The Elephant in the Office

Silo Thinking

In every business, the work flows around the organisation something like this…

• Marketing specialists have an insight into what the customer wants.
• Research teams take that insight and develop a new product.
• Buyers purchase materials according to the new specifications.
• Logistics ship and store materials.
• Operations teams take the materials and produce products.
• Sales demonstrate the products to customers.
• Customers buy products.

That is a little simplistic, as the work can ebb, flow and go back on itself. It may also be that your organisation employs underwriters, data specialists or doctors, but the principal points are the same. Work flows around the organisation one way whilst information and money flow back the other, helping control the flow. The aim is to put a product into a customer’s hands and if the system works well, customers give you money.

Businesses work via a messy, complex system of activity and information flows.

How Is Your Business Structured?

Few managers structure their organisations to reflect the way the organisation works. Most marketing specialists work for marketing managers, who work for marketing directors. Research technicians work for research managers, who work for research directors. I could go on, but you know what an organisation chart looks like.

Organisational structures are rigid, hierarchical and ordered.

An Obvious Problem

The systems and processes are at odds with the functions and hierarchies. This insight is not new news. It is blindingly obvious, but it results in silo thinking which leads to all sorts of problems.

• The system has a chain of internal customers making requests, with a paying customer at the end. But in the hierarchy, the customers aren’t present. So, in most organisations, it is only the managers’ demands that matter.
• The managers are measured and rewarded on the performance of their functions. They aren’t paid to care about the system. So, the system’s performance (that the customer sees and feels) is rarely measured and invariably neglected.
• The managers optimise their functions to ensure they look good. They cut costs and allocate resources without regard to the system or customers, as each function looks out for itself.
• It is rare for one function to help another at its own expense. System trade-offs aren’t considered.
• System problems that could (and should) be resolved lower in the organisation are ignored. Information and complaints flow up and down the hierarchy as staff throw their problems “upstairs”.
• Decision-making slows down, and managers spend time reinforcing functional positions instead of improving the system.
• The lack of cooperation between functions creates walls, land grabs, and turf wars.
• Managers saddle the system with costs and delays.

In some organisations, it becomes so bad that it is surprising that the work reaches the customer at all.

The Elephant in the Room

If you optimise the functions, you sub-optimise the system, yet the system determines the revenues you receive, the costs you incur and ultimately, the profits you make. It is hard for anybody to argue about; silo thinking leaves money on the table and customers in the cold. Functionally driven businesses are poorly managed. It is inevitable.

That last statement makes people shudder, so here is a sense check. Is your IT service desk:

1. Staffed by helpful people determined to solve your problems and prevent them from happening again.
2. Outsourced to somewhere where they only care about low wages and getting you off the phone as quickly as possible.

Whilst your IT department may boast a “best-in-class cost base“, it is also responsible for a crowd of expensive employees who can’t get their computers to work. As the wealthiest man I ever met pointed out, “You don’t save yourself rich”.

(If you answered “1.”, please leave your organisation’s name in the comments section; I imagine plenty of people would like to work with you).

Ten Ways to Improve

If your organisation wants to make more money / serve more citizens, the solution is easy: improve the system and stop thinking about the silos.

1. Ask your internal and external customers to measure your service quality.
2. Act on their feedback. Stop the errors and late delivery.
3. Promote cooperation between functions, not competition. If you must have targets and goals, set them against customer feedback.
4. Appoint process owners, system directors, or business group presidents (call them what you want) and make them responsible for the system. But give them teeth. If functional managers can ignore them, then they will.
5. Go and look at the interfaces. Work stalls and costs spiral at the interfaces.
6. Involve your suppliers and distributors. Your customers don’t care where your business stops and your suppliers starts. Treat them as partners. Think win-win, not win-lose.
7. If your business is “business to business”, find out what your customers’ customers want.
8. Create plans and budgets at a system rather than a functional level.
9. Make sure everybody, visits and talks to customers.
10. Take a long-term view of system performance, not a short-term view of functional cost. Any fool can cut costs (and several have).

Scare Away the Elephant

I could go on but you have heard it before. It is easy to point out what to change, but it is hard to do as it challenges everything we have been taught about management. But if you rid yourself of the elephant, you will be amazed at how productive your organisation will become.

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