2 The Eight Elements of Effective Decisions ProblemObjectivesAlternativesConsequencesTradeoffsUncertaintyRisk ToleranceLinked Decisions
3 Effective Decision Making ProblemBe creative about your problem definition.Turn problems into opportunities.Reexamine your problem definition as you go.Maintain your perspective.
4 Effective 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.
5 Effective 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
6 Effective Decision Making ConsequencesCompare alternatives using a payoff matrix.See Game Theory presentation atUse experts to help define consequences.
7 Payoff 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
8 Effective Decision Making TradeoffsUse swaps.Determining the relative value of different consequences is the hard part.
9 Effective 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.
10 Effective Decision Making UncertaintyUse a Decision Tree.Alternatives - Uncertainty - Consequences
11 Decision Tree KBBB Go KAAA Go KBBB No Go KAAA KAAA No Go KBBB Go 10
12 Effective Decision Making Risk ToleranceUnderstand and calibrate your group’s tolerance to take risks.Incorporate your risk tolerance into all of your decisions.
13 Effective 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.
14 Effective Decision Making Summary ProblemObjectivesAlternativesConsequencesTradeoffsUncertaintyRisk ToleranceLinked Decisions