What if you could create a team that would dramatically improve your company’s forecasting ability? But to do so, you must expose those professional corporate forecasters’ unreliability. Would you do it? Here for Part 2 of the five-part Innovation in Compliance series, Tom shares his insight into “superforecasting” and its role in compliance functions.
Forecasting is the predictive capability organizations use to anticipate or enhance outcomes. The new “superforecasting” movement, led by Philip E. Tetlock and others, aims to enhance this capability even further by following four precepts.
To frame the precepts, in a recent Harvard Business Review (HBR) article by Tetlock and Paul J. H. Schoemaker, entitled “Superforecasting: How to Upgrade Your Company’s Judgment,” the authors revealed three general observations:
- “Talented generalists can outperform specialists in making forecasts.”
- “Carefully crafted training can enhance predictive acumen.”
- “Well-run teams can outperform individuals.”
Here are the four precepts to move into superforecasting:
- Find the sweet spot between something entirely straightforward or seemingly impossible. For example, using scientific expertise and sound business judgment, or using data and intangibles like cultural fit and anticipated synergies to gauge outcomes.
- Train for good judgment. Provide your employees with the necessary training to understand probability concepts and techniques, as well as the effects cognitive biases have on their judgment.
- Build the right teams. Your team composition is critical to your superforecasting success. Look for: “Cautious, humble, open-minded, analytical, and good with numbers. In assembling teams, companies should look for natural forecasters who show an alertness to bias, a knack for sound reasoning, and a respect for data.”
- There must be trust among your team members to facilitate good outcomes. Regardless of errors and miscalculations, the superforecasters and the senior management should work together to build a secure environment where outcomes do not threaten the team itself.
It’s also important to note that tracking performance and providing feedback are essential to improve forecasting outcomes in the future. This also helps in creating an audit trail that the company can use to learn from both good and bad predictions. Ultimately, this will provide the team with the insight necessary to replicate, anticipate, or enhance specific predictions.
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