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Decision Making Tools

Joseph Lewis Aguirre
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Strategic Planning Tools
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Summary Problem Solving Tools
Affinity Chart Bar Chart Benchmarking Brainstorming Cause-Effect Force Field Analysis Group Think Histograms Imagining Importance Weighting Pareto Chart Pie Chart Plan-Do-Check-Act Provocation Run Chart

Cause Screening
Check Sheets Criteria Matrix Control Chart Decision Tree Flow Chart Following the Rule
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Influence Diagram
Intuition Line graph Metaphorical Thinking Mind Mapping Multivoting Nominal Group Technique

Requirements Analysis
Scatter Diagram Starbusting Value Analysis Visualizing

Planning Models SWOTT 3/20/2012 .

GE’s Planning Matrix 3/20/2012 .

Ansoff’s Product/Market Matrix 3/20/2012 .

Porters Generic Strategy 3/20/2012 .

Bowman’s Clock 3/20/2012 competitive advantage in relation to cost or differentiation advantage .

Window of Opportunity Window of Opportunity when Solution remains Valid 3/20/2012 .

Benchmarking 3/20/2012 .

3/20/2012 .Benchmarking …. the process of comparing and measuring an organization’s operations against those of a best-in-class performer from inside or outside its industry.

Benchmarking is NOT!  Cheating Unethical Illegal   3/20/2012 .

Form agreements with bench-marking partners. Analyze data and establish the gap. Update benchmarks: continue the cycle. 5. 2. Select processes to be benchmarked. 6. Plan action to close the gap/surplus. Implement change. 11. Baseline your own processes. Identify your strong and weak processes and document them. 1. 4. 9. 3/20/2012 14. Select candidate best-in-class benchmarking partners. 13.Benchmarking process Obtain management commitment. Research the best-in-class 7. 8. Form benchmarking teams. Collect data. . 3. 12. Monitor. 10.

Benchmarking drivers  Compares processes with those of a best-in-class performer Major improvements achieved quickly  3/20/2012 .

Alterantives  “[Benchmarking] is the difference between teaching yourself how to hit a golf ball and taking lessons from Jack Nicklaus.” -Steven George 3/20/2012 .

Benchmarking references American Society for Quality Control Benchmark Application .Medical Field 3/20/2012 .

Tools and Techniques Decision Matrix 3/20/2012 .

Introduction The Decision matrix prioritizes a list of options  It helps make a tough decision based on the criteria chosen  It is only used when only one decision can be reached  3/20/2012 .

Picking the criteria The criteria must be picked on what is most important. 3/20/2012 . Careful selection of the criteria can help ensure a favorable solution.

Rating the criteria   The ratings can be assigned by a team or by an individual Guesswork is sometimes involved with rating certain criteria 3/20/2012 .

Conclusion – Everything that has a beginning has an end. even a tough decision! 3/20/2012 .

Following the Rules 3/20/2012 .

Introduction A rule is described as:  A regulation  A principle or condition that customarily governs behavior 3/20/2012 .

Description Application Examples Sunday Rules National Association of Realtors® Code of Ethics 3/20/2012 .Topics of Discussion   1. 2.

Conclusion  Critical Thinking provides an excellent framework for clearly and carefully evaluating whether or not we can assume a definite position and follow a rule with reliance. 3/20/2012 .

.False Rules Tool When using the False Rule method. an 3/20/2012 unrelated rule is used in a new environment.

you take a pre-existing. not related rule and attempt to apply it in your own area of business. 3/20/2012 .Definition  With the False Rules method of coming up with new ideas. It requires a connecting thought between the irrelevant rule and the current business.

 Keep dangerous materials away from irresponsible people.  3/20/2012 .Example Keep medicine away from kids.  We’ll confine and lock up our dangerous resources by eliminating irresponsible people from the area through the use of ID cards.

False Rules/Not Always

False Rules do not come to distinct problem solving, they are used to generate new ideas.

