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Between 2005 and 2011, IMC published Daily Tips every weekday on consulting ethics, marketing, service delivery and practice management. You may search more than 800 tips on this website using keywords in "Search all posts" or clicking on a tag in the Top Tags list to return all tips with that specific tag. Comment on individual tips (members and registered guests) or use the Contact Us form above to contact Mark Haas CMC, FIMC, Daily Tips author/editor. Daily Tips are being compiled into several volumes and will be available through IMC USA and Mark Haas.

 

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#715: Look Deeper Than Just the Headlines For Business Facts

Posted By Mark Haas CMC FIMC, Friday, December 9, 2011
Updated: Saturday, December 10, 2011
If small businesses are the principal source of job creation in the US, should consultants be focusing their efforts on small vs. large businesses?

A fundamental understanding of statistics is essential for every consultant to be able to tease the truth from the headlines. It is common to see articles, reports and pundits talk about how one segment of the economy generates most of the jobs. Recently either government, healthcare, small business, energy or technology are sectors with the most economic activity and thus job growth. Usually a graph or a single number will accompany that statement and a lot of philosophy about why the data will lead to a conclusion about the future of that sector.

If we took these proclamations at face value we would be possibly misleading our clients if we were advising them on where to invest. We need to bring a critical eye and logic to this interpretation. Consider the recent news that small businesses created all net job growth over the past decade. The NFIB published a graph on Page 1 of U.S. Private Sector Employment by Size of Payroll that seems to prove the point. Without further investigation, it seems clear: consultants should be looking more closely at small companies to support their active growth.

But looking a little deeper reveals the flaw in this interpretation. It is not small businesses that create most jobs but young businesses (by definition, most new businesses are small). But, we are not done yet. When we separate the newly formed from young businesses, it becomes clear that is new businesses that create almost all the jobs. Furthermore, the younger a business is the higher net job loss it creates. Far more complicated than the dominant headlines would indicate, right? See an enlightening analysis of these data.

Tip: Whether we are looking for new markets for our services or are advising clients on emerging (or declining) markets, consultants need to bring their skeptics hat and a competent statistical capability to interpreting reported data.

© 2011 Institute of Management Consultants USA

Tags:  consulting skills  market research  methodology  statistics 

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#685: Consultants Need to Understand Type I and Type II Errors

Posted By Mark Haas CMC FIMC, Friday, October 28, 2011
Updated: Friday, October 28, 2011
I always hear about Type I and Type II errors in business and how important it is that consultants understand these concepts. Why should I care about this?

People are referring to a statistical concept where a Type I error is a false positive and Type II error is a false negative. For the statistician, a Type I error is rejecting the null hypothesis when it should have been accepted. For a businessperson or consultant, a Type I error is seeing something that is not really there. Type II errors are missing something that is really there (and potentially company making or breaking).

A Type II error (false negative) can be serious when looking at competitive markets or human resource issues such as culture or employee opinions. Inadequate surveys or incomplete analysis may lead a consultant to conclude that there are not serious competitors or impending revolts among employees when, in fact, there are. Depending on the situation, a Type II error may result in serious losses for a company or put it out of business.

False positives are of most interest to consultants engaging in diagnostic or investigative activities, in two ways. As a consultant whose job it is to find problems to solve or opportunities to capture, we are looking for something on which to act. Maybe a process is "broken" or a market is "large and available" to your client. In either case, you may identify something that is not really significant enough to expend resources on. Alternatively, as a result of your activities, you conclude that your impact is significant when it really is not. In both cases, you have overstated the significance, or even existence, of your role to the client. Understanding Type I and Type II errors gives you good perspective on your role and significance to a client.

