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Effective Decision Making

Effective Decision Making. The Eight Elements of Effective Decisions. Problem Objectives Alternatives Consequences Tradeoffs Uncertainty Risk Tolerance Linked Decisions. Effective Decision Making. Problem Be creative about your problem definition. Turn problems into opportunities.

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Effective Decision Making

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  1. Effective Decision Making

  2. The Eight Elements of Effective Decisions • Problem • Objectives • Alternatives • Consequences • Tradeoffs • Uncertainty • Risk Tolerance • Linked Decisions

  3. Effective Decision Making • Problem • Be creative about your problem definition. • Turn problems into opportunities. • Reexamine your problem definition as you go. • Maintain your perspective.

  4. Effective Decision Making • Objectives • Let your objectives be your guide. • Objectives determine what information you seek. • Objectives can help you explain your choices to others. • Master the art of identifying objectives.

  5. Effective Decision Making • Alternatives • Don’t box yourself in with limited alternatives • Use your objectives and ask “how?” • Set high aspirations • Never stop looking for alternatives • Think outside the box • Brainstorm (See Rules for Brainstorming) • Give your subconscious time to operate • Incubate

  6. Effective Decision Making • Consequences • Compare alternatives using a payoff matrix. • See Game Theory presentation at http://www.charleswarner.us/indexpresentations.html/ • Use experts to help define consequences.

  7. Payoff Matrix KBBB Go No Go Go 4, 2* 3, 4 * KAAA, KBBB KAAA 2, 1 1, 3 No go Assigning weights is the most difficult decision.

  8. Effective Decision Making • Tradeoffs • Use swaps. • Determining the relative value of different consequences is the hard part.

  9. Effective Decision Making • Uncertainty • Use risk profiles to simplify decisions involving uncertainty. • What are the key uncertainties? • What are the possible outcomes of these uncertainties? • What are the chances of occurrence of each possible outcome? • What are the consequences of each outcome? • Use experts to help define possible outcomes.

  10. Effective Decision Making • Uncertainty • Use a Decision Tree. • Alternatives - Uncertainty - Consequences

  11. Decision Tree KBBB Go KAAA Go KBBB No Go KAAA KAAA No Go KBBB Go KBBB No Go

  12. Effective Decision Making • Risk Tolerance • Understand and calibrate your group’s tolerance to take risks. • Incorporate your risk tolerance into all of your decisions.

  13. Effective Decision Making* • Linked Decisions • Linked decisions are complex. • Ask: “How will this decision affect other people, other departments, other brands, other company divisions, partners, the industry?” • Based on the book Smart Choices: A Practical Guide to Making Better Decisions, John S. Hammond, Ralph L. Keeney, Howard Raiffa, Harvard Business School Press, 1999.

  14. Effective Decision Making Summary • Problem • Objectives • Alternatives • Consequences • Tradeoffs • Uncertainty • Risk Tolerance • Linked Decisions

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