Tag Archive

Tag Archives for " Professional Services KPIs "

Why Your Salary Will Always Be Below Average

By Rho Lall

Have you been on glassdoor lately? Maybe you’ve tried the Payscale salary calculator? Is your take home pay below average? Chances are it is. Use the calculator below and find out.

It’s ok . . . i’ll wait.

Did you check it out? Is that surprising? Before you start planning how to bring this up with your boss you might want to take a second look at that number. I'll explain.

Income follows a power law distribution.

There are two issues with this number. First you will run into trouble if you look for averages where there aren't any. Income follows a power law distribution.

What’s that?

If you have heard of Pareto’s 80/20 rule, that is a power distribution. For income, 80% of the income is earned by 20% of people. Don’t take that literally. 

If we plot out income (see image above) you would see a small number of people (in green) earn a disproportionately larger amount of money relative to everyone else (in yellow). 

If you try to take the average of a set of incomes (any power distribution) your average will wildly misrepresent the truth. It's going to underestimate a small number of people, and overestimate the majority. The average (in blue) makes it seem seem like higher incomes are more common than they are in actuality. Case and point:

Bill Gates walks into a bar and everyone inside becomes a millionaire . . .
 . . . on average.

Accurate, real-time salaries for thousands of careers.

So when you or someone else pulls up a report on glassdoor and circles the average salary, it is likely not telling the whole story.

But. You might ask, what if Bill Gates doesn’t walk into the bar? What if in this bar we only have locals who all work the same job. I like where your head's at. You might be onto something. But no, you’re not.

Income follows a power distribution even on a localized scale, it's just less noticeable. Let's look at SaaS Implementation Consultants in Provo, UT (see right). The average is $50,800. But look at the range. The low is $39K and the high is $78K. There are a few highly paid individuals driving the average up but most consultants probably earn less than 50K. In full disclosure I don’t know. But the point is neither do you.


The average is not representative of this sample. Let alone the salaries that were not reported.

Implementation consultant earn $50,800  in Provo, UT are on average.

Average is not the same as usual and customary.

Here is the second issue. What do you think of when I say average? When we talk averages, most people assume it's a mean. Most people would agree that average and mean are synonymous. That is not the case. An average doesn't have to be a mean. You can google the definition: a number expressing the central or typical value in a set of data, in particular:

the mode, median, or mean

When you read about an average, you could be reading about one of three different measurements. It's easy to be mislead. The government reports median income. Median is the middle number: 50% earn above median, 50% below. But what if I want to know what salary is usual and customary? What do most people make? This is the mode. If you want to get a sense of where the long tail on the power law distribution falls, the mode would work best. It will tell you what the most common salary is. That could be useful.


The lesson:

Don’t hang your hat on average salary. First, averages don’t fit the data very well. You can take the average, that doesn’t mean you should. Second, when you see an average take steps to learn what kind of average it is. Personally, I find the bookends, the high and low values of a range, to be more useful.

Do you want to learn more? If you a SaaS professional that struggles with aligning your team & getting to the truth then you have come to the right place. Find out how to use averages, bookends, and other KIPs to make better use of your data so you can . . .

Confront The Deluge of Information.

Perfect for people that want to become leaders! You don’t have to be an expert math person to be data literate - Download the FREE report.

Why would you want to learn to “Bull Doze Through Bull Sh*t”?​

  • Would you benefit from a deeper knowledge from your data? Probably.
  • Do statistics and data analysis intimidate you? It intimidates most people.
  • Do you want to be able to make use of all the data you have access to, so that you can make better business decisions? Of course you do!

Stop letting your fear of “number crunching” keep you from learning what is actually true. Sign up for my newsletter, and download my FREE Report on making sense of data without becoming a math expert!

Confront The Deluge of Information.

Bulldoze_thru_bullshit

Perfect for people that want to become leaders! You don’t have to be an expert math person to be data literate - Download the FREE report.

Why would you want to learn to “Bull Doze Through Bull Sh*t”?

Would you benefit from deeper knowledge from your data?
Probably.

Do statistics and data analysis intimidate you?
It intimidates most people.

