By Greg Wolf
Four years ago Kennedy and Coe, LLC established a wellness initiative for those of us within the firm. That includes, among a number of other things, having a clinic come in and provide annual biometric screenings--physical statistics and blood work. Those screenings have been held in October each year, and I just received information back from my fifth biometric screening. My interest in them has grown each year, and now with the results of five straight in hand I created a simple spreadsheet to summarize the trends over that time. It was very insightful, and even though I try to think (from memory) in terms of trends, it led to some conclusions that had escaped me just looking at the most recent screening results.
I am sure a detailed description of all my screening results would bore readers to tears, but I'll share some general observations from this trend analysis, because there are direct parallels to the trend analysis I do and see for client businesses. First, I saw some humor in the results in the first measurement--my height. I noticed when I was measured that I came in more than an inch shorter than I thought I had ever been before. But looking at the trend I see that four years ago I was my tallest ever, at the height I have regarded myself as being for years. I then "shrunk" steadily for the next couple years, stretched back up last year, then shrunk again this year--a range of 1.25". Maybe there is really some change going on, maybe it is change in posture and outlook, or maybe a little "chatter" in the measurement each year--regardless the changes are not consequential, but I did find a bit of humor in them.
The second measurement meant more to me--my weight. When I first saw my report this year I thought it looked higher than I wanted it to be, something not too uncommon, and also higher than I remembered it from the past. But when I spread the trends out side by side, I was left feeling more encouraged. I've heard of weight gain challenges not coming so much in bursts but in steady year-over-year increases--like a pound a year following high school graduation. But the trend analysis revealed that my weight this year was actually seven pounds less than it was four years ago. I would like to see the number drop some more, but I'm feeling better today about the trend line.
Next, I dropped down to body fat percentage, and my measurement jumped dramatically. In fact, after four very consistent readings, my recent reading increased 37 percent. Given what I've just shared about weight above, and the test itself, I believe the recent reading is an outlier, but it wasn't obvious and wouldn't be obvious without trend analysis.
I then moved to blood pressure, and both readings had jumped as well, though not into dangerous territory. Again, like body fat, I was struck with how consistent the prior year readings were. But in this case I'm concerned that the recent readings are not outliers, but rather a breakout to the upside. Trend analysis helps monitor not only trends, but inflection points--measurements in time when the trend either changed directions or at least accelerated significantly. I suspect this may be happening here, and so through trend analysis I've identified a key metric that I'm going to watch more closely, not only a year from now but with some more frequent evaluation too.
Lastly, I observed all of my blood work readings, including triglycerides and the several cholesterol readings. Though not perfect, I was generally pleased with the direction they were trending. The one that fascinated me the most, however, was a ratio (Cholesterol/HDL) that I had never noticed much before. Though the two components of the ratio have moved up and down, the trend of the ratio itself (which is an indicator of cardiac risk) was very favorable.
I'm only talking about my biometrics here, but the broader point illustrates the power of trend analysis. In just a few minutes this morning after putting together a spreadsheet summary of my biometrics, I have a much clearer picture of my health picture today. In fact, through observing the trends, and comparing with benchmark ranges to reference, I feel much more educated about where I am today by observing where I have been. That is what I see as well with clients doing financial analysis. Consistent financial trend analyses, combined with relevant benchmarking and some thoughtful review and discussion within a management team, can lead to some profound insights and "intelligence" regarding a business's position, and the path it has taken to get there.
Just as with my biometric screenings, some trend analysis observations will be insignificant or even humorous. Others provide encouragement and affirmation by their positive direction and their consistency. Others will be identified as outliers. Still others will identify inflection points. These are especially significant because they can serve to either affirm or alarm the results of a strategic management change. And lastly, ratio analysis offers an opportunity to observe not just the trend of two measurements, but also how they have moved in relation to each other. In your management toolkit, don't underestimate the power and potential of a consistent and well-considered trend analysis.
Editor's note: Greg Wolf is a consultant with Kennedy and Coe, LLC (www.kcoe.com) and works to help clients of the firm navigate toward better returns in all areas of their businesses. He is based in the firm's Pratt, Kan., office and can be reached at 620-672-7476.