Module 4

Data Analysis
Contents
4.1 Introduction.............................................................................................
4.2 Management Problems in Data Analysis .............................................
4.3 Guidelines for Data Analysis ..................................................................
Learning Summary .........................................................................................

Learning Objectives
By the end of this module the reader should know how to analyse data systematical-
ly. The methodology suggested is simple, relying very much on visual interpretation,
but it is suitable for most data analysis problems in management. It carries implica-
tions for the ways information is produced and used.

4.1 Introduction
What constitutes successful data analysis? There is apparently some uncertainty on
this point. If a group of managers are given a table of numbers and asked to analyse
it, most probably they will ‘number pick’. Individual numbers from somewhere in
the middle of the table which look interesting or which support a long-held view
will be selected for discussion. If the data are profit figures, remarks will be made
such as: ‘I see Western region made £220 000 last year. I always said that the new
cost control system would work.’ A quotation from Andrew Lang, a Scottish poet,
could be applied to quite a few managers: ‘He uses statistics as a drunken man uses
lamp posts – for support rather than illumination.’
Real data analysis is concerned with seeking illumination, not support, from a set
of numbers. Analysis is defined as ‘finding the essence’. A successful data analysis
must therefore involve deriving the fundamental patterns and eliciting the real
information contained in the entire table. This must happen before sensible remarks
can be made about individual numbers. To know whether the cost system in the
above example really did work requires the £220 000 to be put in the context of
profit and cost patterns in all regions.
Module 4 / Data Analysis

The purpose of this module is to give some guidelines showing how illumination
might be derived from numbers. The guidelines give five steps to follow in order to
find what real information, if any, a set of numbers contains. They are intended to
provide a framework to help a manager understand the numbers he or she encoun-
ters.
One might have thought that understanding numbers is what the whole subject
of statistics is about, and so it is. But statistics was not developed for use in man-
agement. It was developed in other fields such as the natural sciences. When it is
transferred to management, there is a gap between what is needed and what
statistics can offer. Certainly, many managers, having attended courses or read
books on statistics, feel that something is missing and that the root of their problem
has not been tackled. This and other difficulties involved in the analysis of manage-
ment data will be pursued in the following section, before some examples of the
types of data managers face are examined. Next, the guidelines, which are intended
to help fill the statistics gap, will be described and illustrated. Finally, the implica-
tions of this gap for the producers of statistics will be discussed.

4.2 Management Problems in Data Analysis

Managers face a unique set of problems in their general task of understanding
numbers. This may partly explain the poor or non-existent data analysis seen (or not
seen) in a lot of companies. Rich sources of information, of great potential value in
decision making, are often ignored. The first step in making an improvement is
accepting that these problems exist. The set of problems includes the following
main features:
(a) The statistical gap. The subject of statistics does not provide all the techniques
and methods that a manager would like to have at his or her disposal. For in-
stance, much of statistics is concerned with the rigorous testing of hypotheses.
The manager faced with last month’s sales figures or some accounting data has
first to find a hypothesis (i.e. has first to find what might be the real information
in the data). Statistics gives no clear help with this task. Having found some real
information by whatever means, the manager is less concerned with rigorous
statistical testing than with taking action. He or she will no doubt test the validity
of the information, but by other informal, perhaps qualitative, means. Contrast
this with the natural sciences where the emphasis is on thoroughly testing under
different conditions hypotheses derived by non-statistical methods (such as be-
ing hit on the head by an apple). Statistics plays a different role in the natural
sciences than in management. What the manager primarily needs, and what sta-
tistics does not fully provide, are techniques for first detecting patterns and
regularities in data, without having to wait for an external impetus.
(b) A lack of confidence. This manifests itself in different forms: from the free
admission of a fear of numbers to the aggressive statement that management is
solely a matter of instinct and that methodical evaluations of information are
unnecessary. Whatever the manifestation, the effect is the same: little or no data
analysis is done. In fact the majority of numbers problems require only a mini-
mal knowledge of technical matters but a lot of common sense. Data analysis is
 Module 4 / Data Analysis

