Cream of the Crop 1/Cream of the Crop 1.iso/BUSINESS/DECISION.ARJ/WHT-PAPR.TXT

Text File | 1991-06-11 | 27KB | 600 lines

THE SEVEN STEP DECISION METHOD AND COMPUTER-BASED EXECUTIVE
DECISION SUPPORT TOOLS

A Management Technique Briefing from Dalton Dialogic, Inc.



There are decisions, and then there are decisions. Some are of
trivial importance.  Some have implications beyond the obvious. On
one thing, however, the experts on decision making all agree: good
decisions stem from good decision making techniques.

The art of decision making is one that is learned and practiced.
Regardless of what we may believe regarding "born" leaders, the
decisions they make are not, usually, seat-of-the- pants guesses
based solely on past experience. In fact, those types of "gut level"
decisions are very often wrong.

The best decision makers, both on the personal and professional
levels, use a decision support system to organize and direct their
decision making process. This support system may be unconscious,
born of years of practice, or it may quite formalized. In either
case, it is structured and it imposes discipline on the decision
making process.

Decision making is integral to problem solving as well. Often, you
can use the decision making process to decide between more than one
potential solution to a problem.  In other words, every problem has
multiple possible solutions. For example, we might need to deal with
a problem of, simply, being hungry. There are many solutions to
dealing with our hunger. Now we must decide which is best. The need
to make a decision often proceeds from a menu of possible solutions
to a dilemma.

Many problems are trivial. Their solutions are, almost, automatic
responses to a question. Should we name our new daughter Jane or
Mahitable? While some may argue that Mahitable is a unique name,
most would, without thinking (given those two choices), select Jane.
However, people in all facets of business and commerce make volumes
of decisions on an almost hourly basis in the course of their
business affairs.


Finally, in today's business world, management experts agree that
most organizations are "flattening", that is, becoming less vertical
and hierarchical in their management structure. That means that ever
more managers, supervisors, administrators, and, just, plain
workers, are being empowered to make decisions about the ways they
do their jobs. In fact, the concept of employee empowerment is one
that is gaining far reaching support throughout business.

These decisions may or may not be trivial. They may or may not have
far reaching impact on the company's future. But regardless of their
weightiness, they take time to consider and they almost always have
some sort of impact on the business or the people involved. So,
there are decisions to be made. And they are important and the
process time consuming.



HOW DO WE MAKE DECISIONS?

Paul Moody in his book Decision Making... Proven Methods for Better
Decisions (McGraw-Hill, Inc. 1983) describes a five step problem
solving loop. This process describes how most people solve problems.
The model is applicable to decision making. Moody tells us that the
first step is to become conscious of the problem. Then, once an
awareness of the problem exists, we attempt to recognize it and
define it.

The third step is to analyze potential alternatives and
consequences. That leads to the fourth step, selecting a solution.
Next you will implement the decision and, finally, provide feedback
as to the success or failure of the solution. A negative outcome
would require  that you start the process over again. Thus, the
description of this process as a problem solving loop.

There are, however, other, similar, processes for arriving at a
decision. Moody describes several in his book, ranging from simple
brainstorming to complex mathematical statistical analysis. In
reality, for the bulk of all business and personal decisions,
people  require a simple, yet elegant, set of decision support
rules.

Decision support is an extremely important piece of phraseology, by
the way. No system, from the simple Ben Franklin approach (write
down all the negatives on one side of a sheet of paper and all of
the positives on the other. The longest list wins) to complex
mathematical analysis can make a decision for you. They can, at
best, help you guide your thinking and provide tools for exploiting
your experience and the experience of others. At the end of the
process, it is still left to you, the decider, to accept or reject
the decision.

People tend to make decisions based upon a finite set of criteria
whose content and relevance are suggested by personal experience.
Although there are a great number of decision types supported
specifically by a detailed analysis of numeric data (such as surveys
or sales curves), the bulk of all day to day decisions are supported
only by the weight of experience or "gut feel".



