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Things were simpler in times of old. Back in the pre-industrial era, the only data you needed for a profitable harvest was a ledger of your past sales and maybe a farmer’s almanac.
Today, data is everywhere. The problem isn’t how we get the information we need to make decisions, it’s how we get the right information we need, in the right format, and how to see through the clutter and white noise that surrounds everything we do.
Every day, our systems accumulate vast amounts of data without any intentional action by us. As I write this article, Outlook is sending me insights into my productivity over the past week and reminding me of the commitments I’ve made to my peers. With so much data accumulated and available for our use, the leaders of the future will need to develop skills to pick the right data and use it in an informed and intentional way.
Understanding Your Data Systems
The first step in using data to make decisions is to get the right data in a useable format.
Most sophisticated business systems, be they CRM, accounting, production, or hybrid systems, contain massive quantities of data. Taking the time to understand what your systems can do and the data they can produce is critical at the beginning of any new data-driven decision-making journey. No one wants to spend the first 30 minutes of an hour-long meeting arguing about where their data came from and whether it’s “good or not.” My Microsoft CRM may be able to run 200 different reports, but how many of those are useable and can help in informing my decisions? How will I know without experimenting and understanding what my systems can do?
If we take the time to see what capabilities our systems already have (and where they may be lacking), we are on our way to more informed decision-making and leadership.
Using Your Data
Once we have data in a useable format, what do we do with it? How should it impact our decision- making? What do we do if the data challenges our long-held beliefs or existing practices?
Strong leaders use data to improve their organizations and the lives of the employees working for their business.
As an example, in professional services we have historically looked to the “billable hour” as a gold standard of how to run a successful practice. The more hours your employees billed, the more successful your business. Ergo, if we want to be more profitable, our employees should work more hours.
However, if we look at historical data outside of hours (including non-financial data such as turnover rates, client and employee satisfaction surveys, and average tenure of employees) we may find that a better indicator of profitability is utilization, or client satisfaction, or average amounts billed each week. It may be that the way we’ve run the business in the past isn’t the most efficient.
This brings up one of the challenges in using data to lead – what if the data shows us the historical way of doing things is flawed or can be improved upon?
A good leader is able to pivot based on new insights created by analysis of data, even if it means reassessing previously held beliefs on how something should be done. While subjective measures can be influenced by feelings, thoughts, emotions, or experiences and therefore be inherently flawed, data doesn’t lie.
Preparing for a Data-Driven Future
At Clark Nuber, our leaders pride themselves on bringing useful data into the decision-making process early, including relevant facts and figures as part of the process. It may be that professional accountants are hard-wired to seek out “the numbers” first, but this tendency to get data to “back up your opinion” has created a culture in which we strive to support our opinions with hard facts.
In the audit world, change is coming quickly. The AICPA, the organization responsible for creating auditing standards, is undergoing a years-long project to rethink standard practices and re-engineer financial statement audits with data analysis at the core.
If you’re a financial professional on the other end of our audits, you’ve no doubt had to pull “samples” of transactions for your auditors to review. In the future, instead of analyzing a sample of items, computers and AI will analyze 100% of the transactions and flag those needed for auditor review based on algorithms written by experts in both auditing and data science. In many cases, this is happening now.
For many organizations, the biggest challenge right now is how to incorporate raw data into decision-making and developing the necessary skills to do so. Statisticians, data scientists, and professionals with skills in computer-assisted data analysis techniques are going to be in demand for the foreseeable future. Good leaders will recognize the need for hiring such experts and utilizing their services for the extraction of quality data that can be used to make decisions.
The applications will be endless. The recruiting process, the hiring process, the evaluation process, new client acquisition, product development, marketing plans, and lookback analyses will all be significantly changed over the next decade as we enter a realm of data-driven decision-making. In all likelihood, much of this change will be driven by artificial intelligence and algorithms. The leader who embraces this technology and uses it as part of a well-informed decision-making process will be set up well to lead into the future.
This article is part of the Learning, Adapting, and Growing: Leadership Perspectives series, which explores the role of leadership from a diverse array of perspectives. Each article is written by a Clark Nuber leader who shares their ideas on the unique challenges and opportunities they have experienced, and the lessons they’ve learned along the way.
This article or blog contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.