Workbook DecisionMaking

| 1
1.1 What is Decision?

Improving Managerial
Skills
for
Leadership
Decision Making Self Education and Learning Forum.
| 2
Decision Making
Setting a goal is not the main thing. It is deciding how you will go about
achieing it and staying with that !lan."
#om Landry
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Contents
1 WHAT IS DECISION MAIN!"##############################################$
1.1 What is Decision?---------------------------------------------------------------------6
1.2 Decision Maker Characteristics--------------------------------------------------8
1.3 Decision Makers Common Mistakes-------------------------------------------8
1.4 Making Decisions---------------------------------------------------------------------8
1.4.1 Do You Have to Make the Decision?---------------------------------------9
1.4.2 How to Make the Decision?---------------------------------------------------9
1.5 What Can You earn !rom "ast #$%eriences?--------------------------------&
1.6 'o( Much )na*+sis ,o You -ee,?-----------------------------------------------&
% T&ADE#O'' ANAL(SIS#####################################################11
2.1 When to .se--------------------------------------------------------------------------11
2.2 'o( to .se----------------------------------------------------------------------------11
2.3 #$am%*e-------------------------------------------------------------------------------12
2.3.1 Step 1: !enti"# the $ptions------------------------------------------------12
2.3.2 Step 2: !enti"# the C%ite%ia------------------------------------------------12
2.3.3 Step 3 & 4: 'i(( the )a*(e & Sco%e +ach $ption-----------------------13
2.3.4 Step ,: !enti"# -po%tance------------------------------------------------13
2.3., Step . & /: Ca(cu(ate 0eighte! Sco%es an! )ota(s-----------------14
2.4 )na*+sis--------------------------------------------------------------------------------14
2.5 /ariations------------------------------------------------------------------------------15
) *AI&ED COM*A&ISON ANAL(SIS########################################1$
3.1 When to .se?------------------------------------------------------------------------16
3.2 'o( to .se?--------------------------------------------------------------------------16
3.3 #$am%*e-------------------------------------------------------------------------------10
3.3.1 Step 1: !enti"# the $ptions------------------------------------------------1/
3.3.2 Step 2 & 3: Make a )a*(e an! Co-pa%e the 1ai%s-------------------1/
3.3.3 Step 4: Ca(cu(ate the )ota( Sco%es---------------------------------------12
3.4 /ariations------------------------------------------------------------------------------18
+ 'O&CE 'IELD ANAL(SIS###################################################%,
4.1 When to .se?------------------------------------------------------------------------21
4.2 'o( to .se?--------------------------------------------------------------------------21
4.3 #$am%*e-------------------------------------------------------------------------------21
4.3.1 Step 1 & 2: !enti"# the 1%o*(e- an! the 'o%ces--------------------22
4.3.2 Step 3: Sco%e the 'o%ces----------------------------------------------------23
4.4 )na*+sis--------------------------------------------------------------------------------24
- *MI ANAL(SIS###############################################################%-
5.1 When to .se?------------------------------------------------------------------------25
5.2 'o( to .se?--------------------------------------------------------------------------25
5.3 #$am%*e-------------------------------------------------------------------------------26
| 4
,.3.1 Step 1: !enti"# the $ption-------------------------------------------------2.
,.3.2 Steps 2 & 3: C%eate a 1M )a*(e an! 1opu(ate it---------------------2.
,.3.3 Step 4 & ,: Sco%e the Concepts & Ca(cu(ate )ota(s-----------------2/
$ COST .ENE'IT ANAL(SIS#################################################%/
6.1 When to .se?------------------------------------------------------------------------2&
6.2 'o( to .se?--------------------------------------------------------------------------2&
6.3 #$am%*e-------------------------------------------------------------------------------31
..3.1 Step 1: !enti"# the 1%o*(e------------------------------------------------33
..3.2 Step 2: !enti"# Costs---------------------------------------------------------33
..3.3 Step 3: !enti"# 4ene5ts-----------------------------------------------------31
..3.4 Step 4: Ca(cu(ate 1a#*ack )i-e------------------------------------------31
6.4 /ariations------------------------------------------------------------------------------32
0 DECISION T&EES############################################################))
0.1 When to .se?------------------------------------------------------------------------33
0.2 'o( to .se?--------------------------------------------------------------------------33
0.3 #$am%*e-------------------------------------------------------------------------------34
/.3.1 Step 1: !enti"# the 1%o*(e------------------------------------------------34
/.3.2 Step 2: C%eate a )%ee o" Choices-----------------------------------------34
/.3.3 Step 3: !enti"# the Costs6 4ene5ts an! 1%o*a*i(ities--------------3,
/.3.4 Step 4: 1a%se the )%ee--------------------------------------------------------3/
0.4 /ariations------------------------------------------------------------------------------41
1 DECISION MAIN! *&INCI*LES#########################################+1
8.1 2ccams 3a4or-----------------------------------------------------------------------41
8.2 "areto "rinci%*e----------------------------------------------------------------------43
8.3 "arkinsons a(---------------------------------------------------------------------43
8.4 5m%ortance 6ersus .rgenc+-----------------------------------------------------44
8.5 7ame 8heor+-------------------------------------------------------------------------45
8.6 8he 8rage,+ o! the Commons--------------------------------------------------46
/ NOMINAL !&O2* TECHNI32E###########################################+1
&.1 8hinking in 7rou%s-----------------------------------------------------------------48
&.2 -omina* 7rou% 8echni9ue--------------------------------------------------------4&
&.3 When to .se?------------------------------------------------------------------------4&
&.4 'o( to .se?--------------------------------------------------------------------------4&
1, DEL*HI METHOD##########################################################-1
11.1 'istor+-------------------------------------------------------------------------------51
11.2 When to .se?----------------------------------------------------------------------51
11.3 'o( to .se?------------------------------------------------------------------------51
11.4 ),6antages-------------------------------------------------------------------------52
11 STE*LADDE& TECHNI32E##############################################-+
11.1 When to .se?----------------------------------------------------------------------54
11.2 'o( to .se?------------------------------------------------------------------------54
11.3 Di:erences (ith the De*%hi Metho,----------------------------------------55
&E'E&ENCES#####################################################################-$
| 5
$ourse %b&ectie'
(y the end of this course you will be able to'
Make better indiidual decisions using a ariety of tools and increase the
efficiency of your grou! decisions
)our %b&ecties'
List your three main objectives below. What do you want to learn in this course?
What do you want to take away with you? What do you want to become better at?
What do you need?
*.
+.
,.