EVERYBODY HAS A THEORY

There are many theories of decision making. Moody's book defines the
process. However, there are many authors who have provided us with a
variety of decision making techniques. Some of these authors,
recognized experts in the field of quality decision making, have
identified two important areas of the decision making process.

The first area is improving the quality of your decisions. The
second is identifying and breaking down barriers to good decision
making. Unlike theories advanced by self-proclaimed "experts" to
advance a "system", this terrain in the vast tract of the decision
making process includes the basic considerations with which you, as
a decider, must deal.  Simply, for a "system" or "theory" to be of
any practical use, it must accommodate these basic precepts.



1. Making Quality Decisions

Author and educator Irving L. Janis, professor of psychology at Yale
University and his colleague Leon Mann, professor of psychology in
the School of Social Sciences at Flinders University (South
Australia) and former professor at Harvard outline seven major
criteria for high quality decision making in their book Decision
Making - A Psychological Analysis of Conflict, Choice and Commitment
(Free Press - 1979).

According to Janis and Mann, these seven criteria include:

    - Canvassing a wide range of alternatives and choices

    - Surveying the full range of objectives to be fulfilled and
      the values implicated by the choice

    - Carefully weighing costs and risks of negative consequences,
      as well as positive consequences of each alternative

    - Intensively searching for new information relevant to further
      evaluation of the possibilities

    - Taking account of any new information or expert judgement,
      even if it does not support his or her preferred course of action

    - Reexamining both positive and negative consequences of all
      known alternatives before making a final decision

    - Making detailed provisions for implementing the final decision,
      including contingency plans for the materialization of known risks

Considering these qualities of superior decision makers should be
paramount in the design of any decision support system, regardless
of whether it is mental or mechanical. Deciders should, in other
words, frame their decision making processes around these guidelines
for making quality decisions.

Developers of decision support software programs should, likewise,
fully consider and, where practical, support the quality decision
making process.


2. Avoiding Barriers to Good Decisions

J. Edward Russo, professor of Marketing and Behavioral Science at
the Johnson Graduate School of Management, and faculty member at
Cornell University in the Field of Cognitive Studies, and Paul J. H.
Schoemaker, associate professor of decision sciences and policy at
the Graduate School of Business, University of Chicago, approach the
decision making process from the other direction.

In their book, Decision Traps - The Ten Barriers to Brilliant
Decision-Making and How to Overcome Them (Simon and Schuster,
October 1990), the authors help deciders break down barriers that
get in the way of the making of quality decisions. Here are Russo
and Schoemaker's 10 traps:



    =  Plunging in - beginning to gather information and
       reach conclusions without thinking through the issues

    =  Frame blindness - solving the wrong problem because
       have created a mental framework for the decision with little
       thought. This causes you to overlook the best options or lose
       sight of important objectives

    =  Lack of frame control - failing to fully define the
       problem in multiple ways, or being unduly influenced by others

    =  Overconfidence in your own judgement

    =  Shortsighted shortcuts - using rules of thumb when solid
       research is indicated

    =  Shooting from the hip or "winging it"

    =  Group failure - assuming that just because good people
       are involved in the decision making process quality decisions will
       follow automatically without the need to manage the process

    =  Fooling yourself about feedback - failing to interpret
       the evidence of past experience because you are protecting your ego

     = Not keeping track - failure to analyze past results
       because you did not systematically track outcomes of previous
       decisions

    =  Failure to audit your decision making process - failing
       to create an organized approach to collecting the results of decisions

As with the need to frame any decision support system around the
criteria for making quality decisions,decision support systems must
have the means to break down these 10 barriers.


DECISION SUPPORT TOOLS - WHAT DO THEY DO?

Typically, a decider will, consciously or unconsciously, apply the
weight of experience, either personal or otherwise, to defining,
refining and selecting the best option in a decision set. If a
decision support system is to be useful in this venue, then, it must
provide the decider with three things.

First, it must allow for quantizing empirical information. That
means that the experiential factors which will effect the decision's
final outcome must be able to be stated in a manner that yields a
finite  response. Often, this response is binary - that is, allowing
just one of two and only two outcomes. That response could be a yes
or a no  (as in a go-no go situation). Or, it could be selecting one
of a pair of choices as superior to the other.

