Decision Making

Techniques

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• range from the very simple to the rather
sophisticated.

• Which technique you choose for a given

decision will be influenced by the importance
and complexity of the decision.

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• While decision making without planning is fairly
common, it is often not pretty.
• The terms used to describe it--crisis management,
putting out fires-all reveal the inelegance and
awkwardness of this way of life.
• Planning allows decisions to be made in a much
more comfortable and intelligent way.
• Planning even makes decisions easier by providing
guidelines and goals for the decision.
• We might even say that planning is a type of
decision simplification technique
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 Decision makers will find four major
benefits to planning:
• 1. Planning allows the establishment of
independent goals.

• 2. Planning provides a standard of

measurement.

• 3. Planning converts values to action.

• 4. Planning allows limited resources to be

committed in an orderly way.
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 1. Planning allows the establishment
of independent goals.
• The vision which will shape the decisions is set apart
from surrounding events.
• Decisions are not made only as reactions to external
stimuli.
• "Management by firefighting" is replaced by a
conscious and directed series of choices.
• Managers now steer the organization, individuals now
steer their lives, rather than being steered by external
forces.
• Sometimes the difference between planning and not
planning is described as "proactive" (taking control of
the situation) versus "reactive" (responding to stimuli).
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 2. Planning provides a standard of
measurement.
• A plan provides something to measure
against, so that you can discover whether or
not you are achieving or heading toward your
goals.

• As the proverb says, If you don't know where

you're going, it doesn't matter which way you
go.

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3. Planning Converts Values To Action.
• When you are faced with a decision, you can consult your
plan and determine which decision will help advance your
plan best.

• Decisions made under the guidance of planning can work

together in a coherent way to advance company or
individual goals.

• Planning is useful in emergency situations, too. When a

crisis arises, a little thought about the overall plan will help
determine which decision to make that will not only help
resolve the crisis but will also help advance the overall plan.
Without a plan, crises are dealt with haphazardly and
decisions are made which may ultimately be in conflict with
each other.
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 4. Planning allows limited resources to be
committed in an orderly way.

• Budgets, time, effort, manpower--all are limited.

Their best use can be made when a plan governs
their use.

• A simple example would be planning to buy a

house or a car. Rather than having to decide
between buying the item right now with all cash
or never having it, you can plan to buy it over
several years by making payments. Or, you might
combine this plan with the plan to buy a smaller
house and add rooms later as they could be
afforded. By planning you can thus accomplish
things that might otherwise look impossible.
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 DECISION LEVELS
Some decisions are more important than
others, whether in their immediate impact or
long term significance.

As a means of understanding the significance of a decision so

that we can know how much time and resources to spend on
it, three levels of decision have been identified:

1. Strategic.
2. Tactical.
3. Operational.
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 1. Strategic.
• Strategic decisions are the highest level.
• Here a decision concerns general direction,
long term goals, philosophies and values.
• These decisions are the least structured and
most imaginative; they are the most risky and
of the most uncertain outcome, partly
because they reach so far into the future and
partly because they are of such importance.

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 Strategic Decision Example:
• Decisions about what to do with your life,
what to learn, or what methods to use to gain
knowledge (travel, work, school) would be
strategic.

• Whether to produce a low priced product and

gain market share or produce a high priced
product for a niche market would be a
strategic decision.

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 2. Tactical Decision.

• Tactical decisions support strategic decisions.

They tend to be medium range, medium
significance, with moderate consequences.

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 Tactical Decision example:

• If your strategic decision were to become a

safety manager, a tactical decision would
include where to go to school and what books
to read.

• If your company decided to produce a low

priced product, a tactical decision might be to
build a new factory to produce them at a low
manufacturing cost.
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 3. Operational Decision.
• These are every day decisions, used to support
tactical decisions.
• They are often made with little thought and are
structured.
• Their impact is immediate, short term, short
range, and usually low cost.
• The consequences of a bad operational decision
will be minimal, although a series of bad or
sloppy operational decisions can cause harm.
Operational decisions can be preprogrammed,
pre-made, or set out clearly in policy manuals.
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 Operational Decision Example:

• If your tactical decision is to read some books

on safety, your operational decision would
involve where to shop for the books.