rather like reading. When looking at a business report, a manager will usually
read it carefully, work out exactly what the author is trying to say and then decide
whether it is correct. The process is similar with a table of numbers. The data
have to be sifted, thought about and weighed. To do this, good presentation (as
stressed in Module 3 in the rules for data presentation) may be more important
than sophisticated techniques. Most managers could do excellent data analyses
provided they had the confidence to treat numbers more like words. It is only
because most people are less familiar with numbers than words that the analysis
process needs to be made more explicit (via guidelines such as those in Section
4.3 below) in the case of numbers.
(c) Over-complication by the experts. The attitude of numbers experts (and other
sorts of experts as well) can confuse managers. The experts use jargon, which is
fine when talking to their peers but not when talking to a layperson; they try
sophisticated methods of analysis before simple ones; they communicate results
in a complicated form, paying little regard to the users of the data. For example,
vast and indigestible tables of numbers, all to five decimal places, are often the
output of a management information system. The result can be that the experts
distance themselves from management problems. In some companies specialist
numbers departments have adopted something akin to a research and develop-
ment role, undertaking solely long-term projects. Managers come to believe that
they have not the skills to help themselves while at the same time believing that
no realistic help is available from experts.

4.2.1 Examples of the Problems Faced

The following three examples are all situations in which experts have over-
complicated the presentation or analysis of data. In each case a simpler treatment of
the data reveals important information.

Accounting Data
In Module 3 Table 3.12 showed the income statement of a multinational shipping
company. It is difficult to analyse (i.e. it is difficult to say what the significant
features of the company’s business were). Some important happenings are obscured
in Table 3.12, but they were revealed when the table was re-presented in Table 3.13.
Module 4 / Data Analysis

Table 4.1 Budgeting data from an MIS

PORT - OCEAN PORT TERMINAL COSTS - SHIPSIDE OPERATIONS SCHEDULE 2
PERIOD - (CURRENCY US DOLLARS)

MONTH CUMULATIVE
TERMINAL COSTS
ESTIMATE STANDARD VARIANCE VAR % ESTIMATE STANDARD VARIANCE VAR % BUDGET
LO-LO
STEVEDORING
STRAIGHT TIME - FULL 131 223 143 611 1 288 8.6 1 237 132 1 361 266 124 134 9.1 1 564 896
STRAIGHT TIME - M.T. 13 387 14 651 1 264 8.6 256 991 281 399 24 408 8.7
(UN)LASHING 78 (78) 78 (78)
SHIFTING 801 (801) 11 594 (11 594)
OVERTIME, SHIFT TIME OF
WAITING & DEAD TIME 7 102 (7 102) 190 620 (190 620)

RO-RO
STEVEDORING
TRAILERS
STRAIGHT FULL 20 354 26 136 5 782 22.1 167 159 215 161 48 002 22.3 330 074
STRAIGHT M.T. 178 228 50 21.9 14 846 18 993 4 147 21.8
RO-RO COST PLUS
VOLVO CARGO
ROLLING VEHICLES 14 326 19 515 5 189 26.6 98 210 157 163 58 951 37.5
BLOCKSTONED 29 27 (2) (7.4) 613 674 61 9.1
(UN) LASHING RO-RO 355 (355) 355 (355)
SHIFTING 977 (977) 3 790 (3 790)
OVERTIME, SHIFT TIME OF
WAITING & DEAD TIME 1 417 (1 417) (28 713) (28 713)
HEAVY LIFTS (OFF STANDARD) 2 009 (2 009)

CARS
STEVEDORING
STRAIGHT TIME 6 127 6 403 276 4.3 38 530 35 328 (3 202) (9.1) 168 000
(UN) LASHING 2 (2)
SHIFTING 795 (795) 1 288 (1 288)
OVERTIME, SHIFT TIME OF
WAITING & DEAD TIME 7 573 (7 573)
OTHER SHIPSIDE OF COSTS 3 422 (3 422) 24 473 (24 473)

TOTAL TERMINAL COSTS 200 571 210 571 16 000 4.5 2 083 976 2 069 984 (13 992) (.7) 2 062 970
 Module 4 / Data Analysis

Management Information System Output

Table 4.1 is an example of perfectly accurate and meaningful data which are
presented in a form convenient for the producer of the data but not for the user.
A manager would take a considerable time to understand the table. Since this is
part of a Management Information System (MIS) which contains many such tables,
it is essential that a manager should be able to assimilate the information contained
in the table very rapidly. A little thought given to simplifying the table in accordance
with the needs of the user would bring an enormous improvement (see Table 4.5).

