Why silos persist: your performance system is paying for them

Recently I sat with an executive team frustrated by their silos.

They had done everything the playbook suggests. They restructured. They ran the collaboration workshops. They rewrote the values, and "one team" sat right at the top.

The silos stayed exactly where they were.

So I asked a different question. Show me how people here get rewarded.

Every scorecard was individual. Every bonus, every performance rating, every promotion case. The strategy asked people to share resources and deliver together. The system paid them to do the opposite.

Nobody in that business was being difficult. People were responding sensibly to what the organisation pays for.

Why do silos persist after a restructure?

Silos persist when the performance system rewards individual or team results while the strategy depends on collective effort. People protect their own budgets, people and priorities because their scorecard, bonus and promotion case depend on those results. Restructures and culture programs change the lines on the chart. The reward system decides what people do day-to-day.

One senior leader in my research put it plainly: "You cannot give away all your resources if you are being rewarded with individual objectives. People are competing."

The same pattern came up across leader after leader I interviewed. The strategy required collective effort. The processes and rewards incentivised the individual. Those silos were designed, by accident, by the performance system.

What the mismatch creates

When the strategy says "together" and the system pays for "mine", you get four predictable behaviours:

• Resources get protected. Lending your best analyst to another team for a quarter costs you a target. Nobody does it twice.
• People compete. Colleagues in other functions become rivals for the same budget, headcount and ratings curve.
• Trade-offs go local. Each leader makes the call best for their own numbers, and nobody owns the call best for the strategy.
• Silos persist. Every workshop gets undone by the next performance review.

The wider evidence backs this up. In their HBR study of nearly 8,000 managers in more than 250 companies, Donald Sull, Rebecca Homkes and Charles Sull found 84% of managers could rely on their boss and direct reports all or most of the time. Only 9% could rely on colleagues in other functions all of the time. Managers rated those internal commitments about as reliable as promises from external suppliers.

Why collaboration workshops don't fix it

Workshops build goodwill. Goodwill lasts until the first quarter where helping another team costs someone their bonus.

People read the system, and they read the pay slip more closely than the values poster. If your rewards point one way and your strategy points another, people follow the rewards. Every time. Asking them to do otherwise asks them to take a personal hit for the organisation, again and again.

The fix sits in the design of the performance system.

Five things to redesign

1. Shared goals. Make the collective outcomes explicit and put them in writing. If three functions need to deliver a new customer platform together, the platform belongs on all three scorecards, with the same measure.

2. Collective measures. Measure team and cross-team impact, and give it real weight. A shared goal worth 5% of a scorecard tells people exactly how much you mean it.

3. Cross-functional incentives. Reward how work gets done together. Ask, in every performance conversation and every promotion case: who did this person help succeed outside their own team?

4. Governed trade-offs. Decide competing priorities at the right level, through a forum that owns the whole strategy. When two teams need the same resource, the call should go to the people accountable for the combined result, not settled by whoever argues hardest.

5. Clear accountability. Define who is accountable for what, together. Shared goals without named owners turn into nobody's goals.

Where to start on Monday

Pull five scorecards from across your leadership team. Lay them side by side. Then ask three questions:

• How many objectives on these scorecards depend on another team to deliver?
• How much of each bonus rests on a shared result?
• If two of these leaders needed the same resource next quarter, whose scorecard would win, and who decides?
  

If the answers make you wince, you have found your silos. They are sitting in your HR system.

Where this fits in Strategy Execution by Design
The link between rewards and strategy sits within Performance and Commitment, Lever 6 of the Strategy Execution by Design model. The lever covers whether people understand why the strategy matters, and whether the performance system rewards the work the strategy needs. Read the full lever or see all seven levers.

Frequently asked questions

Why do silos persist after a restructure? Silos persist when the performance system rewards individual or team results while the strategy depends on collective effort. A restructure changes reporting lines. Scorecards, bonuses and promotion criteria decide behaviour.

Do individual incentives cause silos? Individual incentives create silos when the strategy needs people to share resources, solve problems across functions and deliver together. People protect what their scorecard measures.

How do you break down silos? Redesign the performance system. Put shared goals on every relevant scorecard, give collective measures real weight, reward cross-functional contribution, govern trade-offs at the level accountable for the whole result, and name owners for shared outcomes.

What is a collective performance measure? A collective performance measure tracks a result two or more teams deliver together, such as a customer outcome or a shared project milestone. Every contributing team carries the same measure on its scorecard.

Can culture workshops fix silos? Workshops build goodwill and shared language. Without a change to rewards and measures, the performance system wins, and the silos return.

If you want one team, design the system so acting like one is the sensible choice. Reward what you need repeated.

Not sure whether your performance system is working with your strategy or against it? The SEBD Snapshot assessment gives you a flavour of where your execution is slowing down.

Take the Snapshot assessment →

Source: Sull, D., Homkes, R. and Sull, C. (2015), Why strategy execution unravels, and what to do about it, Harvard Business Review, March 2015. Quote from a senior leader interviewed for Reti, R. (2022), Massey University.