The cost of silos and a retail example
An efficiency improvement in one department, without considering its systemic impact, can trigger costly consequences.
One case from a South African national retailer illustrates this vividly. The online shopping operation was tasked with improving order picking productivity. After a series of layout redesigns and procedural changes, picking output tripled.
On paper, this indicated success: throughput increased and labour costs per unit decreased. However, operational consequences rapidly emerged across the value chain.
The staging area, not designed to handle the increased volume, became congested. Staff were overwhelmed, access routes were blocked, and bottlenecks delayed order preparation. The logistics team, under pressure to dispatch on time, faced reduced sorting windows, which increased misloads, delivery errors, and skipped quality checks. Condensed packing in totes, intended to save time, resulted in higher damage rates due to fragile items being compressed or mishandled.
Although the performance of the picking team had improved, the net result was diminished customer experience. Each department had fulfilled its own KPI:
- Picking: items per hour
- Logistics: dispatch speed
- Customer Service: accuracy and damage prevention
Individually logical, these targets functioned in competition rather than cohesion. The system had been optimised in part but degraded as a whole. This scenario is symptomatic of misaligned KPIs, where localised optimisation masks structural friction.
Why silos form
Silos form incrementally as organisations scale. In early-stage companies, small teams often communicate informally, share context, and align easily on priorities. However, as headcount increases, specialisation intensifies and departmental autonomy expands. Senior leadership becomes more removed from daily operations, and visibility gaps emerge.
Without deliberate structural design, each department begins to optimise for its own success. Performance reviews, promotions, and team credibility become tied to local metrics. Departments work with limited awareness of how their decisions affect other teams. As a result, collaboration erodes and organisations lose alignment between strategy and execution.
Several structural and behavioural patterns drive silo formation:
1. Unclear roles and visibility gaps
As complexity increases, the connection between individual roles and company objectives weakens. Without clear role definitions or integrated reporting structures, staff revert to executing tasks within their own scope, ignoring downstream impacts.
Example: Finance vs Procurement
A finance team delays supplier payments to preserve cash flow. A procurement team, simultaneously responsible for supplier relationships and inventory continuity, experiences stock shortages due to vendor dissatisfaction. Both teams meet their internal objectives, but the business suffers service failures and reputational risk.
2. KPIs that conflict across departments
Misaligned KPIs are a common cause of intra-organisational tension. When teams are rewarded based on internal performance rather than shared goals, they may undermine each other unintentionally.
Example: Sales vs Customer Success
In a SaaS company, the sales team is incentivised to close as many deals as possible using aggressive discounts. The customer success team, responsible for retention, inherits poorly qualified accounts with unrealistic expectations. Churn increases, negating sales growth. The business prioritised acquisition volume over lifetime value, producing a self-inflicted revenue leak.
3. Structural stagnation during growth
Organisational structures that served early-stage businesses often become obsolete as scale increases. Yet many firms retain legacy hierarchies, outdated approval chains, or unbalanced team configurations well beyond their useful life.
To counteract this, a 12–18 month redesign cycle is recommended. Leaders should periodically ask:
- What would this organisation look like if designed from scratch today?
- Are current roles and departments still fit for purpose?
- Where is collaboration being obstructed by structural design?
Without such reflection, growth compounds misalignment rather than building resilience.
4. Ambiguity in communication and responsibility
In the absence of clearly defined priorities or inter-team protocols, employees interpret organisational intent based on local context. This results in informal power dynamics, territorial decision-making, and reactive rather than proactive behaviour.
Example: The Leadership Vacuum
When executive teams fail to translate strategy into actionable direction, middle management fills the void with locally rational, but uncoordinated objectives. Without shared definitions of success or clarity on ownership, progress becomes fragmented and inconsistent.
How to recognise a siloed organisation
Silos are often invisible until symptoms emerge. Indicators of a siloed organisation include:
1. Departmental blame culture
Departments absolve themselves by pointing to others’ failures. Instead of root cause analysis, teams focus on defending performance. This culture impedes problem-solving and reduces trust.
Example: Marketing vs Fulfilment
A marketing team launches an uncoordinated discount campaign. Orders spike, but the fulfilment team, unprepared for the volume, falls behind. Errors increase, customer complaints rise, and each team blames the other for the fallout. This breakdown stems from misalignment, not incompetence.
2. Decision-making bottlenecks
When cross-departmental coordination is absent, even minor decisions require multiple escalations, redundant meetings, and delayed sign-offs.
Example: Feature Launch in Enterprise Software
A product feature is ready but delayed by fragmented sign-off procedures across compliance, legal, marketing, and customer success. Without central tracking or integrated workflows, what should be a simple release becomes a protracted negotiation.
3. Conflicting KPIs
When targets in one department directly contradict those in another, teams are set up for failure.
Example: Customer Support vs Finance
Customer support is expected to reduce resolution times, while finance reduces staffing budgets. Support quality declines, customer satisfaction falls, and internal credibility erodes—despite both departments meeting their individual goals.
4. Duplicated work
In siloed environments, departments independently initiate projects that overlap. Lack of shared information leads to redundant expenditure and inconsistent outputs.
Example: Two Unaligned Marketing Teams
Separate regional teams independently create product campaigns using different messaging, materials, and agencies. Without coordination, resources are wasted and market consistency suffers.
Structural solutions to prevent silos
Preventing silos requires active design. Alignment must be embedded into organisational structure, measurement, and communication systems.
1. Design from the top down
Organisational design must begin with business objectives. Once outcomes are defined, structural needs and roles can be mapped to support them. This ensures form follows function, not legacy.
Questions to guide this process include:
- What roles are essential to achieve current strategic goals?
- Are responsibilities clearly defined and not duplicated?
- Is the business structured for collaboration or isolation?
2. Align KPIs across teams
Before finalising departmental KPIs, cross-check them for unintended tension. Ask:
- If this department hits its target, does another suffer?
- Are short-term wins compromising long-term health?
- Is each KPI anchored to shared business success?
KPIs must cascade from company-level objectives and reinforce collaboration, not competition.
3. Apply the Function Accountability Chart (FACe)
Based on Verne Harnish’s Scaling Up methodology, the FACe framework ensures role clarity:
- Every function has a single accountable person.
- Performance is measured using defined metrics.
- Each role is visibly linked to company priorities.
This avoids blurred responsibilities and supports transparency.
4. Reinforce alignment through tools and communication
Tools alone do not create alignment, but they support it when paired with effective practices:
- Weekly leadership check-ins to review cross-functional priorities.
- Shared dashboards tracking interdependent metrics.
- Internal knowledge repositories and onboarding guides for consistent context.
Sustained alignment requires frequent communication, structural feedback loops, and disciplined review.
Final reflection
Silos are not caused by individual departments failing to deliver, they are the product of systemic misalignment across teams, metrics, and decision-making frameworks. Left unchecked, they result in duplicated work, poor handovers, blame-shifting, and lost growth opportunities.
To prevent silos, organisations must not only react to symptoms but proactively design their operations for clarity, collaboration, and strategic cohesion. High-performing businesses recognise that operational alignment is not a by-product of culture but a structural commitment. Teams must be measured and managed in a way that supports the entire system, not isolated components.
The goal is to ensure departments contribute to a coherent, unified organisational direction.