RATING AND WEIGHTING OF INDICATOR

There are lots of them, but how can they be translated into data that can be used for strategy planning? One can read them one by one and will develop a guts feeling for some selective ones….but what about the rest? Rating and Weighting helps in a structured way to order choices in better and worse.

Every strategy has its own dimension (reflected in a set of indicator) dependent on the market you are in and what kind of products you have in mind. I will give an example, that explains the process and will enable you to adapt it to your needs. First you decide which dimension you would like to look at, e.g. country, customer, portfolio and which indicator could be used for that. The rest is very simple and always the same.

Step 1: rating

Take your indicator list and sort it from better to worse, e.g. if the largest GDP per capita is best, you would sort it from smaller to larger. Your worst performing country would be the first one listed. You create one more column next to it and just count downwards. First list item gets a one, second a two, third a three and so on.

Step 2: weighting

Decide how important each indicator is for your purpose. If it is crucial, you give it a higher weight – e.g. 8. While the lower ones could get 1 to 3. Add another column to your list and multiply your rate with the weight you decided on.

Repeat these two steps for all the indicator you decided to use. Once done, add them all up. The list items with the highest values are your best bets. Since we sorted them in the way that the worst ones are getting the smallest rates. You could also turn it around, then your smallest figures are the winners. Does not matter as long as you stay consistent throughout all indicator. Note: good idea to keep all the assumptions captured in a separate sheet.

In case your results are odd, check and maybe adjust the weighting. There are usually a few items on the list that you know better than the rest. See if these ones are where you would expect them to be.

For visualization I recommend using spider charts. Give each of the indicator one dimension (up to 5 is good, otherwise too difficult to read for most). Remember that spider charts require the reader to spend time to comprehend in case you use them in a presentation.