Friday, January 4, 2013

McKinsey Case Interviews and Unit Conversions - An Easy, 3-step Method

One of the most common causes of math errors during case interviews is unit conversions.  Here's a method I learned as an engineering undergrad that helped me get through all of my case prep and interviews without making any unit conversion errors.  I've also used this method countless times at McKinsey and even after leaving the Firm...



There are three critical elements for getting your unit conversions right during case interviews.  The method I'm suggesting to make unit conversions foolproof will be introduced in Step 2, with visual examples.

STEP 1 - Gather all of the relevant information

The "quant" part of any case test both a) your ability to perform mathematical calculations and b) understanding the implications of the numbers on the case.

Let's suppose this case interview is about agriculture and you're being asked "how much revenue can be generated by Supplier X's average seed?"  During the interview, you ask the right questions and have the following information:

  • For every 10 seeds planted, 3 plants typically grow  (Fact A)
  • It typically takes 14 plants to produce 1 pound of fruit  (Fact B)
  • For every 100 pounds of fruit, 10 pounds are usually not suitable for sale  (Fact C)
  • Every pound of fruit can be sold for $7  (Fact D)
Keep in mind that you might get some extraneous data.  If you find that you're missing a piece of data, you can always ask questions to get it.  Just don't ask something like "do I have everything I need to know?" because figuring that out is part of your job.

STEP 2 - Set up the calculation

As you can see from this example, even if each piece of data is straightforward, how to manipulate them to get to the final answer can be challenging.  The technique I'm recommending is powerful because it makes it easy to organize your information and clarifies how to apply each number (e.g., should you be multiplying or dividing?).

First, set up what looks like a "+" sign that has a longer horizontal line.  In the top left, enter in your starting point.  In this case, "1" and the units, "seed"




Then, to the right of the vertical line, start adding the data elements that will help you cancel out the "seed" unit and get you closer to the desired "$" unit.  Thinking about your unit cancellation goals will help you see which numbers go above or below the line.


 

 

 

STEP 3 - Cancel units and do the math

After you've set up the problem, cancel out the units one at a time.  When you finish, the remaining unit(s) should align with the the answer you're seeking - in this case, "$" (of revenue per seed purchased).  If the units don't cancel out the way you intended, you've either made an error in the set-up or are missing information.  In either case, you've laid out your thinking clearly so you and your interviewer can discuss next steps.

Now, you can begin reducing to make the math easier.  Look for numbers above the line that are easily divide into numbers below the line.  Often, cases are designed so that the arithmetic becomes easy - we're looking for problem-solvers who are comfortable with numbers, not human calculators.




Finally, multiply the numerators, multiply the denominators, and divide.  You now have a numerical answer in the correct units.

 

 

 

 




Throughout the case math, keep these additional tips from a previous post in mind.

 

 

REMEMBER - It's not just about getting the right number

I've seen plenty of candidates forget about the implications of the final answer.  They're so amped up about the case and relieved that they got the calculation right, that they don't think about what this number might mean to the case.  Always remember the context - that's why I encourage people I case coach to write the question down at the top of the paper.

In this example, you now know that the average seed from Supplier X will yield about 13.5 cents of revenue.  Can you tie that to other facts you might know about the case?

For example, on the one hand, suppose you learned earlier that your client is a farming cooperative and Supplier X wants to charge $200 for every 1,000 seeds, or 20 cents per seed.  At this point you might mention that each seed generates less revenue than it costs to buy the seed.

On the other hand, suppose you were told previously that your client is Supplier X and they are thinking about selling every 1,000 seeds for $70, or 7 cents per seed.  You might want to mention that farmers are going to generate a lot more revenue (13.5 cents) than they're paying per seed (7 cents) so there might be opportunity for Supplier X to raise the price.  You would get bonus points if you added the caveat that your simple calculation has not yet taken into account costs - other than seeds - that farmers might incur (e.g., planting, growing, harvesting) that would be taken out of the revenue, impacting how much more Supplier X might be able to charge for their seeds.

