Breaking Up (Cartoon)
Scandalous Financial Benchmarking?
I just stumbled across an old post of mine, and couldn’t help reposting some of it in the light of recent events.
All those financial wizards were making a fortune based on the money they were “creating” — money that has since turned out to be largely fictitious. Top hedge fund managers were earning more in the time it took for an average New York City cab ride (8 minutes) than the average American made in a year.
As I said with a cartoon at the time: “who’s being taken for a ride?!”
Top hedge fund managers made over $657M in 2006. You can use this handy calculator to work out how long it took them to make more than you did all year — the time to brush their teeth? Take a shower? Commute?
(model below — you will probably have to connect directly to the site to see it)
Unbelievably, the financial industry apparently STILL thinks that million-dollar bonuses are perfectly reasonable for work they do (for example, it’s argued that it’s needed to retain the “best and brightest” at AIG).
Benchmarking is a great practice — but you have to know when to update your benchmarks!
Sources: Pay statistics, time usage stats, NY cab ride, commute, TV watching. Model built using Crystal Xcelsius.
BI Incompetency Center (Cartoon)
Making Tough Decisions
There’s increasing agreement that business intelligence and performance management technology has to go further than “just” data, analysis, and planning, to helping with the intrinsically human process of making decisions.
Today, most corporate decision-making happens in meetings and conference calls, with little support from technology. As a process, it functions, but most of us would be hard-pressed to call it optimized.
in many ways, corporate decision-making resembles the manual, time-consuming operational processes that have been replaced by automated, connected business applications. Isn’t it time that we applied some of the lessons we’ve learned while implementing ERP to the executive boardroom?
The payoff is huge: organizations make thousands of decisions every day. A little better data, and a little better analysis behind every decision can make a big difference.
Just as most technology discussions don’t talk about the decision-making process, most discussions about decision-making don’t mention technology. Here’s a case in point: SAP’s Don Bulmer recently posted on the subject of Leadership: Making the Tough Decisions. It was a great article, but we could also talk about the technology behind the principles he laid out.
So here’s Don’s three basic steps to making tough decisions, followed by my comments on how technology could – and should – help more in the future.
Understand what is the core issue, and separate facts from opinions
First, it is important to understand the ‘core issue’ associated with the business challenge that you are dealing with and gather as many facts and insights surrounding the issue as possible. At this stage in the process, it is important to separate ‘facts’ from‘opinions.’
As a leader, you are often presented with ‘facts’ that are presented to support a specific argument or point of view – which by default make them adverse. This is not to say that these adverse or ‘position-based’ facts are not valid, but they seldom represent a fully informed view of the core issue that needs to be addressed.
Any decision you make is only as good as the information you base it on. Accurate, transparent decision-making requires a strategic approach to information across the organization. If everybody comes to the meeting with their own spreadsheets and numbers defending their point of view, you’ll end up spending more time arguing about the data than about the decision itself. A “single view of the truth” across the organization, with consistent, reliable information, makes it much easier to separate fact from opinion.
Look at the decision from all angles and perspectives
Second, it is important to look at your decision options from all angles and perspectives. Many tough business decisions will have a broad effect on your business which might include: brand; reputation; relationships with employees, customers, partners, governments, etc. It is very common to overlook the total impact that a tough decision will have on your business. This is why it is important to consider many options – as you weigh the impact and trade-offs that most important decisions will require.
As a leader, this is where intuition and experience play a big role.
No computer can help you figure out all the angles of a decision, but technology can help. For example, profitability and costing analysis can help ensure that everybody involved in a decision understands the real drivers of the business: what is value-added activity, and what is not? What should you be spending time on, and what is less important? And predictive analysis can help determine what factors have historically had the most influence on the numbers at hand, and determine what might happen in the future.
Ask lots of questions of lots of people
Third, it is important to ask a lot of questions. This will help you to understand the options on the table as you make sense of the facts and sift through potential agendas/motives of people involved. Asking the right questions also helps you to measure the risk and impact that your decision will have on your business and with key relationships.
You may even consider speaking with trusted representatives from affected internal or external groups (customers, employees, partners,etc.) to get their perspective. This interaction will also help secure support and buy-in (by all parties) of your final decision once you are ready to communicate.
The ‘tougher’ the decision the more challenges you can expect to face as you communicate and implement. You will need to be prepared to help affected parties understand the rationale behind the decision and even share some of the alternatives considered and why you chose a different path.