Market Research
Table 4.2 indicates what can happen when experts over-complicate an analysis. The
original data came from interviews of 700 television viewers who were asked which
British television programmes they really like to watch. The table is the result of the
analysis of this relatively straightforward data. It is impossible to see what the real
information is, even if one knows what correlation means. However, a later and
simpler analysis of the original data revealed a result of wide-ranging importance in
the field of television research. (See Ehrenberg, 1975, for further comment on this
example.)

Table 4.2 Result of the analysis of some market research data

Adults who ‘Really Like to Watch’: Correlations to 4 decimal places
(Programmes ordered alphabetically within channel)
PrB ThW Tod WoS GrS LnU MoD Pan RgS 24H
ITV PrB 1.0000 0.1064 0.0653 0.5054 0.4741 0.0915 0.4732 0.1681 0.3091 0.1242
ITV ThW 0.1064 1.0000 0.2701 0.1474 0.1321 0.1885 0.0815 0.3520 0.0637 0.3946
ITV Tod 0.0653 0.2701 1.0000 0.0926 0.0704 0.1546 0.0392 0.2004 0.0512 0.2437
ITV WoS 0.5054 0.1474 0.0926 1.0000 0.6217 0.0785 0.5806 0.1867 0.2963 0.1403
BBC GrS 0.4741 0.1321 0.0704 0.6217 1.0000 0.0849 0.5932 0.1813 0.3412 0.1420
BBC LnU 0.0915 0.1885 0.1546 0.0785 0.0849 1.0000 0.0487 0.1973 0.0969 0.2661
BBC MoD 0.4732 0.0815 0.0392 0.5806 0.5932 0.0487 1.0000 0.1314 0.3267 0.1221
BBC Pan 0.1681 0.3520 0.2004 0.1867 0.1813 0.1973 0.1314 1.0000 0.1469 0.5237
BBC RgS 0.3091 0.0637 0.0512 0.2963 0.3412 0.0969 0.3267 0.1469 1.0000 0.1212
BBC 24H 0.1242 0.3946 0.2437 0.1403 0.1420 0.2661 0.1221 0.5237 0.1212 1.0000

In all three examples any message in the data is obscured. They were produced by
accountants, computer scientists and statisticians respectively. What managers
would have the confidence to fly in the face of experts and produce their own
analysis? Even if they had the confidence, how could they attempt an analysis? The
guidelines described below indicate, at a general level, how data might be analysed.
They provide a starting point for data analysis.
Module 4 / Data Analysis

4.3 Guidelines for Data Analysis

The guidelines comprise five stages. A manager who follows them should be able to
understand better the data he or she is faced with. They are, however, guidelines and
not a rigorous methodology which guarantees complete success every time.

4.3.1 Stage 1: Reduce the Data

Many tables contain too many numbers. Data are often included on the grounds
that ‘someone, somewhere, may need them’. For the sake of these probably
mythical people, all others wanting to understand the data have to distinguish what
is important from an enveloping confusion of other irrelevant data.
It is true that the producer of the data has to cater for the many requirements of
the people who receive them. Even so, producers tend to err on the side of over-
supply and include more than is necessary, even given a wide range of users. The
effect is multiplied if receivers of data, on the occasions when they are asked what
they require, overstate their needs ‘just in case’.
The first stage of an analysis is, then, to cut down on the numbers. This means
omitting those that are redundant or irrelevant. This is very much a matter of
judgement, but it is important to resist the assumption that every single piece of data
must be important because it has been included. The producer is unlikely to have
included them because he or she knows them to be important (how would they
know?). They will probably have no idea whether they are important or not. They
will have been included because they are available and the producer is being
cautious. Moreover, it is easier to include everything than to have to agonise over
what should be excluded. By reducing the data the analyst may well find that he or
she is dealing with just a fraction of the original set.

4.3.2 Stage 2: Re-present the Data

The visual approach is central to the understanding of numbers. A pattern can often
be seen quickly in a set of well-arranged data which otherwise (for example, when
computerised) appears to be no more than a random jumble. Recall the similarity
between handling words and numbers. In the same way that a verbal report is sifted,
meditated upon and mused over, so time also needs to be spent thinking about a
table of numbers. If the numbers are skilfully presented, the thinking process should
be shorter and there will be a greater chance that they will be understood. Good
presentation of numbers is analogous to clarity of style and the absence of jargon in
verbal reports. However, the visual aspect of data analysis and the need to present
data well is usually neglected, perhaps because it does not have a high technical
content, but the approach has been shown to work in practice.
 Module 4 / Data Analysis