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Analogies
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What is an Analogy
Analogies involves correlating one problem to other similar problems/solutions  In business particularly, analogies are used as descriptors to show employees correlations to how others have solved problems or overcame barriers

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When to use Used when you have a person or group that may not understand the exact process you are teaching or describing but has the ability to understand once an inference is made  Can be used to clarify ones point of view  3/20/2012 .

When not to use For a Analogy to be effective. the receptor must understand or at least partially understand (Gentner. et al. 2003) what is meant by the analogy  Not to be overused with any one group or situation  3/20/2012 .

Metaphorical Thinking 3/20/2012 .

 3/20/2012 .  Metaphorical Thinking is comparing a subject to a completely unrelated topic.Overview of Metaphorical Thinking Children are not taught to think metaphorically.  Thinking Metaphorically leads to more abstract ideas.  Logical thinking cannot efficiently be used to analyze complex thoughts.

The Metaphorical Thinking Process Consists of Using the Imagination to View Ideas or Objects in a Different Way 3/20/2012 .

The Logically Thinking Business Mind The Manager The Manager Input Output A Rubber Ball A Rubber Ball The Logically Thinking Mind Sees No Correlation Between the Manager and a Rubber Ball 3/20/2012and Therefore the Output is the Same as the Input When Asked to Compare Them .

The Metaphorically Thinking Business Mind The Manager The Manager A Rubber Ball + Input Output Globally Thinking Well Rounded A Rubber Ball 3/20/2012 Flexible Compare the Manager to a Rubber Ball The Metaphorically Thinking Mind Uses Metaphors to .

Metaphorical Thinking and the English Language    Thinking metaphorically allows the thinker to use a more extensive tool set to describe a condition Metaphors are used to provide a better understanding of an idea by relating it to a completely unrelated topic. Metaphors for this reason are used often in the media to more clearly present information to the average reader without losing them in minute details 3/20/2012 .

as in “A woman is a delicate rose”  Tetrium comparison: Only similarities in above is that the two are live organisms. stating that A is B. Metaphors implies (implicit)  3/20/2012 .  Metaphors seek to substitute A for B.Metaphorical Thinking Ignites imagination and allows individuals to think beyond the logical and rational.  Similies explain(explicit).

Metaphors implies (implicit)  3/20/2012 . Proprietary .  Conceptual Metaphor.creates connections by making the unfamiliar seem familiar and vice-versa.“bursting with flavor”  Tetrium comparison: Only similarities in above is that the two are live organisms.Metaphorical -Types Synectics .  Similies explain(explicit).

Examples of Metaphors Fuzzy logic is a term meaning the logic in a statement is intentionally left vague.  There was a scandal involving Iran and the Contras that was dubbed Contra-gate. dry and  3/20/2012 . baked.  Terms in football use metaphors to describe plays such as the “Flea Flicker” or the “Statue of Liberty”  Wine tasting uses metaphors such as Fruity. bouquet.

 Using shades to describe things allows for a more granular view also expanding the tools used in description.Improving the Critical Thinking Proces Metaphorical Thinking expands the horizon of the thinking realm.  Metaphors can be used during problem solving to describe particular situations in more detail and in ways.  3/20/2012  .

Metaphors are used to compare an entity unknown to the listener to a known entity. Metaphors are used in the English language to supplement explanations or to provide more colorful descriptions.Summary     3/20/2012 Metaphorical Thinking is a powerful tool that can be used in the decision making process. . Thinking in an abstract way by using metaphoric thinking enables the thinker to identify certain aspects of a problem with an unrelated topic.

Tools and Techniques: The Decision Tree Analysis 3/20/2012 .

Decision Tree Analysis  How to draw  Begin with a decision  Draw lines from the decision  Lines represent solutions a square or a circle  At the end of each line    Draw Squares represent more decisions Circles represent uncertain outcomes  Continue 3/20/2012 until you can go no further .

