Articles » Latest Articles

The Dangers Of Business Silos And How Red Flag Alert Can Help

Oct 18, 2023 Rory Traynor Updated On: October 18, 2023
The Dangers Of Business Silos And How Red Flag Alert Can Help

Silos are one of the most common problems that businesses face. They've become so familiar that many see them as an inevitable feature of organisations above a certain size, and accept them as part of doing business. Indeed, traditional company structures and the human tendency towards tribalism make them very difficult to avoid. 

Whilst common, it does not mean that they are problem-free, and the presence of silos is almost always to the detriment of a business. Their removal and the alignment of all departments throughout an organisation should be a priority to the senior management of a company. 

In this article, we will look at what a business silo is, their effects, their cause and ways to counter them.

What are business silos?

Named for the agrarian grain storage silos, business silos refer to business divisions that do not share or hoard information and operate independently from other parts of the business. This is most often down to cultural problems within a business, but can also caused by computer systems that do not successfully align and therefore struggle with easy information sharing.

Very commonly, business silos form around departments and are characterised by employees that look and think inwardly as to the needs and goals of their department rather than those of the wider company. An ‘us versus them’ mentality often develops and those within a silo regard employees outside it with suspicion or even hostility.  

Siloed departments will fail to collaborate and will resist helping other departments, as anything taking employee time away from their professional goals is seen as counter to the perceived good of the silo. Similarly, they will pursue the completion of their own objectives, even if doing so harms or works contrary to those of another department, or even the company as a whole.

Business silos are normally intrinsically linked with the various verticals and departments, as successful companies generally proscribe to the same blueprint for corporate structure as it is proven to be effective and manageable. Despite this, with the proper processes in place, silos can be avoided. 

As well as silos forming around departments they can also form around geographical locations in multi-office companies, shifts (eg. day shift vs night shift) or seniority levels. 

So what is an example of a business silo?  

  • A Sales department closing deals that are not suitable or practical for the business to deliver, resulting in customer service or account management teams dealing with the unhappy customer and ultimately costing the business time and money.  
  • A Development team not taking the time to request input from other departments when designing a new product as it would slow the process down and they may want to avoid sharing credit. This silo harms a company by stifling innovation. 


What causes silos?

There are many ways that business silos can come about but some of the most common are:

  • Silo mentality within senior leadership: When competition between members of senior leadership leads to rivalry, a silo mentality usually follows. This trickles down the ladder as the senior manager is protective of their power structure and discourages subordinates from communicating and collaborating in a way that may circumvent them. This inevitably trickles down the ladder as employees follow their example.
  • Internal communication barriers or a lack of communication: As communication between departments slows or ceases, they lose visibility over what their colleagues are doing, any ongoing planning, and how they might help each other. In this instance, departments may set goals and priorities to decide on a direction without knowing, considering or caring how they tie in with other departments.
  • Competition for resources: Most commonly caused by budget allocation, an ‘us against them’ mentality can swiftly arise where departments perceive that others are competing for money from their budget and any increase to their own must come from another’s. In this situation, silos can feel incentivised to not help or actively hinder another, as if another silo is high-performing and enjoying successes, then they may be seen as a priority in budget allocations.
  • Lack of understanding of the company’s goals and mission: When individuals and departments do not understand their place in the wider business and how it is working towards its goals, they will develop an insular mindset. A lack of context around how their actions contribute to the general good of the company, and how other departments also contribute to this, those within a silo will see only their targets as relevant to them. There is also evidence to suggest that not understanding the benefits of your actions can cause employee disenfranchisement and disengagement with their job.
  • Poor knowledge management practices and internal data tools: It is difficult for separate parts of a business to work towards a common goal if they do not know or understand what another is doing. This can lead to individual departments interacting with other businesses or customer bases differently, both pursuing the same prospects or duplicating projects. Should a company not have adequate tools for individuals to record their actions, or for others in the business to see this information, such as a CRM, then each department is operating blindly.

The negative impact of silos

  • Diminished innovation: Lack of communication and the internal focus of silos means that each works on projects in isolation. This means that experts in different fields from the wider business do not have visibility over them and are not able to share beneficial ideas or see additional uses for the product that will give it a competitive advantage in the marketplace. Silos can also stifle creativity within themselves; as command structures become strictly vertical and insular employees can be scared of sharing ideas or be seen to disagree with the opinions of management, as they feel they can only progress their career up that silo specific vertical and doing so could jeopardise that.
  • Duplication and inefficiency: With different areas of the business being unaware of what work is being carried out by each other, projects can be duplicated or even work towards conflicting goals.
  • Employee disenfranchisement and toxic workplace culture: Employees not knowing how their actions contribute to the good of the company or even matter can lead them to feelings of disenfranchisement and that their job has no value or meaning. A needlessly competitive environment that makes employees feel like outsiders, whose successes are seen as a threat, causes a toxic environment which will then lead to an increased employee turnover. 

How Red Flag Alert helps avoid business silos

Silos, at their core, come from a lack of alignment and communication between different parts of a business. One of the key actions that can be taken to alleviate the negative effects of silos is to ensure that all departments have the same data to base decisions on and can share new findings.

 At Red Flag Alert, we understand that for data to be effective it must be visible across your business. We have designed our platform to allow a collaborative approach to risk management and AML compliance.

Our business data is delivered in easy-to-understand company reports that can be used by staff from any department and means that transparency and visibility are increased across your entire business, based on the same reliable source of information. This helps align separate departments by allowing for process-led decision-making. 

A good example of this is reducing the friction between credit risk and sales. These are two departments that very frequently silo as salespeople work in a high-pressure, target-driven environment where individual jobs can be quickly lost. Those working in credit risk can develop an ‘us against them’ mentality as they frequently are seen as ‘the bad guy’ and feel that their role protecting the business is undervalued by colleagues. 

These two departments frequently come into direct conflict as the sales team has spent time prospecting and selling, only for credit risk to block the deal. Both departments eventually get more and more entrenched and their relationship can become hostile.

Using Red Flag Alert’s business health ratings, credit risk professionals can set an acceptable level of risk to pass their standards, and the sales team are able to prescreen prospects to ensure that they are only spending time selling to creditworthy companies. In this way, the relationship between the two is collaborative, not a competitive one.

Our company monitoring software has also been designed to promote intradepartmental communication. With Red Flag Alert, you can create fully customisable monitoring lists and share these, and their alerts, with any other members of the business. Should a key client show signs of going insolvent then all department heads can be alerted at the same time and work together to find, market to, prospect and land a new key account; or if a prospect is showing key buying signals then marketing and sales can find out at the same time and work out a marketing strategy for sales to then call at the perfect time.

Red Flag Alert can also seamlessly tie into your CRM system, keeping information automatically up to date and giving all staff members access to our market-leading business data directly in your own platform.

These are just a handful of benefits that our platform will bring your business. Get a free trial today and see how Red Flag Alert will protect and align your business today. 

Published by Rory Traynor October 18, 2023

Stay informed

Sign up to receive expert insights direct to your inbox.