Here is a brief excerpt from an article by Neil Smith for Fast Company. To read the complete article, check out others, and obtain subscription information, please click here.

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Silos are necessary in companies. They provide the structure that allows companies to work. Every company is split into divisions, departments, or groups, such as sales, technology, and finance. This structure allows expertise in different areas. In companies, silos tend to be places where information, focus (another word for choosing priorities), and control flow up and down. But company silos also cause problems—that same structure prevents the flow of information, focus, and control outward. And in order for a company to work efficiently, decisions need to be made across silos.

There are three aspects to the organizational silos barrier:

o Nonaligned priorities
o Lack of information flow
o Lack of coordinated decision making across silos

Silos occur naturally because of the way organizations are structured. Each part of a company reports up to a manager who has responsibility only for that part of the company. But none of the parts is truly independent. Each relies on others to perform its function, and the company performs well only when each of these sometimes many parts or units work closely together.

This kind of company structure is also necessary because it keeps accountability and responsibility in the silo. It also fosters a sense of independence and pride of ownership, which is a good thing. Senior management’s role is to look broadly at the organization; a department manager’s is to look deeply into his or her own area. The problem is, doing this creates what I call “tower vision.” Managers tend to look up and down only within their own silos—never looking around or across—so all they see, and tend to think about, is their own silo. They don’t know what is happening elsewhere in the organization or how their actions impact other areas. They act primarily in the interest of their own silo.

This makes sense. After all, when you are a division manager, your priorities naturally and appropriately center on your division. You may not even be thinking about other groups. And when you have to make decisions that may affect other silos, you are conditioned to think about your own silo first.

Just because a course of action makes sense for a silo manager doesn’t mean it is the best way to do things or even in the best interests of the entire company. From a company point of view, silos need to work together. But too often that doesn’t happen. Problems arise when departments do not share the same priorities, knowledge, or information, and when managers work in an independent, entrepreneurial manner—in short, when people are operating with tower vision.

You see the organizational silo at work all the time. Every manager is part of a silo and has been frustrated when his or her priorities did not align with someone else’s in a different department. (Can you remember telling a colleague that whatever you needed was really important? Or telling another colleague that you were doing something that has a higher priority? We have all been on both sides of the equation.)

Customers also see the organizational silo barrier at work. Think about the process of buying a new car. The salesman at the dealership sells you a car but has to rely on a computer system to tell you if it is in stock. The dealership’s sales department is run by a sales manager, who has no control over how the computer system works. She relies on another unit to keep technology running smoothly.

The salesman also needs to know how quickly he can get the car to you. This is also not in his manager’s control. Even if the auto manufacturer actually has a car in stock in the color and with all the features that you want, and even if the computer inventory program is accurate, it is up to the distribution department, under the control of yet another manager, to get the car to you. And if you want to finance the car, that is yet another department—and another department the salesman and his manager have no control over. It is only when all of these units within the dealership operate successfully together that the salesman is able to make you happy with the purchase of your new car.

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Then in “Breaking The Barrier” and when providing key questions to ask/answer, Smith explains HOW to build a business by smashing its silos.

This material is excerpted from How Excellent Companies Avoid Dumb Things: Breaking the 8 Hidden Barriers that Plague Even the Best Businesses by Neil Smith with Patricia O’Connell. Copyright © 2012 by the author and reprinted by permission of Palgrave Macmillan, a division of Macmillan Publishers Ltd.

Here is a direct link to the complete article.

Neil Smith, a graduate of Harvard Business School and Keele University in England, and CEO of Promontory Growth and Innovation (PGI), has over 20 years’ experience helping large corporations dramatically improve performance and profitability by growing revenues and innovatively reducing costs. Smith has led initiatives across a number of industries with some of the best-known companies in the U.S. and internationally including, Bank of America, Willis, and North American Van Lines.