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KRENTZ APPRAISAL SERVICES

Nancy Krentz, the owner and manager of a property appraisal service based in York, Pennsylvania, is concerned that her four appraisers (Allen, Felan, Maloy, and Nelson) are producing appraisals of comparable properties that are generally not equivalent. She wants to conduct an investigation to determine whether her concerns are valid. Nancy directs her administrative assistant, Katie Shaffer, to identify 40 similar properties in the York area for use in the study. Given the sample of comparable properties, Nancy then arbitrarily divides the 40 properties into four subsets of ten. Next, she randomly assigns each subset to one of the four appraisers for assessment. The appraisals of the given 40 properties are listed in the file C19_01.xlsx. Given Nancy’s limited background in statistical analysis, she has asked for your expert assistance in evaluating the data that her assistant has compiled. She recalls that at one point in her business studies she learned a systematic method, called analysis of variance, for comparing the averages of related groups of quantitative data. However, she cannot recall the assumptions that must be met to apply this methodology, nor the procedures for implementing the appropriate method and correctly interpreting the results. Nancy has prepared the following list of questions that she would like for you to help her answer:

1. What requirements must be met to apply analysis of variance? Is it appropriate to use analysis of variance in this case?

2. Assuming that it is appropriate to apply a form of analysis of variance here, how can she use the appropriate method to analyze the data?

3. Does the statistical analysis confirm her suspicion that there are individual differences among the four appraisers? If so, which of the four appraisers are typically generating evaluations that are larger or smaller than those of the others?

4. Has the statistical test been formulated in the best manner? In particular, was it appropriate for Nancy to divide the 40 selected properties into four subsets of ten and then assign each subset to one of the appraisers? If not, how could the design of the study be modified to discover the most useful information in evaluating the appraisal staff at Krentz? Be as specific as possible.

5. In light of the results of this data analysis, what steps, if any, should Nancy take to improve the situation in her organization?