In its 2017 Global Human Capital Trends report, Deloitte found that while 71% of organizations see people analytics as a very important priority, only 8% believe they have useable data. While there are many culprits in the problem of unreliable information, data silos rank high on that list. Data is housed in two or more different places running on disparate systems without a common report writer to pull the information together. This creates a challenge when senior leadership requests a report that includes time data, HR data, payroll data, benefits data. Then, in this great age of digital and big data, you have someone pulling from two, three, or four different systems, combining the information in excel and creating the reports. How accurate can we expect the information to be if it’s being pulled from multiple sources?
The Cost of HCM Data Silos
When data silos exist, senior leadership is forced to make HR driven business decisions based on data subject to a significant degree of human error. That data is also not produced in real-time, which can have a further impact on accuracy. Imagine a report run in excel with a keystroke error in the formula or a report run by someone in accounting, not realizing that it does not include month-end data from payroll. According to the Harvard Business Review, data silos make it virtually impossible to develop predictive analytics and they make data collection and analysis such a drain on labor that actionable reporting is prohibitively costly.
Departmental Politics and HCM Data Silos
While widely agreed upon as costly and inefficient, data silos persist in organizations for many reasons, but politics play a big part. It is not unusual to find that a payroll department, for example, has created their own processes over time and is both resistant to interference with that process and reluctant to share with another department. There is often a concern on the part of HR, for example, that another department should not be able to see certain sensitive information.
Trapped in this battle is typically a CFO who would just like to have everyone on the same page, and sometimes assumes that they are, but ultimately learns that the reporting he’s received is not reflective of the collaboration he needs. Patrick Lencioni, the author of Silos, Politics, and Turf Wars, suggests that “Silos – and the turf wars they enable – devastate organizations. They waste resources, kill productivity, and jeopardize the achievement of goals.”
Why HCM Data Silos Persist
Data silos live on due to politics and also possibly misconceptions of how a single system will function. Stakeholders are often reluctant to give up the comfort of using a system they have worked in for many years and have a fear of the unknown when moving to a single system is suggested. Administrators of various systems sometimes develop a dangerously proprietary attitude toward their applications.
Misunderstandings around cost can sometimes be a barrier to moving to a single HCM system. Some companies may look at the cost of migrating to a new, single database system and just see the hard costs of the software upgrade. What they often miss is the costs they’ll no longer at risk to incur after the upgrade. These may be costs due to duplication of data in various systems, resulting in overpaying health insurance premiums due to errors in deductions, for example, or missing out on a tax credit because the resources needed to put it into place are not available due to overall inefficiency. The ultimate soft cost, of course, is the drain on an organization caused by the time it takes to research, analyze and report on data when it is siloed.
Unified HCM Software Breaks Down Data Silos
Breaking away from data silos will require a shift in organizational culture. The great news is that technology, the same enabler that will break down your data silos, is also a tool to support the elimination of departmental silos at the every level. The analytics delivered through a single database system naturally foster proactive collaboration within an organization. As a company learns to rely on its people analytics to connect the value of its employees with the strategic goals of the organization, everyone benefits.
As a result, the adoption of unified the rise. Nearly 40 percent of all global firms are either replacing or plan to replace their core HR systems over the next two years. What’s driving this adoption? All the reasons stated above and more importantly, the hidden impact that integrated HR can have on employee engagement and retention. The Bersin HR Factbook reports that employees working at companies that embrace integrated HR functions have a 38% higher retention rate and a 40% higher engagement rate.
Is your organization still trapped by HR data silos? If so, it’s time to move forward and let your people analytics guide your future strategy.