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How to avoid being fooled by percent changes


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Ever feel like you are being fooled by a chart showing changes in percent year over year? We use them in business all the time. Follow Jim, Joe and Larry as they try to sort through their tractor-selling dilemma.

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How to avoid being fooled by percent changes

  1. 1. A Tale of Two Districts or, how NOT to be fooled by “% change”
  2. 2. Meet Jim
  3. 3. (Jim says Hi)
  4. 4. Jim runs a company selling…tractors.
  5. 5. Sales are down 3.6% this year -3.6%
  6. 6. Jim wants answers…
  7. 7. Meet Jim’s two sales guys, Joe and Larry Joe Larry
  8. 8. Larry’s numbers are up 2.9%… Larry +2.9%
  9. 9. Joe’s numbers are…not. Joe -8.3%
  10. 10. What should Jim do?
  11. 11. (I know, I’m worried about him, too…)
  12. 12. but what if it was all just a big misunderstanding?
  13. 13. Instead of just looking at % change “Year Over Year”… -3.6%
  14. 14. … what if we plotted units sold by month?
  15. 15. and what if we applied some brand new techniques? Walter Shewhart written in1931
  16. 16. to understand the variation in the data: x-bar (or average) UCL – Upper Control Limit LCL – Lower Control Limit “Common Cause” variation “Special Cause” variation “Special Cause” variation
  17. 17. So wait, only LAST month is a “down” month…
  18. 18. … and WHO do you think caused THAT? Joe Larry
  19. 19. Hmm, Joe (“down” 8.3% this year) has NO outliers… Joe
  20. 20. but Larry has some explaining to do about December… Larry
  21. 21. The Morals of the Story: <ul><li>DON’T just compare % change </li></ul><ul><li>DON’T assume a % change is statistically significant just because you don’t like it. </li></ul><ul><li>DO use a Control Chart to filter out noise in a data set and identify signals </li></ul><ul><li>NEVER adjust the y-axis to cross the x-axis at anything other than 0 (did you catch that trick?) </li></ul>
  22. 22. Got all that, Jim?
  23. 23. If you liked this: <ul><li>Visit , click on the “How to Crunch It” tab and buy me a coffee. </li></ul><ul><li>More info on Control Charts here: </li></ul><ul><li> </li></ul><ul><li>Thanks, and Happy Crunching!! </li></ul>