Tips for Using Statistics Well

Statistical tools are gaining in importance as the volume, variety and velocity of data increases. These capabilities are built into spreadsheets, EPM tools, reporting software, and business intelligence packages at rates of increasing sophistication. The power of statistics is the ability to understand the world and make meaning from the increasing piles of data that accumulate around us. Statistics is a critical tool to work with data, interpret key messages, make predictions and take action upon that wealth of data.

If we are not using these tools, then we are sub-optimizing. If we are using them incorrectly, then we are in danger of drawing false conclusions. If we don’t speak the language, we are at the mercy of those who do. Here are some questions to ask that will help all your statistics and data projects:*?

• Which came first, the data or the question?
• What data do you have, and is it the right data for this purpose?
• Can you tell me about the source of the data you used in your analysis?
• Are you sure that the sample data represents the population?
• Are there any outliers in your data distribution? How did they affect the results?
• What assumptions are behind your analysis?
• Are there conditions that would make your assumptions and your model invalid?
• Why did you decide on that particular approach to analysis? Did you use multiple approaches?
• What transformations did you have to do to the data to get your model to fit well?
• Did you consider other approaches to analyzing the data, and if so, why did you reject them?
• How likely do you think it is that the independent variables are actually causing the changes in the dependent variable?
• Is there additional analysis that can be done?
• How do you know that the correlation is causality?
• Did someone check (and duplicate) your findings??
• Be careful that you are managing the numbers — don’t let the numbers do the managing for you, or of you.

The rewards for being fluent in statistical tools are many. We become more efficient and effective in everything we do and can keep pace with the new normal of capabilities driving new operating models. We can remain conversant with our partners in marketing, supply chain, and other areas that are already using statistics in their daily work. This will help us to provide effective challenge to the business and drive decisions as valuable business partners. Without it, we lack a seat at the decision-making table. The capabilities to apply data are expanding as well; it is our responsibility as financial stewards to make sure we are prepared to harness the data and apply our tools appropriately.?

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For more information about the statistical tools most used or misused, check out these?Five Statistical Tools and Tips You Need to Focus On.

*This list relies heavily on Keeping Up With the Quants, Davenport & Kim, Harvard Business School Publishing Corporation, 2013. “Good questions about quantitative analyses,” page 171.?

We are always looking for more tips ... please add your own in the comments section.