Consensus forecasting - Marketing Strategy

To overcome the limitations of individual forecasting the obvious step is to involve a group of individuals in the forecast. These individuals will develop a forecast by reaching some sort of consensus. There are different methods available to reaching this consensus: a straight forward jury system or the Delphi technique.

Jury forecasting

According to Dalrymple (1989) and Mentzer and Cox(1984), a jury of executive opinion is one of the most popular forms offorecasting used by organizations. Effectively a group of company executives(or it could be a panel of experts external to the company) are brought togetherto discuss their respective views of events that may occur in the future. A Group forecast emerges that is the consensus view of the group. Any forecast will depend on the quality of the individuals within the group. There are several problems with a jury method. Decisions about the composition of the jury will have a major impact on the judgments the group will derive. The consensus reached by a jury, as it attempts to reach an accommodation all members can live with, may diminish the input of the more talented forecasters.

An even greater threat is that persuasive individuals, or those with greater status, rather than those with the most knowledge dominate the group. The greater the cohesiveness of the group the more likely it is that they will be unwilling to listen to a dissenting individual within the group. This tendency is called ‘group think’ and can have major implications for management groups in general and jury forecasting in particular. Group think tends to occur with groups of individuals that know each other well, enjoy being together and belong to the same ‘in group’ (Janis, 1972; Janis and Mann, 1982). These in groups are widespread in organizations.

Four key factors affect the way in groups work and the level of group think that develops:

  • High cohesiveness :In groups display the tendency to have a high degree of cohesiveness among their members. There is a great feeling of harmony among members of the group and a mutual self-support of fellow members. This results in members of the group increasingly conforming and complying to group norms. Members are less willing to show dissent during group meetings as a result.
  • Strong leadership :Strong group leaders carry enormous influence within the group and this can lead to increased pressure for a unanimous group position to be taken in order to show solidarity with the leader.
  • Lack of objective search and evaluation :Groups develop their own way of reaching decisions, which tends to be informal because of the level of trust between members. The result is that alternative courses of action are not explored. When alternative actions are identified they are only considered at a superficial level.
  • Insulation of the group :As the group bonds increase members tend to have fewer interactions with members outside the group. Alternative viewpoints therefore are not heard on a regular basis. When they are heard they are largely rejected because the individual proposing them is not a member of the group and therefore not a reliable source. Group think causes six different types of problem for jury forecasting:
  • Illusions of invulnerability :Because the responsibility for a decision is shared in a group, individuals don’t feel the same level of responsibility for the outcome. Groups therefore are more willing than an individual to take decisions that carry a higher level of risk. This is exacerbated by the fact that the individual group members have confidence in the combined wisdom of the group and feel the group’s deliberations will have identified all the potential dangers. The reality is that in groups tend to be over-optimistic and ignore warning signs, taking more risky decisions as a result. Research also shows that groups tend to become more extreme, whatever they are like, so for example conservative groups become more conservative.
  • Collective rationalization :In groups tend to develop a collective rationale to discredit any evidence that may act as a warning or a threat. Elaborate reasons are developed to explain why events did not happen as predicted. The group will find a rationale that will allow it to defend itself from criticism, especially from outside individuals or groups. The overall effect is to reassure the group that its decisions are legitimate.
  • Belief in the inherent morality of the group :All members of the group are presumed to have a set of high moral and ethical standards. Group decisions as a result are seen as unquestionably morally right. In groups therefore fail to pay rigorous attention to the moral consequences of their decision making.
  • Pressure on dissenters :Both direct and indirect pressure to conform is applied to members of the group. A member who shows signs of dissent may be excluded from a select inner circle unless they return to the conformist view. Ultimately they may be ejected from the group altogether if their dissent continues.
  • The illusion of unanimity :Individuals who may hold opposing opinions to other members of the group on an issue tend to practice self-censorship.They will give voice to mildly opposing views or keep quiet altogether as a way of avoiding the hostile reaction of the rest of the group. Group members may stay quiet merely because they believe that no one else shares their views,which further reinforces self-censorship.
  • Self-appointed mind guards :Members of the group take on the role of guarding against incoming information that may threaten the group’s position. Thus information is effectively filtered to stop any opposing evidence from being considered during group discussions. The absence of any contradictory evidence reinforces the unanimity of view amongst group members.

