1. Decision-Making….Going beyond…
Commonsense, Experience, Judgment, Intuition, Gut-feel, etc…
5/12/2005
A HOLISTIC APPROACH TO DECISION-MAKING
Dr. Errol Wirasinghe – 1

2. What do we mean..? Decision Making Problem Solving Implementing
The Three Phases
Decision Making
Implementing
Problem Solving 2

3. DECISION MAKING IS NOT PROBLEM SOLVING
5/12/2005
DECISION MAKING IS NOT PROBLEM SOLVING
Problem Solving is unique to the problem
[Domain Expert]
Decision-making is unique to the person
[Human Judgment]
Some of our work has shown that problem solvers are not the best decision-makers… 3

4. WHAT IS A GOOD DECISION? Questions:
Do you know anyone…. who intentionally makes a “bad” decision; one that makes him/her unhappy?
From his point of view (at the time he makes the decision)…
Can we then agree that at the time we make decisions, we all make “good” decisions?
Format
Then why do we see
so many fiascos? 4 4

5. Is Decisions-Making Complicated. ?
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? 5

6. Complicated Decisions?
City >>> 1
Heat index – Req. AC days 2
Cold index – Req. Heating days 3
State income tax rate% - 4
Average home price - $1000 5
Prop. Taxes (per $1000 of M.V.) 6
Restaurants 7
Doctor's offices and clinics 8
Medical and surgical hospitals 9
Air pollution index 10
Property crime risk 11
Access to family [hrs]
Tanta
Leigh
Hoxni
Jackal
Seaga
Lando
Sopel 52 33 29 59 20 15 69 14 25 32 10 42 11
6.0%
8.3%
5.0%
0.0%
9.3%
$227
$176
$129
$108
$157
$293
$88
39.0
11.4
15.0
18.0
67.4
13.4
6.6
3681
1177
3464
1532
2312
6073
951
7930
3668
5759
2511
3815
10515
1115 85 27 76 36
130 19 83
104 78 94 88
103
377
112
218
189
306
171
117
6.5
3.5
2.0
1.5
5.0
9.5 6

7. Detergents for Dry Cleaners…
Procurement Decision?
Detergents for Dry Cleaners…
Factors & Options
Wash-Off
Rapid-Clean
One-Time
Twister
1. Time to clean – min. 12 15 10
2. Detergent Cost [$ per lb.]
0.12
0.18
0.19
0.23
3. Energy Consumption
Reasonable
Low
High
4. Water Consumption
5. Stain Removal
Good
Excellent
Selective
6. Damage
Excessive by-products
None
7. Freshness
Fabulous
Average
8. Appealing Smell
Nice
9. Wrinkle Free
Poor
Medium
10. Germ & Bacteria Removal
Germs good; bacteria poor
Bacteria free
Germ Free & Bacteria free
Your company may be facing a similar problem… 7

8. Information Overload & Choice Overload
5/12/2005
Buying a camera…!
Thanks to the Internet, now it is possible to be extremely well informed, and yet be completely wrong at the same time…!” 8

9. Your competition will challenge you with better decisions!
Information Overload
Executive’s Dilemma
Utilities
Inventory
Manpower
Supplies
Distribution
Currency Fluctu’ns
Budgets
Market Satu.
Sales
Geopolitical
Transport
Your competition will challenge you with better decisions!
Future pricing
Competitor mergers
Regulatory issues
Cash flow
Share prices 9

10. Decisions?
Multi-criteria decisions?
Single criterion decisions? 10

11. We help bridge this divide! We help people make better decisions!
RESEARCH & LITERATURE ON….. DECISION-MAKING SIT AT TWO EXTREMES
Mathematicians….:
Artificial Intelligence, Neural Networks, Fuzzy Logic, Robotics, etc.
Neurobiologists and Behavioral Scientist focusing on the brain and human behavior.
Unfortunately, these are beyond the reach of industry professionals
We help bridge this divide!
We help people make better decisions! 11 11

