Judgmental Forecasting
Unavailability of data drives business executives to adopt judgmental forecasting techniques. One such method is the Delphi method.
What is Delphi Method
The Delphi Technique is a method used to estimate the likelihood and outcome of future events by using knowledge of subject domain experts. It seeks to gain consensus using a series of questionnaires and is especially useful when researchers need to collect ideas from isolated experts on a specific topic and establish agreement to discover the underlying assumptions or perspectives among the experts. Delphi technique is “a method for structuring a group communication process so that the process is effective in allowing a group of individuals, as a whole, to deal with a complex problem"
When to use Delphi Method
- Unaivailibity of historical data on the subject
- The need for experts' judgment
- Group consensus to achieve the results
- Lack of consensus and imperfect knowledge
- Experienced and capable experts
- Dispersion of experts, no time limitation, and lack of cost-effective method
Steps to executing the Delphi Method
- Problem statement
- Choose a facilitator
- Composition of an expert panel team.
- The facilitator shares a questionnaire’s in order to gather expert opinions.
- A group of experts exchanges views, and each independently gives estimates and assumptions to a facilitator who reviews the data and issues a summary report.
- The facilitator determines the level of consensus.
- The group members discuss and review the summary report, and give updated forecasts to the facilitator, who again reviews the material and issues a second report.
- This process continues until all participants reach a consensus.
Delphi Method Considerations
- The panel size may vary according to the topics covered, the nature of different viewpoints included, and the time and money available.
- Use a combination of individuals with multiple specialties and heterogeneous groups better than the homogeneous groups.
- Subjects should be highly trained and competent within the specialized area of knowledge related to the target issue.
- Delphi panel is done with the participation of individuals who have the knowledge and expertise of the study subject known as the Delphi panel.
- Use Five-point or seven-point scale to determine the importance or screening of items i.e. "extremely agree”, Agree, Neither Agree nor Disagree, Disagree and "extremely disagree"
- 3-10 rounds are adequate at reaching consensus
Advantage over face to face interviews
- Alleviates some of the bias inherent in group meetings such as:
- Dominant individuals who won’t get a chance to exercise their personality.
- The unwillingness of many people to defend their views, even well-founded ones would be a thing of the past.
- Participants can change their minds anonymously
- Eliminates need for group meetings
Weakness of the Delphi approach
- Can take a lot of time to reach consensus
- Participants may drop out