Managing by Averages Leads to Below Average Performance: The Need for Granular Metrics

Abstract

In most businesses today managers are hostages to two types of information: average data and anecdotaI data. The averaged information comes in the form or corporate, business unit, product group, or customer sector data identifying revenues, costs, contribution, and assets regarding actual performance and budgets. Perhaps they a1so receive market data segmented the same way on share, growth, and competitive activity. Armed with this information executives are asked to improve underlying performance. But, since this information reflects an average across an entire business product, or customer group, it provides few clues as to what is driving performence. As a consequence, management turns to anecdotes learned from the field. At least this is specific data on a customer or marketing campaign, but it is usually gathered selectively and accompanied by stronghy held beliefs. How can executives objectively isolate the critical cause and effect relationships in a business? Managing by anecdote is no better than managing by averages.