Knowl­edge Man­age­ment

Pit­falls of Silo Men­tal­ity

Insurance - - CONTENTS - Text Rumesh Ku­mar PMP | Sharma Man­age­ment In­ter­na­tional

From an or­ga­ni­za­tional stand­point, the ex­is­tence of func­tional si­los be­comes prob­lem­atic when the di­rec­tion of fo­cus cre­ates bar­ri­ers that do not serve a rea­son­able busi­ness pur­pose and neg­a­tively im­pacts the unit's abil­ity to serve their role in the broader mis­sion of the or­ga­ni­za­tion. Most in­sur­ance com­pa­nies grap­ple with prob­lems that arise from in­sur­ance agents, of­fi­cers and staff hav­ing a silo men­tal­ity. Such a men­tal­ity, when deeply en­trenched makes it very dif­fi­cult to re­or­ga­nize or reded­i­cate re­sources to en­gage in prof­itable chan­nels. The ten­dency to down­play im­por­tance of re­or­ga­ni­za­tion and adap­ta­tion to chang­ing busi­ness en­vi­ron­ments from an over­all or­ga­ni­za­tional stand­point makes such an un­der­tak­ing a mon­u­men­tal task. For such a task to be suc­cess­ful, a will­ing­ness to put the in­ter­est of the com­pany above that of the depart­ment and aban­don silo men­tal­ity is cru­cial. This ar­ti­cle aims to shed some light on how a num­ber of in­sur­ance com­pa­nies man­aged to over­come this prob­lem and emerge bet­ter equipped to in­crease their mar­ket share and bot­tom line per­for­mance.


The Amer­i­can United Life In­sur­ance Com­pany (AUL), made a dras­tic change in its or­ga­ni­za­tional struc­ture of its man­age­ment team to break down func­tional bar­ri­ers that stood in the way of the or­ga­ni­za­tion. Bill Yo­erger, AUL’s Se­nior Vice Pres­i­dent of Re­tire­ment Ser­vices said “Be­fore the man­age­ment struc­ture change, we were not only siloed, we had a bunker men­tal­ity, say­ing, in ef­fect, that if we can’t keep the money in our own di­vi­sion then we’re do­ing some­thing wrong. Now, we’ve come 180 de­grees to ask, ‘How we can bet­ter lever­age the In­di­vid­ual di­vi­sion?’ The com­pany es­tab­lished an in­ter­nal re­ten­tion unit to as­sist with pay­out strat­egy and rollovers and started hold­ing col­lec­tive meet­ings de­voted to prod­uct de­vel­op­ment. By mak­ing a fun­da­men­tal shift in the way busi­ness was be­ing man­aged by chal­leng­ing as­sump­tions that they held, they were able to steer the fo­cus away from the in­di­vid­ual di­vi­sions to the or­ga­ni­za­tion as a whole. An­other com­pany, Ameriprise Fi­nan­cials set up a loose af­fil­i­a­tion of ex­ec­u­tives that were tasked to fo­cus on how the com­pany could cap­i­tal­ize on a spe­cific tar­get mar­ket such as the re­tire­ment mar­ket. The dis­cus­sions that en­sued cul­mi­nated in the for­ma­tion of a struc­tured and wellde­fined ap­proach of co­or­di­nat­ing all of the com­pany’s ex­ter­nal mes­sag­ing to con­sumers as well as in­ter­nal mes­sag­ing to its fi­nan­cial ad­vi­sors about Ameriprise’s ap­proach to the re­tire­ment mar­ket. This im­me­di­ately set the scene for a ramp up in sales in that tar­get mar­ket. “The change was a very tac­ti­cal and tan­gi­ble force in the or­ga­ni­za­tion,” says Rusty Field, Ameriprise Vice Pres­i­dent for Fi­nan­cial Ed­u­ca­tion and Re­tire­ment. “It wasn’t an is­sue from a sys­tems per­spec­tive, but rather a mat­ter of work­ing across the si­los in the busi­ness, get­ting ev­ery­body talk­ing about re­tire­ment the same way, and hav­ing the right de­gree of fo­cus on the op­por­tu­nity, given the mag­ni­tude of the num­bers.”


