Fildes, R A and Goodwin, P (2007) Against your better judgment? How organizations can improve their use of management judgment in forecasting. Working Paper. unknown, N/A.
Accurate forecasts are crucial to successful planning in many organizations and in 2001 forty international experts published a set of principles to guide best practice in forecasting. Some of the principles relate to the use management judgment. Almost all organisations use judgment at some stage in their forecasting process, but do they do so effectively? While judgment can lead to significant improvements in forecasting accuracy, it can also suffer from biases and inconsistency. The principles therefore indicate how forecasters should use judgment and how they should assess its effectiveness. The question we examine is whether judgment is used according to these established principles. We conducted a survey of 120 forecasters to investigate whether their forecasting procedures were consistent with the principles. In addition, we conducted four in-depth case studies. We found examples of good practice. However, many organizations could improve forecast accuracy if they followed basic principles like limiting judgmental adjustments of quantitative forecasts, asking managers to justify their adjustments in writing and assessing the track record of judgmental interventions.
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