Breaking down corporate silos

How to align a corporation′s departments towards a common objective: “The Customer”.

Spanish Version: https://www.dhirubhai.net/pulse/derribando-silos-empresariales-c%C3%B3mo-alinear-los-de-la-felipe-quintana/?published=t

Organizations tend to be structured by areas that, on many occasions, are not integrated nor coordinated with each other, thus creating difficult working environments with constant tensions. This problem is known as “corporate silo vision”, a situation that is very common and widespread in businesses. But why does this silo vision exist? It has multiple causes.

Starting with our educative system, which in general has not adapted neither to modern times, nor to technological evolution, nor to the new positions that are being created.

This educative system tends to be structured in silos: most educative institutions do not have courses of study focused on showing the integration that needs to exist between the different areas, or the negative consequences for business when there is no department alignment.

Each professor opens their toolbox drawer for the subject that they are teaching and presents the tools to the students. However, there are not many professors who actually explain how the different business subjects or areas interact with each other. This does not correspond with corporate reality, where this interaction is constant. This then often leads to the creation, already from the academic process, of entrepreneurs that begin their careers with a silo vision.

This problem can become so relevant that many big businesses have their own universities and their own initial training that promotes roaming through different workplaces, or an initial week to show all the functions of the organization to the new candidates, using a significant part of the training to teach them the company′s mission, vision, values, and culture.

On the other hand, these organizations present their vision with stagnated and segregated departments. This produces corporations that are not customer-focused, which is a huge problem that shows up in the market as low-level retention of new customers and of loyalty. The problem with silo vision is that it is not just an internal problem: IT ALWAYS COMES BACK TO THE CUSTOMER, HUGELY AFFECTING HIM/HER, as this drawing shows:

To explain the consequences of this silos-vision I often use this video, that I recommend you watch.

In this case, we observe an organization where marketing is in command and apparently is very keen on keeping an eye on the market, understanding what the customer wants, but it is not aligned with Operations management or with the area in charge of the development of new products. This leads to delays on release dates, extra costs for each new attempt, employee dissatisfaction, mistrust for the project, inter-departmental feuds etc.

According to several studies, 80% of businesses acknowledge that they have silo vision, so we can safely say that this is a curse for organizations, generates a lot of waste, and has huge consequences.

Being customer-centered requires to break down silos, one of those things that is easy to say but harder to do. That is why I intend to give you, in this article, a performance framework and tools that can allow you to tackle the number one enemy of customer centricity: Silo vision.

Discovering the enemy: Types of silos: The exponential effect of the different types of silos.

There are more types of silos than the?departmental?ones, as big corporations tend to have a matrix structure and to have a country or regional divisions, making this silo vision and its consequences exponentially negative:?regional or matrix silos.?There can, of course, also be?project silos?(in consultancy corporations). There are also complex areas like Operation Management and Supply Chain that have silos within silos. These areas have under their responsibility: Logistics, Supply, Quality Control, Production, Planning, etc. Therefore, in large corporations with managers in each of these areas under the umbrella of Value Chain Supply, it can itself work as a silo within a silo.?

To make matters more complex, there can be?informational silos, which are those where a collective of people have certain information but they do not share it with other areas. This tends to happen when a “veteran” person within the company, who has gathered an undocumented expertise, sees his/her position threatened, believing that a way to become indispensable is to not share information, and makes life impossible for any junior person placed near him to develop his/her abilities and knowledge.

I believe that the worst type of silo is the one generated because of a?presidential silo,?when a general director creates silos because of his/her behavior from a position of leadership and management. An example of this can be seen in this video:

Using this video, we can see that a big part of the decisions that a company takes are cross-functional, meaning that they are not taken by a single department and require an alignment and integration of the company. This is the case with sales forecast. It is a big mistake to leave sales forecast solely in the hands of “Marketing and Sales”, as this are the departments that initiate them because of their market and customer knowledge, but also the Operations and Supply Chain departments should make a study to see if they can fulfill those forecasts at a capacity, personnel, storage, and logistical level. On the other hand, the finance department needs to verify that those forecasts make financial sense and that the numbers correspond with the income statement and the established budget.

The problems and consequences that emerge from not being aligned when it comes to sales forecast are:

• Sales?have a tendency to bloat previsions, since that way they ensure the product, and they do not incur in those cumbersome stock depletions that make customers unhappy, force a reordering of the products with the missing references, and can even provoke the cancellation of complete orders if the client has demanded in their contract that they do not accept stock depletion.?
• Operations/Supply Chain?tends to optimize production, and is chiefly preoccupied in keeping the machinery always running, so that there′s an increase in production of that which sells best. It is uncomfortable for an Operations Director to have to constantly change the format in production, like producing low quantities of that which sells the least.
• Finance?to make the decision of what should be the optimal level of stock to give a good quality service to the customer without having an excessive stock that negatively affects the income statement and its floating assets. Finance/Management Control needs to also create indicators or KPI′s that are consistent to measure the evolution of performance. It is important to have common measure indicators, with the customer at the center, and guaranteeing that the actions taken by a department to achieve their objectives won′t go against other departments, or won't undermine them. For our particular case, the optimal level of stocks and the adjustment of sales previsión vis-à-vis real sales, need to be present in the objectives of all departments.