Decision Tree Analysis  How to evaluate  Assign a value to possible outcomes  Assign a probability to each outcome  How to calculate  Value of uncertain outcomes  Multiply the value of the outcome by the probability  Value of decisions  Subtract 3/20/2012 the cost from the outcome value to get benefit .

Decision Tree Analysis  Benefits  Shows all possible outcomes  Shows risks and rewards  Allows decisions to be made based on what you know  Drawbacks  Time consuming 3/20/2012 .

2006 from http://www. Retrieved April 8.Decision Tree Analysis  References  (2006). Decision tree analysis: choosing between options by projecting likely outcomes.com/dectree/ html 3/20/2012 .mindtools.

Linda Birnbaum Influence Diagram: A Decision Making Tool 3/20/2012 .

What is an Influence Diagram?   A visual representation of a decision problem Method of identifying and displaying  Decisions  Uncertainties  Objectives  How they influence each other 3/20/2012 .

Node Shapes Decision Variable the decision maker has the power to control Chance Variable Variable the decision maker cannot directly control Objective General Arrow Variable Quantitative criterion decision maker is trying to maximize or minimize Variable by the quantities it depends on Determined (arc) influence Signifies 3/20/2012 .

Influence Diagrams are best used for:
     

Sensitivity analysis Mathematical modeling Model fidelity Improvement initiatives Quantifying risk Quantifying uncertainties

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Sample Application
Marketing Budget Costs Market Size Unit Sales Market Share Revenues Profit

Product Price

• Marketing

budget and product price influence expectations associated

with market size and market share • Market size and market share influence costs and revenues • Costs and revenues influence profits
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Planning, Tools and Descriptions
It is not the plan that matters, It’s the planning. -General Dwight D. Eisenhower
Graphical Diagrams do not constitute a specification….nothing replaces clear, concise text.
- David A. Ruble

At a recent study, I commented at one point in our deliberations that we had spent more time on wordsmithing than we had on considering the substance of our report. -Robert W. Lucky, VP for Applied Research at Telecordia. NJ

It seems to me language by its very nature is imprecise. I think of each word as inhabiting a fuzzy ball of uncertain semantic meaning…. – Robert W. Lucky 3/20/2012

Decision Making Framework GOALS OPPORTUNITIES OBJECTIVES PROBLEMS EVALUATION IMPLEMENTATION OPTIONS RELATIVE TIME SPAN 3/20/2012 .

PM KBI 03/04/2001 11/28/2001 3/20/2012 .Dashboard .

60% 6 7 5 Comp 40% 10 8 Expand 3/20/2012 No expansion. 60% Comp 40% .Invest or no 1. $100K Large $300K 9 12 11 No comp.Decision Tree . $0 No comp. Test market $75K 3 Alternative 1 Stop $0 2 n n 4 Decision Probability Terminal Test fail 70% Success 30% Increment.

Suffer the slings and arrows of outrageous fortune A To Be To be or not to Be of time Bear whips and scorns oppressor’s wrong proud man’s contumely pangs of dispriz’d love law’s delay insolence of office spurns that patient merit of the unworthy takes End the heartache and the thousand natural shocks that flesh is heir to: a consummation devoutly to be wished B Not Dream Not To Be Dream 3/20/2012 C Ills we know not of .

Mind Mapping Business Trip 3/20/2012 .

Mind Mapping Preparing Travel Business Trip Recreation Business 3/20/2012 .

Suit from cleaners Mind Mapping Money Photo ID Tickets Hotel Out of office message on phone & computer Travel kit Preparing Travel Clothes Business items Business Trip Rental Car Food School items Recreation Business Golf presentation 3/20/2012 Sales samples Business cards Casino Pool .

