Statistics and Performance

I always thought that Mark Twain was purported to be the author of one of my favorite quotes:

“There are three kinds of lies: lies, damned lies and statistics.”

I have come to find out that in his own autobiography Twain attributed this quote to a nineteenth century British statesman and former Prime Minister Benjamin Disraeli. This fact perplexed me slightly so I continued my research a little further using those modern bastions of all knowledge, Google and Wikipedia. After an exhaustive five minute search I found that the general consensus is that no one knows for certain who the author of one of my favorite quotes is. This fact will make it reasonably difficult to give attribution in the future should the opportunity to use it come up again.

Be that as it may, it may be time for me to take the slightest exception with one of my favorite quotes. When you are looking at the performance of a business, the numbers don’t lie. Now the way the numbers are arranged can sometimes be confusing or even misleading, so the business leader needs to be aware and careful.

I don’t say this too loud or too often, but I think I may understand numbers reasonably well. Physics, Mathematics, Finance, I have studied them all. And believe it or not, to one extent or another they are all numbers based disciplines. In addition to this degreed book learning, I have had what could almost be called a moderately useful stint of practical numerical application in the business world.

I sometimes use this unbridled numerical capability and familiarity to complete the most difficult of Sudoku number puzzles in the USA Today newspaper, or various in flight airline magazines. Just to stay in practice and make sure that I still “have it”.

Since it appears that this is going to be a quote based discussion, I might as well continue in that vein. Hippocrates, the ancient Greek physician (hence the source of the physicians “Hippocratic Oath”) said:

“There are in fact two things, science and opinion; the former begets knowledge, the latter ignorance.”

I think the corollary here is that if it cannot be expressed in numbers in business it is not fact, it is opinion. I have written and spoken in the past about the need for leaders in the business world to become increasingly more familiar with “numbers” of business as they matriculate up the leadership ladder. There may have been past instances of corporate wizardry where a leader intuitively knew what needed to be done (maybe Steve Jobs, or Bill Gates fall into this category), but their moves were invariably backed up by the analysis (numbers) justifying their moves. For the rest of us, as Robert McNamara said:

“Get the data.”

While I am muddling along focusing on equating science, facts and numbers, I probably should pay at least some heed to the power of opinion. While the truth may be out there, it will be people’s opinion of it that drives its valuation. As John Maynard Keynes, a man who is credited with some of the very foundations of economic theory (think of the source of Keynesian Theory) said:

“A study of the history of opinion is a necessary preliminary to the emancipation of the mind.”

Okay, enough quotation roulette. I hope you get my point, whatever it was.

Now back to the topic; in the business world, the proper statistics, when properly presented and interpreted are invariably a good indicator of business performance. That is correct. Statistics, which are the indicators associated with past performance, are usually good indicators of future performance. I understand that Mark Twain, Benjamin Disraeli and whoever actually created one of my favorite quotes regarding statistics are all probably collectively grumbling, wherever they are, but this is the case.

This brings us to probably the most common and clichéd quote in this dialog:

“Past Performance is Not Necessarily Indicative of Future Results”

We have all probably seen it or read it on just about any investment prospectus ever written. Why is it there? To make sure that we all know that just because an investment that has done well in the past does not mean that it will continue to perform, or do as well in the future. Investment firms don’t want anyone to cry “foul” if they have not interpreted the statistics properly or if a statistical performance anomaly occurs in the market. So with this in mind I now ask the following question:

When we have the choice of making an investment, or are reviewing the continuation of an existing investment, which investment alternatives do we choose: those that have done well in the past, or those that have done poorly in the past?

All things being equal, and pursuing an intelligent risk diversification portfolio, understanding long term investment return and interest rates, blah, blah, blah…..we almost always pick the one that has done well in the past expecting (hoping) that all things being equal it will continue to exhibit the same performance traits going forward. We very rarely select the one that has been performing relatively poorly expecting (hoping) that it is going to turn around. Why do you suppose that is?

Welcome to the world of statistics. You have taken the data points associated with performance in the past, extrapolated the line or curve forward and made a choice and prediction about the future. Statistically speaking that is probably the correct choice. But this isn’t a discussion about investments. It is a discussion about business. And the same exact concepts apply.

Herein lies a rub. Statistics can only be misleading if you don’t understand the underlying numbers. Hence my predilection and continued haranguing regarding the necessity of leaders being numerically literate. Remember there is another quote that may also be incorrectly attributed to Mark Twain:

“Figures don’t lie, but liars do figure.”

