The danger of the 'average' lies in its deceptive simplicity, which masks the intricate variability of data, leading to oversights that can fuel misinformed decisions and propagate misleading narratives.
The Problem with the Average
There is a common saying in statistics: “If your head is in the oven and your feet are in the freezer, on average, you feel just fine.” This humorous remark underscores a serious issue with relying solely on averages – they can often be misleading and misrepresented.
The problem with averages is that they can easily obscure the reality of the situation. For example, if one student scores 100% on a test and nine other students score 0% in a classroom, the average score would be 10%. This gives the impression of a low-performing class, but fails to highlight the outstanding performance of the one student. Similarly, averages can offer a distorted view in the realm of income. If a billionaire moves into a small town, the average income of the town would skyrocket even though the majority of the residents’ income levels remain unchanged. This leads to skewed perceptions and inequality, often called the ‘average trap’. Consequently, while averages can be useful for providing a quick snapshot, they mustn’t be the sole metric relied upon for decision-making or understanding a situation.
So why do Businesses Rely on averages?
Businesses often rely on averages because they are simple to compute and easy to understand. They provide a useful starting point for data analysis by summarising a large amount of data into a single figure. This simplification of data allows businesses to make quick assessments and comparisons.
For example, the average sales figure of a product can give a general idea of its performance, or the average customer review can indicate the overall satisfaction level. Moreover, averages can be useful in forecasting trends, setting budgets, and assessing overall business performance.
However, as previously mentioned, they can also obscure the diversity and complexity of the underlying data.
Although tempting for many businesses, the simplicity of averages does not equate to providing insightful data. Averages merely provide a midpoint, effectively smoothing out the highs and lows of data, thereby erasing the nuances and subtleties that could be pivotal for strategic decision-making. This over-simplification can lead to misinterpretation of data, with significant implications. For instance, a business may target the wrong demographic based on average data, or misallocate resources due to an inaccurate view of performance metrics. It’s, therefore essential that businesses supplement averages with other statistical tools such as median, mode, or range to gain a more comprehensive and accurate understanding of their data landscape.
Therefore, businesses need to use them judiciously and in combination with other statistical measures to ensure a comprehensive understanding of the situation.
The Pitfall of Averages
In its simplest form, an average is a single number that represents a group of numbers. It’s calculated by adding all the numbers and dividing by the number of values. While this can provide a basic dataset understanding, it often fails to capture the full story.
For instance, consider the average income in a community. If Bill Gates were to move into a small town, the average income would skyrocket. However, this doesn’t mean that everyone in the town has suddenly become wealthier. The disparity between the average and the median (the middle number in a sorted list of numbers) can paint a distorted picture.
Similarly, in the business world, if a company relies solely on the average sales per store to determine its success, it might overlook underperforming stores. If one store has exceptionally high sales, it could artificially inflate the average, masking the struggles of other stores.
Some Real Life Examples:
Call Centre Answer Time
Consider a scenario within a call centre. Let’s say the average answer time reported is 3 minutes. At first glance, this might suggest an efficient operation; however, this average could mask a wide range of answer times. What if 50% of calls are answered within 1 minute, but the remaining 50% aren’t answered until 5 minutes or later? The experience for those customers waiting longer would certainly not reflect the seemingly acceptable 3-minute average. It may even lead to customer dissatisfaction and potential loss, a serious concern for the business.
Recruitment Time To Hire
When contemplating recruitment, the average time taken to fill a position, also known as “time to hire”, might prove misleading. An organisation could report an average hiring time of 30 days, but this figure alone does not clearly understand the process. Perhaps several roles were filled in a week, whilst others took several months due to their complexity or the scarcity of qualified applicants.
Hence, while the average suggests a month-long recruitment process, there is significant variation affecting both the organisation’s planning and candidates’ experiences. Consequently, it’s imperative to always dig deeper into averages, ensuring they do not obscure a more convoluted reality.
It’s therefore important not just to rely on an average but also to look at the distribution of data, understand the range, and consider other statistical measures like median and mode. These can provide a more granular understanding of performance and highlight areas for potential improvement.
Beyond the Average: Exploring Alternatives
To understand data more comprehensively, we should look beyond averages. Consider the data distribution, the outliers, and other measures like the median and mode. Understanding the range and variance can also provide insights into the spread and inconsistency of data.
For example, the average score might show a generally happy customer base in customer satisfaction surveys. However, delving deeper into individual responses might reveal many highly dissatisfied customers whose voices get drowned in the average.
The Right Way to Use Averages
- Averages are not inherently bad; they can offer a quick snapshot of data and simplify complex datasets. However, it’s essential to use them judiciously and understand their limitations data representation
- Use averages as a starting point, but don’t stop there. Explore other statistical measures to get a comprehensive understanding of your data.
- Be aware of outliers. They can significantly skew your average and create a misleading data representation.
- Leverage technology to help you analyze and interpret data accurately. Tools like can provide valuable insights beyond the average.
So why are averages bad?
While averages can be useful, relying too heavily can lead to misinterpretations and false assumptions. By understanding the limitations of averages and embracing a more comprehensive approach to data analysis, we can make more informed, reliable decisions and truly understand the story our data is telling us. Remember, it’s not just about the numbers but about what they represent.