• You might have a personal policy of shopping

for books at a certain store or two. Thus, the
operational decision is highly structured:
"Whenever books are needed, look at MPH."

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 Important Comment !!!
• Issues should be examined and decisions
should be made at all of these levels.
• If you discover that nearly all of your thinking
and decision making is taking place at the
operational level, then you are probably not
doing enough strategic thinking and planning.
• As a result you will lead a reactive life,
responding only to the forces around you and
never getting control of your life, your
direction or your goals.
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Some Techniques for Decision Making

• Practical techniques that can be applied to simple

or complex decisions.
• They share the assumption that circumspect
/careful analysis is the key to making good
decisions.
• Many decisions are made with too little
information and too little thought, in a non-
deliberate way.
• These techniques provide a visible, structured,
orderly set of factors involved in a decision, so
that the decision maker can consider them in a
thoughtful and coherent way.
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 A Systematic Approach to Decision
Making
There are six steps to making an effective decision:

• Create a constructive environment.

• Generate good alternatives.

• Explore these alternatives.

• Choose the best alternative.

• Check your decision.

• Communicate your decision, and take action.

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 T-Chart

• T-Chart is an orderly, graphic representation of

alternative features or points involved in a
decision.
• In one form, it can be a list of positive and
negative attributes surrounding a particular
choice.
• Drawing up such a chart insures that both the
positive and negative aspects of each direction or
decision will be taken into account.
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For example, what are the pros and cons of deciding to buy a sport utility vehicle?

A company is trying to decide whether to create its own advertising or hire an agency.

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 PMI (plus, minus, and interesting.)
• Edward de Bono refines the T-Chart idea into a three part
structure, which he calls PMI for plus, minus, and
interesting.

• First list all the plus or good points of the idea, then all the
minus or bad points, and finally all the interesting points--
consequences, areas of curiosity or uncertainty, or
attributes that you simply don't care to view as either good
or bad at this point (consequences that some people might
view as good and others might view as bad, for example).

• The "interesting" category also allows exploration of the

idea or choice outside the context of judgment--you don't
have to evaluate the attribute into a positive or negative
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 PMI Example
• Suppose that you are on the “JIWA MURNI” project your group has
decided to improve the roads in a small Kampung. You as a leader must
present the alternatives, which are that you have enough gravel either
to pave half the roads completely or to fix the worst spots and holes in
all the roads.
• If you stand up and say, "Well that's it; what do you think?" you'll get
the usual off-the-cuff first impression opinions, backed up later by
whatever arguments those who have committed to them can dredge
up.
• But suppose you say, "Let's make two PMI lists, first one of all the
good and bad points for paving half the roads completely, and then one
for the good and bad of fixing the worst problems on all the roads.
• Then we will have all the ideas and reasons before us when we make a
decision." This way, you will be pooling your ideas and working
together without the threat of being wrong or the need to defend your
first opinion.
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 PMI Worksheet.
Fill out a PMI worksheet on one of the following questions. Be sure to
list at least ten reasons pro and ten con. Then on the back of the
worksheet, name and defend your final decision on the question.

1. Should drivers entering KL city center be charged 25 sen per mile during
peak traffic hours?

2. Should manufacturers be required to reduce the amount of packaging

they use for consumer products, as a means of reducing trash?

3. Should people desiring to marry be required to pass a test before being

allowed to marry?

4. Should customers be charged 20 sen per plastic bag at Hyper Market on

Saturday.

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 Buriden's Ass.
From an old fable of an ass placed between two equally nice
bales of hay. The ass couldn't decide which bale to turn to
because they were both so attractive, and so it starved to
death from indecision.

