SIMULATING BUSINESS DECISION-MAKING: USING STATISTICAL CASES FOR CLASSROOM EXERCISES Development In Business Simulation & Experiential Exercises, Volume 18, 1991 140 SIMULATING BUSINESS DECISION-MAKING: USING STATISTICAL CASES FOR CLASSROOM EXERCISES Dr. John E. Knight, University of Tennessee at Martin ABSTRACT Business decision making can be greatly enhanced by the use of statistics when managers are more attuned to viewing statistics as a tool of negotiation -rather than strictly a science of numerical calculations. The paper demonstrates the difference between the traditional examples of applied statistics textbooks versus an case scenario approach. A specific example is given to illustrate the procedure. INTRODUCTION The use of statistical logic in business decision making could be greatly expanded if businessmen and future businessmen (students) could understand that many of their discussions could be more clearly focused through the use of statistics. Unfortunately, statistical courses generally fail to bridge the gap between statistical nomenclature and business terms. Rather statistical courses generally focus on the calculation of terms, which are seldom addressed in a business discussion. Seldom will one ever hear a businessmen ask a colleague, ~ the R-squared value for that least squares regression line?” Most collegiate statistics books follow a prescribed format for statistical presentations. Students routinely follow mathematical calculations designed to answer specifically asked statistical questions. This observation can be made even when the statistics books are replete with “business examples”. To illustrate this observation, an example from Statistics for Business and Economics by McClave and Benson (1988) describes a company that services micro- computers that is interested in developing a regression model that will assist them in manpower planning. In particular, they want a model that describes the relationship between the time a service person spends on a preventive maintenance service call to a customer, y, and two independent variables: the number of microcomputers to be serviced, xl, and the service person’s number of months of experience in preventive maintenance, x2. A sample of the resulting questions posed by the text follows. (a) Fit the model Y = Bo + B1 X1 + B2 X2. to the data. (b) Investigate whether the model is useful. Test using alpha = .10. (c) Fit the model y = Bo + B1 X1 + B2 X2 + B3 X1 X2 the data. (g) Do the data provide sufficient evidence to indicate that the interaction, xl*x2, con- tributes information for the prediction of y? SIMULATED BUSINESS CASE EXAMPLE As an example, the case and questions were rewritten (Knight 1990) as managerial simulated managerial situations (some examples of which follow). A complete description of this case and others can be found in the Knight reference. Situation #1. Because of the time study analysis, the repairmen felt that an unfair expectation would be placed on them. After a group meeting, they suggested that a time standard be developed which found the average maintenance time per computer and then add 20% to allow for special problems that may come up on the job. What repair time per computer would they have suggested? Situation #2. Although the proposal seemed fair on the surface, manager felt that the figure was fair for “one computer” but what if the job had “multiple computers”. How much time should be allowed so as to be 70% sure the job could be finished in less than the allotted time? Situation #3. Using the formula “total time” = 2.41 + 1.43 (no. of computers) - 0.36)6 (no. of months experience), the company wanted to knot the average time it would take for a repairman to complete a job if the job had 6 microcomputers and the repairman had 8 months of experience. Situation #4. One manager claimed that the formula implied that the incremental time to complete an additional computer was constant regardless of the amount of experience that the repairman had. He suggested that each incremental computer would take less time if a repairman had more experience. If this wasn’t so, why should the company be giving higher pay if they were no more capable than a new repairman? Differences in “Applications” The questions posed in the standard text example were statistical in nature but did little in regards to showing the true application to business and management. The questions that were posed in the standard text have been reworked to become typical managerial’’ situations that could be more clearly understood when statistics are applied. Many sample cases are available from the author. Conclusions Business statistics can be one of the most exciting topics for a student or a businessman to learn because it dramatically increases his ability to negotiate through logic. However, most business statistics problems, although said to be applications, do not present this particular approach. Problems