OPERATIONS MANAGEMENT

ARTICLE PRESENTATION

Information Processing Behavior and Estimating

Accuracy in Operations Management

JOHN R. ADAMS
LLOYD A. SWANSON

SUBMITTED BY:-
FATIMA MESUD
AMMAD AMER ZIA
KHUDIJA NAVEED
ATTA-UL-HASSAN
MOHAMMAD USMAN KHAN
Case Summary:-
The article discusses and focuses on the factors including personal and environmental
influencing the estimating accuracy in operations management. It points out that making
correct decisions on part of the manger are critical to the success of estimating accuracy in
operations management and that the manager should take proper corrective decisions for
problems occurring and plans accordingly to the future problems and issues. The manager's
ability determines both his skills and competence and reputation as a manager as well as for
the success of his product. Three major factors that might affect the accuracy of an individual
operating managers estimates Firstly, the importance of the estimate as perceived by the
manager should determine his motivation and the amount of effort he is willing to expend in
the search for accuracy. This perception is almost certain to be affected by a variety of job-
related conditions in the operating environment. Secondly, certain managers may exhibit
characteristics which help them develop accurate estimates. Such managers generally become
recognized as successful and are referred as talented and lastly, the information which is
sought provides the historical data base which may be extrapolated to predict future events.
The amount and type of information collected and the manner in which it is processed may
limit the possible accuracy of predictions. In order to test the above factors, a relatively large
number of estimators are needed to allow a clear distinction between the information
gathering process, the various personality characteristics of the estimators, and the
environmental or motivational factors which impinge on the estimating process. Further each
estimator should have made several estimates so that the impacts of influences beyond his
control are minimized. Thus, research is needed to examine the behavioral aspects of the
estimating process; that is, to determine what personal and situational factors are associated
with accurate estimates, and what managers tend to produce them. The model identifies job
performance as dependent on the individual's problem solving approach, which, in the case of
developing accurate estimates, must be determined by the type and amount of information
sought and processed by the estimator. McClelland and Kahn state that managers and
business executives appear particularly driven by a high need for achievement. Meyer
indicates that managers improve their performance most when specific goals are established.
Hall and Lawler have demonstrated that pressures for quality and financial responsibility are
both related to organizational performance where professionals are concerned. Ferguson and
Swift found that the Program Evaluation and Review Technique (PERT), which uses three
time estimates for each activity to define a distribution of possible activity durations, yields
more accurate estimates than the Critical Path Method (CPM), which uses only a single time
estimate per activity An alternative explanation may be that the additional study required to
provide three independent estimates may well increase the manager's knowledge sufficiently
to explain the improvement. A project management setting was chosen for the study because
it most nearly exemplified the characteristics described earlier. Specifically, a large number
of estimators representing independent functional organizations typically contribute a number
of estimates to the network analysis systems used as planning and control devices. These
estimators are subject to differing environmental influences and are generally free to
determine what information they will gather and how that information will be used in
developing their estimates. In addition, the network systems used in this specialized form of
management make the individual estimates and actual accomplishments clearly visible and
relatively easy to obtain in quantitative form. The method used included the sample
consisting of those managers who had provided initial estimates of activity durations to the
project's network analysis system. Thirty individuals, representing 94 percent of all the
estimators on the project, were studied in depth using interviews, survey responses, and an
analysis of the network records. Data from the surveys and records were analyzed using
correlation analysis, while the interview data proved invaluable for interpreting and
confirming and qualifying the statistical results. The variables of accuracy of the estimates,
managerial talent, perceived importance of accurate estimates and information sought and
processed. The nine characteristics identified as supervisory ability, intelligence initiative,
self-assurance, decisiveness, working class affinity, achievement, motivation, self-
actualization and security show a measure of a degree of managerial talent. The results
Analysis of the data indicates that the more accurate estimators apparently have more confidence in
their ability to estimate, for not only do they estimate more precisely in the interviews, many
respondents expressed doubts that this hypothesis would result in any significant relationship
Because of the many outside, uncontrollable factors each felt impacted the actual duration of an
activity. While each respondent indicated that such a relationship should exist, the individual
invariably indicated some delayed political decision, an extended strike, a period of bad weather, an
Unexpected technical problem or some other reason why his particular estimate might not be accurate.
Yet the amazing result of this analysis is that over 65 percent of the variation in accuracy is explained
by the amount of information sought and processed, despite the admittedly large number of
uncontrollable factors impacting this and most other projects. The important conclusion to be drawn
from this analysis is that the uncontrollable factors have a much smaller impact on accuracy than is
generally believed. The implication is that estimating accuracy can be largely controlled
By the estimators in an operating environment a more detailed analysis indicates that six of the nine
components of managerial talent are significantly related to the information sought and processed the
remaining three components also demonstrate reasonably high simple correlations. While the
Existing covariation rules out any conclusion about the most important components, initiative and
decisiveness are logical driving characteristics for distinguishing those estimators who will strive for
the greater amount of information in developing their estimates. Further Job security and promotion
potential of consistently inaccurate estimators was certainly reduced by their poor performance, but
no formal system existed for recognizing and rewarding accurate estimators. Thus the
Relationships between the components of managerial talent and the estimator's perceived importance
of accuracy may help explain why the interview data clearly demonstrate that those who feel accuracy
is important also strive to achieve accurate estimates, despite a formal organizational reward system
that tends to provide only negative rewards to them. It was hypothesized that certain personality and
situational factors, as well as certain aspects of an individual's decision methodology, affect the
accuracy of his estimates. The primary conclusion of this study is that the accuracy of an estimate
Is largely determined by the estimator himself. Without a doubt, uncontrollable outside variables,
such as strikes, late decisions, weather conditions, and a wide variety of other influences' affect the
actual duration of activities and hence the accuracy of the estimates.