12. WHY WE MAKE DECISIONS…? Change happens! or We initiate change..!
Because of a process called “CHANGE”
Change happens! or
We initiate change..!
Even a decision not to respond, is driven by our desire to be happy, or self-preservation, seeking a positive outcome…
We respond to change because we want to be happy…!
Split this into 2 slides
Change the title to, “ Some thought provoking questions” 12 12

13. CHANGE CONFLICTS.. PROB-OPPS.. SOLUTIONS DECISIONS Simply happens! or
We initiate change..!
CHANGE
CONFLICTS..
CAUSES
Environment
Definitions
Interests & Values
Roles & Styles
Emotions/Feelings
Time
Perception
Knowledge
PROB-OPPS..
SOLUTIONS
This slide needs a title, leave a space for it, I’ll have to ask Errol
Again, content accurate, format needs changing
DECISIONS 13 13

14. Change, Decisions.. and Happiness..
Thus we see.. the relationship…
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.”
Charles Darwin…. 14

15. Psychologists & Behav. Economists
Studying Human Behavior related to decision making 15

16. 1. THE PARADOX OF CHOICE
The western dogma is that more choices and greater freedom leads to greater happiness!
– is it really true?? **
Video: 1C - Paradox of Choice (5.24), Barry Schwartz 16

17. 3. VISUAL ILLUSIONS OUR EYES DECEIVE US
Our judgments are inherently tied to the environment. **
Video: 3A - Illusions - Table and Cube Illusion (2.47), Dan Ariely 17

18. Would you like to touch this animal?
Perception 18

19. Would you like to change your mind?
Perception 19

20. New York Plastic Surgeon Darrick Antell looked at the jaw line of CEOs
5/12/2005
PERCEPTION!
Only 14.2% of white US males are over 6.0’ tall.
Yet, 58.7% of CEOs of Fortune 500 companies are white, male and 6.0’ tall!
New York Plastic Surgeon Darrick Antell looked at the jaw line of CEOs
About 90% of the Top CEO’s had a “prominent” chin
vs. 40% for the general population…
CONCLUSION
When it comes to decision-making, perception still reigns 20

21. 5/12/2005
RELYING ON NUMBERS
Why is a $12.00 stock a “good buy” for one person, and a “sell” for another..?
Good/Bad…?
DOCTORS
All decisions are driven by qualitative interpretations of quantitative data….! 21

22. When we have too many options – …. we settle for the default option.
4. COGNITIVE ILLUSIONS
When we have too many options –
and we cannot decide –
…. we settle for the default option. **
Video: 4A - Cognitive Illusions - Default Option (5.29); Dan Ariely
Video: 4B - Cognitive Illusions – Forced; Comparisons (4.41), Dan Ariely 22

23. www.XpertUS.com/hb.html Decision Making – Natural Pitfalls!
Informed decisions?
Tendency to avoid complexity
Comparisons
Shifting comparisons
Ghost offerings
Default options
Perceptions
Priming 23

24. Do you believe you might be making sub-optimal decisions?
Show of hands please…
Do you believe you might be making sub-optimal decisions?
Remove the Stop icon
Place his logo at the bottom
I’d like to change the question on the slide from, Do you agree…. to ….Why do you think that
The text box at the bottom doesn’t make sense, the two sentences don’t make sense.
Instead of, “We help people make better decisions, I’d rather say, “We teach people how to make better decisions.
Are we ready? 24 24

25. A HOLISTIC APPROACH TO DECISION-MAKING
PART 2
FUNDAMENTALS 25

26. Factors that influence the decision Options or likely solutions
The Decision Making Process
Objective
Process
Criteria
Factors that influence the decision
Candidates
Options or likely solutions
The Decision… 26 26

27. Let us start with the ….. OBJECTIVE: THE VIETNAM WAR
The Army did a great job training our soldiers to have superb “marksmanship” skills [Objective]..
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.
Yet, surveys revealed that only 25% of soldiers actually fired at the enemy...!
Do you see the value of a well-defined objective? 27

