The Psychology of Teamwork: What Makes Teams Work and Why They Sometimes Don’t

by Atiya Sheikh | Mar 30, 2025 | CEO, CFO, COO, CIO, News & Articles

What makes teamwork effective—and why it fails? In the workplace, no matter the industry—from healthcare and education to finance and tech—success is rarely the result of individual brilliance alone. It’s teams that deliver the results.

But what separates high-performing teams from those that struggle? Why do some groups work like clockwork while others fall into confusion, miscommunication, and missed deadlines?

Welcome to the psychology of teamwork—a field that uncovers what really goes on beneath the surface of collaboration, and how you can build better teams that consistently deliver.

Why Teamwork Is More Complex Than It Looks

Teamwork may sound like a soft skill, but it’s a sophisticated blend of group dynamics, leadership, communication, and role clarity. Psychology first began exploring teamwork through the lens of group identity: how we define ourselves through the teams we’re part of, and how we behave differently when we’re in a group versus acting alone.

Over time, the field evolved. Researchers now examine how teams form, how they make decisions, what makes them efficient—and what makes them fall apart.

When Teamwork Fails: A Real-World Scenario

Let’s take an example from the retail banking world—though the same principles apply across industries.

A customer services advisor meets with a client applying for a mortgage. The standard process involves the advisor gathering initial details and booking a follow-up with a mortgage adviser, who then conducts affordability checks and submits the formal application.

In this case, the advisor assumes the adviser will confirm all financial documentation. Meanwhile, the adviser—new to the branch—believes those checks have already been handled. A key document is missed, the application is delayed, and the client becomes frustrated.

No one was careless. But a lack of shared understanding and clear communication led to an avoidable error.

The Three Pillars of Effective Teamwork: Collaboration, Coordination, Communication

At the heart of any effective team are three essentials:

1. Collaboration

True collaboration isn’t just working side-by-side—it’s aligning on a shared goal and appreciating the value of different perspectives. For instance, in a project team, one member might spot a client risk others overlook due to their specific expertise. Strong collaboration means their voice is heard and considered.

2. Coordination

Teams must be clear on roles, responsibilities, and timing. Who’s doing what—and when? Without proper coordination, even simple tasks can fall through the cracks, especially in industries with tightly sequenced workflows like healthcare, finance, or manufacturing.

3. Communication

Poor communication is the most common cause of team breakdowns. It’s not just about talking more—it’s about ensuring that information is accurate, timely, and reaches the right people.

Why Every Team Needs a Leader—But Not Always the Same Kind

Leadership style can make or break a team. Broadly speaking, there are two main styles:

• Democratic leadership: values group input, ideal for building trust and motivation.
• Autocratic leadership: makes decisions quickly, useful in high-pressure or time-sensitive settings.

The best leaders adjust their approach based on the team’s needs and the task at hand. Interestingly, research shows that gaining power tends to shift people toward more independent thinking—often reducing their willingness to consult others. This is true for both men and women, though women leaders often maintain a stronger group orientation even as they rise.

What Goes Wrong in Group Decisions? Two Common Pitfalls

1. Groupthink

This occurs when teams avoid conflict to maintain harmony. Members stop questioning decisions—even bad ones. It’s how warning signs get ignored and poor choices are rubber-stamped. Think of a team launching a flawed product because no one wants to speak up.

2. Group Polarisation

Sometimes, groups make more extreme decisions than individuals would. A cautious team becomes overly conservative, or a confident team takes bigger risks than any one member would suggest alone. It’s a distortion of reality that comes from collective confidence—and it can backfire.

Size Matters: Why Smaller Teams Often Perform Better

The ideal team size? Around five people.

Once a team grows beyond that, accountability tends to blur. People assume someone else will take responsibility. This leads to social loafing, where effort drops because everyone believes others are picking up the slack.

In large organisations, this problem scales. When something goes wrong, individuals are quick to say, “That wasn’t my area.” The collective “we” dissolves, replaced by a flurry of self-preservation.

The Cultural Side of Teamwork

Teamwork isn’t just psychological—it’s cultural. In Western countries, the individual is often seen as the core unit. In Eastern cultures like Japan or South Korea, the group comes first.

This plays out in how accountability is assigned. In Europe or the US, a failed initiative may be traced to a single manager. In Japanese firms, the entire team may take collective responsibility.

Understanding these cultural differences is vital, especially for global teams.

How to Build a High-Performing Team

Strong teams don’t come together by chance—they’re built deliberately. Here’s how:

• Keep teams as small as possible for the task
• Define clear roles and responsibilities
• Select members for both technical ability and interpersonal skills
• Create psychological safety where people feel safe speaking up
• Encourage empathy and perspective-taking

In some industries, exercises that ask team members to “step into each other’s shoes” have shown real value. For example, asking a team leader to write from the perspective of a frontline employee can open up new insights into how decisions are experienced on the ground.

Diversity Isn’t Just a Buzzword—It’s a Necessity

Teams that are too similar in mindset, background, or personality often suffer from groupthink. In sectors like consulting or investment banking, hiring from the same profile pool can reduce the range of ideas and increase competition within teams.

The strongest teams are diverse in thought, experience, and working styles—and know how to leverage that difference rather than suppress it.

Final Thoughts: The Future of Work Is Team-Based

Whether you’re delivering financial services, leading a healthcare team, managing a creative agency, or running a non-profit, your results depend on how well your team works together.

The psychology of teamwork offers more than theory—it gives us a framework to build better collaboration, avoid common pitfalls, and unlock real performance.

What makes teamwork effective—and why it fails? Because in the end, success isn’t just about having great people.

It’s about building great teams.

The Right Conversation Can Change Everything. Let’s Talk.

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