$ha!ter ,' -aired $om!arison .nalysis 3.1 When to Use? | 6

1 What is Decision Making?
Each indecision brings its own delays and days are lost lamenting oer lost
days... /hat you can do or think you can do0 begin it. For boldness has magic0
!ower0 and genius in it."
1oethe
%b&ectie'
(y the end of this session you will be able to'
2se good decision making !rocesses to get the best out of your decisions
In the course of our lives, we need to continuously make decisions. Some of these
decisions are simple what to buy in a supermarket, what to wear to work, what to
say to your collea!ue, which !ad!et to buy and so on. Some decisions are much
more profound with lon! lastin! results. "#amples are business decisions such as
movin! offices, e#pandin! to new markets, producin! new products, partnerin!
with new companies, pricin! products and so on. $he more you have at stake, the
more you need to pay attention to decision makin! and use appropriate techni%ues
to ma#imi&e your chances of makin! the ri!ht decisions.
In this course, you will be introduced to decision makin! principles and will !o
throu!h a series of tools that can help you to decide between many options.
What is Decision?
$he root of the decision comes from a Latin word which means cut away. $o
make a decision, you want to cut away throu!h the search space, remove clutter
and find a way to a solution that satisfies your criteria.

*&ACTICE4 De5ision Maker Chara56ris6i5s
Describe the characteristics of a !ood decision maker.

Decision Maker Characteristics
Good Characteristics:
'nalyses the problem systematically before makin! decisions.
Is aware of the limitation of his decision makin! process and knows when to
stop analysin!
(ses systems to allow others provide their true opinion
'ttempts to evaluate risk and considers it when makin! decisions
Is happy to chan!e position when confronted with new data
Is not emotional durin! decision makin!
Is happy to e#plore various options even those that don)t sound promisin!
initially
Bad Characteristics:
*ocuses more on symptoms than facts
Does not learn from e#perience
Does not put his decision into conte#t
Is hasty and impatient to reach a conclusion
+akes his mind before !oin! throu!h the available data
$reats pros and cons e%ually
Decision Makers Common Mistakes
When makin! decisions, certain mistakes are easy to make. $he followin! mistakes
are common and you can take steps to avoid them,
3ushing. Don)t make a decision before facts are e#plored. Lack of
information can easily lead to bad decisions.
4arrow -ers!ectie. -onsider all areas before makin! your decision.
Decisions made based on a narrow area can be ideal for that part but often
don)t work in the real world.
%er5confidence. Don)t assume that you already know the solution and
there is no reason to !o throu!h the details.
Shortcuts. .eware of usin! shortcuts to !et to a decision as %uickly as
possible. /ou risk i!norin! critical information that could have profound
effect on the outcome.
Filtering. $ake care not to leave certain areas that mi!ht be difficult to
address or emotionally unpleasant. $his may lead to sub0optimal decisions
which you want to avoid.
2nstructured .nalysis. .eware of makin! comple# decisions on the fly
based on instincts, emotions and unstructured meetin!s where politics can
!reatly influence the outcome as opposed to jud!in! each option based on
its own merit.
Making Decisions
When you want to make !ood decisions, you need to consider a number of areas,

