Silos – Beware!
If I asked you to think about how you would draw your company as a whole you’d probably think of your organisational structure chart which might or might not fit on one piece of paper depending on the size and structure of your company. A structure chart is typically how companies divide and manage the myriad roles and accountabilities and might look like the one shown below.
This approach has a number of strengths – clear demarcation lines, functional centres of excellence and a clear understanding of who the boss is. It has a number of weaknesses – it encourages ‘silo’ thinking, makes people status and authority conscious and has an internal focus. The risk is that the customer gets lost – in summary, it is not a customer centric way of doing things.
Another risk is that it gives rise to what is described as ‘command and control’ behaviour such as ‘my way or the highway’, the existence of a fear/blame culture and with individual initiative stifled out. It is also incomplete – it does not respond adequately to the needs of other stakeholders such as suppliers and business partners.
Take now the customer’s perspective. In a consultative sales environment, the customer expects the salesperson to be able to harness all the strengths of the company to deal with their particular needs. This may mean ‘picking and mixing’ from different parts of the company – perhaps pulling together cross-functional teams to design and deliver a solution.
This cross-functional working is an increasingly common feature linking, for example people from IT, Operations and other customer facing areas to improve the way in which customers are served.
Aligning resources to customers’ need is at the heart of Customer Relationship Management. It is common to talk about CRM as an ‘enterprise-wide’ strategy. What does this mean? It means that the effective implementation of such a strategy requires the appropriate parts of the organisation to be ‘joined up’ with a totally embedded customer focus.
Most companies who look to IT to enable their CRM strategy find that this is easier said than done. According to research, the benefits of such IT solutions are not realised in 50 to 70% of cases. In essence, such an approach has to be viewed as a major change management programme, needing integrated working across the whole company. Inevitably there is always the potential for conflict between organisational structures, control processes, procedures and operational systems.
Helicopter Views
It’s helpful if these sorts of organisational problems can be viewed in a number of different ways and the good news is that there are models which can help you do this. These tools can help stimulate flexible and adaptive thinking that is not constrained by the status quo.
The ability to see things in different ways is particularly helpful if you want to adopt a consultancy problem solving approach to your customer’s needs rather than defining them in terms of the products you have and delivery in terms of organisational fiefdoms.
View 1: Value Chain Analysis
If the traditional structure chart is a static, bureaucratic view of the company then another way of thinking holistically i.e. seeing things as a whole from a helicopter view, is using the concept of a value chain. This derives from a model developed by Michael Porter and suggests that an organisation can be seen as a number of integrated components, the focus of which is to delver value through the organisation to the customer.
The diagram shows an illustrative Banking Value Chain and is derived from Michael E. Porter’s book, Competitive Advantage: Creating and Sustaining Superior Performance, New York, Simon & Schuster 1985.
Symbolically, the value chain points towards the customer segments and has some parallels in terms of integration with the CRM approach discussed earlier. Clearly it could suffer from the same tensions as the silo view but the issue is one of alignment of the parts to deliver the whole in a horizontally integrated way. The challenge – as always- is smoothing over the gaps at the boundary edges.
This is a powerful tool for challenging the silo mentality and developing a true customer focus. It helps in determining areas of competitive advantage and also helps at an operational level in thinking about the alignment and balance of the company.
It has the potential to trigger a host of questions such as:
- Can we effectively deliver joined-up solutions to our customers?
- Where are the gaps?
- What improvements can be made/
- Do we make it easy for customers to buy from us?
- Do we have a single view of organisational risk?
- Are marketing and sale singing off the same hymn sheet?
- Do we have the right balance between centralised and decentralised control?
View 2: The McKinsey 7S Framework
If we now think of your company as a series of dynamic linkages – may be like a suspension system on a car – we can move from the functionally specific to thonk in terms of sets of interactive capabilities, competencies and thus strengths.
One of the models that is particularly helpful in this context is the 7S framework developed by the global consultancy firm McKinsey. This framework identifies a range of attributes that can be used together to analyse and develop an understanding of your company, or indeed if you are doing strategic account planning – profile your customers also.
These attributes should link together in a synergistic way that meet your market’s needs by delivering superior value to your customer. By its very nature, it suggests that the factors are both interlinked and interdependent. Strategic and tactical programmes equally will have an effect on these nodes. An important point is that the general rule is that ‘structure follows strategy - so often companies start from the structure they have which is a recipe for disaster.
Note: the colour coding distinguishes between the hard S’s which are more easy to identify and the soft S’s which are more intangible.
Dealing then with the S’s in turn:
- Strategy: This is the set of activities that the company will undertake to achieve its business performance goals. In large companies this may vary by business unit but this will need to be carefully co-ordinated if they are harvesting the same customer segments. Customers should not be over solicited as the brand values and business prospects may be damaged.
- Structure: The textbook view – which we have alluded to previously – is that structure should follow strategy. Often, though, driven by expediency and power plays, companies will try to implement new strategies using the existing structure. Think of the number of mergers that either don’t happen or are compromised because of ego clashes at a senior level.
A particularly pertinent issue in the current environment is the delayering of middle management in companies because quite often this is the repository of organisational knowledge.
