Lecture 2: Generating Objectives and Alternatives

Keywords Lecture Outline

Fundamental objectives EWL Chapter 3
Means objectives EWL 4.1 The generation of promising
Objectives hierarchy alternatives
Natural attributes EWL 4.2 Cause-effect analysis
Zero or one measure
EWL 4.3 Ideal alternatives
Constructed (artificial) attributes
Cause-effect analysis EWL 4.4 Context enlargement
Dominance EWL 4.8 Preselection of alternatives
CC 4 Structure decisions with multiple
objectives

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Components of a decision problem

One of the reasons for why decision making can be difficult is the complexity
of the problem.

A complex decision problem is easier to solve if the problem is decomposed

into its components:
1. Objectives (and preferences): What you want
2. Alternatives (Actions): What you can do
3. Uncertain events: What you know or do not know
4. Outcomes: the impact of choices and uncertain events on objectives

In this lecture, we will focus on two of these components, mainly on objectives

and alternatives.

Common objectives in corporate decision making are to minimize cost and to

maximize profits.

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Why do we need to identify our objectives?

If you do not understand your objectives you CANNOT

find and generate new alternatives

identify the relevant environmental influences (e.g. uncertainties)
make a sensible choice between alternatives

Unfortunately, people have the tendency to generate an inadequately

narrow set of objectives.

Let’s look at the following experiment in Bond, Carlson and Keeney (2008).

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Do we know our objectives? (Bond, Carlson and Keeney, 2008)

Envision that you were

planning to pursue an MBA
but had not yet decided on a
school. List the objectives
that you thought were
“relevant when making this
decision.”

The master list contained 28

objectives such as:
- maximize personal growth
potential
- availability of electives
- geographic location, etc.

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We don’t!

Results clearly indicated

that participants failed to
generate a comprehensive
list of objectives. On
average, the number of
recognized objectives was
7.6, and the number of
self-generated objectives
was only 6!

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Where to look for your objectives?

1. Obvious insufficiencies: Look for things that you are currently not happy
with.

2. Comparison of alternatives: Differences between alternatives might help

you to realize what is important to you.

3. Strategic goals: Some objectives are not directly linked to your current
decision but are of overall interest (e.g. company reputation).

4. External guidelines: Guidelines and constraints (such as budget

constraints) should indicate an important objective (e.g. minimizing costs).

5. Impact on other people: Consider the objectives of other people (such as

family, shareholders, employees, etc.) who might be affected by the
consequences of your decision.

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Organize your objectives: Objectives hierarchy

Objectives hierarchy is a diagram of relationships between objectives,

sub-objectives, and attributes.

The most general objective is located at the top of the hierarchy.

The higher levels represent more general objectives, which are vaguely stated.
Lower levels represent more specific statements regarding desirable
characteristics of alternatives.
The lowest levels of the hierarchy represent attributes based on which the
alternatives will be compared (therefore they are measurable).
An attribute (or measure) is used to characterize performance in relation to an
objective (See Slide 15)

Uses for objective hierarchies:

Guide to information collection

Help to identify alternatives
Facilitate communication
Evaluate alternatives

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 Example: Bill Frail has recently been promoted to a product
development manager position and he will move to his new office. His
new office is being repaired now. He will select light bulbs for the
office. In the office, there are 10 bulb fixtures. What is the best bulb for
Mr. Frail?

Most general Lower-level

(ultimate) objective objectives Attributes

What is “Best Light Bulb” to the DM?

or subdivide cost as “Operating cost” and “Purchase cost”

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 Example (alternative representation): A fundamental-objectives hierarchy for vehicle
regulations (Keeney, 1992)

“What do you
mean by that?”

“Of what more general

objective is this an aspect?”

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Constructing an Objectives Hierarchy

Top-Down Approach Bottom-Up Approach

Start with overall objective Start with details and alternatives
List major objectives List and define differences between
alternatives
Subdivide specific objective to
develop lower-level objectives Group differences into
sub-objectives
Continue until reasonable
attributes defined Group sub-objectives into major
objectives

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 Top-Down Approach Bottom-Up Approach
Example: Objectives hierarchy for manufacturing Example: Bottom-up objectives hierarchy for
facility location selection contractor selection

The Lyon’s have decided to remodel their

kitchen and invited four potential contractors to
their home. Each contractor submitted designs,
cost estimates, a timeline, and a list of
references.

In which ways do these contractors

differ? (i.e. What are the important
differences?)
total labor cost, duration, reputation

Group details into categories

cost, time, quality

Group categories into two or three

major objectives
minimize cost, maximize quality,
minimize time

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Exercise: Objectives Hierarchy

A small company called “Decision Aid International”, based in Washington DC,

provides decision support consultancy to the public and private sector. The
managing director believes that there is a new and growing market in Europe for
services offered by the company. The director is unsure of the best location and
wishes to explore the multitude of possibilities in a structured manner.

The manager determined the following objectives: Ease of setup and operations,
Accessibility from the US, Private sector, Location, Staffing issues, Business
potential, Quality of life, Public sector. Construct a hierarchy using these objectives.

(Belton and Stewart, 2012)

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Which objectives are fundamental?

Fundamental objectives are Means objectives are considered to

considered to be relevant for their be relevant, because they help to
own sake, i.e. without requiring any achieve a more fundamental
further justification. objective.

Example
Means objectives: Educate public
More traffic lights
Enforce traffic laws

Fundamental objectives: Maximize public safety

Minimize loss of life
Minimize serious injuries
Minimize minor injuries

REMARKs:
All objectives in a hierarchy are fundamental.

A DM compares alternatives based on fundamental objectives only.

“Would the DM be satisfied if objective y is achieved but objective x is not?”
If the answer is “No!”, then x is a fundamental objective.