28. DEPARTMENT OF AGRICULTURE EVER-INCREASING POPULATION
HEAVY DEMAND FOR MORE FOOD
LOSS OF AGRICULTURAL LAND 28

29. MISLEADING OBJECTIVES!
Set out to develop a high-yield plant…
After 18 months and several million $$ they developed a super plant..!
Sadly this plant needed more space…
They went after the wrong objective.
… to increase the YEILD PER PLANT!
The objective should have been..
Increase the YEILD PER ACRE!
Walgreens … profit per customer..
Eckerd… profit per store..
Do you see the value of a well-defined objective…? 29

30. CRITERIA Vital element in any decision-making operation
Selecting the most relevant criteria
Determining the significance of each criterion
(Too many criteria can be counter-productive) 30

31. What factors caused high oil prices…
Euro
vs.
US $
CRITERIA
Step – 2
Oil Price $/bbl
What factors caused high oil prices… 31

32. Ranking Techniques
Common techniques used to prioritize or rank a set of candidates [based on feelings]… :
Distribution,
Scaling,
Decision Trees,
Matrix,
Pairwise comparison..
Bayesian Models
Monte Carlo Techniques
Fuzzy Logic
Expert Systems
Neural Networks
Artificial Intelligence; etc. 32

33. (Decision Tree Technique)
SINGLE CRITERION
DECISION-MAKING
(Decision Tree Technique) 33

34. A government committee is considering the economic benefits of a program of preventative flu vaccinations.
Option 1:
Vaccinate the entire population at a cost of $7.0M. The vaccination is assumed to be 100% successful, with no additional treatment costs.
Option 2:
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.
Option 3:
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)?
Example 1: Vaccination
Option 1: (Vaccinate entire population)
Cost of $7.0M. Program is assumed to be 100% successful, with no additional treatment costs.
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 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%). 34

35. 35

36. Example 2: Bid Submission
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 ..
If qualified >> Cost of preparing bid: $5,000
Labor, Material & Shipping : $127,000…
Possible bid prices:
$155,000 (90% chance of winning)
$170,000 (75% chance of winning)
$190,000 (35% chance of winning)
What should you do? 36

37. 37

38. SIMPLEX’s cost per computer is $8,000.
Example 3: Competitive Bidding
SIMPLEX Computer Company & COMPLEX Computers, Inc., are the only bidders….
SIMPLEX market intelligence shows that COMPLEX is likely to bid $10,000, $9,000, or $8,000 per computer. ..
SIMPLEX’s cost per computer is $8,000.
However the bid is complicated because they are working on a new process that is likely to bring the cost down significantly. 38

39. SIMPLEX…. The NEW manufacturing Process….
With the proposed new manufacturing process, the cost per computer is likely to be….
$5,000 (P=25%); or $7,500 (P=50%); or $8,500 (P=25%)
SIMPLEX is considering bid prices of…
$9,500; or $8,500; or $7,500; per computer….  
 If SIMPLEX decides to bid, they must include the $1,000,000 cost of development because of the requirement that a prototype computer be included with the bid.
This $1,000,000 will be totally lost regardless of whether SIMPLEX wins or loses the bidding competition….
Question : Should SIMPLEX submit a bid, and if so, what should they bid? 39

40. 40

41. Example 3: Insurance Decision
A Company has to decide if they should insure their warehouse (valued at $300,000), against vandalism...
Probability of damage
20%
30%
50%
Extent of damage (losses)
$150K
$ 90K
$ 30K
Crime statistics: Probability of any damage is 10%
[There is a 90% chance – no damage at all…]
Insurance Quotes:
Policy from Company “A”: Annual cost $2,000;
….would pay 90% of loss, after a $20,000 deductible.
Policy from Company “B”: Annual cost of $1,800;
….would pay 80% of loss, without a deductible….
What should he do?
Insure with one of the companies, or not insure at all? 41

