel Non-ferrous

tral

ee with too

litics, and

power

(�) Manager finds

the central leadership

too transactional

(+) Active manager and lead

buyer with transactional focus

llective

system

(+) Collective

reward system

(+) Collective reward system

k of resource

lity. Inability

e appropriate

mposition

(+) Appropriate

skills to meet tasks

(�) The team has very limited

resources, and seems burdened

by administrative work

king

ent from

gy

ents

(�) Tasks in team

and business unit

differ largely, and

give rise to

organisational

conflicts related to

resources and goals

lining belief

pacity to be

(+) Meaningful

knowledge exchange

and training

(+) Autonomy due to formal

mandate

gets met but

ited actual

(�) Low perceived

project success and

impact

(+) Some cohesion and a

sense of duty

ief in potency

rate

ions

(+) Autonomy due

to formal mandate

(�) Team necessity is

questioned

nager feels

red by

andate

(+) Has achieved synergies

related to scale, process, and

information

Plastics Steel Non-ferrous

Below target Below target Above target

On target Below target Below target

On target Below target Below target


was relatively low. Team members explained that there wasa sense of duty to comply with team decisions, and a clearintent to seek synergies on a corporate level, but that theteam structure was unnecessary for obtaining synergies,and inferred excessive administrative work. On the otherhand, the steel team has experienced below targetperformance, due partly if not entirely to increasing priceson raw materials, but indicated that they value the team forsynergies of knowledge exchange and training.

5.2. Empowerment, leadership, and team cohesion

Team cohesion and sense of empowerment were mediumto high in the electronics, plastics and non-ferrous com-modity teams. In these teams, there was a sense of duty tocomply with team decisions, and this cohesivenessappeared to be based on a shared and clear understandingof the teams’ purpose, mission and tasks, and why these areimportant. The team members did not necessarily feel thatthe team organisation was right, but the mission, purposeand tasks made sense to them. Strong and visible leadbuyers and managers had successfully linked team goals tothe organisational strategy. The commodity teams gener-ally lacked central leadership from the CPC and inspiring,transformative leadership behaviours within the teamtherefore seems to have played a significant role. Incontrast, the managers of the steel and casting teams didnot enforce or even encourage team members to complywith decisions Here, the leadership was rather loose, andthe team cohesiveness relatively low.

5.3. Resource and task compatibility

The resource and task compatibility is generally med-ium–high in the commodity teams, as the teams areequipped with skilled purchasers who are certainly ableto pursue the dimensions of the set goals; price develop-ment, savings compared with external benchmarks, sup-plier reduction, and supplier consolidation on spend. Theplastics team, however, would have benefited from a cross-functional composition. In retrospect, it seems that the lackof cross-functional representation has largely influencedthe team motivation and effort, and begun to undermine ateam which has been extremely well functioning. But apermanent cross-functional team composition combinedwith a cross business unit composition would result in verylarge teams, and more flexible structures are needed.Therefore, the case company is now establishing a poolof project resources with a cross-functional competencebase.

Alignment of team and business unit tasks and goals hascome across as a key issue mentioned by many teammembers. In the successful electronics team, the alignmenthas been exceptional, and meant that local purchasingteams have worked as part of the corporate team. Theyhave not distinguished between local and corporateassignments. In the steel team, in contrast, the alignment

has not been good, and the manager even expressed thatthe team tasks and goals were in direct conflict withbusiness unit tasks and goals. Therefore, the unsatisfactoryperformance as a corporate team might have occurred as aresult of prioritising local business unit interests. Themanager took part in defining team goals, but only in termsof targets; the nature or dimensions of the goals were givenby the CPC, and were identical for all teams.

5.4. Compensation and rewards systems

While the lead buyers in the most successful team sawthe teamwork as an opportunity for personal promotionand influence, the general picture is that team members findthat their personal development and career opportunitiesare created in the business units, and not in the commodityteams. In fact, some team members speculated that beingpart of a commodity team might set their career back,because results achieved in the teams are not valued in thebusiness unit, where the career moves are to be made.There is no promotion ladder in the corporate structure, aslong as it is only a coordination structure with no centralorganisation. Advancement in the business unit wouldactually be necessary for anyone striving to become part ofthe CPC, as the committee is by definition composed ofpurchasing managers.The electronics team performing on or above target has a

special meeting structure and organisation, which meansthat there is a high degree of communication and feedback.Embedding of the commodity team in the line organisationand a high frequency of meetings are special features,which might help explain why this team has performed verywell both in terms of operational performance and teammotivation.