Do You Have to Make the Decision?
/ou may need to consider the followin!,
Is it the ri!ht time?
Is it necessary?
1as a similar decision been made by others who were in your position in the
past that you can simply take advanta!e of?
How to Make the Decision?
/ou need to consider how decision makin! process is !oin! to work. /ou have the
followin! options,
+ake a decision on your own
In !roups. In this case you need to consider
o Who should attend?
o Where should we meet?
o When should we meet?
o 1ow much time should be allocated for the meetin!s?
What Can You Learn from Past Exeriences?
' critical task is to look into past and learn from similar e#periences made by you
or others before makin! the decision. /ou need to consider,
What were the issues in the past?
Why certain decisions were made?
What was the outcome?
1ow does the past situation relate to the current situation?
1ow ur!ent is it?
How Much !na"#sis $o You %ee$?
When makin! decisions, some people like to e#amine every little detail. .elievin!
that it is important to know everythin! before makin! decisions, they !et obsessed
by collectin! data and analysin! to death2 Is it always better to do more analysis?
's you may suspect, more analysis and data collection leads to better decision
makin!, but only up to a point. 'fter a certain level, the more you know the less
likely you are to make a valid or optimal decision.
$he problem with over analysin! is that you can easily evaluate a small number of
variables a!ainst each other. .y collectin! more and more data and analysin! in
more detail you will simply end up with a lot more variables that you need to set
a!ainst each other. 's you will see later in the course, you can resort to tools
which make this process easier. 1owever, beyond a certain point the sheer number
of variables will increase the comple#ity of your decision makin! si!nificantly and
you may no lon!er understand or comprehend your own analysis. $he decision
makin! process becomes random. +ore analysis at this point only makes it more
difficult to decide. 1ence, always scale your analysis based on the si&e of the
problem so that your decision makin! process is not affected by 3paralysis of
analysis.

' !ood measure is the potential implications of the decision. -hoosin! which cloth
to buy should take a lot less time proportionally to buyin! a house.
Durin! this course, you will be introduced to a series of tools and techni%ues that
will help you to systematically make decisions. $hese tools can be broadly divided
into three areas,
What actions can you take and how to choose the best one?
Is the action you are about to take !oin! to improve the situation?
1ow to make optimal decisions as a !roup?
Let)s start with e#aminin! actions based on the available options and see what
tools can be used to facilitate this.

& 'ra$e()* !na"#sis
In any moment of decision the best thing you can do is the right thing0 the
ne6t best thing is the wrong thing0 and the worst thing you can do is nothing."
#heodore 3ooseelt
%b&ectie'
$hoose the best aailable o!tion based on a number of criteria using a trade5
off analysis
1avin! many variables and options to choose from means that you can no lon!er
decide just by comparin! the options in your head. $he comple#ity of the task
re%uires a more systematic approach. ' common techni%ue often employed in
many business environments such as sales, en!ineerin!, bankin!, marketin! and
others is Trade-off Analysis. $his techni%ue is also known as Grid Analysis, Decision
atri! Analysis, "u#h atri! Analysis and ulti-Attri$ute Utility Theory 4+'($5.
Whatever the name or variation, you are effectively settin! up a table of
parameters versus options and score the options based on these parameters to find
the best course of action. $he followin! !uideline shows how this works in
practice.
When to +se
$his method is particularly useful when you have a number of alternative but
similar options to choose from. "very option seems to have its own advanta!es and
disadvanta!es and you may find it difficult to make an intuitive decision.
How to +se
'pplyin! a trade0off analysis is %uite easy. /ou need to create a table and carry out
a number of calculations to derive a score for each potential option. /ou can then
choose the option with the hi!hest score as your desired choice. 1ere is how it
works,
Ste! *' Identify the o!tions.
o List a number of options you want to consider. /ou want to eventually
choose one of these as your desired solution.

