The Small Business Conundrum: Silo Formation

This is the fifth in a series of blog posts.

Small businesses are often formed because the owner has a good new idea. If the idea has legs, then the business grows to a reasonable but fixed level of revenue, then begins to flatten out.

Established data tells us that only half of small businesses survive more than five years, and further decays continue over time. There are a host of reasons for this, but in general, the reasons are similar to why mid-level and large firms stagnate. The small business has one advantage, however: there are fewer people to get on the same page, so misalignment becomes noticeable and actionable early.

Silo Formation: The Organization's Greatest Sin

Silo formation is probably the greatest sin of large and want-to-be-large organizations. Most business leaders believe they must organize the business around functions. In doing so, they create silos that kill market innovation creativity. On the other hand, small businesses suffer from the load of work that must be done in these functional areas just to survive and, thus, don’t have time to think about growth or innovation. This factor is easily fixed, and the fix is generally dependent upon the nature of the small business.

The Owner's Vision

The greatest obstacle for small businesses is the business owner.

I started this business and I need to have absolute control.”

Although this sentiment is easy to understand, the business owner must gradually share responsibilities and focus more on growth drivers. That means properly instructing employees to perform key operating tasks. Thus, operations must be well documented, reviewed, and continually improved. Start with the customer in mind. Customer care is the most powerful driver for all other operations.

The business owner must have a vision that is both clear and shared across the organization. Operational activities need to be linked to the vision, and each employee needs to know how the work they do relates to or supports achieving the vision. Openness is critical.

All direction and tasks are tied to the vision and shared across the organization. The business owner needs to build trust and openness among all employees to eliminate the tendency for them to “compete” by sheltering their work from others.

Salaries/incentives should be tied to responsibilities and development programs encouraged to enable employees not only to improve performance, but also to enable advancement. Individuals who resist direction should be dealt with in a uniform approach.

If you want to discuss any of these elements now, leave a comment below.

Read the other articles in this series

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