The author of this quote also appears to be shrouded in the past as well, but like all the other good quotes of the period, it was attributed to Twain.

Let’s look at a simple statistical example to make my point. Let’s say that in the next measurement period (it doesn’t matter how long the period is) that a business sells one more product unit than it did the previous measurement period. This is good right?

Basically the answer is “yes” selling more, any more is usually always good, but how good? If it is your first measurement period in business, it’s hard to say how good without more data (statistics). If you only sold one unit the last period, and then you sell two units this period, that is sales growth, but it is still difficult to evaluate without more data. If you sold a thousand units last period, then one more this period might not be statistically important.

On the other hand all of those responses could be changed depending on the cost and value of the product being sold. If you are selling nuclear power plants as opposed to canned hams, a single unit growth in sales could be seen as spectacular, whereas the sale of a single additional canned ham might not be a cause for much celebration.

Statistically speaking selling one more than nothing is infinite sales growth but it is still only one unit. Selling one more than one is one hundred percent growth, but it is still only two units. Selling one more than one thousand is only one tenth of a percent growth. All represent the same one unit growth, but can be represented significantly differently in the statistical growth example. The wary leader needs to always be aware of how statistics are being used and the story that is trying to be portrayed.

Again, when using data and statistics unless a business can specifically quantify what changes it is going to make and how those changes are going to be translated into performance, like your investment decisions discussed earlier, you would expect the business to perform very much in the future as it is doing today. It is through this process that the market valuates companies, and it is through this process that companies provide their future forecasts of performance.

Leaders always need to be aware that statistics are extensions of the data. They are the way that the data is being presented and interpreted. The data is the fact. It is the consistency of the statistic, the interpretation of the data that is the key. Understanding the underlying numbers, and the analysis and statistics associated with them is required and essential for the successful leadership of the business. To not be able to do so is to be at the mercy of those that do.

Because as Mark Twain also (and finally) said (and this one is actually directly attributed to him):

“Facts are stubborn things, but statistics are pliable.”

Kung Fu and the Laws of Change

It seems that I do have a tendency to talk about change in business, a lot. I think one of the main reasons for this is that some of my initial leadership roles involved being charged with either changing and transforming some underperforming organizations, or shutting them down. No one likes or wants to shut an organization down. It doesn’t matter that it was not your leadership that caused the performance issue. Shutting down an organization is an event that will stay with you for a while.

This is what has led me to coin what I humbly position as “Gobeli’s First Law of Change Management”. It goes something like this:

No matter how many businesses you grow, expand and improve in your career, shut down just one business because you could not get it to change in order for it to survive and you will always and forever be known as a “hatchet man”.

A hatchet man is a person who is recognized in the organization as someone who causes people either voluntarily or involuntarily to leave the company. They lay off. They fire. They close. When they walk into a room or meeting, all conversation momentarily stops. Other people keep track of them and never turn their backs on them. Once given the label, it is almost impossible to shake it.

This fact has led me to coin what I humbly position as “Gobeli’s Second Law of Change Management”. It goes something like this:

A “Change Agent” is someone who when faced with the option, will almost always do whatever it takes so as to not be labeled a hatchet man.

When faced with the down side prospect of being labeled a hatchet man as opposed to the upside opportunity of changing a poorly performing business into a more profitable one, I think it is easy to see why I usually chose to be a change agent. It really isn’t so bad once you understand some if the realities associated with being a change agent. You need to understand that even though you are avoiding the down side of shutting down a business there are still many obstacles that will need to be overcome.

This is what has led me to coin what I humbly position as “Gobeli’s Third Law of Change Management”. It goes something like this:

No matter how necessary the change is that you are leading, no matter how much it will improve profitability, efficiency or customer satisfaction, there will be people who will feel that they have something to lose as a result of the change, and they will resist the change at every opportunity.

Everybody understands in some esoteric way that change must occur. They just don’t want it to happen to them. They want someone else to have to change. They may already have plans and strategies that conflict with your change. They may have organizations that are dependent on the change not happening. (I am sure that there were buggy whip product or service or maintenance groups that were not happy with the change in corporate direction when the automobile came about). They in short have a vested interest in the status quo.

The point is that they will take the short sighted approach and fight change. The fact that the alternative would eventually be the emergence of a hatchet man on the situation does not seem to matter. That will be then and this is now.

