Why silos survive – and what’s good about that
The top reason that most companies give for introducing a matrix organization structure is to break through the traditional vertical silos of function and geography and unlock resources that can then be shared across the organization more effectively.
However, none that I know of have chosen to abandon function and geography entirely – and there are good reasons for this. A lot of writing assumes that silos are bad and that they automatically become impenetrable and a problem.
The vertical structures of function and geography are extremely enduring. People still work in a place and the vast majority of people still have local jobs, so geography will continue to be essential, even in the most global organization.
Functions have traditionally given most people their career development, training, and a great deal of their sense of identity. These things remain important. When we introduce a business structure that cuts across these functions or geographies, such as in a matrix structure, we disrupt the traditional power structures of the verticals.
This can even lead to resistance as the traditional power resists its power being shared or undermined.
There may be good reasons for this resistance: sometimes globalization can go too far. Often global processes do not improve local operations. To represent the local is the role of the region or country. If we blithely globalize everything, we may find we can’t respond flexibly enough to nimble local competitors.
The functions do have, and should have, their own agendas. We expect functional independence and even control from our finance, HR and legal people, so we don’t want them to owe all loyalty to horizontal business structures.
Perhaps the main role of the geography in a fully integrated business is to create identity and a home for people, as well as to reflect local laws, competitions and traditions. The role of the function is, particularly, to establish capabilities – finance will need to ensure we have enough qualified accountants for the future, for example.
And so long as people within a function look to the function for their training, identity, career development and progression then we should expect the function to play a powerful part in organizations of future.
A problem arises if the focus and loyalty to the functions is too high to enable us to deliver ‘horizontal’ activity that cuts across the function successfully. We can balance this with virtual teamwork, matrix working or a formal matrix structure where we have multiple bosses.
Either way, the vertical structures are here to stay. They play a critical role in creating capability and identity. The key is not in destroying the silos but in making them open enough to enable collaboration and resource sharing across the organization.
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