Data Presentation (#222)
/In this podcast episode, we discuss the best ways to report performance measurements. Key points made are noted below.
Identify Actionable Items
Always pinpoint the underlying goal for reporting the measurements. It should be to tell the recipient about actionable items. That means you give the person some information, and he acts on that information. So let’s play with this concept for a bit.
First, narrow down the presentation to a few actionable items. The trick is to set change thresholds for reporting the measurements. There’re usually two thresholds, one on a percentage basis and one on a currency basis. For example, you might have a trigger that reports on changes in the amount of office supplies expense if it exceeds a 25% unfavorable variance or a $1,000 unfavorable variance. If the change is less than that, don’t report the variance.
But that’s not enough. The trouble is that some changes, even if they’re quite small, could be key indicators of bigger problems. For example, what if a measurement is the percentage change in products being returned? I don’t want to wait to see this information if it has to increase by 25%. I may want to know if it increases by just 1 or 2%. So what this means is that the threshold may change, depending on the measurement. You may not want to see an unfavorable office supplies variance unless it’s a seriously large one, because – most of the time – who cares?
But a very small change in things like the cost of goods sold, the order backlog, or product returns could be a good reason for people to run around pulling their hair out.
Consider the Baseline
The next issue to consider is the baseline. We’re talking about only reporting something if it exceeds a threshold, which is calculated as the change over a prior period. But which prior period? What if the immediately preceding period was also an odd month? For example, a major supplier invoice is lost in the mail in April, and no one notices, so the expense appears in May. So the calculation of the variance is based on the percentage change of the number in May – which was high – over April – which was low. In reality, there is no variance, because there was a timing problem. A good way to get around this is to base a percentage change over the average for the past three months. That way, the monthly anomalies are reduced through averaging, so there should be fewer big variances to report.
Watch the Trend
But that’s not all. Sometimes measurements have a way of creeping up on you, maybe at the rate of a fraction of a percent per month. So if you’re only spotting items based on their changes within a short time frame, you might never report on it, even though it’s actually pretty important. For example, if the cost of goods sold percentage is going up by a half a percent a month, it might not appear significant. But over a full year, that’s six percent, and that might put you out of business. So the way to get around that problem is to also compare the measurement to what it was 12 months ago. If there’s a significant year-over-year difference, then report it.
After spotting an issue, write up a report, sit down with the recipient, and go over it in person. The report length should be one page. That is the best way to convey performance measurements.
Simplify the Report
If you want to just lay out the performance measurements, then at a minimum, only report quarterly results plus the most recent month. By doing that, you’re dropping down from 12 data items per year to four or five, depending on the situation. Once you’ve reduced the number of data items, round off the numbers. Showing something to the third digit really doesn’t help. Just round up the number to a reasonable level. For example, a performance measurement is the total monthly sales for a product line, and let’s say the actual number is $14,326,820, you can probably report it as $14.3 million. As long as the rounding is still within about 1% of the actual figure, no one is going to care. And it’s way easier to read when you use rounding.
Alternative Presentation Formats
What about using diagrams and charts? For me, the answer is no and no. I prefer the straight numbers, and so Excel is what I use. But that is also my preference. It works for me, because I deal with numbers all day. What you might want to do instead is ask the recipient what he wants. If he prefers to see horizontal bar charts or pie charts, than give him that. If I absolutely have to report information in a chart, I use vertical bar charts. Again, it’s a matter of preference. I find them to be less vague than other forms of presentation.
When done right, PowerPoint is a great presentation tool. Doing it right means keeping the number of slides down to a tiny amount – like ten. Or less. And having just a couple of points on each slide – which it seems that almost no one can do. Instead, there are way too many slides and vast amounts of information crammed onto each one. If you really want to try PowerPoint, just keep in mind that a clean, simple presentation probably took hours and hours to put together. And it may have started with quadruple the number of slides and then took about 20 iterations to boil it down to the essentials. So my comment in regard to PowerPoint is to avoid it unless you absolutely, positively have to give a presentation, and then block out a whopping amount of time to prepare it.