Introduction to Decision

Making

Manahan Siallagan
 Thinking Skill

Critical Thinking Creative Thinking Strategic Thinking

examining the meaning exploring ideas, generating possibilities, assessing a program in
and significance of what and looking for many right relation to its mission, its future goals,
is observed or expressed. answers rather than just one and the external environment
logic, reasoning, clarity, The ability to accept change and examining whether a program is "doing
credibility, newness, a willingness to play with ideas, the right things" in order to achieve its
accuracy, relevance, and a flexibility in their outlooks mission
depth, significance, and
fairness

Problem Solving and Decision Making

Identifying Generating Analyzing Implementing Chosen Evaluating and

Problem Alternatives Alternatives Alternatives Improving
Lets Warming Up
1. What do you think the answer is ?

If it takes 5 machines 5 minutes to make 5

widgets, how long would it take 100
machines to make 100 widgets ?

100 minutes OR 5 minutes

2. What do you think the answer is ?

A bat and ball cost $1.10

The bat costs one dollar more than the ball

How much does the ball cost?

Bat + Ball = 1.1
Bat = 1 + Ball
(1+Ball) + Ball = 1.1
1 + 2Ball = 1.1
2Ball = 1.1 -1
2Ball = 0.1
Ball = 0.1/2
Ball = 0.05
 3. What do you think the answer is?

In a lake, there is a patch of lily pads.

Everyday, the patch doubles in size

If it takes 48 days for the patch to cover the entire

lake, how long would it take for the patch to cover half
of the lake ?

24 days 47 days
Two modes of decision making in
your brain!

System 2 System 1
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 System 1
• System 1 does not like a
complicated matter. If it
founds something
complicated, naturally, it will
cope with a strategy that
make the complexity
becomes simple matter
through heuristics process
• The comfort zone is System 1

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 System 1 contains Bias

THE CONSEQUENCE
• the decision does not
systemic
• susceptible to mistakes
• often jump to conclusion

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Jumping to Conclusions
EXAMPLE: THE BANK IN
HAWTHORNE

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 The Bank in Hawthorne (1)

A major bank in California has a number of branches in the Los

Angeles area. The operating results of all branches are reviewed
monthly by the Executive Committee. At a July review, the
Hawthorne branch showed a volume of transactions slightly below
plan. All the other branches were right on target or above.

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 The Bank in Hawthorne (2)
In August the Hawthorne branch slipped a little further, in September
even more. In October the news was worse yet. Members of the Executive
Committee began an investigation. One vice president suggested
exploration of the subject of change, saying he had already given it some
thought and pointing out that when the decline in transactions was
observed the new branch manager had been in his position for about two
months. "Look, he represents a change all right. He came in just before the
branch started to slip. I thought we were making a mistake then and I'm
sure of it now."
August October
Other Branches
Target transaction

New branch manager

Hawthorne branch
July September 13
 The Bank in Hawthorne (3)
• The committee went on to consider- who
might take over that position if the bank let
the new manager go. After long discussion
the, chairman suggested that they might be
jumping to cause on the basis of a single fact.
• He just wanted to make sure the situation was
investigated thoroughly and objectively before
action was taken that would seriously affect
the branch manager's career.

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 The Bank in Hawthorne (4)
• Despite some disagreement they began an
objective analysis.
– The question "What is distinctive about the
Hawthorne branch when compared with all other
branches?" led to discussion of its proximity to
International Airport and the factories of North
American Aviation and Douglas Aircraft.
• "Wait a minute," someone said. "North American
has been stretching out work on the B-70 bomber
and laying off people for some time. And Douglas
is transferring a lot of its work from Hawthorne to
Long Beach. . . ."
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 Problem
• What is a problem?
– A problem is the visible effect of a cause that
resides somewhere in the past.
• How to solve a problem?
– We must relate the effect we observe to its exact
cause. Only then can we be sure of taking
appropriate corrective action-action that can
correct the problem and keep it from recurring.

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 The Structure of a Problem
A performance standard is achieved when all conditions required for
acceptable performance are operating as they should.

Sometimes
conditions
improve, positive
changes occur,
but unexpected
decline occur.

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MASALAH DALAM MASALAH

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 Diskusi(1)
• Di suatu gerai telkom, pelanggan
mengeluhkan pelayanan operator cash
register, mengklaim bahwa kasir "tidak terlalu
membantu," dan "mereka tidak
memperhatikan apa yang saya minta."
Beberapa keluhan mencatat bahwa kasir
"lebih tertarik pada mengobrol di antara
mereka sendiri daripada menjawab
pertanyaan pelanggan. "
 Diskusi(2)
• Untuk membuat situasi ini tidak menjadi lebih
buruk, Budi sebagai manajer lapangan
mengembangkan sebuah peraturan yang
menyatakan,
"kasir yang bertugas
Apa akardilarang saling berbicara saat
permasalahanny?
ada pelanggan."
Sepintas lalu kebijakan baru ini dirasakan telah
menyelesaikan masalah. Minggu berikutnya, Budi
dipanggil ke kantor bosnya untuk menjelaskan
mengapa keluhan pelanggan tentang kasir yang
tidak membantu masih “ada."
 System 2
System 2
Rational/conscious

