Company silos create a shortfall for CFOs
As CFO, your responsibility is to ensure the good financial health of your company. However, there are few things that stand in the way of success more than organizational silos within the company. This internal compartmentalization, where each department operates autonomously and siloed, can lead to a significant lost profit. The answer to this fragmentation is a more collaborative and integrated approach. Moving from a silo structure to a holistic view can be the trigger for significant financial growth.
How CFOs define a shortfall
Shortfall refers to financial losses or unrealized profits that result from various factors hindering the financial performance of a company. This generally includes:
- Potential losses linked to late payments
- Additional financing costs
- Mistakes in financial management
- Missed opportunities to reduce costs
- Customer relationships that are impacted
In other words, shortfall represents lost or compromised financial opportunities due to problems, delays, or inefficiencies in the financial management of the business. Financial managers seek to minimize it by implementing strategies and solutions aimed at maximizing company profitability.
Three ways silos challenge organization
Whether it’s due to a concern for job security or simply resistance to change, people tend to remain in an area they know well and where they feel secure. Exchanging information with another area of the business can make them question their position in the company, even though it, in effect, makes the company stronger. Here are three ways working in silos hurt a company:
- Loss of efficiency: Organizing in silos hinders collaboration and communication between departments. Processes become redundant, resulting in wasted time and efficiency. According to a study conducted by McKinsey in 2021, companies in silos can see their productivity reduced by 20% compared to those that promote collaboration.
- Additional costs: Indirect costs related to duplication of effort, miscommunication and inefficiency can quickly add up. In 2020, Deloitte found that companies in silos spend on average 15% more than those with an open organizational structure.
- Loss of opportunities: Failure to share information between departments can result in a lack of awareness of strategic opportunities or potential threats.
Solutions to reduce a shortfall due to silos
- Facilitate collaboration: To break down organizational silos and facilitate collaboration, encourage cross-functional communication within your company. By encouraging these regular exchanges, CFOs can create a culture of collaboration that promotes the smooth flow of information, innovation, and effective problem solving.
- Technology and integrated systems: Investing in integrated information systems, such as ERP systems or SaaS solutions, is essential to facilitate the smooth flow of data within the company. By adopting Corcentric’s Source-to-Pay solution , all departments can access the same level of information regarding suppliers, contracts, and spend. This simplifies collaboration by eliminating obstacles often resulting from manual data management. This solution helps centralize data and process management, removes data silos, and encourages collaboration by providing a holistic view of business operations. CFOs play a crucial role in implementing this solution, ensuring that it is tailored to meet the specific financial needs of the business.
- Strategic leadership: Due to their central leadership role within the company, CFOs are often best placed to promote effective strategic alignment between the different departments. In collaboration with other departments within the company, CFOs have the opportunity to define a common vision for the entire company that reflects shared strategic objectives. This vision must be clearly articulated and put forward, so that each member of the organization understands their role in achieving it. CFOs ensure that financial decisions, such as investments, budgets, and resource allocation priorities, are fully aligned with this vision.
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