In my Golden Rules of CX series, I started with the bold assertion that achieving extraordinary results requires courage. Customer Experience (CX) practitioners often struggle to secure budget approval due to institutional resistance. One of the biggest obstacles to transformative CX are organizational silos – structural and behavioral barriers that hinder collaboration, innovation, and customer-centric thinking.
This issue has been widely discussed by management experts like Peter Drucker and Jack Welch, whose insights, alongside real-world business failures and successes, shed light on how silos erode value. By dismantling these barriers, organizations can unlock efficiency, innovation, and extraordinary CX outcomes.
Understanding the Psychological Barriers of Silos
Silos are not only structural but also psychological. Employees often unconsciously reinforce these divisions through internal scripts—preconceived mental models that limit cross-functional collaboration. The classic 9-dot exercise illustrates this concept, where participants struggle to solve the puzzle because they perceive an imaginary square boundary. Similarly, employees unknowingly resist cooperation, hoard information, and maintain territorial mindsets.
Jack Welch’s idea of a “boundaryless organization” challenges these restrictive mindsets by promoting transparency, rapid decision-making, and cross-departmental synergy. To bridge silos, companies must actively challenge internal assumptions, dismantle ingrained behaviors, and create environments where collaboration is rewarded.
During a senior leadership development program for Dominion Textiles, a global textile manufacturer based in Montreal, Canada, the Chairman sought to transform the C-Suite from a group of capable executives who excelled at following directives into leaders who would take ownership and responsibility for their projects, proactively deciding how to execute them. The goal was to shift the organization’s culture from a passive “tell me what to do” mindset to an active “I will initiate” approach.
In one of the meetings with the executives, a senior Vice President strongly resisted the idea of adopting new ways of working. He argued that the proposed changes were inconsistent with how “King” had done things in the past. When I asked who King was, I learned that he was a former CEO who had passed away twenty years earlier. Despite his absence for two decades, King’s leadership style continued to shape this executive’s behavior and decision-making. This enduring influence of a long-departed leader underscores how internal barriers, such as ingrained habits and loyalty to past practices, can limit our ability to adapt and innovate. It is a powerful reminder that our thinking is often shaped by outdated routines, even when they no longer make sense in today’s context.
The Hidden Costs of Silos
Silos create political, operational, and cultural inefficiencies that undermine CX efforts.
Organizations suffer from:
- Misaligned incentives prioritizing departmental KPIs over organizational goals
- Conflicting priorities between departments, leading to goal displacement
- Knowledge asymmetries from isolated data systems (e.g. separate CRM platforms for sales and support teams)
- Slower innovation due to risk aversion and bureaucratic roadblocks
- These interconnected issues stall modernization efforts and result in reputational damage, lost revenue, and failed business strategies. Instead of enhancing operations, silos reinforce stagnation and erode employee morale.
Case Studies: When Silos Lead to Business Failure
History is littered with examples of companies that collapsed due to poor interdepartmental coordination.
MySpace and Pets.com are two examples of companies that failed because of lack of coordination between marketing and finance units. The $74 billion Enron scandal illustrates the failure of leadership and siloed accounting practices. More recently, Theranos dissolved because of a failure of engineers and clinical teams to collaborate resulting in flawed Edison blood-testing devices. AIG reflected organizational design flaws during the 2008 financial crisis when its derivatives trading division issued credit without oversight from its risk management teams.
The 2024 rebellion at Dollar General is an example of the structural isolation of leadership from frontline employees illustrating the erosion of trust, engagement and cohesion. Employees, including store management walked off the job, closed the store and announced to their customers they could not tolerate being overworked, underpaid, and disrespected. They also felt corporate greed overshadowed leadership’s pledge to support their communities. Employees were trapped in a silo reflecting two companies: “us” and “them”! This case underscores how structural divides, coupled with leadership insularity erodes engagement and trust. As reflected in the posts on store windows, employees revealed an insidious impact on employee morale.
Boeing’s 737 Max project delays and overbudget crisis are attributed to engineers’ inability to escalate safety concerns past middle management leading to increasing uncertainty.
These examples demonstrate silos’ capacity to amplify operational risk, erode stakeholder trust, and stifle innovation through delayed feedback loops.
