Bridging the Silos
By
Thomas P. Johnson Jr.
Silo coordination is critical if banks are to meet challenges such as Check 21.
When the e-commerce revolution burst upon the scene in the mid-1990s, all of the talk about the need to integrate the various operational silos of the bank ceased to be theoretical. The industry recognized that Web-based delivery hinged on support from all areas of the company, requiring coordinated systems and management practices.
Although the subsequent dot-com crash cast a pall over many multi-silo projects of that day, the need for coordination has only grown. Customer relationship management, for example, critically depends on a blend of people, processes and systems. Other examples include the Check Clearing for the 21st Century Act, or Check 21; enterprise risk management; and product bundling.
Check 21 promises to hasten the transition from paper to electronic transaction processing. Institutions will need to coordinate myriad splinter operations as they work to streamline traditional processes, introduce electronic alternatives, and usher customers into the new environment. Most large banks, therefore, have felt the need to assemble corporate-wide task forces to oversee the process.
Likewise, the recent surge in new regulations has freshly driven home the point that financial institutions cannot address compliance issues in a compartmentalized, piecemeal fashion. More and more, they are including compliance in an enterprise-wide approach to risk management.
Turning to retail banking, relationship-based pricing and product bundling has great potential to improve both customer satisfaction and relationship profitability. This can only be achieved if providers can meld information from various product silos and get those units to support each other in designing the packages.
All of these examples underscore the point that financial services organizations simply cannot achieve many of their most important objectives if the various functional areas operate in isolation. That leaves the question of how best to balance the dual imperatives of business unit focus and cross-functional coordination.
It's important to maintain the integrity and momentum of the various silos because they are the focal points in generating the revenues and enabling the operations of the bank. For that reason "silo busting" cannot be the operative phrase in fostering coordination. "Silo bridging" is more like it, and this managerial challenge requires a nuanced, rather than blunt-edged, approach.
In this light, the role of the senior executive resembles that of a coach who must get all of the individual players to perform well as a team. When it comes to bridging organizational silos, team cohesion rather than star power is the pivotal attribute, because customer needs increasingly transcend organizational boundaries.
Mr. Johnson is publisher of Banking Strategies and president and chief executive officer of BAI.