Impact of underlying assumptions in the analysis process
Indisputably, people often make assumptions when carrying out any analysis, particularly the analysis of information that can aid major decision making. These assumptions are important because the help to ease the analysis. However, they can have serious effects on the performance of an organization if the analysts are not careful. Sometimes the decision makers tend to be selective on the type of information they use to make their decisions. They assume that some factors do not have significant effects on the organization and ignore them. Assumptions can lead to making wrong conclusions about a certain phenomenon. Additionally, making some unrealistic assumption may lead to wrong predictions and decisions. For example, assuming that the interest rate will remain constant over a given period may result in wrong speculations of business performance. Additionally, assumptions often lead to biased analysis whereby some individuals base their analysis on some figures to protect their interests.
Underlying assumptions discussion (video)
The video demonstrates how the use of analytics can lead to misconceptions and wrong judgments. The analyst just presents the analyzed information and assumes that the audience understands how the figures are computed. Additionally, the presenter seems to concentrate on some figures that may create positive impression to the audience (The Fight, 2012). Some analysis is based on unrealistic assumptions. For example, the poor performance of the Addidas leather company at the initial stages of its establishment and many business organizations result from the assumption of the management that small changes in employees' wages by competitors are not significant. This assumption leads to high rate of labor turnover, resulting in increased costs in the organization and poor performance (Mahdi et al., 2015). The occurrence of such situations can be mitigated through different methods. One of the techniques that can be used is to conduct a critical analysis to establish the impact of every variable individually on the performance of the entire organization. Also, the analysis of essential business information should not be based on unrealistic assumptions to avoid wrong decisions and inappropriate conclusions.
References
Mahdi, H. A. A., Abbas, M., Mazar, T. I., & George, S. (2015). A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Managemetn and Economic Research, 6(3), 167-77.
The Fight in Analyst (2012). Moneyball (breaking biases) Retrieved from http://www.youtube.com/watch?v=yGf6LNWY9AI
