by LAURA LEMCO, Certified Valuation Analyst — Capstone Valuations

A business associate asked me about a key performance indicator for a project she was working on with a client. While I could have given her a simple answer along the lines of, “The benchmark is 30 percent,” I realized that without knowing the details of the whole project, one “good” number plugged in with a lot of bad numbers was potentially harmful.

We have come to expect quick solutions from big data, but we cannot forget where that data comes from — a lot of little data. While averages and benchmarks can be helpful, every business and each project have many variables. To find the best solutions, we need to look at all the inputs for that specific project. Sometimes we give our best guess for one or two variables, but if all the pieces of the puzzle are guesses and averages, you have the classic garbage in – garbage out.

To put it another way, sometimes we look to benchmarks and averages to find a solution, instead of building a solution and then using the benchmarks to compare our performance to the standards and evaluate our solution. There are some instances when knowing the averages can be helpful, but if you build a process, project or product with average inputs, the best-case scenario is average results. Is your goal to be average?    

I understand we are all busy; we want those quick solutions, but quality truly does take time. Slow down and do the hard work. Whatever you are trying to figure out, you are probably working on that project because you have unique knowledge and qualifications to do it. Use big data for guidelines but rely on your unique attributes to come up with something better. Define each variable in the process of providing that great product or service. Then figure out the parameters that each variable needs to become your best solution.   

So, what was my answer to my business associate? “That is complicated. It depends on how much the client is selling, charging, their costs and customer participation.  The truth is, that type of program can be an awesome win-win for the customer and the business if done right. But it is a dangerous, complicated game. It takes work to build the right program, sell enough to make it work and then maintain it over time. I cannot give you one piece of the puzzle without knowing all the components. If the business client is unable or unwilling to do the work, yes, I can do it for them. But it would take days, and I would charge $10,000 to develop the program with an ongoing fee to audit the program each month and tweak as necessary.” She has not unfriended me, yet…

The point is, do the work that you are uniquely qualified to do, or pay someone else to do it right. Don’t follow the path of least resistance and use averages from big data as if they provide infallible solutions rather than guidelines. Benchmarks and key performance indicators are wonderful tools when used appropriately!