How to create a McKinsey-style waterfall chart

The "water fall" chart is an effective way to summarize the quantitative impact of a number of drivers. For example, you need to put the following story in a chart: "Our profits went up by 7, the positive effect of higher prices and lower cost was offset by a lower sales volume." A waterfall chart would look something like this: For illustration purposes I left the light grey color and data labels of the supporting series in so you can see how to make the chart: it is basically a stacked bar chart with 3 series:
  • A "white" series to support the drivers
  • One series for the drivers
  • One series for the (sub)totals
The data table for this chart (Powerpoint 2007): For a final touch, make the color of the light grey series white, take out the data tables and that's it. There is the temptation to make automated tools (in Excel) that do the work for you. Like almost all my charts, I start with a piece of paper and make my waterfalls manually, to make sure that they
  • Are correct (negative numbers can make these charts a bit tricky to get right sometimes)
  • The chart tells the story I want it to tell (what subtotals to use, in what order to list factors, etc.).
(Click on images for a larger picture)

12 comments:

Jon Peltier said...

Interesting. I've thought that a horizontal-bar waterfall chart would be easier to deal with, but I've really only seen them with vertical bars.

I have instructions for vertical style waterfall charts on my web site, and I've even started selling a utility to construct them with a button click.

I need to look into the horizontal style of thiss chart.

Jan Schultink said...

I use the horizontal format to create more space for the explanation text on the left side of the bars. For the untrained eye, these charts can be hard to read, so you need some words here. Obviously a vertical format works as well in the end.

Adrian in Omaha said...

Brilliant! Thanks.

Chee said...

Always wondered how this was done. Thank mate.

Steven Levy said...

One thing that might make the horizontal chart above slightly clear would be to put arrowheads on the three red bars, with the middle bar pointing left to make quickly clear that it's a decline.

Jan Schultink said...

Good idea Steven!

Tobias said...

Thanks for this it really helped my thinking when putting it into Powerpoint.

Jan Schultink said...

My pleasure Tobias

Garrett Field said...

My teacher should read this post and perhaps learn a thing or two on PPTs.

usb copier said...
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Ellen Daehnick said...

Trolling through the archives and came across this post. I get asked that question all the time as well. From now on, I'm sending them to you sensei. Your directions are better than mine.

Jan Schultink said...

I am going to re-post some useful older posts over the summer period as I am spending less time at the computer and more with my family. This one will be part of that series.