The Hindu Business Line : Busting silos

Another year, another annual plan presentation. This is a very familiar scenario that most of us in the corporate world have been a part of. A company I know of had four main business divisions and each of the division heads made glitzy presentations that addressed all the touch points that are a sine qua non in such cases. The SWOT (strengths, weaknesses, opportunities, threats) analysis, the business plans, the profit and loss statement, cash flow sta tement, the capex plans and so on were all there. What was missing was any mention of how each division could best benefit from cooperating with the others and make themselves and the other divisions more successful.

Each division presented a picture of a profitable island in itself, but the connectivity that would have acknowledged their common parentage and their ability to harness individual strengths for greater common good was totally missing. It was clear there were silos here that had been created and nurtured by the senior managers in each division; territory marking, much like what animals do in jungles, had clearly been resorted to.

I still recall one of those retorts that we make when we are students and think it is the cleverest thing ever said. One of my classmates was asked if he was growing a beard and his retort was that it grew by itself! Silos have a similar tendency — they start sprouting mysteriously and grow stronger with each passing day if unchallenged. This can be hugely detrimental to an organisation’s wellbeing and growth.

Working in isolation

In the beginning, each unit sets out to achieve its goals without understanding very much of what the other units in the company are doing and thereby loses out on opportunities for cooperation and collaboration. This is clearly a loss, not just for the unit concerned, but for the entire system. After a while, where common customers exist, the units try to optimise from their own narrow perspective and many a time this can lead to problems for the firm; at the very worst, this can even lead to a damaged reputation for the firm. Think of the multiple calls that many of us receive from different departments of a bank or a telecom service provider and you will get the picture.

Companies may have many diverse businesses in multiple geographies and their complexities may vary, but it is still important to extract the maximum synergy. To do this, it becomes very important to make sure that organisational structures and processes promote collaborative working across different business units and geographies. This will lead to better business results for both the units concerned and also for the entire system.

There will always be friction points, but attempts should be made to minimise them by suitable use of well-understood processes and also escalation and conflict-resolution mechanisms that can quickly nip problems in the bud. It is equally important to make sure that the performance incentives for individuals are properly aligned so that there is minimal chance for oneupmanship.

The fall-out

It is clear that silos tend to isolate individuals and nurture a feeling that their loyalties are reserved only to the immediate unit that they serve and not simultaneously to the larger entity. This will also prevent them from both learning from others and contributing to others in the system. When we read reports on the mess in the financial markets these days, we can see that some of these very issues are being played out — employees making deals without proper approval, unresolved conflicts of interest leading to problems, trust between the customer and the company breaking down, perverse incentive structures for employees that promote short-term achievements while leaving the entire system vulnerable to future shocks and collapse. And increasingly, as Indian companies globalise, there will be the added dimension of having to work seamlessly across borders, business practices and cultures which will add further layers to an already complex milieu. We need to make sure that silos do not get in the way of our success.

Time to nuke those silos, don’t you think?

(The writer is advisor to 3i Infotech, Manipal Education & Medical Group and IDFC Pvt Equity. He can be reached at mcshekaran@gmail.com )