W J Murray & Assoc. 4200 Montrose, Suite 590 Houston, Texas 77006

1. Complex Decisions Made EasierHow To Use Quantifiable and Qualitative Information In Decision Making W J Murray & Assoc. 4200 Montrose, Suite 590 Houston, Texas 77006 (713) 522-9656 fax (713) 522-9661

2. Improving Capital Spending Decisions • Benefits: • Shorter cycle times • Reduced risk of failure • The process allows for quality input from a wide group of specialists: • Meetings are more focused and facilitated by W J Murray & Assoc. Consultants. • Managers and staff personnel know they have had input. • Participation that enhances implementation, “Buy In” • Competitive advantage through rapid, systematic, high quality decisions

3. Improving Capital Spending Decisions • Benefits: • Among Senior Managers, the process of force ranking the decision criteria develops a deeply shared and tested view of decision criteria and their relative importance. • The force ranking provides relative weights for each decision criteria. • Decisions can be challenged by challenging the process, not arguing preferences and biases.

4. What is the W J Murray & Assoc. Decision Process? • It is a technique developed at the Wharton School for making systematic decisions based on component or factor analysis. • Forced Rankings quantify the natural tradeoffs that are intuitively being made on all decisions. • The hierarchy provides the weightings for the key factors. • Key factors are the basis for nearly all decisions. • A measurement of consistency is provided. • Ensures a thoughtful process.

5. Improving Capital Spending Decisions • Procedures: • Senior Management, with the assistance of W J Murray & Assoc. personnel, develops a preliminary list of decision criteria. • W J Murray & Assoc. personnel reviews past decisions of the organization, both successes and failures and validates the preliminary list of criteria. • Results are discussed with Senior Management and a final list of decision criteria is established.

6. Improving Capital Spending Decisions • Procedures: • The decision criteria are weighted by force ranking pairs of decision criteria. • An example for new store location might include force ranking the importance of forecasted discounted cash flow and competitive position. • Force ranking is done for each possible pair of criteria. • W J Murray & Assoc. personnel works with Randalls’ Senior Managers to develop scales for scoring opportunities on each criteria. • For example, competitive position of new store projects may be evaluated on number of competitive stores within a three mile radius.

7. Improving Capital Spending Decisions • Procedures: • Past projects are evaluated and rank ordered using the decision methodology providing a benchmark on which to gauge new projects. • Members or teams within the organization with relevant expertise then score each opportunity on the decision criteria. • Opportunities receiving the highest scores are the focus of further investigation.

8. A Conceptual Example • The executive team determines three key criteria, for example: • Potential Internal Rate of Return • Competitive position • Fit with existing distribution channels • Forced Ranking of Criteria determines the relative values of: • IRR = .5 • Competitive position = .3 • Fit with existing distribution channel =.2 • (These factors’ weights may be held confidential by the executive team)

9. A Conceptual Example • Scales are developed to score potential projects on each of the criteria. • All new store opportunities are evaluated on the three criteria. • W J Murray & Assoc. compiles results. • Natural groupings are identified.

10. Conclusion • The W J Murray & Assoc. Process provides: • Quality decisions • Consistent decisions • Reduced cycle time • Decisions are made. • “Real work” can get done. • All organization knowledge has been incorporated. • Data based decisions become the culture of the organization.