The re-presentation being recommended does not refer just to data that are liter-
ally a random jumble. On the contrary, the assumption is that the data have already
been assembled in a neat table. Neatness is preferable to messiness but the patterns
may still be obscured. When confronted by apparent orderliness one should take
steps to re-present the table in a fashion which makes it easy to see any patterns
contained in it. The ways in which data can be rearranged were explored in detail in
the previous module. Recall that the seven steps were:
(a) Round the numbers to two effective figures.
(b) Put rows and columns in size order.
(c) Interchange rows and columns where necessary.
(d) Use summary measures.
(e) Minimise use of gridlines and white space.
(f) Make the labelling clear and do not allow it to hinder comprehension of the
numbers.
(g) Use a verbal summary.

4.3.3 Stage 3: Build a Model

Building a model is a mathematical-sounding expression for a straightforward task.
It is this stage that can lead the analyst to an unnecessarily technical and mathemati-
cal solution. The aim in building a model is essentially to find a pattern in the
numbers and some way of summarising them. The model may be a verbal one, an
arithmetic one or an algebraic expression, either simple or complex. Frequently the
simpler models prove sufficient. Even so, this stage is the most difficult and skilful,
requiring an element of creativity. The following are examples of very different
models, all of which proved adequate for the particular data and context concerned.
(a) Row averages all equal but with a ±20 per cent variation within each column.
(b) Real profits increased by 5 per cent p.a. between 2005 and 2010 but down by 2
per cent p.a. between 2011 and 2016.
(c) Sales per salesperson approximately equal for each northern region; sales per
salesperson approximately equal for each southern region; but the northern fig-
ure is 25 per cent higher than the southern.
(d) Column 1 (represented by y) is related to column 2 (represented by x) by the
expression: y = 0.75x + 3.
The principal benefit of a model is that just a few numbers or words have to be
dealt with instead of a profusion. If the model is a good one, it can be used as a
summary, for spotting exceptions, for making comparisons and for taking action.
The vast amount of information now available to managers (particularly in view
of recent growth in the use of all sizes of computers) means that when looking for a
model or pattern one should look at the simple ones first. There is usually neither
time nor sufficient specialist help to do otherwise. It has to be a simple model or
nothing. In any case the simple models are usually the more useful since they are
easier to handle and communicate with. There are sometimes objections to simple
models purely because they are simple and, it is supposed, could not represent the
harsh complexities of the world. Yet most of the best established scientific models
have been simple: Newton’s Laws and Boyle’s Law, for instance. They may not
Module 4 / Data Analysis

encapsulate every nuance of reality, but for some time they have been able to
summarise and predict reality to a generally acceptable level of approximation. In
management the objective is usually no more than this.
Only if the simple approach fails are complex methods necessary, and then ex-
pert knowledge may be required. As a last resort, even if the numbers are random
(random means they have no particular pattern or order), this is a model of a sort
and can be useful. For example, the fact that the day-to-day movements in the
returns from quoted shares are random is an important part of modern financial
theory.

4.3.4 Stage 4: Exceptions

Once a pattern is established, it is feasible to look at the exceptions to it. In manage-
rial situations the exceptions can be more important than the pattern. For the
marketing divisions of a company, the latest monthly sales figures may be seen to
have a pattern in which the sales volume per salesperson is approximately the same
in every sales region except for region X, where the figure is lower. The exception
can now be investigated. Did it occur because it is a large region geographically and
thus more time is taken up travelling? Is it because someone is falling down on the
job? Is it on account of reasons within or beyond the control of the company? One
reason for an extreme exception is that someone made a mistake with the numbers,
(e.g. a typist omitted a zero). This last possibility should always be considered.
When the exceptions have been noticed, they can be corrected or regretfully
disregarded (in the case of items beyond the company’s control) or management
action can be taken. However the exceptions are investigated and dealt with, it is the
recognition of a pattern or model in the numbers that makes it possible to see their
existence.
It is a common error to deal with exceptions before discerning the pattern. This
is the basis of the ‘number picking’ mentioned earlier. Not only is this illogical (since
an exception must by definition have something to be an exception from), but it
also leads to true exceptions being missed while spurious ones are discussed at
length and in depth.
A further possibility may arise. The exceptions may be so numerous and inexpli-
cable that the only conclusion has to be that the model chosen for the data is not
good enough. It does not explain the fluctuations in the numbers sufficiently well to
be regarded as a general model. The exceptions disprove rather than prove the rule.
In this situation the only option is to return to the data and attempt, in the light of
knowledge of the inadequacies of the failed model, to find a new model which
better represents the data. Several iterations of this process may take place before a
satisfactory model is found.

