Why is a common data model important?
Simply put, a data model is a way to organize information about people or things for use in software. For example, your finance system will store various entities such as accounts, customers, employees, and suppliers. Each of these entities will have particular attributes within the model—for example, an employee might have attributes like “first name,” “last name,” “country,” “manager,” “cost center,” and so on.
So far, so simple. Where it gets complicated is when you have a multitude of software systems from different vendors (which every business does), each with its own data model (which they nearly always have). If your finance and HR systems each contain different data with different models, suddenly you have roadblocks that you need to overcome.
Every team in your business—including HR, sales, finance, operations, procurement, and others—has processes that overlap with each other. These are touchpoints where everyone involved in the process needs to work from the same data to complete their tasks.
Perhaps nowhere is this more evident than in finance and HR, which have many critical touchpoints. When each team uses its data in a siloed manner, it creates inefficiencies across the business. Each team may be working from the best data it has, but if those data sets are different, teams are duplicating data entry efforts and the potential for mistakes is increased.
In contrast, when HR and finance work from the same data model, they can make decisions and carry out tasks faster and more accurately. Less time is spent on data entry and reconciliation, and departments can reduce conflicts based on bad data, or poor decisions from lack of data.
How does this work in the real world? Employee records are a good example. Separate, disconnected finance and HR systems typically have their own records for employees. These duplicate records are synchronized and reconciled for processes that span finance and HR. With a common data model, a single employee record is used for all processes, eliminating the need for synchronization. This allows more processes to be automated, speeds up work, and eliminates the potential for errors. This is just one instance of how shared data improves operations.
Here are four ways a single data model can make a difference.
1. Management efficiency
As change happens within your organization, it can affect everything from supervisory responsibilities to everyday approvals. For example, when a regional finance executive is promoted to a global role, they need access to data across the entire organization to properly analyze, forecast, and plan across the company. At the same time, when the new regional finance executive steps into their new role, they need access to appropriate data from their region, as well as approval, purchasing, and other privileges for which they are responsible. When change happens, data access needs to keep pace. If you’re working from outdated or incorrect data, efficiency suffers, resulting in mistakes and delays.
2. Compliance controls
Maybe the new global finance executive decides that all contingent labor must be approved by the vice president of accounting. If HR and finance are working with different data sets, a requisition for contingent labor could be denied by mistake or might not even make it to the VP. With a single data set, the policy is immediately reflected in all the appropriate workflows.
Compliance controls also provide opportunities for automation. For example, you can set up rules for automatic approvals, where the vice president only needs to manually review and approve exceptions for salaries above a certain threshold.
3. Budget adjustments
As your organization scales and goes through different business cycles, budgets are affected. Let’s say your company decides to increase the number of salespeople to capitalize on a new market opportunity. With a single employee record, everything from onboarding to benefits to travel spending limits is recorded in one place. Budgets are accurately adjusted, and approval protocols can be automated.
4. Expenses and purchasing
Employees typically have varying authority for purchases or expenses as defined by their organizations or roles. With disconnected finance and HR systems, their role authority may be reflected accurately in one system but not the other, leading to errors or process breakdowns. With a common data model, inconsistency across finance and HR is eliminated and process errors are reduced.
These are just a few of the processes that can be streamlined, automated, and made more effective with a common data model.