"Neil Smith's brilliant insights into removing these barriers and empowering employees to produce creative ideas are a must-read for managers everywhere."

- Bill George, Professor of Management Practice, Harvard Business School

Neil Smith, CEO of Promontory Growth and Innovation, helps Fortune 750 companies dramatically improve performance by increasing profitability.

Organizational Silos

Part of the value proposition for a moving company is ensuring that customers’ furniture is not damaged during the moving process. The harm to a company’s reputation is just as costly as having to replace damaged items. People don’t want to hire a mover with a reputation for breaking things, and moving companies rely heavily on referrals from happy customers for new business. Most moving companies go to great lengths to ensure that damage is kept to a minimum, and they invest heavily in training for their employees. But of course, accidents happen, and when they do, they result in annoyance and frustration for the customer and reputational and monetary damages to the moving company.

One national moving company was self-insured–that is, rather than buying an insurance policy to cover damages to customers’ furniture, it paid out itself for its own damages. The company’s claims department was trying to keep as low as possible what it paid out in damages. The head of claims pored over the claims and payout data, looking for some insight into how he could reduce claims, but the figures remained steady.

The company cut the data in many different ways to try to get a handle on the claims it was paying out. Was damage related to time of day (were the drivers tired), to geographic location (were some areas not as well managed), or to type of house (was the presence of stairs more likely to cause damage)? During their change project, the company decided to sort its damage data differently. Rather than continuing to look at the data in the traditional way, the company cut the data by the type of item that was being damaged. The results were revealing. More than 25 percent of damage claims–almost $700,000 a year–were for damage to dining room tables.

The results were as surprising as they were revealing. The company managed very successfully to transport glass, antique furniture, artwork, and sensitive electrical equipment such as computers. Why was it failing so badly with such a traditional, sturdy piece of furniture as a dining room table?

The mystery here resulted from the Organizational Silos barrier–knowledge and information do not flow freely across silos. The drivers knew exactly why dining room tables were being damaged in such great quantity. When the claims department asked them about the high rate of damage to dining room tables, the reason became clear. Typically drivers used the dining room table as a worktable to pack the rest of the home. As a result, it often became scratched or dented as items were dropped on it. And because the table was being used in the packing process, it was also one of the last items to be loaded onto the truck. If the table was not secured properly, it would be the first item to shift around and get damaged during transit. Or, worse still, if an item actually fell out of the truck when the door was opened, it was inevitably the dining room table.

When is the last time you really examined silos within your organization? What did you find?