Good data won’t guarantee good decisions

Global businesses have entered a new era of decision-making.

The ability to gather, store, access and analyse data has grown exponentially during the past decade and companies now spend tens of millions of dollars to manage the information streaming in from suppliers and customers.

But investments in analytics can be useless and even harmful unless employees can incorporate that data into complex decision making.

To help organisations measure and improve employees’ facility with data driven decision making Corporate Executive Board created the Insight IQ, which assesses the ability to find and analyse relevant information.

The analysis evaluated 5000 employees at 22 global companies and sorted them into three groups:

(a) Unquestioning empiricists trust analysis over judgment.

(b) Visceral decision-makers go exclusively with their gut.

(c) Informed skeptics” – the employees best equipped to make good decisions – effectively balance judgment and analysis, possess strong analytic skills, listen to other opinions but are willing to dissent.

They’re the kind of data savvy workers every company should try to cultivate but the study found that only 38 % of employees and 50% of senior managers fall into that group.

In addition to quantifying the overall skill deficit the assessment identified four problems that prevent organisations from realising better returns on investment in big data:

1. Analytical skills are concentrated in too few employees. When a new form of analytics enters the workplace companies typically start by hiring experts versed in using it, reasoning that the skills will trickle down to all.

But too many companies are stuck in the “expert” phase where they have a handful of highly skilled analytics professionals but have not begun to train everyone else to make use of analytics methodology.

1. They need to spend more time on the “I” and less on the “T”. Most IT functions grew up working with finance, supply chain and HR, where business needs are clearly defined, stable and relatively consistent over a wide group of users.

Other departments may have diverse data demands or may need to use data in ways they can’t clearly articulate.

Meeting those challenges requires anthropological skills and behavioural understanding – traits that are often in short supply in IT departments.

1. Reliable information exists but it’s hard to locate. Many organisations lack a coherent, accessible structure for the data they’ve collected, with the rise of social media, new selling channels, tablets and smartphones making it harder to manage analytic content.

Fewer than 44% of employees say they know where to find the information they need for day to day work.

1. Business executives don’t manage information as well as they manage talent, capital and brand. Too many executives treat data as something for the IT department to handle or consider themselves too inexpert to get deeply involved in how data is shared.

Managers need to wake up to the fact that their data investments are providing limited returns because their organisation is underinvested in understanding the information.

Developing more informed sceptics

Companies seeking to make better use of data they gather should focus on two things – training workers to increase data literacy and more efficiently incorporate information into decision making, and giving workers the right tools.

Some training can take place in workshops and employees need to recognise that some numbers are more reliable than others. They must understand the factors and calculations behind the numbers and learn to think critically about the accuracy, sample sizes, biases and quality of the data.

But workshops aren’t the only – or necessarily the best – way to teach that information, with ongoing coaching often more effective.

To create an environment in which employees get the help they need companies must rethink the types of people they bring in as experts.

Although hiring managers typically put a premium on analysts’ quantitative skills outstanding coaching skills are more valuable, with people oriented data experts able to provide informal, ongoing training, increasing the organisation’s overall Insight IQ.

Many of the best data driven cultures have formalised the decision making process, setting up standard procedures so that employees can obtain and correctly use the most appropriate data.

Companies should make performance metrics transparent and embed them in job objectives as well as ensuring that compensation systems reward dialogue and dissent. Great decisions often require diverse contributions, challenges and second guessing.

Having the right tools to create and interpret data displays is also vital, with half of employees finding that information from corporate sources is in unusable formats.

The best companies avoid that problem by deploying improved information filtering and better visualisation – for example charts instead of raw data.

If given the option of good enough data now or perfect data later most executives choose the former, confident that they can apply judgment to bridge the gaps. They rarely drill down into information but they want to know that it’s possible to do so.

Let’s look at two companies that have shown a growing awareness of the payoffs from data literacy – Tiffany and Blue Cross and Blue Shield of North Carolina.

Tiffany holds year-round workshops to teach employees to use broad categories of information such as sales, merchandising and financial data and to instruct them in creating useful queries and employing analytical techniques.

Surveys indicate that only 25% of all knowledge workers receive effective training in information analysis and use. At Tiffany nearly all knowledge workers participate in ongoing data education.

As a result they are better equipped to exploit information and the IT team spends more time helping them derive value from the company’s data and less time answering simple data support questions.

To understand how many business intelligence tools Blue Cross and Blue Shield of North Carolina required the IT team identified 10 skills that knowledge workers needed in order to collect, analyse and display information for decision making.

It routinely surveys the workforce to assess those skills and creates training and new tools, such as dashboards and scorecards, to close any gaps it finds.

The company recognises the trade-off between having tools that optimise individual worker efficiency and bearing the expense of creating and managing too many customised tools.

To support a broad cross section of workers at a reasonable cost it maintains three to five enterprise tools that are used by most employees. It also supports a number of specialty tools for specific teams or functions.

Thus it’s eliminating dozens of unnecessary tools while ensuring that knowledge workers have those that they need.

Leaders need to ensure that their processes and human capabilities keep pace with the computing firepower and information they import. To overcome the insight deficit big data – no matter how comprehensive or well analysed – needs to be complemented by big judgment.

*Shvetank Shah leads the information technology practice at Corporate Executive Board, where Andrew Horne and Jaime Capella are managing directors.