Kicking the Tires
What You Need to Know About Data-Driven Decision Making
Have you ever been asked by a board member to “check with the club up the road”in advance of an important budget or compensation-related discussion? That same savvy business leader insists on hard data for his own company, yet he readily accepts opinion as fact and can’t seem to tell the difference between guesswork and research when he’s in the boardroom of your club. It’s an age-old dilemma shared by managers everywhere, but that behavior can be changed if you’re willing to do the legwork.
To shed some light on the path to data-driven, fact-based decision making, let’s start by applying that faulty board logic to the process of shopping for a new car.
When the time comes to replace the family car, you might start on the internet, looking for tips and reviews--anything to help you narrow the field. You know that making such a large purchase based solely on an opinion, whether it’s yours or someone else’s, is a dangerous proposition, so in search of something more substantial you embark on what amounts to a survey.
You gather your data by roaming from dealership to dealership, kicking tires, peering at dashboards, taking notes and collecting brochures. By the end of the day you’re up to your neck in information, and while data is certainly more valuable than opinions and guesswork, in raw form it still doesn’t tell you which car to buy. In order to make an informed data-driven decision, you have to be willing to consolidate, filter and analyze your findings.Whether you’re car shopping or making decisions about executive compensation, a collection of data without in-depth analysis and interpretation amounts to little more than a pile of numbers.
The process of going beyond basic surveys to analyze significant variations in data and identify norms is known as benchmarking. By definition, benchmarking is the continuous and productive study of business performance relative to one’s peers and it is a standard business tool in industries ranging from manufacturing to healthcare.That means many of your board members may already be familiar with the benchmarking concept from their corporate experience. While some clubs have developed their own internal benchmarking worksheets to track performance in specific departments, the ability to benchmark to a particular peer set of clubs or to the industry as a whole did not exist until recently.