• This method of decision making is used when two

or more equally attractive alternatives are faced.
• The method is simply to list all the negative
points or drawbacks about each decision.
• That is, when two or more alternatives seem very
desirable, we become blinded to any drawbacks.
The Buriden's Ass method simply focuses on the
drawbacks.
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 For example:
• Suppose you are a young lady about to become engaged. SiDia
asks you, "Dinda, would you rather have a RM 10,000 diamond
engagement ring or RM 10,000 worth of furniture for our new
Bungalow?"
• You find these to be both very attractive alternatives, so you
decide to use the Buriden's Ass method to decide between
them.
• What are the drawbacks of the ring? It might get stolen or lost;
it isn't useful like furniture; people might think you married
your Kanda for his money; it might make your friends feel bad
because they have little rings; you might worry about
losing/damaging it. And so on.
• Now, what are the drawbacks of the furniture? It will wear out
eventually and be gone, while the ring should last a lifetime;
you might worry about staining or damaging the furniture;
furniture isn't "romantic" like diamonds; and so on.
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 Buriden's Ass Exercise 1.
Perform a Buriden's Ass analysis (criticizing each alternative)
on one of the following dilemmas. Afterwards, choose and
defend your choice for one of the alternatives.
Your kindly boss wants to increase your total
compensation. He offers you these choices:
(1) take an increase in hourly pay,
(2) work fewer hours per week so that your per-
hour pay rate will increase,
(3) take a long paid vacation each year and continue
to work at the same hourly pay.
In terms of economic value, each of the three
choices comes out exactly the same.
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 Buriden's Ass Exercise 2.

Through a careless accident (you really ought to watch

yourself), only your brain is left, sitting in a jar waiting
for transplant. The doctors have three choices available
to you and want you to choose one. The first is to be
put into a stunningly attractive body. The second is to
be put into the below average body of a multi-
millionaire. The millionaire's estate will recognize you
as the true millionaire, giving you ownership of all
assets. The third choice is to be put into the body of a
rather homely person. In the process, however, for this
body only, it is possible for the doctors to increase your
intelligence level to highly superior. Which body do you
want? (All the bodies are the same in age, health, etc.)
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 Measured Criteria.
• With this technique, you list the criteria you want
your decision to meet and assign points to each
criterion based on its relative importance in the
decision. Then, each alternative is given a certain
number of points according to how fully it meets
the criterion. For points you can use a scale of 1
to 10, 1 to 100, or any other range that makes
sense to you.

• Once all the alternatives have been assigned their

due points for each criterion, all the points for
each alternative are added up and the alternative
with the highest total points is the one chosen.
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Measured Criteria Example.

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Decision Matrix or Weighted Decision
Table.
• This is a slightly more sophisticated version of
the measured criteria technique. Here a table is
set up with each criterion given a weight
depending on its importance in the decision and
with each alternative given a ranking for that
criterion.

• Making a Decision By Weighing Up Different

Factors. Also known as Decision Matrix Analysis,
Pugh Matrix Analysis, and Multi-Attribute Utility
Theory (MAUT)
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• Grid Analysis helps you to decide between several
options, where you need to take many different
factors into account.
• To use the tool, lay out your options as rows on a
table. Set up the columns to show the factors you
need to consider. Score each choice for each
factor using numbers from 0 (poor) to 5 (very
good), and then allocate weights to show the
importance of each of these factors. Multiply
each score by the weight of the factor, to show its
contribution to the overall selection. Finally add
up the total scores for each option. The highest
scoring option will be the best option.
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Example:
• A windsurfing enthusiast is about to replace his
car. He needs one that not only carries a board
and sails, but also one that will be good for
business travel. He has always loved open-topped
sports cars, but no car he can find is good for all
three things.

His options are:

• An SUV/4x4, hard topped vehicle.
• A comfortable "'family car."
• A station wagon/estate car.
• A convertible sports car.
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 Factors that he wants to consider are:

• Cost.
• Ability to carry a sail board safely.
• Ability to store sails and equipment securely.
• Comfort over long distances.
• Fun!
• Look, and build quality.

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 Example Grid Analysis
Showing Unweighted Assessment of How Each
Type of Car Satisfies Each Factor

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Next decide the relative weights for each of the
factors. Multiplies these by the scores already
entered, and totals them.

