Date posted: 1/12/2016 5 min read

Can the silo mentality benefit a business?

Just maybe, silos have their good points

In brief

  • The silo mentality is what occurs when a business unit or department becomes a veritable law unto itself
  • The disadvantages of the silo mentality, according to critics, are many and ruinous: it saps morale, stunts productivity, creates organisational dysfunction, and sends mixed signals internally and externally
  • The accountability rests with each unit to ensure they get the skills and resources they need to keep moving

By Leo D’Angelo Fisher

Photography By Brett Phibbs

Management gurus warn against it, business authors sell books by the millions about it, consultants have strategies to eradicate it, and modern business leaders won’t have a bar of it.

“It” is the dreaded “silo mentality”.

The silo mentality is what occurs when a business unit or department becomes a veritable law unto itself. As an entity within the larger corporate body it has a culture, and even a self-regard, so distinct and so jealously guarded that there is a reluctance to share resources, information and ideas with other departments. Chances are they will look down on those departments.

The disadvantages of the silo mentality, according to critics, are many and ruinous: it saps morale, stunts productivity, creates organisational dysfunction, and sends mixed signals internally and externally. 

Although the battle to vanquish “silo thinking” has been going on at least since the 1980s — coinciding with the era of hero-CEOs in no mood to tolerate dissenting thinkers, let alone potential empire builders in the ranks — there is fresh cause for a renewed push against the silo mentality. Selfish silos are the antithesis of the 21st century collaborative organisation.

But if the times do not suit the silo, unfortunately it is also true that the times do, as respected management writer and Financial Times columnist Gillian Tett explains.

“The bad news is that the curse of silos will not be easy to beat. For one bizarre paradox of the modern age is that while technology is integrating the world in some senses... it is simultaneously creating fragmentation too,” Tett says.

“And as innovation speeds up, this is creating a plethora of activities that are only understood by ‘experts’ in a silo — be that in finance or in numerous other fields.”

A CEO with a focus on the customer is the managing director of NZX-listed telecommunications company Spark New Zealand, Simon Moutter CA, who has headed the telco since 2012.

An independent management thinker, Moutter does not like to be pigeonholed, nor does he have much patience for management fads.

“My approach to management or leadership is situational,” he told Acuity.

Spark is the former Telecom NZ — the new name became official on 8 August — and the rebrand is the most visible sign of a company in transition.

Change has been a constant at the telco, which traces its roots to the NZ Post & Telegraph Department formed in 1881, but arguably nowhere nearly as dramatic as its most recent past.

Telecom NZ became one of the first telcos in the world to be fully privatised in 1990 — seven years before the first partial privatisation of Telstra in Australia. In 2011, the network side of the business was hived off as the publicly listed Chorus, leaving Telecom to focus on retail.

Moutter had been Chief Operating Officer of Telecom between 1999 and 2008, when he left to become CEO of Auckland International Airport, where he is credited with transforming the airport from a “piece of infrastructure” to a commercially-savvy international aviation and retail hub.

Moutter’s task as chief executive of Telecom-cum-Spark was to break down lingering perceptions of the company — internally and externally — as a grey government monopoly and to transform it into a vibrant, successful, consumer-focused retailer of phone, internet and mobile services. And to do so quickly, sustainably and with impact.

The challenge, he says, dictated his management style.

“The leadership model has to suit the situation, and the situation for us was the need for fundamental change. Speed and definitiveness were a lot more important than seeking a collaborative approach,” Moutter says.

“The business had been declining for ten years and my job was to steer it in a positive direction. That required a bold adjustment to the business.”

Speed and definitiveness were a lot more important than seeking a collaborative approach.

Over the past 18 months, upwards of 250 major initiatives have been implemented towards achieving that change, he says.

In such a hothouse environment, Moutter’s C-suite has little time for the “c” words that figure so prominently in modern management mantras: collaboration, consensus and compromise. But true to his iconoclastic tendencies, he finds favour in the “s” word — silos.

