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Decision Making

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Effective Decision Making The Eight Elements of Effective Decisions Problem Objectives Alternatives Consequences Tradeoffs Uncertainty Risk Tolerance Linked Decisions ... – PowerPoint PPT presentation

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Title: Decision Making


1
Decision Making
  • Decisive How To Make Better Choices in Life and
    Work
  • Chip Heath and Dan Heath, Crown Business, 2013

2
The Four Villains ofDecision Making
  • Narrow framing
  • The tendency to define our choices too narrowly,
    to see them in binary terms.
  • Confirmation bias
  • To develop a quick belief about a situation and
    then seek out information that bolsters our
    belief.

3
  • Short-term emotion
  • We are governed in decision making by how we feel
    about a situation and not necessarily about the
    long-term effects of a decision.
  • Overconfidence
  • People think they know more than they do about
    how the future will unfold.
  • Punditry is the perfect example.

4
Making Good Decisions
  • Widen your options (overcome narrow framing)
  • How can you expand your set of choices?
  • Rather than either/or binary options, uncover
    new options and think this and that.
  • Reality-test your assumptions (overcome
    confirmation bias)
  • How can you get outside your head and collect
    information that you can trust?

5
  • Attain distance before deciding (overcome
    short-term emotion)
  • Wait a couple of dayssleep on it. Use Ben
    Franklins method of making a long pros-and- cons
    list over several days, and then analyzing it
    objectively.
  • Prepare to be wrong (overcome overconfidence)
  • Plan for an uncertain future have a Plan B and
    Plan C.

6
W.R.A.P.
  • Widen your options.
  • Reality-test your assumptions.
  • Attain distance before deciding.
  • Prepare to be wrong.

7
Effective Decision Making
  • 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.

8
The Eight Elements of Effective Decisions
  • Problem
  • Objectives
  • Alternatives
  • Consequences
  • Tradeoffs
  • Uncertainty
  • Risk Tolerance
  • Linked Decisions

9
  • Problem
  • Be creative about your problem definition
  • Turn problems into opportunities
  • Reexamine your problem definition as you go
  • Maintain your perspective

10
  • Objectives
  • Let 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

11
  • Alternatives
  • Dont box yourself in with limited alternatives
  • Use your objectives and ask how?
  • Set high aspirations
  • Ask others for suggestions
  • Give your subconscious time to operate
  • Incubate
  • Never stop looking for alternatives
  • Think outside the box, brainstorm

12
  • Consequences
  • Compare alternatives using a consequences matrix
  • Use experts to help define consequences

13
  • Tradeoffs
  • Use swaps
  • Determining the relative value of different
    consequences is the hard part

14
  • Uncertainty
  • Use 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

15
  • Uncertainty
  • Use a Decision Tree
  • Alternatives - Uncertainty - Consequences

16
Decision Tree
B Go
A Go
B No Go
A
B Go
A No Go
B No Go
17
  • Risk Tolerance
  • Understand and calibrate your groups tolerance
    to take risks
  • Incorporate your risk tolerance into all of your
    decisions

18
  • Linked Decisions
  • Linked decisions are complex
  • Ask How will this decision affect other people,
    other departments, other divisions, partners,
    your industry?

19
Decision Making Summary
  • Problem
  • Objectives
  • Alternatives
  • Consequences
  • Tradeoffs
  • Uncertainty
  • Risk Tolerance
  • Linked Decisions

20
Seven Basic Rules
  • Make bold decisions that challenge the status quo
  • Avoid choices that justify past bad decisions
  • Check for faulty cause-and-effect reasoning
  • Test your decisions with experiments (shoot
    bullets, not cannonballs)
  • Root out unconscious prejudices
  • Foster and address constructive criticism
  • Defeat indecisiveness with clear accountability
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