Good communication within any business is vital to successful growth. Though it’s not hard for folks to communicate in small businesses, as organizations grow and tasks become departmentalized, it becomes more difficult. At times, team members can become so focused on their own area’s tasks that they lose sight of the bigger picture, thus adversely affecting the company’s success. Departments such as sales and marketing, operations and administration can operate as mini-businesses within a company — and oftentimes they have their own politics and cliques. An “us versus them” mentality can develop between departments, resulting in a toxic work environment.
Experts describe this situation as “organizational silos.” Not every aspect of a corporate department — or silo — is negative. Rather than multitasking, silos enable team members to focus on specific areas, allowing them an opportunity to become very good at those tasks. Silos also allow for allocating people efficiently — placing the right person in the right job. Though a siloed approach can be beneficial, the negative effects can be devastating. Here is an example that I witnessed early in my career.
When I first visited the Pittsburgh Terminal Market in the late 1950s, the railroad was the predominant means of transporting fruits and vegetables from distant growing areas. The interstate highway system was not yet built, so receivers at markets around the country counted on reliable rail service. By the late 1960s, the nation’s new highways gave the trucking industry the opportunity to provide delivery to markets faster than the railroads, and offered the flexibility of multiple pickups and drops.
Railroads built terminals around the country in the 1920s and 1930s, and charged the tenants low rental rates to grow the railroad’s freight revenue. By the late 1960s, the increase in trucking resulted in steadily decreasing railroad freight revenue. In an attempt to compensate for lost revenue, the Penn Central Railroad added a clause to the Pittsburgh Market’s tenants’ leases that charged $30 for each truck that was unloaded at the terminal docks.
In the mid-1970s, the Pittsburgh Terminal Market was still a busy place, with hundreds of trucks being unloaded weekly. Using a conservative estimate of 50 trucks per business day, Penn Central should have realized almost $400,000 in annual revenue. This never happened because the railroad’s operations management never looked beyond its own division’s bottom line.
It’s up to management to make sure everyone in the company understands the big picture. Make certain your team knows how important each person is to the overall success of the company.
Proper administration of the program was probably a two-person job that, at the time, would have cost less than $50,000. Despite the potential $350,000 profit for the corporation, internally the money went to the real estate division, while the expenses were in operations. Those running the Pittsburgh operation never placed more than a part-time employee on the job; and when that employee retired several months later, the position remained vacant.
This program was doomed from the start. Managers at Penn Central were evaluated and compensated on the performance of their departments. Forget about the big picture — those whose performance and compensation were based on operations’ bottom line would not consider hurting themselves, despite the overall positives for the company.
Silos in a company can hurt in other ways, too, which can be bad for morale. How do you work to ensure that your organization’s departments work effectively as a team rather than against each other?
First and foremost, communicate. It’s up to management to make sure everyone in the company understands the big picture. Make certain your team knows how important each person is to the overall success of the company. That team member picking a warehouse order at the end of the day needs to know why it’s important to get that rush shipment out the door, rather than let it sit until the next shift.
Don’t be afraid to use incentives to drive performance, but be careful to look at the side effects. Incentives can create tunnel vision. If incentives are conceived without regard to overall company performance, they may end up being counterproductive.
Don’t forget to give a compliment on a job well done and celebrate success. We sometimes forget how important it is to be recognized by the boss. It’s easy to think, “They are just doing their jobs,” but an occasional pat on the back goes a long way to improving morale.
Encourage inter-departmental communication. Set up regularly scheduled discussions between departments to discuss issues and share best practices. Encourage a salesperson to spend a day in operations, and allow a warehouse person to sit in on a sales meeting. Do whatever you can to make sure your team members understand what others in the organization do, and that the overall success of the company depends on everyone working together.
Though trite, it’s true: “A rising tide lifts all the boats.”
Alan Siger is chairman of Siger Group LLC, offering consulting services in
business strategy, logistics, and operations to the produce industry. Prior to selling Consumers Produce in 2014, Siger spent more than four decades growing Consumers into a major regional distributor. Active in issues affecting the produce industry throughout his career, Siger is a former president of the United Fresh Produce Association.
