fooled by average #1: “our company pays averagely the same as our competitor”

August 2, 2010

are you familiar with this ” our company pays averagely the same as our competitor?”

Regardless the use of “average” in above sentence is intentional or simply out of misunderstanding, it is wrong to use only it for representing a population or a group of data.

I’ve been amazed that until today, many people is still using just “average” or “mean” as the representation of a set of data. And more people just take it without question. With the widespread use of spreadsheet, we have to be better than that.

“Average” could be misleading, because it does not tell us the distribution of the data or population. I’ll show you why.

Imagine there are two company: Company A and Company B, each has 10 employees (to make it simple).  In below table, I list the salary of each  employee. NOW, you can see that the AVERAGE of employees salary for Company A equals to Company B. But, you know they are NOT the SAME, don’t you?

When the sample is only 10 data points, you can see with your eyes that there are difference. But if the data points are more than 200, you need other tool.

In this case, standard devation can help.

Standard deviation shows the variation of data in one group. For instance, in Company B, there is one employee (maybe the CEO) who has very high salary while there are several employees are paid less than 4; it means, the variance is high–> shown by the higher standard deviation vs. Company A.

Hence, while the average salary is the same, Company B does not pay employees similar to Company B.

In summary, whenever you hear someone tell you that average X equals to average Y, you need to ask “what is the standard deviation?”. You need to see whether the variance is also similar and whether there is an outlier that drag the average up or down.

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basic principle: you should know the shape/distribution of data, standard deviation and the average/median for making a simple conclusion of data


the importance of understanding delay

July 25, 2010

in solving daily problems, it is important to understand the cause-effect relationship. what problems caused by which root causes.

the same importance goes to understanding the possible “delay” between our actions and the effects.

finding the root cause of a problem has been well known by many people in business and non-business, but many of them do not understand (or seek to understand) whether their improvement actions will create instance impact to the problem or there will be delay.

last nite during my dinner in a small resto near my house, i remembered an old experience at  another resto.

couple weeks ago my wife and i had a dinner in a nice but crowded resto. while we enjoyed our spicy food, my wife ordered lemon tea. Having wait for ten minutes or so, my wife called another waiter and told him that she ordered another lemon iced tea. until we had finished our dinner, the lemon ice tea did not show up on our table, hence my wife was so upset (well, the food was spicy) and complained to the supervisor of the resto; she reminded that she want her lemnon tea.

within 5 minutes, three different waiters were rushing brought three glasses of lemon tea!

apparently, because it was so crowded, the resto had problems in tracking the orders and who’re working or delivering them to each table. The consequence was many orders at that nite were counted as two or three different orders, because many guests did not realized that there were many delays and there was a total mess in the orders tracking. people in the back office did not realize that many orders were actually just reminders/redundants.

The moral of the story is, if we don’t understand there is a delay between our action (“order lemon tea”) and the effect (“getting the lemon tea”), we tend to keep repeating our actions (reminding, re-ordering, complaining) until we get the result. If we understand it, our action might be quite different.

In real business situation, how many times you are doing many different things, tweaking actions, cancelling your one-month old advertising, or trashing execution just because you have not seen the result yet?

How many times your boss stopped your projects because they do not see any improvement after waiting for [just] 3 weeks?

Do your boss understand there is delay between today’s action and the effect?

OR, do YOU understand it and have explained to your boss and other stakeholders?


picking the best option

June 28, 2010

In 2005, I faced a situation to decide which path (job)  I need to choose.

Stay or move on? To which company? Company A or B?

If you have been in this situation, you know what I mean. It’s tough

Staying means feeling secure, I know people and how things work but not sure whether it’s the best for the future. Moving to Company A, give me just OK (not great) salary no guaranteed job security, but the job type is just perfect for me and family in term of time flexibility. Company B seem to have  people who are  just right for me. The salary was much better but a lot of travelling.

Which one to choose?

Rather than overloading my brain, I used a decision matrix to find the optimum solution. Might not perfect but it gave me a visual tool to think more structured. Below is what my decision matrix.

If you are not familiar with this kind of matrix, here are the steps to make one:

  1. List all of your critical factors in deciding a job, in my case: match my passion, the compensation & benefit, quality time with family, and so on.
  2. Give weight for each of the factor, the more important the factor, the higher the weight. Total weight should be 100.
  3. Score each of the option according to each factor. Might not need to be precise, the most important thing is the comparative scores among the options.
  4. Total score = cumulative of (weight x score for each factor).
  5. The highest score is your optimum option.
  6. Use your heart and common sense, does it feel right?
  7. If yes, take the offer.

notes – for singles out there, you can use this tool  if you have too many options to find the perfect one