Remember way back in 2010, when most financial crisis post-mortems contained a heavy dose of skepticism about the models, data and judgment exercised by Wall Street's "quants"? Two years have passed since then, and more and more employees in all industries are becoming quants.
That's because the age of analytics is accelerating: Analytics have crept into nearly every nook of the organization. And while vendors promote their solutions for harvesting Big Data, the extent to which organizations can actually transform data into smart decisions remains disappointing.
A Conference Executive Board study finds that the average employee spends 36 percent of their time collecting and analyzing data; however, less than 40 percent of these employees possess the skills and judgment required to use this information to strengthen decision-making.
This may be Quant Nation's "mushy mile" risk.
Just like the truth (according to "The X Files"), the data is out there -- overwhelmingly so. And many highly effective technology tools can collect data, synthesize it into information and then disseminate it to people. But mushy humans are responsible for carrying the information over the finish line and applying it -- via the right judgment, context and frameworks -- to living, breathing decisions, many of which have extremely high stakes.
The problem, according to the Conference Executive Board (CEB), is twofold:
- Most employees don't possess the right blend of analytical and visceral judgment; and 2. There are several organizational obstacles exacerbating the mushy mile risk and hampering the development of analytical capabilities.
The CEB research indicates that the best type of decision-making style (to fully leverage analytics) is "informed skepticism," an approach that "applies judgment to analysis" and that "listens to others but is willing to dissent." The firm's assessment of 5,000 employees at more than 20 global companies finds that only 38 percent of the workforce consists of informed skeptics.
The remaining portion of the workforce consists of "visceral decision-makers" (from-the-gut types who distrust analysis and comprise 19 percent of the workforce) and "unquestioning empiricists" (the quant-y folks who always win fantasy football leagues and comprise 43 percent of the workforce).
Although that breakdown surprises me (43 percent of employees really trust analysis over judgment?), it underscores the importance of addressing the mush mile, i.e., how employees use, or mis-use, analytics in their decision-making.
The second problem, as described in this Harvard Business Review article, consists of four common organizational shortcomings:
- Analytical skills are concentrated in too few employees;
- Information technology (IT) functions spend too much time managing technology and too little time on managing information;
- Actionable information is difficult to locate; and
- Leadership teams do not manage information as well as they manage other assets, like capital, talent and brand.
The last point is an interesting one: How well do you manage the information that fuels key decisions? How well do you manage this information compared to how you manage your direct reports or your budget?
We don't hear much about the tug of war between quants and risk managers on Wall Street these days. If companies don't start managing their mushy mile risks, we might soon hear about more insight deficits within companies on Main Street.