Suit from cleaners New razor Mind Mapping Money Photo ID Tickets Hotel Out of office message on phone & computer Travel kit Tums Preparing Travel Clothes Swimsuit Golf shoes Phone card Business items Laptop Cell phone Business Trip Rental Car Food School items Syllabus & notes Recreation Business Golf Business cards Seafood presentation 3/20/2012 Sales samples Casino Pool reservations .

Analytic Hierarchy Process Joseph Lewis Aguirre 3/20/2012 .

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Eigen Vector Summary 3/20/2012 .

Accountability. Transparency Driving Forces Varo Mezger Hill Keystone Harkins Consultants ARC/Landscaping Committees 3/20/2012 Restraining Forces Yocham Zipperman .Force Field Analysis COTO DE CAZA FORCE FIELD ANALYS Vision: Public Safety.

Accountability.Force Field Analysis CDC COMMUNITY FORCE FIELD ANALYS Vision: Public Safety. Transparency Driving Forces Varo Mezger Hill Keystone Harkins Consultants ARC/Landscaping Committees 3/20/2012 Restraining Forces Yocham Zipperman .

Radar Charts Logical Instrumentalism Planning Political Ecological Cultural Visionary • Allows a visual comparison between several quantitative or qualitative aspects of a situation 3/20/2012 .

Ishikawa Diagram Finance Quality Process Penalties Lost sales Training Communication Components Training Cost of models Deliver No time Prototypes Lack of resources No credibility Management Technical 3/20/2012 .

Criteria Matrix SOLUTIONS A B 1 0 + + + + + 2 + ? 0 0 0 3 + + + + 4 + + + + + + + 5 ? + ? + 0 0 "Must" Criteria C D e "Want" Criteria f g 3/20/2012 .

5 Weighted Score by Project Project 4 Project 3 Project 2 Project 1 3/20/2012 0 20 40 60 80 100 .Weighted Matrix Criteria Weight Project 1 Project 2 Project 3 Project 4 Supports key business objectives 25% 90 90 50 20 Has strong internal sponsor 15% 70 90 50 20 Has strong customer support 15% 50 90 50 20 Realistic level of technology 10% 25 90 50 70 Can be implemented in one year or less 5% 20 20 50 90 Provides positive NPV 20% 50 70 50 50 Has low risk in meeting scope. time.5 50 41. and cost goals 20 10% 50 50 90 Weighted Project Scores 100% 56 78.

•Aid to stimulate debate.Affinity Charts •Cluster qualitative data and come up with a consensus view on a subject. 3/20/2012 .

Yield Management Model Full fare passenger arrives = Full fare Do not sell at discount No full fare passenger = zero revenue Decision Sell discount Price of discount ticket 3/20/2012 .

Influence Diagram & Decision Tree Decisions Uncertainties Final Outcome Outcome 1 Decision Outcome 2 Outcome n 3/20/2012 .

Test market $75K 3 Alternative 1 Stop $0 2 n n 4 Decision Probability Terminal Test fail 70% Success 30% Increment.Decision Tree 1. 60% 6 7 5 Comp 40% 10 8 Expand 3/20/2012 No expansion. 60% Comp 40% . $0 No comp. $100K Large $300K 9 12 11 No comp.

To develop or Not Nodes New product Uncertainty circle Decision Consolidate Keep adding outcomes and probabilities for the decision 3/20/2012 .

base = 21.2 million $400.50 = 7.00 (1) Volume x price – capital x .5 million The only guaranteed expected value is the sell price of $400.000.00.000.25 high price $7.25 Low Volume .65 poor prospect . high = 30.5 million (1) $15 million .000 Low vol = 500.000.000 bbls.25 good prospect Do you spend $800.To Develop or Not Capital .50 base price . high = 2.25 $312.000 you have been offered. .000 low price = 12. base = 1.50 base vol.25 high vol Do Seismic .000 on seismic to clarify how good the prospect is? Sell -1. 3/20/2012 .50 per bbls.500 .25 low price $6 million $8 million $12 million Expected Value Vol x price – capital x .15 inconclusive Dry Hole .