can be developed however, that simulate reasonable managerial arguments that can be addressed with the proper application of statistics. REFERENCES (1) Statistics for Business and Economics, McClave, James T. and Benson, George, Dellen Publishing Company, San Francisco, Ca. 1988. (2) Statistical Cases In Business, Management, and Marketing, Knight, John, 11Th Print Shop, Martin, Tenn., 1990. Table of Contents Volume 18, 1991 Personality Types and Total Enterprise Simulation Performance Using DIS 'n DAT as a Decision Support System for a Marketing Simulation Game Theoretical Derivation of a Market Demand Function for Business Simulators The Ethnographic Case Study: An Experiential Approach to Teaching Retail Management Electronic Bulletin Board Systems (BBS): Support Software for Computer Simulations The New Budget Game Negame: A Cross-Cultural Role-Play to Introduce Students to the Familiarization Stage of Negotiations Modeling Short-Run Cost and Production Functions Using Sheppard's Lemma in Computerized Business Simulations Increasing Simulation Realism through the Modeling of Step Costs Predicting Simulation Performance: Differences Between Groups and Individuals A Facility Location Case to Stimulate Classroom Interaction Educational Effectiveness of Business Simulation Gaming: A Comparative Study of Students and Practitioner Perspective Ethical Dilemmas in Experiential Learning: Issues and Strategies A Critical Review and Assessment of ABSEL's Award-Winning Procedures and Protocols Political Risk: A Simulation for Business Practitioners Upside Down: A Cross-Cultural Game in Experiential Learning Gorby's Dilemma: From Communism to Free Enterprise in Two Hours Strategic Market: Planning with the COMPLETE Product Portfolio Analysis Package: A Marketing Decision Support System Career Concepts and Total Enterprise Simulation Performance Experiential Learning in Human Resources: A Performance Appraisal Application Managerial Motivation and Realism Among MBA Student as Viewed through The Looking Glass, Inc. Simulation An Experiential Approach to Teaching Data Analysis Using MYSTAT: Rationale, Procedures and Results Practicing What Was Preached: A Sequential Learning Model put to the Test Student Attitudes about Policy Course Simulations An Investigation of the Relationship Between Simulation Play, Performance Level and Recency of Play on Exam Scores The Effect of Leadership and Cognitive Processing Styles upon Peer Performance Evaluation: Implication for the Utilization of Simulations in Business Pedagogy On the Transfer of Market Oriented Business Games to Socialist Cultures An Application of Financial Analysis of the Business Firm in a Simulated Competitive Environment Collective Bargaining Simulation: An Exercise based on a Familiar Theme Making Business Policy a Strategic Management Experience A Student Exercise for Intergrating the Concepts of Power and Motivation The Boundaries Extended: An Experiment Comparing Dialectical Inquiry, Devil's Advocacy and Consensus Using the Executive Game Using a Simulation Package to Develop a Simulation Exercise in Cost Accounting Success Factors in Experiential Training for Creative Problem-Solving Teams An Experiential Approach for teaching Quality management Critical Success Ratios: A Comparison of Two Business Simulations in a Multi-Year Environment Stocklogs: A Classroom Exercise for Teaching the Logistical Relationship of Location and Inventory The Organizational Leadership Program Simulating Business Decision-Making: Using Statistical Cases for Classroom Exercises Scripting for the Classroom Upgrading the Business Strategy and Policy Game Developing Student Team-Building and Leadership Skills Using Computer-Aided Experiential learning Strategies Organizing and Outward Bound Field Trip An Architecture for Extensible Simulation Games Performance in the Capstone Business Course: What is the effect of Pedagogy, Learning Styles, and Student Motivation? Operational Strategy with Participant-Modifiable Parameters An Example of a Personal Selling Case Transformed into a Role Play Scenario Instructional Software: It's Evolution and Current State of the Art in the Business Curriculum Ascertaining Performance Variables for use in Determining Student's Grades in Courses Employing a Business Simulation Designing Management Seminars Using Business Simulations The Accounting Information Systems Course: Bridging the Gap between the Classroom and the Real World The Good Cooks Guide to Training Excellence: Working with Passion A Demonstration on Multiple Data Collection Methods: Seeing Strategic Issues Through the Looking Glass Simulation Systems Analysis and Design: Why Undergraduate Education gets a Failing Grade Accommodating Organizational Culture: An Evaluation of Management Development Delivery Modes in Varying Organizational Cultures Modeling Total Quality into Business Simulations The Political Futures Game Meeting Meeting Objectives