Mini-course 1 Decision Analysis (Dr. Mariya Sodenkamp) / Class 2 / Paderborn_ITB_L2_ 2015_04_17 Students

E ectve solu3on

Effective solution is “... a course of action that maximizes positive consequences and minimizes negative consequences, longterm as well as short term”

Nezu, A., D’Zurilla, T.J. (1979). An experimental evaluation of the decision-making process in social problem solving. Cognitive Therapy and Research 3 (3): 269-277; p.271

Mul@-criteria Decision Making typology

A dis@nc@on between Mul@-criteria Decision Making (MCDM) problems and fundamentally di erent solu@on approaches is based on whether the alterna@ves are explicitly or implicitly defined:

1)Mul2ple-criteria evalua2on problems: These problems consist of a finite number of alterna@ves, explicitly known in the beginning of the solu@on process. Each alterna@ve is represented by its performance on mul@ple criteria.

2)Mul2ple-criteria design problems (mul2ple-objec2ve mathema2cal programming): In these problems, the alterna@ves are not explicitly known. An alterna@ve (solu@on) can be found by solving a mathema@cal programming model. The number of alterna@ves is either infinite and not countable (when some variables are con@nuous) or typically very large if countable (when all variables are discrete).

14

(Advanced) IT in Business | © Sodenkamp

Decision making di cul3es

Difficulties in complex environment result from several facts:

(1)  decisions have to take into consideration multiple objectives and opinions of different interest groups

(2)the objectives are usually conflicting

(3)solution evaluation criteria can be quantitative and qualitative

(4)disagreement between different experts and actors

(5)decisions have to rely upon the history, measure of strategic values, as well as on operational characteristics of solutions

(6)potential solutions need to be balanced and analyzed in terms of objectives importance

(7)some solutions may be interdependent

(8)the number of feasible solutions is often enormous, and

(9)uncertainties and unknowns can affect decision outcome.

Decision process

10 steps:

1.  Form a decision group

2.Identify and define the problem

3.Determine requirements

4.Establish objectives

5.Identify feasible alternative solutions

6.Define decision criteria

7.Select decision making tool

8.Evaluate alternatives against decision criteria

9.Evaluate solutions against problem statement

10.Feedback

Decision process

Step1. Form decision group

v  A set of decision makers should be formed to participate in the decision process. Decision group is a team brought together to achieve a shared goal.

vDepending  on the problem, teams can consist of personnel from a variety of functional areas and may include representatives from outside the organization.

Decision process

Step2. Identify and define the problem

"  This step is crucial. It is essential for each decision maker to clearly understand the situation and identify the problem so that all energy will be focused in the same direction.

"  It is essential to develop an objective statement which clearly describes the current condition your group wishes to change.

"  Make sure the problem is limited in scope so that it is small enough to

realistically tackle and solve.

"   Writing the statement will ensure that everyone can understand exactly what the problem is.It is important to avoid including any "implied cause" or "implied solution" in the problem statement. The goal is to express the issue in a clear, one-sentence problem statement that describes both the initial conditions and the desired conditions. The problem statement must be agreed by all decision makers and stakeholders. A problem well stated is a problem half solved!

Write down:

Concise statement of problem definition and its short summary

=== >>> Where you desire to be after the problem has been resolved

Decision process

Step2. Identify and define the problem (cont‘d)

Questions that should be asked when defining the problem:

•Is the problem stated objectively using only the facts?

•Is the scope of the problem limited enough for the group to handle?

•Will all who read it understand the same meaning of the problem?

•Does the statement include "implied causes" or "implied solutions”?

•Has the "desired state" been described in measurable terms?

•Do you have a target date identified?

Decision process

Step3. Determine requirements

•Requirements are conditions that any acceptable solution to the problem must meet.

•Requirements spell out what the solution to the problem must do…

•In mathematical form, these requirements are the constraints describing the set of the feasible solutions of the decision problem.

•For any possible solution it has to be decided unambiguously whether it meets the requirements or not.