This article was updated on July 5, 2018.

As a 2016 Harvard Business Review article points out, "Collaboration is taking over the workplace. As business becomes increasingly global and cross-functional, silos are breaking down, connectivity is increasing, and teamwork is seen as a key to organizational success."

In this era of collaboration, building effective teams is critical to achieving business success. After all, you'll rely on the strength of your teams to create and drive your company's value.

Why Teamwork Matters

Your teams perform so many core business functions on a regular basis: They solve strategic problems, drive innovation, serve the needs of your customers, offer competitive advantages and impact your bottom line.

As the New York Times Magazine points out, effective teamwork is a win-win for organizations and workers alike. Studies have shown that "people working in teams tend to achieve better results and report higher job satisfaction," while company "profitability increases when workers are persuaded to collaborate more."

Team Underperformance

Today's business leaders are increasingly aware of the value of building effective teams, and research and front-page business news continue to confirm the connection between effective teamwork and revenue growth. As a result, one might assume that business teams are currently performing at all-time high levels. Unfortunately, this is not the case.

In their book, Senior Leadership Teams: What It Takes to Make Them Great, four pioneering organizational psychologists presented the results from their study, which measured the performance of 120 senior leadership teams from companies of all sizes. An eye-popping four out of five of those senior leadership teams performed at levels that were described as either "poor" (42 percent) or "mediocre" (37 percent). This type of poor performance often sets a negative tone for the organization as a whole.

When thinking about how to build effective teams, it's also important to consider cross-functional teams, which are often created to drive innovation, solve key business problems or otherwise meet customer needs. Stanford Professor Behnam Tabrizi, an expert in organizational transformation, studied cross-functional teams in several industries, including software, retail, pharmaceuticals and banking. He published his research findings in a 2015 Harvard Business Review article, with a title that tells the depressing story: "75% of Cross-Functional Teams Are Dysfunctional."

Tabrizi found that cross-functional teams often failed because they coudn't align with their company's corporate goals, meet customer expectations, adhere to specifications, stay on schedule or meet a planned budget. To make matters worse, some cross-functional teams couldn't even agree on a common language or methodology to discuss their problems.

The High Costs of Team Failure

Underperforming teams can have a major negative effect on your business as a whole. In fact, downfalls in your team structure can lead to failed projects, lost revenues, disengaged talent and a damaged organizational culture. When teams underperform, the work often doesn't get done, the blame game begins, your most talented people may leave for greener pastures, employee engagement can decrease and your bottom line may suffer.

Thankfully, by establishing a solid understanding of the specific conditions and factors that lead to team success, you can work to avoid paying the heavy costs associated with underperforming teams. Learn more in Part Two: A Team Success Checklist.

Tags: Small Business Research & Insights Articles People Management and Growth Employee Engagement and Productivity