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 BEST

• The Business Evaluation Scoring Technique

(BEST) could be used to help the company
evaluate a group of choices before deciding
which ones to pursue. The tool considers the
various “choices of opportunity” related to
new ventures.

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 Answer the following questions by scoring them on a 1-5
scale: 1 = low and 5 = high.
Fully Scan CCD CDS Combination
ELN ELN All
1 Is the choice really differentiated from other similar choices? 3 2 4 4 5

2 Does the choice have growth potential? 3 2 3 4 5

3 Will the choice require capital? 4 5 3 3 2

(Note: A low RM requirement receives a higher
score, while a high RM requirement should
receive a low score)

4 Can financing be secured? 4 5 4 4 3

5 Does the choice suit the employees work requirement 3 3 4 4 5

(e.g., mind-set, experience)?

6 Does the choice suit thecompany's entrepreneurial profile 3 1 3 4 5

TOTAL 20 18 21 23 25

Total Score Description Action

25-30 Excellent prospects Must try

20-24 Very good prospects Should try
15-19 Reasonable prospects Try if nothing else is available
14 and under Poor prospects Avoid this loser
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 SWOT Analysis

• SWOT Analysis is a useful technique for

understanding your Strengths and
Weaknesses, and for identifying both the
Opportunities open to you and the Threats
you face.

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 SWOT Analysis
• Used in a business context, a SWOT Analysis
helps you carve a sustainable niche in your
market.

• Used in a personal context, it helps you

develop your career in a way that takes best
advantage of your talents, abilities and
opportunities.

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• Strengths and weaknesses are often internal
to your organization, while opportunities and
threats generally relate to external factors.

• For this reason the SWOT Analysis is

sometimes called Internal-External Analysis
and the SWOT Matrix is sometimes called an
IE Matrix.

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 Strengths:

• What advantages does your organization have?

• What do you do better than anyone else?
• What unique or lowest-cost resources can you
draw upon that others can't?
• What do people in your market see as your
strengths?
• What factors mean that you "get the sale"?
• What is your organization's Unique Selling
Preposition
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 Weaknesses:

• What could you improve?

• What should you avoid?
• What are people in your market likely to see
as weaknesses?
• What factors lose you sales?

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 Opportunities:

• What good opportunities can you spot?

• What interesting trends are you aware of?

Useful opportunities can come from such things as:

• Changes in technology and markets on both a broad and

narrow scale.
• Changes in government policy related to your field.
• Changes in social patterns, population profiles, lifestyle
changes, and so on.
• Local events.

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 Threats

• What obstacles do you face?

• What are your competitors doing?
• Are quality standards or specifications for your
job, products or services changing?
• Is changing technology threatening your
position?
• Do you have bad debt or cash-flow problems?
• Could any of your weaknesses seriously threaten
your business?

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strengths
•End-user sales control and direction.
•Right products, quality and reliability.
•Superior product performance vs competitors.
•Better product life and durability.
•Spare manufacturing capacity.
•Some staff have experience of end-user sector.
•Have customer lists.
•Direct delivery capability.
•Product innovations ongoing.
•Can serve from existing sites.
•Products have required accreditations.
•Processes and IT should cope.
•Management is committed and confident.
opportunities
•Could develop new products.
•Local competitors have poor products.
•Profit margins will be good.
•End-users respond to new ideas.
•Could extend to overseas.
•New specialist applications.
•Can surprise competitors.
•Support core business economies.
•Could seek better supplier deals.
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weaknesses
•Customer lists not tested.
•Some gaps in range for certain sectors.
•We would be a small player.
•No direct marketing experience.
•We cannot supply end-users abroad.
•Need more sales people.
•Limited budget.
•No pilot or trial done yet.
•Don't have a detailed plan yet.
•Delivery-staff need training.
•Customer service staff need training.
•Processes and systems, etc
•Management cover insufficient.
threats
•Legislation could impact.
•Environmental effects would favour larger competitors.
•Existing core business distribution risk.
•Market demand very seasonal.
•Retention of key staff critical.
•Could distract from core business.
•Possible negative publicity.
•Vulnerable to reactive attack by major competitors.
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