What Does Silo Stand for in Business
Silos and Turf Wars: What are Organizational Silos and Why Do They Exist
Silos and turf wars
We have all most likely seen organizational silos, or turf wars, in action in our careers. Different departments fight for budget dollars, head count and control over direction, seemingly intent on winning no matter the effect on the overall company. Information sharing between teams becomes scarce as information becomes power in the silo game.
This is so common it is almost considered normal in the corporate environment. In large corporations, silos can get so intense as to bring the competitive drive of the company to a halt – without the active participants having any idea of the damage being caused. In smaller startups, organizational silos can be fatal to the company as infighting for resources consumes energy better spent on becoming successful – and silos may even destroy the company if left unchecked.
What are organizational silos?
Silos definition
The term "silo" generally refers to the large structures (most often seen in agriculture) used to separate different types of bulk materials, such as grain. You've almost certainly seen these large cylindrical towers on farms, and maybe you've even wondered what the heck is inside of them. Most likely you'll just find grain inside these silos, but they can also be used for other bulk materials such as food products, sawdust, wood chips, coal, and even cement.
Organizational silos definition
While agricultural silos refer to the separation and storage of assets vital to a farm, organizational silos refer to the separation of a different kind of asset vital to an organization: people. Organizational silos in business terms is defined as the separation of different types of employees, often defined by the department in which they work.
When a specific department is working efficiently, like a well-oiled machine, one would think this is an obvious plus for the business as a whole. However, when employees in one department fail to interact effectively and efficiently with those in other departments, business operations can start to suffer, resulting in lost revenue and even turf wars between departments. In effect, these organizational silos can become huge barriers within a company and can be very difficult to break down once in place, and that's exactly why we're introducing a 3-part series on this very topic – Silos and Turf Wars.
Why do organizational silos exist?
In business it is ultimately a failure of leadership that allows organizational silos to form and exist. It starts, and ultimately ends, at the top. If we can peek into the conference room of a leadership team, we will begin to see the symptoms of silos and the related causes. Watching the interactions between the members of the leadership team will usually reveal behaviors that create and enforce silos.
Organizational silos form when leaders, and ultimately employees, are allowed to develop more loyalty to a specific group or team than to the employer or company as a whole.
When silos exist, employees become more insular and distrustful of other departments, making it increasingly difficult for groups to work together. Information sharing grinds to a halt. We see this in the interactions in meetings. Team members are careful about what is shared, reluctant to really participate in debates and generally non-communicative.
The unfortunate reality is many companies regularly create environments that allow organizational silos to grow and flourish. Lack of direction from the top regarding overarching corporate goals, fostering an environment of mistrust and a lack of formal communication gives tacit permission for leaders and employees to form silos.
When the executive team believes their loyalty is based in their division of the company, and not the company as a whole, silos form.
What causes organizational silos?
Lacking a team mentality
A common cause of organizational silos is a lack of understanding as to how a particular department or team fits into the bigger picture, causing the executive or leader in charge of that team to focus on what we can refer to as local goals vs. company goals. Let's use a competitive sports team as an example. If players on a team are focused on their individual statistics, then they don't really care if the team wins or loses so long as they look good.
We have seen the basketball player shooting 3-pointers instead of passing inside; baseball players focused on home runs over necessary singles; football players demanding the ball be thrown to them regardless of the situation on the field. In a team sport, if every team member isn't focused on the overall goal of winning the game, they generally don't do well even if there is a standout player on the team.
Business is much the same. Silos are created when the individual departments lose sight of the overarching goal of market success and instead focus on departmental goals. In sports, it's the fault of the coach when this occurs. In business, it's the leadership.
Competing for resources
Organizational silos can also exist because groups are forced to compete for resources. This happens every budget cycle and every discussion about additional headcount. These discussions are typically run as a zero-sum game, meaning if a dollar or head goes to one department, another department does without. Unfortunately, this situation is actually true as few companies have unlimited budgets, so the pie has to be shared.