What if What-if analysis Observing how changes to selected variables affect other variables What if we cut advertising by 10%. What happens to sales? Sensitivity Analysis: Observing how repeated changes to a single variable affect other variables Let’s cut advertising by $100 repeatedly so we can see its relationship to sales Goals Seeking Analysis Making repeated changes to selected variables until a chosen variable reaches a target value Let’s try to increase stock videos until we reach $3000 in revenue Optimization Analysis Finding an optimal value for selected variables given certain constraints 3/20/2012 .

Group Decision Support Strategies Brainstorming  Nominal group technique  Delphi technique  Computer assisted decision making   GDSS = Group Decision Support System  CSCW = Computer Supported Collaborative Work 3/20/2012 .

Brainstorming  Group process for gathering ideas pertaining a solution to a problem Developed by Alex F Osborne to increase individual’s synthesis capabilities Panel format Leader: maintains a rapid flow of ideas  Recorder: lists the ideas as they are presented  Variable number of panel members (optimum 12)    3/20/2012  30 min sessions ideally .

random inputs Step 4: Review and evaluation 3/20/2012  A list of ideas is sent to the panel members for further study . no negative ideas or criticism All ideas are listed To stimulate the flow of ideas the leader may    Step 2: Introduction  Step 3: Ideation     Ask stimulating questions Introduce related areas of discussion Use key words.Brainstorming Step 1: Preliminary notice  Objectives to the participants at least a day before the session  time for individual idea generation The leader reviews the objectives and the rules of the session The leader calls for spontaneous ideas Brief responses.

Credit for another person’s ideas may impede participation Works best when participants come from a wide range of disciplines 3/20/2012 . no special expertise or knowledge required from the facilitator .Brainstorming + Large number of ideas in a short time period + Simple.

NGT  Organised group meetings for problem identification. problem solving. program planning Used to eliminate the problems encountered in small group meetings    Balances interests Increases participation   3/20/2012 2-3 hours sessions 6-12 members  Larger groups divided in subgroups .

NGT Step 1: Silent generation of ideas    The leader presents questions to the group Individual responses in written format (5 min) Group work not allowed Step 2: Recorded round-robin listing of ideas   Each member presents an idea in turn All ideas are listed on a flip chart Step 3: Brief discussion of ideas on the chart  3/20/2012  Clarifies the ideas  common understanding of the problem Max 40 min .

NGT Step 4: Preliminary vote on priorities   Each member ranks 5 to 7 most important ideas from the flip chart and records them on separate cards The leader counts the votes on the cards and writes them on the chart Step 5: Break Step 6: Discussion of the vote  Examination of inconsistent voting patterns Step 7: Final vote  More sophisticated voting procedures may be used here 3/20/2012 Step 8: Listing and agreement on the prioritised items .

NGT  Best for small group meetings Fact finding  Idea generation  Search of problem or solution   Not suitable for Routine business  Bargaining  Problems with predetermined outcomes  Settings where consensus is required  3/20/2012 .

forecasts on a given problem Utilises written responses instead of brining people together Developed by RAND Corporation in the late 1950s First use in military applications Later several applications in a number of areas    Setting environmental standards Technology foresight Project prioritisation 3/20/2012  A Delphi forecast by Gordon and Helmer .Delphi Technique       Group process to generate consensus when decisive factors may be subjective Used to produce numerical estimates.

Delphi Characteristics:    Panel of experts Facilitator who leads the process Anonymous participation  Easier to express and change opinion Interaction with questionnaires Same arguments are not repeated All opinions and reasoning are presented by the panel  Iterative processing of the responses in several rounds     Statistical interpretation of the forecasts 3/20/2012 .

