The Advantages of Data Driven Decision Making

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It should be a given that decision makers in business use data to inform their decisions. Afterall, why wouldn’t you want to look at data and information relevant to decisions you’re making? A bank wouldn’t offer you a mortgage without the bank looking at your bank statements and payslips to see if you could afford the repayments. But it may (or may not) surprise you to know that it’s not as common as it should be. So often important decisions – decisions with tangible impacts and risks for a business – are made only on intuition and opinion rather than more quantitative evidence.

Having said that, I’m not suggesting that the experience and business instinct of leaders should be ignored in favour of what a trend line in some financial data says, for example. As modern consumers, we’ve all seen what happens when decision-making is left purely to data and algorithms: I’m sure I’m not the only one to have adverts for unexpected items that I have no interest in appear in my social media feeds just because an algorithm has been programmed to suggest that is what an average person of my age, gender, and geographic location is probably interested in – yes, random adverts for Tena Men, I am talking about you!

Instead, decision-making should be all about triangulation – the idea of taking information from multiple different perspectives and combining it to give a more rounded, nuanced view.

Imagine you’re the CEO of a big nationwide plumbing and heating company. You spend a day shadowing staff on the phone in your contact centre and hear a number of calls from customers complaining about how long it takes to get their boilers repaired. Do you react instantly and trigger a big, costly review of how your services are delivered because the standard of service your company delivers can’t possibly be good enough? Or do you recognise that what you’ve heard is a cause for concern, but is only one datapoint for understanding the quality of your service and that you need to look at others before you reach the conclusion that there are issues with your service?

If this imaginary business used data driven decision making, the CEO would be asking to see a variety of data such as trends from customer satisfaction surveys over time, percentage of calls to the contact centre that are complaints, average time to complete repairs, how many customers are repeat customers, and so on. They’d also apply their experience and knowledge to recognise that people are more likely to take the time to phone up if they have a problem than to flag up great service so the single day in the contact centre may not be reflective of a genuine issue.

Data driven decision making combines the experience and real-world expertise of business leaders with insights from their data so that the decision-making process is informed by evidence and plans can be tested and validated before they’re fully committed to.

Let’s have a quick look at 5 big advantages to data driven decision making:

1) Greater transparency:
We’ve probably all worked in a business where a decision comes down from on high and we have no idea why it’s happening or what it’s supposed to achieve. Data driven decisions are easy for everyone to understand and get behind because they have a clear rationale and normally have a quantifiable business case behind them. For example, we’re going to increase the number of gas engineers in our Wiltshire area because we are getting a disproportionate number of complaints that boiler repairs are taking too long there compared to our other areas. The logic is clear so people will understand and buy-in – a massive cultural win in any change management process.

2) Greater employee satisfaction:
There’s little worse at work than putting all your time and effort into something when you don’t really know why you’re doing it. On the other hand, there is little that is more satisfying than knowing that your efforts contribute value. In a culture of data driven decisions, you’ll know that projects you work on have that genuine value and reason for happening, and that you’re not just trudging away to fulfil someone’s vanity project.

3) Be more profitable:
This isn’t a direct benefit of using data driven decision making, but good use of your data in decision making should help you to become more profitable. That may be from identifying issues and challenges in your business that cost you, such as particular products or services that end up costing you more to deliver than they make. It may also be from understanding emerging trends in your sector that allow you to invest in the right products at the right time to meet those emerging customer needs and corner a market before your competitors.

4) Greater consistency and predictability:
If all leaders use data and insight to support all the major decisions in your business, you’ll quickly find that you operate more consistently as a whole. People may come and go but there will be an embedded culture around decision-making that new recruits will be able to come in and adopt as the standard, expected, normal way to operate.

5) Get decisions right more often:
The more you use data in your decision making, the more you’ll understand how to get the best from it. You might even start collecting new data just to help with decision making. The net result will be that you start to make the right decisions far more often because you cut out so much of the guess work.

Data driven decision making offers so much value to businesses, and, best of all, you probably already have all the data you need to get started.

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