top of page



Everyone talks about the need to break up organizational silos, but few succeed in that effort. For the past thirty years, CEOs have recognized “silo mentality” causes different business functions and teams to march according to different drum beats. The resulting dysfunction torpedoes achievement of organizational objectives and the ability to compete effectively.


Consider four key questions about silos:


  • If silo dysfunction is well understood, why is it so hard to overcome?


  • Why is it particularly prevalent in financial services?


  • What must be done to reduce or eliminate it?


  • Why is this more important now than ever?  


First, we must recognize that silos are a natural and important part of every business organization. A recent article in Fast Company (6/5/12) commented: “Silos are necessary in companies. They provide the structure that allows companies to work. Every company is split into divisions, departments or groups, such as sales, technology and finance. This structure allows expertise in different areas.” In fact, one could argue that silos can trace their roots to the origins of multi-unit business organizations 150 years ago.


However, problems occur when communication and coordination between silos break down. A deeper challenge emerges when different silos develop separate and distinct visions of where the organization is headed and what its purpose should be. The worst-case scenario pits silos against each other in political and territorial turf battles.  


Financial institutions (FIs), including credit unions and banks, may be particularly susceptible to dysfunctional silo behavior for several reasons. First, FIs historically have been organized around products or distribution channels, rather than around the customer. As a result, different product or channel groups compete for scarce resources within the firm and may not be motivated to share information or insights that would benefit a competing group.


Second, FIs are inherently risk-management businesses. Certain silos in an FI (e.g. internal audit, the CFO’s office, compliance, legal) might be viewed as the “enemy” or at best an impediment to getting things done by customer facing units (e.g. sales, marketing, lending).


Third, different business units in an FI may have very different sets of priorities. In a classic example, marketing may see its IT needs as a key organizational priority, whereas IT may place marketing far down its list.  


Eliminating dysfunctional silo behaviors has obvious benefits. If everyone in a boat rows in the same direction according to the same beat, the boat will move rapidly across the water.


However, less obvious is the fact that achieving silo alignment today is not only desirable, it is essential. As noted above, the FI sector has largely been built around product and distribution silos.  That organization structure worked for many years, but now more and more financial services players are realizing they must shift to a true customer-centric model if they are to compete successfully.


This shift is being driven in part by technology and in part by competitive market forces. Twenty years ago, visionaries such as Don Peppers envisioned a time when a business could treat each customer as a “segment of one”, meaning the business would so deeply understand the attitudes, needs and behaviors of each customer that it could provide exactly the right product and service offerings at the right time to each customer. Today, with the rapid convergence of data analytics, AI and digital channels, that dream is becoming a reality.


Technology leaders such as Amazon and Google have already raised the bar for what a truly customer centric business model can achieve. The expectation level on the part of credit union members will jump significantly based upon their daily experience with those and other market leaders.


This leads us to two conclusions. First, market leadership in financial services will require a high degree of customer centricity to remain relevant. Product innovation and price competitiveness will be important, but will not be sufficient to win the battle. Second, customer centricity will be impossible to achieve in an organization whose cultural DNA still revolves around product and channel silos.


Customer centricity requires consistent and comprehensive sharing of information and data amongst all business units. If there is to be competition between internal units, they should compete to provide the best service to the customer. All incentives and cultural initiatives must align around that objective.


Three factors are critical to break silo dysfunction and to pave the way for a truly customer centric organization.


First, strong leadership at the top of the organization must define and articulate a clear vision and purpose for the organization. Each silo within the organization must understand how it is directly linked to the overall vision and purpose. Competing visions must be eliminated. Alignment is not an option, it is a necessity.


Second, the organization’s strategic planning process must prioritize disciplined choices to put the customer at the center of every key initiative. Whenever silo dysfunction gets in the way of those choices, recognize it for what it is and take immediate steps to prevent recurrence.


Third, identify the type of organization culture required to minimize silo dysfunction. Take care to ensure that the words and actions of senior leaders in the organization embrace the “ideal culture” and support its growth. Hire new leaders that fit the required cultural norms and eliminate those who cling to an outmoded and dysfunctional silo mentality.


Breaking the back of dysfunctional silo behavior can be highly energizing for the entire organization. For some organizations, this transformation will be natural and for others it will be a significant challenge. Failure to do so paves the path to obsolescence. 

bottom of page