HKSM

An organization built around isolated functions or departments that each handle only a portion of the work, so it cannot deliver end-to-end customer value on its own; contrasted with organizing by value stream.

Key Points

• Function-focused structure rather than value-stream alignment.
• Creates handoffs, delays, and coordination overhead between teams.
• Promotes local optimization and conflicting KPIs over whole-system outcomes.
• Limits customer focus, slows feedback, and reduces flow of value.

Example

A software firm has separate business analysis, development, QA, security, and operations departments. Work is passed from one group to the next, causing queues, rework, and long cycle times. Customers wait weeks for a simple enhancement because no single team owns the end-to-end delivery.

PMP Example Question

A project manager notices long cycle times driven by multiple handoffs across functional departments, each measured by its own local KPIs. Which organizational pattern is most likely contributing to this problem?

1. Projectized organization
2. Siloed organization
3. Value stream-oriented organization
4. Strong matrix organization

Correct Answer: B - Siloed organization

Explanation: The symptoms of many handoffs, local KPIs, and lack of end-to-end ownership are characteristic of a siloed structure.