Context in business comparison charts – how much is enough?
McKinsey Quarterly example
Posted: February 15th, 2010 | Comments: | No Comments »We recently received this “Chart Focus” email from McKinsey Quarterly and found it a bit perplexing. We generally love McKinsey charts for their clarity of message, unbiased presentation, and clean design — but this one missed the mark by leaving the viewer with more questions than answers because of the lack of context.
It’s a complex chart, to be sure. The author is trying to make the case that companies should make bold strategic moves like acquisitions during (or shortly after) the market “trough” of a recession by showing the historical, rapid bounceback of total returns to shareholders after recent recessions. The article from which this chart was taken, was published in April 2009, seemingly at the market trough of the recent global recession. But, in anticipating the bounceback of the market, did this chart provide enough context?
As a rule of thumb, the level of context needed in comparison charts should be determined by how similar the “apples” are. The greater the difference of “apples”, the more context is needed. Obviously, you should avoid “apples-to-oranges” comparison charts (since there really is no underlying foundation for comparison), but even “apples-to-apples” comparisons present problems.
In this chart from McKinsey, it treats historical recessions equally (a key issue when evaluating the point the article is trying to make). Clearly, that is not the case. The recession (or Depression) of 1929-1932 was vastly different than the recession of 1990-1991 on a number of levels, most notably on the severity of the market downturn. Even the outcomes represented in this chart are vastly different by recession, with some achieving 100%+ returns while others not hitting the 100% mark (even at Year 3).
If this chart included the percentage downturn (simply as a value next to each line chart), the reader would be much better off. [The underlying assumption being that the greater the downturn, the greater the bounceback.] They then could assess the magnitude of the current downturn (from it’s peak to the trough), and see which historical post-recessionary environment may be the better gauge.
Obviously, even this improvement may be too simplistic (given other factors like swiftness of downturn/recovery, effects on the global market, access to credit, etc.), but it might help give the reader better context in assessing possible outcomes (and strategic actions that can/should be taken).
So, when preparing comparison charts, evaluate how similar (or different) your variables are, and adjust the level of context appropriately.
