Companies are often faced with the prospects of spending money on external analytics and reporting and reducing costs by engaging in internal reporting and data analytics. Usually, they opt for the latter but it is not really advisable to do so. The preference for internal reporting and data analytics stems from a false sense of security and a feeling of being in control.
Moreover, companies are always looking at reducing costs and looking at internal solutions often seems like the right thing to do to avoid overstretching budgets. By using internal reporting and data analytics, companies face a number of risks and it can be detrimental to the success of the company. This article shall take a look at why one’s own reporting and data analytics may not be adequate.
Biases and prejudices
Internal reporting is often undertaken by managers who are probably clouded by their biases. Being biased towards a particular result may distort analytics and the conclusions drawn thereof may not represent the reality. There are many kinds of biases and prejudices. Strengths could be mistaken for weaknesses and weaknesses could easily be overlooked, in an attempt to present a favorable report to senior administration. Thus, biases and prejudices are usually present in internal reporting and data analytics.
Lack of industry grade experience
No matter how experienced a manager or an analyst maybe, he or she may lack the kind of industry grade experience that professional agencies come equipped with. It is not enough to be experienced with one or two analytical tools. It is also not adequate to be familiar with certain statistical methods. Industry grade experience requires professionals to constantly solve problems that clients and companies face across varied industries. Such an experience can only be gained when analytics and reporting is done at a professional level.
Technology and expertise are not always accessible
Even if internal analysts and managers are experienced and possess a wide-range of knowledge, they may not have access to the kind of technology that is required to run complex data modules. Running these data crunching tools and interpreting their results need a special kind of expertise as well. Internal reporting and data analytics fall short of access to the latest in technical expertise, which is one of the reasons why a third-party analytical entity is much preferred.
Lack of non-judgmental and critical insight
While this point is similar to the first one stated above, non-judgmental analysis of data is something that even a non-biased person will miss. A third-party entity will usually find problems that an insider may fail to recognize. Data analytics may reveal unpleasant but very important critical insight which insiders may often choose to ignore, precisely because it is unpleasant. Moreover, critical insight is something that professional analysts develop as part of their profession. This helps them to look at their clients’ reporting and data analytics from an unbiased, critical and non-judgmental position.
A fine balance between internal and external reporting is necessary
While internal reporting and data analytics may seem like an attractive option especially when costs are rising, hiring a third party entity is of utmost significance. It is important that a company’s reporting and data analytics are free from biases and prejudices. It is also important to have access to critical insight no matter how unpalatable it may seem in the beginning. At the end of the day, data analytics is done in order to infer insights and draw conclusions. These conclusions should be free from internal judgments and biases.
This is not to say that internal reporting and data analytics have no place in corporate decisions. Instead, it is important to intertwine both internal and external data analytics in order to form an unbiased opinion, which can help in solving issues, strategizing for the future and gathering valuable insight. At the end of the day, there should be a balance between internal and external analytics and both have their own places within an organization. However, to rely entirely on internal reporting and data analytics may not be adequate. That is where the necessity for hiring a professional analytics firm arises.