Jamie Keen, CEO FundSense
March 3rd, 2023
Organisational silos are by no means unique to the asset management industry, but the impact on the sector is clear – as are the consequences for firms, employees and clients.
Firstly, let’s be clear about what we are referring to here. The term Organisational Silos is defined as the separation of different types of employees, often by the department in which they work. Most of us will have experienced times when communication, collaboration and data flow between different parts of the business has been inefficient, or even absent – and suffered the consequences of the effects on business operations.
To be competitive as regulations, client expectations and demands for transparency increase, firms simply cannot afford to be hamstrung by their operations. But before we examine how to address the existence of silos, we first need to look at why they exist.
Why are asset managers working in silos?
Lack of Communication & Collaboration
In many instances, silos are created because of a lack of communication. when there isn’t enough interaction between departments, each is left to set its own priorities and direction without knowing enough about what the other departments are doing or need.
The causes can be cultural, or down to a lack of understanding of how a particular department or team fits into the bigger picture, causing leaders to focus on local rather than company goals. If Product have KPIs based solely on their own output, should they really dedicate resources to the downstream impact on Marketing or Data teams? Will Sales communicate effectively with the whole organisation, or will their focus be solely on hitting target?
Often, though, they are simply a result of technical limitations; when departments need to collaborate through a mixture of emails, phone calls, meetings and other non-centralised tools, it is hardly surprising that alignment is difficult to achieve.
M&A activities
The industry has seen considerable merger and acquisition activity in recent years, with obvious long-term benefits for the parties involved. However, integrating two complex tech stacks with completely different configurations, protocols and workflows can dramatically slow ROI.
In addition, disparate teams with different company cultures and work styles can be hard to align into one ‘common goal’. Even where one would think the goals are already aligned, the manner in which they have been achieved in the past may be markedly different.
At FundSense, we frequently see that even though different firms want to achieve exactly the same thing (e.g. launch a new fund, generate a client report, manage product data, etc.) the way they go about it is completely different. When bringing two companies together, deciding on how to merge these processes (or choose one over the other) can take considerable time and cost.
Legacy technologies
When considering whether to update existing infrastructure that may no longer be fit for purpose or explore new technology, sometimes the cheaper near-term option is favoured over the one that would future-proof the business over the long term.
Not only can this add to a growing pile of tech debt that asset management firms eventually have to pay down, the existence of such technology with its limited scalability and flexibility increases the likelihood that different departments are managing processes and data in different ways which are hard - or even impossible - to integrate.
And yes, for the purposes of this article we will class Excel as a legacy technology! You can read our thoughts about the over-reliance on spreadsheets in the industry here.
Decentralised IT services
Although rare now, some organisations will historically have had decentralized IT services, allowing departments to buy their own software and technologies. This leads to platforms and databases that are not compatible or integrated with other systems around the firm. When IT purchases are isolated within departments or teams without checking for compatibility with existing systems, working silos (and data silos) can be an unintended consequence.
What is the impact of working in silos?
For many asset managers, this way of working is the norm; it’s always been this way, and the company is successful, so do things really need to change? To properly answer this, we need to look at the implications of working in silos, which can lead to wasted time, unnecessary costs, missed opportunities, and the creation of a new, significant challenge – data silos.
Inefficiencies
An uncoordinated approach across teams frequently leads to duplication of effort, and wasted time and resources. Furthermore, without efficient communication between departments, there is a greater risk of misunderstandings and errors.
A common example of this that we see at FundSense is when firms are launching new funds. A huge amount of data is collected, created and verified by Product teams to meet all internal launch requirements – yet only when completed will this data be sub-divided and transformed into the format required for document providers, data vendors etc. – often as a separate task by a separate team - despite the obvious crossovers.
Lack of innovation and governance
When departments are not sharing ideas or collaborating effectively, it can stifle innovation and creativity. If systems are not in place to foster collaboration, not only will great ideas slip through the cracks, but the lack of management information will prevent the firm from identifying and fixing issues that could improve future productivity.
When talking to clients we often hear ‘we know the process isn’t working well, but it’s very difficult to establish why’. For processes that do – or should – involve multiple teams, a lack of MI and analytics make it much harder to identify and remedy bottlenecks.
Poor experience for employees and customers
Working in a siloed environment can lead to a feeling of isolation – both in terms of interaction with colleagues in other departments and buy-in to the company’s overall philosophy and strategy. And as well as the negative impact on morale, it can have repercussions on the employee’s ability to do their job; if they need information held by another department but don’t where it can be accessed, it can be a time-sapping and frustrating experience.
