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Effective 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: Effective Decision Making


1
Effective Decision Making
2
The Eight Elements of Effective Decisions
  • Problem
  • Objectives
  • Alternatives
  • Consequences
  • Tradeoffs
  • Uncertainty
  • Risk Tolerance
  • Linked Decisions

3
Effective Decision Making
  • Problem
  • Be creative about your problem definition.
  • Turn problems into opportunities.
  • Reexamine your problem definition as you go.
  • Maintain your perspective.

4
Effective Decision Making
  • 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.

5
Effective Decision Making
  • Alternatives
  • Dont box yourself in with limited alternatives
  • Use your objectives and ask how?
  • Set high aspirations
  • Never stop looking for alternatives
  • Think outside the box
  • Brainstorm (See Rules for Brainstorming)
  • Give your subconscious time to operate
  • Incubate

6
Effective Decision Making
  • Consequences
  • Compare alternatives using a payoff matrix.
  • See Game Theory presentation at
    http//www.charleswarner.us/indexpresentations.htm
    l/
  • Use experts to help define consequences.

7
Payoff Matrix
KBBB
Go
No Go
Go
4, 2
3, 4
KAAA, KBBB
KAAA
2, 1
1, 3
No go
Assigning weights is the most difficult decision.
8
Effective Decision Making
  • Tradeoffs
  • Use swaps.
  • Determining the relative value of different
    consequences is the hard part.

9
Effective Decision Making
  • 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.

10
Effective Decision Making
  • Uncertainty
  • Use a Decision Tree.
  • Alternatives - Uncertainty - Consequences

11
Decision Tree
KBBB Go
KAAA Go
KBBB No Go
KAAA
KAAA No Go
KBBB Go
KBBB No Go
12
Effective Decision Making
  • Risk Tolerance
  • Understand and calibrate your groups tolerance
    to take risks.
  • Incorporate your risk tolerance into all of your
    decisions.

13
Effective Decision Making
  • Linked Decisions
  • Linked decisions are complex.
  • Ask How will this decision affect other people,
    other departments, other brands, other company
    divisions, partners, the industry?
  • 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.

14
Effective Decision Making Summary
  • Problem
  • Objectives
  • Alternatives
  • Consequences
  • Tradeoffs
  • Uncertainty
  • Risk Tolerance
  • Linked Decisions
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