What are organizational silos?
Organizational silos are where different parts of the firm do not talk to one another. Development, manufacturing, manufacturing, and sales may all operate in individual bubbles, isolated from one another. Decisions made in one part of the firm are not aligned, communicated, or consistent with decisions made in a different part of the company.
Why are organizational silos bad for firm performance?
The key issue with organizational silos is that decisions are not necessarily consistent with one another. Different parts of the firm may be pulling in different opposing directions. While individual decisions may make sense within a particular department they may be at odds with achieving the overall firm success.
Organizational silos may also mean that opportunities are missed. If departments don’t talk to one another, then a possible new market opportunity may not be communicated from the sales department to the development area. Similarly, the claims made to customers by marketing may not be areas that the firm is well positioend to deliver on.
Why do organizational silos occur?
One reason why organizational silos can occur is that there is not coordination between different parts of the firm. Each part of the business works independently, not speaking to the other, nor considering the impact that operations in this part of the business will have on the broader firm.
Organizational silos can also occur because the firms lack an overarching strategy to integrate the overall parts of the firm together. Not having a unifying strategy can result in the different functional areas of the business each developing their own approach to operating – which may or may not be consistent with one another.
How coordination can help overcome organizational silos
One approach to reducing organizational silos is to increase coordination between divisions. Bringing everyone together periodically, or increasing inter-divisional coordination within the office can help break organizational silos – helping individuals understand the impact of their division on the broader firm.
The role of a firm's strategy in preventing organizational silos
Another component of preventing organizational silos is having an overarching strategy. A firm’s strategy helps in ensuring internal consistency – different divisions working together in the same direction. The overall firm strategy helps ensure that the individual decisions made by departments are unified, reinforcing one another, rather than pulling in separate directions.