Statistics in Business
Value of Business Statistics
Because of the complexity of modern business it is practically impossible for the management or an executive of a large organization to rely on personal observations and impressions when formulating plans and policies. To do so would lead to frequent errors and costly mistakes of judgment. The human mind cannot adequately grasp the significance of a multitude of facts in the variety of their occurrence. In consequence many problems of management are today being solved by the intelligent use of statistical records or tabulations of past and present operations. By this means the pertinent facts regarding a business are classified and summarized, and the analysis of complicated figures and large aggregates is made possible. The relation of the groups to each other and of each group to the past, the relation of the unit to the whole, and so on, is best shown by the tabulation of facts in the form of figures. By reducing the facts to figures comparisons can easily be made and the proportion of one thing to another is more accurately presented. By divesting facts from their aspect in daily life and the caprices of temperament, a truer estimate of tendencies can be made. Because statistics generally deal with large masses or great numbers, standards, ratios, and types can easily be established. The mortality statistics of insurance companies afford a good example of general averages or ratios that hold true when applied to such an uncertain proposition as the length of human life. Business statistics, however, cannot attain this accuracy because facts of a similar kind are not of such frequent occurrence and consequently the average is not so reliable. But the manager who is acquainted with the limitations of the statistical method and who intelligently understands the business forces with which he is dealing, finds it sufficiently accurate in the great majority of instances. The frequent and almost universal use of the sampling method of testing mailing lists, the use of figures as to the density of population in selling campaigns, and the increasing use of time studies in factories, show that statistics can be made to serve as a valuable guide in arriving at important decisions.
Railroad Statistics
Railroad companies have for a long time used statistics to aid them in interpreting the mass of detail involved in operating over a large area. The figures are generally grouped into two classes: (1) those showing results of operations, such as annual reports; and (2) tabulations of operating details. The latter are devised mainly for the purpose of checking and control. Another classification, more minute, is the grouping of railroad statistics according to their nature into:
1. Statistics pertaining to maintenance of roadbed, track, buildings, signals, etc.
2. Cost of maintaining locomotives, cars, and rolling stock in general in good condition.
3. Expenses connected with the movement of trains.
4. Expenses in connection with the securing of new business.
5. Administrative expenses.