Janis regarded decisions such as the Bay of Pigs crisis, escalation of the Vietnam War and the lack of preparation for an air attack on Pearl Harbor as illustrations of the effect of group think. A more contemporary example would be the disaster of the Challenger space shuttle There are obvious commercial examples as well, including perhaps the Sinclair C5.

In groups cause obvious problems for organizations as they curtail critical evaluation, limit the serious reflection of alternative courses of action and foster acquiescent behavior in individuals. However, they are virtually impossible to eradicate. In groups exist precisely because they offer security to individuals and a sense of belonging. There are ways to minimize group think behavior during forecasting and planning activities.The aim of these curtailing actions is to enforce a critical evaluation of the decision-making process without destroying the group. Fostering a critical evaluation can be facilitated by instituting several procedural measures(Makridakis and Wheelwright, 1989):

  • A member of the group can be assigned the role of the ‘Devil’s advocate’ when specific decision-making activities are taking place. The individuals undertaking this role will obviously work in rotation.
  • The group leader is not allowed, at least at the early stages of the discussion, to advocate a particular point of view. They have to take an impartial role and allow the group to develop its own opinions.
  • The group can invite outside independent individuals to attend group discussions when critical decisions are being made. Their role could be precisely to raise alternatives or to provide alternative evidence not considered by the group.
  • Given that group forecasting is prevalent in organizations it is crucial that companies recognize the dangers of group think in their forecasting and planning activities.

Delphi forecasts

One technique that has been developed to overcome the problem with group forecasts is the Delphi forecast. A Delphi forecast purposely keeps the panel of experts involved physically apart. In many studies they will remain unknown to each other. Communication is undertaken by letter or e-mail directly to each individual from the Delphi study coordinator. This approach is taken in order to remove the social pressures and other undesirable aspects of group interaction. If a study examining what technological break throughs are desirable and achievable in the next twenty years was commissioned the following procedures would be executed. Once a panel of experts has been formed by the coordinator the Delphi study will have at least four phases:

  • Phase 1 : A letter is sent to each of the experts asking them to state the scientific breakthrough and technological developments that they feel are firstly beneficial and secondly could be attainable in the next twenty five years. Each expert will send his or her independent judgment back to the co-ordinator. From these lists the co-ordinator will create a comprehensive list or choose those items of particular concern to the organization undertaking the study.
  • Phase 2 : In the second phase each expert is sent the list and asked to judge for each item the probability of when each potential development will take place. The timescale would normally be broken down into five year bands.
  • Phase 3 : The co-ordinator will then write to each panel member enclosing the charts that have been developed as a result of the second phase. These results will, however, be broken down into two areas. One set of results will have a very small spread of responses and therefore a near consensus. The other set will have a wide spread of responses and therefore be clearly non-consensus items. On each question the expert can see how far they are away from the average. They are then asked to reassess their responses. Experts that are at an extreme position from the mean can be asked to give a rationale for their prediction if they continue to maintain their position.
  • Phase 4 : This is a repeat of the third phase except that the experts will now consider revised charts that have been developed as a result of the reconsideration that individuals have undertaken in the previous round. Panel members can adjust their judgments in the light of the previous round.In particular, they may change their view once they have seen the reasoning given by the experts who took an extreme position.

Delphi forecasts aim to arrive at a consensus position and can go beyond a fourth phase in order to do so. Once a consensus has been achieved an organization can then begin to weigh up the impact the forecasted events will have on their operations.

There are several problems with this forecasting technique:

  • The process consumes a lot of time, as there can be considerable delays waiting to receive a full set of replies every round.
  • The time delays cause organizational problems as panel members begin to drop out or become less motivated.
  • Delphi forecasts appear to be heavily influenced by the ideas in fashion at the time of the survey.
  • Experts on these studies have invariably been over-optimistic on the timescale's involved in developments coming to fruition.
  • There are also issues about the membership of the panel in the first place. Panel decisions, and who is involved in making those deliberations,can be subject to all the problems outlined in the jury method discussed earlier.

The advantages of the Delphi method should not be dismissed, however – the technique does attempt to remove some of the problems related to group decision making. The Delphi method is also a move away from striving to form a single view of the future. Although the aim is to narrow down the responses to as much of a consensus as possible this may not be achieved. When the process does not reach a clear consensus it can still be useful as it has identified the spread of opinion among experts in the field. A planning team can therefore consider a series of potential outcomes.

All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd Protection Status

Marketing Strategy Topics