• Leila Ainge

An educated guess

Updated: Mar 19, 2021

Measuring stuff helps our decision-making processes, what we measure and how we measure is intrinsically linked to the things we value, and the things we know. When I work with business owners, I‘m interested in the data they collect, but I’m also trying to understand what is not measured, and what this tells me about the decisions that business is making, and what they value most.

Diving into data might not sound like the most exciting activity but being curious about what you do and do not measure is a competitive advantage, and grazing on information without questioning it leaves us with gaps that can impact the things that matter the most.

Out of 6 million private businesses in the UK, 5.9 million are small businesses employing 0-49 people. It’s hard to say exactly how many female founders, entrepreneurs and business owners there are because the data is not specifically measured.

Which seems significant now that we’ve been through a pandemic, where working women have been disproportionately impacted by government policies.

To understand what percentage of these businesses have female leadership we have to use an estimate taken from a sample of SME’s (1). This provides two different percentages, estimates of the number of female led SME’s who employ staff and those that don’t.

A crude figure would look something like 1-2 million female led SME’s, contributing £85 billion to economic output, that’s if we take the estimate reported to the House of Commons in January of this year (2).

The other main source of business information influencing government , uses VAT and PAYE records and is the Business Population estimates (3).

This data does not include gender, ethnicity or any other characteristic details of owners, yet the report aims to support the government:

‘understand the likely impact of policy changes and monitoring the impact of recessions on different sections of the business population’

2021 is the year of the census in the UK, it is a unique snapshot of data that does provide characteristics on gender and jobs. This year it includes changes to the way in which we capture gender information and unpaid care.

Census data is used by The Department of Communities and Local Government (DCLG) use in the calculation of local government funding through the current Formula Grant system, this is the way that money moves from central government to Local Authorities, Fire and Police.

it is a hugely complicated affair, the guidance document actually states: 'Local government finance in England is complicated and can be difficult to understand'

One of the highlights of my career involved working with Chief Accountants from 10 Local Authorities to design a new Council Tax scheme in response to formula grant changes, so I've seen first hand how census data ripples through decision making that impacts individual households.

Census information is one of the biggest influences on spending per person in the UK, but to put this into context , the last time a census took place was 2011, Whatsaap and Instagram had just launched, consider that the way in which we work, build and promote businesses has changed significantly during this period. It is right that the way we capture information should be reviewed and updated, and this is why the 2021 census is likley to be the last. There is a huge push to capture data digitally, and more frequently.

We should be aware of the bias that the practice of large scale data collection brings though, when we start looking at patterns we forget about the detail, the characteristics of the people behind the figures and the way in which policies impact them. Combining census data sets with HMRC data to achieve answers to bigger questions is one way in which the 2021 census output will be developed (4)

In psychological terms we know that we have evolved to process complex information by developing shortcuts, and in psychology we call these heuristics, the idea that we think about what we can bring to mind, categorise, and what we can estimate based on existing information. Heuristics are simple strategies to help us make decisions.

Essentially, it’s educated guessing, when we link performance or success to a single event without having specific data or feedback to tell us, we are drawing an assumption without fact to back it up. We use past experiences and understanding to help us make decisions about future activity, and heuristics also gives us an explanation as to why stand-out stories stick, whether the data backs it up or not.

In my latest newsletter I discuss the impact of data we don't collect, how we are psychologically wired to take shortcuts, a much deeper issue is how we graze on data that is offered to us without questioning it.

I offer up some practical advice on how to make data measurement more meaningful for your business so you see the whole picture.

You can sign up to my Monthly Newsletter here


I've update this blog to include the way in which Census data is used to infleunce policy, and the challenges that brings.

Below is footnote data that fails to capture the characteristics and reality of business ownership.

  1. Longitudinal Small Business Survey, 2019

  2. Briefing Paper Business Statistics Number 06152, 22 January 2021 (does not incude self-employed data)

  3. Business Population Estimates

  4. Enhanced Census Outputs

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