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The silo effect

Oct 26,2015 - Last updated at Oct 26,2015

While I was watching Fareed Zakaria’s “Global Public Square (GPS) on CNN two weeks ago, I was especially attracted to his conversation with Gillian Tett. She is the US managing editor of the Financial Times and the author of the new book: “The Silo Effect”.

The book gives a new meaning to the term “outside the box”. Can we commit a grave and maybe a destructive mistake believing that we are thinking outside the box while in reality we are contained by the box?

Why would a huge and supposedly a rational company like Volkswagen (VW) commit the blunder of introducing a smart card to cheat on the gas emissions of its diesel-operated cars?

How could a high-profile tech-savvy electronics company like Sony ignore the mobile phone only to lose ground to its die-hard competitors Samsung of Korea and Apple of the US?

The answer Tett provides to this questions and many others like it is the “silo effect”. Such huge corporations or conglomerates are divided into smaller silos, which are in turn divided into sub-silos, until each employee is cooped up inside a cubicle. 

Competition is encouraged, and departments are considered either as cost centres or profit centres. They do not transmit information to each other. Many of them end up working on the same projects, duplicating the costs and fighting for the same limited assets. 

In certain banks, a department or even an investment office could chase a rainbow opportunity before they lose billions of dollars causing the bank to sink.

If we project this idea onto governmental departments we discover the same trend. Either prompted by security or bogged down by bureaucratic practices, they do not exchange information. 

As a result, they could lose money by either duplicating each other’s work or hiring external experts, not aware of employees in other departments who can do competent work on the problem that these experts had been hired to resolve.

The fact that a water department is planning to rehabilitate a pipe network in a major city without alerting the municipality could lead to digging up newly paved streets. 

The fact that managers in public, private and civil society units insist on defending the jurisdiction of their respective departments without coordinating and planning with others causes huge losses to the economy and many missed opportunities.   

We could widen the circle of discussion to talk about the silo effect which is gripping the Arab world.

We have been irrigating and farming deserts in some countries using scarce and irreplenishable water while ignoring fertile lands in Sudan. The result is that water aquifers in some Gulf states are saline and desertification is eroding fertile lands in Sudan. 

How many companies have been established at a very high cost only to discover later that the exact same project was being implemented in other neighbouring countries?

Smartness and bigness does not mean that US President Barack Obama did not blunder in Syria, Iraq and Afghanistan. It did not stop  the Lehman Brothers from going under.

The silo approach to management could enhance competition. If that is done at the expense of shared information and proper knowledge management, the result could be tragic or fatal.


The writer, a former Royal Court chief and deputy prime minister, is a member of the Senate. He contributed this article to The Jordan Times.

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