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Whether an objective is Means or Fundamental depends on the decision context

Example

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How to tell that you have accomplished?

An ideal set of fundamental objectives that are relevant for a given decision
situation should satisfy:

Completeness: All fundamental objectives are included

Simplicity: A small set of fundamental objectives is easier to communicate

and requires fewer resources to estimate the performance of alternatives

No redundancies: Avoid double counting or overlapping objectives

Preference independence: Preferences with respect to the attribute levels

of a subset of objectives should be independent of the attribute levels of the
remaining objectives (see Lecture 3)

Measurability: The achievement of objectives should be accurately

measurable (i.e. there is an attribute for each)

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 Attributes are unambiguous ratings of how well alternatives do with respect to each
objective. They can be qualitative or quantitative. They are useful for
describing the consequences of alternatives
making value tradeoffs between objectives

Example
Highest-level fundamental objective: to find the best job

Lower-level fundamental objectives: (i) maximize salary, (ii) minimize working hours, (iii) maximize
career opportunities

Attributes: (i) dollar amount of monthly salary, (ii) hours per week, (iii) one of the following qualitative
measures: very good, good, bad

A good attribute should be

Direct: “number of fatalities” versus “number of accidents”
Operational: low cost of information collection
Comprehensive: attribute levels cover the full range of possible consequences of the
objective (e.g. attribute “number of fatal heart attacks” for the objective “to minimize
detrimental health effects from carbon monoxide”, how about nonfatal heart attacks?)
Understandable: units should make sense to the decision maker (e.g. miles per gallon vs
litres per km)
Unambigious: we should all have the same interpretation of the same attribute level (e.g.
number of stars on Yelp)
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Types of Attributes (Measures)

1. Natural: is in general use with a common interpretation by everyone

Cost, Profit or NPV (dollars)

Weight (grams, tons and pounds)
Time (seconds, minutes, hours, days)

2. Zero or One Measures: describe whether the alternatives have a specific

attribute or not

Vehicle has ABS brakes or not

High school diploma
Technology is computer controlled or not

3. Constructed Measure: is developed for a particular decision problem

A descriptive phrase is attached to each attribute level (e.g. a five-point scale to

measure ease of use in the case of a personal computer)
Group natural attributes to obtain discrete attributes when the natural attribute is too
specific.

REMARK: Prefer natural attributes whenever they are available.

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 Example 1: Constructed attribute for customer satisfaction

Example 2: Constructed attribute for contractor’s level of experience

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 Example 3: Attributes for buying a used car

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Exercise: Attributes

Find an attribute for the following objectives and determine the attribute types:

a) Minimize employee injuries

b) Maximize employee satisfaction

c) Promote job creation

d) Minimize the loss of wildlife habitat

e) Minimize emission of greenhouse gasses

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How to generate promising alternatives?

1. Extend the context: replace means objectives with fundamental ones

2. Think about a perfect (but not available) alternative and then search for (available)
options that do not deviate too much from this perfect alternative

Example: Looking for an administrative office to rent

The ideal alternative A new promising alternative

What would be optimal? Former military baracks
Price per m2 : 15 e Price per m2 : 15 e
Time to availability: 8 months Time to availability: 8 months
Space: 600 m2 Space: 2000 m2
try to rent the basement of baracks

3. Perform a cause-effect analysis (generate your own alternatives)

Example: Impact model to find the best marketing mix
Sales: x = x(p, B), Profits: π = px − C, Market share: px/(px + T )

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The problem of “too many alternatives”: How to preselect alternatives?

1. Use restrictions and aspiration levels

Example: Choosing a job candidate

Below 50
Work experience required
English proficiency required

But be careful! You might eliminate an alternative that violates a certain aspiration
level only marginally but substantially surpasses your aspirations in many other
dimensions.

Another Example: Choosing a project to invest

The management requires a maximum payback period of 2 years.
Project Investment CF1 CF2 CF3
A 3M 4M 0 0
B 3M 0 0 10M

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How to preselect alternatives? (cont.)

2. Perform dominance checks: The alternative a is dominated by alternative b if it is

not better than b for any objective (and is worse for at least one objective).

Exercise: Mark the non-dominated alternatives

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 Answer the following questions
1. Where do objectives come from?

2. Explain the experiment in and the findings of Bond, Carlson and Keeney (2008).

3. What are the properties of an ideal set of objectives?

4. How to construct fundamental-objectives hierarchies?

5. What is the difference between fundamental and means objectives?

6. Suppose you want to go out for dinner. List your fundamental objectives. Create a
fundamental-objectives hierarchy.

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 Answer the following questions (cont.)
7. Suppose you are planning on going for a trip over spring break. What could your
fundamental objectives and means objectives be for this problem?

8. Determine your fundamental objectives and means objectives in the context of

renting an apartment as a student. Create a fundamental-objectives hierarchy.

9. What are the desirable properties of an attribute? Explain each with an example.

10. What are the types of attributes (measures)? Explain each with an example.

11. What are the ways of generating alternatives?

12. What are the ways of preselecting alternatives? Explain why restrictions can be
problematic.

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 Reading
EWL Chapter 3 and Chapter 4, CC Chapter 4
Bond, S. D., K. A. Carlson, R. L. Keeney. 2008. Generating objectives: Can decision
makers articulate what they want? Management Sci. 54(1) 5670.
Keeney, R.L., Gregory, R.S. (2005). Selecting attributes to measure the achievement
of objectives. Operations Research, 53, (pp.1-11).

Next Lecture

Lecture 3: Making Decisions with Multiple Objectives Under Certainty

Reading: EWL Chapter 5 and Chapter 6 and CC Chapter 5

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