One same topic, three different points of view. If these areas don′t coordinate with each other, the entire day will be dedicated to “putting out fires”.

But don′t leave just yet, there′s still more:?The silos generated because of bad relations between area directors.?I find this video to be very suitable to illustrate these types of silos that, unfortunately, are very common:

What an unfortunate marriage! Couples therapy tends to be long and tedious, but the more that they know each other, and the better that they get along together, the easier that their relationship will be. They are not wrong fighting and seeking therapy. You won′t be surprised if I tell you that there are people who get along so poorly with each other that, even if they are seating nearby, they send each other emails with copies to their bosses to “watch their backs”. Would you like to work in such a company? Believe me: it's exhausting!

Look at this study that was done regarding the relations between a company′s departments:?

Indeed: “Operation and Sales Management” are the departments where having a good relationship is the most important (94%) and where the gap is the biggest in the undertaking of this relationship (52%). The gaps between the other departments should not be underestimated.

Six years ago, when I started learning about this exciting topic, I created with Ana Rumschiscky, Marketing professor of IE Business School, this video called “Building good relationships between Marketing and Operations”, where we analyze four specific problems: Retail Cost/Price, special offers, development of new products, and forecasts. A video where, aside from being six years younger, I am especially proud of all the things that I learned from Ana and of the topics that we tackle together in this video, which is what encouraged me to continue examining this very relevant topic.

The main reasons why this view is created are:

1. Internal Focus and not oriented towards the customer: Organizations are so worried about their internal processes and about generating products, that they forget about their customers.?
2. Short-Term thinking: Very short-term thinking leads to not having a business development plan that is centered on the customer, where the objectives of the company can be aligned to have the customer at the center and design new experiences based on innovation. The innovation processes need to be studied with sufficient time and constantly taking into account inputs from the customer.
3. An organizational structure that is excessively hierarchical: This restricts the flow of ideas, discourages multidisciplinary working teams, and limits the information flow from and to the customer.
4. Not having enough information or customer data, or having too much and not knowing what to do with it: Having the most information possible of our customers allows us to create valuable and personalized products and services. This is the reason why there needs to be adequate channels to get this communication flowing throughout the value of the company.
5. Believing that “the solution” is just technology:?If we don′t have involved personnel and our processes are not well designed, and without a human component, not interacting with customers, it won′t matter if we count with the most advanced technology, we won′t be able to create value. Allow me to please illustrate this point with an example that is acknowledged as the best practice at a global level: Food delivery in Mumbai, India. DabbaWalas, which delivers more than 200.000 meals on a daily basis has a success rate of 99.9996% (Read Six Sigma) without technological support and with many of their riders being illiterate, though committed and seeking visual solutions so that these riders can do their job. Amazing and educational, don′t you think?

6. Not having a suitable incentive system:?If we don′t count on them, we won′t have the involvement of our employees nor will we receive feedback from front-office staff, nor their suggestions to refine the processes for continuous improvement.?

The consequences of this silo vision are negative for businesses. According to several studies, lacking inter-departmental alignment and integration costs companies 20% of their global budget. If we are able to revert this situation we will be contributing not only to an increase in customer satisfaction and our value proposition, but also company benefits, guaranteeing its continuity and generating a competitive advantage.?

Ok, I understood the message. But how do we break down silos? What can I do?

First, don′t panic. You won′t be the first nor the last person to suffer this conundrum, but if you are reading this article it is because you want to do something about it. Please allow me to guide you.

To address this, I have developed a model, based on my research on the matter, that I call “the 5 Cs”, which has as its objective to tackle silo vision within corporations and create a company centered on the customer.

This model can be understood as a complete action plan for an organization to achieve breaking down silo vision and thus create a customer-centered model, as well as a good working environment for its employees (Employee Experience).

I consider silo vision to be the natural enemy of customer-centricity, but also the biggest creator of resistances to change when you implement new technologies or new methods of work.

If you don′t believe me, just look at the implementation of ERP′s in businesses, like for example SAP or Oracle. The implementation period is completely related to the company′s silo vision. The biggest this silo vision, the longer the implementation period.?

Another clear indicator that we have silo vision is a high “time to market” (or the time that it takes since we identify a market need to develop a new product and have the first unit ready for sale). The bigger the silo vision, the longer we will take in this development.

The businesses that attempt to implement a Lean Management philosophy, or a “Customer Experience Management” project, have the hardest time when silo vision is rampant, being this the number one reason for the failure of said implementation.?

If there is a silo vision in my company: What do I do?

1. To measure the silo vision: With surveys regarding the work environment, the time that it takes to develop new products, the number of customer complaints, and the time that it takes to resolve them, the number of cross-functional groups created to tackle problems, etc. If we are creative, we can establish a clear view and scope of the problem.?