4.3.5 Stage 5: Comparisons

Having detected the pattern and explained or corrected the exceptions to it, one
may compare the results with other relevant information. Rarely is any analysis done
completely in isolation. Nearly always, there are other results with which to make a
 Module 4 / Data Analysis

comparison. The other results may be from another year, from another company,
from another country or from another analyst. In other words, reference can usually
be made to a wider set of information. In consequence, questions may be prompted:
Why is the sales mix different this year from the previous five? Why do other
companies have less brand switching for their products? Why is productivity higher
in the west of Germany? Making comparisons such as these provides a context in
which to evaluate results and also suggests the consistencies or anomalies which
may in turn lead to appropriate management action.
If the results coincide with others, then this further establishes the model and
may mean that in future fewer data may need to be collected – only enough to see
whether the already established model still holds. This is especially true of manage-
ment information systems where managers receive regular printouts of sets of
numbers and they are looking for changes from what has gone before. It is more
efficient for a manager to carry an established model from one time period to the
next rather than the raw data.
Example: Consumption of Distilled Spirits in the USA
As an example of an analysis of numbers that a manager might have to carry out,
consider Table 4.3 showing the consumption of distilled spirits in different states of the
USA. The objective of the analysis would be to measure the variation in consumption
across the states and to detect any areas where there were distinct differences. How
can the table be analysed and what information can be gleaned from it? The five stages
of the guidelines are followed.
Stage 1: Reduce the data. Many of the data are redundant. Are percentage fig-
ures really necessary when per capita figures are given? It is certainly possible, with
some imaginative effort, to conceive of uses of percentage data, but they are not
central to the purposes of the table. It can be reduced to a fraction of its original
size without any loss of real information.
Stage 2: Re-present. To understand the table more quickly, the numbers can be
rounded to two effective figures. The original table has numbers, in places, to eight
figures. No analyst could possibly make use of this level of specification. What con-
clusion would be affected if an eighth figure were, say, a 7 instead of a 4? In any
event, the data are not accurate to eight figures. If the table were a record docu-
ment (which it is not) then more than two figures may be required, but not eight.
Putting the states in order of decreasing population is more helpful than alphabetical
order. Alphabetical order is useful for finding names in a long list, but it adds nothing
to the analysis process. The new order means that states are just as easy to find.
Most people will know that California has a large population and Alaska a small one,
especially since no one using the table will be totally ignorant of the demographic
attributes of the USA. At the same time, the new order makes it easy to spot states
whose consumption is out of line with their population.
The end result of these changes, together with some of a more cosmetic nature, is
Table 4.4. Contrast this table with the original, Table 4.3.
Module 4 / Data Analysis

Table 4.3 Consumption of distilled spirits in the USA

Per cent to US
Rank in Consumption in Total
consumption wine gallons Percent consumption Per Per
Licence states increase capita capita
2015 2014 2015 2014 decrease 2015 2014 2015 2014

Alaska 46 47 1 391 172 1 359 422 2.3 0.33 0.32 3.64 3.86
Arizona 29 30 4 401 883 4 144 521 6.2 1.03 0.98 1.94 1.86
Arkansas 38 38 2 534 826 2 366 429 7.1 0.60 0.56 1.20 1.12
California 1 1 52 529 142 52 054 429 0.9 12.33 12.32 2.44 2.46
Colorado 22 22 6 380 783 6 310 566 1.1 1.50 1.49 2.47 2.49

Connecticut 18 18 7 194 684 7 271 320 (−1.1) 1.69 1.72 2.31 2.35
Delaware 45 43 1 491 652 1 531 688 (−2.6) 0.35 0.36 2.56 2.65
Dist. of 27 27 4 591 448 4 828 422 (−4.9) 1.08 1.14 6.54 6.74
Columbia
Florida 4 4 22 709 209 22 239 555 1.7 5.33 5.28 2.70 2.67
Georgia 13 13 10 717 681 9 944 846 7.8 2.52 2.35 2.16 2.02

