By Adrian Stalham
We’ve all experienced it in modern business life – a silo mentality between teams or departments. This manifests itself when several departments or groups within an organisation do not want to share information, or work, with other individuals in the same organisation. It reduces efficiency in the overall operation, reduces trust and morale, and contributes to the demise of a productive company culture.
Most organisations seek the opposite. To be more collaborative, have a vision that everyone is aligned to, communicate better or simply improve trust and accountability. All of those things, when properly executed and weaved into the culture, have an amazing effect on the effectiveness of an organisation. The reality is, of course, organisations struggle with their historical systems and structures, and the fear of loss of control.
So what causes silos? And what can we do about them?
Structures and principles
You might think that century-old theories wouldn’t persist in today’s fast-paced, technology-driven world. Think again. In fact, much of what is taught at business schools is based on concepts from the early 20th century. This is also what you’ll find in the workplace. If you recognise any of the following, you have seen these concepts in action:
- Organisation charts – the chain of command and hierarchy separated from the work
- Reductionism – the division of labour and work into specialisms
- Structure determined by functions – Design, Build, Test, Deploy
- Reward and punishment as motivators
- Individual performance evaluations
- Department goals
- Bureaucracy – process and policy to control the masses (in place of good management)
- Theory X – assuming workers are inherently lazy, have little ambition, are self-interested, motivated by money, avoid responsibility and are driven by individual goals.
Fundamentally, most organisations are using structures and management practices that are remarkably out of date. There has been little management innovation in this area in the past 100 years. It would be easy to blame the creators of these management practices – the likes of Frederick Winslow Taylor, Fayol and Max Weber (who all published their works in the early 1900’s). But that would be wrong. They lived at a time when industrialisation was being fuelled by massive movements of labour from the land, and from local crafts, to the factory. In their day, they were brilliant. Their work was instrumental in dramatic improvements in efficiency and productivity that supported the industrial revolution.
However, that was a time when life, and business, was much simpler. We should not be surprised that these structures and principles from a bygone age are now failing us in a world of increasing complexity, connectedness, technology and pace.
The problem is that these structures and practices create vertical alignment. This is fine when you are passing work down a production line. Each area does it’s activity and passes it on. But as life and business became more complex over the last 100 years, the work became knowledge work and cross-functional outcomes became important. Those outcomes run horizontally across the organisation. This juxtaposition between vertical structures and horizontal outcomes is a major issue for modern organisations, because it causes the all-important accountability to evaporate in favour of a focus on activity. From a Systems Thinking viewpoint, we get local optimisations in each department or function as they try to be the best they can be. But in that search for internal efficiency, the functions become “selfish” as they lose sight of the optimising goal of the organisation.
“Every system is perfectly designed to get the results it gets”
W. Edwards Deming
The thinking mistake is that if every department is efficient, we will have an efficient system overall. This is simply wrong. In fact, the system becomes sub-optimal in this situation. W.Edwards Deming and Russell Ackoff taught us this in the 80’s. What have we done since? Mostly ignored their wisdom and failed to adopt their practices.
“The performance of a system is never the sum of the performance of its parts; it’s a product of their interactions”
And so, silos are precipitated by the structures and principles held over from the distant past. To eradicate them, we have three main levers we can use; structures, incentives and leadership behaviours.
We could of course restructure. Some companies have embraced a network style structure that supports truly cross-functional working and outcome-oriented teams. But in reality, organisational structures have huge inertia and are difficult to change radically. It’s much easier to start a new organisation with a new outcome designed structure, than change an existing one. Unfortunately, most of us don’t have that luxury, so what‘s the alternative?
Organisation charts are practically useless – they tell us nothing about how the work gets done. There are two other structures, however, that are important. The Operating Model and the Influencer Network. The trouble is, these two are often invisible to most organisations. Many organisations are only now waking up to the concept of operating models. An Operating Model is the combination of roles, skills, structures, processes, assets and technologies that allow any organisation to effectively deliver on its service or product promises. In effect, it is the way the business is set up to deliver. The current way of operating often evolves organically over time into something ugly, rather than being designed in any holistic way. Meanwhile, the world around them is changing rapidly and they are caught on the back foot.
By identifying a new operating model, we can start to address and optimise how the work gets done. We can explore value streams, remove waste, ensure all departments are aligned to the single optimising goal. We can look at incentives and behaviours. An operating model lens allows you to look at the system holistically, rather than its individual parts.
The Influencer Network, who listens to whom and who actually influences thinking and action, is often completely invisible to management. And yet these are exactly the structures that can be re-designed, re-energised and influenced to break down silos.
The influencer network is even more powerful, but again, your boxes and lines hierarchy structure will be of no use to you here. If you can identify the influencers in your network, and get them to play a key role in role modelling new behaviours, you can achieve a social movement and viral change across the organisation. I recently saw this with a team of fifty people who needed to change and modernise their ways of working. After months of slow movement, we stumbled across the three people who everyone in the team looked to for guidance. Once we had elevated them and involved them in co-designing the future, the rest of the team simply, and willingly, clicked into place. Everyone looked to these three for validation, yet they weren’t obvious on the organisation structure.