 

WHY THIS IS IMPORTANT:

While this method can't protect you from errors in arithmetic, it will reduce the likelihood that you'll make a math mistake by:
  • Increasing the likelihood of setting up the calculations correctly
  • Ensuring your answer is in the correct units
  • Simplifying the arithmetic by giving you chances to reduce some of the numbers

17 comments:

  1. Why does the text say "For every 10 seeds planted, 3 plants typically grow" but the diagram has 20 seeds for 3 plants?

    ReplyDelete
    Replies
    1. Open the diagram to full size. When it's small, the "1" in this font looks like a "2", but when it's large, you can see it's actually a "1".

      Delete
  2. I'm not sure what you mean - I've checked all 6 examples and plants and seeds always seem to be in a 3 to 10 ratio. Is there a specific diagram to which you're referring?

    ReplyDelete
  3. Fabulous ideas you have still provided to us, anyway this blog is really wonderful for all. http://entertainment-articles-guide.com

    ReplyDelete
  4. McKinsey is a world famous and respected consulting company which provides insight and guidance to firms with particular issues or problems or who are just seeking direction. Many ex-McKinsey employees are now Chief executives of corporations.Unit Converter program is an easy, adaptive and also yet an astonishing allin 1 Unit Conversion Calculator program that's developed bearing in your mind regular utilization of apparatus converter at various activities every afternoon. It's just a universal component converter program that's effective at reversing components of distinct types. Basic to utilize beautiful user-friendly and graphics user interface.

    ReplyDelete
  5. Health Is God is the main finish wellbeing and health site that you may portray as it yours. We made a site that presents the accumulation of wellbeing and way of life data bolstered by solid substance suppliers and certifiable client surveys. This is a true exertion on our part to deliver a client encounter which is drawing in, moving, and intuitive.

    ReplyDelete
  6. Quit 9 To 5 Academy Review is an amazing website where you get to work and learn with the professionals and then start your business in the platform of Facebook.

    ReplyDelete
  7. 5 Ways You Can Get More Adtrics Academy While Spending Less - https://www.reviewengin.com/adtrics-academy-review/

    ReplyDelete
  8. I always used to read piece of writing in news papers but now as I am a user of internet therefore from now I am using net for posts, thanks to web.               
    https://www.drozus.com

    ReplyDelete
  9. Great Post! You Shared Everything About The Topic. Thanks Again! Times For Education - Everyday News Portal Of Education. We Regularly Update Education's News From All Over The Worlds. Our Mission Not Only Provide Education's News But Also People Get Become Educated. Visit also this website: https://timesforeducation.com/

    ReplyDelete
  10. Hi to all, the contents existing at this site are actually remarkable for people experience, well, keep up the good work fellows.               
    https://care2fit.com

    ReplyDelete
  11. For most up-to-date news you have to go to see web and on the web I found this website as a finest website for latest updates.
    https://www.drozus.com

    ReplyDelete
  12. I found this post to be very educational. Thank you for broadening my knowledge of this subject. No doubt its a great piece of writing as well. Thanks
    health tips "write for us"

    ReplyDelete
  13. Thanks for sharing this useable article - I really increase your acquisition.it is really very informatic post for young people, and hope they will enjoy well after reading this post.
    Home Improvement Write for us

    ReplyDelete
  14. In genuineness prosperous content and very helpful in sequence. I got it my elucidation from over here. I very much urge his/her workings with the constructive enlightening information. Thanks a lot………
    Home Decor "Write for us"

    ReplyDelete
  15. A cutting-edge health website, MagazineZap is committed to equipping people with useful knowledge and ideas on health and wellbeing. People looking for trustworthy health advice and direction can turn to MagazineZap thanks to its user-friendly interface and well curated content.

    ReplyDelete