Departmental Silos: The Silent Productivity Killer [New Research]

Written by Cindy Praeger and Eskinder Assefa

Departmental silos in business are organizational units that should operate as specialized components of the proverbial ‘well-oiled machine’ but, unfortunately, almost always wind up operating increasingly in isolation of the rest of the company and will often end up in turf wars.

Organizational units created to provide excellence in some functional area inevitably grow to the point that they become more or less independent of the rest of the company. That, in turn, leads to fragmentation, destroying synergy with the rest of the organization and, at the same time, wasting resources by replicating expertise and data found elsewhere in the company choking the flow of information and making most cross departmental projects failures.

The question to CEOs is how to foster a high-performance company culture of building centers of excellence while maintaining tight unison of shared purpose, mission, communication and collaboration necessary to quickly adapt in a highly changing world and adopt industry best practices quickly as departmental silos affect cross functional teams working together to achieve the company's targets and goals.

The first step towards effectively eliminating departmental silos is to understand how they are created in the first place. When silos become entrenched in an organization, cross divisional collaboration evaporates and the amount of lost time and rework increases and your team loses sight of the bigger picture.

How Departmental Silos Are Created

Ironically, silos are consequences of scale and maturity and the implementation of management teams.

Since time immemorial, jobs have been broken out by areas of expertise. Before the industrial revolution, we had farmers, shepherds, artisans, money changers, and merchants who came together in marketplaces. This made good sense because each of these specialists had expertise that took time and energy to create. Their expertise was not easy to replicate.

Then, the beginning of the Industrial Revolution heralded an era when entrepreneurs created companies to leverage the benefits of mechanization. The management of those companies recognized that there were areas of expertise that needed to be cultivated. This led the entrepreneurs to create functional organizational units—units that eventually proved to be embryonic forms of organizational silos.

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As they grew in size, these company silos became disconnected from other units that should service them and that they should serve. They became increasingly self-sufficient and began to duplicate expertise in other areas so they can become even more independent.

These specialized organizational units continue to make a lot of sense today. In fact, today there may even be a greater imperative because the world is becoming increasingly complex and necessarily demands increasing specialization. Specialists in any area will seek out like-minded colleagues to work with. The leadership team is often doing what they thought was expected of them, as their team goals may not align perfectly with company goals.

Current Metrics Are Siloed by Department

Corporations need to foster core expertise in an ever-growing number of specialist areas. It is this very need for increased specialization that drives functional divisions within companies.

Senior managers tend to manage the organizational divisions in their companies in ways that minimize complexity. They do this by establishing metrics of performance they will use to evaluate the divisions of their companies and the VPs and general managers of those divisions. Ironically, the managers inadvertently establish cultures that encourage the development of silos that are so devastating to their companies over the long term.

These metrics for performance often relate exclusively to the performance of the divisions under their direct control and don't encourage cross-divisional collaboration. Those types of metrics are difficult to articulate. It is no easy task to develop metrics that encourage collaboration and that don't allow the parties in question to "game" the system.

departmental silos can kill growth

Both first-hand management experience as well as academic research shows that organizational units can simply not rely on other parts of their own companies to deliver on their promises. The organizational units learn that if they want to get a job done, they have to do it themselves—each organizational unit must replicate expertise that is already available elsewhere in the company.

Costs due to this duplication increase at a much faster rate than any associated benefit to the company—especially revenue. Profits dwindle, and the company begins a downward spiral.

This is exactly what happened with General Motors in the late 90’s and early 2000’s. Once the largest auto manufacturer and one of the top companies in the world, it came to the brink of bankruptcy.

Departmental Silos are the Silent Killer because they occur normally and incrementally-- all but invisible and decimate team work while creating information silos. They remain invisible because senior management doesn’t have the optics to identify the costs associated with these silos or how they inhibit organizational learning and integrated corporate planning.

This is the conundrum with which all growing companies need to grapple with sooner or later. On the one hand, grouping individuals who work in a similar capacity tend to increase excellence in that area as they learn from each other. The “learning curve” proved that the more a group does something, the faster that group can consistently produce high-quality work.

On the other hand, when people are grouped functionally and only interact with each other, they tend to see what they do as the “end-all” and lose sight of the unified vision of the bigger picture. Inevitably, they start fighting with other groups whom they believe do not understand what they do and only want to diminish or tarnish their efforts in some way.

The Silo Solution: A Shared Mission

As we have seen above, silos are both good and bad. Their strength is in that they foster the building of expertise and centers of excellence that are critical to attaining a position of leadership in a market. However, you don't want a silo mentality to permeate your company and make your team members feel like they are operating in a vacuum, they need to share vital information between departments and increase team work.

Their weakness is that they lead to the fragmentation of a company’s overall know-how—its collective knowledge and excellence—eventually leading to its demise.

The challenge for any CEO is to let silos do what they do and foster centers of excellence, but somehow find a way to weave them together into working as a single unit—similar to the way the human body functions with its specialized organs expertly doing one thing, while the brain orchestrates these various functions into a highly performing organism.

In other words, CEOs must find a way to ensure that everyone in their companies has a sense of shared mission, that they understand how their individual expertise fits into the whole strategy, and how they contribute towards the execution of the overall strategy and work towards a common goal.

This is a two-way street where Senior Management fluidly and constantly communicates strategy all the way down to every employee, and the insights and experiences regarding the execution bubble up all the way to the top to inform future decisions of Senior Management.

We call this kind of work—knowing what the end game is and working both effectively AND efficiently towards the end game—Intelligent Work.

What CEOs need to destroy silos and increase focus and productivity is an Intelligent Work Platform that enables them every day to confidently execute their growth strategies by bringing everyone in their company together to work as one unit.

How do enterprise systems solve the problem of silos? They break down silos by providing alignment towards a common company goal, organize cross departmental projects, increase collaboration, provides a simple repository to share information and increase the customer experience. No matter how you define silos in your business, Rhythm is a silo killer, put it to work in your organization. See the Intelligent Work Platform in Action.