On the new CEO’s first day of work, he assembles all of the executive team and their next two layers of managers into the corporate headquarters cafeteria for an introductory speech. His tone is defiant.
The New CEO’s Speech
“My fellow workers. I am your new CEO. Expect significant changes from how things have been done here in the past. The way I lead is by taking action. Most organizations overanalyze and under-execute, but not under my watch. I do not tolerate smarty-pants types of managers who wave studies in my face with lots of numbers and graphs. Those types of employees are just trying to pull wool over my eyes and confuse others.
“The types of managers who will be successful with me are take-charge types, and they don’t need no stinkin’ numbers to do that. Oh, and one more thing. All of those software licenses for analytics: Kiss ‘em goodbye. If you can’t solve problems with a spreadsheet, then you are just looking for unneeded and bigger tools that you think make you appear smart to everyone. If you go with your sixth sense and not with your quant-brain, then you will be my kind of worker.”
The Management Team’s Reaction
After the new CEO’s speech, everyone leaves the cafeteria for their offices, and the emails begin to privately fly among the executive management team.
CMO: “Houston, we have a problem! This guy is nuts. Without our advanced analytics, there is no way we can offer the right deals and special services to the right customers at the right time and at the right price for profit lift from those customers.”
Vice President of Operations: “Anyone got a crystal ball that I can use to replace our advanced forecasting techniques? Make it a low-priced used one, because this guy is not only misguided, he is cheap.”
Vice President of Research and Development: “Hey, wait! Maybe he’s got a point - a point where he can directly crash us into the ground after all of our innovative new product development these past years. That product development was made feasible for us only with using our advanced analytics methods.”
CFO: “I have temporarily recovered from shedding my tears. What a shame. My staff has been applying correlation analysis to refine the selection and validation of the best key performance indicators for our strategy map and bonus incentive system. We have been applying recursive customer segment partitioning and decision trees to identify the top rank-ordered differentiators of our more and less profitable customers. We learn things from our advanced analytics that our competitors could never know. Well, kiss our intelligence goodbye.”
One Year Later
So, what do you expect happened to your imaginary company if this happened? Which of these outcomes?
- It dropped its advanced analytics software. Good decisions were replaced by bad ones. The company went bankrupt.
- The board members were leaked the executive team’s private emails above and fired the new CEO.
- The executive team all resigned and the new CEO replaced them with his preferred managerial style of rugged individualist cowboys and ready-fire-aim types of managers who quickly tripled the profits and grew the company’s sales.
Here is my take: When executives, managers and employees make decisions at any time with any level of impact or significance, they may confidently believe they are correct or subconsciously sense they are not truly sure - like Shakespeare’s famous line “To be or not to be.” I think of this potential risk to organizations as this:
- Do they know? (Do they deem their judgment about any decision is precisely accurate?)
- Do they think they know? (Is there doubt but suspicion that without the analysis and facts that their decision may be wrong.)
Ideally, the management style for your organization will be one with an executive leader and team who has the will to create a culture of metrics and analytics and delegate decision rights to managers and employees to align their projects and work priorities with the executives’ strategy. After all, the executives’ job is to answer “Where do we want to go?” The managers should then answer “How are we going to get there?” They will need analytics to execute the strategy and, because a strategy is dynamic and never constant, to re-align to adjustments to the strategy over time.
Gary Cokins is the founder of Analytics-Based Performance Management LLC, an advisory firm. He is an internationally recognized expert, speaker and author in advanced cost management and performance improvement systems previously a principal consultant with SAS. You can contact him at firstname.lastname@example.org. For more of Cokins' unique look at the world, visit his website at www.garycokins.com.