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Planning for a Recession

Management of companies might not be outwardly saying it but they are planning for an impending recession. Each recession is different and in many ways cannot be fully planned for but there are some common tools that are employed. One of those is cost-cutting.

ROI is the number one measurement of which projects will be cut or postponed. Technology investment is often one of the first victims of the ROI analysis. But all technology investments are not created equal. Data Analysis and Business Intelligence, when done properly, can make the difference in how companies weather the storm and emerge from the other side.

Is your company data-driven? And why you should care

"When done properly" was a key part of that previous statement. By some estimates, 85% of big data projects fail. Forget the potential recession for one second, that alarming level of failure begs the question, why bother invest when success is so unlikely? The answer to that question is another question, why did they fail? According to Deloitte, 63% percent of executives of companies do not believe their companies take advantage of data-driven decision making. 31% of C level executives feel that their companies are data-driven.

The role of data is to provide management with the information to make course corrections and measure success. A leadership and culture that do not use the data at hand when charting a course, and adjusting that course, is taking on a significant risk factor.

Aside from corporate culture, there are other reasons big data projects fail. It has been seen that having centralized data analysis units who are focused on business outcomes are more likely to succeed than smaller, embedded units. The leaders of these units make inroads with their business partners to ensure that they are able to show their value to the organization, according to Charles Thomas who leads data and analysis groups at General Motors when he spoke with MIT Sloan Management Review. This is where the corporate culture can change to become more data-driven and big data projects succeed.

Challenges to creating a centralized Data Analysis Unit

Covid-19 has stirred what is commonly referred to as the "great resignation". This has pushed salaries up, caused a huge turnover of employees and made it challenging for companies to fill the void with full time employees (FTE). Hiring is expensive! The employee lifecycle can be defined like this:

  1. A company spends time searching for and hiring the ideal candidate

  2. The new employee takes time to onboard and be productive - up to 8 months

  3. The employee stays with a company, in technology, for roughly 2-3 years

  4. The employee leaves taking their experience, knowledge of the company and its ecosystem to another employer

  5. Please proceed to point 1

The bottom line is that if your company is on the lower end of that average employment duration range then you will get just over one year of full productivity out of your employees before they leave.

This is a short list of costs associated with a FTE:

  • Time spent recruiting

  • Recruitment costs, if an agency is used

  • Training

  • Salary

  • Benefits

  • Vacation

What can be done?

MIT Sloan Management Review further found that during a recession, when the culture is receptive and the value of the data analysis units is correctly communicated, that the demand for Data Analysis Units might increase. Jack Levis who headed a data analytics group for UPS said to them, “During the [2008] recession, everyone wanted to find cost-cutting measures,” and “My team was buried with work. ... We were running alternatives day and night.”

MIT Sloan Management Review was clear in their assessment of big data projects by saying, "We feel strongly that data science capabilities are critical to competitive success".

With these and the previously mentioned points in mind, an alternative exists that will be less likely to bloat bottom lines and more likely to provide a steady team to act as a centralized Data Analytics Unit - leverage a partner company's expertise. By avoiding the challenges and costs of hiring a team of FTE's, especially in this climate, companies can have have their cake and eat it too. This will be especially important given the current economic trends.

TMH Solutions provide cloud solutions to medium sized businesses. We would love to explore how we can help your business realize its Business Intelligence potential! Contact us to discuss your vision!

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