42. 42

43. MULTI-CRITERIA DECISION-MAKING [Pairwise Technique]43

44. 4. Matrix Method
But my brother owns a Mitsubishi dealership..!
Ex: The Fleet Manager of a car rental company buying cars
Candidates
Criteria
1. Reliability [+]
2. Price [-]
3. Miles/Gallon [+]
Total/Rank.. >>
Criteria
Weights.. 48 32 20
100%
Honda
Accord
Toyota
Camry
Nissan
Altima
Mitsubi.
Gallant 35 30 20 15 20 15 30 35 25
48 x x x 25 =
28.20%
24.20%
23.40% 44

45. Matrix Method [Biased] Let us look at a better method!
Helping family!
Candidates
Criteria
Reliability [+]
Price [-]
Fuel Economy [+]
Total/Rank>
Criteria
Weights 15 35 50
100%
Honda
Accord
Toyota
Camry
Nissan
Altima
Mitsibi.
Gallant 35 30 20 15 25
Forced…
24.75%
22.25%
26.00%
27.00%
Let us look at a better method! 45

46. THE SEVEN-STEP APPROACH… [MULTI-CRITERIA DECISION-MAKING]
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…
Rank candidates…
AHP
AHP
AHP
AHP = Analytic Hierarchy Process 46

47. “AHP” ANALYTIC HIERARCHY PROCESS
What is AHP?
Is AHP reliable?
Who is using AHP? 47

48. Wikipedia Worldwide Applications of AHP
AHP conference
where 19 countries participated…
Site selection
Sub-contractor selection [bid evaluation/procurement]
Recruiting Univ. Faculty [Univ. of Pennsylvania]
Manage US Watersheds
Closure of US military bases (2005)
Study of overall software quality [Microsoft]
Offshore manufacturing plants [Univ. of Cambridge]
Railroad projects in Korea
Risks of cross-country pipelines [Soc. of Civil Eng.]
Agro industry [Archer Daniels Midlands]
Seismic evaluations [Shell Oil Co.]
Reducing impact of global climate change [Fondacione Eni Enrico Matter]
Is there anyway to zoom in the content with a button click instead of using the text boxes. 48 48

49. THE “AHP” PAIRWISE TECHNIQUE
Imagine you are at an Airport Lounge
By the way, I forgot to mention that I didn’t like the formatting of the slide counter in the bottom right
Just clean up.
Note:
This research was initially conducted at Cornell University.
The pictures themselves are from prior public beauty pageants. 49 49

50. DIFFICULTY OF GROUP COMPARISON
Ladies…
Distribute 100 points among these ladies to reflect their beauty!
Difficult? Probably not! 50

51. DIFFICULTY OF GROUP COMPARISON
Ladies…
Distribute 100 points among these ladies to reflect their beauty!
A bit more difficult? 51

52. Requires much more attention?
Distribute 100 points among these ladies to reflect their beauty.
Requires much more attention? 52

53. BACK TO THE PAIR
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? 53

54. RECRUITING! Let us think of some criteria!
Candidates:
Harry Sands
Joy Bergmann
Quincy Williams
Jane Smarts
Dick Davis
Roger Smith
Maria Lopez
Citizenship
Education
Languages
Age
Sex
Family status
Foreign exposure
Present employment
Directed work experience
Related work experience
Salary expectation
Availability
Management ability
Management aspirations
Leadership potential
Temperament
Willingness to travel
Self motivated
Computer Skills
You had difficulty with just one criterion…?
Communication skills
Presentation skills
Unwavering courage
Self control
Sense of justice
Definiteness of decision
Organizational skills
Willing to do more
Pleasing personality
Master of detail
Assume responsibility
Team player skills
Follow instructions
Free of other commitments
Health & Physical condition
Personal habits
Hobbies & Interests
Integrity & Honesty….
Multiple
Decision-Makers:
V.P. Marketing
Dir. H.R.
Mngr. Bus. Dev...
Aside from the colors and overlays. Let’s keep the build as it is, except can we make the background a blank or lighten it. 54 54