Tip: Think in terms of medical testing when you consider how you are going to control for Type I and Type II errors. The worst outcome when looking for a serious disease is to conclude it is not present when it is (Type II). To accommodate that, we use screening procedures that are relatively fast, cheap and for which we can tolerate a Type I (false positive) error. As a consultant, you may want to develop protocols that let you quickly tease out potential problem areas and for which you recognize there may be Type I errors. Those items that show up may be real or, more likely, false positives. Then you can proceed with more focused and rigorous protocols to look more closely at an issue, recognizing that what you want to avoid is a Type II error (false negative). You don't have to be a statistician to understand the concept and how your ability to mitigate risk on behalf of your client is a significant value added.

© 2011 Institute of Management Consultants USA

Tags:  analysis  assessment  assumptions  consulting terminology  consulting tools  diagnosis  information management  recommendations  risk analysis  statistics 

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#469: It's All in the Presentation

Posted By Mark Haas CMC FIMC, Thursday, December 30, 2010
Updated: Thursday, December 30, 2010
I have a fascinating source of data visualization I'd like to share with my fellow Daily Tips readers. It is Information Is Beautiful.

All the data in the world will not help you convince a client of your findings, much less compel them to take your recommendations and implement them, unless you can present these data in an interesting and understandable way. Take the time to find the best way to present data, and don't just throw them into a PowerPoint template because you think everyone is familiar with that approach. Glad to pass this source along. The Information Is Beautiful website is an inspiration for all consultants to "think before they print."

Tip: One of my favorites is the Hierarchy of Digital Distractions.

© 2010 Institute of Management Consultants USA

Tags:  communication  data visualization  presentations  statistics 

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#360: Every Consultant Needs a Solid Understanding of Statistics

Posted By Mark Haas CMC FIMC, Friday, July 30, 2010
Updated: Friday, July 30, 2010
My firm focuses primarily on training and HR consulting. We don't do process reengineering or analytics so is there a reason why we need to develop our staff in analysis or statistical skills?

In a word - yes, particularly statistics. In an increasingly technical world, anyone advising management of a business, nonprofit or government agency needs to know the fundamentals of probability, sampling, inference and (perhaps most of all) how to both display and interpret statistical information. The potential to misinterpret information from a poorly analyzed dataset or prepared graph can mean the difference between solid advice and misdirection. If you can't understand the nuances of data, you have no business giving advice.

Just because you are an HR firm doesn't mean you don't have use for statistical analysis. Designing and interpreting employee surveys, evaluating the effectiveness of training curricula, and predicting social demographic or company trends all require solid statistical skills. As a consultant to a business function where practitioners may be less skilled in statistical analyses than others, you have an extra responsibility to assure that HR is solid in its use of analysis in pursuit of performance.

Tip: Validity, reliability, correlation, inference, sampling, validation are all concepts with which you should be familiar. Look around for some primers on statistics such as Statistics for Managing Human Resources, or even Statistics for Dummies

© 2010 Institute of Management Consultants USA

Tags:  customer understanding  data visualization  learning  professional development  statistics 

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#982: Knowledge of Statistics is Critical for Consultants

Posted By Mark Haas CMC FIMC, Monday, February 9, 2009
How important is knowing statistics for a consultant, especially if their specialty is not in process management or technical consulting?

Statistics is often misunderstood as the province of "technical" consultants. On the contrary, every consultant should have a solid working knowledge of basic descriptive and inferential statistics. Regardless of your specialty or discipline, your ability to interpret client data, make inferences about information you collect and evaluate, and to clearly communicate you recommendations all benefits from statistics.

Most consulting firm interview cases involve an analytical problem that may not require statistics but do require a feeling for numbers. We should always have a sense of magnitude, direction and units of any number that describe our client's situation or operations. Even if you are in HR, training, or other "people" discipline, numbers are still an important way to understand performance appraisal trends, interpret survey results, or predict the probability your recommendations will have the desired effects.

Tip: If you haven't been actively using statistics or are uncomfortable with numbers, now is the time to spruce up your numeracy skills. Two classic books on the importance of everyone to have solid math and statistical skills are How to Lie With Statistics and A Mathematician Reads the Newspaper. For a slightly more directed look at statistics, look online for "basic business statistics"

© 2009 Institute of Management Consultants USA

Tags:  education  professional development  statistics 

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