John had been working for the company for 25 years and is close to the patriarch. In fact, Dad hired him and has consulted with him in making key decisions over the years. Today the company is facing some real challenges. The market appears to be growing, and its products are still well received, but profitability is lacking due to internal inefficiencies.
An outside consultant was called in to assist in getting the company on track again. What he found was a common problem in many previously successful family businesses. Over the years, the company had developed management “silos”, the most destructive of which was led by Dad’s valued confidant, John. Because of his position as a top manager in the company and his close relationship with dad, John was thought to be immune to challenge by the other managers, even when they knew that his departmental decisions were harming the rest of the company. In order to cope with the situation, the other senior managers began to develop their own silos to protect their departments from John’s power plays. Interdepartmental teamwork and communication almost ceased to exist, as did overall profitability.
It took the outside consultant’s report on the situation to open Dad’s eyes to the cause of the problem. John was given an ultimatum to destroy his silo and become a collaborative team member or retire. John chose to retire. On his retirement, other silos began to collapse and an effective management team began to evolve. Internal efficiencies began to improve and profits began to rise again.
Silos are not restricted to farms or companies. Some of our worst defeats during WWII were caused by admirals or generals who were not team players. The resulting lack of communication often led to lapses in intelligence and failure to coordinate battlefield or naval campaigns, causing unnecessary loss of lives.
Unfortunately we see many family businesses using silos as a way to ‘work around’ family tension – where one brother is put in charge of one area, and another in charge of a different division and they make a ‘pact’ to stay out of each other’s sand boxes as their personal dysfunction prevents them from working effectively together.
Don’t be blindsided by loyalty and longevity, and don’t use silos as a way to ‘divide the enterprise’ between feuding factions of the family. Silos in the company lead to unhealthy internal competition, breakdowns in communication and opportunity for your competition. Beware the silos as they can really set you up for failure.