Importance of statistics in decision making

When managers use research, they are applying the methods of science to the art of management and all business undertakings operate in the world of uncertainty. There is no unique method which can entirely eliminate uncertainty; however, research methodology, more than any other procedure, can minimize the degree of uncertainty. Thus it reduces the probability of making a wrong choice amongst alternative courses of action. This is particularly significant in the light of increasing the competition and growing size which make the task of choosing the best course of action difficult for any business enterprise.

It is imperative that any type of organization in the present environment needs the systematic supply of information coupled with tools of analysis for making the sound decisions which involve the minimum risk. Under this context, the research methodology plays a very important role.

Research is not an existing bag of techniques and it is not a fishing expedition or an encyclopedic gathering of assorted facts. It is purposeful investigation. It provides a structure for the decision making. There are three parts involved in any investigation namely; 1) the implicit question method; 2) the explicit answer proposed; 3) collection, analysis and interpretation of the information leading from the question to the answer.

In fact, the third part is the defense that justifies the recommendation and is viewed as research. For example, the following statement can be considered: “We recommend that model X television can be priced at $15000”. This is the recommendation forwarded to the marketing head by the marketing manager in charge of research wing. The implicit question posed in this quote is what should be the selling price of the model? The explicit answer is $15000. The third part deals with collection, analysis and interpretation of the information leading from the question to the answer of $15000.

The word: “research” identifies a process by which the organization attempts to supply the information required for making sound management decisions. In fact the research is not synonymous with common sense. The difference revolves around words such as “systematic”, objective and reproducible. Both research and common sense depend on information; the distinction between them lies in the procedures and methods adopted by which the information is obtained and used in arriving at conclusions. The research cannot address itself to the complete information on a particular subject. As such, the two secondary characteristics of research specify “relevance” and “control”.

When it comes to good research, the systematic approach is very much essential and each step should be so planned that it leads to the next step. It is usually very difficult to go back and correct the mistakes of the previous step; sometimes it is impossible. Even when it is possible, it always involves loss in time and money. Research can be divided into a number of steps and both the number of steps and the names are somewhat arbitrary; however, the recognition of a sequence is crucial. Planning and organization are part of this systematic approach with a lot of emphasis given to the interdependence of various steps.