Are Organizational Silos Impeding Your Business Agility?

What is a silo?

Most companies have organizational structure and systems that are formed around skills and functions, rather than around end-to-end outcome-focused groups such as a product, service, business outcomes, or customer experience. These organizational silos are identified as one of the top-ten impediments to business agility in consecutive annual Business Agility Survey Reports from the Business Agility Institute. 

In his article “How do Committees Invent?” published in Datamation back in 1968, Melvin Conway wrote what has since become known as “Conway's Law”:

The law is based on the reasoning that in order for a software module to function, multiple authors must communicate frequently with each other. Therefore, the software interface structure of a system will reflect the social boundaries of the organizations that produced it, across which communication is more difficult.



That is, if we organize our teams based on the systems they develop and maintain, the overall outcome will be misaligned from the end-consumer’s needs.

The Impact of Organizational Silos

Organizational silos can be found across organizations and they can be a problem for large and small businesses alike. Not only can silos make it difficult for communication and collaboration to occur across individual teams or business units, but they can be resistant to change and may also throw up barriers to cross-team cooperation.

The Current State of Organizational Silos

Today, business leaders often assume that they can make their organizations more agile by simply getting everyone to work faster. Hence there is a lot of focus on productivity, quality, efficiency and speed. This is a mistaken belief, for at least two reasons.

First, the theory of constraints tells us that any improvements not made at a process bottleneck are illusory. So if everyone works faster, but the handoffs between teams are still slow, that faster work won’t produce the desired results.



Let's take the example of the Sony Walkman®, a cultural icon in the 1980s with significant market share and a leading influence in personal audio device technology. But why don’t we have the Walkman® today? Why couldn't Sony take the Walkman® and translate it to the digital era? Because at that time, Sony was riven with silos—one department looking at software, another at hardware, and another one at music. Those silos impeded Sony’s ability to meet the needs and expectations of their end users as technological advances enabled more possibilities with digital audio players (such as MP3 players and Apple’s iPod®).

Being organized into departments becomes unhealthy when the departments become silos. W. Edwards Deming’s quote from his book on this subject, The New Economics for Industry, Government, Education, is still incredibly relevant: 

Deming also went on to clarify that if there is no alignment to the end goal and everyone is working hard in different, self-serving directions, there is no point. Improved outcomes can only be delivered when all business functions work collaboratively towards the same goal.

Take the example of an integration team. Software integration is a specialized engineering discipline that needs to be part of each of these groups—engineering, partnership and product, not outside of it.

The biggest obstacle to agility at most organizations isn’t how hard people work. However, a significant obstacle is the silos between those hard-working people.

Types of Silos 

It’s a natural tendency: as businesses grow, they tend to adopt more traditional structures which leads to centralized functions and divisions. Over time, organizations respond according to their internal needs over those of the market and the customer. And silos spread, ultimately inhibiting collaboration and innovation. 

There are many kinds of silos, some of which are described here:

• Mental silos—A silo mentality is the unwillingness to share information or knowledge between employees or across different departments within a company.
• Social silos—The lack of new perspectives, ability to look outside the box and see it as a whole.
• Data Silos—Silos packed with information that keep people and departments from communicating effectively.
• Process Silos—Focusing on outputs and projects over outcomes and products including its governance. 
• Operational Silos—Organizational design is fundamental to transformational business agility.
• Structural Silos—The presence and quality of the connections between teams is the fundamental expression of the organizations' structure and an indicator of business agility fluency. 

Stopping the Silo Spread 

Mature agile organizations break down all kinds of walls; for example, an organization may bring sales, marketing, finance, and operations into a relevant cross-functional team when needed. Guilds or centres of excellence form around less widely available skills (such as architects, infrastructure, or coaches) to share this expertise, as well as common skills to provide a forum for skills growth and knowledge sharing.

How to Overcome the Silo Challenge

Before we proceed, the basic question to ask is: “Does your company have a strong leadership culture and strategy?” If yes, read on. If not, focus on building that first.

To make your organization agile, you have to vigorously attack your organization’s silos. Align the organization’s structure towards business outcomes; customer experience and journeys; or platforms, products, and services to help reduce internal handoffs and increase team ownership of business outcomes. 

How do we do that? Here are some things we might try:

1. Identify the Gaps as the first step in removing counter-productive silos is to find them. 
2. Create an Aligned One Team mindset (that overrides divisional allegiance) for co-creative efforts toward shared goals spanning functions, teams, and divisions within the organization. 
3. Create and Charter a Coalition Team of change agents to define common goals and ways of working to develop a culture of honor and mutual respect.
4. Gaining Buy-In is important and includes keeping project and product teams small, eliminating politics, building a culture of “disagree but commit”, and developing a sense of accountability. 
5. Transparency and Sharing for all non-confidential information enables all individuals to have access to relevant key information and strategic decisions to help inform appropriate decisions and deliver value.
6. Adopt Agile Methods to help blur and break down organisational silos. An agile organization is designed to collaborate. 
7. Experiment with Organization Structures, Policies and Metrics as needed  to embrace new opportunities with ease and without disruption. 
8. Focus on Outcomes and Products over Outputs and Projects to ensure all parts of the organisation make appropriate business and financial decisions, and control quality processes. Problems occur when processes conflict or lose sight of the customer. 
9. Create Value Delivery Teams that are accountable to deliver a specific outcome,  the team structure by necessity, integrates the skills from multiple functional areas. 
10. Maintain Continuity of Ownership rather than handing off responsibility from a group of “producers” to a different group of “maintainers”. The team that produces a product should be the team that supports and maintains the product. 
11. Network Organization enables fast and simple processes to move people between teams. Communication with affected people must be clear and non-disruptive to form quick dynamic teams. 

As mentioned before, this is not an exhaustive list. There are many tools and practices that you can adopt to improve how your teams collaborate. Large enterprises are losing market share to smaller, more flexible startups. Business agility is an objective for enterprises to become more adaptable and competitive, more dynamic, resilient and customer-centric, but that’s not going to be possible without breaking the silos.