Problem Solving /Decision Making Kepner-Tregoe The New Rational Manager Chapter 4
Chapter 4 Contents • Conditions & Skills of Making Choices • Major Elements of Decision Analysis • The Techniques of Decision Analysis (DA)
People and Decisions • Almost universally, people will tell you they want to be included in making decisions that impact them • But, many shun the task of making a decision • Controversy • Lack of unbiased procedure • Power play vs non-confrontational
People and Decisions • When people are provided a commonapproach they find they can work well in teams and arrive at mutually acceptable decisions • more sharing of information • differences are effectively reconciled • decision making is less biased
Decision Analysis • Decision Analysis (DA) is a systematic procedure based on the thinking pattern we use when making reasoned choices. • Recognize a choice must be made • Consider specific factors to be satisfied • Decide on an action • Consider the risks
DA Thinking Pattern • These four elements of the decision making thinking pattern play a roll in every decision we make. • For simple and repetitive decision we may not even be conscious of this process because memory and experience play such an important roll. • Contrast when you were first learning to drive with your driving decisions today.
DA and Information • For complex decisions, there are a myriad of details behind every decision. • But the information available may not match the need: • not enough information • poor quality information • too much information • questions of relevancy & accuracy
K-T’s Decision Making Procedure • What we need is a systematic procedure that will do the following: • blend experience and judgement • with the best, most relevant information available • to produce good decisions.
K-T’s Decision Analysis • The purpose of K-T’s DA is to: • identify what needs to be done, • develop the specific criteria for its accomplishment, • evaluate the available alternatives relative to the criteria • identify the risks involved.
Major Elements of DAThe Decision Statement • The decision statement is the identification of the “choice” dilemma to be resolved. • Provides focus • sets limits • Wording deserves careful attention • implies “level” of decision • implies prior decisions
Major Elements of DAThe Objectives of the Decision • Objectives are the criteria for the decision. • Identification of MUSTs and WANTs • the specific results and benefits to be achieved • This approach is the antithesis of identifying a course of action and then building a case to support it.
Major Elements of DAMUST Objectives • MUSTs are mandatory • They must be achieved by a successful decision • MUSTs may not be the most important objectives • MUSTs must be measurable • MUSTs operate as a screen for decision alternatives
Major Elements of DAWANT Objectives • All other objectives are WANTs • They are used to evaluate relative performance among the alternatives • WANTs create a comparative picture • MUSTs decide who plays; WANTs decide who wins • The same objective (slightly reworded) may be both a MUST and a WANT
Major Elements of DAAlternatives • An ideal alternative (1) satisfies the MUSTs; (2) is the best relative performer against every WANT; (3) doesn’t add new difficulties. • Ideal alternatives are rare so seeking a balanced choice among the alternatives is common.
Major Elements of DAAlternatives • Choices among alternatives may take the form of: • Choosing between several alternatives, • Deciding whether a single alternative is good enough to accept, • Choosing between a current and proposed method.
Major Elements of DAIdentification of Risks • The final step in DA is to search for possible adverse consequences of all feasible alternatives. • Before the final choice is made • Judgement, experience, and intuition are critically important here.
The Techniques of Decision Analysis • State the Decision • Develop Objectives • Classify objectives into MUSTs and WANTs • Weigh the WANTs • Generate Alternatives
The Techniques of Decision Analysis • Screen alternatives with the MUSTs • Compare alternatives against the WANTs • Identify adverse consequences • Make the best balanced choice
Techniques of DADecision Stmt and Objectives • State the decision • review case discussion (W 86-87, B 90-91) • Develop and classify objectives • MUSTs are measurable GO/NO GO • WANTs are additional desirables • see case discussion (W 87, B 91-92)
Techniques of DAWeighting • Weigh the objectives • most important one(s) get a 10 all others get weights between 1 and 10 • Danger signals • too many high or low numbers • too many reflecting a single viewpoint • Review the case discussion (W 88, B 92-93)
Techniques of DAGenerate & MUSTs • Generate alternatives • Generate, Generate, Generate! • Do Not Evaluate -- yet! • Once generated, compare the alternatives to the MUSTs • Retain if GO on all MUSTs • Drop if NO GO on any MUST • See case example (W F7 90-91, B F6 94-95)
Techniques of DAWANTs • Compare against the WANTs • Alternative that best satisfies the WANT gets a 10 • Others are scored relative to this alternative . • This scoring is based on selecting the best alternative not on determining closeness to an ideal.
Techniques of DAWANTs • If “none of the alternatives deserve a 10” comes up repeatedly, consider: • are the objectives realistic? • do we need to generate more alternatives? • Alternatively, if all alternatives score very high on all objectives, consider: • do the objectives need to be more demanding?
Techniques of DAWeighted Scores • See case example ( W F8 92-93, B F7 96-97) • Next compute the weighted score for each alternative under each WANT • multiply objective weight by alternative score • Total the weighted scores for an alternatives total weighted score.
Techniques of DATentative Choice • See case example (W F9 94-95 , B F8 98-99) • The highest total weighted score becomes the tentative choice. • This choice is not the best balanced choice yet since risks have not been considered.
Techniques of DAWhy Evaluate Risks • Identifying risks is often skipped. Why? • A “clear” winner as a tentative choice • Attitude of pessimism • Don’t want to revisit painful lessons from the past • To make the analysis objective and rigorous, we must evaluate risks!
Techniques of DAQuestions to Evaluate Risks • Considering adverse consequences • What are the implications of being close to a MUST limit? • What information might be invalid? What are the implications? • What could go wrong in the short-term? Long-term? • What might keep this alternative from being successful?
Techniques of DAEvaluating Risks • Evaluating adverse consequences • alternatives are evaluated separately, not in comparison to one another. • State the consequence • Rate its probability • Rate its seriousness • See Case example (W 97, B 101)
Techniques of DABest Balanced Choice • Start with the Tentative Choice Alternative • Ask “are we willing to accept the risks of this choice to gain the benefits?” • If yes, select as the best balanced choice • If no, move to the next highest weighted score and re-ask the question. • See case discussion (W 98, B 101-102)
Decision Analysis Summary • DA does not guarantee a perfect decision every time. • DA provides for the productive use of all available information & judgements. • DA enables a manager to reduce the incidence of poor decision making by providing a systematic framework for evaluating alternatives.