Speaker: Becoming a Data-Driven Organization Isn't Easy, But It's Worth It

Chris Gaetano
Published Date:
Jan 17, 2019

Many people are talking about data, and how big data will change everything, but what exactly does this mean on an operational level? Amy E. West, CFO of AHRC New York City and a speaker at the Foundation for Accounting Education’s 41st Annual Nonprofit Conference on Jan. 17, offered lessons from her own experience. AHRC is an organization that advocates on behalf of people with intellectual and other developmental disabilities.

A data-driven organization, West said, is one that makes decisions based on verifiable data, essentially being evidence-driven. There are many advantages to taking this approach. One, she said, is that decision-making is more systematic, objective and measurable.

“Plain intuition can carry a very big risk. [In a data-driven organization,] progress is measured using data rather than gut feeling, so you can actually measure progress and depersonalize decision-making,” she said.

She also said that, because this approach is forward-looking rather than historical, it is easier to respond quickly to changing conditions. She noted that in her own organization, “we have a very dynamic funding operating model—we see market conditions are changing all the time,” and so this approach “allows an organization to adapt with agility.”

This adaptability arises because a focus on data allows an organization to test different strategies and scenarios to determine what is truly effective, which, in turn, lends greater confidence to decision-making. For instance, she said, her own organization now gets information about donor preferences through its social media, and uses that information to provide better customer service.

She noted, however, that making this change requires a large cultural shift in the organization that leadership might be reluctant to enact. Being data-driven, she said, means there’s significant pressure to achieve results in less time, as it tends to accelerate an organization’s pace, and so “everything seems due yesterday.” She also said that powerful personalities can disrupt more data-driven approaches due to what she called the “HiPPO effect”: the highest-paid person’s opinion.

“When the data suggests you go this direction, but the most senior person in the room says you go in that direction, do you defer to them or do you just go with the data? So that always leads to challenges,” she said.

West observed that a focus on data requires a different set of skills. Instead of reporting information, much more focus is on analyzing information, meaning that organizations will need people keen on doing statistical analysis. These people will be essential, since making this shift introduces new challenges around things like data integrity, quality and access. She also warned against the temptation to spend all of one’s time analyzing data without making any meaningful decisions.

West pointed out that, if data is to be meaningful, it must answer the right questions. For example, while knowing that the operating budget is important, it does not reveal much about an organization’s overall health. Similarly, the amount of money it costs to fund-raise “doesn’t speak to the type of funding we get: Is it restricted? Unrestricted? Is there overhead?”

“These metrics are rather easy to calculate, and the data is easily available to us, but I don’t think they provide much information as to how to run our business or whether we’re operating an effective not-for-profit organization,” she said.

The questions she is more interested in, as the head of a data-driven organization, are ones such as, “Are we fulfilling our mission? Are we able to meet our obligations when they come due? Are we offering the goods and services required by our constituents?” or “Are we attracting and retaining exceptional employees?” Learning to ask the right questions, she said, can lead to meaningful answers, even in situations where one is swimming in information that can’t be made meaningful.

“It’s important [that] you focus on the questions you want answered, focus on the data you need,” she said.

In order to enact the cultural change necessary to become data-driven, she said that organizations must start at the top. Leaders must support the move, and their support can be gained through the use of what she called “aha moments” that genuinely improve operations. She noted that one such moment at her own organization was when it looked at exit interviews in order to determine why people left.

“We had a group of senior folks who really thought most people were leaving our organization because of compensation, but the aha moment was they were unhappy with their relationship with their manager, and so we took that data away and we created managerial training for our front-line managers,” she said.

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