2. To name a Project leader for “Customer Centricity”, who should have a budget to take the actions needed to break down silos with the support and leadership of the management team. This is stated in the positive, customer centricity, rather than in the negative “breaking down silos”, since the name that the project is given already shows the approach that you want to give the company.?

3. To state very clearly the objectives of the company and of its different areas, looking at the different common objectives/indicators and ensuring that the departments don′t undermine each other when seeking their objectives/indicators.?

4. To have a brainstorming meeting with a cross-functional group where the 5C′s model is transformed into concrete actions that promote each of the C′s to ensure that the model actually gets done, with a plan indicating managers, dates, indicators, etc. This is the real battlefield to fight against siles. As an example, and so you can do this in your company, I am going to show it to you with an example of each of the C′s that will help you in creating an action plan:

• Communication: Analyze the meetings that take place in your company. Does it suffer from over-meetings, that is, meetings all the time, without a specific timeframe or concrete aim, with people that shouldn′t be there and where you leave without achieving anything? Prepare a template to be used in every meeting and a meeting protocol (máximum 15 minutes, meeting preparation, timeframe, actions to take for the next meeting, etc). Discipline is the keyword: To be punctual, to follow the template, professionalism. This will aid in having better communication.?
• Trust: Ban emails with Blind Carbon Copy. Promote a spirit that makes problems visible instead of hiding them, of resolving problems instead of playing the who′s guilty game. Your employees will gain motivation and trust, and they will lose the fear of making a mistake, seeking always group solutions.?
• Coordination and Cooperation: Create cross-functional groups that tackle the company′s challenges: on stock, erroneous sales forecasts, excessive release dates, common customer complaints, bad results on employee satisfaction, etc. On top of that team, you have an even bigger challenge in improving the indicators that show those problems. For example: Reduce stock by 5%, reduce customer complaints 20%, to bring down the errors in forecasting from 40% to 20%, etc. And give that team the power to be able to make decisions, giving them a budget, and rewarding them for good results (not just an economic reward, but especially acknowledging their effort, so that they gain confidence and they can feel proud of having done a good job).
• Mutual knowledge: It is sad that many employees from a company have never seen the factory and don′t know the creation process. How unfortunate when a sales manager doesn′t take the time to visit his suppliers and to learn about their production process. What a big mistake when the Operations Director never visits the market with the Sales Director to understand the problems of the average person. Promote activities so that the different departments get to know each other. For example: Having coffee on Fridays after lunch and having each department manager present, in an informal manner, his/her department to the others and the challenges that his/her department faces as well as the main achievements.?

There is a TV program called "undercover boss" that directly tackles this silo vision, making their managers act like first-line employees to see if the plans that they have designed in their offices are working. The more silos there are, the bigger the employee surprises and the bigger the manager′s annoyance because the plan hasn′t been properly implemented. Here is one of my favorite episodes.?

?There are new strategies that Foster working in cross-functional teams, like Design Thinking, Lean Start-up, agile methodologies, all of them inspired in Lean Management, whose main objective is to implement as quickly as possible the customer′s feedback to develop products and services of value (they utilize basic, viable prototypes or products) with the objective of making the mistake early, learn early, and having more success when launching a product or service, reducing the time to market and reducing the chance of a failed release. All of these require teamwork and breaking down silos, so it is crucial that the company starts implementing these models that will lead to a more customer-centered business and will break down silos.??

I wouldn′t want to finish this article without mentioning Sustainability and Resilience.?

A company that is centered on the customer, where there is a clear awareness regarding breaking down silos, will be better prepared to tackle Sustenability initiatives in all three spheres (economic, environmental, and social). In my work as a sustainability consultant, the first step we make is to produce an action plan to break down silos based on the 5C′s. If there is a topic that requires integration and alignment it is sustainability, since it affects all areas of the company.?

You will also be in a better position to tackle possible disruptions to the value chain and you will be more resilient, since the key aspects of resilience are flexibility, agility, organizational culture, risk management study, etc. All of these require an integrated and coordinated company.?

I would like to finish this article with an idea derived from the graduation speech given to the graduates of the class of 2020 by the special guest: Pablo Isla, Chairman and CEO of Inditex. He made special emphasis on the “people” that form an organization. It is precisely this silo vision the problem that attacks a company′s people, as well as creating a bad working environment. If you are going to take place in a selection process to enter a new company, make sure that that company does not have silo vision, as this will make your professional life much happier. The way to detect this silo vision is selection processes that take very long and with a lack of coordination, without a clear definition of the position, without an interview with your boss, and with a lot of secretiveness and lack of transparency.?

Breaking down silos leads to better relations, which in the current situation having a good working environment and focusing on people are two very necessary values that we need to have when facing a challenge.?

Well, it turned out to be a very long article, but if you reached this far it is because you are interested in the topic and because you feel that this problem is one of the most serious ones affecting businesses today. What actions do you take to break down silo vision in your company? Each one of us, as managers of working teams, we have the power to break down internal silos and to spread the seed to other departments.?