Delphi First round   Panel members are asked to list trends and issues that are likely to be important in the future Facilitator organises the responses Similar opinions are combined  Minor. marginal issues are eliminated  Arguments are elaborated   3/20/2012  Questionnaire for the second round .

medium) 3/20/2012 .Delphi Second round    Summary of the predictions is sent to the panel members Members are asked the state the realisation times Facilitator makes a statistical summary of the responses (median. quartiles.

Delphi Third round     Results from the second round are sent to the panel members Members are asked for new forecasts  They may change their opinions Reasoning required for the forecasts in upper or lower quartiles A statistical summary of the responses (facilitator) 3/20/2012 .

Delphi Fourth round   Results from the third round are sent to the panel members Panel members are asked for new forecasts  A reasoning is required if the opinion differs from the general view  Facilitator summarises the results 3/20/2012 Forecast = median from the fourth round Uncertainty = difference between the upper and lower quartile .

Delphi  Most applicable when an expert panel and judgemental data is required  Causal models not possible  The problem is complex. multidisciplinary  Uncertainties due to fast development. or large time scale  Opinions required from a large group  Anonymity is required 3/20/2012 . large.

Laborious. time-consuming .Lack of commitment  Partly due the anonymity Discounting the future (current happenings seen as more important) Illusory expertise (expert may be poor forecasters) Vague questions and ambiguous responses Simplification urge Desired events are seen as more likely Experts too homogeneous  skewed data . expensive.Delphi + Maintain attention directly on the issue + Allow diverse background and remote locations + Produce precise documents .Systematic errors       3/20/2012 .

value and probability elicitation Facilitate changes to models relatively easily Easy to conduct sensitivity analysis Analysis of complex value and probability structures Allow distributed locations . Excel.Groupware  A large number software packages available for    Decision analysis Group decision making Voting    Web based applications Interfaces to standard software. Access Advantages     3/20/2012  Graphical support for problem structuring.

Multivoting   In democracy most decisions are made in groups or by the community Voting is a possible way to make the decisions Allows large number of decision makers  All DMs are not necessarily satisfied with the result   The size of the group doesn’t guarantee the quality of the decision  3/20/2012 Suppose 800 randomly selected persons deciding on the materials used in a spacecraft .

DMk  Each DM has preferences for the alternatives  Which alternative the group should choose?  3/20/2012 .Multivoting as a social issue N alternatives x1. DM2. x2. …. …. xn  K decision makers DM1.

Plurality Voting    Each voter has one vote The alternative that receives the most votes is the winner Run-off technique The winner must get over 50% of the votes  If the condition is not met eliminate the alternatives with the lowest number of votes and repeat the voting  Continue until the condition is met  3/20/2012 .

B. 4 states that A > B > C 3 states that B > C > A 2 states that C > B > A Plurality voting 4 votes for A 3 votes for B 2 votes for C A is the winner B is the winner Run-off 4 votes for A 3+2 = 5 votes for B 3/20/2012 . and 9 voters.Plurality Voting Suppose. C. there are three alternatives A.

1 -  A is better than B by 18:15  A is the Condorcet winner  Similarly. The alternative which is the best in most comparisons is the winner. C. There may be no solution.18 1.32 32. thus it cannot be winner  eliminate 15. 33 voters and the following voting result A B C A B 18.15 C 18. C is the Condorcet loser 3/20/2012 . B.18 15.15  C got least votes (15+1=16). Consider alternatives A.Condorcet    Each pair of alternatives is compared.

n-2 points to the second most preferred. An example: 3 alternatives. …. 9 voters 4 states that A > B > C 3 states that B > C > A 2 states that C > B > A B is the winner A : 4·2 + 3·0 + 2·0 = 8 votes B : 4·1 + 3·2 + 2·1 = 12 votes C : 4·0 + 3·1 + 2·2 = 7 votes 3/20/2012 . The alternative with the highest total number of points is the winner. and 0 points to the least preferred alternative.Borda    Each DM gives n-1 points to the most preferred alternative.

