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JUNE 2006

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	The Perfect Storm QUOTE “Do not wait for extraordinary circumstances to do good; try to use ordinary situations”  Jean Paul Richter		Bridging Silos in the Eye of the Perfect Storm As we examined in our past newsletters, three storms are brewing in today’s economy that are creating the Perfect Storm for businesses and government agencies:  Globalization (competition is anywhere and everywhere), Segmentation (the shift to custom solutions), and Tradition (functional/hierarchical organizational structures).   In this month’s newsletter we will focus on functional/hierarchical structures and how these traditionally organized enterprises are headed into the eye of the storm.  Traditionally organized companies tend to work in functional silos.  When they start to do something new, they create a new department.  When they acquire a company, they inherit more departments.  While they may integrate the new departments with their existing departments, they still have departments.  This happens because departments have value.  For day-to-day transactional work or black and white business needs departments work well.  They are the organizational centers for the conduct of specific kinds of “functional” work.  Functional experts “live” and work there.  Ideally, new functional capabilities, processes, and skills are developed there.  This is the high side of a functional department that must be maintained and nurtured as a “center of excellence.” But the underbelly of functional silos is increasingly exposed as pressure from the Perfect Storm intensifies.  In the wake of Globalization, traditional transactional work is moving off-shore and being automated.  Companies are left with something different and more complex.  For example, the customer-driven shift from products to custom solutions (Segmentation), requires companies to employ a variety of functional skill sets from multiple functional silos to conceptualize, design, develop, and implement custom solutions for individual customers.  Internal initiatives such as large IT projects and process engineering efforts are no different.  This pressure to work across functional lines gives rise to the need for cross functional teams, which are becoming the workhorse of corporate America. The underbelly of functional silos is that they inherently prefer to work independently and departmentally.  People are used to taking direction from their functional silos.  While they may be assigned to a cross functional team, their primary allegiance remains with the silo.  In traditional organizations, teams suffer from silo-centric thinking and behaviors.  Communication and relationships across departments are often ineffective and sometimes adversarial.  The ability to share resources, knowledge, and ideas is often restricted.  The result is usually a breakdown that can be painful, disruptive, and ineffective in producing results.  Problems occur when team leaders are not empowered to make decisions, when reporting relationships are not clear, and when buy-in across departments is not obtained.  These obstacles often lead to confusion, conflict, and tension.   In short, the organizational entities, (our teams), that are increasingly called upon to accomplish the most important work we do are typically disempowered by traditional functional silos that inherently strive to maintain their traditional role and power.  The birth of cross functional teams automatically threatens the power and identity of silos. How can organizations avoid these pitfalls and resolve the dilemma of teams vs. silos?  How do they maintain the high side of functional departments (centers of excellence) to support instead of hinder cross functional teams?  How do organizations approach this necessary and dramatic transformation?  Although the journey can be challenging, examining the organizations’ Business Infrastructure is an essential first step.  By “Business Infrastructure” we mean how a company is governed, and essentially how things get done.  Having systems in place that clearly communicate authority and responsibility, how resources are controlled and by whom, performance and accountability ground rules, and how teams work, are just a few areas that must be examined and reinvented. This is a cultural shift that requires us to dig deep into the very fabric of our organizations.  Organizations that do not embrace this challenge will be overtaken by intense economic pressures as the eye of the Perfect Storm approaches. At Advance Consulting, we have helped many organizations transform their business infrastructures.  Our unique products and services help companies with organizational design, operational planning and alignment, and people and process development.  If you would like to learn more about how we can help you transform your business infrastructure, please contact us at info@advanceconsulting.com or call 831-372-9444.
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