Why Data Should Never Overshadow Good Business Judgment

Granville-judgement

by Granville Triumph

There is a long history in corporate America of not questioning business judgment. Even the courts have shown deference to business judgment as evidenced by the “business judgment rule,” a doctrine based upon the principle that the actions of executives and directors are motivated by a desire to promote the best interests of the organization.

Although good business judgment has traditionally been given deference, an increased reliance on data-driven decision-making has muddied the waters. After all, judgment is difficult to quantify, while data is easily measurable. Big Data provides us with massive volumes of data, delivered in real-time, that provides insights into customers, business processes and performance.

Just as technology is used to minimize or eliminate human error, Big Data is being used by many organizations to minimize or eliminate the influence of human judgment. If the numbers add up, the data shouldn’t be questioned. After all, you can’t argue with math or facts.

The problem with relying solely on data to drive decisions and strategy is that it completely discounts the characteristics of leaders who are capable of exhibiting good business judgment. Such leaders know how to prevent problems and maintain composure when things get dicey. They can sense when a person is right for the job, even if their resume says otherwise. They can negotiate effectively and anticipate a competitor’s next move. They know when to argue for or against investments in new products, technology or personnel.

All of these judgments may be based in part on data, but a strong leader uses experience, knowledge and instinct to give that data context before making a final decision. Unfortunately, many proponents of data-driven decisions want us to stop trusting our judgment and let data make decisions for us.

This reasoning is flawed because data-driven decisions are not always possible or desirable. As we speak, organizations are struggling to gather, store, retrieve and analyze data. This is an incredibly time-consuming, expensive endeavor. Just because you have data doesn’t mean you understand data.

For example, if the data is based upon inaccurate assumptions, or an employee lacks the analytic skills to extract the right data points, the ensuing decisions are likely to be poor. Not only do you pay for a poor decision, but you’ve already paid handsomely for the time and resources required to process the data that resulted in that poor decision.

Obviously, it wouldn’t make sense to ignore data completely. Finding balance is the key. Leaders with good business judgment have the ability to take data, facts, processes and analysis, and balance that information with their own expertise and sound reasoning.

Colin Powell once said, “Experts often possess more data than judgment.” Although the use of data to guide decisions and business strategy certainly has merit, we should never underestimate the value of good business judgment.

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