Second, the system must allow the decider to impose relative weights
on the various aspects of the decision. The system must not assume
that all factors are of equal importance. Nor must it assume that,
simply because one factor of a pair outweighs the other, such an
outcome is consistent among all pairs of factors. In other words A
being more important than B doesn't imply that it is also more
important than C, even though B may be more important than C. The
decision support system must allow for relative weighting based upon
the merits of the individual factors alone.

Finally, the system must allow the decider to manipulate factor
weightings and the factors themselves in the easiest possible manner
in order to remain consistent with the experiential sources of the
factors. A simple analysis of decision pairs, consistent with
Moody's Precedence system depends for its accuracy upon the
decider's ability to apply experience to the decision and weight it
properly. Such a support system implies that all relevant factors
have been considered, each in relation to the others and that the
decider's (or his or her advisor's) specific experience has been
applied in a quantified fashion.


So, we have three requirements for a coherent decision support
system. Is that all we need? In a practical sense, such a system
must also allow the user to apply consistency in the way he or she
makes decisions.


Many decisions are, in part, based upon politics:

    = Will I ruffle my boss' feathers if I decide this way,
      even though it's the right decision?


Often deciders allow personalities to enter the decision making process:

    = I know he's best for the job, but I don't want that
      turkey in the next office.


Irrelevant factors often enter the decision making process:

    = He wears the ugliest ties. We can't give him a bigger
      sales territory (even  though he consistently performs ahead of
      quota).


Finally personal opinions pollute the process:

    = I don't like him. I'm not going to  promote him.


The point is, a good decision support system will help guide the
decider to consider and weigh all relevant factors in a decision,
while ignoring the irrelevant ones altogether.

It will also do one other thing. It will validate and document the
final decision and the steps taken to arrive at it. Decision
support  systems are just that: support systems. They don't replace
human experience. They don't make decisions. They simply guide the
decider through the web of possibilities and then support and
document the  final decision. It is still the decider's experience
that determines the final outcome.

Also, these systems, by documenting the decision making process,
allow two additional benefits. First the decider can, in the event
of an unexpected outcome, review the factors and their weightings
that lead to the decision, changing them if appropriate. Second,
deciders can perform "what if" analyses by manipulating factors and
weightings to suit other circumstances.

Finally, when evaluating decision support systems, the intrusiveness
of the system itself must be a consideration. People tend to think
randomly when making decisions. Factors affecting outcome are rarely
properly ordered and paired in the decider's mind. A good decision
support system must be simple to use, non-technical in nature and
supportive of change during the decision process. It must also offer
the broadest possibilities for weighting. A simple
"good-better-best" analysis may be excessively restrictive to allow
fine tuning complex decisions.



SEVEN STEPS TO MAKING GOOD DECISIONS

One of the premier benefits of a good decision support system is
that it promotes ordered thinking. Such a system, by virtue of its
own superior organization, guides the decider into an ordered
approach to assembling and considering the factors which will affect
the outcome of the process.

Dalton Dialogic, after examining several different decision making
methods, has determined that most can be supported by a single seven
step process. This process, though considered as a simplification of
a complex activity, does not trivialize the organization, data or
experience that define the decision making activity. Likewise, it is
consistant with Moody's 5 step problem solving loop and the Moody
Precedence Charts as well as supporting quality decisions and
breaking down barriers to good decisions.

Here are Dalton's seven steps.

1. List Your Goals and Mission Objectives

No decision can be made, regardless of the sophistication of the
support tools, if the decision itself hasn't been defined. The
premier companies in the business world set their corporate
objectives by formally listing goals and a mission objective.

The military, always the most directed and focussed of
organizations, accomplishes its tasks by defining missions. Once a
mission has been completed, it can be analyzed for successes and
failures along with the reasons for the outcome.

Deciders should learn to make such goal and mission statements at
the start of the decision process for two reasons. First, the
activity itself forces the decider to state clearly the decision to
be made and the objectives which will be met by the outcome. Second,
it  forces deciders to formulate a mission that can have a
measurable result.


