Organizational Silos? No One to Blame but the CEO
By Michelle Malay Carter on January 23, 2008
In my last post, I said that the manager owns the output of his team, as it is his accountability to integrate the work of the team.
Therefore, when organizational silos exist between the functions, the person who owns all the functions, usually the CEO,?is not doing his job to integrate the work of the team.
Silo Example
I once worked for a company where the sales department would frequently run retail special promotions?that would create order volume that operations could not deliver within the time frame guaranteed to the customer.
The sales group achieved their productivity numbers, but it was at the expense of the operations managers’ numbers.? Additionally, the “special promotion” cut the profit margin on each sale, and we owed recompense to our customers for late delivery.? When you take into account the damage to the company’s reputation, I have to wonder how the sales department got away with it.? Who was sleeping at the wheel?
My Requisite Diagnosis?
If I were to put on my requisite consultant goggles, I would say there were several potential issues here.
1.? The CEO was not integrating the work of the team.
Why?? Possibly ignorance.? Or he was lacking the cognitive capability needed to integrate the work of the team.? If the latter, then the board of directors is to blame for hiring a CEO incapable of the CEO work.
2.? Clear accountabilities for how sales and operations were to work with one another were not codified.
3. The performance management system only took into account productivity NUMBERS not overall effectiveness.
4. The head of the sales and/ or operations functions were not staffed at work level 4 which is the first level at which a person can contain and integrate multiple serial pathways.?
If my cognitive capability is at level 3, I can work with multiple serial pathways, but I deal with them independently.? I do not yet take into account the intersection of the pathways.? So if I am in sales at level 3, I see my role as making the sales processes faster, cheaper, more efficient, but I do not take into consideration how it will affect other departments.? From an organizational standpoint, this type of thinking is OK and necessary (at level 3)?as long as there is someone above me at level 4 doing the integration work.
5.? The roles of the head of the sales and/or operations functions were slotted at level 4 on the organizational chart, but the person/people occupying them were not yet capable of level 4 work.
Did you notice how important understanding requisite work levels and organizational design are to effectiveness and productivity??? I’m OK.? You’re OK.? Let’s fix the system.
Have you ever watched one department undercut another?? What do you think was going on?
Filed Under Accountability, Executive Leadership, Managerial Leadership, Organization Design, Requisite Organization, Strategy
Comments
9 Responses to “Organizational Silos? No One to Blame but the CEO”
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Michelle – I think there are a couple of things to blame for the organizational silos you speak of. First and foremost I agree that the CEO is a main culprit in these situations. The CEO, knowingly or unknowingly(uh-oh) sets the tone for the rest of the oragnization and how it will cooperate. If the CEO treats treats the various functional departments of an organization as autonomous units whose actions don’t impact other units, the leaders of these departments will behave as such.
I think another culprit is the compensation structure of so many organizations. In an effort to hold everybody accountable for results many leaders/CEOs find the best way to do so is to tie results to compensations. A great motivator, but one that sometimes has consequences that are not always in the best interest of the organization and its stockholders.
-Chris Young
The Rainmaker Group
Chris,
Thank you for your comment. Yes, holding people accountable for results (numbers) rather than effectiveness is a problem, and performance management is ultimately tied to compensation. So you are right, compensation is another element in play here.
Michelle
[…] 24, 2008 by gautamghosh Michelle Malay Carter lays the blame squarely at the doorstep of the CEOs. She says: when organizational silos exist between the […]
Hello Michelle,
I agree completely that the CEO – or the manager at the top of whatever segmented unit that may be at issue – is completely responsible for the final output. I also think there is often a lot to Chris’s suggestion that some CEOs may actually promote – unknowingly, but also knowingly – the silo phenomenon.
And it is true that thoughtlessly patched-together compensation schemes can cause, or exacerbate, the same problem.
The key is in your emphasis on integration – in every way from process to compensation. The nature of the thinking that occurs at various levels of management is an excellent way to look at this. It has developmental implications too, which, if not properly addressed, sometimes result in what you point out: people in integrative positions who haven’t acquired the requisite approach to management at that level.
Thanks for the thought-provoking presentation!
Jim,
Thanks for the comment. Level 4 cognitive capability is often called “strategic thinking” in competency speak as it is where this integrative thinking ability emerges.
When people hit level 4, they begin to ask the question: What is the strategic intent of X? Level 3 is about operational excellence. So the question as level 3 is: Now that we have X, how do we make X the best darn X in the world? Level 4 is about questioning whether current operations still supports the business unit strategy. Level 3 makes the best of the current operation through continuous improvement.
When level 4 decides that new processes, products, etc, are needed to support the strategy, level 3 generally writes and implements the roll out plan.
Regards,
Michelle
I find excellent examples in IT projects. I recall a big IT project I was working on for a large intergrated steel mill. The project was to totally revise their logistics system from order to delivery. However the scope of the project was the responsibility of the logistics group and the budget was the responsibility of the IT department. The logic was that the cost of the project were primarily in IT. The project was a complete disaster. The only place that these two groups met was at the presidential level and I never saw any evidence of his influence at any time.
So sad, because the project was so crucial for their competitive survival.
Thanks for the IT example, Jim. Yes, this type of project structure seems doomed from the start.
Often when I am writing blog posts, I think to myself, this seems like such common sense. Yet, common sense does not seem to be common practice!
Michelle
From a human relations point of view, good, actually understood communication, first time around, is very rare. It?s true that ?common sense ain?t so common? but it?s more likely that clear communication is distorted by anxiety, pecking order issues, grandiosity, genuine mis-hearing, short attention spans, fear of appearing stupid, and sometimes outright resistance.
The textbooks say ?delegate,? trust your people, but there?s no assurance the job will be done right without explicitly stated directions. For some, that?s already micromanaging.
Managers can ?communicate? ?til the cows come home, provide ?context,? and try to ?integrate.? There?s still no guarantee they?ve been heard.
Walking around, eyeballing the situation, and reiterating the key messages needs to be done ? until they don?t need to be done anymore.
Some people ?get it? right away, some think they do, but they don?t really. Some only pretend to listen, then do what they want to do. Sometimes that leads to a problem, but shockingly often, it doesn?t. It?s humans at work.
Welcome Shaun! Yes, I agree stress and fear caused by inconsistency and ambiguity can interfere with work and communication.
And yes, delegation sometimes works, others it doesn’t. It helps when employees are well matched to their roles.
Yes, we are humans at work. And I think if we put some effort into creating consistent and clear management systems, we would be much more happy and productive people at work.
Thanks for stopping by and taking the time to comment.
Regards,
Michelle