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Quality control and the business economist.

This article provides a quality control overview for business economists. The importance to both businesses and individuals of high quality analysis is clear, yet the economist's role in ensuring the quality of his or her work is a frequently overlooked aspect of what business economists actually do on the job. Ideas and general steps to be considered when reviewing one's own analysis, as well as the work of others, are summarized.

QUALITY PRODUCTS - whether manufactured products or executive briefs relating economic conditions to corporate operations - are vital for both business and individual success. Questions of quality are most often described in the popular media as they relate to the manufacturing environment; for example, this company's cars are better than that company's cars, or XYZ industry's productivity increased 8 percent after better statistical quality controls were implemented. Yet quality control is no less important in the service sector. Indeed, many leading experts note that the need for increased quality control might be greater in the service sector than in the manufacturing sector.

Deming, for example, emphasizes the magnitude of the problem by noting that six out of every seven American jobs are now service jobs if support staffs of manufacturing firms are included in the calculation. (Deming, 1982) Drucker states that lack of good management in the public-service sector, whether in governments, graduate universities, or other environments is ". . . a glaring weakness." (Drucker, 1974) And Peters has estimated that only 10 percent of service firms have mastered even the basic stage of quality control, while 25 percent of manufacturing firms have done so. (Peters, 1990)

Business economists should not be immune from the constant quest for quality. just as economists can show that productivity and economic growth are related to quality in the workplace, it is equally important for economists to ensure the quality of their own work. Additionally, many economists ultimately assume top managerial and decisionmaking responsibilities in corporate and government hierarchies, achieving such roles as Chief Economist, Vice President for Economic Affairs, Division Director, and a host of other high ranking positions, which further focuses on the need for strong quality management among economists. Similarly, economists are undertaking an ever-widening variety of tasks. For example, economists are called upon to assess economic conditions, explain and forecast economic indicators, provide technical analyses, estimate intercompany transfer pricing, draft Congressional testimony, write policy papers, propose and analyze budgets, give briefings to other corporate or agency officers, or estimate costs for proposed projects. Each of these activities is likely to play a crucial role in the organizational decisionmaking process; hence, it is equally crucial for these products to be of high quality, that is, clear, concise and error-free.

The potential benefits for economists in thinking about quality, however, go beyond the obvious effects on corporate profits, efficiency and competitiveness. Economists do not need to be told that, because time is money, things should be done right the first time. For example, corporate confidence in economic analysis grows in proportion to the quality and clarity of the work, which in turn translates into increasing influence and effectiveness for all economists - not to mention more jobs for economists. Consistent attention to quality also will help individual economists in their career paths by leading to better performance evaluations, job promotions and salary increases. In addition, a job well-done will provide a boost to self-esteem and morale.

Even though quality control is as necessary a function in the economist's job description as running regressions or forecasting the unemployment rate, it is often understated (if not unstated). Most graduate economics programs do not offer a course on ways to control quality. Indeed, economists are often notorious for heavy-handed, indecipherable and irrelevant analysis and writing. The purpose of this article, then, is to provide a quality control overview for economists. It offers ideas and steps that might be considered when reviewing economic analyses. These ideas can be applied when reviewing one's own work and the work of others where there is supervisory responsibility.

THE PREREQUISITES: AWARENESS AND COMMON SENSE

The first requisite in any quality control process is to be aware that professionalism is important. Questions should continually be asked about the nature of the work. To select a few examples:

1. Does this economic product make sense, especially for the intended audience? For example, for many audiences, too much technical jargon serves no purpose.

2. Is this what the client asked for? If the client wants to get a quick breakdown of comparative changes in unemployment rates relative to inflation rates for the past twelve calendar quarters, do not provide five different two-stage-least-squares specifications of this relationship for the past fifty years.

3. Is this how the product should look? Results should be displayed in the best possible manner. For example, if tables and graphics will clarify, use them. if not, don't.

4. Have the facts been fact-checked? Any data, numbers, quotes, sources, and other factual information presented should be checked against existing hard copy. Calculations should be verified by a fact-checker. (See below for examples of fact-checking routines.)

5. Is this the best that can be done, given the resource constraints? Strive to maximize the quality of the output, given the time, money and personnel limits placed on the work.

The importance of simple common sense in ensuring quality of one's work cannot be overemphasized. One can, for example, cheek to see if the analytical conclusions appeal to common sense. If not, can they be reasonably (and briefly) explained? Data with outliers that appear to be outside the realm of reality should be similarly justified. In short, the analysis, writing, presentation, data and other product components should be believable to even the most cursory reader. One loses credibility if three fatal flaws can be found by a busy reader.

SOME BASIC FACT-CHECKING ROUTINES

One key to turning out quality products is to devise a series of basic fact-checking routines and implement them while work is in progress and after the task is complete and ready for review in draft form. A series of general quality control fact-checking steps applicable to economics tasks is provided below. The list is not all-inclusive, but rather a starting point; each economist can modify these steps and add additional routines as needed to meet specific and personal work requirements.