9 voters DM1 DM2 DM3 DM4 DM5 DM6 DM7 DM8 DM9 total A B X X X X X X X X X X X 4 7 the winner! C 3/20/2012 - - - - - - X - X 2 .Approval Voting    Each voter cast one vote for each alternative she / he approves of The alternative with the highest number of votes is the winner An example: 3 alternatives.

Codorcet Paradox Consider the following comparison of the three alternatives DM1 1 2 3 DM2 3 1 2 DM3 2 3 1 A B C Every alternative has a supporter! Paired  A is  B is  C is 3/20/2012 comparisons: preferred to B (2-1) preferred to C (2-1) preferred to A (2-1) .

Condorcet Paradox Three voting orders: A DM1 DM2 DM3 1) (A-B)  A wins. (A-C)  C is the winner B 2 C 3 2) (B-C)  B wins. 3/20/2012 . (B-A)  A is the winner 3) (A-C)  C wins. (C-B)  B is the winner 1 3 1 2 2 3 1 The voting result depends on the voting order! There is no socially best alternative*. * Irrespective of the choice the majority of voters would prefer another alternative.

B-C. AC) Her favourite A cannot win* If she votes for B instead of A in the first round     B is the winner She avoids the least preferred alternative C 3/20/2012 * If DM2 and DM3 vote according to their preferences .Strategic Voting  DM1 knows the preferences of the other voters and the voting order (A-B.

Coalitions  If the voting procedure is known voters may form coalitions that serve their purposes  Eliminate an undesired alternative  Support a commonly agreed alternative 3/20/2012 .

….Rk)?  Voting procedures are potential choices for social choice functions.Weak Preference Order The opinion of the DMi about two alternatives is called a weak preference order Ri: The DMi thinks that x is at least as good as y  x Ri y  How the collective preference R should be determined when there are k decision makers? What is the social choice function f that gives R=f(R1. 3/20/2012  .

e. all DMs have an opinion) If x Ri y  y Ri z  x Ri z The group has a well defined preference relation.Social Choice Function Requirements 1) Non trivial There are at least two DMs and three alternatives 2) Complete and transitive Ri:s If x  y  x Ri y  y Ri x (i. regardless of what the individual preferences are 3) f is defined for all Ri:s 3/20/2012 .

Social Choice Function Requirements 4) Independence of irrelevant alternatives The group’s choice doesn’t change if we add an alternative that is   Considered inferior to all other alternatives by all DMs. the group should choose the alternative x 3/20/2012 6) Non dictatorship There is no DMi such that x Ri y  x R y . or Is a copy of an existing alternative 5) Pareto principle If all group members prefer x to y.

Arrow’s theorem There is no complete and transitive f satisfying the conditions 1-6 3/20/2012 .

A ballot between the alternatives 1 and 2 gives DM1 x1 x2 1 0 DM2 1 0 DM3 0 1 DM4 1 0 DM5 0 1 total 3 2 Alternative x1 is the winner! The fourth criterion is not satisfied! 3/20/2012 .Arrow’s Theorem Borda criterion: DM1 x1 x2 x3 x4 3 2 1 0 DM2 3 2 1 0 DM3 1 3 2 0 DM4 2 1 0 3 DM5 1 3 0 2 total 10 11 4 5 Alternative x2 is the winner! Suppose that DMs’ preferences do not change.