Not long after he took the helm a staff memo from the boss was leaked to the NZ media — presumably by a nervous employee who could sense that change (a “c” word that has pride of place in Moutter’s leadership lexicon) — which in part outlined the role that individual units would play in Telecom’s transformation: “I’ve charged each member of my leadership team with getting their business unit fighting fit to implement our new strategy as soon as possible — that means over the next few months. I’ve told them to question everything we do, then decide what’s right for their business unit and for the group as we realign for the future.”

Spark comprises five core business groups: Spark Home, Mobile & Business; Spark Digital; Spark Ventures; Spark Connect; and Spark Wholesale.

Moutter says silos comprising “tighter groups” ensure decision making that enables rapid “organisation-wide” outcomes.

“Within a silo it is much easier to define and implement an initiative or outcome,” he explains.

Moutter says it is up to the chief executive to ensure that each unit is accountable and consistent with corporate objectives.

“The accountability rests with each unit to ensure they get the skills and resources they need to keep moving. Each business unit is completely in charge of taking an initiative through to the end, but I’m very demanding when it comes to each unit being directionally aligned with the rest of the organisation.”

Moutter says collaboration can be “disabling” in a large organisation and in some cases become an excuse for not acting.

“When you need 30 people to say ‘yes’ for an idea to proceed, but you only need one to say ‘no’ for everything to come to a halt, that’s when the well-intentioned desire for collaboration can lead to inaction.”

Asked to describe his style of leadership, Moutter offers “movement”, “direction” and “winning”.

“I’d rather move than over-analyse something. Some CEOs don’t move fast enough because they’re striving for the perfect answer, but that’s not always possible or in the best interests of the business because everything around them is moving so quickly,” he says.

“Movement matters, direction matters – making bold decisions and making them quickly. If you’ve got a bias to action, yes, you’ll make mistakes, but you just have to accept that’s part of the process.

The key, he says, is that the “winning” decisions outnumber the “duds”. And if something’s not working, “you adjust, you reset or you do something else”. The aim: to win.

“We use the word ‘winning’ a lot. What I wanted from day one was a winning culture. When you create the habit of winning, when there are pockets of winning throughout the organisation, the whole organisation wins, and our customers win,” he says.

“We’ve moved from having an infrastructure-business culture, which tends to be risk-averse and cautious, to a retailer’s culture, which is forward-looking and extremely competitive.

“That’s a pretty dramatic shift, a complete reworking of how we approach our customers and create value, but we’re only halfway through that process.”

It might be the halfway mark, but the figures show that Moutter’s style of leadership — silos and all — is paying off.

The rebranded Spark New Zealand has delivered an annual result worthy of its new name, almost doubling its 2013-14 net profit from NZ$238m to NZ$460m – albeit a result boosted by the sale of its Australian AAPT business.

Collaboration can be ‘disabling’ in a large organisation and in some cases become an excuse for not acting.

Moutter’s boss, Spark chair Mark Verbiest, is certainly happy with the result.

“Two years ago, we made the decision that we needed to become significantly more relevant and competitive,” he says. “Since then our business has been rapidly changing ... We are confident we are generating real momentum.”

Dr Marc Stigter, associate director of Melbourne Business School and principal of Critical Management Group, says the idea that silo thinking can be a positive is “almost everything I stand against”.

But he agrees — “reluctantly”, he stresses — that there are instances when self-contained organisational silos can be of benefit.

“If, for example, there’s a particular project or you’re in the early stages of trying to get something off the ground, in such an environment it makes sense for a group of people to be protected and for decision-making processes to be concentrated,” he allows.

But then the caveat — Simon Moutter take note.

“Even if there can be a case in certain circumstances for a silo to be beneficial, it cannot endure, it’s not sustainable. A silo means ingrained thinking and inward-looking practices and today’s volatile business environment doesn’t allow for ingrained practices anymore.”

Leo D’Angelo Fisher is a Melbourne journalist, writer and commentator. He is a former associate editor, features writer and columnist with BRW magazine. leodangelofisher.com

This article was first published in the October 2014 issue of Acuity magazine.