Common Sense. Again, as a first step - and at the risk of redundancy - it is worth emphasizing the importance of common sense and awareness. One should always be alert to the absolute need for quality, and be certain that the work and the work processes make sense.

The Right Question? As part of the process, one should relax, sit back and look at the product as a whole. Assess whether it meets the specifications requested by the client (or the boss). Are all the questions clearly and directly addressed? In addition, check to see if all techniques, theories, models, statistical applications and the like are applied properly and the results are interpreted correctly, and if they can be easily understood by the intended audience.

Internal Consistency. Frequently, economic reports are presented in multiple parts. For example, a report might have an independent executive summary, a longer explanatory paper, some computer printouts, a set of graphs, and a series of backup technical analyses. Each component might even be produced by different members of a team, or by different teams. In these situations, it is easy to "lose something in the translation." Hence the need to check to be sure that everything said and shown is internally consistent. For example, numbers relating to the identical concept but that appear in various parts of the analysis must be the same each time they are noted. A negative coefficient in a table in the technical analysis should not become a positive result in the executive summary. At a more basic level, be sure that names, sources, ideas, technical terms or other items are referred to (and spelled) the same way each time they appear (correctly, of course).

Number Checking. Economists deal with a lot of numbers. A first step in ensuring the quality of these many numbers is to know the data. Try the data on for size, manipulate them, get familiar with the information intuitively. After all is said and done, only a few people in the world know those numbers; it is essential that these data become second nature to reduce the possibility of error.

In the same manner, do not trust computer-generated output on faith. Check the output for obvious errors, programming mistakes or misinterpretation, data transmittal problems, wrong use of procedures, incorrect output formats, omitted variables in regressions or crosstabulations, etc. For large outputs, randomly check data and other information against known sources and hard copies.

Basic arithmetic also can be cause for grief if care is not taken. Check to see if totals in tables match the sum of the components, both horizontally and vertically. Differences that do not make sense need be explained. If totals do not add due to rounding, say so; while this may be apparent to most, it shows that the researcher is aware of discrepancies, and these discrepancies are not the result of sloppy work. Further, if some numbers presented seem to have greater than usual variance from the norm, i.e., if there are noticeable outliers, be sure to double check them and, if they are found to be correct, have a ready explanation for them on hand.

Compare To Hard Copy or Prior Work. There are several reasons to obtain hard copies, i.e., original documents, letters of transmittal, backup computer outputs, studies with similar analysis. First, they provide a way to check the final results against the original information. Misery may love company, but so does quality. Second, if errors occur in the product due to problems with the original data, there is some advantage in having the original in hand, and having it available might lead to improvement in the original as well. Third, having hard copies of all data will ensure that information will be available for others who wish to replicate the work. in addition, having alternative studies on similar topics will allow the results to be compared against information previously published or otherwise available; if such a comparison serves no purpose other than to confirm the economist's common sense, it will be worthwhile.

As a final check on the quality of numerical presentations (as well as statistical and editorial presentations), it is useful to run the results through a knowledgeable reader, and to discuss calculations and results with the reader.

Statistical Analysis. With statistical and econo-metric techniques growing increasingly complex, it is important to develop a fact-checking subroutine for such analysis. Here, for example, is a very brief sample of the types of quality control questions that might be asked in relation to statistical analysis:

1. Are statistical techniques, formulas, approaches or methodologies used for the right reasons, i.e., do they add anything to the story? For example, multivariate regression analysis might be included in a report more to impress than to provide real information. Often, simple crosstabulations or confidence interval tests might indicate the same relationships, while causing less reader confusion or stress.

2. Are the statistical techniques used the most appropriate for the purpose at hand? In forecasting corporate revenues, for example, one might need to select between a double-exponential smoothing technique, a Box-jenkins method, or a regression approach. The technique selected depends on the type of data available, the length of the historical series, or the necessity to include other exogenous data in the model, among others.

3. Do the results of the statistical processes make sense? Can the meaning of a coefficient be easily translated for decisionmaking purposes, or are they just nice results suitable for framing?

4. Are the proper disclaimers part of all final products? One should state the confidence placed on numbers, show the standard errors, and point out problems with the data that might bias the results or the interpretation of the results.

General Internal and External Reviews. One rule of thumb in managing quality control in economic analysis is to have all products reviewed. In general, initial reviews will be by the author and the person assigned a supervisory role. This person, for example, may be the supervisory economist, a task leader or a project manager. It is the manager's responsibility to ensure that sufficient time is available for review of all interim and final products. For analyses of extreme political sensitivity, it is not uncommon to request that a corporate officer or agency head review the product. It is important to ensure that the reviewer selected be the most capable internal person to review the material, or to find an outside reviewer if the internal skills needed to judge a product properly are insufficient. This consideration is very important when working in an environment with a few economists (or only one economist). Later versions of each product should be proofread by an editor. Final product in "non-draft" form should again be cleared by those individuals noted above.