Hawaii 41 40 2 023 730 1 970 089 2.7 0.48 0.47 2.28 2.28
Illinois 3 3 26 111 587 26 825 876 (−2.7) 6.13 6.35 2.33 2.41
Indiana 19 20 7 110 382 7 005 511 1.5 1.67 1.66 1.34 1.32
Kansas 35 35 2 913 422 2 935 121 (−0.7) 0.68 0.70 1.26 1.29
Kentucky 26 26 4 857 094 5 006 481 (−3.0) 1.14 1.19 1.42 1.47

Louisiana 21 21 7 073 283 6 699 853 5.6 1.66 1.59 1.84 1.77
Maryland 12 12 10 833 966 10 738 731 0.9 2.54 2.54 2.61 2.62
Massachusetts 10 10 13 950 268 14 272 695 (−2.3) 3.28 3.38 2.40 2.45
Minnesota 15 15 8 528 284 8 425 567 1.2 2.00 1.99 2.15 2.15
Missouri 20 17 7 074 614 7 697 871 (−7.9) 1.66 1.82 1.48 1.61

Nebraska 36 36 2 733 497 2 717 859 0.6 0.64 0.64 1.76 1.76
Nevada 30 31 4 360 172 4 095 910 6.5 1.02 0.97 7.15 6.92
New Jersey 8 8 15 901 587 16 154 975 (−1.6) 3.73 3.82 2.17 2.21
New Mexico 42 41 1 980 372 1 954 139 1.3 0.47 0.46 1.70 1.70
New York 2 2 41 070 005 41 740 341 (−1.6) 9.64 9.88 2.27 2.30

North Dakota 47 46 1 388 475 1 384 311 0.3 0.33 0.33 2.16 2.16
Oklahoma 33 29 3 904 574 4 187 527 (−6.8) 0.92 0.99 1.41 1.54
Rhode Island 39 39 2 073 075 2 131 329 (−2.7) 0.49 .50 2.24 2.30
South 23 25 5 934 427 5 301 054 11.9 1.39 1.26 2.08 1.88
Carolina
South Dakota 48 48 1 312 160 1 242 021 5.6 0.31 0.29 1.91 1.82

Tennessee 24 24 5 618 774 5 357 160 4.9 1.32 1.27 1.33 1.28
Texas 5 6 17 990 532 17 167 560 4.8 4.22 4.06 1.44 1.40
Wisconsin 11 11 10 896 455 10 739 261 1.5 2.56 2.54 2.36 2.33

Total licence 319 583 215 317 874 435 0.5 75.04 75.22 2.13 2.13
 Module 4 / Data Analysis

Table 4.4 Consumption of distilled spirits in the USA (amended)

Licence states Consumption
(in order of population) Wine gallons (millions) Per capita (gallons)
2015 2014 2014
California 53.0 52.0 2.4
New York 41.0 42.0 2.3
Texas 18.0 17.0 1.4
Illinois 26.0 27.0 2.3
Florida 23.0 22.0 2.7

New Jersey 16.0 16.0 2.2

Massachusetts 14.0 14.0 2.4
Indiana 7.1 7.0 1.3
Georgia 11.0 9.9 2.2
Missouri 7.1 7.7 1.5

Wisconsin 11.0 11.0 2.4

Tennessee 5.6 5.4 1.3
Maryland 11.0 11.0 2.6
Minnesota 8.5 8.4 2.2
Louisiana 7.1 6.7 1.8

Kentucky 4.9 5.0 1.4

Connecticut 7.2 7.3 2.3
S. Carolina 5.9 5.3 2.1
Oklahoma 3.9 4.2 1.4
Colorado 6.4 6.3 2.5

Kansas 2.9 2.9 1.3

Arizona 4.4 4.1 1.9
Arkansas 2.5 2.4 1.2
Nebraska 2.7 2.7 1.8
New Mexico 2.0 2.0 1.7

Rhode Island 2.1 2.1 2.2

Hawaii 2.0 2.0 2.3
D. Columbia 4.6 4.8 6.5
S. Dakota 1.3 1.2 1.9
N. Dakota 1.4 1.4 2.2

Nevada 4.4 4.1 7.2

Delaware 1.5 1.5 2.6
Alaska 1.4 1.4 3.6
Average 9.7 9.6 2.3
Module 4 / Data Analysis

