The Silo Effect: Why putting everything in its place isn’t such a bright idea
Gillian Tett has the unique viewpoint of a financial journalist who witnesses the performance of companies and economies close up, and steps back to observe human and tribal behaviour from her training in anthropology. The award-winning FT columnist and US editor has now turned her attention to silos – the practice of building groups in companies to create specialisations. The American subtitle of this book – the peril of expertise and the promise of breaking down barriers – emphasises the real dangers of having these rigid organisational structures in place. From the BP oil spill in the Gulf of Mexico, to the threat from al Qaeda in 2001, major disasters could have been averted if individual departments had not hoarded data and communicated concerns more widely.
While acknowledging that silos are not always bad – we need specialist expertise – the book highlights what can be achieved when cultural walls are breached.
Through engaging story-telling, Tett uses eight case studies to highlight what can go wrong, and looks at organisations who are doing everything they can to disrupt the negative effect of silos. Highlights include:
- Sony: The company that blazed a technological trail with the Sony Walkman, has since been long overtaken by rivals including Apple, despite creating digital music well before the appearance of the iPod. The British executive Sir Howard Stringer, who was appointed as its first non-Japanese chief executive in 2005, tried hard to change the entrenched company culture of separate teams and product divisions, with departmental profit and loss accounts (a technique borrowed from Nestle), but largely failed. Even the launch of the digital music devices, when two different versions made by two separate divisions (later to be followed by a third) were demonstrated showed just how deep the divides had become. As one manager pointed out: “I have 35 Sony devices at home. I have 35 battery chargers. That’s all you need to know.”
- UBS: Once admired for its cautious approach to banking, and despite employing 3,000 risk managers, no one in the bank had a complete view of the true risk of subprime mortgages. As losses quickly mounted by the billions, and shareholders and the Swiss government had to intervene to keep it afloat, there was much soul-searching about what had gone wrong. Tobias Straumann, an economics history professor at Zurich University, found that the bank was riddled with structural silos. The managers at the top were not aware of what was happening in the grass roots, because the climate was so defensive that each department hugged data to itself
Silos exist in structures. But they exist in our minds and social groups too. Silos breed tribalism. But they can also go hand in hand with tunnel vision.” Gillian Tett
- The Bank of England: When HM the Queen asked the Bank of England “Why did nobody see the (financial) crisis coming? If the problems were so big, why did nobody see it?” they answered that the single biggest reason was that the system was fragmented. Macro economists looked at economic statistics, but ignored the finer details, banking regulators watched individual banks, but had not looked at the ‘non banks’. And some financiers working in private sector banks were experts on ‘shadow banks’ but did not speak to senior economists at central banks, meaning they all failed to spot the system was overloaded with debt. Radical regulatory and other reforms mean that economists are now being trained in bigger picture issues, and non economists are being hired at the Bank of England. Mark Carney has also completely restructured the Bank, forcing economics and financial analysis to coexist. While the new structures mean there is some overlapping of responsibilities, it means that hopefully in the future there won’t be underlapping, where things fall between cracks, or departmental responsibility
- OpenTable and the Chicago Police: Brett Goldstein was the founder of the hugely successful restaurant reservation start-up OpenTable. But the attacks on the World Trade Centre left him searching for new meaning in his life. Instead of volunteering or charity fundraising, he decided to join the front end of policing in Chicago, entering as a raw recruit and fighting crime on the front line, until he was invited to use his expertise in big data to help cut the US’s highest murder rate. He faced an uphill battle from colleagues in getting them to share information about gangland movements meaning they could send specialist units to potential hotspots. Despite suspicions that he was an FBI plant, they nevertheless started to work more effectively together, achieving dramatic drops in the murder rate, which are now being replicated elsewhere
- Facebook: Facebook well knows the danger of silos – they actively spend time working out how to avoid the pitfalls of Sony and Microsoft and use a number of techniques to open up specialist departments. They were particularly wary when they first reached 150 employees – which the British evolutionary psychologist Dunbar had identified as the maximum number of a functioning social group that people would still be able to make meaningful connections with. This now means that all Facebook employees: are sent on the same six week induction programme – Bootcamp; participate in Hackamonth – a rotation programme to prevent teams hardening into inward-looking units; work in open plan units, including Mark Zuckerberg and Sheryl Sandberg; participate in all company meetings every Friday; and take part in Hackathons, when different teams work all night on coding challenges, fuelled by takeaways and inspiring poster quotes like: Move fast, break things! Done is better than perfect!
- The Cleveland Clinic: Toby Cosgrove is a renowned heart surgeon and CEO of one of America’s most successful and largest medical centres, but it was a simple question from a student about whether the hospital trained its doctors in empathy that triggered a wholesale restructuring to ensure patients were put at the centre of services. The hospital was no longer split between surgery and medicine, but on areas of the body, like the brain, or broad ailments like cancer. Patient satisfaction has now improved dramatically, while costs and performance continue to be among the best in the US. Cosgrove is also a prolific inventor, filing 30 patents, and believes that innovation happens at the margins, where one discipline rubs up against the other. In other words, when silos break down
Mastering silos is not a task that is ever truly completed – it is always a work in progress. It comes about when we leave ourselves open to collisions with people and ideas outside our own (often self-imposed) structures. Could we all become better anthropologists – looking at how we can better organise ourselves – and seeing all those risks and opportunities which might just be right under our own noses?
** About the author Gillian Tett is US managing editor and columnist at the Financial Times. She has also been the FT’s Tokyo bureau chief, and deputy head of the influential Lex Column. She has won many awards for her work including Columnist of the Year in the British Press Awards in 2014 and British Business Journalist of the Year in 2008. Tett is the author of the award-winning Fools Gold, which covered the financial crisis, and Saving the Sun, which looked at banking practices in Japan. She gained a doctorate in Social Anthropology from the University of Cambridge, studying human behaviour in Tajikistan and Tibet.
Reviews “Her treatment is highly intelligent, enjoyable and enlivened by a string of vivid case studies. It is also genuinely important, because her prescription for curing the pathological silo-isation of business and government is refreshingly unorthodox and, in my view, convincing.” Felix Martin in The Financial Times
“This lively business book aims its fire at company groupthink.” Anne Ashworth, The Times
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Author: Gillian Tett