Charts and Graphs – Organizational Decision Making to Solve Problems

Human beings are hard-wired to respond and interpret visual clues to make sense of their surroundings.  Visual clues are just as effective when we want to communicate in business, with customers and staff. Charts and graphs communicate more information in a shorter time than reading words or interpreting columns of numbers. You already know this, but let us take the next step.

Whenever we can achieve a shared understanding of what we are going to do in a business, we have set the stage for easy achievement of the goal.  The results just seem to flow and team performance improves without any apparent effort. The next beneficial side effect is that people become more satisfied with their contribution.

The big question is how can this be achieved?

We often use a whiteboard and scribble diagrams on it to explain our ideas to a group.  If we take this to the next step we can give smaller groups their own whiteboards and give them the task of creating their own diagrams, but then we are confronted with the task of pulling together charts or diagrams that cannot be readily connected.  We realise that the big picture only emerges for the whole group when we achieve the difficult bit – linking up the individual bits of our picture to create the whole.

The bit that is missing is a framework or a chart structure that enables the parts of the picture developed by small groups to be linked up into a picture of the whole. 

I have two stories for you that illustrate surprising ways that make this work.

Tribal elders and satellite images in the Australian outback.

The Pitjantjatjarra people of Central Australia are the traditional owners of a huge area of trackless desert country, and have been for 40,000 years.  In the early ’90s the Australian Government were looking for a way to assist them to manage the land and deal with the pressure for commercial development of their resources.

The Australian Survey and Land Information Group (AUSLIG) came up with the idea that the Pitjantjatjarra people could use satellite images and land information systems for this purpose, and the government funded the project.  The AUSLIG team consulted extensively with tribal elders, sitting under gum trees drawing pictures in the sand with writing sticks.

The AUSLIG guys put together a set of satellite images of a large area of desert and overlaid them with the known man-made features.  They loaded them into a laptop computer and set up a power supply from a small lightweight generator.  The flew from Canberra into Alice Springs then set off into Pitjantjarra country in a small 4WD convoy.

After a few hundred kilometers of desert tracks they found the group of elders, and set up the laptop and the generator under a gum tree for a training session.  The old guys clustered around the screen of the first computer they had ever seen, and looked at the image of the place they were sitting in on the screen. One of the elders pointed to part of the screen and waved his hand around at the surrounding landscape, asking “where is this?”

The AUSLIG guys were able to point to a hill in the distance, and the Pitjantjatjarra elders got it instantly.  They had a precise and detailed understanding of the relationship between the satellite image and the features in their land.  They made the connection between 40,000 years of learning how to find their way from waterhole to waterhole, and the most recent advanced imaging technology. It was almost as if they used a view from above to find their way around, despite none of them having been in a plane.

This is the real power of the visual in taking people to a new level of understanding.  A group of highly intelligent people with very limited euro-style education were able to learn how to use sophisticated Land Information Systems on modern computers to make decisions about the resources they controlled, because they had a common frame of reference, a map.

A visual frame of reference for business thinking

So many people I have met have difficulty making sense out of the accounting numbers that they are expected to use to run their businesses.  They think about the activities that have to happen to serve their customers, deliver the goods, or finish their projects.  The cash and the process that turns it into an accounting statement is an arcane mystery that happens in the background.  They take a sudden interest in the accounts when they run out of cash.

People have difficulty interpreting accounts because they lack a frame of reference to connect the $ numbers to the physical activities that are the stuff of management. It should not be so hard.

The solution lies in a particular form of chart; a “plumbing chart”.  This is an odd name for a chart of financial stuff but it had been adopted by a group of people I worked with. When I asked why, I was told that they used it because there should be no leaks. Just like good plumbing should not leak water, management systems should not leak cash.

So how do you get your group to create a “plumbing chart” of your business unit.  This is a way that works, step by step.

  1. Assemble your group, and explain what you are going to do. Have pencils, erasers and large sheets of paper available, as well as a whiteboard if you believe it will help.
  2. Start with your unit objective; in most businesses this could be Gross Profit $. Put this in a box on the left hand side of the whiteboard.
  3. Now ask “What are our drivers of gross profit?” The usual answer is sales revenue minus costs. put the answers in two boxes linked by arrows to the Gross Profit box.
  4. “What drives sales revenue?”  The answer is likely to be “number of transactions x $ per transactions”.
  5. “What drives Cost of Sales?” The answer is likely to be “number of units sold x cost per unit”>

By now they should be getting the idea so you can split them up into work groups to tease apart their part of the activity that they contribute to the whole business.  They will be able to draw a small plumbing chart of their own activities and costs. After an hour or so you can pull it together and share progress, with each small group putting their part into a whole chart. You will finish up with an imperfect chart of the business. Everone will get the picture and believe it because they created the picture.

Now the difficult bit starts but do not worry. You will have everyone contributing to the solution.  You need to define the formula that links each box to the next, but the algorithms are simple, just plus, minus, multiply or divide. Anyone can do it with a little focused thought.

The next step is to get some numbers of activities and $ and test your chart. The first time it will not work but that does not matter. You can refine the details later.

So what have you achieved.  The whole group will have learned about their contribution to the success of the group, and they will have understood how their day to day decisions affect the performance of the business. If you finish the chart you will have a fantastic management model for analysing and communicating real business performance. Because you get your $ numbers from the accounting system your plumbing chart will not leak.

How can it be so simple?

The whole management team from general manager through to the supervisors of the gangs of plumbers and gas-fitters that did the work got together to work their way through the process set out above.  Above all they knew the system they built could not be allowed to leak.

By the end of the day they had created their chart of their business.  The general manager learned that some of the make or buy rules imposed by head office were ripping the operation apart and forcing the supervisors to make bad decisions.  They had proved it.  He was able to get the rules changed.

The supervisors had learned how their work depended on other parts of the business and how their work quality affected profitability.  They had learned what the accounting numbers really meant, and they did not have to do an accounting course to achieve this.

The business improved so dramatically that it became the high performer is a large organization, and the model for other units. It was a real win-win-win success.

Harness the visual power of a plumbing chart

The two stories illustrate the power of the visual in communicating ideas and getting meaning out of numbers. Charts maps and diagrams can be a simple as a writing stick in the sand, or as complex as a computer program. My advice is to keep it simple so that everyone can contribute.  After all, the people who know how it really works are the people who do the work.

When they know how  their successes add up the profit in a business, everybody wins.