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How to Organize Business Analysts

Business analysts are a key resource for creating an agile organization. These MBA- or PhD-accredited, number-crunchers can quickly unearth insights and correlations so executives can make critical decisions. Yet, one decision that executives haven’t analyzed thoroughly is the best way to organize business analysts to enhance their productivity and value.

Distributed Versus Centralized

Traditionally, executives either manage business analysts as a centralized, shared service or allow each business unit or department to hire and manage their own business analysts. Ultimately, neither a centralized or distributed approach is optimal.

Distributed Approach. In a distributed approach, a department or business unit head hires the analyst to address local needs and issues. This is ideal for the business head and departmental managers who get immediate and direct access to an analyst. And the presence of one or more analysts helps foster a culture of fact-based decision making. For example, analysts will often suggest analytical methods for testing various ideas, helping managers become accustomed to basing decisions on fact rather than gut feel alone.

However, in the distributed approach, business analysts often become a surrogate data mart for the department. They get bogged down creating low-value, ad hoc reports instead of conducting more strategic analyses. If the business analyst is highly efficient, the department head often doesn’t see the need to invest in a legitimate, enterprise decision-making infrastructure. From an analyst perspective, they often feel pigeonholed in a distributed approach. They see little room for career advancement and few opportunities to expand their knowledge in new areas. They often feel isolated and have few opportunities to exchange ideas and collaborate on projects with fellow analysts. In effect, they are “buried” in departmental silos.

Centralized Approach. In a centralized approach, business analysts are housed centrally and managed as a shared service under the control of a director of analytics, or more likely, a chief financial officer or director of information management. One benefit of this approach is that organizations can assign analysts to strategic, high priority projects rather than tactical, departmental ones, and the director can establish a strong partnership with the data warehousing and IT teams which control access to data, the fuel for business analysts. Also, by being co-located, business analysts can more easily collaborate on projects, mentor new hires, and cross-train in new disciplines. This makes the environment a more rewarding place to work for business analysts and increases their retention rate.

The downside of the centralized approach is that business analysts are a step removed from the people, processes, and data that drive the business. Without firsthand knowledge of these things, business analysts are less effective. It takes them longer to get up to speed on key issues and deliver useful insights, and they may miss various nuances that are critical for delivering a proper assessment. In short, without a close working relationship with the people they support and intimate knowledge of local processes and systems, they are running blind.

Hybrid Approach

A more optimal approach combines elements of both distributed and centralized methods. In a hybrid environment, business analysts are embedded in departments or business units but report directly to a director of analytics. This sounds easy enough, but it’s hard to do. It’s ideal when the company is geographically consolidated in one place so members of the analytics team can easily physically reconvene as a group to share ideas and discuss issues.

Zynga. For example, Zynga, an internet gaming company, uses a hybrid approach for managing its analysts. All of Zynga’s business analysts report to Ken Rudin, director of analytics for the company. However, about 75% of the analysts are embedded in business units, working side by side with product managers to enhance games and retain customers. The remainder sit with Rudin and work on strategic, cross-functional projects. (See “Proactive Analytics That Drive the Business” in my blog for more information on Zynga’s analytics initiative.) This setup helps deliver the best of both centralized and distributed approaches.

Every day, both distributed and centralized analysts come together for a quick “stand up” meeting where they share ideas and discuss issues. This helps preserve the sense of team and fosters a healthy exchange of knowledge among all the analysts, both embedded and centralized. Although Zynga’s analysts all reside on the same physical campus, a geographically distributed team could simulate “stand up” meetings with virtual Web meetings or conference calls.

Center of Excellence. The book “Analytics at Work” by Tom Davenport, Jeanne Harris, and Robert Morison describes five approaches for organizing analysts, most of which are variations on the themes described above. One approach, “Center of Excellence” is similar to the Hybrid approach above. The differences are that all (not just some) business analysts are embedded in business units, and all are members of (and perhaps report dotted line to) a corporate center of excellence for analytics. Here, the Center of Excellence functions more like a program office that coordinates activities of dispersed analysts rather than a singular, cohesive team, as in the case of Zynga.

Either approach works, although Zynga’s makes it easier for an inspired director of analytics to shape and grow the analytics department quickly and foster a culture of analytics throughout the organization.

Summary. As an organization recognizes the value of analytics, it will evolve the way it organizes its business analysts. Typically, companies will start off on one extreme—either centralized or distributed—and then migrate to a more nuanced hybrid approach in which analysts report directly to a director of analytics (i.e., Zynga) or are part of a corporate Center of Excellence.

Posted by Wayne Eckerson on May 23, 2010


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