Silos and systems thinking

Silos and systems thinking

Industry old_Mikael MiettinenLast week, writing about General Motors caused me to reflect a bit more on why silos exist in organizations, and why they are so difficult to break down. Certainly, one of the reasons the silos are so deeply entrenched is that the structures and processes of the “Industrial Corporation” that evolved over a period of about 100 years are still prevalent in many companies. Today, as our economies move steadily forward into Information Age and beyond, most corporations understand the need to change. At the same time, their long-standing mindsets and traditions continue to resist.

As we will see later in this post, GM is far from an isolated case of silos hindering systems thinking. In fact, I have seen numerous examples, both recent and less so. Yesterday, I looked up an article I recall reading in Fast Company about a decade ago; as it turns out, it was from November 2004. The piece is a conversation with former Harvard professor Len Schlesinger, about his first impressions of the business world after he decided to leave academia and become COO of the prestigious retailer Limited Brands.

One of Schlesinger’s observations that struck a cord with me 10 years ago and still does today was this: “The biggest surprise moving from the academic to the ‘real world’ has been the strength of organizational forces that reinforce silos. We all know silos are bad, but it is just so hard to eliminate them. It’s more than a full-time job. People are so busy doing ‘their job’ that there’s often not enough time for our job, which is to energize the behavior of the entire organization. Getting people to do that is much more complex than I ever expected.”

So, here is my brief attempt at an explanation of the silo phenomenon and why it continues to have a negative impact in many organizations today.

From the Age of Industry to the Age of Information: One of the fundamental problems of many of today’s large corporations is simply that they were structured for success in a different time—the Industrial Age. Though we have been in the Age of Information for several decades now, many traditional organizations are still having trouble adapting to new environments and ways of thinking.

In sum, Industrial Age companies were built for stability, consistency, and predictability. Corporate success was based on maximizing the return on physical assets, through the streamlining of systems to make everything run more efficiently. Strategic planning and control were exercises in discipline and exactitude.

To increase efficiency, corporations splintered into vertical subunits. While the resulting silos were effective at controlling systems, they were not good at encouraging the flow of ideas or collaboration between individuals. On the contrary, this style of organization often engendered the opposite of cooperation, as each unit focused on its own internal processes. Within a large enterprise, silo mentalities and withholding of information frequently prevailed. Above all, the industrial company certainly did not motivate people to take the initiative or to cross boundaries.

We should keep in mind that silo cultures, and bureaucratic managers, at one time made perfect sense. In the Industrial Age corporation, success often resulted from a the ability to make each part of the organization more efficient. As such, employees tended to have an inward, task-oriented focus, an eye toward perfecting and streamlining their systems. Of course, these inward-looking mindsets also bred the cultures of fragmentation we still see in many large organizations today.

The problem is that, in today’s Information Age organization, much of the corporation’s work should be horizontal rather than vertical. But, the traditional silos are proving difficult to dislodge, even in companies that we tend to think of as well managed, such as General Motors. In the financial sector, where intelligent people manage massive resources, things may be no better. As Financial Times columnist Gillian Tett wrote recently, “When massive losses erupted at companies such as AIG, Merrill Lynch, Citigroup and UBS, many blamed greed or deliberate deception. That was sometimes true. However, another crucial problem was that the financial groups were so fragmented that it was almost impossible for managers, regulators and employees to connect the dots–and see risks.”

Once again, the central problem here seems to be the long-standing silo mentalities that discourage lateral thinking.

Next week, I will write a bit more on how systems thinking can be helpful—and how it can be encouraged—in our organizations.

Image: Flickr-user Mikael Miettinen

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