Historically, many organizations have introduced clearly defined silo-based support functions through separate departments that look after Finance & Accounting, Procurement, HR, Supply Chain, Corporate Communications, IT/ Technology, etc. This clear split was originally introduced to create focus on the execution of the individual activities, resulting into clearly defined skills and experience levels of the employees in these departments to deliver clearly defined outputs.
This clear segregation of departments, and the aligned employee skills, has been very effective in the 'old economy.' Even in the early 2000s, there was still a focus on this type of specialisation through the use of Shared Services, Centres of Excellence and creating sub-departmental divisions, e.g. in Finance & Accounting functions there is often a separation between finance professionals, treasury specialists, internal audit and tax & legal advisors. All these specialised professionals have acquired their own specific country or international qualifications (In the worse case scenario the department will only consist of professionals with a country-specific qualification that have progressed their career within their own department).
However, in the last few years, there has been an increased focus on business partnerships to reduce the operational gaps between the various departments. The introduction of ERP systems, Shared Services and other similar types of transformational initiatives, has increased the need for new operational partnership roles to reduce the process, communication, and operational effectiveness gaps. Examples of these roles are:
- Business relationship managers across multiple departments and functions (mainly operational departments),
- Finance business partners, HR business partners, IT account managers, etc. to deliver an effective internal service to their key internal partners,
- Cross-functional teams to deliver transformational solutions and operational excellence,
- Business integration managers, delivering continuous integration solutions to reduce ineffective processes or technology hand-offs between organizational departments
These new roles have been established to be a 'translator' between the various departments and reduce the silo-based departmental environment with inefficient process hand-offs, bureaucratic policies and procedures and non-value added outcomes, which have shown to reduce the overall business performance of the enterprise. This silo-based departmental approach has also created a silo career progression for the employees which is now prohibiting the 'flow of operational innovation' in an organization due to employees having a single viewpoint, limited cross-functional skills, misunderstanding of the internal customers, and the silo-focus delivery of organizational activities without clearly understanding the enterprise-wide impact.
Based on international studies, it has been found that there is a direct correlation between a highly divisional or functional structure, the skill diversity of the employees AND the level of operational innovation that exists.
Although many organizations have started innovation labs through separate business units or departments that focus solely on innovation, innovation initiatives in their function, digital business innovation, or embedding external experts in their organization to come up with innovation initiatives, it is crucial to highlight that successful organizations have shown that innovation can only flourish through cross-functional collaboration.
What is the best method to break the operational silos and introduce operational innovation effectiveness?
Current organizational structures and employee career progression paths to adopt innovative skills and experience require to be radically changed through introducing the following basic guidelines:
- Innovation initiatives should be linked to overall organizational goals and targets to ensure innovation is relevant,
- Between 5 – 10% of employee’s time is spent on innovation initiatives,
- All innovation is conducted through cross-functional, self-directing teams to obtain various viewpoints, insights and create holistic innovative solutions. Innovation is all about embracing diverse thoughts!
- Innovation is embedded in the organizational performance management environment to measure and track innovation as part of the organizational goals
- Innovative ideas are radical, out-of-the-box, but simple. Implementation is iterative and result-focussed to transform the operational effectiveness, disruptive technology, operational processes, business model, roles and responsibilities, etc.
- Innovation requires mentoring through internal or external mentors which have been there, done that and can speed-up innovation efforts through embedding innovation in the organization and across the employees.
What is the immediate next step for your organization?
To allow operational innovation, it’s imperative that your employees have experienced different views of their specialism. Some of the leading innovative organizations are actively exploring this cross-functional pollination of skills, knowledge and experience through:
- Extending finance professionals to operate in IT/ Technology to allow them to understand the impact of IT/ Technology on the business performance of the organization. Through close collaboration between finance and IT/ Technology specialists, the finance professional is able to effectively communicate with technical staff, understand technical solutions for finance and is able to conduct financial analysis in IT.
- Introducing integrated teams across procurement, logistics, warehousing, export/ import and digital specialists to collaborate across their supply chain. This connected supply chain approach will allow the various parties to understand and experience the impact they have across the end-to-end supply chain process. By introducing effective cross-functional supply chain teams there will be a higher focus on the connectivity, intelligence, scalability and rapid new market and channel extension to your existing or new customers.
- Creation of a continuous collaboration partnership between HR and their organizational departments to drive operational innovation, real-time performance effectiveness and continuous feedback processes. When HR executives operate directly across different organizational units, he/ she is able to directly impact the culture, values, employee programs and other HR services. Through this cross-functional insight, HR is able to better tailor their HR services to the employees and management.
Many global businesses have started to abandon the operational silos and have started to embrace this cross-functional focus through operational innovation with flat organizational structures, cross-functional leaders with diverse teams and cross-departmental career progression. This approach has allowed these organizations to deliver innovative solutions, products, and services to their internal and external customers.
However, it’s surprising how many businesses are still holding on to these silo-based operational departments, while trying to introduce innovation at the heart of their business…