WHY TODAY’S C-SUITE STILL MAKES BAD DECISIONS IN A WORLD FULL OF DATA
In previous years, management meant leadership, and leaders were brought up through the ranks of the organisation until the survival of the fittest led organically to roles as the heads of the various executive divisions of the organisation. While the ‘fog of war’ meant that the leaders had very little situational awareness about adversary capability, location and intent, leaders were at least blessed with a plethora of experience about their own organisations.
Then came the information revolution. In recent generations, data about what was going on inside and outside the information became readily available. Experience became derided as a bias filter that distorted our judgments. Anecdotal data had been replaced with statistical data, and older experienced leaders were replaced with data managers. The age of scientific management had arrived.
So, what has gone wrong? In such a world, how could the 2009 financial crisis have happened?
The difficulties are threefold: (i) in a world flooded with data, parsing reliable data remains surprisingly difficult; (ii) all information coming to the chief executive is filtered, in ways that suit the parties who act as the filters, either consciously or unconsciously; and (iii) value judgments latent in the data gets lost in the process.
First, parsing data for reliability is difficult. In statistical terms there are type one and type two errors: rejecting data that is reliable, and accepting data that is unreliable, based on models that must filter data to prevent outliers from showing results. However, things are often more difficult than that.
Jan-Mar 2020 Issue
McMillan LLP