Stage 3: Build a model. The pattern is evident from the transformed table. Con-
sumption varies with the population of the state. Per capita consumption in each
state is about equal to the figure for all licence states with some variation (±30 per
cent) about this level. The pattern a year earlier was the same except that overall
consumption increased slightly (1 per cent) between the two years. Refer back to
Table 4.3 and see if this pattern is evident even when it is known to be there. There
may of course be other patterns but this one is central to the objectives of the anal-
ysis.
Stage 4: Exceptions. The overall pattern of approximately equal per capita con-
sumption in each state allows the exceptions to be seen. From Table 4.4, three
states stand out as having a large deviation from the pattern. The states are District
of Columbia, Nevada and Alaska. These states were exceptions to the pattern in the
earlier year as well. Explanations in the cases of District of Columbia and Nevada are
readily found, probably being to do with the large non-resident populations. People
live, and drink, in these states who are not included in the population figures (diplo-
mats in DC, tourists in Nevada). An explanation for Alaska may be to do with the
lack of leisure opportunities. Whatever the explanations, the analytical method has
done its job. The patterns and exceptions in the data have been found. Explanations
are the responsibility of experts in the marketing of distilled spirits in the USA.
Stage 5: Comparison. A comparison between the two years is provided by the
table. Other comparisons will be relevant to the task of gaining an understanding of
the USA spirits market. The following data would be useful:
(i) earlier years, say, five and ten years before;
(ii) a breakdown of aggregate data into whisky, gin, vodka, etc.;
(iii) other alcoholic beverages: wine, beer, etc.
Once data from these other sources have been collected they would be analysed in
the manner described, but of course the process would be shorter because the
pattern can be anticipated. Care would need to be taken that like was being com-
pared with like. For example, it would have to be checked that an equivalent
definition of consumption was in force ten years earlier.

4.3.6 Implications for the Producers of Statistics

The methodology is intended for use by managers who are not statistical specialists.
However, if the problems that the methodology is intended to counter are real and
if it does indeed prove useful in overcoming them, there are implications for the
producers of data as well as for the users.
The obvious implication for producers of statistics is that more attention should
be paid to the uses to which the data are being put. This does not mean asking
managers what they want since this will just lead to an over-provision of data.
Likewise, the practice of issuing all the data that are held (albeit broken down into
finance, marketing, etc.) results in a surfeit of data which merely confuses the
aspiring analyst. Designers of information systems, writers of reports and the like
should consider exactly what contribution their data are supposed to make and how
they are expected to improve decision making. What is needed is a more systematic
approach whereby data are provided not in isolation but in the context of the
management processes they are intended to serve.
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The second implication is more direct. Data should be presented in forms which
enable them to be analysed speedily and accurately. Much of the reduction and re-
presentation stages of the guidelines could, in most instances, be carried out just as
well by the producer of the data as by the user. It would then need to be done only
once rather than many times by the many users of the data. Unfortunately, when
time is spent thinking about the presentation of statistics, it is usually spent in
making the tables look neat or attractive rather than making them amenable to
analysis.
There is much that the producers of data can do by themselves. For example,
refer back to the extract from a management information system shown in Ta-
ble 4.1: if thought were given to the analysis of the data through the application of
the guidelines, a different presentation would result (see Table 4.5).
(a) Some data might be eliminated. For instance, full details on minor categories of
expenditure may not be necessary. This step has not been taken in Table 4.5
since full consultation with the receivers would be necessary.
(b) The table should be re-presented using the rules of data presentation. In
particular, some rounding is helpful. This is an information document, not an
auditing one, and thus rounding is appropriate. In any case, no different conclu-
sions would be drawn if any of the expenditures were changed by one unit. In
addition, improvement is brought about by use of summary measures and a
clearer distinction between such measures and the detail of the table.
(c) A model derived from previous time periods would indicate when changes were
taking place. There is a good case for including a model or summary of previous
time periods with all MIS data. This has not been done for Table 4.5 since previ-
ous data were not available.
(d) Exceptions can be clearly marked. It is, after all, a prime purpose of budget data
to indicate where there have been deviations from plan. This can be an automat-
ic process. For example, all variances greater than 10 per cent could be marked.
This might even obviate the need for variance figures to be shown.
(e) The making of comparisons is probably not the role of the data producer in this
example, involving as it does the judgement of the receivers in knowing what the
relevant comparisons are. The task of the producer has been to facilitate these
comparisons.
Making the suggested changes does of course have a cost attached in terms of
management time. However, the cost is a small fraction of the cost of setting up and
operating the information system. The changes can transform the system and make
it fully operational. If an existing system is being largely ignored by managers, there
may be no alternative.
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Table 4.5 Budgeting data from an MIS (amended from Table 4.1)
Port: Liverpool OCEAN PORT TERMINAL COSTS – SHIPSIDE OPERATIONS
Period: December (U.S Dollars: Conversion rate 1.60)

