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

Decision process

Step 4. Establish objectives

"  Objectives are broad statements of intent and desirable values. They go beyond the minimum essential must have’s (i.e. requirements) to wants and desires…

"  In mathematical form, the objectives are contrary to the requirements that are constraints.

"  The objectives may be conflicting but this is a natural concomitant of practical decision situations.

"  Objectives must be clear, consistent, realistic and time-dependent !

solutions

option) is usually designated a

it is necessary to have

Any alternative must meet the requirements

Alternatives can be mutually exclusive, or implemented conjointly. Using a variety of creative techniques, group participants create an extensive list of possible solutions. Asking each group member for input ensures that all viewpoints will be considered.

How to identify alternatives?

Brainstorming: It implies formation of a group of experts from the related fields. Group members express different ideas for solving the problem at hand. Critics of the proposed alternatives is not allowed. All options are recorded so the whole group can see them. The focus is on developing imaginative and creative solutions.

Synectics: Generation of ideas using associative thinking. Among the problems with already known solution should be found similarities to the considering problem.

(for more information see

Morphological analysis: Considers all possible combinations of initial variables and their critical relations for the prospection of scenarios. These combinations give different alternatives.

(see example on

ideas-and-morphological-analysis/l1-morphological-analysis/)

Decision process

Step6. Define decision criteria

"   A decision may not be appropriately made without fully considering its context. A criterion can be any type of information that enables evaluation and comparison of alternatives according to a well-defined objective or point of view.

"   Criteria should be (Baker et.al’s(http://emi-web.inel.gov/Nissmg/Guidebook_2002.pdf):

•Able to discriminate among the alternatives and to support the comparison of the performance of the alternatives

•Complete to include all objectives. The criteria in a given problem must encompass all the relevant areas of concern to represent the decision factors as thoroughly as possible

•Operational and meaningful. Criteria must be measurable in the sense that it must be possible to assess, at least in a qualitative sense, how well a particular option is expected to perform in relation to the criterion

•Non-redundant

•Concise (few in number)

Syn. criterion = indicator, attribute, feature, characteristic, factor, objective

How to identify criteria?

1) Value-Focused Thinking (VFT)

Decision criteria reflect organiza@onal mission, values and mo@ves

2) Alterna3ve-Focused Thinking (AFT)

Decision criteria reflect di erences between the alterna@ves

3)Mixed AFT-VFT Approach:

●VFT: for CEOs, top managers and strategy planners

(define organisa@onal values; do not know alterna@ves) ● AFT: for opera@onal managers, e.g. purchasing managers

(know Alterna@ves, but not organiza@onal values)

Decision process

Step7. Select a decision making tool

There are several tools for solving a decision problem. Some of them will be discussed within our course.

Selection of an appropriate tool is not an easy task and depends on the concrete problem.

The simpler the method is, the better it is. But complex decision problems may require complex methods, as well.

Decision process

Step 8. Evaluate alternatives against decision criteria

Depending on the criterion, the assessment may be objective (factual), with respect to some commonly shared and understood scale of measurement (e.g. money) subjective (judgmental), reflecting the subjective assessment of the evaluator.

Types of decision problems

I.Choice  - the result is a subset of potential alternatives, most often single best alternative

Examples: supplier selection, investment project selection, selection of the best political action plan.

II.Ranking  - the result consists in potential alternatives ordered collection

Examples: decision about purchasing order; ranking of periodicals; customers prioritization.

III.Classification  - the result represents the potential alternatives' grouping into some predefined clusters Examples: division of goods into quality groups, classify potential markets to enter.