The first step involved proposing a working model for the process which
generates judgmental adjustments. This model provided the groundwork for identifying the major dependent and independent variables, the interactions among the variables and basic cognitive mechanisms utilized. Furthermore, this model helped visualize the internal functioning of the judgmental adjustment process. The significance of the
working model derived from the fact that it formed a theoretical foundation for proposing hypotheses. First, a theoretical foundation enabled a systematic exploration of factors that affected the effectiveness of judgmental adjustments. In other words, important factors
affecting judgmental adjustments were not overlooked. In fact, Sanders (2001) emphasized the need for systematic research on judgmental adjustments. Second, a theoretical foundation provided a means to combine empirical research findings in a coherent way. Without a theoretical foundation, one could argue, and potentially find empirical support for, any number of variables that may affect judgmental adjustments.
However, if these variables are not studied with a prior theoretical framework the results will be very difficult to integrate into a solid body of knowledge. For example,
researchers in the area of motivation have complained about the lack of a unified theoretical framework in studies related to motivation (Judge 2002). Such studies focus on a narrow set of traits and their effects on motivation. However, without a theoretical framework, results of different studies cannot be compared and integrated. Furthermore, since behavior is usually determined by an interaction of different traits, one would want to study the interaction of traits which, in the absence of a theoretical framework, is virtually impossible. For all these reasons, it was important that this research be based on a working model of judgmental adjustments that identified relevant factors and illustrated the interaction among them. Since such a framework was not present in the literature, we proposed a working model based on various, more generic models in the cognitive psychology literature.
The literature on cognitive psychology deals with cognitive faculties of humans such as perception, memory and information processing. As such, researchers have proposed many models of human cognitive functioning. These models describe how humans perform cognitive functions in a generic way that is independent of context.
Moreover, each model looks at human cognitive functions from a specific point of view
which depends on the research question that a particular researcher wants to answer.
Consequently, these models were too generic for use in this research.
The solution to this situation was to build a working model for judgmental
adjustments that was a synthesis of relevant characteristics of various models in cognitive psychology. The working model was based on four different models. The first model was the Brunswik Lens Model (Brunswik 1956) which established the relationships between the organism (the forecaster) and the ecology (business setting). Given this background, the second model, Hogarth’s model (Hogarth 1987) illustrated the sequential nature of human judgment. The third model by Arthur, Doverspike and Bell (2004) provided further detail in terms of information processing. Finally, the work performance model (Robertson and Callinan 1998) tied various environmental and personal variables to task performance. The working model was developed as a synthesis of these models and was customized to reflect the specifics of the judgmental adjustments process. As a result, the working model was, on the one hand, generic enough to be applicable beyond the
operations of the research company, and, on the other hand, specific enough to accurately capture the relationships between different variables affecting judgmental adjustments.
A simplified version of the working model is provided in Figure 4. The inputs to the working model are statistical forecast and contextual information. When the store manager generates a judgmental adjustment, he or she also takes into account relevant previous experiences. After the judgmental adjustment, actual sales are observed and forecasting performance can be determined in terms of accuracy improvement, learning and biases. The information generated by this outcome is added to the memory of the store manager to be used again in future decisions. The judgmental adjustments and the
memory processes are both moderated by personal and environmental variables which include intelligence, personality, motivation and situational variables.
Figure 5: A simplified version of the working model
The dependent variables studied in this research were (1) accuracy, (2) learning and (3) biases. Accuracy of judgmental adjustments refers to the “closeness” of a forecast to the actual value at a given point in time. Hence, the accuracy was analyzed from a cross-sectional perspective. The learning effects, however, are longitudinal in nature,
Perception Processing Execution
Contextual Information Statistical
Forecast
Outcome
Memory Feedback Past Performance Personal and
Environmental Variables
Intelligence Personality Motivation Situation
Accuracy Improvement Learning
Biases
since learning occurs over time when the forecasters gain experience and their
performance improves. In other words, learning can be described as the positive change in accuracy improvement over time. Biases are systematic deviations in judgmental adjustments. Normally, errors should display a random behavior. However, if there are errors that show some systematic recurrence then there may be a bias in judgmental adjustments. The nature of the bias is expected to reveal the source of bias which can be addressed to eliminate this particular bias and improve accuracy.
The working model’s conceptualization of judgmental adjustments led directly to the identification of independent variables to be investigated in this research. The
working model viewed judgmental adjustments as a cognitive task, as a judgment and decision-making task and as a repetitive and complex task. As such, three streams of research were reviewed to identify independent variables. The first stream was related to judgmental adjustments and this review can be found in Chapter 2. The other two streams of research were human judgment and task performance. These findings are integrated into hypotheses proposed in Chapter 3 along with the findings reviewed in Chapter 2.