Do you want to be able to make use of all the data you have access to, so that you can make better business decisions?
Of course you do!
Stop letting your fear of “number crunching” keep you from learning what is actually true. Sign up for my newsletter, and download my FREE Report on making sense of data without becoming a math expert! Powered by ConvertKit

Why You Shouldn’t Grade Employees’ Performance on a Curve

by Rho Lall​

If you haven't already, I highly recommend reading, "Managing Your Processes Using Averages May Be Hazardous to Your Company’s Health." from my ebook, Bull Doze Thru Bull Sh*t. And if you have questions feel free to ask. Really.

Here are a couple additional power tips:

If you remove the top ten percent of a power curve you are left with . . . a power curve.

That means you can split power distributions into leagues. In middle school, for example, I was captain of the Jr. Varsity Soccer team. I could have played varsity (meaning I could have sat on the bench for the season). My coach knew I would rather play. I felt successful as captain because relative to my JV peers I outperformed. I was happier. I contributed more in the JV league then I would have in the varsity league. You can create similar results for your team.

Another point to consider, performance is dynamic. Take the time to find the areas where you outperform. Take the time to find the areas where your team member outperform. I'd rather have a team of out-performers that excel across a variety of areas than a team of individuals competing against each other in one narrow area.

If you would like to better understand power curves, then check out, Bull Doze Thru Bull Sh*t.

You can get it for FREE, just click here.

1

#1 Best Tip to Improve Your KPI Dashboard

#1 Best Tip to Improve Your KPI Dashboard

By Rho Lall

Key Performance Indicators PDF

I Hate Averages. And You Should Too!

 

Hate is a strong word. But I do hate seeing averages used as KPIs. The problem is they are so prevalent. The only practice more prevalent is reporting on raw totals: We did this much in sales, we worked this many hours, etc. etc. (See my Key Performance Indicators PDF for a set of great examples.) Averages are terrible:

One. There are better KPIs that communicate more meaningful information.

Two. You can be taken advantage of when you rely on averages.

Did I Tell You About The Time I Almost Dated A Model?

I asked a girl for her number. She was clearly out of my league and she let me know it. I responded that she was acting like a ten when she was clearly a seven. She agreed! Then she started in on herself about how she needed a nose job. Her error? Only comparing herself to other models (not all women). She blew her nose out of proportion (double pun intended). I got her number (And didn't use it). The lesson. Don't be taken advantage of.

There are better options.

Why Averages Perform Below Average In Your KPIs.

 

Out of a group of two-hundred KPIs, I have researched the seven top KPIs for Professional Service firms. None of the seven are from taking averages. Six of them are ratios (and the seventh can be). Isn't that interesting. So what is so great about ratios?

Ratios reveal trends and makes large numbers easier to digest.

Ratios provide indicators of organizational performance.

Ratios allow me to compare apples to oranges.

 

Three Keys To Understand And Use Ratios.

 

First, ratios can be confusing because we were never taught to use ratios in a professional setting. We learned basic fractions. A half or a quarter is an intuitive number. I know what that looks like. I can imagine a pie which gives a fraction meaning. But if a ratio comes out to be 1.09, that is not intuitive. Is it 109%? 92%? Or something else all together?

Comment below on which you think is right?

 

Second, not every ratio is great. But the great ones compare two opposing metrics. Let's look at one of my top seven Professional Services KPIs. Revenue Per Employee. If you are in business then revenue is a positive. More revenue is better. More people isn't necessarily better. This ratio reflects the sensitivity between these two metrics. More revenue will drive the ratio up. More employees will drive it down. More employees will only drive the ratio up if synergies increase revenue at a greater rate. This ratio simplifies the relationship between revenue and employees down to a number. It also lets me compare two companies that are drastically different in terms of size and revenue.

 

Third. When I first started learning KPIs I spent a lot of time memorizing definitions. I tried to wrap my head around them. It was hard. I re-learned grade school fractions on Khan Academy because I thought it would help. It didn't. The memorization didn't either. For every new KPI I had to memorize a new definition. Don't waste time memorizing definitions!

There is a better way.

 

Next time . . . 

In my next blog I am going to teach you a very simple visual aid that has helped me break down ratios so I don't have to memorize definitions. Subscribe to my blog so you do not miss it! You might as well pick up my Key Performance Indicators PDF as well. It's free!

I'm shooting to have it out in about a week.

Insider Acess Before Everyone Else!

Assume Wisely provides uncommon sense on how to make better decisions.

Get a free weekly update with exclusive content. No Spam, ever!

Powered by ConvertKit