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The pros and cons of being data-driven

4 minute read

Nadeem Khan
steering wheel of car

Most of us – whether business owners, managers, employees or consultants – work in organisations and have to deal with people around us. People within organisations create their cultures with basic assumptions and beliefs that are shared, and ultimately this allows them to operate with a unique modus operandi. However, organisational culture can create a major difference in business performance.

As business leaders, we sometimes rely on our emotions and gut feelings when making strategic business decisions. And eventually, this guides the organisational culture that influences our actions towards employees and customers. However, when such a culture sets the tone within organisations we run into problems. Our emotions may blindsight us from the truth at large. To set the tone right we need to encourage and use a data-driven approach to decision making.

Being data-driven signifies the importance of using research or data as opposed to our intuition and personal experiences. While the latter is one way to make decisions, it may not always be the best, especially when it comes to the ever-evolving world of big data, technology and analytics. Starting to look at the data will enable you to feel more credible with your decisions and ultimately build your trust with the people around you. So, let’s look at some of the pros and cons of having a data-driven culture that can eventually assist you to improve strategic business decisions and lead to long-term success for your contemporary businesses.

Pros:

1. Making better decisions:

With the advent of technology, big-data has become increasingly important. So, making decisions on intuition alone can lead to biases or errors. Taking advantage of insights from the data generated from both internal sources – operational and financial systems, and external sources – Glassdoor and social media platforms – can enable managers to reduce risk and make better decisions.

Embracing data-driven decisions is just the start, for companies to fully adopt this practice the culture of the firm must support it. Ultimately, this effort will enable the workforce to understand the importance of using data to make better decisions.

2. Enhances communication:

The future of work revolves around organisational wide access to relevant data and insights. Creating a data-driven culture enhances communication as it facilitates decision making and promotes confidence on ‘why’ such decisions have taken place.

Providing everyone with organisational wide access to data promotes transparency and trust. This sends a message to key stakeholders of your commitment to a culture of openness and information sharing. However, one needs to be cautious of what level of data to share with staff. Ultimately, this helps enhance communication, employee engagement and productivity.

3. Improves productivity:

When data is accessible to everyone it increases the opportunity to understand and gain new insights from all levels of the organisation. Such insights open a systems-thinking approach and ultimately enable opportunities for learning and growth for the organisation. Another important aspect is to share Key Performance Indicators (KPI) that can enable employees to know ‘what’ to achieve.

KPI’s are measurement values that demonstrate how effectively a company is achieving its key business objectives. A good KPI acts as a barometer enabling the workforce to understand whether they are taking the right path towards their strategic objectives. Consequently, creating a culture of accountability and holding the workforce accountable where necessary.

When the entire organisation has access to relevant business performance data and key metrics they will ultimately know what direction to strive towards. Therefore, having measures in place enables business leaders to gauge success. Sure, data can be a great resource for making better decisions, enhancing communication and improving productivity, however, it can also cause problems if used inadequately. So, let’s have a look at some of the pitfalls to avoid.

Cons:

1. Data overload:

Big data is massive and currently it is estimated that by 2020 the digital universe will hold up to 44 trillion gigabytes of data. It is easy to get sucked into the plethora of information that can be collected via digital platforms such as customer feedback, employee engagement data, wireless sensors, mobile phones etc. that we end up collecting more data then we can analyse and make sense of.

The problem is that we not only waste resources but also this data according to GDPR once collected for a particular cause cannot be reused for another issue.

2. Low-quality data:

Insights from the data collected depends on the quality of the data. Poor data quality can lead to less reliability, eventually destroying business value.

Recent research from Gartner shows that poor data costs organisations on an average $15 million in damages per year. Some of the major reasons may include human error in data entry and errors through software and formatting. So, a lot is at stake when decisions are made using poor data.

3. Misinterpretation or blind trust:

Data can be wrong, it always makes sense to investigate further. Sometimes companies fall in the trap of blindly trusting numbers alone. So, it’s important to always triangulate this data with further insights and professional acumen. Not knowing the full context, you end up making inaccurate decisions based on your own assumptions. Occasionally, you may even use this data to support a decision you have already made.

Nevertheless, it’s important to use data visualisation software such as MS Excel and display this data using the correct graphs and charts rather than just tables of raw data. Visualising the data correctly enables the audience to recognise trends, connections and correlations. However, the ability to fully interpret and analyse the data comes with wisdom.

Understanding the importance of using data to make decisions is just the first step to success. Businesses that place importance in using data for a competitive advantage create a data-driven culture and will ultimately emerge as future leaders. Smart businesses realise that without the right culture they will eventually be left behind. What organisations need to progress is a data-driven leader who can connect all this data and drive accountability across the organisation i.e. someone who is measured and focused. Leadership and culture, are two sides of the same coin. So, a leader who can facilitate and manage a data-driven culture will ultimately lead to long-term success and improved profits.

Nadeem Khan is the Managing Director at Optimizhr – a human capital consultancy that offers services around People Analytics, Talent Strategy and Leadership Development. A fellow of the CIPD, Nadeem specialises in People Analytics and its business impact. While at Lancaster University Management School, he interviewed top C-Level Executives in FTSE 100 and management consultancies in the UK to unlock his research question 'Why HR Cannot Embrace HR Analytics.’ Nadeem is also the official trainer for the North & Western Lancashire Chamber of Commerce where he works with SMEs to improve their performance and is an official contributor for Tucana – Europe’s leading community of People Analytics thought leaders.

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