Value Aggregation
Theorem (Harsanyi 1955, Keeney 1975): Let vi(·) be a measurable value function describing the preferences of DMi. There exists a k-dimensional differentiable function vg() with positive partial derivatives describing group preferences >g in the definition space such that

a >gb  vg[v1(a),…,vk(a)]  vg[v1(b),…,vk(b)]
and conditions 1-6 are satisfied.
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Value Aggregation

In addition to the weak preference order also a scale describing the strength of the preferences is> required DM1: beer > wine tea DM1: tea > wine > beer
Value
1 1

Value

beer

wine

tea

beer

wine

tea

Value function describes also the strength of 3/20/2012 the preferences

Value Aggregationdownside
  

There is a function describing group preferences but it may be difficult to define in practice Comparing the values of different DMs is not straightforward Solution:

Each DM defines her/his own value function Group preferences are calculated as a weighted sum of the individual preferences
Should the chairman get a higher weight Group members can weight each others’ expertise Defining the weight is likely to be politically difficult

Unequal or equal weights?
  

How to ensure that the DMs do not cheat? 3/20/2012 See value aggregation with value trees 

3/20/2012 . Effectiveness of problem solving techniques. · · Examine various forces affecting problem framing. · Resources in terms of their usefulness for problem solving in various organizational scenarios.Problem Identification Process · · The problem identification process Types of thinking used in problem recognition processes.

how Prescriptive Issues: What should be Conclusion 3/20/2012 . when.Problem Identification Gap Analysis Issue Descriptive Issues: What. where.

Problem Identification Inference This because of That This  Conclusion That  Support of conclusion 3/20/2012 .

We believe that age is an inappropriate and unreasonable basis for determining whether an individual can do a job 3/20/2012 .Problem Identification Inference We oppose a mandatory retirement age.

Finding Nemo 1: What is the issue? 2. Indicators 3. Look in likely locations 4. A Conclusion is not 3/20/2012 .

Reasons Reasons are beliefs. analogies. metaphors. evidence. They are what is offered as a basis for why we should accept the conclusion. Evidence 3/20/2012 . Reasons are explanations or rationales for why we should believe a particular conclusion. and other statements offered to support or justify conclusions.

Argument Reasons + Conclusion = Argument 3/20/2012 .

Questioning Process why question 3/20/2012 .

exit interviews with 400 patients revealed high amounts of dismay and anger when the patients were informed about the size of their total hospital bill.000 patients found that hospitals overcharge their patients by an average of 15 percent. In short.Questioning Process Is the cost of hospital care outrageous? A recent survey by the American Association of Retired Persons offers reliable evidence on this issue. the costs of hospital care are higher than the services provided warrant. 3/20/2012 . In addition. Independent audits of the bills of 2.

Questioning Process Euthanasia is detrimental to the welfare of society because it destroys man's ideas of sacrifice. and courage in bearing pain. Some dying persons accept their suffering as a way of paying for their sins. These people should be permitted to die as they wish—without help from any other person in speeding up the dying process. loyalty. 3/20/2012 .

Equity Premium Dilemma Risky assets (stocks) outperform safe assets (fixed returns) Why do people invest so much in safer stocks? - Loss aversion Myopia Bernatzi/Thaler 3/20/2012 .

Wheel of Logic 2. Prediction 4. Conclusion 1. Observation 3. Verification 3/20/2012 Scientific Method .

6. Self-Censorship: Gloss over the bad. Direct Pressure on Dissenters: 8. speak no evil". Self-Appointed Mind Guards: Mindguards protect a leader from assault by troublesome ideas 3/20/2012 Source: Irvin Janus . Illusion of Unanimity: 7. Illusion of Invulnerability: 2. 5. What other people think of the group. Belief in Inherent Morality of the Group: 3.Groupthink Symptoms         1. see no evil. 4. "Hear no evil.

Groupthink Examples        Pearl harbor Kennedy’s Bay of Pigs fiasco Johnson’s escalation of the Vietnam war Nixon’s Watergate break in Reagan’s Iran Contra scandal cover ups Clinton’s approval on the Waco Texas raid. 3/20/2012 .

Misc terms 3/20/2012 .

Decision Making Strategy Satisficing Sensible decision procedures given the constraints 3/20/2012 .

3/20/2012 .Bounded Rationality Because of computational limits and cost of deliberation. rules of thumb. we use decision heuristics.