6. Discussion

In spite of the shared organisational framework, tasksand goal dimensions, reward structure and central leader-ship, the five teams of this case study function verydifferently, and with varying success. The electronics andnon-ferrous teams appear to be well established andintegrated in the daily operations, whereas the casting,plastics and steel commodity teams seem more detachedfrom the line organisation. Having conducted the inter-views, one of the most striking observations was that thecommodity teams barely functioned as teams, but rather ascollections of individuals. This is surprising, given theefforts made by the company to motivate and directteamwork. For instance, the teams were formally empow-ered to make decisions, a leadership structure wasestablished, and top management attention ensured. Teammanagers took part in formulating team goals, and theteams could, at least partly, define own strategies towardsthe achievement of these goals. A collective rewards systemwas established, and a support function established toprovide service in form of methods, training, and more.


Given all this and according to the literature presented inthe beginning of this paper, the teams should have beenperforming effectively. One explanation for the relativelylow level of effective teamwork might be the lack ofleadership, which many team members clearly felt wasmissing, although this would be difficult to conclude withany confidence on the data available in this study.

Other explanations for the low level of team effectivenessmay be found in looking more closely at some of themechanisms the company had put into place to supportteamwork. For instance, while the teams had participatedin setting explicit, clear and shared goals they consideredmeaningful, these often conflicted with other goals, whichwere often given priority. This appeared to be the case withthe commodity team goal of reducing the total number ofsuppliers, when there were distinct advantages for some ofthe individual team members to maintain relationshipswith select suppliers. In pure centralisation, such dilemmasmight be avoided, but at the same time potentially create asevere conflict between business units and a detachedcentral purchasing department enforcing decisions. In thecase, commodity teams were actually given a mandate toenforce decisions, but this was rarely done. This may havebeen because goals were formulated and logical but notentirely believed in. The team goal setting was a breakdownor operationalisation of goals defined in the purchasingcommittee, and not something coming from the teamsthemselves. Neither teams nor the committee seemed toreally take responsibility for the goals; and while perfor-mance was evaluated relative to goals, there was no realconsequence of performing below target. In addition, itseemed that team members did not find transparency in theannual evaluations. Performance was not related directlyto team activities, and therefore did not really contribute toa sense of team success and achievement.

Team members could of course miss out on a bonus ifperforming below target. As mentioned previously, Vroom(1964) proposed that individuals will be motivated to exerteffort when they feel those efforts will be rewardedappropriately. In the case investigated here, the bonussystem was structured to encourage teamwork. Specifically,when a commodity team meets the set targets on costsavings, each team member is rewarded regardless of whichbusiness units save money. This should enhance collabora-tion and serve as performance feedback to the teammembers. However, problems develop because it is theindividual business unit that pays the bonus to itsemployees. The corporate purchasing structure has nobudget, but leans entirely on resources from the localbusiness units. It is the business units that must cover allexpenses from travel costs to wages and bonus payments. Itis problematic because both the workload and savings areunevenly distributed among business units, and it is notnecessarily those that put in the work who benefit from thesavings. In effect, some business units pay a bonus topurchasers that have been largely absent from the localwork as they were creating savings for other business units.

One commodity team member even reported an examplewhere a business unit had accepted higher costs in theperspective of corporate savings, and at the same time hadto pay a bonus. When business units are only interdepen-dent due to a sense of corporate linkage and responsibility,it does not seem sensible to stretch the sense of corporateresponsibility this far. It enhances the built in dilemma ofthe matrix structure: it can be difficult enough to serve twolords, and there is no need to underline the conflicts ofinterest. Moreover, the rewards established for one part ofthe organisation—in this case the commodity teams—should not conflict with the reward structure or practicesin another parts of the company (i.e. the business units).This problem may however have been alleviated at leastpartly if bonuses had been paid from a central purchasingbudget.The lacking team identity and poor team organisation,

conflicting and/or misaligned goals, and rewards that werenot directly related to team performance may havenegatively impacted the team members’ motivation towork as a team, as suggested by the literature (e.g. Clark,2003; Sarin and Mahajan, 2001; Bullock and Lawler, 1984;Trent, 1998; Vroom, 1964; Pagell et al., 1996). However,the analysis conducted here does not point to a directrelationship between motivation to work as a team andoperational performance. Rather, it seems that motivationto work as a team is linked to synergies requiringsocialisation; in particular synergies of knowledge ex-change and training. Further, members of both the plasticsand electronics teams explained that it had been highlymotivating to join together purchasers of raw material andcomponents, as both groups had benefited largely form theknowledge exchange taking place. Thus, learning andknowledge sharing appear to be (more) important motiva-tors of teamwork in this particular type of team.The evaluation of team performance has been very

strongly linked to synergies of scale in the case company; tosupplier reduction and cost savings. Still, the potential anddifficulty of obtaining such synergies varies across teams.In the plastics team, for example, it was becomingincreasingly difficult to pool volumes, as it required deepinvolvement of product development end productionengineering departments. Specifications of materials, pro-ducts, and tooling were subject to change, and thetechnological complexity of pooling projects therefore veryhigh. Prioritising such projects was difficult and perhapsunreasonable as compared with other business unit tasksand projects. The local investment could be relatively high,and with little if any local benefit. In other teams, marketconditions largely influenced the potential for obtainingsynergies. When the ‘‘low hanging fruits’’ had been picked,the hard work began, and this work did not really seem tobe appreciated locally. Here, it is important to realise thatit is still the local organisation and colleagues with whomteam members would spend most of their time, andtherefore also here they would feel a need to be appreciatedand valued as colleagues.


