1. Effective Decision Making

2. The Eight Elements of Effective
Decisions
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Problem
Objectives
Alternatives
Consequences
Tradeoffs
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Uncertainty
Risk Tolerance
Linked Decisions

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

4. Effective Decision Making
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Objectives
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Let your objectives be your guide.
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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
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Alternatives
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Don’t box yourself in with limited alternatives
Use your objectives and ask “how?”
Set high aspirations
Never stop looking for alternatives
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Think outside the box
Brainstorm (See Rules for Brainstorming)
Give your subconscious time to operate
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Incubate

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

7. Payoff Matrix
Go
Go
KBBB
No Go
4, 2*
3, 4
1, 3
2, 1
* KAAA, KBBB
KAAA
No go
Assigning weights is the most difficult decision.

8. Effective Decision Making
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Tradeoffs
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Use swaps.
Determining the relative value of different
consequences is the hard part.

9. Effective Decision Making
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Uncertainty
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Use risk profiles to simplify decisions involving
uncertainty.
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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
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Uncertainty
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Use a Decision Tree.
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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
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Risk Tolerance
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Understand and calibrate your group’s tolerance to
take risks.
Incorporate your risk tolerance into all of your
decisions.

13. Effective Decision Making*
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Linked Decisions
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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
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

Problem
Objectives
Alternatives
Consequences
Tradeoffs



Uncertainty
Risk Tolerance
Linked Decisions