In my work life, I’ve discovered that dread of math, especially statistics, is widespread in the business community. So let’s tackle something fun: the concept of correlation.
When developing performance measures in business, we sometimes face a stumbling block in that the thing we desire most to measure is, unfortunately, impossible to measure directly. So, we have to look for a “proxy” measure that is correlated.
Let me illustrate with an example from daily life. Let’s say I want to know if I am maintaining my ideal weight versus gaining weight. It’s easy to measure that directly – hop on the bathroom scale. But, unfortunately, I can’t. I travel constantly so I do not have a bathroom scale with me most days.
So I have a correlate that I measure. I always carry the same pair of skinny jeans with me. As long as the jeans will button, I am fairly certain of what the bathroom scale might say, if I had one. The fit of my jeans is correlated to my weight. Now, a statistician will remind us that “correlation does not equal causation.” This simply means is that I need to consider that other things may be causing my jeans not to fit – for example, maybe they shrunk in the wash. But understanding this, I am reasonably certain that they are a good proxy measure while on the road.
See how easy it was to master two important concepts for measuring performance in business – Direct Measure and Correlated Measure? It’s all about the attitude!!
Author: Gail Stout Perry
Gail is co-author of The Institute Way. With a career spanning over 30 years of strategic planning and performance management consulting with corporate, nonprofit, and government organizations, she enjoys speaking, training, and writing, sharing her experience with others.