In startup mode, entrepreneurs (and employees) often wear many hats. But as you move into the second stage and add staff, people begin to specialize. While specialization is often a good thing, it tends to create silos, and that in turn can create many insidious problems.

There's always an inherent amount of tension between departments, simply because each one is pursuing different goals. The trouble begins when employees start to believe that their department creates more value than others, and fail to appreciate what co-workers bring to the table.

Seven signs of dysfunctional silos

People talk about "breaking down silos," but you can’t, really, because they're a natural phenomenon. More to the point, you need specialization to grow your company. The trick is to recognize when silos are beginning to cause trouble. Be on the lookout for:

1. Negative assumptions about others generated by stereotyping or prejudice.

2. Finger-pointing. "It’s not my department that's causing the problem."

3. Groupthink. One department believes it has all the answers.

4. Lack of situational awareness. Employees are unclear or unconcerned about what colleagues are doing, or about the company's overall goal.

5. A sense that the enemy resides within your organization. Perhaps the ultimate manifestation of an us-versus-them mentality.

6. An imbalance in the perception of status. Employees view one department as the "in-group."

7. A constraint in information flow, especially if information is repressed due to a sense of competition.

Silos form, in part, because people are more comfortable in small groups. But as the above list shows, this natural tendency can quickly result in structures that foster a sense of exclusion. Neuroscience has shown that when people feel excluded they suffer anxiety and a decrease in performance, particularly when it comes to higher-level tasks such as decision-making.

Jill Bishop is a company founder who saw how silos were beginning to undermine growth and took smart steps to reverse the damage.

Bishop launched Multilingual Connections in 2005, growing the Chicago-based company to more than a dozen employees and $1 million in annual revenue. Multilingual Connections first provided workplace training and translation services, and added language classes in 2009. By 2011 Bishop noticed not only the presence of silos but some negative repercussions. "We had gotten to the point where we had very specific roles for employees," she says. "As a result, people stopped interacting as much."

Those early signs of trouble led to a widening gap. "Employees saw their respective departments as separate companies and didn't have a full understanding of coworkers' roles in different departments," she explains. In addition to eroding information flow, this also created status issues. "It was easy for employees to view tasks being done by other departments as less important."

In response, Bishop has begun to hold companywide huddles each morning. The 15-minute meetings focus on a different topic each day, ranging from weekly priorities and operational issues to sharing challenges and success stories. Bishop has also introduced monthly professional development sessions, which educate employees on various topics--and give them a chance to spend time together.

The result has been greater cohesiveness. "People now know more about each other and the company as a whole," Bishop says. "If prospective clients walk in, employees can give more details about each other's departments."

Bishop built on these efforts by creating "Take Your Co-Worker to Work Day," where staffers from different divisions spent a couple of hours at each other's desks, discussing clients and projects. "This helped them recognize a lot of overlap in their work," Bishop says. "Even though their end products are different, they share many common challenges, such as retaining good translators and teachers or focusing on margins."

In fact, one employee encountered a minor emergency late in the day and sought assistance from the co-worker she had been paired with that morning. "The employee said her colleague helped her resolve the situation faster than she thought was possible," Bishop says. "I don’t know if that would have happened without the Co-Worker Day."

Be a social alchemist

Bishop's actions highlight the value of managing silos by intentionally bringing people together. Leaders can also achieve this "social alchemy" by establishing problem-solving groups with employees from different departments. Such activities help employees appreciate what colleagues do and gain greater awareness of how their individual behavior affects the group as a whole.

There are some other helpful things you can do to manage silos. Communicate a shared fate by making sure your employees understand where the organization is headed and how each person contributes to progress; employees need to understand they’re all co-dependent.

Get information into everyone’s hands via newsletters, regular meetings, or walk-around management, and be on the lookout for any signs that employees are hoarding or bottlenecking information. Be aware of how access to resources can influence perceived status; if there are increases or decreases to any department’s resources, explain why. And, finally, have an understanding of group processes. One classic framework is Bruce Tuckman’s "Forming-Storming-Norming-Performing" model, which describes the different stages teams go through before they can function efficiently as a unit.

Social alchemy doesn’t have to take place at the office. It can happen at offsite social or recreational activities, too. (Having a company softball team or league may be a better business move that you know.)

Remember, silos by themselves aren't the problem. You need specialists working on specific projects and objectives, but you also need everyone working toward one unified vision. Ideally, group boundaries should be permeable, allowing people and information to move back and forth with ease. The bottom line: Make sure the people who work in various silos interact on a regular basis.