How Data Silos Affect Your Business

Understanding Data Silos

In business, data silos occur when barriers keep departments from sharing necessary data across platforms or channels. Many businesses unintentionally create data silos that cause valuable data to become compartmentalized and fragmented. These can slow down processes and create inefficiencies within an organization.

When data silos exist between different divisions of a company, such as sales, marketing, finance, customer service, and human resources, the effectiveness of the department will diminish. Perhaps most importantly, data silos can keep those in management positions from being able to see the data necessary to make informed decisions for the company.

Of course, not all information should be shared. An intern, for example, should not have access to payroll for security and legal reasons. However, these are not what are referred to as data silos.

Causes of Data Silos

Incompatible Systems and Data Formats

Departments will often implement their own systems to store data in a format they are familiar with. However, these systems are rarely compatible and create difficulties for data sharing across systems.

For example, an association may have implemented different systems for billing, budgeting, payroll, and asset management as they needed them. If even a few of these systems are incompatible with one another, they can hinder the ability for an executive to get a full picture of their association. They may be left wondering how much they spent both on bills and payroll but have a difficult time compiling the necessary data.

Organizational Structure and Culture

An organization’s structure and culture can also create data silos. If either encourages data to be gathered and kept in a single department and not shared, data silos will occur. It is important to recognize that a number of different organizational structures can create data silos.

In a departmental or divisional structure, the separation between departments can lead to data silos as each department develops their own databases, tools, and processes.

In hierarchical structures, data may primarily flow vertically and not horizontally between departments. This flow can reinforce data silos and impede cross-departmental collaboration.

In decentralized structures, the distributed decision-making authority can result in data silos because various departments may have diverse approaches to data management and generally will not have a full understanding of data outside their own department.

Undeveloped Data Management Policies

Different teams and departments will naturally have their own goals with their own information and data. Undeveloped data collection, processing, retention, and disposal policies only intensify this natural tendency.

Challenges for Businesses

Data silos create a blurred vision of the company through data inaccessibility, inconsistent data quality, and limited insight. This is especially dangerous for executives, who need to stay informed about the business as a whole. With a lack of visibility, these executives cannot make fully informed decisions regarding the company.

It also keeps departments from collaborating to their fullest potential. If silos exist, even departments that try to collaborate will be hindered by incompatible systems.

Overcoming Data Silos

Since data silos occur naturally, it requires intentionality to ensure that data silos are not becoming typical business practice.

Implement a Comprehensive Platform

The most comprehensive way to address data silos is to implement a comprehensive system that can bridge the gap between departments. A composable enterprise resource planning (ERP) solution is one way to enhance data collaboration. Xledger is a powerful cloud-based composable ERP solution designed to eliminate silos by keeping all departments in an organization connected. Through comprehensive reporting and analytics, streamlined workflows, real-time data updates, and inclusive integration and compatibility, Xledger empowers organizations to make data-driven decisions and work more efficiently.

Foster a Culture of Collaboration

Companies that experience organizational-based silos can focus on fostering a culture of collaboration by encouraging innovation, rewarding collaboration, creating alignment around goals, building trust, and more.

Develop Data Management Policies

Keeping everyone on the same page when it comes to data is not easy, which is why defining a data management policy can help keep data silos from happening in your company. Having clear guidelines on data collection, processing, retention, and disposal can keep everyone in the business on the same page.

To find out more about how Xledger can help you break down data silos, schedule a one-on-one demo.