This obviously becomes very competitive as the executives are only focused on the needs of their team, not the company. The term empire building comes to mind. Specifically in larger companies, but also true in startups, size matters. Nobody wants to be leading a small team, and typically being the person in charge of a large organization brings some form of status within the company. It becomes all about the additional head or the additional financial resources – all while the overarching goals of the company are ignored.
Lack of communication
Many times organizational silos are created because of a lack of communication between the teams. This starts at the top in the leadership team. In a previous series on The Startup Finance Blog, I discussed the five dysfunctions of a team, in which I wrote about the importance of trust and communication in the decision-making process – and the need to communicate decisions down into the organization. In the example above, almost all of the issues covered are caused because there isn't enough communication between the departments, so each is left to set their own priorities and direction without knowing or caring much about what the other departments want or need.
Losing focus of company goals
Organizational silos can be caused by groups having a focus on immediate results vs. larger company goals. The engineering team might drop a key feature in order to make a particular schedule. They make their schedule and look good; however, the overall product suffers. The sales team is focused on getting signed deals, not necessarily whether those deals are good for the company.
When the overall company goals are not clearly spelled out, agreed to at the executive level and communicated to the rest of the company, teams are left to create their own goals. Ultimately this results in leaders who don't necessarily believe it benefits their organization to sacrifice a resource for the greater good, because they may not really understand what the greater good means for the business.
Silos within early-stage tech startups are very common as the leadership teams tend to have less experience in dealing with and preventing the situation. Many times, the overall goal of a startup isn't well defined beyond 'ship the product' – and teams are left to themselves to determine the best way to accomplish the goal. This results in the different teams developing their own set of priorities, which may or may not sync with other teams or even with the company goals.
Misguided incentives
Organizational silos can also be caused by misguided incentives. It is all too common to see different teams incentivized in ways that can actually conflict with the success of the company. I have seen sales incentives based on signed contracts regardless of what they may contain. Guess what you end up with? Stacks of non-performing contracts and happy sales people.
I have seen situations in large corporations where the size of a department is rewarded, regardless of what they accomplish. The worst case was an executive who created a 300+ person engineering organization that accomplished nothing in two years, but resulted in the executive being reorganized to run another group and promoted. They had a huge organization and that was recognized as success and rewarded.
What happens when organizational silos exist?
Unhealthy relationships form between groups
When organizational silos exist, it tends to create bad relationships between groups and group leaders. Of course, silos can also be caused by these bad relationships. When there is distrust between group leaders or executives, typically caused by different agendas or personality differences, the teams tend to pull inside themselves and be much more concerned about the success of the team, not the company. This is, once again, a failure in overall leadership at the top.
Groups lose sight of company goals
When groups within the business have different priorities and have lost sight of the overall goals, silos happen. Let's think about a software startup company. The basic departments would be marketing, engineering, sales, and customer support. Each department has their responsibilities and goals. In a company suffering from organizational silos, these teams rarely talk to each other and, in fact, may hold some animosity towards each other due to competition for resources.
Breakdown in communication between departments
Marketing might be at odds with engineering because they never know when a new release is coming out, or maybe don't have a complete list of features because of a breakdown in communication.
Engineering may dislike sales, because maybe the sales team keeps selling features that don't really exist yet – putting tremendous pressure on schedules.
Customer support has to deal with all of the issues the customer faces when using the product, so their relationship with engineering is strained at best. Customer support also has extensive data about how customers use the product, but maybe they don't share because they don't like the engineers.
You get the point. Marketing fights for dollars so they can advertise, engineering always needs more developers and testers, and the list goes on.
Each department is more concerned with their view of the world and there is little communication between the teams. This is definitely not a healthy situation.
Stay tuned for more as we break down silos in the workplace
Now that we've discussed what organizational silos are and why they exist, in part 2 of this series on Silos and Turf Wars, we take a more in-depth analysis of the common causes of organizational silos, which will lead into our final entry on how to eliminate silos in the workplace.
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What Does Silo Stand for in Business
Source: https://www.lightercapital.com/blog/what-are-organizational-silos/
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