When forecasting or budgeting a project, how often have you asked a subordinate to just give me a number and based a projection on an average of high and low estimates?
It seems obvious that projections based on averages of input forecasts will, on average, be correct. But it's wrong. That way of thinking, which permeates business, government and the military, can be called the Flaw of Averages.
In this execuBook, author Sam L. Savage explains how the Flaw of Averages ensures that plans based on average customer demand, average completion time, average interest rate and other uncertainties will produce results that are below projection, behind schedule and beyond budget. The answer is to stop thinking of uncertainties as single numbers and begin thinking of them as shapes or distributions.
This summary examines what's wrong with the way many planning decisions are made, and offers a more effective alternative. It will be of interest to managers in any kind of organization.
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