MONTH CUMULATIVE
ESTIMATE STANDARD VARIANCE VAR % ESTIMATE STANDARD VARIANCE VAR % BUDGET

LO-LO: Stevedoring (STR-FULL) 131 000 144 000 12 000 9 1 240 000 1 360 000 120 000 9 1 560 000
Stevedoring (STR-MT) 13 400 14 700 1 300 9 257 000 281 000 24 000 9
Unlashing 78 0 −78 * 78 0 −78 *
Shifting 200 0 −200 * 12 000 0 −12 000 *
Overtime, etc. 7 100 0 −7 100 * 191 000 0 −191 000 *

RO-RO: Stevedoring TR (STR-FULL) 20 400 26 100 5 800 22 167 000 215 000 48 000 22 330 000
Stevedoring TR (STR-MT) 180 230 50 22 15 000 19 000 4 100 22
Stevedoring cost plus 0 0 0 0 0 0 0 0
Stevedoring Volvo 0 0 0 0 0 0 0
Stevedoring rolling 14 300 19 500 5 200 27 98 000 157 000 59 000 37
Stevedoring blockstow 29 27 −2 −7 610 670 60 9
Unlashing 350 0 −350 * 350 0 −350 *
Shifting 980 0 −980 * 3 800 0 −3 800 *
Overtime, etc. 1 400 0 −1 400 * 29 000 0 −29 000 *
Heavy lifts 0 0 0 0 2 000 0 −2 000 *

CARS: Stevedoring (STR) 6 100 6 400 280 4 38 000 35 000 −3 000 −9 170 000
Unlashing 0 0 0 0 2 0 −2 *
Shifting 800 0 −800 * 1 300 0 −1 300 *
Overtime, etc. 0 0 0 0 7 600 0 −7 600 *

OTHER: Shipside costs 3 400 0 −3 400 * 24 000 0 −24 000 *

TOTALS: LO-LO 152 000 158 000 5 900 4 1 700 000 1 640 000 −59 000 4
RO-RO 38 000 46 000 8 300 18 315 000 392 000 77 000 20
CARS 6 900 6 4001 −520 −8 47 000 35 000 −12 000 −34
OTHER 3 400 0 −3 400 * 24 000 0 −24 000

GRAND 201 000 211 000 10 000 5 2 080 000 2 070 000 −14 000 −1 2 060 000
TOTAL
Totals may not agree because of rounding.
*Zero standard cost, therefore variance not calculable.
 Module 4 / Data Analysis

Few managers will not admit that there is currently a problem with the provision
and analysis of data, but they rarely tell this to their IT systems manager or whoever
sends them data. Without feedback, inexpensive yet effective changes are never
made. It must be the responsibility of users to criticise constructively the form and
content of the data they receive. The idea that computer scientists/statisticians
always know best, and if they bother to provide data then they must be useful, is
false. The users must make clear their requirements, and even resort to a little
persistence if alterations are not forthcoming.

Learning Summary
Every manager sees the problem of handling numbers differently because each sees
it mainly in the (probably) narrow context with which he or she is familiar in his or
her own work. One manager sees numbers only in the financial area; another sees
them only in production management. The guidelines suggested here are intended
to be generally applicable to the analysis of business data in many different situa-
tions and with a range of different requirements. The key points are:
(a) In most situations managers without statistical backgrounds can carry out
satisfactory analyses themselves.
(b) Simple methods are preferable to complex ones.
(c) Visual inspection of well-arranged data can play a role in coming to understand
them.
(d) Data analysis is like verbal analysis.
(e) The guidelines merely make explicit what comes naturally when dealing with
words.
The need for better skills to turn data into real information in managerial situa-
tions is not new. What has made the need so urgent in recent times is the
exceedingly rapid development of computers and associated management infor-
mation systems. The ability to provide vast amounts of data very quickly has grown
enormously. It has far outstripped the ability of management to make use of the
data. The result has been that in many organisations managers have been swamped
with so-called information which in fact is no more than mere numbers. The
problem of general data analysis is no longer a small one that can be ignored. When
companies are spending large amounts of money on data provision, the question of
how to turn the data into information and use them in decision making is one that
has to be faced.