This week's topic: Top 4 Advantages To Building A Data-Driven Culture.
Everybody likes to say they’re data-driven. Yet, very few companies stop to think about what being data-driven actually means. Sure, you use numbers to measure your organization’s success. But did you use data to determine what success even is? It’s different for every organization and every industry.
In this episode of CFO Weekly, we nail down what data-driven culture is, why you want it, and how to get it. To help us out, we recruited VP of Operations at Sands Investment Group, Ryan Passe. Ryan has a ton of experience in multiple corners of finance. Today, he shares his insights on what it means to be a data-driven organization, the advantages of achieving a data-driven culture and what CFOs should be doing to foster a data-driven culture.
What Does it Mean to be a Data-driven Organization?
Being a data-driven organization means two things you have access to data and you use the data to make smarter business decisions. And what about emotions? While there are a lot of emotions that go into starting a business and willing it to succeed, when you look at growing and scaling, emotions need to be placed aside in favor of numbers.
This shift in mindset to numbers can manifest in something as small as testing copy on a landing page. A marketing director who’s not data-driven might pick the version of copy that best speaks to them or what they guess will speak to the target audience.
On the other hand, a marketing director who’s part of a data-driven culture will likely want to A/B test two versions of the copy. That way, the numbers speak for themselves.
"A data-driven organization is going to build an A/B test in which the new format is tested in the same conditions as the old," Passe said.
Alternatively, a data-driven organization does not switch up a format or process based on zero data, base decisions on gut feelings, take decisions personally or disregard numbers in favor of personal preferences.
4 Advantages of Being Data-Driven
While there are copious benefits of achieving a data-driven culture, we’re outlining four specific advantages today: the ability to make quicker decisions, pivot easily and accurately predict the market.
Make quicker decisions
When you’re consistently tracking and leveraging data, it’s easier to make quick business decisions. You know your organization’s current status on a macro and micro level. That knowledge can be immediately referenced in case something completely unexpected happens, like a pandemic.
Ability to pivot
In the same vein, your organization has an easier time pivoting when you have a data-driven culture. Agility and adaptability are absolutely critical for any business to grow and scale. Your business is a living, breathing thing. It feeds on adept data collection, analysis, and implementation.
Catch lightning in a bottle
When your organization has a data-driven culture, there are many eyes watching trends. If just one team member empowered by data notices an anomaly, there’s a chance you could catch lightning in a bottle. Without a data-driven culture, you’re only relying on hunches. Why not accurately predict an opening in the market and be the first to take advantage of it?
"The numbers are not the only way to gauge the success of things, but they need to be a part of the story no matter what," Passe said.
Empower your employees
It’s difficult to make a decision when you don’t have the data to back it up. Unless your CEO wants to take on the burden of making every single little decision, you should start leveraging data.
Plus, when people are empowered by data, they’re able to see the company and the industry from a more holistic view. Instead of employees working in their own taped-off silos, they can collaborate across departments because everyone has access to the whole picture. This improves retention rates, job satisfaction, and team alignment, just to name a few.
How to Foster a Data-driven Culture
There are several components needed to cultivate a data-driven culture within your organization. The first has to do with KPIs (key performance indicators). One of the main mistakes Ryan sees companies making when going to data-driven is the lack of helpful KPIs.
Every decision your organization makes is going to be influenced by the KPIs you set. For example, if you set a KPI for your quarterly revenue but not for daily users, you won’t be taking in the whole picture of your organization when making decisions.
Not to mention, your team won’t know what they can do on a daily basis to support such a long-term KPI. "It's important to have a variety of KPIs that allow you to see both the micro and the macro and understand how they work together," Passe said.
Although it takes a little more time, setting tangible KPIs allows your team to work daily towards an objective while also keeping the bigger goal in mind.
Get Organizational Buy-In
It sounds crazy, but not everyone in your organization is going to be supportive of a shift to a data-driven culture. But how do you get buy-in? One way is to mimic people’s feelings with numbers. To gain a deeper understanding of someone else’s perspective, you need to be open to learning and asking the right questions. Doing this will give you insight into why they’re making certain decisions and how they align with departmental goals.
Try to speak with all heads of departments to understand their perspectives. Pair the information with metrics that closely mimic those feelings.
For instance, say the head of sales believes that if her team focuses on generating leads on LinkedIn, they’ll get more sign-ons than last month. You can then use data from LinkedIn and previous sales cycles to either support or disprove her hunch.
Another way? Help others visualize the data. Is there a more effective way to display quarterly revenues than in a spreadsheet? Yes, yes there is. Use graphs, charts, and colors to successfully demonstrate growth or decline. People are more apt to buy into your plan when they can literally see why it works.
Use the data to start a conversation. The point of a data-driven culture isn’t to show how right you are all the time. It’s to open up lines of communication around the concrete aspects that are affecting your organization.
Remember: You’re empowering your team. Not bogging them down with math problems. Encourage your team to become experts in their industry. By cultivating a data-driven culture, your employees are going to become masters of their respective fields with the numbers to back them up. Let them know that being data-driven isn’t just helping the company — it’s supporting the individual too.
The Results Are Worth it
CFOs everywhere are going to be asking how your organization isn’t just talking the talk, it’s walking the walk! Yes, it does take time and effort to establish a data-driven culture. But, the results are well worth the work.
Looking to get more data-driven within your finance team? Check out how using an FAO solution to get transactional work done can help. Read Discover Outsourced Accounting: Finance & Accounting Oustourcing (FAO) 101 to find out more.