Pro­fes­sor Dan Deni­son, in his book Leading Cul­ture Change in Global Or­ga­ni­za­tions: Align­ing Cul­ture and Strat­egy uses the Swiss Re case study be­low to out­line how the in­te­gra­tion of knowl­edge as­sets man­age to un­shackle silo men­tal­ity. One of the fore­most rein­sur­ance com­pa­nies in the world to­day is Swiss Re In­sur­ance. With thou­sands of em­ploy­ees em­ployed in more than twenty coun­tries world­wide, this com­pany gen­er­ates around USD 30 bil­lion in sales. When faced with the need to change the strat­egy of its busi­ness given very chal­leng­ing mar­ket changes, the com­pany sought to lever­age on its knowl­edge as­sets by en­cour­ag­ing knowl­edge shar­ing and elim­i­nat­ing silo men­tal­ity among its work­force. In Swiss Re, three func­tional units had to work in a very co­or­di­nated man­ner in or­der to de­velop, pro­pose and close deals for their clients. These func­tional units were ac­tu­ary di­vi­sion, un­der­writ­ers and client rep­re­sen­ta­tives. How­ever, deals fell through due to poor co­or­di­na­tion and com­mu­ni­ca­tion be­tween these func­tional de­part­ments in the com­pany due to the ex­is­tence of deeply en­trenched func­tional si­los. Man­age­ment de­cided to in­te­grate the de­part­men­tal fo­cus of all these three de­part­ments and in the process en­hanc­ing the level of co­or­di­na­tion among them. Set­ting up a plat­form for knowl­edge shar­ing was done to ac­com­plish this ob­jec­tive. The plat­form set-up in­cluded mak­ing changes that were very small and in­ex­pen­sive. These changes in­cluded in­stalling espresso ma­chines in the com­pany and re­lo­ca­tion of man­age­ment board of­fices to op­por­tu­ni­ties for in­creased in­ter­ac­tion. This was done as a struc­tural re­or­ga­ni­za­tion to fa­cil­i­tate smoother and in­creased in­ter­ac­tion be­tween mem­bers of dif­fer­ent de­part­ments. The em­pha­sis on en­cour­ag­ing more in­for­mal dis­cus­sions en­abled face-to­face tacit knowl­edge to be shared in a non-threat­en­ing and com­fort­able set­ting. The tacit knowl­edge shar­ing process over time led to a bet­ter un­der­stand­ing of the key chal­lenges faced by client rep­re­sen­ta­tives, the ac­tu­ary and the un­der­writ­ers. They be­gan to un­der­stand how their work im­pacted other de­part­ments and ul­ti­mately the com­pany as a whole. This came about only af­ter they had closer, more in­for­mal and loosely knit in­ter­ac­tions that brought key com­mon is­sues to the fore. In this way, over time, its cus­tomer re­quire­ments, busi­ness projections and op­er­a­tional doc­u­men­ta­tion in­clud­ing in­sur­ance con­tract draft­ing were in­te­grated in a way that em­pha­sized the needs of the client. This process of knowl­edge as­sets in­te­gra­tion and tacit knowl­edge shar­ing ul­ti­mately led to a com­pletely dif­fer­ent busi­ness model that en­abled Swiss Re to de­rive a com­pet­i­tive edge that en­abled it to in­crease its cus­tomer base and profit mar­gins steadily from 2001 to 2008. This change in the busi­ness model in­volved an in­te­gra­tion of ex­ist­ing knowl­edge af­ter re­al­iz­ing how crit­i­cal the knowl­edge as­sets from client rep­re­sen­ta­tives; the ac­tu­ary and the un­der­writ­ers were to­wards clos­ing the deal prof­itably. Through con­tin­ual and planned in­ter­ac­tion and di­a­logue, prob­lems and is­sues raised were re­solved and op­por­tu­ni­ties for closer col­lab­o­ra­tion sur­faced. Grad­u­ally, this con­trib­uted to a cul­ture of knowl­edge shar­ing and open­ness to ideas. This type of cul­ture was nec­es­sary for bot­tom line per­for­mance to in­crease.

The tacit knowl­edge shar­ing process over time led to a bet­ter un­der­stand­ing of the key chal­lenges faced by client rep­re­sen­ta­tives, the ac­tu­ary and the un­der­writ­ers. They be­gan to un­der­stand how their work im­pacted other de­part­ments and ul­ti­mately the com­pany as a whole.

