Tuesday, 24 May 2011

Management approaches to data

I was chatting to a coworker the other day about different managerial approaches to data. I typically encounter 3.

1. Anecdotal evidence

Decisions made or motivated on the basis of anecdotal evidence are by far the most risky.

Anecdotes can, of course be a very useful leadership tool, enabling the leader to tell stories to illustrate, motivate and bring to life strategies and decisions to a workforce who may not be be exposed to the real underlying data and analysis on a daily basis. But it is anecdotes in the absence of such real underlying data and analysis which can be extremely dangerous. Making decisions on the basis of anecdotal evidence alone would seem to be like doing statistical analysis with a sample of one. Anecdotes illustrate points, they don't confirm generalizations.

2. Observation

Careful and ongoing observation is a much more sound basis for decision making. Observations can be made in the field, such as by walking the floor in your office or factory, or regular client contact, or can be more controlled in the form of customer focus groups. The more frequent the observations and the more deep the engagement, the better they will support decision making.

Observation is what gives rise to hunches and intuition. These arise where someone has learned something by observation but has perhaps not fully articulated the connection between what was observed and what was learned. Hunches and intuition are valuable where decisions need to be made quickly and in conditions of great uncertainty, but they can become addictive. It is important to subject them to the scrutiny of proper analysis from time to time.

3. Measurement

We've all been told that "if you can't measure it you can't manage it", yet I am constantly amazed by organisations' failure to measure their key strategic outputs.

Measurement introduces an element of objectivity into management, which can be especially important in leadership teams dominated by strong but conflicting hunches, intuitions or prejudices.

It is true that measuring the wrong things can be as dangerous as not measuring at all. Accounting and financial measures are, of course important, but the focus on accounting and financial measures to the exclusion of all other measures is at the root of much malaise in the corporate world, and part of the problem the Balanced Scorecard methodology sets out to address.

There is an art to knowing which are the important data to measure and what are the appropriate ways to represent those data, otherwise an organization can quickly drown in numbers even as it starves itself of insight. This is one of the fundamental challenges facing the strategic thinker.

Anecdotes, observation and measurement are all important - just make sure your using each for it's proper purpose.

See also