In my rather arcane way this change resistant conflict has reminded me of an episode of the old television show Kung Fu that I saw as a kid. For those of you unfamiliar with the show, it had David Carradine as a Kung Fu master monk wandering around the old west looking for his brother. That was the extent of the show’s entire plot. There would be a requisite martial arts action sequence and there would also be a requisite eastern philosophy lesson in each episode. As a kid I loved it.

I am sure that it must have had some influence on me and my resulting studies of martial arts and readings of eastern philosophies. Although I have been talking about conflict and resistance to change, I am going to use one of the show’s eastern philosophy lessons here.

The lesson that I am going to refer to dealt with attackers and defenders. The following is a paraphrase of the lesson. Please read it with something of an Asian accent in your mind to get the full value and effect since that is the way the Kung Fu master sounded when he intoned it to the then monk – student David Carradine:

Attackers must win to be considered a success. Defenders need only survive to be considered a success.

The question that must first be answered when making sense of this quote is to understand if you are the attacker or the defender. The answer is that as a change agent you are a little of both. You are attacking the current status quo that you are wanting to change, and defending your proposed change plan. However when you look at the bigger picture, change agents are attacking and those that are resisting the change are defending.

With this in mind, and knowing that you must “win” the change related contention points in order to implement change, I will now coin what I humbly position as “Gobeli’s Fourth Law of Change Management”. It goes something like this:

Before engaging in a change management battle, get the data. Get all the data. The data will be your friend. It is much more difficult for people to argue with and resist numbers than it is to argue with and resist opinion.

Now a certain amount of attribution for this law needs to be given to Robert McNamara. He was one of the first automotive industry “whiz kids” and a member of President John F. Kennedy’s cabinet in the 1960’s. He was a great proponent of data acquisition and analysis. He was called a “whiz kid” because he seemed to be right quite often. This is probably because he had acquired the data and analyzed it better than everyone else at the time. Go figure.

Now if you have acquired the data and properly analyzed it, this will force those that are resisting your change to rely on something other than data for their resistance. They will call in other topics and non sequiturs as reasons for their resistance and defenses for their positions. These reasons and defenses can be quite vociferous and colorful, but data usually wins. They will resist the change with an appeal to the “greater good” argument for the company. They will counter with their own incremental improvement. They will talk about the non-monetary effects of the change.

In general there will be great keening, rending of clothes and gnashing of teeth.

As an aside, I once had a group try to argue that there were more hours in a man year in one country as opposed to another as one of the reasons to resist the pending change. Desperation when it comes to resisting change knows no limits.

In the final analysis, if you have followed these simple laws for effecting change you should be successful. The one note of caution to post here is to understand when you are dealing with a business that does not want to change. Sometimes despite what may be some of your best work, the decision to change will just not get made.

We all need to understand that we may not be acting with all the data that those who must make the final change decisions have. There can be other plans. There can be other strategies that you may not be party to. On the other hand, they may just like the way things are done now.

You need to takes these pieces of information into account when trying to be a change agent as opposed to a hatchet man. It is also a good idea to remember that doing nothing can eventually be an invitation for a visit by those that swing not a hatchet but an ax.

Recognizing Talent Versus Commitment

There is an old “music” joke that goes:
Who is that guy standing around with the musicians?
The bass player.
I know this joke because I am a bass player; or rather I try to be a bass player. I took many years of lessons. I have studied, understand and appreciate much of music theory. I practice. I am committed. I have worked to try and turn myself into a serviceable bass player. I enjoy all of it. There is only one thing holding me back from being a truly outstanding bass player.


I have only a modicum of musical talent. I understand this, and it doesn’t bother me a bit. I love to play. It just makes me want to work at it that much harder. I take what I have and try to get the most I can out of it. Whether it is rehearsing with the band or playing on stage at the last jazz festival, I really like doing what I am doing. The challenge to perform is always there.

I have seen real musicians. Those with real talent. Their ability to learn, play and adapt to the music is amazing. The ease with which they play and perform is amazing. If at all possible, I always try to be in organizations (bands) where I am challenged to play and perform with those that are more talented than I am. Playing with musicians that are more talented than I am has made me in turn a better musician as well.

I once asked the leader of one of those bands that I played in why he selected me as the bassist when there were other bassists with more talent available to him. His response has stuck with me.

He said that sometimes it wasn’t all about talent. There also had to be a commitment and that sometimes the level of commitment could outweigh the level of talent. He said not to get him wrong and that there had to be a reasonable level of talent and ability, but those that work hard and are committed can also perform to very high levels in the right environment. He was looking at the overall sound, arrangement and structure of the band, not just the talent level of each of the members.

