Silo Mentality

What is a Silo Mentality?

A silo mentality is the unwillingness to share information with coworkers of different divisions in the same company. The restriction reduces an organization’s efficiency, and in an extreme case, damages the corporate culture of the organization.

Understanding Silo Mentality

Silo is a word that originated to refer to storage containers for missiles or grains. Still, it is now used to describe departments that store information and successfully seal it in. In an organization, silos are business departments that function separately and avoid sharing information or data. It also refers to organizations with departments in silo system applications where information cannot be distributed due to limitations in systems.

The silo mindset is usually a top-down matter resulting from competition between senior managers, as financial incentives are tied to their performance. Such a defensive attitude passes on to individual employees, who store information for the benefit of their manager. In practice, it is usually found between employees in competing departments, such as sales and marketing, as the two departments depend on each other.

A silo mentality does not occur due to opposing mindsets. It is due to a narrow mindset adopted by employees and managers of the department. It is because the employees and managers are laser-focused on their daily tasks.

Hence, they fail to see the bigger picture or see themselves helping play a critical role in contributing to the organization as a whole. They may also be unaware of the value of information that they are storing. In the end, a silo mentality is present due to a herd mentality adopted by the employees and managers of a department.

Advantages of a Silo Mentality

• It establishes a support network, as individuals in a silo think alike and usually adopt a similar outlook on organizational functions.
• It develops effective communication within a department, as members of a silo know exactly what work you are undertaking and the resources you will need.
• It fosters a community of individuals that will look out for each other, as the end goal is to improve the department as a whole.

Disadvantages of a Silo Mentality

• It creates a self-fulfilling prophecy adopted by departments, as each department cares only about their success and not the organization’s success as a whole. It will lead to inefficiency at the organizational level and may reduce the organization’s potential to achieve their goals.
• Individuals within an organization get blindsided to risk due to the herd mindset.
• Goal setting will become a problem because the department’s goals might not align with the organization’s goals.

Different Types of Silos

1. Geographical Silos

Geographical silos are found in corporations that keep offices in multiple locations or when employees are located in various countries and continents. It causes language, time, and culture to differ, making it hard to organize joint action and adapt to changes.

2. Partnership Silos

Partnership silos can occur between companies that are working towards a similar goal. For example, a partnership silo can exist between a customer and a vendor. It occurs organically, as organizations use different processes that make collaboration difficult.

3. Hierarchy Silos

Hierarchy silos are the separation between higher-level and lower-level employees in multinational companies, as the high-level information is guarded. A hierarchy silo is a major problem in organizations, which leads to high levels of turnover and bureaucracy.

4. Department Silos

Department silos occur when employees are determined to finish intra-department work, and there is a lot of friction when working with employees of another department.

How to Overcome the Silo Mentality?

A company can overcome the silo mentality by using the following techniques:

1. Creating a unified vision

It is advised that leaders in an organization do not focus on differences and always have the vision of the organization’s goals in their minds. It can be achieved by getting over behavioral issues and speaking out on background issues current to the organization. Hence, the leadership team must agree on a common goal and strive to achieve that goal with the lower-level employees.

2. Execute and measure

It is important to set a goal and accurately measure it. The leadership team must create a timeline and benchmark for the goal.

3. Collaborate and create

To develop a thriving and collaborative team, it is important to build a team with knowledge, collaboration, confidence, and creativity. A team is likely to fail without the four factors mentioned.

More Resources

CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.

To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

• Bureaucracy
• Micromanager
• Team Building
• Behavioral Finance Glossary
• See all management & strategy resources