Mission statements should never be fuzzy. In other words, the
results should never be expected to proceed from a broad and
conflicting set of goals. The goals and the mission statement should
clearly define the expected result of the process so that it is
clear what has been decided.

Mission statements are lofty. They are global in nature. Why? Simply
because individual goals and objectives must be capable of being
aligned with the grander objectives articulated in the mission
statement. As deciders set goals and determine the extent to which
their decisions support those goals, they must always be able to
refer back to the mission statement and judge the degree to which
they are deciding in support of their overall mission.

Finally, mission statements should not be trivial. Decision support
systems are not for all decisions. They are only for the important
ones .



2. Identify your Choices and Alternatives

This step requires that you determine what the possible alternatives
to the decision are. For example, if I was interested in deciding
upon a particular type of local area network, my possible choices
might be: Token Ring, Ethernet and Arcnet.

At this point you are not interested in the relative merits of your
possibilities, only the possibilities themselves. Usually it is best
to include all logical choices at this point, but a good decision
support system should permit you to go back later and add additional
alternatives.




3. Set Decision Factors and Weights

Now we get to the part where we decide what the factors affecting
the outcome of the decision are and the individual importances of
those factors. It is very important to understand that we are,
initially, anyway, weighting these factors in a vacuum. In other
words, we don't care how important one factor is against another at
this point. All we care about is the factor itself.

Once you have made the first pass at determining factors and
weighting them, a good decision support system will allow you to
perform a "sanity check" on your determinations. Now you can view
the factors in general relationship to one another and, if
necessary, make subtle adjustments. At this point you have completed
a model for making a specific decision. You have established a set
of goals. You have determined a finite set of potential outcomes.
And you have determined the factors that affect the final outcome
and placed them in relative importance to each other.



4. Gather and Input Data

Now it's time to apply specific data to the factors and weights for
each potential choice. It is now that the model becomes the specific
analysis. The factors and weights that affect the selection of
possible outcomes are applied against specific data for those
possibilities. The result is an order of preference for the possible
choices.



5. Evaluate Scored Choices

Once the decision support system has applied its scoring methodology
to the choices, factors and data, it is time for your personal
experience to come back into play. You used your experience (or
someone else's) to arrive at the factors and their weightings as
well as the universe of possible outcomes. Now that the system has
applied  your knowledge to the decision at hand, it's time to impose
the human factor once again.

This time we want to know if the results are consistent with our own
experience. We should be able to see choices that are clearly not
acceptable, either because they don't fully apply to the stated
objectives or because they are of such low scoring that they may
safely be eliminated.

In a capable decision support system, you should also get an
explanation for why one choice was not selected over another. With
that additional tool, you can decide what might be required to shift
the outcome to one more desirable from your personal perspective.

The best choices should be equally identifiable, and the ability to
make subtle "what if" adjustments should also be present. This step
is the first of two sanity checks on the outcome and the processes
that lead to it.



6. Check Choice Conformance to Goals

This is the final sanity check. Did the final selection(s) conform
to the stated goals and objectives established in step 1? If not,
perhaps you need to reevaluate either the factors or weightings to
remain consistent with your mission. This is where you will notice
and be able to remove irrelevant factors such as personal prejudice,
opinion or politics.

Occasionally, you will be faced with another possibility which a
competent decision support system should help identify and deal
with.  There will be times when, based upon your existing data or
weighting, there is no good choice, or, at least, not one which is
in conformance with your objectives.



7. Act on Your Decision

You have now arrived at a decision that is consistent with your
stated objectives as well as your (or another expert's) experience.
You can act on the decision. However, many management specialists
believe that even the most experienced and competent decision makers
are correct but 50% of the time.

While modern information systems may have improved that somewhat, it
is still clear that nobody is 100% correct 100% of the time.
However, a good decision support system will provide the tools which
insure that you will not only make better decisions, but you will
also have more confidence in them.

Thus, you can expect, even with the best decision support systems,
some percentage of error. That percentage of possible error is
called uncertainty. A competent decision support system should
identify areas of uncertainty and allow adjustments in factors and
weightings to fine tune the system and limit  the uncertainty as
much as possible. It should also permit a very important part of
step 7: feedback.