The ef­forts paid off. In two years from 2000 to 2002, the di­vi­sion’s re­sults were noth­ing short of re­mark­able. The pre­mi­ums were up by over 50 per­cent and this was ac­com­pa­nied by strong profit gains and a marked de­crease in ex­penses. Hence what tran­spired was a de­lib­er­ate and very timely knowl­edge based re­align­ment that gave the com­pany the life­line it needed to steer it­self into achiev­ing higher bot­tom line per­for­mance. In do­ing so, the func­tional si­los were grad­u­ally dis­man­tled and the silo men­tal­ity was re­placed by a cus­tomer first men­tal­ity across all func­tional units. The ex­am­ple re­lat­ing to Swiss Re In­sur­ance demon­strates how un­der­stand­ing the needs of the client by the client rep­re­sen­ta­tives, prepa­ra­tion of the best pol­icy pos­si­ble by the ac­tu­ary and draft­ing the rel­e­vant con­tracts by the un­der­writ­ers could oc­cur seam­lessly and in an in­te­grated fash­ion in the ab­sence of a silo men­tal­ity.


Like Field, AUL’s Yo­erger also be­lieves that the nec­es­sary change should be viewed pri­mar­ily in cul­tural terms. “First and fore­most,” Yo­erger says, “you have to have a cul­tural shift to be able to get people to talk to­gether and be able to work to­gether to then cross-mar­ket prod­ucts. The tech­nol­ogy is only of limited value if the cul­tural mind­set doesn’t en­cour­age that kind of com­mu­ni­ca­tion.” The key les­son that could be learnt from the cases above is that man­ag­ing break­ing down silo men­tal­ity is a crit­i­cal com­po­nent when at­tempt­ing to im­prove bot­tom line per­for­mance. This can be done by re­or­ga­ni­za­tion of the man­age­ment struc­ture and in­te­grat­ing knowl­edge as­sets. How­ever to sus­tain these ef­forts re­quires a cul­tural shift al­to­gether. Break­ing down func­tional si­los is dif­fi­cult to achieve if the or­ga­ni­za­tional cul­ture that ex­ists en­cour­ages knowl­edge hoard­ing and in­ward func­tional fo­cus as op­posed to knowl­edge shar­ing and be­ing cus­tomer fo­cused. Hence what is needed is to change the or­ga­ni­za­tional cul­ture from a low per­for­mance, func­tional fo­cused cul­ture in which hav­ing a silo men­tal­ity and knowl­edge hoard­ing is a norm to one that is high per­for­mance and cus­tomer fo­cused one that thrives on knowl­edge shar­ing. For this to oc­cur, a cul­ture pro­file as­sess­ment will have to take place. Based on the cul­ture pro­file, a strat­egy that ad­dresses the lim­i­ta­tions iden­ti­fied by the cul­ture as­sess­ment with re­gard to why silo men­tal­ity man­i­fests, how en­trenched it is and what needs to be done to steer the com­pany away from low per­for­mance silo men­tal­ity to a high per­for­mance mind­set. In sum­mary, it ap­pears that for any or­ga­ni­za­tion that seeks to break down silo men­tal­ity and im­prove bot­tom line per­for­mance, an as­sess­ment of the ex­ist­ing or­ga­ni­za­tional cul­ture is re­quired as a first step. Through such an as­sess­ment, rel­e­vant and ap­pro­pri­ate strate­gies to elim­i­nate silo men­tal­ity may be eas­ily iden­ti­fied and mon­i­tored for ef­fec­tive­ness over time. As ev­i­denced by the case study pre­sented for Swiss Re, this ap­proach has worked very well for the in­sur­ance and fi­nan­cial in­sti­tu­tions and has brought the de­sired out­comes. For more de­tails on how to over­come the pit­falls of silo men­tal­ity by mak­ing a shift in the or­ga­ni­za­tional cul­ture, please con­tact Dr Rumesh Ku­mar of Sharma Man­age­ment In­ter­na­tional at or visit www.denison­con­sult­

Break­ing down func­tional si­los is dif­fi­cult to achieve if the or­ga­ni­za­tional cul­ture that ex­ists en­cour­ages knowl­edge hoard­ing and in­ward func­tional fo­cus as op­posed to knowl­edge shar­ing and be­ing cus­tomer fo­cused.

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