Siloed Organizations & Structures Do Not Deliver Stakeholder Experiences

Break Silos, Delight Stakeholders

Most business leaders have long understood the vital role of cross-functional and inter-departmental collaboration, but it's still hard because teams, departments, functions often stay isolated (in silos) and things get stuck. This makes it slower to get things done, come up with new ideas, and make decisions.

An article featured in the Harvard Business Review (HBR) highlights that without collaborative efforts among leaders at the highest echelons, the existence of silos and organizational dysfunction is practically unavoidable. The HBR article places the responsibility squarely on senior leaders to dismantle these silos. This involves not only leading their individual teams but also prioritizing leadership across the entire organization.

But why are we discussing this? It is because delivering positive experiences to stakeholders of a business is imperative for its sustainability, because siloed organizations and structures may not effectively deliver positive experiences to these stakeholders. In the words of Nitesh Mehrotra, EY Partner Sustainability and ESG, “We won’t solve the sustainability challenges if we work in silos. We need people with different skillsets to work together”

The Silo effect is a widely recognized issue in companies, affecting both large public corporations and small private businesses. This organizational phenomenon can significantly impact a company's profit potential by keeping each department or silo isolated from the others, in the process limiting positive and innovative stakeholder experiences. This article delves into the silo effect, exploring its implications for the stakeholders of your company.

Let's begin by exploring the meaning and implications of siloed organizations and structures.

In the business context, a Silo refers to a department, service unit, or business unit that lacks effective communication with other units, resulting in a dysfunctional organization. Instead of working for the benefit of the entire enterprise, a Silo operates solely for its own gain. These Silos often point fingers at one another when problems arise, operating with their own teams rather than contributing to a broader company-wide effort.

Siloed organizations and structures

Enterprises commonly organize themselves based on specific team functions, forming what is known as an organizational structure. While organizational structure is not inherently negative, it can result in organizational silos (or isolated teams) which in turn can lead to communication and collaboration  issues; which impedes the organization's ability to offer seamless experiences for stakeholders.

The existence of organizational silos can contribute to a silo mentality, where individuals or teams withhold knowledge from others, impeding communication and collaboration. While silos themselves aren't inherently harmful, they can be reinforced negatively through turf wars, unclear vision, and a lack of communication. Such reinforcements, coupled with the silo mentality, can lead to reduced interactions with crucial teams, redundant work, and resistance to change.

The origin of the silo mentality is linked to senior management and managerial competition, highlighting their crucial role in perpetuating or mitigating siloed structures. These organizations, quite obviously, contribute to stakeholder experiences through independent operations, information hoarding, and limited collaboration; and the consequences include hindered collaboration, a restricted organizational vision, and a potential lack of awareness about the broader impact of individual actions on the organization.

Let's consider a use case to appreciate how both siloed organizations typically operate. The business case, furnished underneath, is a work of fiction based on real life events at businesses and that any resemblance to real persons or organizations is purely coincidental.

A case of siloed organization and structures with respect to stakeholder experiences

Silicon Valley Inc. is a large multinational company operating in the information technology sector. Deep within the organizational structure, communication barriers have become a pervasive issue. The lack of a formalized process for cross-departmental communication has created gaps through which crucial information falls, leaving departments operating in isolation.

• Product Development Silos: Engineers work independently, missing insights from marketing and sales. The lack of collaboration may lead to creating products that don't align with customer needs.

• Marketing and Sales Silos: These teams plan campaigns without experiencing or understanding the product, resulting in disjointed marketing messages.

• Customer Experience Impact: During product launches, customer confusion arises due to discrepancies between marketing messages and actual product features, creating a disjointed experience.

• Inefficient Problem Resolution: Customer service struggles with problem resolution due to limited insights into the product, exacerbating challenges without collaboration from product development.

• Negative Impact on Stakeholders: Dysfunction spreads, affecting customers, frustrated employees, and concerned investors as reputation and satisfaction metrics suffer.

Stakeholder experiences - Value delivery hindered by organizational silos and structures

The term "stakeholder experiences" implies the interactions and relationships that an organization has with various entities that have a vested interest in its success. Fair experiences involve delivering value consistently and transparently, and unfortunately  siloed organizations and structures negatively impact the experiences of a business's stakeholders. Let’s understand how they influence some of the key and most obvious stakeholders:

Customers	●      Siloed structures, characterized by inadequate communication, result in customer dissatisfaction and decreased loyalty. ●      Conflicting information and inconsistent policies contribute to confusion, eroding trust in the brand. ●      The absence of information sharing impedes the personalization of customer experiences and relevant offerings.
Employees	●      Isolation lowers morale impacting productivity, fuels frustration, and increases turnover.
Investors and shareholders	●      Inefficiencies and missed opportunities harm profits, impacting investor returns. ●      Poor customer experiences and internal conflicts diminish brand value, eroding investor confidence. ●      Siloed thinking hampers adaptation to market shifts, endangering future success and shareholder value.

Navigating omnichannel success - Stakeholder collaboration and silo disruption

Implementing an omnichannel business model is widely acknowledged as a potent strategy for fostering positive stakeholder experiences, especially for customers. Stakeholders in an omnichannel business are diverse, ranging from those directly involved in day-to-day operations (customers, employees) to those with broader interests (investors, regulators) that contribute to the overall success and sustainability of the business. However, the effectiveness of value delivery through an omnichannel approach can be impeded by organizational silos and structures.

Building an omnichannel business model is vital in today's business landscape, emphasizing seamless customer experiences. Stakeholders, including customers, employees, suppliers, and partners, are pivotal for success. Organizational silos pose challenges, disrupting customer journeys. Breaking down silos is crucial in an omnichannel environment to ensure collaboration, efficiency, and adaptability to changing customer expectations. Addressing silo mentality is essential in a stakeholder-driven economy for enhanced customer satisfaction, loyalty, and overall business success.

In essence

Siloed organizations, with isolated departments and communication barriers, struggle to deliver positive stakeholder experiences. Customers and other stakeholders suffer due to unmet needs, hindered communication, collaboration and disjointed interactions, as a fallout of organizational silos and the associated silo mentality.

Understanding and addressing organizational silos and the silo mentality is crucial for enhancing overall stakeholder satisfaction and organizational effectiveness. This requires a shift from compartmentalized structures towards cross-functional teams, improved communication channels, and a culture of information sharing.

An omnichannel business model holds great promise for positive stakeholder experiences, but its success hinges on mitigating the impact of organizational silos and fostering a culture of collaboration and integration within the company.