Departmental Silos:  Breaking down Organizational Barriers

Organizations need, well in a word, organization. We need and like to put our work into neat compartments. We divide work into first, big compartments, then increasingly smaller ones as we get closer to the actual work of making the things we make.

Clearly we need to organize our work. But equally clear sometimes we organize too much; over organize. We can create so many compartments within our companies that it actually adds complexity to process and workflow increases time from order entry to cash, impedes our progress and can negatively impact quality and customer experience.

Traditionally businesses organize work into functional process compartments (departments) that are defined by the work they do: sales, engineering, planning, purchasing, production, shipping, accounting, human resources, etc. It all makes perfect sense.

While compartmentalization is a natural and logical way to organize workflow in our business, rational design doesn’t always produce expected or wanted outcomes. Dividing our work solely based on functional activities frequently results in departmental ‘silos’ between which work is tossed over the top from one to the next in the process flow.

These silos generally inhibit the flow of customer order fulfillment. They require that work enter each departmental ‘in-basket’ queue separately and independently. From order processing, to engineering, planning, purchasing and production each stop slowing the processing of an order.

Far beyond the issue of efficiency, our departmental silos often supplant our mission of service to our customers. The departmental work itself becomes the mission and the importance of the customer is lost within the boundaries of our departmental work. Perspective is lost to the belief that our personal work is more important than service to our customers. Regrettably, I have seen this played out in companies across the country over since the mid-nineties.

In an industry that continues to underperform in terms of revenue and profitability, an industry that continues to contract each and every year, we may want to rethink organization structure and behaviors.  Here are some things we might want to consider.

The Customer as Context

No matter whatever we, or any of our colleagues thinks meeting the needs and expectations of our customers are the primary context of our work. The work we do for customers is the very purpose for the existence of any business. Period. All departmental work must be done in the context of that purpose. Period. If we believe differently, that belief is simply wrong.

If there is work being done in your business that is being driven by any context other than meeting the needs and expectations of our customers, find it and stop it. Organize your people around the idea of making customer work more important that our own.

More importantly, instill the importance of identifying work that is being done in the company that is not directly improving product quality or delivery or the experience for the customer. Challenge your team to directly connect their work to improving how they meet the needs and expectations of the customer. If they can’t, maybe they shouldn’t be doing that work.

Getting your team sharing a common and simple goal – improving our performance for our customers – will create a shared goal that will begin breaking down departmental barriers.

The Systems View

Your business is, in effect, a customer order fulfillment system. Despite the thinking of some of your people, no departmental function is more or less necessary, thus more or less important than any other. You need every function in your business to fulfill a customer order. If you didn’t, you wouldn’t (or shouldn’t) have it.

Your CNC machine is a system. So too is your business. The router spindle is useless without either a cutting tool or a program to position the head to process the component. Purchasing is no more important than accounting. Accounting is no more important than production.

Getting your people to think of the business as an end-to-end system rather than a loosely connected assortment of independent functional silos will create an understanding of where interdepartmental disconnects and issues exist. Getting your team to think systematically will help remove the barriers between departments and improve process efficiencies.

Fast Fish

It has often been said, that ‘it’s no longer the big fish that eat the small ones, but the fast ones that eat the slow ones’.  If we don’t believe it, may we need to need to remember that wood industry revenue productivity (dollar of revenue created per dollar of payroll spent) is, on average, half that of all other manufacturers combined.

Revenue productivity, line productivity on the shop floor is simply a function of thru-put.  Higher thru-put is the result of higher process efficiencies in the front office as well as on the plant floor. Furthermore the process efficiencies of the plant are directly related to the work being done in the front office.

From front to back, the goal of all staff must be to increase the speed (and precision) with which order are processed through the company. Breaking down silos to increase the velocity of order fulfillment processes is key characteristic of ‘fast fish’ and should be a high management priority in your organization.

Smashing Silos

It all sounds interesting, but how do you break down a silo.  Here’s one example. A small cabinet company with which I recently worked was processing its orders through its engineering software. Each order was being processed as a unique production order and the process took five to ten business days to generate materials demand depending on the accuracy and completeness of the customer order.

In studying these orders we discovered that over 90% of their production came from fewer than 50 cabinets. A sales catalog was created in their accounting system that allowed materials demand to be recognized on the day orders were received rather than five to ten days later.

The change in business process happened first because the business was continuously struggling to meet customer requested ship dates within promised delivery times because of the lag time between order receipt and material purchases.

Second, the management team broke down silos and worked cross-functionally to move the planning process from engineering to the accounting system. Working in concert, engineering, operations, purchasing and accounting staff developed and executed a plan that speeded up the delivery process by a week.  Result: a faster fish!

We all recognize the importance of departmental function and responsibilities, but recognizing where department silos become barriers to responsiveness. Shortening or removing the silos is necessary for companies to best serve its customers and maintain its competitive advantage.

If you need help assessing your organizational silos, I can be reached at 608.279.8089 or dshultz@jemoran.com.