Easy creation of tornado charts in Excel - 5 steps, no add-ins

Tornado diagrams are a classic tool of sensitivity analysis for decision analysis. They are not used as frequently as you would expect, given how clearly they help showing the impact of different variables on a geven outcome. As suggested by Ted Eschenbach on a recent article of Engineering Economist, (issue of 06/22/2006), perhaps this is due to difficulties in constructing them.

Sensitivity analysis is needed to address the inherent uncertainty in engineering economy applications because (1) time horizons are measured in years or decades and (2) much economic analysis is done at the feasibility and preliminary design stages. This is often shown using relative sensitivity analysis charts or spiderplots, which have a long and rich history in practice and texts (they are described in 10 of 18 texts reviewed, including Blank and Tarquin (2002), Canada et al. (1996), Eschenbach (2003), Lang and Merino (1993), Park (2002, 2004), Sullivan et al. (2003), Thuesen and Fabrycky (2001), White et al. (1998), Young (1993). Tornado diagrams are not new, but they have not been used nearly as frequently. Only one of the 18 texts included a tornado diagram (Eschenbach, 2003)–

Searching Google on how to make tornado charts, you’ll get many results, most of them requiring you to download an add-in. Keep reading to see how you can create tornado charts with plain Excel in just 5 steps… very easy and straightforward!!

This is a tornado chart created with the method described below:

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Normalize Excel tables

Business data is quite often expressed across many dimensions. The profitability equation in a company is very simple in concept, but in practice those revenues come across regions, product lines, products etc., making them in fact multidimensional data.

Users of OLAP systems are very aware of multidimensional data. However, many spreadsheet users are not, so they manage to flatten the data the best they can, using pages or subtotals for dimensions beyond the second one.

Modern spreadsheets have “PivotTable” capabilities, which makes easier to deal with multidimensional data. To feed these pivot tables, the information has to be normalized. This post explains how to normalize data from non-normal representation, using a Visual Basic macro

If you are familiar with OLAP and normalized data, skip to the code. I’ll show samples of non-normalized data, how the same data would look normalized, and why this recipe is useful.

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