As Moody identified in his 5 step problem solving model, decision
making, in order to approach perfection, must be fined tuned over
time. That means, as decisions are made, the quality of those
decisions, based upon the proverbial 20/20 hindsight, must be used
in a feedback mechanism to continually improve the decision making
model.



APPLYING THE 7 STEPS TO THE QUALITY OF DECISIONS

The Seven Step Decision Method (SSDM) is not a viable decision
support system unless it enhances the quality of the decision making
process. However, interestingly, the steps themselves have real
correlation with Janis and Mann's approach to quality.

For example, surveying the full range of objectives (Janis and Mann)
is supported by listing goals and mission objectives (SSDM). By
recognizing your objectives you are lead to exploring a wide rage of
alternatives.

Canvassing a wide range of alternatives and choices (Janis and Mann)
is supported by step 2, identifying choices and alternatives (SSDM).
Intensively searching for new information (Janis and Mann) is
supported by step 4, gather and input data (SSDM).

Virtually all of the Janis and Mann quality decision guidelines have
corresponding steps in the Seven Step Decision Method.  That, of
course, is no accident, since the SSDM was designed to support the
most consistent and well conceived decision making guidelines today.



USING THE 7 STEP SYSTEM TO BREAK DOWN BARRIERS TO GOOD DECISIONS

If the 7 steps support the quality decision making process, they
shine when it comes to breaking down barriers to good decisions.
Again, deferring to the experts, Russo and Schoemaker declare that
the first major barrier is Plunging In. Step 1 of the SSDM, listing
goals and mission objectives forces that extra measure of
attentiveness to the question at hand.

When you must list on paper (or on a computer screen) exactly what
you wish to accomplish, you tend to stop and think a bit about it.
You have, then, avoided the first of Russo and Schoemaker's traps.

In the same way that the 7 steps support quality decision making,
they also continue to break down barriers. Setting decision factors
breaks down lack of frame control. Gathering and inputting data
overcomes short sighted shortcuts and shooting from the hip.

Checking choice conformance to goals avoids fooling yourself about
feedback. And the whole SSDM process avoids the failure to keep
track and the failure to audit your decision making process.

In short, the SSDM promotes quality decisions and breaks down
barriers because it was designed to do so.



APPLYING THE 7 STEPS TO A DECISION SUPPORT TOOL

A decision support tool, in order to be most useful, must follow a
decision making model closely in both its analysis process and its
user functionality. Users must be able, without a stringent
technical background, to apply the model functionally within the
tool.

For example, if you are using the 7 step model to arrive at a
decision, then the tools you use should functionally support that
model. The SSDM is a proven model for arriving at complex decisions.
It is applicable to most analytic methods (often as a simplification
of an extremely complex process)  and it provides results that are
consistent, both with empirical testing and experiential analysis.

Dalton Dialogic has developed, as a tool for applying SSDM in
practical applications, a PC software package called
Decisions?/!Decisions.

Decisions?/!Decisions uses a special "light tunnel" user interface
to guide the decider through each of the seven steps in the model.
In addition it provides for fine tuning the factors and weightings
during the decision making process using a graphical  display for
easy visualization of relative weighting of factors.

Areas of uncertainty and non applicable results are displayed
clearly and you can apply feedback directly to the model for
additional fine tuning or "what if" analysis. Finally,
Decisions?/!Decisions provides a dialog at the completion of each
analysis which contains an explanation of the rationale for not
selecting a particular choice along with the requirements for its
future selection.

The SSDM provides decision makers with the means to model most
complex decisions as well as many that are of lesser complexity. It
provides a means for establishing a company-wide platform for
consistent decision making and documentation. It supports the
principles of empowerment by providing consistent tools both for
making decisions and honing the individual worker's decision making
skills. Decisions?/!Decisions provides an easy to use PC software
decision support tool for implementing SSDM.



Dalton Dialogic, Inc
102 Runnymead Road,
Toronto, Ontario, Canada M6S 2Y3
[phone]