How A Company Made Everyone A Team Player

American corporations love teamwork. But few companies are as smitten as ICU Medical Inc. At the San Clemente, Calif., maker of medical devices, any worker can form a team to tackle any project. Team members set meetings, assign tasks and create deadlines themselves. Chief Executive George Lopez says he's never vetoed a team decision, even when he disagreed with it. These teams have altered production processes and set up a 401(k) plan, among other changes. Teams have been in vogue in business since the 1980s. Now, companies are experimenting with different kinds of teamwork as competition and complexity increase and business problems cross departmental or geographic boundaries. Consulting firm Accenture Ltd. has scores of globally dispersed teams serving clients. Teams at International Business Machines Corp. share information on internal Web sites using "wiki" technology that allows collaboration online. Google Inc. assembles teams of three or four employees to assess new ideas. Most big companies assign teams for projects. ICU, which has around 1,480 employees, is unusual in that it allows workers to initiate the teams. It's "rare that a company says, 'Go form your own team and go address this issue,'" says Ben Rosen, a management professor at the University of North Carolina, Chapel Hill. Dr. Lopez, an internist, founded ICU in 1984. By the early 1990s, the company had about $10 million in annual revenue and was preparing for a public offering. Demand for the company's Clave product, used in connecting a patient's IV systems, was skyrocketing; Dr. Lopez needed to figure out how to ramp up production. ICU had fewer than 100 employees but was expanding rapidly. Handling the booming growth and demand "was an overwhelming task for one entrepreneur CEO," says Dr. Lopez, 59 years old. He was still making most decisions himself, often sleeping at the office. Then, he had an epiphany watching his son play hockey. The opposing team had a star, but his son's team ganged up on him and won. "The team was better than one player," says Dr. Lopez. He decided to delegate power by letting employees form teams, hoping it would help him spread out the decision-making and encourage input from people closest to the problems. Some executives hated the idea; his chief financial officer quit. Putting the new system in place, Dr. Lopez told employees to form teams to come up with ways to boost production. It didn't work. With no leaders, and no rules, "nothing was getting done, except people were spending a lot of time talking," he says. After about a year and a half, he decided teams should elect leaders, which brought a vast improvement. In 1995 he hired Jim Reitz, now the human-resources director, who helped him create a structure with a minimum of bureaucracy. They developed core values -- "take risks" -- and so-called rules of engagement -- "challenge the issue, not the person." At the same time, ICU started paying teams rewards based on a percentage of the cumulative salaries of their members. It worked. Employees embraced teams. Today 12 to 15 teams finish projects each quarter, often meeting once a week or so. The typical team has five to seven members, and the company allots $75,000 quarterly to reward those that succeed. Teams have propelled changes over the objections of top executives. Dr. Lopez, worried about the cost, didn't want to institute a 401(k) plan, but acquiesced after a team recommended one. He now concedes the plan has helped in retaining employees. Dr. Lopez can veto team decisions but says he hasn't yet. For teams to work, employees need to feel they have authority, he says. A veto would "really have to be worth it," Dr. Lopez says. The team would have to be putting the company "on a pathway to destruction." So far, that hasn't happened. ICU's revenue grew 28% last year to $201.6 million, though the company projects that revenue will decline this year. Its stock has climbed more than sixfold in the past decade. Many teams have delighted executives. A few years ago, Don Ramstead, who planned manufacturing schedules at the time, watched a forklift inefficiently shuttle parts back and forth between a molding site and a warehouse. He talked with colleagues, and proposed a team to reconsider the manufacturing process for the Clave, still one of the company's top sellers. The team, which ultimately included the director of manufacturing and the head of logistics, in six months cut the process to nine steps from 27, saving at least $500,000 annually. Mr. Ramstead's cut of the reward was about $1,500. Dr. Lopez -- whose hobbies include competitive free-diving, which involves descending underwater as far as he can while holding his breath -- thinks the extreme team approach could probably work only in a company culture similar to ICU's. "The way I created this company, the employees sort of follow my personality, and my personality is to be very competitive," he says. "In a competitive environment, this is what works best. It allows these people to take control -- they can do as much as they want to do and can advance as much as they want." Jeff Polzer, a Harvard Business School professor, says teams generally amplify a company's culture. Healthy cultures tend to produce collaborative teams, while divisive, political cultures become more so. The strategy can be effective, as long as companies impose ground rules to prevent chaos, says Mr. Rosen of the University of North Carolina. But Mr. Rosen and others say teams can also be inefficient and distracting. It "has to be done in a culture where people understand they just can't blow off everything else they're doing," he says. At ICU, team members don't get a break from their regular jobs. Serving on teams is technically voluntary but some employees with special expertise are "requested" to join. "It's above and beyond your job," says business-applications manager Colleen Wilder, who has served on many teams in the 10 years at ICU. "You still have to get your job done." The rewards can create tension. Ms. Wilder once balked at sharing a reward with co-workers she thought had joined a team solely for the money. She proposed dividing the money based on what tasks team members performed. "I said, 'You did nothing, and I propose you get nothing,'" she says. The team agreed. The payment system has been changed to peg the size of the reward to the importance of the project. "People started thinking, 'We created a whole new product for the company and these guys painted the lunch room, and they're getting the same amount of money that we are?'" Mr. Reitz says. He encourages employees to question whether teams really met their goals, or whether a project is significant enough to merit high reward levels. Over the years, ICU has instituted more rules to help teams function smoothly. A group of employees created a 25-page handbook that concretely spells out team operations -- for instance, listing eight items for "What should we do at the first meeting?" -- and addresses frequently asked questions. Teams must post notes of each meeting to the company intranet, where any employee can offer feedback. Teams aren't perfect, but Dr. Lopez says they're better than the alternative: A while back, the information-technology department ordered new laptops that many traveling staffers find too heavy. "That's what happens when you don't form a team," he says. "Top-down decisions are frequently wrong."