Do Banks and Credit Unions Need a Chief Data Officer?

The Chief Data Officer (CDO) position has become quite popular in many firms across a number of industries, including financial services. A recent survey from Forrester Research found that half of the firms responding to the survey already have a CDO in place, with another roughly one in five planning to appoint one in the coming year.

The CDO title joins the never-ending parade of Chief [Fill-in-the-blank] Officer roles that businesses have been created over the past 15 to 20 years including Chief Customer Officer, Chief Experience Officer, Chief Privacy Officer, Chief Information Security Officer, Chief Technology Officer, Chief Digital Officer, Chief Analytics Officer, and Chief Artificial Intelligence Officer.

Deloitte took a stab at trying to distinguish between a few of the roles.

Interestingly, though, whereas Deloitte sees the Chief Data Officer as a "scientist," Forrester's research revealed that business factors--more so than technology or analytic factors--led firms to create the CDO role.

And yet, despite the prevalence of business (vs. technology) factors, Forrester found that 47% of CDOs have an IT background, with 54% coming from a business background.

The CDOs responding to the Forrester survey predominantly report to--and serve--C-level executives. But they do see changes in the coming year in who they will see as their internal customers--specifically a shift away from sales leaders and to digital leaders.

Those internal customers may not have a common view of the role of the Chief Digital Officer, however. According to a survey from NewVantage Partners (reported in Forbes):

"While 34% of executives believe the ideal CDO should be an external change agent (outsider) who brings fresh perspectives, an almost equivalent 32.1% of executives believe the ideal CDO should be an internal company veteran (insider) who understands the culture and history of the firm and knows how to get things done within the organization."

As the Forbes article states:

"The point of disagreement appears to come down to the scope of the Chief Data Officer mandate, and whether the primary responsibility of the CDO should be to plan, coordinate, or implement data initiatives."

Deloitte offered recommendations for improving the effectiveness of the Chief Data Officer role:

  • Make the CDO a true C-level executive. While the CDO role may carry a C-level title, it frequently sits too low in the executive hierarchy to be truly impactful.
  • Send a top-down message that effective, enterprise-wide data management is a strategic imperative. Frequent and supportive executive communications confirm to the organization at large that the CDO has the responsibility and necessary charter to operate, innovate and help set the direction of the business to unlock the embedded value of its information assets.
  • Defuse territorial issues before they start. Since FI business functions traditionally haven’t had the resources or leader to engage in data-related agenda setting, technologists have grown to own data dictionaries, analytics, etc. The CDO is increasingly assuming these responsibilities and this can create friction. With direction from the CEO and board, the CDO and CIO can work collaboratively to mine business value from the organization’s technology and data resources.

Deloitte also weighed in with their view of the future evolution of the Chief Data Officer position:

Many financial institutions are creating a Chief Data Officer for the wrong reasons, with the wrong expectations, the wrong people, and the wrong strategy.

With all due respect to Deloitte, their recommendations are off-base.

  • The CDO doesn't need to be a C-level exec. After recommending to make the CDO a "true C-level exec," Deloitte goes on to say: "There is, in fact, no single right answer [to where the CDO should report]. In reality, the CDO should sit where the position can most positively influence such concerns as availability, completeness, quality, and reliability for data consumers enterprise-wide." So, the CDO doesn't really need to be a "true C-level exec."
  • Top-down messages don't get things changed. Sending "top-down" messages about how important "strategic imperatives" may sound like a great idea, but you know very well that nothing will change without money--whether that's money spent on initiatives to improve data-related competencies,  money that's spent on rewards and incentives that change the way data is gathered, shared, and used.
  • You can't "defuse territorial issues before they start" because they've already started. In fact, those territorial issues are probably so ingrained in your organization, that one reason why you want a CDO is to defuse the existing territorial issues.

The underlying problem here is that too many organizations look at the CDO role--and a lot of other Chief [Fill-in-the-blank] Officer positions--as a panacea, or cure-all for fixing intractable problems in the organization. 

With the right person in the role, it might work. By "right person," I'm referring to someone who, if coming from within the organization, is already a member of the senior management team, or who has already been identified as a soon-to-be-added member of that team. If the "right person" is coming from outside the organization, he or she is probably already a senior- or C-level exec at the firm s/he worked for previously.

CEOs considering appointing a Chief Data Officer in your organization, answer these questions first:

  • Why do we need a CDO? If the CEO's answer is "because data is increasingly important to our strategic success" then the organization's board should consider firing that CEO for lack of leadership skills. Lots of things are important to strategic success, and it should be the responsibility of existing leaders to have strong data competencies in their areas of the organization.
  • How good are we at data management and utilization, and why aren't we better? It never ceases to amaze me that organizations appoint CDOs with no clue how to measure or gauge their level of data management and utilization competency. The important part of the question is the latter part, though: Why isn't that competency better than it currently is? Answering this requires a gut-wrenching level of honesty because it's probably due to some combination of personal skills/leadership shortcomings on the part of some senior execs and the lack of collaboration and teamwork at the senior. Sorry if that hurts.
  • Can we get done what we need to get done without creating a new position? It's an abdication of leadership to simply think "we'll appoint someone to a new role, make it a Chief-level position, give him or her a budget, and have them report back on a regular basis on their progress." CEOs should explore alternatives to new C-level positions like strategic initiatives utilizing cross-functional teams to improve data-related capabilities in targeted areas first. If that initiative is successful, and can be rolled out across other functions and business units--and requires a CDO-level position to oversee that--then sure, create a CDO role.
  • How will we measure the CDO's success? The findings from the Forrester and NewVantage surveys uncovering the conflict between the strategic and tactical components of the CDO's role is a red herring. As you well know, strategy without implementation is useless, and implementation without strategy is dangerous. Thinking that a CDO can or should focus on one or the other--strategy or implementation--is a prescription for failure. So, how are you going to measure the success of the CDO role--and importantly--how will you attribute that success to the CDO versus the other parts of the organization that will be contributing to the success? Do you see what I'm getting at here? Creating a CDO is potentially creating more political issues that it will alleviate.
  • How long do we need a CDO for? The concept of a C-level executive is rooted in an organizational based on business functions (finance, IT, HR, etc.), and business units that may be product-focused or geographic-focused. C-level execs based on capabilities (data, digital, AI, etc.) won't survive in the more traditional org structure. Nor should they. Capability-based Chief [Fill-in-the-blank] Officers should have a two to three year life span. Deloitte's picture of the future of the CDO position as enabling the "insight-driven" organization is aspiring--but it's wrong.

Ron Shevlin
Director of Research
Cornerstone Advisors