Have you ever wondered about the effectiveness of business silos? Most of us have seen them or worked in them.
The metrics, the P&L and certainly the culture, do not encourage co-operation between divisions, capabilities or regions. The results can look good from silo to silo – maybe – but the global result for the business may not be so strong.Resources are often duplicated, efforts may be directed silo against silo, and there is frequently internal competition between executives.
From inside it is often impossible to discern what would be the greater good, and the pressure to protect the near-in is too great to resist.
The Economist tells the story of how this culture changed at Ford, and how this change is credited with its recent massive financial turnaround. Here is an excerpt from that story:
Soon after Alan Mulally arrived as Ford’s chief executive in September 2006 he organized a weekly meeting of his senior managers and asked them how things were going. Fine, fine, fine, came the answers from around the table.
“We are forecasting a $17 billion loss and no one has any problems!” an incredulous Mr Mulally exclaimed.
When he asked the same question the next week, Mark Fields, head of Ford’s operations in the Americas, raised his hand, and – in what once would have been a moment of career suicide – admitted that a defective part threatened to delay the launch of an important new car. The room fell silent, until Mr Mulally began to clap his hands. “Great visibility,” the new boss added.
Four years on, Ford is making record profits. Its revival began with this new willingness to recognize its faults. In the old days management at Ford was preoccupied with executive rivalry, recalls Mr Fields. “Now it is about who’s helping whom,” he says. When Mr Fields stuck his hand up at that meeting and won Mr Mulally’s approval, colleagues soon began chipping in with helpful suggestions to overcome the problem with the new car. It was more than a symbolic moment for a business which used to be run like a collection of principalities rather than a global enterprise. As far as Mr Mulally is concerned, demolishing those management divisions has been the most important factor in turning Ford around.