Breaking Silos for CX Success: Lessons from High-Performing Organizations
Organizations that successfully bridge silos often achieve exceptional CX and operational efficiency. The New York Times overcame the divide between its print and digital teams by establishing a centralized data science and engineering group.
This effort led to:
- Shared company-wide dashboards accessible to editorial, marketing, and product teams.
- A streamlined editorial workflow promoting collaboration.
- Hackathons to promote innovation.
Similarly, Ritz-Carlton transformed a customer complaint into an unforgettable experience by drawing on its global preference database to leverage historical data (including a 2008 wedding event) to transform a service failure in 2016 into a memorably positive experience. This underscores how unified data access enables:
- Predictive personalization at scale
- Consistent service recovery protocols across locations
- Employee empowerment through holistic customer visibility
When a guest faced an unfulfilled room request, the hotel compensated by personalizing their stay with framed wedding pictures from a previous visit—an example of how centralized customer databases overcome siloed logic and create remarkable experiences.
Bridging Silos through Top-5 Things
Peter Drucker observed that companies pay lip service to ‘people talent’. Silo structures leave large reservoirs of untapped capabilities, including leadership influence on the table. Jensen Huang, CEO of Nvidia is a model example of a leader who recognizes the capabilities of his employees.
He successfully flattened the hierarchy and broke impermeable silo walls with an organization design implementing a ‘Top-5 Things’ email strategy. He argued strategy was not what he says but what people do. Therefore, he encouraged all 30,000 employees to send regular emails to their supervisors, teams and directly to him about the Top-5 things everyone should know about. These are brief bullet point emails that give ‘everyone information from the edge.’ He even expects information about a restaurant an employee recommends.
Yes, he reads all his emails, as everyone else does. This approach allows the company to move at the speed of light! Jensen recognized early that complacency, encouraged by silo personalities, is a serious impediment to competition and innovation. T5T emails give him unvarnished information and have become a vital feedback channel.
This approach:
- Surfaced frontline insights previously trapped in departmental silos
- Accelerated decision-making by distributing strategic awareness
- Reduced complacency by creating accountability for continuous improvement
- Bridged non-work-life with work
Real Voice Bridges Silos
Drucker noted that companies that have empowered their employees achieve spectacular increases in productivity and output. Prologis, a company that has hardly a household name, stands out in the 2023 Top 250 companies for overall effectiveness. It has a work environment in which employees, regardless of rank or title, are given real authority and responsibility.
Prologis’ weekly C-Suite Monday Meetings rotate cross-departmental teams through high stakes strategy sessions involving $500M+ decisions. Key outcomes include:
- Dispelling “ivory tower” perceptions of executive leadership
- Eliminating hierarchical knowledge gaps
- Fostering innovation via safe spaces for risk-taking and diverse perspectives
Moghadam, the CEO, shares his position on business matters at the meetings to avoid swaying any thoughts before the meetings.
Summary and Key Takeaways:
- Silos Are Both Structural and Psychological
- Organizational silos limit collaboration, stifle innovation, and create inefficiencies. Employees often reinforce these barriers unconsciously through ingrained mental models, requiring deliberate efforts to dismantle them.
- Silos Lead to Operational and Business Failures
- Case studies from MySpace, Theranos, Enron, Boeing, and Dollar General illustrate how siloed decision-making results in financial scandals, failed products, reputational damage, and disengaged employees.
- Breaking Silos Requires Leadership-Driven Change
- Leaders like Jensen Huang (Nvidia) and Hamid Moghadam (Prologis) successfully eliminated silos by prioritizing cross-departmental communication, real-time data sharing, and empowering employees at all levels.
- Unified Data Enhances CX and Decision-Making
- Companies like The New York Times and Ritz-Carlton demonstrate that centralized customer data, open collaboration, and shared dashboards drive better service, innovation, and customer satisfaction.
- Transparency and Inclusion Foster Agility and Trust
- Organizations that integrate employees into decision-making processes, eliminate hierarchy-driven knowledge gaps, and create open feedback channels achieve faster innovation, stronger engagement, and sustain competitive advantage.
References:
https://www.culturemonkey.io/employee-engagement/organizational-silos/
https://hbr.org/2015/09/jack-welchs-approach-to-breaking-down-silos-still-works?autocomplete=true
https://hbr.org/2011/07/are-you-a-collaborative-leader
WSJ, December 14, 2024
