The word “silo” (originations relating to agriculture and an isolated structure for storing grains) has over the past few years been used to denote a negative aspect of organisational culture.
The reason why is not hard to see. The image of a silo is one that is sealed off from its surroundings. It is insular and protected. In the organisation, this has tended to manifest itself in functional silos. Meaning Finance, HR, IT, R&D, Supply Chain, Marketing etc. It can, of course, apply broader to also divisions within an organisation or even regions / markets.
Why are silos thought of so negatively? I’ll highlight 3 reasons.
Philosophical: “No man is an island unto himself”. There are very, very few instances where any work these days is done without any interaction with others.
Environmental: The nature of modern organisation life is getting more and more complex due to the combined effect of globalisation, increased risk and technological advances. This fuels the need for the solving of more complex problems and confronting more decisions to be made at higher levels of uncertainty. This requires more, not less collaboration and holistic thinking.
Social: As humans, we spend an inordinate amount of time at work. At heart, we are a social species. At the same time, our “lizard brain” still makes us feel faintly suspicious of “the other”. In general, familiarity breeds increased levels of security. Hence, an environment where siloed behaviour is encouraged is likely to be one that breeds more suspicion and uncertainty than trust and confidence.
Applicability to Finance
How does this relate to Finance? As long as any organisation unit has different components the risk is there that these components work independent of each other. In a typical (core) finance function, one may find the following sub-functions:
- Financial Accounting
- Financial Planning & Reporting
- Business Control / Commercial FP&A
- Internal Control / Audit
How can silo behaviour exhibit itself within finance?
Narrow focus. Focus is normally good, but a failure to look at the big picture and define too narrowly the purpose of the role can lead to ignoring dependencies and interdependencies.
Differing temperaments. Typically, the types of personalities, skillsets and mindsets found in the different sub-functions tend to differ. This makes by nature, collaboration harder. Understanding the world of the other is often felt as an inconvenience, especially when neck high in the operations swamp.
Lack of collaboration moments. If the only collaboration moments are handover moments, in other words, passing some kind of information over, then the chances are high that the walls of the silo limit the boundaries of taking responsibility. To go beyond the wall so to speak.
Information is power. Finance ultimately deals with information. That is its “product / service” to the business. In the past information had a scarcity value. Now that is much less so. In that environment adopting a hoarding mentality is counterproductive.
This can lead to, amongst others, the following consequences:
A blame culture, especially when things go wrong, normally around reporting or controls.
Dis-synergies, meaning that in terms of providing solutions for the customers of finance these solutions are likely to be sub-optimal, due to a lack of finance integrated thinking and action.
Lack of any kind of finance identity, leading to different sub-cultures within finance.
Barriers to talent management and career development. This is perhaps the most important consequence. Especially if the purpose of the function is to continue to become stronger and to develop stronger finance leaders.
So, what are ways to stop this happening? In any silo situation, it starts with the tone at the top. With the CFO. They need to acknowledge that this is an issue that is holding the function back. It is either causing demonstrable damage or getting in the way of achieving objectives.
Breaking historic and current silo behaviour is a question of managing change. Therefore, it is also important to note that it starts and ends with people. Technology, behavioural nudges, incentives, consequences will all have a role to play, but to move from necessary to sufficient – the willingness of the people in the function is critical.
Concretely, I would highlight six things that a CFO can address to start to break down these internal walls.
Ensure that the Finance LT is committed to this and the ongoing FLT agenda reflects the importance of this. After all, on the FLT are likely to be the heads of each sub-function and therefore people who will have to live with the change.
Make the case for the change. Illustrate concrete examples of where there has been unnecessary friction, frustration, noise, regretted losses, lost opportunities to improve service levels and, therefore, credibility.
Create opportunities for deeper collaboration. Moving away from silo behaviour comes much more naturally when people get to work with each other more and they get to know each other better
Demand and facilitate information sharing across the function about how well the different parts of the finance are doing. Share KPIs. Share performance results of the business.
Involve the people in the function to design what positive behaviours they would like to see in an integrated one finance environment compared with the past. Enshrine these behaviours and focus on peer and leadership recognition of these especially in the early periods of the shift.
Last but not least, involve the business. Let them know about the shift that the function is attempting. Enlist their help in calling out when they still see signs of the silo at work in finance.
In many ways the rise of technology as a catalyst for finance transformation (think Intelligent Automation, Robotic Process Automation, Algorithms, Data Analytics and Visualisation amongst others) can increasingly break down such silos by giving a common language – that of systems, technology and data – to speak. Another example is in the continued use of collaborative technology to bring people closer together.
Ultimately, the problems faced by organisations only get more complex and that requires finance as a function to step up in its abilities to deliver end to end business solutions that will lead to supporting a healthier business in the future. This requires – just as in the whole business – a real and demonstrable shift from a narrow, boundary defined, responsibility to a broader, collaborative, dependent view of the real outcomes expected of the finance function as a unit. Without active support and drive from the CFO and their LT, any efforts to move to such a place are likely to fail.