Scrutinising forecasts through the lens of traps and biases
An affiliate of a global pharmaceutical company was looking to improve the robustness of their revenue forecasts through an evaluation step, with the forecasts’ reliability being key for marketing and management teams’ decision making. They engaged SiLS to develop a framework for evaluating forecasts based on mitigating psychological biases, which leveraged SiLS’ experience in supporting decision making through the evaluation of traps and biases.
The SiLS team took a two-step approach to increase awareness of biases and reduce their impact:
Built awareness of traps and biases and how they manifest themselves in forecasting. A workshop introduced the team to the concept of traps and biases and illustrated the risk they pose in forecasting. Through a structured and interactive approach, SiLS supported the forecasters in pin-pointing occurrences of biases in the forecasting process and collaboratively generated methods for mitigating them.
Developed a framework for evaluating traps and biases in the forecasting processes. Building on the output of the workshop, SiLS developed a framework for identifying and mitigating traps and biases in the client’s forecasting process. The framework consisted of a set of questions to guide evaluators and forecasters in ensuring steps had been taken to address biases. Recognising the need for efficiency and relevance, SiLS ensured the framework was succinct, based on rigorous analysis and action-oriented.
Recommendations and outcomes
SiLS’ recommendation for an evaluation framework based on psychological traps and biases proved to be a powerful approach to challenging forecasts. The evaluation framework was implemented into the forecast review process. Combined with the team’s new awareness of traps and biases, it is enabling more robust forecasting and ultimately improving decision making. The business analytics team are also now empowered to support stakeholders in identifying and mitigating traps and biases in decision making, which has enhanced their value as a strategic partner.
SiLS have since been engaged to run similar workshops with other teams in the same organisation, helping them to avoid traps and biases in their decision-making processes.