Stuck Standing Still: 5 Steps to Move Beyond Siloed Thinking in Organizations

Pitfalls of Siloed Thinking in Organizations

“You cannot look in a new direction by looking harder in the same direction.” – Edward de Bono

Dr. Edward de Bono boldly asserted over the years that the biggest problem humans face is not the climate crisis but a failure to think in diverse ways, a skill that can be taught to anyone. He coined the term “lateral thinking” to encourage ways of thinking beyond the traditional logical/linear (i.e., vertical) thinking characteristic of siloed functional departments in organizations (think sales, accounting, human resources, IT, and so forth).

This problem is not new, nor have thought leaders been silent in sounding the alarm. We’ve been trapped in this dysfunctional cycle of being stuck standing still in our silos for decades.

The pioneer of business process re-engineering, Dr. Michael Hammer, shared this same view and devoted his professional career to pushing organizations to adopt cross-functional, process-centered thinking. He referred to functional silos in organizations as “functional castles, little fiefdoms with high walls and moats around them.” Employees of the typical organization today still perform their jobs in isolation from employees in other departments, blind to the “big picture” of their organizations. Metrics to reward employees are still mainly set at siloed levels, encouraging employees to reach silo-level goals at the expense of enterprise-level goals. In large organizations, employees in one department may never meet or even see employees in other departments. They are often unaware of how their roles fit into the larger goals and vision of the organization.

I’m no exception to succumbing to the siloed mindset. As an Information Systems professor for over a decade, I taught Enterprise Resource Planning (ERP) courses to undergraduate and graduate students using a textbook that referred to lateral thinking as “thinking sideways.” The idea was to promote cross-functional, process-oriented thinking to enable digital transformation with ERP systems. Still, I recall in my early years teaching ERP asking faculty colleagues if I should drop the lessons on lateral thinking and change management to spend more time covering the ERP software assignments and activities. I failed to see the value of lateral thinking lessons in a foundational ERP course. I thought, “Aren’t these concepts better taught by Management department faculty anyway?” Eventually, I understood that students could not truly grasp the value of ERP systems and digital transformations without engaging with the cross-functional nature of most business processes in organizations—in other words, learning to switch between vertical and lateral thinking to have a holistic view of how organizations fulfill their goals, mission, and vision. It’s not enough to see the trees; employees must also see the forest.
Still, organizations struggle to evolve beyond hierarchical structures with specialized functional departments. Not only are these models often not efficient—they are also not effective, and they can greatly impede successful digital transformations (or any kind of transformation).

Negative Consequences of Siloed Thinking

There are too many examples of the negative consequences stemming from siloed thinking to cover in this article, but here are a few examples to illustrate the gravity of this problem.

• In medicine, many of the problems with fragmented health care and high rates of medical errors are attributed to traditional vertical thinking approaches embedded in medical education and the high specialization of medical fields. Though specialization has led to certain scientific discoveries, it has not led to better coordinated and integrated health care, literally costing lives needlessly.

• Numerous companies report losses and defund their own research and development programs each year for failing to put forth successful innovations. The onboarding process of organizations is still heavily skewed toward hiring for certain college degrees and certifications, which reflects the siloed training that higher education continues to perpetuate. Having worked at R1 flagship public universities in three different U.S. states, I can attest to how higher education is just as slow, if not slower, to change with the times as many companies are—yet it is still producing the core human resources input into the organizations of today. Students are trained on how to follow the normative rules and practices of their chosen field of study, not how to innovate and create value for the future.

• Cybercrimes are on the rise, with immense negative impacts on the banking industry and its customers. One of the problems highlighted is the lack of an integrated approach among different departments, such as cybersecurity and fraud, in not only detecting and reacting to financial fraud—but also preventing it. The monetary losses to banks and customers are substantial.

How to Evolve Beyond Siloed Thinking in Organizations

So how do organizations break free from the rigid norms of functional silos to ensure higher success in weathering not only digital transformations but any disruption? How do organizations become resilient to the inevitable turbulence they will face in the future? Here are some suggestions to promote lateral thinking in organizations.

1. Implement initiatives that teach and encourage lateral thinking in employees, including middle and upper management. Many of these overlap with teaching creativity, which typically involves fun activities that also nurture bonding among employees. There could also be formalized processes that allow employees in different departments to shadow each other or rotate offices on a regular basis to better understand the broader workings of the organization.

1. Implement reverse mentorship programs in the organization, allowing employees traditionally viewed as subordinates to mentor middle and upper management on skills they possess that their superiors may lack. This could be the latest trends in social media, common problems faced by employees at lower levels in the organization, how to connect with different generations, and so forth.
2. Prioritize metrics and rewards at the enterprise level rather than emphasize those at the silo level. Design metrics that specifically target employees’ adding value to the whole organization, serving its core mission and vision. Involve employees at all levels in designing and developing these metrics, rather than relegate this responsibility only to those who sit in the “high castle.”
3. Update onboarding practices to seek candidates who have not only specialist knowledge but possess generalist knowledge too, preferably with high levels of mental flexibility. The rapidly evolving business environments of the future will demand more generalist knowledge rather than relying so heavily on specialists.
4. Gamify the workplace to encourage learning about different areas and scanning for opportunities that would benefit the organization. One example would be using the ERP simulation game developed by Information Systems faculty at HEC Montreal. Although it employs the use of SAP ERP, the concepts players learn generalize to other ERP software. The game provides a hands-on, team-based experience for employees to learn how processes in organizations are necessarily cross-functional, with the bonus of helping employees understand how enterprise software can help integrate cross-functional processes. If employees work in sales, for example, they will be exposed to how their role impacts other areas of an organization, like accounting, warehousing, production, and material planning.

Once your organization emboldens a culture of lateral thinking, it will naturally create and discover solutions that work best to not only survive but thrive in the long run.

If you are looking to strategize an upcoming transformation or are looking at selecting an ERP system, we would love to give you some insights. Feel free to reach out to me here with any questions you may have eric.kimberling@thirdstage-consulting.com

Be sure to download the newly released 2023 Digital Transformation Report to garner additional industry insight and project best practices. https://www.thirdstage-consulting.com/reports/2023-digital-transformation-r

References

Davenport, T. H., & Westerman, G. (2018). Why so many high-profile digital transformations fail. Harvard Business Review, 9, 15.

Hasham, S., Joshi, S., & Mikkelsen, D. (2019). Financial crime and fraud in the age of cybersecurity. McKinsey & Company, (October), 1-11.

Hernandez, J. S., & Varkey, P. (2008). Vertical versus lateral thinking. Physician Executive, 34(3), 26-28.

Christina Serrano’s Bio:

Christina has a Ph.D. in Business Administration with a concentration in Management Information Systems from the University of Georgia. For over 10 years, she taught ERP fundamentals to undergraduate and graduate students at the University of Arkansas and Colorado State University. Christina is passionate about researching, teaching, and learning about topics concerning human behavior and technology. She applies a human-centric lens to help people and organizations overcome the various growing pains inherent in transformations.