The “Silo Effect”
We all know the ‘silo effect’ within organisations, with individual departments focusing on their own priorities and not sharing information and working together. Whether this is a conscious decision or not, there’s no denying that it exists to some extent within every company.
The classic example of this is the relationship (or lack of) between Sales and Operations. In a traditional silo organisation, Sales are focused on maximizing revenue and want everything in stock and delivered on-time to the customer. Operations are focused on efficiency and cost reduction which translates to long production runs, fewer changeovers and large batch sizes. Outside of these two departments, there are other competing agendas. Supply Chain will be trying to optimise and reduce inventory levels whilst Purchasing are focused on reducing cost prices which means ordering bigger volumes from suppliers.
A Matter of Perspective
As well as the relationship across departments, there is also a hierarchical relationship between management and workers. There are often differences between the ‘top down’ view of management and the ‘bottom up’ view of the workforce. At the executive level, management are focused on the strategic, high level and long term plans for the business. By contrast, the workers are focused on the operational, detailed and short term plans. Although these are separate activities, the long term vision will one day become the short term reality and if the two are not aligned then the execution of the operational plan becomes difficult, costly and unrealistic to achieve.
What does it all come down to? The plan that they are working to. Sales are continually forecasting to make sure they are on track to hit their target. It’s just that they are forecasting in revenue and not in the same ‘language’ as Operations of items and volumes. The same is true of other departments for example Finance and HR. Finance are forecasting to monitor cash flow, profit and currency requirements etc. and HR are forecasting to plan recruitment. So everyone is forecasting, everyone needs a forecast and everyone’s forecast is different. Is it any wonder that the end result is confusion and distrust between departments!
It certainly can’t be removed entirely, but you can try to reduce it’s impact and encourage individuals and teams to pull in the same direction.
A Single Integrated Business Plan
The answer lies in having a single Integrated Business Plan that has been discussed, understood and agreed by everyone. Each department has reviewed the plan in their own ‘language’ whether that’s sales volume, revenue, margin, people, machine hours or materials. They have all signed up to the plan and the assumptions behind it and are then committed to executing it.
The benefits to the organisation are huge as ultimately everyone is pulling in the same direction to achieve a common goal. The organisation becomes more agile and able to react to demand and supply changes as there is only one single plan to update and review. The organisational friction that comes from constantly arguing over the plan is massively reduced. The symphony is created !