Chapter 16

1. Chapter 16 Problem Solving and Decision Making

2. Objectives • After reading the chapter and reviewing the materials presented the students will be able to: • Understand the decision making process. • Differentiate between objective and subject decision making. • Understand management information systems. • Use creativity in decision making.

3. Decision Making & Problem Solving • In decision making we are concerned with decisions that impact the organization in some significant, tangible way: for example those that can affect the future path of the organization, its mission, staffing, culture, environment, equipment, or training. Decisions of this type can lead the organization to success or failure. • Problem solving is most often a reaction to the problem presenting itself. • Decision making is frequently aimed at the future rather than an event that has taken place.

4. The Plan Do Check Adjust Cycle • The PDCA cycle consists of 4 major components: • 1. Plan: The problem must be defined, relevant information gathered, the root cause of the problem identified, possible solutions developed and considered, and the best alternative selected for implementation. • 2. Do: Implement the solution chosen as best. • 3. Check: Monitor the implemented solution. Analyze the data to determine whether the implemented solution eliminated the problem. • 4. Adjust: If it was found that the solution has not accomplished the intended result than it will be necessary to adjust the implemented solution. Adjust can also mean to discard the implemented solution and try a different approach. This cycle can be repeated as many times as necessary to eliminate the problem successfully.

5. Toyota Practical Problem Solving Process • 1. Perceive the initial problem. • 2. Clarify the problem. • 3. Determine the actual point of cause (POC). • 4. Determine the root cause: use the 5 why analysis. Ask why the observed variance exists. Ask why the answer to that question is as stated. Repeat the “why” question until the root cause is determined. • 5. Determine and implement a solution to the problem. • 6. Evaluate the solution’s effectiveness in solving the problem. Observe and monitor after implementation. • 7. Change the standard. The original standard must be changed to reflect the solution (countermeasure).

6. The Decision Making Process • The decision making process is a logically sequenced series of activities through which decisions are made. • Identify or Anticipate the Situation: Look, listen, ask, and sense. • Gather the Facts: To determine the underlying causes of dissatisfaction or poor attitude so it can be permanently resolved. • Consider Alternatives: List the alternatives, and evaluate each alternative. Cost is another criterion used in evaluating alternatives. • Choose the Best Alternative, Implement, Monitor, and Adjust: Selecting the best alternative requires study, logic, reason, experience, and intuition. Monitor the progress, and adjust appropriately.

7. Objective Versus Subjective Decision Making • Objective decision making: The objective approach is logical and orderly. It also assumes that that complete and accurate information is available and that managers are free to select the best alternative. • Subjective decision making: is based on intuition, experience, and incomplete information. This assumption assumes decision makers will be under pressure, short on time, and operating with only limited information. It should be avoided whenever possible.

8. Scientific Decision Making & Problem Solving • Scientific decision making means agreeing to make decisions based on data rather than hunches, to look for root causes of problems rather than react to superficial problems, to seek permanent solutions rather than rely on quick fixes.

9. Juran’s 85/15 Rule • Juran pointed out that the potential to eliminate mistakes and errors lies mostly in improving the systems through which work is done, not in changing the workers. • Rule of thumb that at least 85% of the problems can only be corrected by changing systems (which are largely determined by management) and less than 15% are under worker’s control.

10. Complexity of the Scientific Approach • Complexity means nonproductive, unnecessary work that results when organizations try to improve their process without first developing a systematic plan. • Errors and Defects: Errors cause defects and defects reduce competitiveness. Waste or extra work that results from errors and defects adds cost to the product without adding value. • Breakdowns and Delays: Equipment breakdowns delay work causing production personnel either to work overtime or to work faster to catch up. Overtime adds cost to the product without adding value. Competitors gain an advantage. • Inefficiency: Inefficiency means using more resources ( time, material, movement, etc.) than necessary to accomplish a task. • Variation: Common cause variation – due to sum of small variations in the process. Special cause variation – only occur with faulty raw material or new untrained operator. The data points that fall outside the control limits are likely to be the result of a special cause of variation.

11. Employee Involvement in Decision Making • Advantages: It can result in a more accurate picture of what the problem really is and a more comprehensive list of potential solution and decision alternatives. • Employees who participate in the decision making or problem solving process are more likely to understand and accept the decision or solution and have a personal stake in making sure the alternative selected succeeds. • Potential Problems: The major potential problem is that it takes time, and managers do not always have time. • Employee involvement can lead to democratic compromises that do not necessarily represent the best decision. • Disharmony can result when a decision maker rejects the advice of the group.

12. Role of Information in Decision Making • Having accurate, up to date comprehensive information is critical in decision making. • Information can be defined as data that are relevant to the decision making process that have been converted to a useful format. • Data that are relevant to decision making are those that might have an impact on the decision.

13. Creativity in Decision Making • The pressures of a competitive marketplace are making it increasingly important for organizations to be flexible, innovative, and creative in decision making. • To survive in a rapidly changing marketplace, organizations must be able to adjust rapidly and change directions quickly. • To do so requires creativity at all levels of the organization.

14. Summary • In decision making we are concerned with decisions that impact the organization in some significant, tangible way: for example those that can affect the future path of the organization, its mission, staffing, culture, environment, equipment, or training. Decisions of this type can lead the organization to success or failure. Problem solving is most often a reaction to the problem presenting itself. Decision making is frequently aimed at the future rather than an event that has taken place. • Objective decision making: The objective approach is logical and orderly. It also assumes that that complete and accurate information is available and that managers are free to select the best alternative. • Subjective decision making: is based on intuition, experience, and incomplete information. This assumption assumes decision makers will be under pressure, short on time, and operating with only limited information. It should be avoided whenever possible. • The decision making process is a logically sequenced series of activities through which decisions are made. • The PDCA cycle consists of 4 major components: 1. Plan 2. Do 3. Check 4. Adjust. • Juran pointed out that the potential to eliminate mistakes and errors lies mostly in improving the systems through which work is done, not in changing the workers. Rule of thumb that at least 85% of the problems can only be corrected by changing systems (which are largely determined by management) and less than 15% are under worker’s control. • Having accurate, up to date comprehensive information is critical in decision making. Information can be defined as data that are relevant to the decision making process that have been converted to a useful format. Data that are relevant to decision making are those that might have an impact on the decision. • The pressures of a competitive marketplace are making it increasingly important for organizations to be flexible, innovative, and creative in decision making. To survive in a rapidly changing marketplace, organizations must be able to adjust rapidly and change directions quickly. To do so requires creativity at all levels of the organization.

15. Home Work • Answer Questions 1, 4, 9, 15 on page 294. • 1. Contrast decision making with problem solving. • 4. Describe the PDCA cycle. • 9. What is Juran’s 85/15 rule? State the rule. • 15. Explain creativity as a concept and the role it can play in decision making.