As organizations expand, they tend to naturally develop silos within their structures. The term “organizational silo” often has a negative connotation attached to it. People envision a company with strict protocols and thick bureaucracy that limits the free flow of ideas. However a silo design for an organization is not necessarily good or bad, this depends on what the objective of the organization is. This article captures the benefits of silos, when it causes problems, and how to overcome challenges of silos in business-as-usual situations.
There are a number of situations where it can be a beneficial structure such as:
There are different elements of the value chain adding value at its core to the end customer, more than overall integration. These are the key differentiators that the organization wants to make difficult for the competition to copy. Organizing people in these core functions is important to develop skills and scale to build and deliver differentiating products or services.
The structure is required for accountability, clarity in roles, and responsibility. It also satisfies the expectation of external parties to the organization.
As functional expertise gets deeper, the resources in that function get rich in knowledge and experience, which leads to efficiency improvement.
It is important to focus and concentrate on the task given. A chef, a doctor, a machinist in the workshop, and an assembler at the assembly shop, all need to be good at what they do.
When Silos Pose Problems
In new product/service development where companies need both efficiency and flexibility – organizational silos can make it so difficult.
Inputs /Outputs of a process can change unpredictably – dramatically and frequently because of internal or external process variability.
When the structure does not represent the value chain – it is an organizational design issue. As organizations build or acquire new capabilities, either in incubation or scale, decisions about where to position are very important, yet challenging. Unfortunately, many a time, it is positioned based on short-term views or preferences, eventually, the new capabilities end up being misaligned with the flow of value creation.
When right people are not in the functional leaders’ roles – lacking vision, big picture, communication, and motivation skill
- Same structure with the same set of people and capabilities for too long.
- When in organizations, small details of changes are ignored till they become big and unmanageable.
- When groups are not aligned in their work together so small and medium issues must be escalated regularly in order for decisions to be taken, causing bottlenecks and lowering productivity
A purely functional way of work can bring efficiency to specific functions but eventually becomes ineffective as a lot of non-value-added work is created. Excessive amounts of meetings, complex decisions making, the low outcome of the decisions, too many approvals, too much documentation for communication and alignment across functions cause a delay in responding to changes in customer need. In such situations, functions require a lot of capacity and management bandwidth to keep up with the changes.
Overcoming the Challenges of Silos in Business as Usual
In transformative initiatives, we commonly hear about the cross-functional ways of work and breaking silos. However, companies need to find opportunities to overcome the challenges of silo in ways that don’t require large programs or investment. The following 7 points have been found to be very helpful and are practiced by great companies and leaders.
- Communication, periodic meetings involving people from multiple functions will facilitate sharing of information and improve the visibility of each function’s work.
- Creating a culture of shared responsibilities increases the chances for people to collaborate cross-functionally which helps develop an understanding of broader perspective and make sense of subtle changes.
- Functional heads to take more responsibility to understand the requirement of other functions, internal customers; and communicate the same to the team within the function, allow them to see the big picture and relate their work.
- Functional teams can be organized/structured based on process, which makes it easy to set review points and ensures a smooth flow of information and feedback. Align input and output of process with team roles.
- The organization needs to be redesigned from time to time to have a central focus on the core capabilities.
- Make people accountable for a chain of process of the value chain. How to segment the processes and where we want to keep the coupling is a strategic aspect. This approach is applicable when the processes are changed, front-loaded, or the chain of processes is very integrated. This eases the problem of communication overload from shared accountabilities.
- Rotate team members among functions to develop different functional skills, perspectives of inputs and outputs, understand the impact of one process onto another. However, frequent changes may hinder the development of core capabilities.
Just like removing bottleneck, we need to periodically look at the overall picture, and synchronize. The structural decisions are related to strategic core capabilities, synchronization, orchestration, and global optimization.
The article was published two years back. Can WEA O&M conference started then in Toronto. We had been talking about Cost Efficiency, Health, and Safety, Digital. While looking forward to speaking at the session, I thought I would publish the article on Silos and Cross-Functional Collaboration to our broader audience. Thank you all who inspired me all the time on this topic.
I like your suggestions for overcoming the challenges of managing in a silo environment. Your point 6 on making functional leaders accountable for the overall process in the value chain can be particularly effective if it is done well. Many silo-created issues are caused by mismatched objectives between functions.
For example, perhaps the supply chain function is focussed on cost take out which has resulted in some modest reduction in distribution flexibility. Perhaps that reduction in distribution agility does not impact the current customer base in any meaningful way but it is preventing the sales function from adding new clients that require such agility. This cost-reduction endeavor may consequently lead to a sub-optimized overall outcome.
Mark Poole, MBA, MEng.
Designing incentives and assigning accountabilities that cause silo managers to consider the overall outcome of a process certainly can be very effective in reducing sub-optimization but it has to be done well. It is not a trivial exercise.
In my experience, almost any structure can work. The key is to understand the high-level goals and then construct the framework intentionally, with ongoing follow-up to confirm that specializations and connections are still doing what the organization really needs them to do.Karie Miller