Two meanings of index: a combination of factors or a normalizing technique

An index is a way to show percentage changes in different series of numbers against the same starting point. Typically, a scale’s starting point is 100 and it tracks the divergence from that number over time of the series under consideration. For example, starting with data from five years ago a law department might show the increase in number of patents filed per year by competitors, the change in appellate court decisions involving major patents, the total headcount in the department’s patent group, and fees paid to external law firms, foreign agents and government patent agencies – all as a percentage change from the 100 starting point (See my post of Aug. 14, 2005 about a trademark index.).

This kind of index gets away from absolute numbers and conveys percentage changes visually. It normalizes disparate data in terms of the same starting point and their subsequent percentage changes.

A different use of “index” means a composite of data elements, where usually some of the elements are weighted by their relative importance: the Consumer Price Index is a classic (See my posts on composite indices of Aug. 28, 2005 about client satisfaction; Sept. 10, 2005 about overall law department performance; and Aug. 27, 2005 about a complexity index; of Aug. 20, 2006 about an index of law firm performance.).

The first type of index shows percentage changes in various measures that are otherwise on different numeric scales (outside fees and appellate decisions are hard to compare in absolute numbers). The second type of index compiles different measures into a single metric.

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