Welcome. This week, we're looking at biases in judgmental forecasting. Although judgmental forecasting methods have relative merit in some situations, there are also problems to be aware of. These problems can lead to biases and hence systematic inaccuracies in our forecasts. Some biases are due to individual judgment and psychology, others are related to group biases. In addition, political and organizational issues may lead to systematic biases as well. Research indicates that an individual's decision making processes and judgments including forecasts, can be influenced by psychology, personality, physiology, and other circumstances. These factors can influence the accuracy of judgments in selecting relevant information, the waiting applied to that information, and thus the subsequent forecasts. Two individuals presented with the same available information may produce widely differing judgmental forecasts. You may have seen some of these famous examples. Which of the two panels has the larger inner circle? Which of these three lines is the longest? Which of these three lines is centered? How about this? Count the number of times the letter F appears in the following sentence. The answers to these questions and more are in the activity after this video. When it comes to judgmental forecasting using any of the methods discussed earlier in this course, here are some individual judgmental biases to be aware of. Inconsistency: Due to an individual humans nature, the mood, forgetfulness, boredom, or sudden interests, their belief conditions can actually change. The Primacy or Recency Effect: If you're going through a list of options where each option presents a case like an interview or a talent show, the information you are presented first, primacy and last, recency is retained better than information presented in the middle, which then influences our judgment. Anchoring: Somewhat an extension of the primacy effect, where previous decisions provide an anchor which an individual may be reluctant to move from. Confirmation Bias: As humans, we may unconsciously weight information that agrees with our viewpoint more than information that does not. Here's an interesting one. As humans we tend to wait verbal information more heavily than numbers or statistical information; go figure. These are just some cognitive biases to be aware of. In the activity after this video, you'll be awed to find out there is so much more. Some remedies for cognitive biases include: aiming to find different sources of data and different viewpoints, review past examples of success and failure in data sources, discuss and seek feedback and input from others from both within and outside your team, use a structured decision-making approach, prioritize time and thinking when making a judgment. We've looked at some individual judgmental biases. Now, let's look at some group judgmental biases. Evidence suggests that group decision-making can actually amplify biases. This could be because the responsibility for the decisions taken may not be attributable to any single individual, which could possibly impact on accountability, input, process, and decision-making. Group-think and conformity are particular problems that may bias decisions. Both problems suggests that individuals will behave and react differently to stimuli if they are in a group situation. Group-think occurs when the individuals in a team seemingly end up agreeing due to their desire for a harmonious team that makes unanimous decisions, which then interferes with each individual's critical thinking skills and hence below optimal forecasts and decisions. Conformity occurs when teams have a dominant team member who may exert peer pressure on other team members to follow or conform to the opinions or beliefs of the dominant team member, or the majority of the members in the team. Thus, team members may end up accepting the overall team judgment even if they disagree or they cannot individually justify the team decision. Some remedies for group biases: Critically, evaluate each group members contribution. One group member could be assigned the role of being the devil's advocate. Assign a non-partisan leader. Outside independent evaluations by inviting an outside expert to participate in the critical group discussion. Always, reassess important decisions by inviting open expression of doubts. Understanding both group and individual biases, and their remedies can ensure that you are judgmental forecasting performs effectively and efficiently for your organization. Don't forget to check out this week's toolbox for even more resources and detail about biases. By the end of this week, you'll have finished this course. If you've completed the previous two courses as well, the entire specialization on Business Forecasting. Everyone say wow. As always, reflect on what you've learned, how far you have come, and how you can apply this to your own work setting. Apart from the quizzes and discussion board that you've had each week. This week, you have an assessment that draws upon the entire course on judgmental forecasting methods. As always, we've designed an assessment which will be an assessment that is for your learning and is not just an assessment of your learning. Once you obtain your certificate for this course or the entire specialization, make sure you post it on social media and definitely LinkedIn to showcase your achievements to build a community of business forecasting. A community of discovery, learning and practice. We are so proud of you for completing this course and super proud of you for completing the entire specialisation. Everyone say, wow.
