Comment: How to break down departmental silos

The suffocating effect of working within an organisation structured around individual departmental silos is a major concern for retailers today, as they look to improve the customer experience and maximise profitability across all channels. They realise that they need to restore the speed of decision-making that they enjoyed when they were running much smaller (and less complex) businesses, as working within silos is a massive hindrance.

Most new companies are nimble, productive, close to the needs of the customer and most, importantly, quick to respond to changes in the trading landscape. However, as organisations are social structures, when they become big enough to support different functional departments – finance, operations, IT and marketing, for instance – it is almost inevitable that silos develop.

The cause is well-documented and, therefore, predictable – politics, disproportionate influence, inflated egos, the preservation and/or lust for greater power, poor discipline, complacency and so on. Silos affect the speed and quality of decision-making and a retailer can become sluggish, unproductive and slow to respond to changes in the market.

It is people that create this harmful equilibrium and denial that perpetuates it. A point well made in the insightful book Surfing the Edge of Chaos – The Laws of Nature and the New Laws of Business, Pascale et al which states that "equilibrium is death". The authors use the challenges faced by Sears in the 1980s to illustrate the danger of equilibrium brought through the denial of the risks posed by Walmart and Home Depot etc. They argue that prolonged equilibrium dulls an organisation's senses and saps its ability to arouse itself appropriately in the face of danger. Woolworths, Comet and many other well-known retailers have succumbed to this fate.

Breaking down silos is easy in theory, yet far more difficult in practice due to the inability of many leaders to objectively and credibly look inwards.

Among the retailers that have successfully avoided creating silos are Zara and Dixons [now Dixons Carphone]; both respond very well to the constantly changing retail landscape as each operational department operates across functions and not in silos.

Zara, acknowledged as best-in-class for market response, can fast-track items to store within four weeks to meet emerging customer demand. Its ability to make quick, high quality decisions and respond like a smaller, nimble retailer is world renown. The "fast fashion" concept demands the continuous exchange of information throughout the supply chain and allows maximum agility.

In the mid-2000s Dixons used "hothousing" – a balanced scorecard approach to break down silos and break equilibrium. It formally encouraged "the new guy at the back of the plane" to be involved in decisions and work with colleagues across stores and other business functions. Dixons constantly evaluates and evolves as the electricals retail landscape has become digital dominant.

So how does an organisation go about breaking down functional silos and re-establishing value creation? The first step is to acknowledge there is a problem. 

Often the changing of the guard brings new levels of energy and the ability to objectively review the way teams perform and interact with the wider business. Where conflict exists between departments or individuals, "Valentines exercises" can be used to make cross-functional decisions. This is a concept created by Henry Ford where teams debate and agree an approach together and then an individual takes accountability for delivery.

Dixons has used this technique, renaming it the PSTB or Problem Solving Team Building exercise.

To understand the changes required to break down silos, here are some questions that the business should periodically ask itself and each department:

The Kurt Salmon team writes a regular column on technology in retail for Essential Retail.

Click below for more information:

Kurt Salmon

What’s Hot on Essential Retail?