Silos Hinder Organizational Performance

Gillian Tett: Silos Hinder Organizational Performance 
 by Frank Kalman
Organizational silos may have worked in the industrial era, but today’s economy requires a more collaborative structure to be productive, says author Gillian Tett.

The industrial era brought innovation and prosperity to the American economy, both in the products and services it spawned and in the way enterprises organized themselves to achieve maximum efficiency.
But silos, a byproduct of industrial-era organizational design, has long overstayed its welcome, argues Gillian Tett in “The Silo Effect: The Peril of Expertise and the Promise of Breaking Down Barriers.”
The idea that organizations need to be grouped into specialty units is outdated and counterproductive, Tett writes. For organizations to create a thriving modern-day work environment, many firms are going to have to reimagine the physical – and mental – ways in which they organize workers.

Tett, who is also a managing editor and columnist for The Financial Times, spoke with Talent Management on the ways organizations can break down silos. Edited excerpts follow.
How do you define a functional department, or organizational silo?
Gillian Tett, author of “The Silo Effect: The Peril of Expertise and the Promise of Breaking Down Barriers” and managing editor and columnist for The Financial Times, I don’t use the term functional department so much in my book. I talk about silos to really give the sense that any large institution tends to create specialist units, specialist teams, and those can often be quite inward-looking; they can often operate as separate little units inside an organization; and they can often be incentivized to be a bit independent if they’re paid on the basis of their team, not the organization as a whole.
But what I stress is it’s just not about having structural teams or departments. It’s also about having a mentality. You can have silos in organizations in terms of how people are organized, but you can also have silos in your mind in terms of how people are beset with tunnel vision, because they only think about the interests of the team and they only see it through the same vision of that team – and they end up with groupthink and tunnel-vision.
Why do organizations structure their employees in silos?
Ever since Adam Smith wrote about the division of labor, people have known that the way to get efficient outcomes in our modern economy is basically to have specialist people doing specialist tasks. The sheer complexity of today’s business culture and the sheer size of most organizations means that you have to create specialist teams just to get stuff done.
Our brains are not big enough to cope with all the information flying around on a day-to-day basis, unless we have a social map or a classification system used to organize the world. So we can’t get rid of areas of specialization, and we can’t get rid of the need for what I call silos. But the question then becomes how do we manage them to make sure that they don’t become too detrimental and breeding the type of tunnel vision and tribalism that I talk about in the book.
Why were silos once productive?
If you look at organizations, they tend to start off small. They’re freewheeling; they don’t have silos; they’re creative and fluid, and everyone can basically look at everyone else and toss ideas around the table. And then they get bigger and bigger, and what happens is they become successful, which is why they become bigger, and the different teams, or specialist units, begin to harden into rigid structures, into silos.
Then what happens is different teams become incentivized to protect their success from the past. If they had ridden to glory on the back on a particular great product idea or geographic location or business niche, the leaders of that team have every incentive to say, ‘Actually, this is going to be our team. We don’t want to collaborate with everyone else.’
So, what tends to happen is an organization has a structure, which is set up to accommodate a world that existed 10-20 years ago, and it doesn’t really reflect the world as it is today, and it doesn’t really reflect the way that businesses and products and technologies can change. In many ways, what happens is you have rapid conversion in the wider world between different product categories, but organizations don’t reflect that internally.
One example of that is Sony, where you have the company having grown to enormous success on the back of the analogue “Walkman” and then at the turn of the century hardware content and software all started to converge rapidly in the wider world – but Sony continues to organize itself on the basis of separate hardware, content and software silos that couldn’t collaborate, and I’ll say miss the chance to innovate a digital version of the Walkman or what later came to be known as the iPod before Apple launched it.
How do organizations fight the silo effect?
The first step is some ways is the simplest and the hardest: It’s to use what lies between your ears – your brain – and to start off recognizing that we need to think about the cultural patterns that we use unthinkingly every day at work to organize ourselves. In the last few years we’ve all learned about the value of learning a bit about psychology to understand how employees behave. We need to think about our cultural patterns too.
Everyone has a cultural map in their head about how they think the world should be organized. Some of this is based off spoken truth and the organizational chart. A lot of it, though, is not, and it reflects our mental maps inside our head.
First off, think about how you’re organizing the world, classifying the world, into different silos. Secondly, try imagining alternatives by comparing other organizations, other business sectors, and just realizing that, although we’re hard-wired to put everything into buckets, we don’t all have to do that in one way, and often we do create organizational structures that do represent the world that existed 20 years ago.
Thirdly, try to keep the boundaries of your organizational departments pretty fluid, or at least rotate people around and enable people to collide with each other regularly and swap ideas. You can use architecture to break down silos. You can get people to collide that way. You can use training programs. You can use technology.
Technology doesn’t automatically break down silos, but you can enable people if they use their brains to connect with each other, and not just talk to different employees but also reorganize how different information is stored and just try to reimagine the world in different ways.
All of those tools can help break down silos, but the most important one is to recognize that we all classify the world unthinkingly every day, and that has big implications on how we operate and often makes us very blind to risks and opportunities.
What are the factors that leaders should look when trying to change the structure of their teams and organizations?
I think first up is to try to imagine alternatives. Try playing a little experiment and imagine if you starting designing the company by focusing on the consumers – the people you’re trying to serve – rather than the needs of your own employees, or the historical patterns that are taken for granted.
Try to think of incentive structures or power structures. It’s very scary for people to imagine a world where the classification system is changed. People often have a lot of interest in keeping the silos systems the way they are. And if companies were incentivizing people to work in teams rather and silos, then it would make it that much harder to keep fluid boundaries. So thinking about incentive structure is absolutely critical.
Architecture can help. Technology can help. But above all else, it’s about trying to encourage employees to have a few experiments in their minds or their lives and to recognize that every organization has to have a tiny bit of slack. It’s very hard to defend that in today’s culture of high proficiency, where it seems like every employee, every organization, has to be ultra lean, efficient, etc.
But when you have organizations that are incredibly efficient, they tend to end up with very rigid silos, and having a bit of slack enables employees and managers and leaders just enough space to play around with the boundaries of their organization to experiment a bit, to think of alternatives. This can pay enormous dividends and can actually make organizations much more productive and effective in the long term – even if they don’t necessarily seem to be so efficient in the short term.
A great article for all.  Be proactive over the long haul as many of us will have a career of 45 years or more!  
~ Scott and David

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