Does "crunching numbers" give you nightmares? GLOBIS lecturer Masaru Hoshino shares three easy and insightful tips on how to improve our quantitative skills, and become better business professionals.
Any good quantitative analysis requires three things:
1. Removing any ambiguity from quantitative information
2. Backing your numbers up with valid assumptions
3. Looking out for hidden information
The goal of this article is not how to improve analytical skills, but rather how to accurately communicate numbers in the proper context. One way is to avoid expressions such as “sales have increased a lot” or “there are very few,” which lack both context and clarity. Instead, follow these tips below!
Training #1: Change Adverbs into Numbers
Scenario: Your boss complains your reports always contain words like “a lot” or “many.”
Benefit: By communicating specifics, the sense of scale is clarified.
Example: “Sales are increasing a lot.” → “Compared to last year, sales are up by 20% for this quarter.”
There are many people who, when reporting to their boss, will say “we have gotten many claims.” However, this does not convey a sense of size or scale at all, such as the occurrence rate of complaints, the rate of increase and decrease, and whether there are 10 instances or 100 instances.
The first step in communicating quantitatively is to get into the habit of replacing vague adverbs such as “fairly” and “quite.” In the previous example, by replacing “substantial complaints” with “an average of three claims per day in the past month,” the situation becomes much clearer, even to someone just hearing the story for the first time.
However, an excess of numerical information can make the situation overly complicated. To avoid this, compare movements (e.g. month-to-month or year-to-year sales trends), differences (e.g. sales comparisons for each item), or percentages (e.g. for grasping the size or scale).
Training #2: Clarify Unstated Assumptions
Scenario: During a negotiation, one party believes that there is some kind of discount of 25%.
Benefit: Information is communicated more accurately.
Example: After doing a cost evaluation, you inform your client that the cost is ￥1M. You are told that it is high, since there is a 25% gap with the budget.
Now this information can be interpreted in two ways--either the budget is “25% less than 1 million yen,” or “1 million yen is 25% higher than the budget.”
This arises from the fact that there was lack of information regarding the budget and the parties involved have different assumptions regarding the base amount. The assumptions need to be clarified, for example, through questions. Supplying accurate information and confirming assumptions are effective ways of making sure that you are on the same page as the people you are doing business with.
Training #3: Visualization Training
Scenario: Your manager is not sure what to make of the numbers in your report.
Benefit: The situation hidden behind the numbers is clarified.
Example: Let’s take a look at an example regarding “averages.” Say that a company is stating its repeat order rate, which it says is 65%, as compared to the industry average of 70%. Now one may feel that a 5% difference means you are not lagging significantly. However, given the proper context behind the numbers, you may see a very different picture.
Let’s plot this data on a distribution map. If the plot shows a gentle slope with the vertex at 70% (right graph), then 65% may be said to be within the average range. However, if it is a tight distribution (left graph), then 65% indicates that it is close to the lowest in the industry. Even though it is the same "65%,” the implications are totally different.
Therefore, when dealing with vague numerical entities like “average,” it is very important to use tools (often visual) that show the degree of variation such as standard deviance and variance along with graphs and distribution charts to convey the significance of the numbers.
While numbers do have a certain eloquence about them in that can convey information briefly, they can also be very silent and mysterious at times, unless put in the right context and explained in the right manner. I'm sure these tips will help you do that!