Customer experience can also be impacted; if, say, sales, marketing, billing and support all have unconnected interaction with a client, the chances of incorrect information or inefficient service being provided increase considerably.
Creation of Data Silos
We all know the value of data in asset management, but when data held by one group is not easily or fully accessible by other groups in the same organisation, the results can be anything from inconvenient to catastrophic!
Managing disparate data housed across various departments, as well as external datasets sourced, managed, and stored in multiple systems is a major ongoing regulatory challenge for asset managers, which is amplified when the firm operates in and has to comply with rules from multiple jurisdictions.
With ever-increasing regulatory reporting and evolving ESG disclosure obligations requiring highly scalable reporting solutions, late or incorrect information is simply not an option; but siloed data increases the possibility of duplicate entries, outdated information and human error - all of which in turn increase the likelihood of it occurring.
Another risk can occur with data security; if data is stored in solos, data privacy compliance becomes more challenging, as it becomes more difficult to uncover who is accessing what. Additionally, where employees are storing data on their own devices in documents, spreadsheets and other formats, the chances of data becoming stale will increase.
Finally, siloed data means incomplete information across the organisation. If department heads only have access to ‘their’ data, they have an incomplete view of the business, and their decisions may not be fully compatible with global business goals. At C-level, where decisions need to be made based on consolidated data from across the firm, working with isolated data sets makes this a much more challenging and time-consuming task. And as discussed earlier, this can have a knock-on effect on both staff and customers.
What can we do to eliminate silos?
With all of these challenges stemming from the existence of silos, it is clear that in most cases there will be considerable benefits from removing them – but how do we go about this? Much of the answer lies with technology – but the starting point is often to address the company culture and mindset.
Stop thinking in silos!
This may seem like an obvious point – but there is no point in investing in great technology to alleviate a problem if adoption is low due to company and employee mindset. If departments are used to working in their own silos, it is critical that the benefits of collaboration - and their role in achieving company objectives – are clear to them.
Organise the data
If data continues to be managed separately, the job of eliminating organisational silos becomes more challenging. Creating and/or sufficiently empowering a Data Governance team is a good starting point; enabling understanding of the disparate, outdated and incomplete data housed in different areas, reviewing existent system capabilities and communicating the importance of accurate data across the business are key tasks.
Another step towards this can be achieved by standardising communication. To achieve tasks, teams may previously have been using any combination of email, phone, meetings, ‘print and sign’, Sharepoint, etc. (with a spreadsheet or two thrown in for good measure!). With no process consistency, barriers to collaboration already exist. This is where technology begins to play a part.
Centralise data and information with integration software
With data stored in different software across the business, integration of these systems is the best place to start; centralising, normalising and providing access to the data can go a long way towards eliminating existing silos and reducing the chances of new ones forming.
With data likely stored in a combination of legacy in-house as well as third-party systems, this may seem like a daunting task, but there is a wide range of integration platforms - cloud-based solutions for data integration between systems and third-party vendors – designed to do just this. Once in place, data sharing becomes much easier.
Invest in a unified platform for collaboration and data management
Once the legacy issues have been resolved, the next step is to ensure they can never occur again! A centralised digital platform is an ideal way of keeping all of the company’s departments and objectives aligned by streamlining processes, data and communication.
For a start, it will ensure that tasks, requests, reporting etc. are carried out in a consistent manner, with timers/SLAs, and ‘track progress’ capabilities. It will also provide the governance and analytics necessary to understand what is happening across the business, when, and why, enabling ongoing process improvements when inefficiencies are uncovered over time.
By enabling the efficient and consistent completion of activities, the platform will make collaboration and communication across the business much easier – accessing information becomes less time-consuming, and understanding of teams’ roles in the big picture becomes clearer.
Taking these steps ensures the ongoing management and streamlining of data is much more straightforward – there will be no more processes run in standalone systems, no critical data stored in spreadsheets, and no inconsistent task-related communication. And with all data consolidated on one platform, it becomes much easier to find, understand, and use.
Conclusion
Organisational silos continue to be commonplace in the asset management industry and can lead to numerous challenges including process inefficiencies, poor communication and increased occurrences of data silos, which bring their own problems.
Resolving this requires a combination of cultural change and technology – specifically to integrate disparate data sources, standardise process management and communication, and ensure data is managed centrally and efficiently going forward.
For more information on how FundSense works with asset managers to alleviate organisational and data silos please contact info@fundsense.io