There are several symptoms that show a firm’s value chain is dysfunctional:

1. There is a chronic silo mentality within the firm.

This silo mentality makes all processes run slowly and in a sequential cycle times; no collaboration or smooth integration among teams. It happens because each department only cares about its own box; for instance, engineering department designs a product that no consumer wants it, purchasing department keeps changing its vendors, marketing department creates unrealistic forecast and operation department is too busy in fire-fighting mode (e.g. reactive maintenance).

In addition, in this kind of company, the organization structure is usually a very traditional-hierarchical model, a model that has bold boundaries among departments. With this kind of organization, there is no open communication culture in it.. When a management’s effort is not yielding the desired result, everyone often will be too afraid to confront top management with evidence that things is not going as planned.

2. There are turf-wars everywhere in the company.

Because of the silo mentality, tremendous time and energy spent into defending one’s individual performance. For example, if a manager is developing a program/project, there might be some big questions from other managers regarding the project market/business perspective. In a horizontally dysfunctional company, that kind of questions could create a war between two managers. Most of the time, they are not arguing about financial/business objectives but rather blaming each other because no one wants to look bad.

3. Sub-optimized of organization.

In a horizontally dysfuntional company, there is one word missing: SYNERGY.

Each function tries to do what was best for its own performance, not the performance of the company as a whole. For instance, the people in production department maybe tries to show the best performance (sometimes by "cooking" the production numbers) or project department tries to impress others by keeping itself busy spending huge amount of budget in some projects that are never finished. Many departments announces each saving initiative's success.

But the performance of the company as a whole: increasing cost, decreasing production, and loosing market share.

4. There is enemy-within syndrome.

The boxes among functions makes a big gap between one department to another; there is always “us” versus “them” in every good initiative.

Every improvement effort would be seen as a conspiracy to make other people looks bad. Quality improvement might be seen as a "flavor of the month." Operation efficiency improvement might be seen by employees as the management's way to cut head counts. There will always be suspicions.

If you are familiar with at least one of the above symptoms, then there is an opportunity for improvement :)

Reference:

Ashkenas, R.et. al. “Beyond Turf and Territory” Understanding the Value Chain GRBUS-510 Supplemental Readings. Summer 2004