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The Silo Effect

By Gillian Tett

(Simon and Schuster, 290 pages, $28)

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In startups, it's common for everybody to work together closely. But as organizations grow, silos are built, distancing us from each other. As a marketer, you market. In a very large organization, the focus might be even smaller than that – you're a digital marketer, or an Intranet specialist. It's a logical, convenient segmentation, allowing specialization.

But journalist Gillian Tett says in The Silo Effect that it also has downsides. It can make us, collectively, act in stupid ways. It can prevent us from seeing risks because we are so consumed with our own area of expertise that we are unaware of information from allied silos and thus fail to see the big picture.

A prominent example is the financial crisis, which she wrote incisively about in her 2009 book Fool's Gold, which took readers behind the scenes at JPMorgan, where a talented derivatives team came up with a clever money-making idea that was later perverted into the financial folly we fell prey to. As she dug into the crisis, she says in the new book, she "saw a world where the different teams of financial traders at the big banks did not know what each other was doing, even inside the same (supposedly integrated) institution. I heard how government officials were hamstrung by the fact that the big regulatory agencies and central banks were crazily fragmented, not just in terms of their bureaucratic structures, but also their worldview. Politicians were no better. Nor were credit rating agencies, or parts of the media."

Tunnel vision and tribalism ruled. We know how universities house experts so specialized that they don't share with the person in the neighbouring office, let alone those from complementary allied disciplines. Ms. Tett probed the economics tribe to show "how skilled experts can become so confident in their own ideas that they end up missing dangers hidden in plain sight." Their mental maps – in academe or in policy-making at central banks and government ministries – kept them securely ignorant of growing risks outside those mental silos.

During the first two centuries of the Bank of England's existence, she notes, money, society and politics were entwined. New recruits were expected to be flexible and gain a holistic view of how money moved around the economy. But economics over time became preoccupied with mathematical models and became distanced from financial experts looking at markets. The different silos contributed to the inability to piece together what was happening in the shadow banking world. Interestingly, Mark Carney, the Canadian who now heads the bank, has restructured to try to encourage a broader outlook.

It's not just the financial world that suffers from silos. Ms. Tett tells how silos crushed innovation at Sony, beginning that account with how in 1999 – two years before the iPod's debut – Sony unveiled a digital music device the size of a chewing gum package called the Memory Stick Walkman. But immediately after that was brandished at a tech fair by the head of its American operations, another official unexpectedly stepped forward with a pen-sized digital audio player, the Vaio MusicClip. And as if that wasn't enough, somebody else revealed a third device, the Network Walkman. "The devices competed with each other. The company seemed to be fighting itself," Ms. Tett observes. While Sony fought turf wars, Apple was united.

But some organizations avoid silos, or at least minimize their impact, and Ms. Tett devotes equal time to looking at success stories.

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She shows how the police departments of New York and Chicago benefited from data experts who busted silos to tie as much information together as possible, leading to analysis that improved operations and helped the citizenry.

Facebook, wary of becoming as siloed as Microsoft, has introduced various countervailing policies, including bringing new recruits together for a six-week induction course known as Bootcamp, which exposes them to various facets of the organization; it doesn't allow them to choose which team to join until the end of that stint. Tech companies love holding around-the-clock hackathons to solve problems, but a special feature at Facebook is mingling people from different parts of the company in those challenges. And after someone has been working on the same issue for a year to 18 months, Facebook will rotate them out for a few months to get a broader experience, most people choosing something far different from current work.

Ms. Tett acknowledges that "we cannot entirely abolish silos, any more than we could abolish electricity and maintain our modern lifestyles. We need to have specialists in the twenty-first-century world to create order in the face of extreme complexity."

But through examples like Facebook, she pieces together some lessons to mitigate their impact, including keeping boundaries of teams fluid, rethinking how incentives can stifle collaboration beyond a team, and ensuring the broadest information flows.

We often complain about silos, but like the weather take them as a given. Ms. Tett's book, wound around some lovely stories of the good and bad of silos, illuminates their dangers and how to guard against them.

Postscript

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Social business strategist Bryan Kramer looks at how sharing is powering the economy and giving us competitive advantage in Shareology (Morgan James, 199 pages, $21).

Maximizing the Value of Consulting (Wiley, 520 pages, $55) is a guide for internal and external consultants to be more effective, written by accountability experts Jack Phillips, William Trotter, and Patricia Pulliam Phillips.

In Mindware (Doubleday Canada, 320 pages, $32) University of Michigan psychology professor Richard Nisbett reveals some unknown tools for smarter thinking drawn from the latest research.

Harvey Schachter

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