The Business Case for Creating a More Analytical Culture

For all the buzz of business analytics today, analytics are a means to an end where the endgame is enterprise performance improvement. That is, analytics are enablers, not necessarily the root cause for improvement. And there are obviously other contributors to organizational improvement, such as having enough money and resources to invest, along with the right 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 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: watchers and analyzers. To be sure, any employee does both. The distinction is in the weighing of each.

Executive leaders are mainly watchers. They cook up a hodgepodge 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 1998 and 2007, 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, but that does not prevent them from being inquisitive and converting data 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. The topic of decision rights was recently presented at the annual Institute of Management Accountants conference by Ron Kral, a principal with Candela Solutions, a CPA firm specializing in governance, risk and compliance. 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 the results. Hence, continuous organizational improvement will follow, financial or otherwise. It is now time for organizations to connect these dots.

Studies have shown the two major barriers to effective strategy execution are not distributing decision rights downward into the layers of the organization chart and poor cross-functional information flows. Contrary to common beliefs, removing these two barriers trump reshaping 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 their nation's economic prosperity. The same goes with an organization's employees. Organizations need a culture for being analytical.

Sowing Seeds for 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 No. 1. Prudence or nonsense to embrace analytics? Definitely wise and prudent.

You may think 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, some big ones and some minor. But they all add up, and the more that decision rights are granted down into the workforce skilled with analytical competency, then the faster the rate of organizational improvement.

Gary Cokins is the global product marketing manager for Performance Management solutions at SAS, a vendor of data management, business intelligence and analytical software. He is an expert, speaker and author on advanced cost management and performance improvement systems. Cokins is a regular contributor to Business Finance.