Morrison on Metrics: The coefficient of variation

Sophisticated managers may want to compare unrelated data sets, especially when it comes to inside spending budgets.

Sometimes people want to compare the degree of clustering or spread between two sets of numbers that have completely different units: banana weights and heights of trees, say. A sophisticated (and slightly hypothetical) manager might want to know how the various sizes of all the law firms used by a law department compare in their distribution to the third-year annuity costs it pays for all its patents. How do you compare two unrelated data sets? A statistical measure called the coefficient of variation (CV) does the trick.

The CV is the ratio of the standard deviation to the average of a set of numbers. You divide the standard deviation of a set of numbers (which Excel does instantly) by the average of those numbers (ditto).

author image

Rees Morrison

Rees Morrison, Esq. is the founder of General Counsel Metrics, LLC. Based in Princeton, NJ, Rees has for the past 25 years consulted solely to...

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.