Ideally, a team should be valuable especially whenfurther cost reductions are difficult to obtain. However, itwas difficult to staff the teams in such situations. Linemanagers could obstruct the participation of their ‘‘bestpeople’’. The idea is that team members and lead buyersshould integrate the corporate work in what they alreadydid, and that the time spent in a commodity team shouldmean less local work with respect to this commodity.Further, the purchasers are given an opportunity tospecialise in a commodity or material category and bereleased from covering everything in their local businessunits. While it might be true that team members and leadbuyers were not ‘‘overloaded’’, the team manager rolegenerally represented additional overtime. With scarceresources on the team manager side, a low frequency ofmeetings is a natural consequence. Here, it is worth notingthat the one team that introduced an efficient high-frequency meeting structure was also the best performingand most highly motivated team.

7. Summary and conclusion

At the outset of this research, we assumed a link betweenteam motivation and team performance. This simplerelationship has been challenged in the above analysisand discussion, as it seems quite possible that a team canperform well in terms of, for example savings, withoutbeing motivated to function as a team. Team membersexpressed the view that the time and money spent toparticipate actively in the team outweigh the benefit, partlybecause of the administrative burden associated with theteamwork, and because of geographical distance. Themotivation to achieve corporate synergies appeared to bemore meaningful than the motivation to work as a team;thus, it is not certain that teams are the most appropriateorganisational form for achieving corporate-wide purchas-ing synergies, especially when shared team goals are secondto business unit goals.

This research has identified several problems that aresomehow a result of the matrix organisation composed ofthe business unit and commodity team structure. One suchproblem is concerned with monetary rewards. It is notuncommon that corporate purchasing structures areinvisible in organisation charts, and have no or littleoperational budget. Therefore, and in order to enhancelocal attention to the corporate work, rewards are oftenpaid by the local business units. It was however found thatsuch a constellation may influence motivation and teameffort negatively, especially where business units are onlyinterdependent due to a sense of corporate linkage andresponsibility. Another problem concerns the personaldevelopment and advancement opportunities in the matrixorganisation. Personal pursuits of leadership responsibil-ities and global learning opportunities can be a potentiallever of team motivation and effort; yet it has also beenindicated that the devotion of time to commodity team-work can negatively affect one’s career. The case here

clearly suggests the need to develop goals and rewards thatare aligned with the individual team member’s careerobjectives, for example, knowledge sharing and learning.The case company has been on a journey from

centralisation to decentralisation, and then towards cen-tralised coordination. This tendency, with the pendulumshifting from centralisation to business unit independence,and then back towards coordinated processes, is alsoobserved in many other companies (Rozemeijer, 2000). Inthe case explored here, it seems that the next step is tocentralise some commodity management further, whileother commodities are managed locally, in a differentiatedmatrix structure. This indicates that the choice oforganisational form is not just a matter of the pendulumswinging for the sake of change itself, nor is it a matter oforganisational size and business diversity alone. Rather,there are commodity specific constraints to be considered.We have seen that for some requirements, the pursuit ofsynergies might not make sense as the technologicalcomplexity demands unreasonably high cross-functionalinvolvement and local investments, or because the supplymarket situation does not make pooling possible. In thosesituations, it is questionable whether a team should still tryto achieve synergies of scale, or rather focus on synergiesrelated to knowledge and information sharing. Thepotential for knowledge sharing and learning that mayonly exist in a team structure should not be minimised.A number of authors have emphasised the importance ofintegration and distribution of knowledge throughout anorganisation as being critical in terms of gaining compe-titive advantage (e.g. Alvesson, 2001; Purvis et al., 2001;Lei et al., 1999).The paper contributes to theory and practice by

providing a unique in-depth description of some of thechallenges that may be present when organisations attemptto implement a team structure in which there arecontinuous goals but only part-time membership. Specifi-cally, the issue of motivation must be considered on both atheoretical and practical level: how can the goals for teammembers within the commodity team be aligned with othergoals, including a team member’s own career aspirations,so that they are motivated to participate in the purchasingand sourcing activities? Barker (1999) and Sewell (1998)both suggested that in some situations, due to peer pressureto perform, team members may seek ways in which tointensify their own behaviour without concern for the teamas a whole. Further, the experiences reported here suggestthat a company may need to weigh up whether teams arethe most appropriate structure for creating purchasing andsourcing synergies when policies and practices in that areaoften rely more on one-on-one relationships betweenindividuals within the company and their suppliers.

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Documents

Commodity team motivation and performance