Weightings – a misconception

Abstract Blurred Boxes On Rows Of ShelvesAre you using weightings?  If so, stop.

A weighting is an arbitrary number attached to an algorithm (of sorts) by someone who believes they have a divine power to predict the unpredictable.

Here is a crude example.  We are trying to set performance criteria for our buyers and we workshop what we think are the most important factors.  We conclude that GP$, age of stock, inventory levels and sell through are important but not equally important.  So we decide that gross profit dollars should have a weighting of 60 per cent; age of stock 20 per cent; inventory levels 10 per cent; and sell through 10 per cent.

We now somehow attach these weightings to each of the criteria and we calculate that the buyer has a score of 68 and we therefore calculate the buyer’s bonus as 68 per cent of the ‘full’ bonus that the buyer could have earned.

If you haven’t followed this you are blessed with stupidity because it is only an idiot of extreme intelligence with a high IQ who could develop such a ridiculous system.

A similar approach can be adopted almost anywhere.  Allocations, replenishments – you name it – and everyone sits back happily as things just happen.

Several years later someone challenges the weightings and so they are changed.  This is called progress and needs to be rewarded.  The person who challenged the weightings is formally recognised and awarded the coveted Visionary of the Year award.

With complete confidence and with no possibility of being contradicted, I categorically declare that any/all weightings in any shape or form should be stopped today. The reason being that nobody can say that weightings are ‘correct’ or are even helpful.

They are arbitrary, random, subjective, uninformed, based on chance, illogical and capricious.  And these are their better qualities.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

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Comments

2 comments

  1. Avatar

    Gerald Simenson posted on December 11, 2016

    I agree. GMROI carries the ultimate weight - the result of all the blood, sweat and tears. reply

  2. Avatar

    Johan von Benecke posted on September 3, 2017

    Hi, I agree but, even GMROI has limitations. Sometimes high GMROI items do not ultimately deliver direct profits. Maybe we should weigh it - Weighted GMROI Now that's an idea ! reply

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