55. IN SEARCH OF THE OPTIMUM DECISION
Data & Inform. (Objective)
Context Information
Criteria and Candidates
Solution Technique Used
Expertise
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:
Appropriate Timing
Adequate Resources
Commitment to Execution
Changing Circumstances….
Format 55 55

56. A HOLISTIC APPROACH TO DECISION-MAKING
PART 3
DECISION
VALIDATION 56

57. VALIDATING YOUR DECISION!
Bias & Risk Exposure
You the Decision-Maker
The Environment
Need a picture 57 57

58. VALIDATING YOUR DECISION!
Case Study: A hotel chain is considering hiring a Business Development Manager.
Criteria (6):
Availability (2 weeks)
Leadership
Salary
Self Motivated
Team Player
Temperament
Candidates (4):
Jane
Kathy
Sue
Mary
Remove the exclamation mark. The title should read, Validating Your HR Decision 58 58

59. OPTIMUM DECISION
Mary 59

60. “If we are willing to wait longer, who should we hire…”
V.P. HR asks you..
“If we are willing to wait longer, who should we hire…”
Overall Optimum Ranking
Jane (Availability) 60

61. “What if we are willing to pay whatever it takes…”
Overall Optimum Ranking
Sue (Salary) 61

62. VALIDATING YOUR DECISION
Case Study: An Engineering Contractor is considering opening a branch office in Asia.
Criteria (6):
Language
US Relationships
Market Opportunities
Real Estate Costs
Bureaucracy
Taxation
Candidates (5):
Sydney
Singapore
Beijing
Kuala Lumpur
New Delhi
Remove the exclamation mark. The title should read, Validating Your HR Decision 62 62

63. OPTIMUM DECISION 63

64. RELAXING CRITERIA (N-1) ANALYSIS
This company formed a joint-venture with an Indian conglomerate, [experts on navigating the bureaucratic system] 64

65. GROUP DECISION MAKING… “PRIMING THE MIND”
Planting thoughts..
Also known as “priming” the mind… **
Video: 5 - Priming the Mind (3.10), Malcolm Gladwell 65

66. PRIMING THE MIND
WHAT DID WE LEARN
“Priming” can have serious implications with regard to TEAM meetings. Our way of thinking can be directed. Associated positive or negative consequences can be over-stated. 66

67. YOU NOW SEE…. So will training help..?
That you are human, and too could fail
That we need a robust, reliable methodology
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..! 67

68. IMAGINE A SHOOTER ENGAGING IN TARGET PRACTICE
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%..?

69. Truett Cathy…… Founder of the “Chick-Fil-A” restaurant chain was asked……
5/12/2005
How did you become so successful? He said:
By making good decisions..!
How did you make these good decisions? He said:
From experience....!
How did you gain this experience? He said:
By making bad decisions...!
Get trained, or learn through mistakes? 69

70. RECAP..!
We stressed… about ...
Change,
Decisions, &
Happiness 70

71. RECAP!
Given the same set of data & information, different people will make different decisions…
Real-world-decisions are multi-dimensional:
Multiple criteria
Multiple candidates
Multiple stakeholders & decision-makers 71 71

72. Segregate Criteria (AHP) Validate Decision (AHP)
RECAP!
Set a Clear Objective
Segregate Criteria (AHP)
Make Decision (AHP)
Validate Decision (AHP)

73. ? Call-to-Action Information Knowledge Power! Knowledge is Power..!
When acquired
Knowledge
When utilized
Power! 73

74. Take the skill-test (Free)
CALL-TO-ACTION
Take the skill-test (Free)
Take the online course!
Attend a workshop…!
Book:
US$ 20.00
Take now and pay on website
E-Book:
US$ 7.95
Buy from
website
This slide needs a complete overhaul.
I don’t like the title, call to action, too cheesy. Perhaps, Time To Make Another Decision
Picture of the book
$ 10.00
$ 5.00 74