Ste! +' Identify the criteria.
o List a number of criteria related to these options. $hese are the
parameters that you want to use to compare the options with each
other. +ake sure to include all the relevant criteria.
Ste! ,' Fill the table.
o +ake a table and put the options into rows and the criteria into
columns. $o make your life easier, use a spreadsheet to automate the
calculations.
Ste! 7' Score each o!tion.
o 6o throu!h the table and score each option for each criterion. (se
numbers from 7 to 8, where 7 is very poor and 8 is very !ood.
Ste! 8' Identify im!ortance.
o -reate a new row at the top and call it i%portance or wei#ht. *or
each criterion, choose a number between 9 and 8 where 9 is not
important and 8 is e#tremely important.
Ste! 9' $alculate weighted scores.
o *or each option, create a new row called wei#ht scores& and fill it by
multiplyin! the wei!ht row with the score row for each option.
Ste! :' $alculate #otals.
o 'dd up all the wei!ht scores to calculate the total score for each
option. /ou can now use this score to compare the options with each
other.
Exam"e
Suppose you want to buy an advanced internet0enabled mobile phone 4so called
smart phones5. $hey usually come with many features each havin! their own
advanta!es and disadvanta!es. $rade0off analysis is an ideal tool for choosin! an
option based on your needs.
,te 1- .$entif# the )tions
Windows +obile 1$- $ouch 1D
'ndroid with 1$- 1ero
i:hone ;6S
,te &- .$entif# the Criteria
"book reader
.rowser
+ulti touch
Last.fm
<ideo -apture
-ompass
Screen resolution
,te / 0 1- 2i"" the 'a3"e 0 ,core Each )tion

'ot
a"
,co
re
e3ook
rea$er
3row
ser
mu"
ti
tou
ch
"ast4
fm
vi$eo
cat
ure
com
ass
screen
reso"ut
ion

HTC To75h
HD
5 3 1 5 3 1 5
i*hone )!S 4 5 5 5 5 5 3
Android HTC
Hero
1 5 5 5 3 5 4
,te 5- .$entif# .mortance
'ota
"
,cor
e
e3ook
rea$e
r
3row
ser
mu"
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vi$eo
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reso"ut
ion
Weigh6 8
Impor6an5e

- + ) + + % )

HTC To75h
HD
5 3 1 5 3 1 5
H'C HD
'ota"
i*hone )!S 4 5 5 5 5 5 3
iPhone 'ota"
Android HTC
Hero
1 5 5 5 3 5 4
H'C Hero
'ota"

,te 6 0 7- Ca"cu"ate Weighte$ ,cores an$ 'ota"s

'ota"
,core
e3ook
rea$e
r
3row
ser
mu"
ti
tou
ch
"ast4
fm
vi$eo
cat
ure
Com
ass
screen
reso"ut
ion
Weigh6 8
Impor6an5
e

- + ) + + % )

HTC To75h
HD
5 3 1 5 3 1 5
H'C HD
'ota"
81 25 12 1 21 12 1 15
i*hone
)!S
4 5 5 5 5 5 3
iPhone
'ota"
111 21 21 15 21 21 11 &
Android
HTC Hero
1 5 5 5 3 5 4
H'C Hero
'ota"
91 5 21 15 21 12 11 12
!na"#sis
.ased on the trade0off analysis and the choice of criteria and their importance to
you, the results show that it is best to !o for an i:hone with the hi!hest score at
99=. 1owever, you have not considered cost yet. $here are many ways you can
brin! the cost in. >ne way is to consider it like any other criteria and score it from
7 4most e#pensive5 to 8 4cheapest5, assi!n an importance to this criterion and
calculate the total scores. 1owever, since cost is usually a definin! factor when
purchasin! products that have very similar features, you can use the cost to
compile a new score that allows you to compare the options directly. *or e#ample,
you can research each mobile phone)s best available price, create a new column
called price and include them there. ?e#t, calculate a new score usin!
'ew (core ) (core * "rice
$he result looks like this,
'ot
a"
,co
re
Price
%ew
,core
H'C 'ouch HD
'ota"
84 411 :4715

