This book reveals the hidden and potentially misleading nature of indicators, empowering readers to avoid making critical business decisions that are harmful, unreasonable, unwarranted, or plain wrong.
During the 2007–2009 Credit Crunch, as banks crashed or lost billions of dollars, their primary measure of risk was found to be fatally flawed. This fundamental error set off a monumental landslide of negative consequences around the globe. Misleading indicators are not limited to the financial world; they permeate any field that requires measurement, estimation, and prediction.
Decision makers in business and government are more reliant than ever on measurements, such as business performance indicators, bond ratings, Six-Sigma indicators, stock ratings, opinion polls, and market research. Yet many popular statistical and business books and courses relating to measurement are based on flawed principles, leading managers to the wrong conclusions—and ultimately, the wrong decisions. misLeading Indicators: How to Reliably Measure Your Business provides something unique and invaluable: trustworthy tools for judging measurements.
Each chapter illustrates the four key principles for reliable measurements: sufficient background information, accuracy and precision, reasonable inferences, and reality checks in different situations. After the three fundamental methods of measuring are defined, the authors expand to the application and interpretation of measurements in specific areas, including business performance, risk management, process, control, finance, and economics. This book supplies essential information for managers in business and government who depend on accurate information to run their organizations, as well as the consultants who advise them.
- Examines why common performance indicators and measurements such as stock and bond ratings, Six-sigma indicators and charts, risk metrics, corporate performance dashboards, inflation, climate change indicators, customer satisfaction surveys, opinion polls, and safety statistics can be so misleading
- Explains why indicators that appear to be performance “drivers” can actually drive you out of business
- Provides a “tool box” with each chapter for finding and fixing misleading indicators in your business
- Numerous figures, including graphs, illustrations, and tables
Table of Contents
Chapter 1. What indicators indicate
Chapter 3. Measuring accurately with instruments
Chapter 4. Rating, scoring, and ranking reliably
Chapter 5. How people react to measurements
Chapter 6. Why performance dashboards mislead
Chapter 7. Focusing employees with measurements
Chapter 8. Going against the flow: navigating changing data streams
Chapter 9. How averages distort indicators
Chapter 10. Opposing views: Are you being misled?
Chapter 11. Misleading ourselves with measurements of risk