In the age of transparency, an organisation risks eroding trust with data sets that are too rosy. Kristin Rivera and Andrew McPherson discuss how reporting actionable metrics with a focus on outcomes can spark important changes for your business.
In the age of transparency, an organisation risks eroding trust with data sets that are too rosy. Kristin Rivera and Andrew McPherson discuss how reporting actionable metrics with a focus on outcomes can spark important changes for your business.
Kristin Rivera:
Welcome to our podcast series, “Emerge stronger through disruption.” I'm Kristin Rivera and I lead PwC’s global forensics practice as well as our Global Crisis Centre. Today, I'm once again coming to you from my home office, just outside San Francisco, California. In each episode of this series, we talk to global colleagues about the challenges that are facing business leaders as they navigate disruption.
And today, I am once again joined by Andrew McPherson, and we will be chatting about how transparency in data and reporting can drive change in an organisation -- and specifically how they can enhance risk management. Andrew, delighted to have you once again.
Andrew McPherson:
Hi, Kristin. Great to chat again, and thanks for these great podcasts.
I'm again,coming to you from down under -- Sydney, Australia. Heading into summer as you folk are heading into winter, and really fascinated by transparency as a force in the world in all sorts of ways. I mean, I've spent 30 years focused on sort of risk and compliance and assurance for clients in a range of sectors, and very interesting what transparency means to that work -- because the world has just become more transparent with technology and so forth.
And I think it's manifesting in so many different ways. As I talk to my children about it, as I see it in different clients in different sectors -- I think it's a fascinating force that's impacting our organisations in lots of ways, and it’s giving me lots of pause and cause to think about how we support our clients on that.
Kristin Rivera:
And transparency of course, is a very broad topic. So one thing that's been on my mind lately, and I'd love to get your perspective, is transparency in sort of corporate reporting. A few months ago, I was talking to one of my partners who helps companies in the healthcare industry to build compliance programs.
And healthcare is generally viewed as more mature when it comes to compliance. And so I was really eager to get perspectives on the type of advanced reporting that they're doing in that industry around compliance. And I was a little bit disappointed to learn that in many cases they've waited -- they haven't invested heavily.
And part of that is that they've been waiting to build their programs -- for their programs to become very mature, so that when the report ultimately comes out with all of their compliance metrics, everything's green, everything looks rosy.
And I find, you know, again, I'm based here in San Francisco and I work with a lot of technology companies, that they are eager to take the opposite tack. They want to use data very early on in their programs to drive change, to enhance transparency -- and quite frankly, to garner investment and interest in compliance by demonstrating that they're not perfect, that they have a lot of room to grow.
So I'm curious how we flip this conventional stance. I think it's a little bit of -- a “looking good rather than being good” mentality, and how we get corporate leaders to really think about using data as a way to drive better risk management.
Andrew McPherson:
Absolutely. Kristin, and look, I say, I don't think that's all that surprising, right?
If you go back to that “looking good rather than being good,” right? Like I do think organisations and us as humans feel more comfortable when we're looking good. There's an embarrassment when you're not looking good, when you've not done something right, when there's a fault, when there's a fissure in your behavior or yourself or your organisation. I think that's a very human condition that plays out in this as well.
And if I think of an analyst briefing -- so if I imagine an organization and they're giving a briefing to analysts about themselves: In years gone by, that would have very much been about all the great things. But analysts, just like my kids, are pretty smart -- and they can smell when they're not quite being given a balanced story.
And what that does is erode trust. We all know that if I tell my kids, “Hey, this is going to be a great holiday” and I don't tell them it's a 12-hour drive, then that then erodes their trust in me for the next one. And it's the same with an organisation. Like it or not, the world's just more transparent. If I think about the photographs taken at social functions of me as a 15 year old, before digital cameras and the internet, and now my kids -- the world's different.
And therefore, the way we behave, the way we respond to that is different. Organisations are facing a lot more transparency, whether they like it or not. So the question is: How do they use it to support themselves? How do they use it to build trust? And what does it do to things like how they think about risk management?
Because by definition, you know, risk management generates at one level a list of all the things that could go wrong -- and compliance management, those are the things that are going wrong. And organisations have often felt very self-conscious about sharing that. Well, in a transparent world, you can lose a lot of trust if someone else shares it before you do. As we've seen. You can all think of an example of that be it a government information or a whistleblower or so forth.
