Evaluate the role of statistics in business and management decision making (10)

A.L. Bowley defined statistics as numerical statements of facts in any department of inquiry
placed in relation to each other. Statistics is the study and manipulation of data, including ways
to gather, review, analyze, and draw conclusions from data. The two major areas of statistics are
descriptive and inferential statistics. Statistics can be used to make better-informed business and
investing decisions.

The role of statistics

We have different types of statistics which helps us deal with different senarios;

♦ Correlation is used to analyze the efficiency of business operations.

Correlation can be used by managers to try and identify substitute supplies
that lower manufacturing cost. The same goes for employee behavior. If a
business finds that employee performance picks up with the implementation
of a bonus, the correlation of behavior can signal that a small bonus expense
can make serious production improvement.
♦ Regression analysis technique helps to understand how the dependent
variable changes when one of the independent variables is varied, while the
other independent variables are held fixed. Business analysts use this
statistical tool for eliminating the unwanted variables and select the
important ones for the growth of business.
♦ Statistics helps business to deal with future uncertainties with more
confidence because statistical tools provide a more accurate solution than
other techniques. Business can take quick and long-term decisions with the
help of trend analysis which analyzes the past trends of the market and
predicts the future on the basis of that.
♦ Business growth is unthinkable without the use of statistics and statistical
tools. Different types of statistical tools are used by businesses to measure
the performance and identify trends of business, allowing managers to make
the decision which is based on data and not on assumptions.
♦

Discuss how management can misuse statistics in an organization.

Misleading statistics refers to the misuse of numerical data either intentionally or by error. The
results provide deceiving information that creates false narratives around a topic. Misuse of
statistics often happens in advertisements, politics, news, media, and others.
There are different reasons and ways an organization can misuse statistics including;

In 2007, the Colgate company came up with an ad that shows that 80%
of the dentists are recommending their product to solve dental problems.
As per details of the promotion, several shoppers supposed Colgate as
the best choice. But actually, it was not true. Therefore, it considers
being a popular example of statistics to mislead.

Data fishing
This misleading data example is also referred to as “data dredging” (and
related to flawed correlations). It is a data mining technique where
extremely large volumes of data are analyzed for the purposes of
discovering relationships between data points. Seeking a relationship
between data isn’t a data misuse per se, however, doing so without a
hypothesis is.

Misleading data visualization

Insightful graphs and charts include very basic, but essential, grouping of
elements. Whatever the types of data visualization you choose to use, it
must convey:
- The scales used
- The starting value

Strategically picking the time period

a common misuse of statistics is strategically picking the time period to
show a result. This is a case of misleading statistics that can be done
purposely, to achieve a specific result, or accidentally. For example, picking
only a good-performing month to build a sales report will portray a
misleading picture about the overall sales performance.
Faulty polling
The manner in which questions are phrased can have a huge impact on the
way an audience answers them. Specific wording patterns have a persuasive
effect and induce respondents to answer in a predictable manner. For
example, on a poll seeking tax opinions, let’s look at the two potential
questions:
Do you believe that you should be taxed so other citizens don’t have to
work?
- Do you think that the government should help those people who cannot
find work?
These two questions are likely to provoke far different responses, even
though they deal with the same topic of government assistance. These are
examples of “loaded questions.”
A more accurate way of wording the question would be, “Do you support
government assistance programs for unemployment?” or, (even more
neutrally) “What is your point of view regarding unemployment assistance?”

References
Financial Analysis Made Easy. (2018). John Wiley & Sons Ltd: Company financial data.
http://fame12.bvdiup.com/