1. Problem Solving

2. References  Smart Choices, John S. Hammond, Ralph L. Keeney and Howard Raiffa, Harvard Business School Press, 1999  The Thinking Manager’s Toolbox: Effective Processes for Problem Solving and Decision Making, William Altier, Oxford University Press, 1999

3. Objectives  Learn how to state and clarify a problem  Develop a procedure for problem solving  Learn the traps in problem solving

4. What’s typical? Self-Doubt Over Confidence Procrastination Flip-flops Desperation! WRONG!

5. Six Criteria for Effective Decisions  Focus on what is important  Be Logical and consistent  Acknowledge objective and subjective factors, blends analytical and intuitive thinking  Do not gather too much information  Try to reach consensus  Straightforward, reliable, easy to use, flexible tools or techniques

6. Problem Solving Model POACTPOACT roblem bjectives lternatives onsequences radeoffs

7. What’s the best solution? A good solution to a well-posed problem…. An excellent solution to a poorly posed problem Is a almost always a smarter choice than..

8. Define the Problem What triggers the problem? State the problem Question the constraints of the problem statement Identify the essential elements How does this impact other decisions? What is the scope of the problem? Gain insights from others Restate problem, if necessary Stair stepping to the point of certainty

9. Objectives By stating the objectives you hope to achieve you can:  Help determine what information to seek  Determine the importance of, time and effort devoted to the problem  Write down the concerns you hope to address:  Wish List  Worst/Best Cases  Impact on others  What’s not feasible

10. Alternatives  Use your objectives and ask HOW?  Challenge constraints to your alternatives  Set high aspirations  Think through your alternatives before consulting others- inquiry  Learn from past experience  Then ask others for suggestions  Brainstorming  Others’ Agendas

11. Consequences  List the consequences of each alternative  Eliminate any clearly inferior alternatives  Organize descriptions of remaining alternatives into a table …….  Common scale to measure consequences  Qualitative and Quantitative data  Get expert advice

12. Tradeoffs  Eliminate alternatives clearly dominated by others  Then swap between alternatives using priorities  Value incremental improvements Some additional factors to consider……

13. Uncertainties z What are the key uncertainties? z What are the possible outcomes of these uncertainties? z What are the changes to the outcomes, given these uncertainties? z What are the consequences of each outcome?…. Probabilities Decision Trees Weighted Value Chart

14. Risk Tolerance  How much risk do you want to handle?  How much are others affected by your decision?  Quantify the risks, if possible  Seek to lessen the risks but avoid being overly optimistic  Don’t avoid making risky decisions just because they are complex  How can you reduce the risks??????

15. Psychological Traps  Working on the wrong problem  Failing to identify key objectives  Too few good, creative alternatives  Overlooking crucial consequences  Giving inadequate thought to tradeoffs  Disregarding uncertainty  Disregard or underestimate risks  Failure to see/plan for long range consequences

16. Common Traps  Anchoring trap  Status Quo Trap  Sunk Cost Trap  Confirming Evidence Trap  Framing Trap  Overconfidence Trap  Recallability Trap  Base Rate Trap  Prudence Trap  Random Events

17. Traps for Groups/Teams  Allowing the loudest/most senior person to control the decisions  Allowing the most articulate to frame the decision  Self interest over what’s best for the firm  Lack of objectivity