Definite rules must be established and adhered to if a chart program is going to be effective in contributing to greater profits through better understanding of the business.
A series of charts should not be attempted until all levels of management involved agree in principle on the major areas to be covered by the charts, the type of charts to be drawn and the purpose and use of the charts. To be most effective charts should follow these principles :
1. Use Lines or Bars Where Each Is Most Meaningful. Don't Exclude One or the Other.
Lines or bars are usually the easiest to understand. Each serves a definite need. For example, bars generally are better suited when comparing one year's profit with another, or comparing another company's results with your own. Line charts can be very useful to indicate the trend of sales or profits over a period of time.
2. Specific Colors Should Designate Like Information.
The people who use the charts will adapt to them more easily if they become accustomed to seeing the same information depicted in the same color on all charts. For example, black for sales, green for profits, red for losses, and varying shades of orange and yellow for ratios such as profit per cent to sales, return on assets, etc.
3. Make It Simple to Construct and Easy to Understand.
The use of lines or bars are suggested for easy preparation and understanding. If bars are used it is generally best to put the total at the end or top of each bar. If lines are used, the figures being plotted should be indicated about every 3 years. If more than one line appears on a chart it should be identified by a distinctive color, or legend or the name of the item being represented should be printed on the chart, with an arrow pointing to the line.
4. Make it easy to update and revise information.
When forecasts of future operations or preliminary actual information is being plotted, the lines or bars should not be inked onto the chart. It is recommended that special colored chart tape be pasted onto the chart or onto a special cellophane chart cover or sleeve. The tape can be removed as revisions dictate. This tape is easy to apply and is neat in appearance and can be purchased in colors which match exactly the ink being used on other chart areas.
5. Avoid Overloading of Data or Too Many Subjects on One Chart.
It is far better to have two charts than to crowd too much information onto one. The person studying the chart can absorb only a limited quantity of statistics relating to one subject. This problem should not be compounded by introducing several subjects on the same chart.
6. Use Easily Interpreted Scales.
The chart should provide a clear indication of whether the information is being expressed in units, dollars, pounds, and whether the quantities are in hundreds, thousands, millions, etc.
7. Scales Should Match the Requirements of the Maximum Amount of Data.
Good judgment must be exercised by those using charts as well as those preparing them. A proper evaluation is impossible if the information being charted is improperly presented.
8. Chart Taper Should Be Uniform in Size.
Even though a chart program begins on a modest scale, consideration must be given to the problem of display and storage. This will be easier if the charts are uniform in size.
9. Have All Headings in the Same Place and Commensurate in Size With the Over-all Dimensions of the Chart.
The best acceptance of a chart depends to a considerable extent on maximum standardization. The headings should always be in the same place on every chart. The size of the headings as well as the size of other words and figures should be commensurate in size with the overall dimensions of the chart.
10. Neat Appearance.
The people using a chart should insist that the headings, scales, time periods and other information be properly centered and neatly presented.
Follow these rules and the charts will be easily understood.