Introduction of Different “Easy to Handle“ Decision Making Techniques E-Book

Matthias Ackermann

• Herausgeber: GRIN Verlag
• Sprache: Englisch

Veröffentlichungsjahr: 2015

Beschreibung

Research Paper (undergraduate) from the year 2015 in the subject Business economics - Miscellaneous, FOM Hochschule für Oekonomie und Management gemeinnützige GmbH, Hochschulstudienzentrum Freiburg, course: Management Decision Making, language: English, abstract: The most important job of any executive is making decisions. It is also the toughest and riskiest job, because bad decisions can damage a business and a career, in some situations irreparably. In many cases these bad decisions occur when alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighed, or the decision maker himself was sabotaged by the human brain. In the present complex environment, the executives call for a way to cope with the myriad factors that affect the achievement of goals and the consistency of the judgement the decision makers use to draw valid conclusions. (Harvard Business Review 2011, p. 1, Saaty 2013, p. 6) Many difficulties like uncertainty about the future, variation of consequences of different actions, difficulties because of too few or too many available alternatives, and complexity of a decision situation, if more factors have to be taken into account, make it more important to support the decision makers with procedures and tools that have been developed for a systematic selection of requirements and processing of relevant information. The general approach of decision making ranges from the highly complex problems to the relatively simple choices but ensures its applicability and can be helpful in various decisions. So it is not only relevant to executives and managers but also to physicians, politicians, judges, and engineers to structure analytical thinking which supports decision making perceived as rational and well-founded. (Eisenfuhr et al. 2010, p. 3) This assignment introduces different “easy to handle” decision making techniques that help to decide rather on intuition than on structured analysis and methodical dissection.

Leseprobe

Impressum:

Copyright (c) 2015 GRIN Verlag / Open Publishing GmbH, alle Inhalte urheberrechtlich geschützt. Kopieren und verbreiten nur mit Genehmigung des Verlags.

Bei GRIN macht sich Ihr Wissen bezahlt! Wir veröffentlichen kostenlos Ihre Haus-, Bachelor- und Masterarbeiten.

Jetzt bei www.grin.com

Table of Contents

List of Abbreviations

List of Figures

List of Tables

1 Introduction

1.1 Problem and Objectives

1.2 Procedure of Seminar Paper

2 Defining the Terms

2.1 Decision Making Techniques

2.2 “easy to handle”

3 Introducing different “easy to handle” Decision Making Techniques

3.1 Decision Matrix

3.2 Decision Tree

3.3 Cost-Benefit Analysis

3.4 Observe-Orient-Decide-Act Loop

3.5 Kepner-Tregoe Analysis

3.6 Vroom-Yetton-Jago Decision Model

3.7 Recognition-Primed Decision Model

3.8 Analytic Hierarchy Process

3.9 Pros and Cons Analysis (of the introduced Techniques)

4 Conclusion and Outlook

Appendices

Bibliography

List of Abbreviations

List of Figures

Figure 1: Decision Tree for the Product Development Problem (Eisenfuhr et al. 2010, p. 46)

Figure 2: Boyd´s Observe-Orient-Decide-Act Loop (Richards 2005)

Figure 3: The Vroom-Yetton-Jago Decision Model (Mindtools 2014c)

Figure 4: Integrated Recognition-Primed Decision Model (Klein 1944, p. 27)

Figure 5: Comparison Matrices and Priorities of Alternatives and Criteria (Sander 2014)

Figure 6: Choosing a Leader using the AHP (Sander 2014)

Figure 7: The Decision Making Process

Figure 8: Calculation for the Alternatives with Respect to the Goals (Sander 2014)

Figure 9: Overall Priorities for the Alternatives (Sander 2014)

List of Tables

Table 1: Example Decision Matrix: How Suppliers satisfy each Factor (Mindtools, 2014a)

Table 2: Example of CBA Calculation, Alternative 1 (referring to Baker et al. 2001, p. 25)

Table 3: Ranking of Objectives (Decision Making 2013a)

Table 4: Assigning a relative Score for Alternative 1 (Decision Making 2013a)

Table 5: Adversity Rating for Alternative 1 (Decision Making 2013a)

Table 6: Pros and Cons Analysis of the introduced Techniques (own Exposition)

Table 7: Vroom-Jago Leadership Styles (Mindtools 2014c)