That really erodes trust, if you're seen to not be transparent in a world that operates in a pretty transparent way these days.
Kristin Rivera:
I think there's this concept of vulnerability -- and even vulnerability as the new strength and taking that risk of sharing what you're not good at, or what you're still struggling to build. Because to your point, that builds trust.
But it also can help you garner the resources that you need to invest to get there. Within PwC US, we've decided to report publicly on well over a dozen diversity statistics. This is more than we have historically reported and also more than what most companies in the US are currently reporting.
And the reality is they won't all look pretty in year one, but we can guarantee that by reporting those publicly, we will put the effort behind them internally, even more effort than we ever have before, and it will drive action. And so I think there's a lot of power in that, particularly for executives who are in the business of risk management or compliance and have struggled historically to get the resources and investment.
They need to do the things they want to drive the change that they're looking for. In fact, it's not surprising that if they haven't been transparent about where they still need to grow or develop, it's not surprising that they weren't garnering those resources, perhaps, that they needed, if they weren't doing that reporting.
Andrew McPherson:
Yeah, and that's sort of where my comment before was going: How do you use transparency? Because it's here, it's happening. It's real. You can't swim against this tide. It's how you swim with it and use it for your organisation that I think is really, really important. But what we were saying is we really care about this.
It's really important and we're really determined to become better. My wife doesn't see me as a perfect man and my clients sure don’t see me as the perfect advisor. But it really helps when I'm actually open, say, with my clients about looking at challenges on a team, and then we can work together on things. That actually builds trust, whereas...
That took a bit of confidence in me to start to express things I was worried about to my clients as I've come through my career. It's exactly the same for organisations. When I look at the public reporting of most organisations-- market reporting, where they've got to report on risks and so forth -- I would describe most of it as de minimis.
In fact, I've actually described much of it as platonic. It actually doesn't give me a great deal of insight or confidence that they're kind of on top of it. And I feel that reporting is a real opportunity to show that you're on top of it -- to signal what's important and to build trust. So I do feel as though there's something for organisations really in this, and then I think resisting that is a bit of a trap.
You really lose trust. I mean, we've just had some reporting come out on ESG reporting around the world, and there's a whole bunch of organisations, many of them great organisations, have been rated by that as they got D minus for their reporting on this. And the commentary was, “Look we've got a little confidence they're on top of this.”
But having worked with a couple of them, well, actually, no, they’re quite on top of a few things and yet they got a D minus for the reporting and everyone now thinks they're not on top of it. That's a bit of a miss for me. So I do think -- and it's come from anxiety around reporting and being open -- so I do think it's a real opportunity to shift thinking and use transparency as a force here rather than resist it and get some of the collateral damage that comes.
Kristin Rivera:
So you raise a really interesting point, which is once you've decided, yep, I'm going to be vulnerable, I'm going to report more data, more statistics, even if they don't look good -- the next question is, what data do you report? What statistics, what measures will be valuable, actionable?
And do I even have the data readily available that I need to be able to provide those, and can I do it real time? You know, how much work will it entail? Will this be something that I have to compile a team once a quarter to be able to pull this information together manually? What are you seeing in your work with companies around selecting those metrics -- key performance indicators that they might consider using to augment their existing reporting?
Andrew McPherson:
There's a couple of things there, and I think your comment’s a great one around -- in my experience, I don't think many organisations, we don't have this sorted. It's not elegant. It's not easy, including on our own, we’re all cobbling together data from a range of different systems.
It's not particularly automated. It's not particularly integrated, et cetera. It's kind of hard work, pulling it together, right? So that's the way it is. To me, that can be changed. To me, the broader issue here is, what are you seeking to measure -- and particularly in the area of kind of risk and compliance and even ESG and so forth, in that reporting, I'm seeing a lot of input-based reporting rather than those KPIs focused on outcomes.
So yes, reporting is hard, but I really do think there's also a piece around what you're reporting here. And I think there's a couple of things that we can focus on here. So the first would be, I really think on risk compliance, on ESG, on all that sort of reporting diversity, really having a look at those measures and challenge -- are they telling you about the inputs and the effort they're putting you in, or are they actually telling you about the return on investment and progress on outcomes that you're achieving?
And many of those measures that we observe, I would say are input measures. They're actually not telling you about the outcome or the trajectory. Yeah, that just makes it even tougher, because outcome measures are often harder to measure. So there we go. We've just made a difficult problem worse for all of our clients.