Systematic
Optimal solution
Slow
Explicit
New
situation/experience/problems

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 Iceberg: Level of Thinking for Problems Solving
• Dengan kompleksitas yang tinggi, dibutuhkan
perspektif baru dan cara berpikir yang beragam.
• Semua orang melihat masalah dari lensa uniknya
sendiri.
• Ketika membawa lensa yang berbeda, maka kita
mengidentifikasi blind spots, potential solutions, and
new insights.
• Untuk merubah dibutuhkan pendekatan unik dan
Level of thinking

bagaimana menerapkannya untuk memecahkan

tantangan bisnis dan kepemimpinan yang kompleks.

Structures

Thought

Metaphors Source
From Linear to Circular Thinking
Metaphors

Linear causal relationship

Circular and multiple causal loop

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 The Problem to Reduce Crop Damage by Insect A

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How to
reduce crop
damage?

The root
cause is
insect A!
Insect A
Finding Solution for the root cause
This is what
I want !

Insect A

Solution of How to Minimize number of Insect A

Spray the crop
with a
pesticide
designed to
kill that insect
!

I’ll design a
pesticide to kill
that insect !
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 Linear Thinking

• To continue to look at something from one point of

view.
• To take information or observation from one situation,
and make a conclusion.
• Searching for single cause to a particular problem.

Root Solution
Problem cause

Linear causal relationship

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 Unforeseen consequences

27 After several years

What’s going
on?

Insect A

Insect B
 Explanations of failure of Analysis (Linier Thinking)
Boundary of Linier Thinking
unintended side effects

Pesticide Application Insect A

The Best Solution Root cause
The more pesticide is applied, the fewer
insects there will be damaging crops, and the less
total damage crop (better in the short time).

Next problem (in the long time) cause more damage

The population
of insect B
explodes
Pesticide Application Insect A

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 Circular thinking: Wider thinking
Deeper
Understanding
Lead to greater
How to balance
numbers of insect B
insect A and B?
Numbers of
insect B
Consequence
Lead to greater
numbers of insect B
damaging crop

Numbers of insect A
Damaging Crop

The greater the pesticide

application, the smaller the Numbers of insect B
numbers of insect A damaging crop

Decrease in the Decision: Pesticide Lead to greater of

numbers of Application total numbers of
insects eating the crop insect damaging crop

Feedback
Total Number of insects
Damaging Crop

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We don’t know what we are doing simply because
we have no adequate basis to judge the effects of
our decisions. (Churchman, C.W., 1968).

DEALING WITH DRIVING

EXECUTION
 Rational/Ideal/Normative
Decision Approaches
Decision Making Actual/Descriptive
Decision Making
GAP
Bounded
Assumptions: Rational
1. Perfectly define the problem
2. Identify all criteria
Prescriptive
3. Accurately weigh all criteria
according to their preference
Intuition
4. Know all relevant alternatives
5. Accurately asses each Systematic Model of
alternative based on each Decision Process
criterion
6. Accurately calculate and Biases
choose the alternative with
the highest perceived value
Guidances to be more
rational

Not
Optimal Need to
Close to optimal
solution Improve
solution
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 Prescriptive Decision
Making
Prepare relevant data
Prescriptive

Use appropriate
Systematic Model of methods
Decision Process

Systematically drive
the action plan

Guidances to be more
rational Use the resource
optimally

Evaluate the
implementation and look
at possible side effect

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SAD BUT TRUE
Thinking about making decision (1)
• During cold war

• Russia put missile

detection system in place
through fear of American
rockets

• Lt colnel Petrov was officer

who was monitoring the
system for signs of an
attack
Russian Satellite Missile Detection System

Put in place to detect threats from America

during cold war
O Stanislav Petrov monitored system on 26th
September 1983
K Oko alerted Petrov that 5 missiles were
heading towards Russia.
Petrov had to choose:
O Declare it a false alarm
Start a counterstrike and probably a
Nuclear war
 The outcome

STANISLAV PETROV
THE MAN WHO SAVED THE WORLD
Thinking about making decision (2)

USS Vincennes

• The USS Vincennes

mistakenly identified an
Iranian civilian airplane
with 290 people on board
as a war plane and shot it
William C. Rogers III,
down
 Time Constraints

 Missile had to be fired before aircraft closed within

10 miles of Vincennes
 CO Vincennes had approximately four minutes from
the time he was notified of the threat to react
 Could anything have been done to give Captain
Rogers more time?
 Decision:
 Shoot
 Don’t shoot
 The outcome

KILLING 290 CIVILIANS AND

CREATING AN INTERNATIONAL
INCIDENT
THANK YOU

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