Professional Insights

Introducing Human Discretion to Predictive Analytics

Organizations increasingly rely on predictive analytics for forecasting and planning, but a central question remains whether human judgement still adds value when decisions are guided by data-driven models. Using proprietary field data from a large retailer, our team shows that managers can improve forecasting outcomes by selectively overriding predictive models when historical data are limited or environmental uncertainty is high. However, managerial discretion can also harm performance when decisions are influenced by stakeholder pressure and misaligned incentives, highlighting the importance of management control systems that guide when and how humans should stay in the loop.

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Financial Management

AICPA-CIMA Research Summary