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2014-06-21 11:43:49
Rana Foroohar @RanaForoohar
June 12, 2014
Insular management and lack of responsibility are hurting big firms around the
world
General Motors CEO Mary Barra may have summed it up best when she described
former U.S. Attorney Anton Valukas 325-page report on the company s
ignition-switch problems, which resulted in numerous deaths and millions of
recalled vehicles, as extremely thorough, brutally tough and deeply
troubling. It was all three and then some. But the report also illuminates a
systemic problem in most big corporations as well as governments insular
management or, in the parlance of gurus, information silos.
More
Valukas found that GM didn t fix its ignition-switch issues quickly or
correctly because the company s many departments and employees literally weren
t communicating with one another. The engineers who were looking into reports
of cars stalling while moving didn t know that engineers elsewhere in the
company had designed air bags that would not deploy when cars were technically
off. That meant engineers made different decisions about fixing the switch
problems decisions that ultimately led to over a dozen deaths.
But it was GM s culture, in which silence and buck-passing were raised to a
Kafkaesque art form, that kept these silos in place. Valukas report brings to
light a number of tics that were unique to GM. There was the GM nod, for
instance, in which everyone nods with respect to a certain course of action
before leaving a meeting and then does nothing at all. And there was the GM
salute, firmly crossed arms pointing outward toward others, signaling a
steadfast refusal to take personal responsibility.
The problems of information not being readily shared and personal
responsibility not being assumed are old ones. Napoleon wanted to create a
military without silos, says Ranjay Gulati, a Harvard Business School
professor who has spent 15 years studying silos. Adam Smith spoke about the
problem of labor silos. Events like 9/11 could have been prevented if there had
been more sharing of information across organizational divisions. Indeed, many
of the biggest corporate debacles in recent years have been linked to
information silos. The Rana Plaza disaster in Bangladesh, in which more than
1,100 garment workers were killed when a poorly built factory collapsed, was
due in part to the fact that major Western retail brands didn t know who their
suppliers were or what they were doing.
Big, complex companies are typically structured so that decisionmaking is
separated according to function, geography and product. That naturally creates
silos. Indeed, McKinsey research shows that the most globalized firms pay an
economic price for this. Examples of silos in blue-chip firms abound: Sony once
had two separate divisions working on creating the same electrical plug without
anyone realizing it. (It s not just old-school companies that are at fault. I
was once offered a job at a well-known tech firm where I would run around
talking to C-suite executives about what they were doing and report back to
other top people in the organization.)
So-called silo busting is already a hot topic in academic circles. Economists,
for instance, are trying to do a better job of predicting market movements by
calling on experts in areas like biology, psychology and the humanities. Major
brain-science initiatives now routinely bring together researchers across many
fields to share data. But in big corporations, silos are a problem that is
becoming only more pressing as the world becomes more interconnected.
How can companies bust silos? according to Gulati, the best way is to create a
set of core values or a core mission that everyone in the firm understands. A
good example of this is IBM s decision, under previous CEO Sam Palmisano, to
create a safer and healthier society via its Smarter Planet initiative. That
goal, says Gulati, helped facilitate cooperation across divisions. It s also
important for firms to consider issues from the point of view of customers
rather than insiders. Consider longtime Cisco CEO John Chambers, who famously
was 30 minutes late to his first board meeting because he felt it was more
important to take a call from an irate customer than to meet the people who d
be deciding his salary. Another way to bring down silos: hire outsiders.
Research shows that women and minorities often communicate better across
divisions.
On that score, Barra is perhaps better placed than most to solve her company s
problems. During her announcement about the report, she set a communal goal for
GM to set a new industry standard in safety and told employees to email her
personally if they felt customers safety was ever in doubt. Silo busting
starts at the top, and if Barra does it at GM, it could set an example for all
large institutions.