“If you give a manager a numerical target, they’ll make it, even if they have to destroy the company in the process”
W. Edwards Deming (adjusted for inclusion)
Often when I come across a silo problem, the first thing I look at is the incentives, targets and goals. Regularly I discover complete misalignment between departments.
A client I worked with had an IT department hiring in contract expertise. They needed high capability and high quality people, and they needed them now. They were under pressure to hit tight schedules and quality standards.
The team liaising with the companies that source these contractors was Procurement. They were incentivised to manage (and reduce) costs to the organisation. They paid the minimum margin they could to the suppliers and implemented strategies to taper down payments over time.
Unless I missed a memo, low cost and high quality and not usually synonymous.
And so the suppliers used junior recruiters and provided C-team contract resources, interview debt was driven to the hiring managers who were desperately trying to find the quality, whilst those important IT deadlines were missed and the cost was driven elsewhere in the organisation as a consequence. The tapering of payments incentivised the recruiters to re-use those contractors elsewhere once their return on them diminishes, robbing the organisation of continuity and knowledge. These were great scenarios for causal loop diagrams to discover adverse balancing effects that bring an organisation back to its status quo.
Of course, we can’t blame either team (even the recruiters), they are simply operating based on what they are each incentivised to do. What we need to do is ensure all teams are contributing to the optimising goal of the organisation. Once we can get all departments aligned with the bigger cause, we are all rowing in the same direction. Yes, this means some departments are therefore sub-optimal to what they could be doing, but if it helps optimise the outcome, it’s worth paying the price.
An alternative to the above scenario would be Procurement working with a resource partner whereby they are paid well to put the best recruiters on the job, find the best talent, and retain them. The IT managers hit their schedules and quality is reached, resulting in value and prosperity for the company. The sub optimisation is that we are now prepared to pay above the minimum rate for the resourcing, but of course, this now pales into insignificance against the value generated.
Looking at the resourcing cost in isolation would assume it is not part of a system and that it has no effect elsewhere on behaviours and interactions. This is simply wrong.
All functions should be incentivised in a way that contributes to the overall goal of the organisation.
I recently engaged a Senior Leadership team at a client site. As part of that engagement we showed them a Gemba video. The concept of Gemba is a Lean term and means “to go to where the work happens”. This Leadership team were far too busy in back to back meetings to walk amongst their teams, so we brought their teams to them. The video had their people talking about the systemic issues that slow them down on a daily basis. These were cross-functional issues that the individuals themselves couldn’t fix.
The video was a tough watch. People trying to do their best, but hampered by the system. I asked “Did you know about these problems? Or is this new news to you ?” Of course, the Leadership team admitted that these issues had been known for a while and were not new. “These are happening on your watch” I said. There was a lot of shoe gazing at this point. Further conversation revealed that, as leaders, they rarely worked together on fixing problems. This is where the silos in this organisation were created.
Deming once said, “Management’s job is to improve the system”.
These managers were not working on the system to improve it. They were busy doing other things they thought added value. The reality was they were managing a mess rather than working together to optimise their teams and the work towards creating an outcome.
“You must not run your organisation as a functional hierarchy. You must understand it as a system”
W Edwards Deming
When leaders and managers between functions/departments do not work together on problems in a visible way, neither do their teams. Silos start with the leadership behaviours. Hold up the mirror. Collaborate with your peers openly in front of your teams. Work together on improving the system. Most of the time, change starts with us as leaders.
It’s all about Systems
To summarise, silos are a consequence of outdated structures and practices. To tackle them we need to:
- Understand and optimise the operating model, ideally leveraging the hidden Influencer Network
- Organisation structures should only be changed to support a new operating model. Structure change, without first optimising the operating model, is pointless.
- Incentives between departments (and between the organisation and suppliers) need to be aligned with the overall goals of the organisation. Look for a mismatch in incentives where silos appear.
- Leaders and managers need to understand systems and how to optimise them.
- The role of management is to improve the system. Openly collaborate with your peers and role model the behaviour you need in your teams.
Silos are not a new problem. The reasons why they occur, and the solutions to them, were discovered decades ago. The real problem is the lack of management innovation.
Managers rarely understand Systems Thinking – and yet it is essentially the whole point of their role. Instead, they are caught up with managing activities (local optimisations), back to back meetings, chasing department targets and maintaining the silos and the status quo. Corporate busyness. Meanwhile, the important customer-facing outcomes are left by the wayside. My advice? Study Senge, Deming and Ackoff (and others). Understand Systems and how they work. Go to where the work happens and see it for yourself. Align incentives to ensure the right behaviours are demonstrated. And then visibly act with your peers to improve the system. Improving systemic problems is the role of management.
Let’s get some innovation going in the management space and finally move out of the early 20th century.
Adrian Stalham is an accomplished Transformation Director with Business and IT expertise across varied industries and a Partner at Sullivan & Stanley.
If you’d like to learn more, contact Adrian