The discipline of data management is now reaching a level of maturity that is revealing the true potential of data. As we illustrated in our post on the Anmut Data Maturity Ladder, it is clear that organisations have made significant strides to use data and analytics to improve profitability.
Many organisations, especially those subject to externally imposed regulatory requirements, such as the banks, have significantly improved their data governance. Often, they have reached level 2 of the data maturity ladder – they have a Chief Data Officer (CDO) tasked with taking a strategic overview of data and its use inside the organisation.
The Gartner CIO (Chief Information Officer) survey of 2016 suggested that while 90% of large organisations will have hired a Chief Data Officer by 2019, they predict that 50% of CDOs will fail.*
To progress to level three, Chief Data Officers have to move beyond data to conduct a more holistic analysis of how the organisation works and how decisions are made. Unless they do this, organisations will fall into the multiple traps of a performance management system that is at odds with the data ambition.
To start let’s unpack performance management. Typically, performance management refers to one of three things:
1: Human performance management, which includes goal setting, feedback cycles, moderation and performance feedback;
2: Financial performance management. This includes target setting, capital allocation, budgeting, forecasting and reporting.
3: Strategic performance management, which focuses on aligning strategy to metrics, ensuring that people across the organisation are aligned with strategic goals.
There are many techniques employed in performance management, including 360-degree feedback, forced ranking, balanced scorecards and the like. All of these have their place and are adopted by many organisations.
Having observed many organisations over the years, Andy and I have seen that performance management driven to the extreme often results in very fractured organisations where sub-units and individuals act in self-interest rather than for the organisation as a whole.
This extreme self-interest is a terrible environment for data. Data at its best is an asset of the whole organisation and needs to be shared to gain more value.
We have not met one Chief Data Officer that has an active design authority in the performance management system of the organisation and very few that have any actual authority in the corporate capital allocation process or budgeting setting process.
The very fact that I mention this has many scratching their heads and trying to understand what the link is. It is far more likely that CDOs will be involved in technology choices for data management and the like, instead of selecting the right key performance indicators.
Ensuring these performance indicators are aligned to strategy and that decision is based on data and fact, rather than gut feel and opinion. This is evident by how analysts estimate the size of the data market.
The view is that the data management market will increase from around $60bn (2015) to over $100bn by 2020**.
Scratch the surface and there is very little about the link to performance management and instead, the data management market is much more about data lineage, cleansing, distribution, lakes and so forth.
Organisations that are serious about data are serious about removing any barriers to the successful use and management of data. For example: Microsoft, Apple, Facebook, Goldman Sachs, and Accenture, have all made significant changes to their performance management systems to enable data to inform decisions.
So let’s look for the five warning signs in the performance management system that spells disaster for a Chief Data Officer:
1. Data is not valued
Without an understanding of the value of data, the CDO has no tool to compare data’s importance with other assets or initiatives. This leaves the CDO in the same place where many CMOs (Chief Marketing Officer) were a few years ago.
CDOs cannot quantify the benefit of the efforts they are undertaking and have to deal with anecdotes rather than facts. It is quite sad that many of the reference works on data management still extoll the virtues of storytelling as CDO … moreover, very little about the active role of value steward.
2. The Chief Data Officer has no seat at the capital committee
You have often heard me ask the question, what if data is your most valuable asset? If data was indeed one of your most valuable assets would you not start to skew investment towards making that asset grow in value?
3. The improvement in the value of data is not in the executive team’s scorecard
Data either is a strategic asset or it isn’t; if it is not at least on the scorecard for your exec leadership team, you are misleading yourself. You know the stat of the 50% of CDOs that fail…
4. Data value is not in the business unit budget
When the business unit targets are set, and there is no explicit budget allocation for data management and measured improvement in results because of data, the business units will invite you along to do the odd presentation to emphasise the importance of data; you might even crack the odd invite to join the dinners afterwards… however, nothing will change.
Get data management outcomes in the budget if you want to survive for more than a year.
5. The Chief Data Officer has no seat in the business review meetings
This is pretty self-explanatory… the CDO is seen as an admin cog, not a business decision-maker. As you seek to mature your use of data, ask yourself how well we are positioned to convert data into performance information and how well do we use this information to guide strategic decisions. Unless you complete this transition you’ll find limited value in your data.