iPhone 'ota" 114 011 :41&/
H'C Hero
'ota"
&4 451 :45&6
's you can see, considerin! the features and costs for each option, it is now more
ideal to !o for 1$- $ouch 1D instead. /ou !et more for the features that you care
about for less money.
What you saw in this analysis is a simple way to calculate scores as you are simply
usin! a linear function. +ore sophisticated analysis can be carried out usin! more
comple# formula. ?otice that the wei!hts have a si!nificant effect on the
outcome. .ecause trade0off analysis is dependent on wei!hts and the choice of
formula which are both subjective, the result of this analysis should only be taken
as a !uideline. $rade0off analysis helps you to %uickly see how thin!s compare.
.y !oin! throu!h this analysis, you end up identifyin! a number of critical criteria
that can be used to compare the options with each other. $his is e#tremely useful
since it allows you to understand your options better. 1owever, it is always best to
put the result of this analysis ne#t to the result of other kinds of analysis and also
compare it with your own jud!ement to make an optimal decision.
;ariations
/ou can use any formula to combine the wei!hts with the scores to calculate
a final score.
/ou can use any ran!e for scorin! the options for each criterion. /ou can
even use ne!ative numbers.
@ather than allocatin! a number between 9 and 8 for wei!hts, a point
system can be used. Ima!ine you have 977 points which can be distributed
between a number of criteria. $his way, one criterion mi!ht receive a lar!e
number at the e#pense of another. $he total of these wei!hts should always
add up to 977. $his method helps you to %uestion your interest in each
criterion as you allocate points to them.

/ Paire$ Comarison
!na"#sis
3emember0 a real decision is measured by the fact that you;e taken new
action. If there;s no action0 you haen;t truly decided."
#ony 3obbins
%b&ectie'
2se a series of systematic com!arisons to identify the most ideal decision
When makin! decisions, sometimes you need to compare solutions or ideas that
are not related very much. In some cases, you may not be able to identify
meanin!ful set of criteria that can be used to compare all options a!ainst each
other. *or e#ample, you may need to decide whether to allocate department
resources to buy a new colour laser printer, hire a new receptionist to ease off
your workload or to spend it on machinery to e#tend your production capacity by
97A. 's the number of choices !oes up, it becomes more difficult to intuitively
decide. $o solve this problem you can use the techni%ue described in this session
known as "aired +o%parison Analysis or "aired +hoice Analysis.
When to +se?
(se "aired +o%parison to understand the value of each option relative to others.
It is ideal for situations where you can)t easily compare the options thou!h you can
always use this method when the options are close to each other. $his method can
be used in conjunction with trade0off analysis to !ive a better idea of the
situation.
$his method is also useful to !ive you an idea of where you need to focus most of
your attention.
How to +se?
(sin! this techni%ue is rather simple. /ou want to compare each option with
another until all options are paired a!ainst one another. *or each pair, decide
which option you prefer and how much. *inally, score the results to see which
option is the most ideal.

Ste! *' Identify the o!tions.
o List the options you want to consider.
Ste! +' Make rows and columns.
o +ake a table with rows and columns of the list of your options.
Ste! ,' $om!are the !airs.
o *or each pair, compare the two options and write which option you
prefer in the table and score this preference. When there is no
preference use score 7 while when there is more preference use a
hi!her number to indicate it. /ou can set a limit 4between 7 and 85 or
no limit at all.
Ste! 7' $om!ile the total scores.
o >nce all scores are recorded, !o throu!h the table and compile a
total score for each option. $he option with the hi!hest score is the
most ideal course of action.
Exam"e
-onsider the followin! e#ample it is the end of the year and you can spend
B97,777 in the current ta# year to avoid payin! more ta#es ne#t year. 's the head
of the en!ineerin! department, you want to spend the money wisely.
,te 1- .$entif# the )tions
/ou have come up with the followin! options,
.uy a new ;D printer to allow rapid prototypin!. /our en!ineers will be able
to produce prototypes much %uicker which frees their time to do other
important tasks.
@efurbish the lab with new desks, shelves, computer e%uipment, plants and
printers.
-onvert a store room to a meetin! room and e%uip it with the latest video
conferencin! tools to facilitate communication with your clients and
suppliers.
'llocate the fund to send several of your lab personnel to conferences and
trainin! courses to encoura!e cross fertilisation of ideas, increase their
productivity and make them feel that you care about them.
,te & 0 /- Make a 'a3"e an$ Comare the Pairs
:air the options a!ainst each other. 1alf the table is !reyed out since you don)t
want to compare pairs twice or with themselves. Letters ' to D are used as
desi!nators for each option.