This is the key area that technology is poised to help more with in the future. Today, there’s relatively little support within Business Intelligence industry for the process of gathering and sifting information from different people involved in decisions. Interesting technology exists today, but is not yet integrated into a whole solution. For example:
- Antivia has done some very interesting work in the area of “BI 2.0” and letting people collaborate around reports and information within a BI platform
- Panonica had some interesting collaboration software, with tight links to BI, back in the early 2000s, but was clearly too ahead of its time, and has since been discontinued
- ExpertChoice and others have supported collaborative decision-making, but without the BI angle.
The next generation of Business Intelligence will combine the best of these different technology approaches to better support decision-making, not just information-gathering. For more information about how technology can help with decision-making, see The 5 Ingredients of Good Decision-Making, based on some research done by the Economist Intelligence Unit.
Other posts related to decisions:
- Bad Decisions: Just Blame Evolution?
- More Milk Please, Ermintrude! A Classic Decision Trap?
- Is There Such a Thing as Good Gut Decisions?
- Will Computers Ever Help With Decisions? (No)
- Intestine-Based Decision-Making
Twittermania? (Cartoon)
The Web 2.0 Manager (Cartoon)
Who Has the Data?
Most organizations like to assert that they are “fact-driven”. But the reality of mundane, everyday decision making doesn’t always match the rhetoric, and force of personality (or simply seniority!) often swings the debate.
But information is still power. As SAP BusinessObjects marketing VP Franz Aman explained in a recent podcast with Jon Reed of JonERP.com
“It’s stunning every single time when you get into a discussion, whether it’s at the board level or whether it’s at the project team level, the moment the person with data around the table speaks up, shows the data, the discussion immediately takes a turn.”
“I’ve seen so many of these discussions at all kinds of levels where people are arguing their points, they’re making great arguments, they’re very convincing, very assertive – but the moment the one person around the table with the data speaks up, all that crumbles and you have a whole different level of discussion.”
Wouldn’t you like to be the person in the picture below? Invest in some great business intelligence!
Digital Native Test
If the image below automatically sets your teeth on edge, you’re probably a baby boomer. If it takes you some time to work out, you’re probably Gen X. If you have no idea what I’m talking about, congratulations, you may well be a digital native!
Image credit: photoshop disasters blog
Coghead Overview Video
A quick overview of the Coghead Platform-as-a-Service, recently acquired by SAP
Is There Such a Thing as Good Gut Decisions?
Thinking and Emotions are Inextricably Linked
It’s long been known that real-life decision-making involves more than just data and logic. For example, people that have lost their sense of emotions find it impossible to make even simple decisions.
Donald Norman (author of the classic “The Design of Everyday Things
‘Emotion was traditionally ignored as some leftover from our animal heritage… It turns out that’s not true. We now know, for example, that people who have suffered damage to the prefrontal lobes so that they can no longer show emotions are very intelligent and sensible, but they cannot make decisions.’
“Emotion… is an information processing system, similar to but distinct from cognition. With cognition we understand and interpret the world–which takes time.. Emotion works much more quickly, and its role is to make judgments–this is good, that is bad, this is safe.”
Not only does emotion help shade rational decision, “gut thinking” is a very real physical phenomena. Malcolm Gladwell’s book “Blink: The Power of Thinking Without Thinking
“Intuition strikes me as a concept we use to describe emotional reactions, gut feelings–thoughts and impressions that don’t seem entirely rational. But I think that what goes on in that first two seconds is perfectly rational. It’s thinking–its just thinking that moves a little faster and operates a little more mysteriously than the kind of deliberate, conscious decision-making that we usually associate with “thinking.”
A Second Brain in Your Stomach
Now researchers may have find the organ responsible for this thinking. According to a recent study, we may literally have a “second brain” in our stomachs — two layers of complexly-connected nerve cells linked to the intestine. (Many thanks to David Meyer of the Decision Velocity Blog for the link.)
“People often follow their gut reactions without even knowing why. It’s only later that they come up with the logical reason for acting the way they did. But we now believe that there is a lot more to gut feelings than was previously believed.”
So What Do We Do About It?
We have to realize that just providing information isn’t enough for effective decision making. We all have a lot more work to do to make sure that business intelligence actually leads to better real-life decisions.
I posted last year about how “sound judgment” was one of “The 5 Ingredients of Good Decision Making“, based on a study by the Economist Intelligence Unit. As technology develops, expect to see more of these ingredients supported by new, more collaborative decision technology.
In the meantime, here’s a repost of one of my old cartoons:
I was the eighth employee of 