I was very pleased to hear this as it gave me additional impetus to continue to work hard, and practice in the effort to improve.

So what does this story about my musical aspirations and talent level have to do with business? I think it points out that there are multiple dimensions to the structure of a business team, just as there are to a musical combo. While talent and aptitude are key components of each team member’s makeup, there are others, such as commitment, that come into play when assessing the team.

This band leader had recognized that there was both a minimum acceptable talent level he was looking for and a commitment level that he wanted. Once we had all demonstrated that we all had the requisite skill levels, with some having more than others, it became a question of other less definable considerations to be associated with the selection process. When you think about it, business operates in much the same way.

A while ago I noted how many of the military leaders throughout our history were not necessarily identified as the most talented or smartest members of their respective military training academies. Yet somehow they advanced to the highest levels of their selected disciplines ahead of those that were at least initially more highly regarded and supposedly more talented. Again all of them obviously had the requisite skill levels, but it was something else that enabled those with supposedly less talent to advance.

I am also a professional hockey fan. I was not particularly a hockey fan when I was younger, but have become much more so a fan as I have grown to understand the game. I now regard the game as an elegant combination of speed and skill where those that may not be genetically selected specifically because of their height or size (as in some other professional sports) can compete.

I just recently read an article written by a hockey scout on what they look for when they are scouting young hockey players as potential draft choices or future professional hockey players. Again some level of talent is always a minimum required baseline, but what they said they looked for in a hockey prospect was what they called the “compete level”. How hard did the skate? How hard did they work? How hard did they battle in competitive situations? Did they take it easy sometimes or did they play hard all the time?

This again sounded suspiciously like assessing their commitment level. They wanted to know if the prospect was getting by on just their talent level or did they also try to outwork the competition? Having the talent and ability to succeed does not necessarily mean you have the desire to compete at such a level in order to succeed. When the time comes and you face a competitor with a similar talent level it will be some other factor, such as commitment that will decide the outcome.

Business, sports and even music are all competitive structures. As you progress through each of them there is a continual selection process that goes on. The further you go, the higher the talent level of all participants, and it becomes something else that separates the participants.

In music you start out at the very lowest levels as a beginner. You take lessons and work at it and practice. If you have talent, stay with it and play well enough you can get to play at amateur and even professional levels. It can be a lot of fun. It is for me at least. It is the rare talent that gets combined with the proper level of high commitment that makes music that is played on the radio, or gets to play for the large paying audiences.

In hockey you start out in the minor leagues or in schools, and again it is the rare combination of talent and “compete level” that get combined that enable the player to progress through the various levels of minor leagues and make it to the highest levels of professional hockey. It is interesting in that there are players in the league that are recognized for their talent levels, and there are players that are recognized for their compete level, and there are very, very few that are recognized for both.

In business the progression from entry level to business leader also has several different levels of responsibility that you must pass through. At each level there is an almost requisite talent level that all participants must have, otherwise they would not be there. It is here that their commitment or “compete level” will begin to differentiate them. Can they get the job done? Do they get the job done? Why or why not?

It has been my experience that much of this commitment level manifests itself in the level of preparation that an individual brings to their assignment. Have they done the preparatory work? Can they anticipate and prepare an answer to the questions that they will invariably be asked?

As I have noted in the past, I see several parallels between music and business. In music my commitment level drives me to practice rehearse and prepare so that when the time comes to step on the stage in front of an audience, I can be confident in my performance. In business it is the preparation and ground work that are the manifestation of this type of commitment. Anyone can step to the front of the room and present slides to the audience, but it is those that are committed that have taken the time to understand and anticipate the questions and the next steps that are confident in their performance.

Despite all the practice and preparation, I still get a little nervous every time I go up in front of an audience. I don’t suspect that I will ever lose that.

Lead, Change or Get Run Over

Normally when I start off on an article I have a pretty good idea of the topic that I want to cover. Call me old school but this antiquated idea of writing coherently about a single topic appeals to me. That will not be the case this time. I have been thinking about change lately and I decided that I need to step outside of my comfort zone and practice a little of what I have here to fore been preaching. Hang on; it could be something of a bumpy ride, at least for me.

Since I have just mentioned change, I think we will go there first. I am going to propose what I humbly call “Gobeli’s Axiom of Change”. It goes something along the lines of the following:

In order to change, you must do something different.

