Guesstimate questions are the most popular questions in the recruitment process of a consulting firm. They are increasingly gaining popularity in other industries as well and are now part of the recruitment process of FMCG, Banking and Retail firms. A guesstimate question is usually an open-ended one where the candidate is expected to make an informed guess-estimate of any particular quantity. Consider the following as a sample guesstimate question: "How many cars are there in Gurgaon?"
As the word suggests, guesstimation involves both "guessing" and "estimation". Not being a single-step solution, the process followed to arrive at the answer gives a fair idea to the recruiter about the thought process, structure and attention to detail, as well as common sense that the candidate possesses. Most panelists are rarely concerned about the final value or answer; the evaluation of the candidate is rather on the approach used to derive the final value. The following steps are generally useful in solving guesstimate questions:
Make sure that you and the panelist are on the same page in terms of interpretation of the question? When in doubt clarify. For example if the question is "How many cars are there in Gurgaon?" - it will definitely help to clarify if you are looking only at passenger cars or even commercial vehicles (like cabs). Many-a-time clarifying the scope of the problem might give you important hints about the approach to be followed.
Sit back and think as to how you will approach the problem, what are the dependent / independent variables to be used and where all you need to make fair assumptions. Explain your approach to the panelist for feedback/course-correction. The funneling technique is a typical approach followed where one starts with a large value that represents the universe, and makes multiple cuts in a progressive manner to finally arrive at the required value. In the question mentioned earlier you might consider using the following variables -
● Population of Gurgaon
● Household units income wise - Upper rich class, middle class and so forth
● Number of cars per household unit
One could start with population and derive the number of households as the population divided by number of members in a household. Then by assuming class-wise population proportions one could arrive at the number of upper-class & middle-class households. Finally, by assuming the average number of cars owned by an upper class household & a middle class household, we could get the number of cars owned by these classes.
In a majority of cases, the candidate is not provided with facts by the panelists and, therefore needs to make assumptions. An uneducated guess like taking the population of Gurgaon as 10 crores is likely to leave a bad impression on the panelists. It is, therefore, useful to forage around for some macro-economic indicators beforehand.
● Do a step-by-step calculation based on the framework that you have devised.
● Make relevant assumptions regarding numbers/percentages as you proceed with the calculation
● Always take simple numbers for ease of calculation
● Give your calculated answer at every step
● Consolidate the calculation and give the final result.
Normally the questions asked are of market-sizing nature, but a candidate must also be prepared for math-oriented guesstimate questions like "How many tennis balls would fit in an Air India aircraft?". Here it is useful to know volume formulas to tackle such questions.
Once you get the final value, do perform a sanity check - this implies that quickly compare the final value with other broad indicator and see if this tallies/agrees with such indicators. Thus for example, if you are aware that the mobile penetration is 70%, then a guesstimate of the number of mobiles phones as equal to 20% of the population does not make sense. In such a case, revisit the set of assumptions you have made.
In one word, "Practice"! Simply practice as many questions as possible. Make guesstimation a part of your life - if you are sitting in a restaurant guesstimate the number of bills in a day in the restaurant. Check the number with the manager - he might look at you with suspicious eyes but there is no harm in trying. If you are in a cab guesstimate the number of passengers that travel in that cab on a daily basis. Also, update yourself with important macro variables like population of the country - of top 10 cities, internet penetration and so forth.