- Systems: These are the rules, processes and procedures that underpin corporate governance. They need to be mutually consistent (purpose, policies, process) and designed to help rather than prevent staff from doing their job – in other words a springboard for performance rather than a barrier.
- Shared Values: Also known as ‘Superordinate Goals’ this S is paced at the centre of the model because in general it summarises ‘the way we do things round here’. It’s often seen as the glue that holds the company together. It may be a set of written affirmations – such as mission, vision and values together with the unspoken but equally powerful cultural and behavioural norms.
For example:
- How are mistakes dealt with?
- How is good performance celebrated?
- How and when is poor performance addressed?
- Is there an institutional blind spot?
- Skills: This is the collective ability of the organisation to deliver customer solutions through the competencies of its people. This is a moveable feast as changing customer requirements need to be reflected by the capabilities of the company.
These skills and attributes may be functional – such as IT based code writing, HR pay and rations and risk management. But they may also be to do with to do with behavioural inclinations such as a positive attitude, personal motivation and ownership of outcomes.
New skills may be acquired relatively quickly but for some disciplines they may take time i.e. apprenticeship schemes. IT may help here – not get rich quick but get ‘fit for purpose’ quick.
- Style: This is the way in which managers collectively behave with respect to the use of time, focus and symbolic action. These behaviours, both explicit and implicit, have a very powerful influence which is often described as ‘walking the talk’.
For example:
- Do managers regard their staff as customers?
- Are their diaries so crammed full with meetings effectively shutting out their direct reports?
- Are they, therefore, too busy to see the people who are probably responsible for delivering customer satisfaction?
- What would a 360 degree feedback exercise say about them?
- Staff: These are the people in the company and addresses the way in which they are supported by their line managers and the HR function. There is growing research that, despite the focus on leadership, the impact of managers in determining employee satisfaction is paramount.
People are our greatest asset is a familiar refrain.
So, does your company:
- Deliver on the rhetoric?
- Put staff before customers?
- Openly help staff to develop transferable skills?
- Deliver a tangible response to staff satisfaction surveys?
View 3: The EFQM Excellence Model
Another way of taking a helicopter view of your company is to use one of the quality improvement models such as EFQM (see www.efqm.org). In the same vein are the Malcolm Baldridge and Deming approaches.
The EGQM model makes a distinction between ‘Enablers’ and ‘Results’. Performance can be measured in each of the areas using a set of predefined criteria so companies can assess themselves and externally accredited as part of a benchmarking process.
Quite often underpinning models such as the EFQM will be accredited quality programmes such as ISO 9001 (see www.iso.ch). ISO 9001 is the internationally recognised standard for an organisation's internal Quality Management. The term 'quality' refers to all those features of a product or service which are required by the customer. An organisation's 'Quality Management' refers to an organisation's actions to ensure that its products or services satisfy its customers' quality requirements and complies with any regulations applicable to those products or services.
View 4: Systems Thinking
So far we have looked at literal models. They are structured, well organised and generally understandable – if not totally compelling for all once we move away from the silo approach.
But don’t worry – the point is to unbundle what might be conventional, orthodox but inherently restricting ways of thinking about your company. So, here’s another perspective.
Whilst the 7S model introduced the idea of interrelationships and the notion of a push/pull effect amongst the various factors, Systems Thinking takes us to the next level.
Systems Thinking is defined as:
‘a way of thinking about, and a language for describing and understanding, the forces and interrelationships that shape the behaviour of systems’.
For completeness and from the same source:
‘A system is a perceived whole whose elements ‘hang together’ because they continually affect each other over time and operate towards a common purpose’.
Source: The Fifth Discipline Handbook, Senge P.M. et al, Nicholas Brealy Publishing, 1994
So Systems Thinking is the ability to see the company as a complex whole, in which you recognise that everything is connected to everything else but in a much more detailed and holistic way than the 7S model. If you do one thing then it inevitably has a knock on effect. It builds on the simplistic interaction identified by the McKinsey framework to allow for more of the complexities inherent in larger organisations.
A frequently mentioned illustration is that of the butterfly effect. This refers to the idea that a butterfly's wings might create tiny changes in the atmosphere that may ultimately alter the path of a tornado or delay, accelerate or even prevent the occurrence of a tornado in a certain location. The flapping wing represents a small change in the initial condition of the system, which causes a chain of events leading to large-scale alterations of events (compare: domino effect).
Had the butterfly not flapped its wings, the trajectory of the system might have been vastly different. While the butterfly does not "cause" the tornado in the sense of providing the energy for the tornado, it does "cause" it in the sense that the flap of its wings is an essential part of the initial conditions resulting in a tornado, and without that flap that particular tornado would not have existed.
Source: Wikipedia
What you often see is the ‘Law if Unintended Consequences’, where, for example, a parochial change in a process or procedure which delivers a benefit for one area has a negative effect on performance in another area. Such changes need to be carefully thought through and people upstream and downstream of the change need to be involved as they are interested stakeholders.
So, in conclusion, each of these models helps you look at your company with a different pair of glasses on – you can choose!
Source: Derived from Managing Relationships in a Corporate Bank, Chris Farrance, Financial World Publishing, 2002.