Pardon my deception by attracting you to read this blog article by stating “business analytics” in its title. Analytics are a means to an end where the end-game is enterprise performance improvement. That is, analytics are enablers, not necessarily the root cause for improvement. And there are obviously multiple other contributors to organizational improvement including having enough money to spend on improving and having good executive leadership.
My question is this: How much does the presence of employee competency with analytics impact the rate of organizational improvement? A little? A lot? Or somewhere in between?
How do organizations improve?
My observation is that there is increasing attention to the topic of leadership. For example, ex-CEOs like General Electric’s Jack Welch get paid large fees for speaking engagements on leadership. Does this mean that better executive leadership equates to a faster rate of organizational improvement?
It sounds logical that it does. Why? Executive leadership is mainly about two items: (1) setting strategic direction with vision, and (2) inspiring and motivating workers and partners to go there. As executive leaders get better they observe, listen, and learn. This then results in a robust rate of organizational improvement.
My take on this logic is it is nonsense – part fiction and part myth. In my opinion concentrating and centralizing decision making and power at the top has become ineffective. Yes, executives need to formulate winning strategies, but today the name of the game is implementing and executing the strategy, not just defining it.
Two types of employees
I am sure there are dozens of ways to categorize and segment an organization’s employees into types. Here is a simple but provocative segmentation of types: (1) watchers and (2) analyzers. To be sure, any employee does both. The distinction is in the weightings of how much they do of each.
Executive leaders are mainly watchers. They cook up a hodge-podge of ideas and projects intended to implement their strategy. Then they monitor performance against expected targets. However, too often their organization’s traditional heritage and past successes blinds executives from seeing insights for change. Motorola’s decline is an example. Executives with power can justify the status quo by invoking dubious rationale. (Did you know that between the years of 1998 and 2007 that 460 of the S&P 500 companies had one or more fiscal losses?) I am beginning to lose faith in my business heroes. Also, less motivated employees who mainly work for a paycheck are watchers.
Analyzers, the other type of worker, are increasing in number relative to the watchers. This type of employee may not be equipped with powerful analytical software tools, like from my employer SAS; but that does not prevent them from being inquisitive and investigating data to convert into revealing information to gain insights.
The inequality of decision rights
A problem, actually an obstacle, is analyzers have not been granted sufficient decision rights to act on their conclusions derived from their fact-based explorations. Decision rights remain hoarded at the top of the organization. Executives are in the saddle. Empowering employees with decision rights and analytical tools to attain them is the key to organizational improvement.
There is an iron law of economics that the better the decisions then the better will be the results – and hence continuous organizational improvement will follow, financial or otherwise. It is now time for organizations to connect these dots.
Studies* have shown that the two major barriers to effective strategy execution are (1) not distributing decision rights downward into the layers of the organization chart, and (2) poor cross-functional information flows. Contrary to common beliefs removing these two barriers trump re-shaping the boxes and lines in the org chart and incentive systems.
Politicians of all nations are wrestling with how best to improve their countries’ education system. They know that in this 21st century the more educated and skilled their citizens are then the higher will be their nation’s economic prosperity. The same goes with an organization’s employees. Organizations need a culture for being analytical.
What factors contribute to organizational improvement?
So, we return to my question of how much does business analytics contribute to organizational improvement – relative to other factors. My unscientific answer based on anecdotal observations is that competency with analytics is number one. Prudence or nonsense to embrace analytics? Definitely wise and prudent.
You may think that I am full of talk and bias about what organizations should and should not do to improve. You may think I am either spot on target or way off base. But my conviction is that every day organizations make thousands of decisions at all levels with some big ones and some minor. But they all add up, and the more that decision rights are granted down into the work force skilled with analytical competency, then the faster will be the rate of organizational improvement.
….the more that decision rights are granted down into the work force skilled with analytical competency, then the faster will be the rate of organizational improvement.
For this hypothesis to hold true, it requires the multiple assumptions to include (1) a robust strategic position (2) performance metrics that dictate strategic infrastructure decisions (3) reward and recognition systems that align behaviors to metrics.
Otherwise, decison-making at the point-of-work often results optimizing local efficiencies to the detriment of system effectiveness. The rate of change may increase, but assuming it results in organizational (eg system) improvement is debateable.