Properly Cite Sources and Facts. Check that all sources cited or implied are included in a bibliography, properly prepared.

THE CENTRAL ROLE OF EDITORIAL REVIEW

Most of the economists' output is in written form. Written products can include economic forecasts, reports, budget estimates, testimony, briefing materials, and many others. However, no matter how good the underlying analysis or product, if it is poorly written, printed, displayed, or full of editorial errors, all else is useless. Thus, if at all possible, the product will benefit by running it through a rigorous editorial process. This process might begin by incorporating an internal reviewer's (or supervisor's) comments into the first drafts. Then, before any draft is sent to a client or requestor, find an editor to read the draft. Take the editor's comments very seriously.

Most businesses or agencies with a strong quality control bent have one or more individuals on their staffs who fulfill the editorial function, or they have such individuals available on a consulting basis. Indeed, many organizations now require such editorial review. Very often, such editorial review will make the difference between producing just an ordinary product or a superior one.

A NOTE ON TABLES AND CHARTS

Tables and charts are frequently the most important part of an analysis. They are also usually the least professional part. Often, readers get most of their information from glances at tables and charts. Therefore, each table and chart should strive to be self-explanatory; they should, as much as practical, stand alone with no need to read the accompanying text.

In order to achieve this goal, the title of and subtitles within each table or chart should provide all of the detail needed to understand the content. Be sure that all of the metrics (i.e., dollars in thousands; fiscal or calendar year; in current year or constant dollars) are clearly noted. In addition, do not use abbreviations in tables and charts if at all avoidable; for example, say that the dependent variable is the log of real income, not DEP = LINC. Dependent and independent variables also need to be clearly labeled. If additional detail is imperative, but too cumbersome for the titles, create appropriate footnotes that will make each table or chart self-contained. In addition, question again if the presentation's format is the most appropriate to convey the information, or if a different format or type of chart - or none at all - will be more appropriate.

THE MANAGEMENT OF QUALITY CONTROL PROCESSES

Quality control in any environment should be an explicit part of the production process, including the work of the business economist. Each economist needs to take responsibility for the quality of his or her own work, while the supervisor should provide the resources - time, money and encouragement - to facilitate the production of high quality work. The supervisor must not only review the work, but must also lead, train and coach individuals in quality techniques and philosophy.

In the final analysis, it is people who ensure quality. It is the job of economists to motivate both themselves and their staffs to produce high quality, error-free work. All of the typical motivation methods need be called upon in this most important task. The goal, in the end, is to want to produce high quality work, and to become self-motivated to do so as a matter of course.

REFERENCES

Crosby, Philip B., Quality is Free: The Art of Making Quality Certain, New York: New American Library, 1979.

Crosby, Philip B., Quality Without Tears: The Art Of Hassle-Free Management, New York: New American Library, 1984.

Deming, W. Edwards, Quality, Productivity, and Competitive Position, Cambridge: MIT Center for Advanced Engineering Study, 1982.

Drucker, Peter F., Management: Tasks, Responsibilities, Practices, New York: Harper and Row, Publishers, 1974.

Juran, J. M., Seder, Leonard A. and Gryna, Frank M. Jr., Quality Control Handbook, New York: McGraw-Hill Book Company, 1962.

Latzko, William J., Quality and Productivity for Bankers and Financial Managers, Milwaukee: American Society for Quality Control, Quality Press, 1986.

Peters, Tom, "Think You Licked Quality Control? Think Again," Washington Business journal, March 5, 1990.

Peters, Thomas J. and Austin, Nancy, A Passion For Excellence: The Leadership Difference, New York: Random House, 1985.

Peters, Thomas J. and Waterman, Robert H. jr., In Search of Excellence: Lessons From America's Best-Run Companies, New York: Harper and Row, Publishers, 1982.

Shetty, Y. K. and Buehler, Vernon M., eds., Productivity and Quality Through People: Practice of Well-Managed Companies, Westport, Connecticut: Quorum Books, 1985.

Shetty, Y. K. and Buehler, Vernon M., eds., Quality, Productivtiy and Innovation: Strategies for Gaining Competitive Advantage, New York: Elsevier, 1987.

U. S. Congress, Congressional Budget Office, A Style Guide for CBO: About Writing and Word Usage, Washington, D.C., 1984.

U. S. Department of Education, Center For Education Statistics, Standards and Policies, Washington, D.C., March, 1975.

* Stephen Chaikind is Associate Professor of Economics in The School of Management at Gallaudet University, Washington, DC.
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Author:Chaikind, Stephen
Publication:Business Economics
Date:Oct 1, 1990
Words:2992
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