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Decision-Making….Going beyond… Commonsense, Experience, Judgment, Intuition, Gut-feel, etc…. A HOLISTIC APPROACH TO DECISION-MAKING Dr. Errol Wirasinghe – www.XpertUS.com. 1. What do we mean..?. The Three Phases. Implementing. Problem Solving. Decision Making. 2.
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The Three Phases
Some of our work has shown that problem solvers are not the best decision-makers…
From his point of view (at the time he makes the decision)…
Then why do we see
so many fiascos?
You & your spouse have retired,
and are planning on moving to a more appropriate location in the USA.
How would you go about deciding on a place to live?
Detergents for Dry Cleaners…
Your company may be facing a similar problem…
Thanks to the Internet, now it is possible to be extremely well informed, and yet be completely wrong at the same time…!”
Your competition will challenge you with better decisions!
Single criterion decisions?
Unfortunately, these are beyond the reach of industry professionals
We help bridge this divide!
We help people make better decisions!
Interests & Values
Roles & Styles
Change, Decisions.. and Happiness..
“It is not the strongest of the species that survive, or the most intelligent, but the one most responsive to change.”
Studying Human Behavior related to decision making
Video: 1C - Paradox of Choice (5.24), Barry Schwartz
The western dogma is that more choices and greater freedom leads to greater happiness!
– is it really true??
Video: 3A - Illusions - Table and Cube Illusion (2.47), Dan Ariely
Our judgments are inherently tied to the environment.
About 90% of the Top CEO’s had a “prominent” chin
Why is a $12.00 stock a “good buy” for one person, and a “sell” for another..?
DOCTORSRELYING ON NUMBERS
All decisions are driven by qualitative interpretations of quantitative data….!
Video: 4A - Cognitive Illusions - Default Option (5.29); Dan Ariely
Video: 4B - Cognitive Illusions – Forced; Comparisons (4.41), Dan Ariely
When we have too many options –
and we cannot decide –
…. we settle for the default option.
Tendency to avoid complexity
Show of hands please…
Do you believe you might be making sub-optimal decisions?
Options or likely solutions
Factors that influence the decision
Subsequently a new objective..
To provide training in “Killing Skills…”
Six months later…
The Army revealed that 100% of the soldiers had fired at the enemy.
Do you see the value of a well-defined objective?
The Army did a great job training our soldiers to have superb “marksmanship” skills [Objective]..
Yet, surveys revealed that only 25% of soldiers actually fired at the enemy...!
HEAVY DEMAND FOR MORE FOOD
LOSS OF AGRICULTURAL LAND
Set out to develop a high-yield plant…
After 18 months and several million $$ they developed a super plant..!
Do you see the value of a well-defined objective…?
Selecting the most relevant criteria
Determining the significance of each criterion
(Too many criteria can be counter-productive)
Step – 2
What factors caused high oil prices…
Oil Price $/bbl
Common techniques used to prioritize or rank a set of candidates [based on feelings]… :
(Decision Tree Technique)
A government committee is considering the economic benefits of a program of preventative flu vaccinations.
Vaccinate the entire population at a cost of $7.0M. The vaccination is assumed to be 100% successful, with no additional treatment costs.
One alternative open to the committee is to institute an "early-warning" monitoring scheme (costing $3M) which will enable it to detect an outbreak of flu early and hence institute a rush vaccination program (costing $10M because of the need to vaccinate quickly before the outbreak spreads). Again assume a 100% success with the rush vaccination.
If vaccinations are not introduced then the estimated cost to the government if flu strikes in the next year is $7M with probability 0.1, $10M with probability 0.3 and $15m with probability 0.6.
Assuming the probability of flu striking in the next year is 0.75, what recommendations should the committee make to the government if their objective is to maximize expected monetary value (EMV)?
WHO studies indicate that there is a 75% likelihood of a Flu striking next year!
A government committee is considering three (3) options to manage the situation.
Option 1: (Vaccinate entire population)
Cost of $7.0M. Program is assumed to be 100% successful, with no additional treatment costs.
Option 2: (Monitoring early-warning)
Spend $3.0M to detect an outbreak;
Then institute a rush vaccination program before the outbreak spreads (costing $10M). Assume a 100% success.
Option 3: (Do not vaccinate)
Cost if flu strikes: $7M (Prob. 10%),
$10M (30%) and $15M (60%).
Disney World… tender for 200,000 special shirts.
Your company is trying to decide whether to bid…
Cost of visit: $10,000. >>> Accept/Reject: 50/50 ..
A Company has to decide if they should insure their warehouse (valued at $300,000), against vandalism...
Crime statistics: Probability of any damage is 10%
4. Matrix Method
But my brother owns a Mitsubishi dealership..!
Ex: The Fleet Manager of a car rental company buying cars
Let us look at a better method!
Clearly define your objective…
Identify all relevant criteria…
Conduct criteria segregation…
Identify all available candidates/options..
Gather information (Judgment table)…
Assign weights to obligatory criteria…
AHP = Analytic Hierarchy Process
where 19 countries participated…
Imagine you are at an Airport Lounge
Requires much more attention?
Would you say that a “pair” was the easiest to handle?
Would you agree… that as the number of contestants increased, it became increasingly more difficult to make a reliable judgment?
Directed work experience
Related work experience
Willingness to travel
You had difficulty with just one criterion…?
Sense of justice
Definiteness of decision
Willing to do more
Master of detail
Team player skills
Free of other commitments
Health & Physical condition
Hobbies & Interests
Integrity & Honesty….
Mngr. Bus. Dev...
The quality of your decision will depend on
(raw materials & skill-set):
Do not judge the quality of a decision, by the outcome!
However, the outcome will depend on the implementation:
Bias & Risk Exposure
You the Decision-Maker
A hotel chain is considering hiring a Business Development Manager.
“If we are willing to wait longer, who should we hire…”
Overall Optimum Ranking
Overall Optimum Ranking
An Engineering Contractor is considering opening a branch office in Asia.
This company formed a joint-venture with an Indian conglomerate, [experts on navigating the bureaucratic system]
So will training help..?
Even though you have been making decisions all your life, you need to learn to make better decisions.
Would you go to a dentist who has not been trained in the latest techniques..?
Girls who have been walking all their lives, still have to learn how to walk elegantly..!
We cannot change the decision-maker! But we can give him the tools to make reliable decisions, consistently…..!
We did NOT change the shooter!
We gave him the tools!
Degree of success
(hit-rate) may be 20%..?
AHP is the “Scope”
Now, he mounts a “scope” on is gun!
Higher hit-rate?.... may be up to 60%...?
The 7-Step XDSS is the “Tripod”
What if he now uses a “tripod” as well?
Improve his hit-rate? Up to 80%..?
Truett Cathy…… Founder of the “Chick-Fil-A” restaurant chain was asked……
By making good decisions..!
By making bad decisions...!
Get trained, or learn through mistakes?
We stressed… about ...
Real-world-decisions are multi-dimensional:
Set a Clear Objective
Segregate Criteria (AHP)
Make Decision (AHP)
Validate Decision (AHP)
Knowledge is Power..!
Take the skill-test (Free)
Take the online course!
Attend a workshop…!
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