1 Introduction

1.1 Problem and Objectives

The most important job of any executive is making decisions. It is also the toughest and riskiest job, because bad decisions can damage a business and a career, in some situations irreparably. In many cases these bad decisions occur when alternatives were not clearly defined, the right information was not collected, the costs and benefits were not accurately weighed, or the decision maker himself was sabotaged by the human brain. In the present complex environment, the executives call for a way to cope with the myriad factors that affect the achievement of goals and the consistency of the judgement the decision makers use to draw valid conclusions. (Harvard Business Review 2011, p. 1, Saaty 2013, p. 6) Many difficulties like uncertainty about the future, variation of consequences of different actions, difficulties because of too few or too many available alternatives, and complexity of a decision situation, if more factors have to be taken into account, make it more important to support the decision makers with procedures and tools that have been developed for a systematic selection of requirements and processing of relevant information. The general approach of decision making ranges from the highly complex problems to the relatively simple choices but ensures its applicability and can be helpful in various decisions. So it is not only relevant to executives and managers but also to physicians, politicians, judges, and engineers to structure analytical thinking which supports decision making perceived as rational and well-founded. (Eisenfuhr et al. 2010, p. 3)

This assignment introduces different “easy to handle” decision making techniques that help to decide rather on intuition than on structured analysis and methodical dissection.

1.2 Procedure of Seminar Paper

In this assignment the most relevant terms are defined in Chapter 2. The main chapter 3 introduces different “easy to handle” decision making techniques. Chapter 4 concludes the assignment and gives an outlook.

2 Defining the Terms

2.1 Decision Making Techniques

Decision making can be defined as the thought process of selecting a logical choice from the available options. When trying to make a good decision, a person must weight the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for that particular situation. (Business 2014a) Decision making techniques are systematic procedures, formulas, or routines by which tasks are accomplished. The techniques support persons to make decisions. (Business 2014b)

2.2 “easy to handle”

A possibility to describe “easy to handle” is usability, effectiveness, and efficiency of the techniques that are used. The “easy to handle” procedures, formulas, or routines should improve the decision making but not being difficult and complex to deal with. Often they are mapped on a tool to simplify the handling. (Investorwords 2014)

3 Introducing different “easy to handle” Decision Making Techniques

One of the executives´ tasks is to make decisions. They do not make great many decisions but they concentrate on important ones. Executives try to think through what is strategic and generic in opposite to solving problems. A systematic process with clearly defined elements and in a distinct sequence of steps is given to them by the decision making process. (Drucker 2002, p. 118) The process is shortly described and illustrated in general in the appendix (Appendix 1: Figure 7).

This chapter introduces different “easy to handle” decision making techniques that are applicable to a wide range of decisions, from those which are as simple as deciding what to drink in a restaurant to ones that are complicated by interdepartmental company interfaces. They provide organized ways to answer questions about the problem in a step-by-step approach including clarifying the purpose, evaluating alternatives (quantitative, qualitative), assessing risks and benefits, and making decisions. Usually these steps involve a systematic method for handling and communicating information. (Baker et al. 2001, p. 6)

The formal decision making techniques should be used when decisions:

 “Require many reviews at different management levels

 Involve more than one program

 Require congressional line item approval

 Affect new or redirected funding

 Require approval for new facilities or upgrades to existing facilities

 Have alternatives with high technical risk

 Have alternatives that appear equally viable

 Require a decision to revise or discontinue work on a program

 Have impact mainly in the future

 Involve multiple or competing drivers, or

 Define data needed to support future decisions.” (Baker et al. 2001, p. 1)

The selection of a decision making technique is not always an easy task and depends on the concrete problem. (Fülöp 2005, p. 2) The following chapter introduces some of these methods to make systematic and effective decisions.

3.1 Decision Matrix

The decision matrix analysis as well as the decision tree (chapter 3.2) are two types of graphical representation. They both display full information about the alternatives, uncertain events and consequences. The decision matrix analysis illustrates the data in a way that allows finding easily a numerical solution. (Eisenfuhr et al. 2010, p. 39)

The decision matrix is easy to handle, for example in Microsoft excel. If each row of a matrix represents an alternative and each column a factor that is to consider, then, each cell may be used to display a respective result. Table 1 exemplifies the decision matrix by having four suppliers as alternatives and different factors. At the end supplier 4 is the best alternative, despite the lack of flexibility of its payment options. (Eisenfuhr et al. 2010, p. 44, Mindtools, 2014a)

Table 1: Example Decision Matrix: How Suppliers satisfy each Factor (Mindtools, 2014a)

3.2 Decision Tree

The decision tree is often better than the decision matrix to visualize multi-stage alternatives. It contains the following elements:

 “decisions, represented by squares,

 uncertainties, represented by circles or ovals,

 consequences, represented by triangles.” (Eisenfuhr et al. 2010, p. 46)

To decide the development of a new product the decision tree is shown in Figure 1. Different uncertainties are provided with probabilities. Additionally the company has to decide whether to produce large or small capacities regarding also different demands. Every path across the tree from left to right ends in a consequence (1 to 6). (Eisenfuhr et al 2010, p. 45-46)