Can hierarchical organizations be data-driven?
I’m formulating a theory. There is really no basis for this beyond things I’ve read and my suspicion about human nature. It goes like this: Hierarchical organizations cannot be data-driven, or are going to have a much harder time getting there. Why? Because hierarchical organizations, by their very nature, are ego-driven.
That’s quite a leap to make, I realize, but hear me out: Layers within a hierarchical organization typically do little more than add unnecessary bureaucracy to the organization. The more layers you add, the less true decision-making power people in those individual layers have. They’re created to give people the ability to “grow” professionally, but ultimately the real power is at the top of the organization in it’s senior leadership. This means that middle managers aren’t really empowered to make larger decisions, which must create a certain amount of dissonance for them. Here they are, at a director level…where they FEEL like they should have decision-making capabilities but typically they don’t on anything that really matters.
Now, where middle managers do have power is in terms of making recommendations and really pushing for certain types of tactical decisions. In theory, they would look at the data when making their recommendations, and base them off of it. But what I’ve seen happen more often than not is that recommendations don’t get made based off of data - they get made based off of ego, or for the sake of pushing an agenda by someone who feels like they should have more power than they have been given. Numbers don’t lie…but they do oftentimes tell you things that you don’t want to hear. I’ve seen people surprised, to the point of being offended, at what the numbers tell them. ”How could MY strategy possibly be wrong? There must be some explanation!” Suddenly the person who implemented this strategy feels as though they are being undercut by the numbers, in full view of their subordinates nonetheless. The results are internalized to the point of being taken personally, and then consequently ignored or rationalized.
Flat organizations, in theory, aren’t as likely to experience this problem since they inherently encourage teamwork and equality - there are fewer levels within the organization and decision-making is decentralized. It eliminates the layer of middle managers, and thus a whole mess of ego-driven problems a long with it.
Installing analytics and looking at reports every now and again is not a mark of a data-driven organization. Until the organization takes actions based on those numbers, the return on investment of those analytics is zero. If you’re collecting numbers but not doing anything with them to improve the success of your tactics, then you have missed the point. If egos are going to get in the way of admitting faults with tactics, don’t even bother wasting the resources it takes to spend time tracking in the first place.
Of course, if I’m right, all of this presents a dismal view for higher education since it’s one of the most hierarchical industries of them all. But maybe I’m too cynical? Perhaps. I’ll concede that point. But does that negate this theory? I don’t think it does.
What do you think of this theory? Anything to add? Totally disagree with it? Leave a comment!
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May 21st, 2009
Karlyn, I think you’ve nailed something: ego-driven organizations can only process data through the lens of the ego-in-chief. But I’m not so sure that flattening out the power structure in and of itself will produce an empirically driven organization. Flat structures tend to operate more on a consensus model that can mute innovative, data-driven ideas in favor of the group’s comfort, and suffer from the absence of a clear decision-maker. I think it has to do more with scale than with flat versus hierarchical. A small enough group (but not too small) could be organized either way and be incredibly responsive to data. Too large or too small a group will, IMO, devolve around ego. (Basing this hypothesis on intuition, not data, so strike me down if you can!)
May 21st, 2009
hahaha well none of this theory is really based on data so I don’t know if I can strike you down
I do think you make a good point about the size of an organization being a factor, and is an aspect of this that I hadn’t considered.
I think there has to be a happy medium between a ridiculously hierarchical and completely flat organization, so that you can have the flat, team-work oriented structure and still have someone in charge who will make the final decision.
May 21st, 2009
I actually wonder if it has anything to do with what piece of the organization you are talking about. I have found that the enrollment people are much more data driven about making decisions than others in the organization.
May 21st, 2009
Paul, I think you’ve added another key component here. I absolutely agree that I’ve seen enrollment people be more data driven. Maybe it has to do with the shortness of the recruiting cycle?
May 21st, 2009
There may be something about the culture of the organization that matters, as well. For example, Google is a huge organization and is extremely data-driven (to the detriment of creativity, if you read some posts from former Google design staff). What goes on their pages, the color schemes for their products, and more are all based on data they collect from user interactions.
I would guess all the top consumer product companies are highly dependent on and highly responsive to market research and sales data. I would also guess they are highly hierarchical. For these companies, data provides the signals they are using to respond to consumer buying patterns and changes in consumer preferences. I used to be a strategy consultant and have seen the amount of data some of these large companies process and analyze on a regular basis. I did a case for a rum manufacturer and was surprised at the quantity of data they had. They could tell you that their rum drinkers also played golf 5 times a month and subscribed to cooking magazines. They had all sorts of data on buying and lifestyle attributes of their customers.
I definitely agree with you that data itself isn’t the key. It’s being able to tease out what’s really important and to determine how you can act on these insights. Does it matter that your buyers of your rum play golf 5 times a month? Maybe it tells the manufacturer that they should be marketing at golf tournaments. Or maybe there is some narrower segmentation or more important attribute that is the real key for marketing to your target market.
I sometimes think for-profit organizations have a slight advantage when using data. There is one clear metric that trumps all else… the bottom line. For colleges and universities, what is the overriding metric that every other metric is serving? Is it the success rate (e.g., salaries, job placement rate) of the graduates? Is it the productivity of the professors? Is it enrollment numbers? Not that this is an excuse, but I would imagine it can make it difficult for those who advocate data-driven decisions. In a for-profit company, you can point to how your numbers impact the most important number of all, profitability, and it’s hard for anyone to argue with that.
May 21st, 2009
Preach it, sister!! Amen!!!
May 21st, 2009
I think the key word you used, beyond hierarchical, is ego.
Hierarchy doesn’t always go hand-in-hand with ego. I’ve worked for “the buck starts and stops here” authoritative/tyrannical decision makers and worked for “the buck starts with all of us and stops here” collaborative decision makers.
The difference was often ego, though the cynic in me would say that ego was sometimes a mask for insecurity.
In contrast (response?) to this is “innovation without permission” which *sometimes* is referred to as a Millennial trait. I don’t know that this is a revolt against authority, though, as much as a do-good worldview. Howe and Strauss labeled Millennials as generally respectful of authority, and my experience as a Gen Xr is that this is often true of Millennials.