2The Eight Elements of Effective Decisions ProblemObjectivesAlternativesConsequencesTradeoffsUncertaintyRisk ToleranceLinked Decisions
3Effective Decision Making ProblemBe creative about your problem definition.Turn problems into opportunities.Reexamine your problem definition as you go.Maintain your perspective.
4Effective Decision Making ObjectivesLet 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.
5Effective Decision Making AlternativesDon’t box yourself in with limited alternativesUse your objectives and ask “how?”Set high aspirationsNever stop looking for alternativesThink outside the boxBrainstorm (See Rules for Brainstorming)Give your subconscious time to operateIncubate
6Effective Decision Making ConsequencesCompare alternatives using a payoff matrix.See Game Theory presentation atUse experts to help define consequences.
7Payoff Matrix Assigning weights is the most difficult decision. KBBB GoNo GoGo4, 2*3, 4* KAAA, KBBBKAAA2, 11, 3No goAssigning weights is the most difficult decision.11
8Effective Decision Making TradeoffsUse swaps.Determining the relative value of different consequences is the hard part.
9Effective Decision Making UncertaintyUse 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.
10Effective Decision Making UncertaintyUse a Decision Tree.Alternatives - Uncertainty - Consequences
11Decision Tree KBBB Go KAAA Go KBBB No Go KAAA KAAA No Go KBBB Go 10
12Effective Decision Making Risk ToleranceUnderstand and calibrate your group’s tolerance to take risks.Incorporate your risk tolerance into all of your decisions.
13Effective Decision Making* Linked DecisionsLinked 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.
14Effective Decision Making Summary ProblemObjectivesAlternativesConsequencesTradeoffsUncertaintyRisk ToleranceLinked Decisions