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CFOs are acutely aware that data analytics is a critical capability, enabling finance functions to forecast more accurately, manage risks more effectively, and, crucially, make better decisions. As Robynne Sisco, chief financial officer at Workday, observes, "Data analytics will continue to play a very important role in how organisations run their business. The more data you have, combined with the tools you need to gain insights, the more informed decisions you can make about your business."
EY/Forbes Insights research in the paper How analytics can help transform CFOs from accountants to strategists found that 57 percent of group CFOs believe delivering the data and advanced analytics for business intelligence and management information will be a critical capability for tomorrow's finance function.
But there's a difference between understanding the benefits of advanced analytics and putting them into practice. In our related blog Unlock the power of advanced analytics by combining finance and non-finance data, we examined how data and systems challenges were preventing organisations from making the progress they wanted. But our "Finance Redefined" study, which gauged the views of over 670 CFOs and senior finance leaders around the world, also found another major stumbling block. Namely, "an organisational culture that is focused on intuition rather than data-based decision-making".
The debate about the importance of intuition versus analytics when making decisions dates back a number of years. In 2014, Aneesh Chopra, the first chief technology officer of the United States, said, "When it comes to making major decisions, there are two camps. One consists of people who believe intuition trumps analysis – go with your gut. The other rejects intuition in favour of careful data analysis – where there is enough data, there's no need for intuition." Chopra argued that the ideal is a marriage of these two approaches.
Since those early debates, analytics tools have become more sophisticated and the importance of building an analytics-driven culture has become clearer.
Others have asked whether intuition is coloured by biases that the decision-maker is not fully conscious of. Long before advanced analytics entered the business mainstream, Bruce Henderson, founder of the Boston Consulting Group, defined intuition as "the subconscious integration of all experiences, conditioning and knowledge of a lifetime, including the cultural and emotional biases of that lifetime."
Since those early debates on intuition versus hard fact, analytics tools have become more sophisticated and the importance of building an analytics-driven culture has become clearer. EY's point of view, "Driving change to an analytics-driven culture", argued that "analytics should be the basis for decision-making. By understanding, valuing and using the insights provided by analytics, individual decision biases, such as confirmation bias, gambler's fallacy, neglecting probability, etc., can be reduced or eliminated."
To begin the process of creating a culture where data insights are prized, finance leaders first need to build alignment with their peers, and within their teams, on the importance of an analytics-driven culture. Our research shows that different groups have very different views on the significance of "an organisational culture that is focused on intuition rather than data-based decision-making":
Once there is alignment on this issue, CFOs need to plot the transition to a culture where data informs and enriches strategic decision-making. This is not just about having the right data and tools available, or about getting the relevant insights to the right people for them to consume.
While these factors are central to the successful use of advanced analytics, it's also important for individuals to know how to use available data and insights. This may involve shifting the balance of the finance role to include more time spent on business partnering. It also means addressing the behaviour of individuals, ensuring that people reach for analytics when making decisions and are encouraged to do so. The EY point of view mentioned earlier notes the importance of aligning incentives and rewards with the "actions suggested by the analytics-based insights."
Strong leadership is also critical, as the article notes. Senior leaders can take a number of steps, from delegating an influential executive to leading the enterprise-wide analytics program to using analytics to challenge existing mental models in the leadership team. Given this focus on the people dimension of data analytics, having the right talent in place is, therefore, an important part of the puzzle. This is a challenging area where finance leaders will need to be innovative and proactive. In our research, 71 percent of CFOs said they face tough competition in recruiting the best data analytics and digital talent.
Many organisations looking to exploit data analytics are focusing their efforts on building capabilities and investing in the right tools. While this is important, if finance leaders ignore the culture and people dimension, they could find that their investments do not deliver the returns they wanted.
For the full research findings behind the "Finance Redefined" global study, read the report here.
About the Workday Global Finance Leader Study
We surveyed more than 670 finance leaders across the Americas, Europe, Asia Pacific and South Africa covering 10 main sectors from September 2017 to January 2018. Over one-third (38 percent) came from large organisations of more than $1 billion annual revenues, with 35 percent between $500 million and $1 billion, and 27 percent between $250 million and $500 million. Over one-third of respondents were CFOs, finance directors or chief accounting officers/controllers, and the remaining were drawn from senior finance roles, such as head of Financial Planning and Analysis or vice president of Financial Operations.