There are so many wonderful quotes about change that are available. I have used many of them in the past. I am particularly fond of the quotes attributed to Albert Einstein regarding change. He seemed like a pretty smart guy to me but I won’t use any of his quotes again here. If you want to read them, go Google “Einstein quotes change” and see what you get. There are not only a bunch of quotes from Einstein; there are a bunch of sites that have a bunch of quotes from Einstein.

However it has been my experience in business that change is not about quotes. It appears to actually be some sort of arcane concept that business people pay little more than lip service to. They are more apt to put up posters encouraging change and quote Einstein when it comes to change, than actually changing anything.

The idea of change and the quotes surrounding change make it seem like a lustrous concept that is neat and clean and simple. It’s positioned as if it is your patriotic duty in business to change. Change however is not clean and simple. It takes effort. It involves risk. It is invariably messy. That is just the way change works. This is because you are usually changing from something you know, to something you don’t know, yet.

It is precisely for these reasons that many managers will talk glowingly about the need for change, but will never ever do anything different. Doing something different would mean that there would have to actually be some change involved and that would subject them to the effort, mess and risks noted above. Therefore there is usually a significant amount of discussion regarding change and the need for change, but due to the inherent reluctance to change anything, very few things are ever done any different.

When it comes to change, remember what Einstein said:

“Insanity is doing the same thing, over and over again, but expecting different results.”

Based on this and other topics that I have covered in the past, one could infer that leading change, or leading anything in business for that matter involves more effort, and more risks than following someone else who may be doing the leading. I think it is pretty safe to say that is the case. In the past managing has been much easier and less stressful than leading.

The shuffling of papers and paying lip service to all the change initiatives used to be a safer, lower profile approach to business. There are many people who have happily gone through their careers on this path.

If that is truly the case, it brings up the question:

Why would anyone want to lead?

The simple answer to this question is:

Because things have changed.

It used to be that people who took jobs and worked reasonably hard were pretty much assured that they probably had a job for the rest of their lives. They had reasonable job security and could look forward to a pension when they retired.

As Dorothy said to Toto in the Wizard of Oz:

“I don’t think we’re in Kansas anymore.”

When was the last time you heard of someone having job security? How about staying at the same company for an extended period of time? Lastly, when was the last time you heard of anyone talking about a pension when not referring to a corporate or municipal bankruptcy?
I don’t think this is a case of Dorothy and Toto leaving Kansas. It is more like Kansas slipping away out from under them when they weren’t paying full attention to the landscape.

With all that being said, it still doesn’t fully answer the question of why anyone would want to lead. This reminds me of a college survey that I once read a long, long time ago in a galaxy far, far away. The survey asked the question:

Which is a bigger threat to society: Ignorance or apathy?

The general consensus at that time was that no one knew, and no one cared.

I think the parallel here is that leaders do know and do care about what the threats to business are, and what needs to be done to avoid them. We have all heard the more than trite saying that the only constant in business today is change. I do not necessarily think that is true, or we would all be experiencing more change and it would be much easier to change than it apparently is. If change is truly a constant we seem to have far too many people constantly fighting against change.

I would not focus on the change function as a topic unto itself, but rather as a result of instability. When business seemed to be stable (and pensions were available) there was not much in the way of change. Now even this was not entirely true. Technology continued to change, but the way business and businesses worked remained reasonably constant. Hence the ability for the risk adverse follower to still make out a reasonable career existed.

The only thing stable about today’s business paradigm (I actually hate that word, but it does seem to fit well in this context) is the instability of business. I worked for a company that was once recognized as a world leader in their market with more than thirty billion dollars in annual revenues, and less than seven years later the company was bankrupt and gone from the market landscape.

In a business world where apparently so many do not know what to do, or are unwilling to venture forth with a plan, it would seem to me that the best way to go now is to lead. When it turns out that everyone is taking the safe route and everyone is following everyone else, then everyone ends up at risk. Inactivity or failure to act now presents a bigger risk than taking action, even the wrong action.

Leaders understand the risks involved with taking a stand or implementing change, and do it anyway. They don’t take unnecessary risks. They understand that the risks associated with today’s business environment are multiplied if they do not take action. They see that what was once a stable landscape is no longer stable. They understand that waiting for someone to tell them to take action is riskier than identifying the action that needs to be taken and then taking it.

Despite my affinity for quotes from Albert Einstein, I’ll close with a quote from someone else. John Cage was a renowned musician and composer. He said:

“I can’t understand why people are frightened of new ideas. I’m frightened of the old ones.”

In an ever more unstable business environment leave it to a musician to capture the essence of the new structure. Go figure.