C-Suite Agenda

Data-Driven Decision Making Is an Oxymoron. Here’s Why

Any executive’s choice to use data-driven decision making is admirable. On the surface, it’s the responsible approach to avoid making costly decisions — especially since executives can directly influence hundreds and thousands of people’s livelihoods. However, this paradigm can end up becoming a shackle that limits your team and company.

Data driven decision making is all the rage in the world today. It seems like a natural evolution from a world that loves data and can capture anything and everything. After all, once you’ve captured every data point in history, you believe must figure out how to use that data.

At the same time, decision making is a weighty responsibility in our lives. We’re told from a very young age that we should make the “right decisions.” The weight of making wrong decisions is ever-present.

It seems obvious that if there’s anything that could increase the chances of us making the right decisions, we should take it and run. Data is supposed to be this panacea. If we can harness our data’s power, our decisions will be more effective and perhaps always right.

Yet, we don’t have to look very far to see a situation where this isn’t the case. An obvious example comes from the COVID-19 pandemic that we’re all experiencing. At this stage, there’s no lack of data about the virus. Health experts know where it’s coming from through contact tracing. They understand how it affects the human body and how fast it’s spreading.

Despite all of this information, it seems that governments can’t figure out how to handle restrictions. We continually see stories of governments removing lockdowns and having to re-impose them. We repeatedly read stories of governments that aren’t able to communicate the restrictions, leaving businesses confused because of the lack of clear decisions.

This is not a lack of data. It’s a lack of a proper understanding of how decisions are made and communicated. The data may actually be making things worse. There’s a point at which we know too much information about a subject and that leads us to overestimate the impact of certain facts. A case in point: think about a restaurant inspector who can’t eat out because he knows all too well how restaurants fail to comply with health regulations.

While data can support our decisions, it shouldn’t drive them. This emphasizes the wrong end of the equation — data instead of decisions.

Can you make decisions without data?

Let’s go into your world. What happens when you don’t have enough data? Are you still able to make a decision?

People often struggle to make decisions when they feel that there isn’t enough data. This is when you hear teams talk about doing more research. The problem with this is obvious. Executives and teams need to make decisions. They can’t just wait until everything is perfect before they can move. There’s room to be prudent, but it shouldn’t lead to becoming risk averse. Because of this, expect that some portion of your decisions will need to be made based on incomplete information.

Some companies produce fantastic data, but they don’t trust it. If they can’t trust their data, then they won’t use it. And, if they don’t use it, they may struggle to make the decisions needed to move forward. This also can require spending time bringing back trust into the data through audits and training.

Using data to support decisions, but not hinder them

Speed matters when making decisions. Getting decisions right is important, but you can’t ignore the need for speed. If a doctor diagnoses cancer too late, the patient may die. It won’t matter how “correct” the diagnosis.

The goal is to make effective decisions rapidly. Anything that helps this goal is welcome; anything that hinders it needs to be removed.

This is not to say that you should never use data and only rely on your intuition. Instead, focus on making effective decisions. If data can help, then use it. If there isn’t any data, you will still need to make the decision.


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Ruben Ugarte
Ruben Ugarte is founder of Practico Analytics, providing expertise in data analytics. He has worked with companies on five continents and in all company stages, helping them to use data to make higher quality decisions, boost performance, increase profitability, and make their teams world-class. His new book is The Data Mirage: Why Companies Fail to Actually Use Their Data (Business Expert Press, January 22, 2021). Ruben Ugarte is an opinion columnist for the CEOWORLD magazine. Follow him on Twitter or connect on LinkedIn.