When assessing the current state of a business or planning for the future, decisions must be supported by data.
For managers and executives in particular, the ability to discuss business performance using numbers is an essential skill.
However, many capable managers still struggle when it comes to speaking the language of numbers.
In this issue, we will look at practical ways to help managers overcome their discomfort with numbers and become more effective business leaders.
1. Clearly Explain Why Numbers Matter
To improve a business and maintain its financial health, it is necessary to accurately understand what is happening.
In other words, information should be communicated in a way that leads everyone to the same understanding.
Consider the following statements:
- “This product is selling well.”
- “Customers don't seem to have a very good impression of this service.”
- “Customer expectations are high.”
While these comments may seem understandable, they are actually quite vague from a management perspective.
The main reason is that the criteria behind these judgments are unclear.
For example, the phrase “selling well” can mean different things to different people. Without a clear standard, people may interpret the situation differently, leading to misunderstandings.
Making business decisions based on inconsistent interpretations can create unnecessary risks. That is why performance should be communicated using clear benchmarks and measurable data.
For example, instead of simply saying a product is selling well, you might say:
- Sales are exceeding budget targets.
- Sales are higher than the same period last year.
- The product ranks among the top three sellers.
- The product accounts for more than 10% of total sales.
These types of statements provide a much clearer picture of reality.
2. Help Managers Overcome Their Fear of Numbers
It is common to hear managers say:
“I'm not very good with numbers.”
The problem is that when people believe they are not good at something, they often avoid it rather than work to improve it.
The first step toward overcoming this mindset is increasing exposure to numerical data.
For example, key performance indicators (KPIs) should be reviewed regularly during weekly management or sales meetings.
When discussing results, managers should not only point out variances from budget or prior-year performance but also explain those reasons for variances using numerical evidence.
In addition, some management tools require specialized knowledge. Concepts such as:
- Reading profit and loss statements (P&L)
- Break-even analysis
- Profitability management
should be taught through structured training programs.
Other useful metrics include:
- Sales mix ratio
- Cross-selling performance
- ABC analysis
These can help identify opportunities to increase sales and profits.
Meanwhile, indicators such as:
- Sales per labor hour
- Inventory turnover
- Employee turnover rate
are important measures of operational and organizational health.
Tracking these metrics over time can help managers develop a stronger understanding of business performance.
3. Use Numbers Logically
The goal is not simply to replace opinions with numbers, but to make evidence-based decisions.
When analyzing results, managers should be able to make logical connections between actions and outcomes.
For example:
- "The sales mix of high-margin products increased from 8% to 10% compared with last year, which contributed to improved profitability."
- "A new event attracted 200 visitors in one week and generated $10,000 in event-related sales. As a result, those sales directly contributed to exceeding last year's performance."
Likewise, when developing future plans, managers should support their forecasts with clear assumptions.
For example:
- "We plan to hold the same promotional fair we ran last year. This time, we will improve product quality and increase prices by 3%.
Since our marketing campaign is expected to reach 30% more people than last year, we are setting an ambitious sales target of $20,000, representing a 40% increase over last year.
- "Weather forecasts indicate a colder winter than last year. Therefore, we will launch our winter product line earlier, in late October, to avoid missing demand.
Although we anticipate a $5,000 decline in autumn product sales, we expect to offset this with a $10,000 increase in winter product sales.
These examples illustrate how numerical reasoning provides a stronger foundation for decision-making.
In Closing
Do the leaders in your organization discuss management issues using data and evidence?
Or are important decisions still being driven by intuition and subjective opinions?
The ability to think logically with numbers is not just a financial skill. It is a critical leadership skill that enables better decisions, clearer communication, and stronger business results.
