Harvard Business Review recently published a report sponsored by SAS (a business analytics software company) called The Evolution of decision Making: How Leading Organizations are Adopting a Data-Driven Culture. As you might expect given the sponsor, the report emphasizes the importance of analytics, but we felt the findings in the report were particularly compelling, and there were some points the report touches on that have repercussions beyond the buzz phrase “Big Data.”
The report is based on interviews with 646 “executives, managers, and professionals, along with more than ten in-depth interviews with individuals whose companies are at the forefront of adopting a data-driven culture.” Of those polled, 16% were from manufacturing companies, and most of the companies were extremely large (48% were worth $5 billion or more and 66% employed 10,000 people or more. Although this indicates that this information would mostly be of use to huge enterprise organizations, many of the lessons we want to focus on are applicable to any company.
First, let’s dig into some of the general findings.
Of those polled:
• 74% said they are feeling pressure to accomplish more in less time
• 3/4 of companies polled have no formal decision-making process, which leaves individuals and departments in the dark more often than not
• More than 70% of those polled said that analytics had improved their financial performance, increased productivity, and quickened decision-making
Now let’s go a level deeper and talk about the points in the report that we feel would be of particular interest to you and your company.
No matter how big or small your company, decisions have the capacity to make or break your organization. In an increasingly competitive world where information is inundating us at every turn, decision making needs to become more seamless, more efficient, and more transparent across your whole company, whether you have five employees or 10,000. Despite the need for better decision-making processes, only about 25% of the companies polled said they had a formal process for making decisions, and a fifth said that their process was inconsistent at best. The report draws a correlation to inconsistent decision-making processes and a lack of reliance on true data. It is suggested that in companies where there is a strong leader, that person tends to make decisions based on gut instinct or judgment based on experience. The basis for his or her decisions, in addition to the decisions themselves, do not always get shared as they should be shared.
This of course can be an obstacle in any organization, regardless of size. If a person at the top of the ladder squirrels away information and/or the opportunity to make important decisions, the rest of the company will be unable to participate.
A bad decision can have negative repercussions for an entire company, and if individuals or departments are caught unaware, the results can be even more dastardly. So how can the use of analytics help?
Analytics as Glue
As it turns out, the report illustrates that the use of analytics across a corporation can help accomplish the silo-busting and integration we talk about so often here on our blog. How does this happen? Consider this statement from Filippo Passerini, CIO at Procter & Gamble, whom the report quotes as saying, “Analytics accelerates our decisions because everyone is now looking at the same reality.” The use of solid, undeniable information, in other words, takes the human guessing game out of the decision-making process. Everyone has the same information, and thus everyone can approach the decision from the same perspective and with the same amount of knowledge on the issue.
A corporate push for using analytics can also create incentive for different departments to communicate more and to share information more. Especially if the same tool is being used throughout the company, everyone can monitor the same data and meet regularly to discuss what that data is revealing.
Finally, analytics can tie a company more closely to its customers. Constantly monitoring mentions across social platforms, visually tracking sales “hot spots,” and tracking other important data can be invaluable for a company attempting to better understand what customers may be wanting or needing. As everyone in the company begins working from the same data and sharing information based on that data, the decision-making process will also, by necessity, become more consistent, more effective, and more reliable.
Analytics and ROI
The report notes, towards the end, that “Corporate-wide analytics users clearly favor quantitative metrics as a decision-making method, while isolated analytics users are most likely to employ judgment, by almost a three-to-one ratio.” This could explain why so many companies are struggling with determining their marketing ROI. If the head of marketing is primarily making decisions based on judgment or sentiment, the report suggests he or she is also less likely to use, or to require the use of, analytics tools. On the other hand, if a company is already making efforts to improve the culture, improve the decision-making process, and improve internal communications, a reliance on analytics and solid data seems to be a key in achieving that evolution.
While your company might not need something as robust as the SAS system of visual data tracking, the moral of the story seems clear. Basing decisions around judgment and sentiment is far less effective than basing decisions on clear data. Sharing data across a company, from department to department, leads to better decisions and a healthier company culture.
Does your company rely on solid data, or is there a leader in your company who bases most decisions on judgment and experience? We’d love to hear from you.
Image Credit: http://www.flickr.com/photos/49889874@N05/5645164344/ via Creative Commons