Most books about business are written by people involved in creating and managing companies: founders, CEOs, or venture capitalists. They are able to leverage their unique experience building businesses because they have been in the thick of things. But this approach can also lead to a certain type of tunnel vision: looking at something from the inside can often make it difficult to see how something actually operates.
Gillian Tett, author of The Silo Effect, comes to business from an interesting background: she trained as an anthropologist, earning a PhD from Cambridge University. Her experience studying social groups gives her a different point of view from those who have only looked at businesses from within, and this allows her to examine the way companies are structured without the preconceptions that most executives have. She is also a high-level executive with The Financial Times, so she can look at companies from both perspectives.
Understanding the silo effect
This isn’t your standard business book, with lots of gung ho slogans, tips, and motivational sidebars. It presents serious analysis of companies and institutions that have suffered from the silo effect. The goal of The Silo Effect is to help companies understand what are silos, why they exist, and the benefits and drawbacks of them. Through a number of examples, Tett looks at how the silo effect can sometimes break companies. Early in the book, she asks a poignant question:
Why do humans working in modern institutions collectively act in ways that sometimes seem stupid?
In the first part of the book, the author explains “how humans tend to organize the world around them into mental, social, and organizational boxes, which can often turn into specialist silos. When these are rigid, they often cause people to behave in foolish or damaging ways; silos can make people blind to opportunity and dangerously unaware of risks.” In the second half, Tett looks “not at the problem of silos—but some potential solutions to problems created by this silo effect. Some of these responses involve big strategies to change the culture of institutions or structure of groups. But before looking at institutions, it pays to think about individuals.”
So this book sets out to answer two questions: Why do silos arise? And is there anything we can do to master our silos, before these silos master us?
How the silo effect arises
Every industry has a culture, developed over time, in some cases across generations. And within each industry, individual companies also have cultures: this may be more apparent for the largest companies, but even small businesses have their own norms and habits. This culture determines how people communicate and work together, but also how they wall off “silos,” intentional or unintentional divisions within companies. In some cases, large companies are organized according to profit centers, each one effectively autonomous, but even in companies not structured in this way, silos and turf wars often develop naturally.
Reading the stories of massive failures of major companies presented in The Silo Effect isn’t very instructive. This type of failure doesn’t easily scale down to smaller businesses. However, understanding how the silos in these businesses helped lead to problems can inspire the leaders of smaller companies to examine their business structures to look for similarities.
Tett looks at how Sony, the vast consumer-electronics company, suffered from the lack of communication across its various silos – one of the common causes of silos in the workplace. For example, at one point, two different divisions of the company released similar portable music players, because neither division knew what the other was working on. “None of these departments, or silos, was able to agree on a single product approach, or even communicate with each other to swap ideas, or agree on a joint strategy.”
The problems that led to this silo effect were, in part, a result of the history of the company and its unique culture. When the company tried to make sweeping changes, bringing in a foreign CEO to try and organize things, he was unable to make much progress, because of the entrenched silos in the company.
The story of the Royal Bank of Scotland (RBS) is much more chilling. This Swiss bank with a long history lost billions of dollars betting on subprime mortgages because many of the company‘s leaders didn’t understand the products, and because some people took matters into their own hands, literally gambling with the bank‘s money until the disaster came.
Looking at the 2008 financial crisis more globally, Tett points out that one of the reasons for the “disaster” was that:
Professions seem increasingly specialized, partly because technology keeps becoming more complex and sophisticated, and is only understood by a tiny pool of experts.
In many ways, this hyper-specialization, with its obscure jargon that only a few people can understand, naturally leads to silos.
Breaking down silos in the workplace
Identifying silos in a business is one thing, but it is hard work to dismantle them. Tett says, “Anybody who is willing to jump out of their silo and break down some boundaries in their own lives in unexpected ways can gain a new vision.”
Tett provides concrete examples of how breaking down silos can be beneficial: in New York‘s City Hall; in the Chicago Police Department; in Facebook; and in one of the largest medical centers in the United States, the Cleveland clinic Ohio. In all of these contexts, people had to break free from existing, entrenched structures and habits in order to achieve a new type of flexibility.
At the end, the book returns to its anthropological origins, and the author explains what we need to do to understand the silo effect and break down silos:
The first step to mastering our silos is the most basic one of all: to think how we all unthinkingly classify the world around us each day. And then try to imagine an alternative.