So that's not very nice at this, but that's the way it is, right? If we want to focus on outcomes, I think that's important. So let's talk about how we make it easier. I do think there is some really tactical, great technologies out there that can help us flow data into dashboards and make that easier to get a bit of a forward focus on this -- on risks, on compliance, on whether it be ESG or safety.
We've got a lot more data available to us that can tell us about patents, real time. It can allow us to react and respond really quickly. And then how do we use that to actually operate, run the organisation, make decisions, look forward, anticipate, see trends emerging. So I do think there's some real value.
And if you think of that, that's really now starting to use the force of transparency to help us be better as an organisation -- back to your comment: It's helping us to be good by having better controls at our fingertips and better insights. And then by reporting, it's going to help us look good, as being on top of our game, aware of those threats, aware of those opportunities.
Kristin Rivera:
So Andrew, you've made a compelling argument for “the why” it's important to leverage reporting in order to drive transparency. But let's talk a little bit about “the how” -- let's get practical. How can companies, how can compliance or risk leaders more effectively leverage data and reporting in order to drive transparency?
Andrew McPherson:
Yeah, well, Kristin, this is something you and I have talked about a bit and we're working with clients on is, well, how do you get after this and do it? And one of the things that I know your practice in the US and mine in Australia are really focused on is putting some things together for clients.
And to me, whatever the measure it is, whatever the thing it is that you're reporting, be it internally or externally, putting together the people who know about that, regulation, that rule, that measure, number one, is really important. They need to be at the table. Next thing is to throw a data scientist into the mix, and sometimes throw them into the mix not just to take a brief from the expert, but sometimes give them a bit of license to play with the data.
They're all smart people. And if you go tell them a bit about what you're trying to measure and then set them free to go play, they come up with some pretty amazing and compelling things for us to use. So empower your data scientists. Remember they're more than a data scientist. They're a fully functioning human being and they'll understand what you're talking about.
They won't be as expert as those who live and breathe the rules, but boy, can they do some great things. There's one other thing I think is really important here and that we love to use, and that's a behavioral scientist. So someone who understands a little bit about the human factors in this whole mix, because remember, this isn't just about reporting; it's about outcomes and achieving great things.
And we find when we're leveraging really great data, but we're understanding the human elements in that, whether it be the human-centered design or understanding how process works or behavioral specialist starts looking at what's motivating or incenting people to act in particular ways -- I think that gets great insight out of existing data, not only to create any new stuff, there's plenty of existing data and existing processes.
So I'd really encourage to put those three together, a deep technical specialist in particular, rules and reg, a data scientist and a behavioral scientist, and let them play. You'll be really amazed at what they come up with.
Kristin Rivera:
I think that is excellent advice, Andrew. I'm reminded of a case study I heard recently of a retail bank that was measuring the number of new accounts that were opened and how that measurement ultimately drove some bad behavior, because some of the bank employees began really driving towards new accounts, even when those accounts weren’t valuable to the customer.
And I think back to our previous discussion about really having a customer-centric approach to compliance, and how in this case, a metric ultimately drove the opposite result. And a solution to that, ultimately, one way that that organisation ultimately solved the problem, was to measure that in a slightly different way -- to begin measuring instead just by total number of accounts opened, but looking at the level to which those accounts were used.
So beginning to measure customer value and impact, rather than just whether there was an account or not. So I think it's a really interesting example -- and it goes back to your behavioral science, as well -- about how really artful metrics that really truly get to the outcome you're looking for can reinforce your mission and your values, but also enhance your relationships with your customers as well.
Andrew McPherson:
Yeah, we know metrics are powerful -- they’re powerful things. But so are behaviors, particularly leadership behaviors. And we've all heard the adage, “We do as we measure,” right? Particularly in big organizations. But the other thing is we do as we are modeled in leadership behaviors, too. And I think putting those together really allows organisations to use that force of transparency to support where they're going and their strategy. I think it's really interesting.
Kristin Rivera:
Well, I can’t think of a better place to stop, Andrew, than there. Thank you so much for your insights today, as always. It's a pleasure to talk to you about one of our favorite topics.
So thank you. I look forward to our next discussion when we'll talk about crisis and the integration with enterprise risk management. So remember to subscribe to our podcast, “Emerge stronger through disruption,” wherever you get your podcasts so you don't miss out on future episodes. Thanks so much for joining us. Until next time.