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Effective Decision Making. The Eight Elements of Effective Decisions Problem Problem Objectives Objectives Alternatives Alternatives Consequences Consequences.

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Presentation on theme: "Effective Decision Making. The Eight Elements of Effective Decisions Problem Problem Objectives Objectives Alternatives Alternatives Consequences Consequences."— Presentation transcript:

1 Effective Decision Making

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

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

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

5 Effective Decision Making Alternatives Alternatives Dont box yourself in with limited alternatives Dont box yourself in with limited alternatives Use your objectives and ask how? Use your objectives and ask how? Set high aspirations Set high aspirations Never stop looking for alternatives Never stop looking for alternatives Think outside the box Think outside the box Brainstorm (See Rules for Brainstorming) Brainstorm (See Rules for Brainstorming) Give your subconscious time to operate Give your subconscious time to operate Incubate Incubate

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

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

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

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

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

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

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

13 Effective Decision Making* Linked Decisions Linked Decisions Linked decisions are complex. Linked decisions are complex. Ask: How will this decision affect other people, other departments, other brands, other company divisions, partners, the industry? 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 Problem Objectives Objectives Alternatives Alternatives Consequences Consequences Tradeoffs Tradeoffs Uncertainty Uncertainty Risk Tolerance Risk Tolerance Linked Decisions Linked Decisions


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