Today’s large businesses are made up of silos. After years of investing in functional expertise, many organizations have been left with a group of high-functioning but disparate and unconnected teams. With leadership structures that work along similar lines, these teams often end up with leaders who reflect this situation: a finance leader with no knowledge or experience of marketing, say, or a technology leader who has never engaged with the HR function.
Business risks are increasingly interconnected, meaning old-fashioned organizational structures are no longer fit for purpose. Businesses need teams that communicate and collaborate effectively. Above all, they need leaders who can see problems from all angles and contribute to solving them even when they fall outside their area of direct responsibility.
This problem is widespread. One recent study found that 80% of business leaders were worried about the siloed functions in their business, but only a quarter of them were working on strategies to resolve the issue. Other research shows that almost two-thirds of CEOs want to replace at least one of their senior colleagues – twice as many who felt this way just two years ago.
The C-suite itself faces similar challenges. From chief marketing officers grappling with the intricacies of digitalization to chief technology officers tasked with innovative redesign of the business model, every leadership role in the business now comes with a broader range of responsibilities. Moreover, many new challenges are mission-critical – potentially even existential.
No wonder CEOs are anxious. In this uncertain and volatile environment, they’re looking for senior colleagues who will offer them support in guiding the business. Too often, when they look around the room, they see a group of specialists lacking the confidence or expertise to swim outside their lanes.
Supply chain executives do a fine job of planning procurement under serene conditions with detailed demand forecasting, but they have had to become more agile in the face of uncertainty.
The supply chain disruption of recent years has brought this crisis of leadership into the spotlight. Procurement specialists built complex, international supply chains based on a just-in-time methodology that kept inventory to a minimum. This approach cut costs dramatically, but when COVID-19 struck, followed by war in Ukraine, those low-reserve supply chains were horribly exposed as they failed to consider the risk posed by potential black swan events.
Supply chain executives do a fine job of planning procurement under serene conditions with detailed demand forecasting, but they have had to become more agile in the face of uncertainty, managing demand amid fluctuating supply and availability of resources. Many leaders flounder because this requires an understanding of the value chain that they simply do not possess.
Of course, no one could have seen these events coming, but leaders with a broader range of commercial experience would have a better chance of spotting vulnerabilities.
It’s certainly reasonable to expect aspiring leaders to be willing to look over the top of the silo in which they have developed and even start thinking about how to break it down.
The operations specialist currently focused on where to site the next factory, for example, could look beyond low labor and construction costs. Where is the next big market for the goods the factory will produce? What are the geopolitical aspects in play? What are the sustainability considerations? Such questions – and there are many – can help executives to understand and address all the areas that their decisions affect.
But if CEOs feel their current leadership teams lack depth and breadth, they must act to correct that, giving their successors a stronger base from which to start. At the individual level, one productive avenue may be to return to the career development practices of the more distant past, which helped to produce well-rounded executives, rather than purely technical specialists.
Spanish clothes retailer Zara, for example, ran programs where new hires worked on the front line of the business, on the shop floor, and in the factory to better understand how those areas operated.
Consumer-packaged goods giant Nestlé used to warn its high-fliers that they would only become eligible for a C-suite role following a stint as head of a country market. Effectively, they had to serve as national or regional CEOs, broadening their knowledge and expertise before getting a shot at a seat on the board.
Many organizations don’t seem to invest in their future leaders in this way. One reason for this has been the breakdown of the concept of a “career for life.” Employers no longer expect their staff to stay with them for decades, and so feel less motivated to invest in their career development. The risk of that approach is that this lack of commitment on the part of employers will exacerbate staff retention problems, and those who stay may be ill-equipped to take on a C-suite position.
Organizations require wholesale change. Executives trained in line with highly specific mandates will develop into specialized but limited leaders. By breaking down silos, organizations can give their executives much-needed exposure to a broader professional experience.
Building cross-functional work streams and teams will offer executives the chance to interact with and learn from a more diverse range of colleagues. There will also be side benefits for organizational culture in evaporating cliques, rivalries, and other negative perceptions between functions. More inventive reporting structures could support this integration, with individuals accountable to two managers: one inside their function and one in another.
In response to rapidly mounting business challenges, CEOs have often sought to bring in more specialists, leading to bloated C-suites that generate opinions but find it challenging to take an overview and devise strategies that are effective for the whole business. A small but broadly experienced C-suite, each member of which understands how the whole business works, will offer agility and holistic thinking.
De-siloed organizations are more cohesive and efficient, with an increased focus on the customer. They will also produce a new cadre of leaders with the skills and experience required to guide the business to a prosperous future.
30 October 2024 • by Richard Roi, Tania Lennon in Business transformation
Skills are becoming obsolescent faster than ever, and potential leaders are given little time to achieve mastery. So, just how important is experience as a driver of career success? ...
Audio available
Discover how CHROs, like Nadim Penser at Epiroc, transform HR from a support function to a strategic force driving business transformation and diversity initiatives. ...
In our Coaching Corner series, we share real-world coaching cases that come from our work with leaders. ...
More than 80% of purchases are made by women. But reaching, interacting with, and converting female consumers is a challenge for most companies. You can get through the maze of marketing to...
Explore first person business intelligence from top minds curated for a global executive audience