Silos – Why The Bunker Mentality Is A Corporate Liability

Monday, April 10, 2006

Posted on my office wall is an FT article (Simon London, Sep 14th ’05) that I find very relevant and want to file for eternity here so I can refer back to the pearls of wisdom it contains long after the paper that it is written on crumbles and becomes dust. 

The subject is organizational silos – divisions or departments that “would rather burn in hell than co-operate with anyone or anything at any time…..Occasionally, silos become so powerful that an organization is rendered dysfunctional….The irony is that silos arise from the quest for efficiency.  As Adam Smith pointed out, work gets done more quickly when it is divided into chunks and done by specialists…..But while division of labor is good for efficiency, it also breeds a complex sociology…..While work mostly gets done in functional departments, it is crucial to remember that value is delivered to customers via cross-functional processes.  Senior executives are getting worried because the costs of non-cooperation are rising…..companies are under pressure to improve efficiency…..the easy cost cuts have already been made….further progress requires redesigning products & processes from first principles – something that can only be achieved if every department gets with the programme…..Without economies of scope(finding cross-selling opportunities and synergies between business units), what other reason do large, multi-divisional companies have to exist ?…..Like viruses, silos occur naturally.  Ask any large group of normally defensive, insecure people to work together on a project.  Then stand back and watch the silos emerge.  Our society of large complex organizations is a perfect breeding ground. 

This is not to say that managers are powerless to combat them…..a concerted effort to encourage cross-company cooperation can yield results…..Jack Welch’s “boundarylessness” initiative of the mid-90s got the message out in no uncertain terms.  GE’s subsequent adoption of Six Sigma, the process improvement methodology, is credited with further breaking down barriers by giving managers from across the organization a common language…..The kind of defensive, political behavior that encourages silos is a function of corporate culture.  A quick flirtation with Six Sigma or any other management technique is unlikely to change the tacit “way we do things around here”.  More important is the steady flow of signals about the types of people who will do well in an organization and the attitudes that are frowned upon.  Ultimately, then, the tone is set from the top…..”

One Response to “Silos – Why The Bunker Mentality Is A Corporate Liability”

  1. Gopi Says:

    A very interesting read sir, with industries focusing on globalization, one must consider that an organization involving multi cultural functional departments there is an expected medium degree of “viruses” emerging and leading to different types of synergy (one of which is “insecurity”) evolving in this process. I feel that an organization invites such viruses to such breeding grounds by not centralizing the organizational structure in a pertinent way, which then leads to the silos rather than unlike personalities. Wouldn’t you agree only if the chunk of work is satisfactory within a functional unit does it work cross functional.

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