Communication/Decision Making

Further to this the intimidating obsession is that this problem is hardly ever, identified, or even thought off. The difficulty is the use of qualitative or subjective expressions in the gathering of data used in the decision making process. For instance, if somebody questions ‘what is worst case sales forecast for the forthcoming year or what is base case the acquisition candidate’s predicted cash flow for the next 10 years?’ there is a miscommunication innate in the question. Such questions are asked using a subjective term, such as ‘worst case’ or ‘base case’. These terms are subjective since they are dependent on the subject being asked, reliant on their sense of these terms and reliant on their risk tolerance. What is the ‘worst case’? What is ‘base case’? These terms meaning may vary from people to people. One may consider worst case has only a 1% chance or less of occurrence, and a different person may consider it means a 30% or less of happening. However, the use of objective and quantifiable expressions to communicate, terms for example % chance of occurrence – percentiles.This is easy to understand and can be verified by doing a simple survey. There are wide ranges of verbal phrases such as probably, very probable, not very probable, unlikely, predictable, frequently, always, etc. It is observed that there is a wide variance on the explanation of verbal phrases, and as such there is often a ‘false impression of common understanding’ while in actual fact there may not be. From this, visualize a person giving the sales forecast says there is a ‘very probable’ chance it will be 50,000 units, and he might mean there is only a 60% chance, or he may mean a 95%. Thus use this in the study of the base case and now multiply this influence in a study with 10 diverse variables. Is there any doubt that the actual results are so far away from the