The Merits and Pitfalls of Numbers

When creating a business case, no matter how many great arguments you have, it's essential to have your numbers correct. Everyone knows that "67% of all statistics are made up on the spot" so make sure that YOUR data comes from the 33% that are rigorously researched, relevent and defensible.

So just how do you make sure that your business case will stack up.  In the words of the nineteenth-century British prime minister Benjamin Disraeli, “There are three kinds of lies: lies, damned lies, and statistics.” Accordingly, I've become rather cynical of numbers over time, as have most managers so if numbers are available, make sure they pass the test of the following 4 R characteristics:

• Relevant—They must directly address the problem.
• Reliable—You must use figures whose authority can be demonstrated.
• Representative —You would not use basketball teams as your sole data in a survey of the average height of the population. The sample would be biased.
• Readable—Put the figures in a form that is easy to read (e.g., graphs, tables; remember that S can look like a the numeral 5).

This is not a blog on statistics, but it would be remiss not to raise a few key points concerning the use of numbers and statistics in your business case. Use your data to its best effect, but remember that numbers can lie. A number of people have been attributed with the quote (or variations thereof) that, in essence "If you torture numbers long enough, they’ll confess to almost anything". Avoid the temptation to abuse statistics in your business case—someone will inevitably notice, and it is only going to detract from your argument when they do so.

Some additional thoughts on using numbers

1. The mean can be cruel. People have drowned in streams that are “on average” only two feet deep. Are you referring to the average depth across the causeway today or the average depth during the year? Are you using mean, median, or mode? Too many unanswered questions have been the death (financial or otherwise) of many an adventurous entrepreneur.
2. Meetings always start late. My friend and I have to meet at 3:30, and it takes us on average thirty minutes each to travel from our respective workplaces. We each have a fifty-fifty chance of making it in that amount of time. If we both leave at 3:00, is there a 50 percent likelihood that we’ll both arrive on time? Your intuition is probably already telling you that something is just not right. Think about this in terms of a coin toss. If I have a fifty-fifty chance of tossing heads, and my colleague has a fifty-fifty chance of tossing heads, there is only one scenario in four in which we both toss heads. Net result—a 25 percent likelihood that we will both arrive on time.
3. Lies, damn lies, and project timelines. If three consecutive stages of a project each have an 80 percent chance of finishing in less than ten days, you would be unwise to tell the boss that you have an 80 percent chance of completing it in less than thirty days. As illustrated in point 2, above, you only have a 51.2 percent chance of completing the project in thirty days. The first stage has a 20 percent chance of taking longer than ten days. If the second stage also has an 80 percent chance of finishing in less than ten days, that only amounts to a 64 percent chance that both stage 1 and stage 2 will each take less than ten days.
4. Half the risk is not the equivalent of double the benefit. If spending ten dollars per person on a drug or vaccination offers a 50 percent reduction in the chance of acquiring a disease, this sounds great. But did the marketing brochure for the drug mention that my risk of acquiring the disease in the first place is only two in a million? Is it worth ten dollars to reduce my risk from a negligible two in a million to one in a million? This is a question for each individual, but if I am the minister of health in a country with twenty million people, it is going to cost taxpayers two hundred million to save twenty people from the disease. It’s a noble cause, but is it the country’s best use of ten million tax dollars per person?
5. Beware the optimist. On-average profit will be less than the profit associated with average demand. Why? Your projections indicate on average a ten-dollar profit per widget with demand from fifty thousand to ninety thousand widgets per year, and therefore your average profit is seven hundred thousand dollars per year. Or is it? Suppose your widget factory can only produce eighty thousand widgets per year. This would create a situation where your profit is capped at eight hundred thousand dollars in all the years when demand exceeds eighty thousand units, and this will bring your average profit down below the projected amount.

Ten Tips for Presenting a Business Case

Building a business case is a complex equation but there are a few simple tips that can make it more compelling. Focussing on getting the risks to be as low as reasonably practicable (ALARP) for threats or (for opportunities) as high as reasonably practicable (AHARP) involves working out what sort of measures are going to provide a return on investment.

Over the years, I've made most of the mistakes that can possibly be made (although to be fair, I'm fairly creative so continually invent more) but as a result I've eliminated a few simple pitfalls.

Here are some thoughts to make your life easier.

1. Format the business case professionally. Spend the time to typeset it, lay it out well, use appropriate illustrations, and make the design look professional. If you don’t have the graphic design skills to do it yourself, find someone to help you with it. You’ve spent a lot of time on doing the analysis, interviews, and legwork, but in the years to come, most people will judge all that effort purely by the quality of the report. Make it worth reading, but put the odds in your favor—structure, format and present it in a way that will make people want to read it.
2. Bind it. When you are happy with it and it has been peer reviewed, print it out and bind it. It does not matter if it is spiral-bound, comb-bound, hard-cover, wire-bound, or whatever. If you have done all the work to develop a professional business case, make sure it looks professional. It is all too easy for a manager to scribble comments on a report that is stapled together—after all, it looks like a draft. Conversely, it is easy to sign off on a professionally bound document. Even if it is not perfect (and we must admit, no document is ever truly perfect), it looks finished. If you want something signed and accepted—bind it!
3. Corporate templates. Use the corporate style sheets, templates, or formats if they exist. People are more receptive to information presented in a familiar way.
4. Back up your business case with a PowerPoint presentation. Build a succinct presentation of the key points using supporting diagrams (if they are relevant and aid communication). You may never need to present it, but if you do, you will look like a true professional. If asked to do a presentation, just say, “Sure thing, give me thirty minutes and I’ll have it ready.” Even if you never give your presentation using a projector, a four-page printout based on a PowerPoint template will look professional, and you again come out looking like a legend.
5. Take one last read of your paper before you submit it and ask yourself: What would my audience want to know, see, or understand after reading it, and what action do I want them to take after reading it?
6. Use diagrams, graphs, and visual aids wherever and whenever you can. Most of us are busy people — a picture paints a thousand words, and if you want to get your message across to someone who is skimming your document, put a graphic in for each key point.
7. Tell a story. The human mind is more attuned to learning and interpreting information through stories rather than facts or statistics. We remember stories much more readily than we can recall facts. Find a way to link the key points in a narrative that speaks to emotion as much as it does to facts. It may be equally true to say that “Our Lost Time Injury Frequency (LTIF) rate was 0.04 percent last year” or that “Last year, forty-three out of our one thousand two hundred employees suffered injuries severe enough that they were unable to work one or more roistered shifts,” but the latter version gets the point across in a much more meaningful way. Where possible, use natural frequencies and real events to illustrate key points.
8. Back the story up with facts and numbers. Use statistics, references, incident reports or in-house data wherever you can reasonably and appropriately do so. If you lack the facts, do not make promises by saying XYZ “will create” a certain result. If the message is important enough to include but you are missing the data, use a phrase such as “is likely to create” or “has potential to create…” For example: “Failure to adequately train staff as part of the project roll-out is likely to create delays and budget overruns due to additional help-desk intervention.” You still get the key message across, but your audience will not get distracted by refuting your unsubstantiated claim.
9. Show us that it is not just something you made up on the weekend while watching sports. Include a list of all the people you consulted. Reference the documents, databases, and records you reviewed and list the dates, places, and attendees of all brainstorming workshops and the like. It adds credibility to the overall report and answers many of the questions that critics or budget holders will have regarding the analysis and recommendations.
10. If it is big and important enough, hire communications experts to get the message across, especially when you are presenting plans and recommendations across a large organization. Like any product, good marketing and advertising pay for themselves many times over.

With thanks to PRESENTERMEDIA for the use of their clipart.