,D -rinter
<.=
3efurbish Lab
<(=
>ideo
$onferencing
<$=
#raining ?
$onferences
<D=
,D -rinter
<.=
3efurbish Lab
<(=
', ;
>ideo
$onferencing
<$=
-, = ., 9
#raining ?
$onferences
<D=
', 9 D, = D, C
,te 1- Ca"cu"ate the 'ota" ,cores
?ow !o throu!h the table and add up all the points for each option.
' D ; E 9 D =
. D 9
- D =
D D C E = D F
/ou can then convert these to percenta!es of the total. $he sorted result is,
D D =7A
- D CF.FA
' D CF.FA
. D F.FA
It seems that you will be better off to !o with option D, sendin! your staff to
trainin! and conferences. >ption ., refurbishin! the office, doesn)t seem to be
valuable as much.
;ariations
/ou can perform this techni%ue individually or in !roups.
Dependin! on the problem under consideration and available options, you
can consider all choices based on their proportional votes. *or e#ample, in
the above scenario you can distribute the money accordin! to the calculated
percenta!es.
$o calculate the scores for each pair, introduce a number of criteria and use
them to score the difference.

/ou can have an open discussion in a !roup for each paired comparison and
decide on each score collectively.
/ou can introduce probabilistic models to further %uantify your decision
makin! process. :lease refer to pairwise co%parison in the literature for
further details.

1 2orce 2ie"$ !na"#sis
%b&ectie'
Make a decision using @uantifiable !ros and cons to ealuate the im!act of
your decision
So far you have seen how to choose from a set of actions. 1owever, sometimes you
may need to know the implications of !oin! with a particular option and want to
systematically e#amine what happens if you !o with that option. ' traditional
techni%ue is wei!hted pros and cons where you simply identify what is !ood about
!oin! ahead with the option 4pros5 and what is bad about it 4cons5. In this session,
you will be introduced to a useful variation of this method known as ,orce ,ield
Analysis.
When to +se?
(se this techni%ue to find out what affects the outcome of this option or choice.
/ou !et to analyse what works for or a!ainst it.
How to +se?
(se the followin! steps to carry out a *orce *ield 'nalysis.
Ste! *' Identify the !roblem.
o Identify the problems or options under consideration. (se the
followin! dia!ram and write this in the bo# at the appropriate
location.
Ste! +' Identify the forces.
o List all the forces that affect this option. Write the positive forces as
arrows towards the bo# and ne!ative forces as arrows pointin! out of
the bo#.
Ste! ,' Score the forces.
o 6ive a score to each identified force between 9 and 8 where 9 is
weak and 8 is stron!.
-roblem A %!tion

Exam"e
Suppose you are considerin! chan!in! the location of your offices from the centre
of the town to a lar!er buildin! in a brand new business park.
,te 1 0 &- .$entif# the Pro3"em an$ the 2orces
(sin! the template, your dia!ram may look like the followin!.
"ositi-e ,orces for
+han#e
'e#ati-e ,orces for
+han#e

,te /- ,core the 2orces
*or each force, assi!n a score of importance between 9 4weak5 and 8 4stron!5. /our
dia!ram may look like this. ?e#t calculate the totals for each set of forces.
Lar!er office space
?o city centre traffic
-an impress visitors with our
new buildin!
-an)t eat out at lunch
Moing offices to the new
business !ark
?eed to commute to city
centre for customer
meetin!s
Inability to do errands in
the city centre at lunch
break
"ositi-e ,orces for
+han#e
'e#ati-e ,orces for
+han#e
:ossible new recruitments
and e#pansion
-ity centre buildin! price
can rise more in the future
than a buildin! in a business
park. 'cts as investment.
-ost of movin!

!na"#sis
's you can see form the analysis it seems that not movin! offices is a better
option. @emember, as with many decision makin! tools, it is the process that is
beneficial and not necessarily just the outcome. $his techni%ue helps you to
Lar!er office space
?o city centre traffic
-an impress visitors with our
new buildin!
-an)t eat out at lunch
Moing offices to the new
business !ark
?eed to commute to city
centre for customer
meetin!s
Inability to do errands in
the city centre at lunch
break
"ositi-e ,orces for
+han#e
'e#ati-e ,orces for
+han#e
:ossible new recruitments
and e#pansion
-ity centre buildin! price
can rise more in the future
than a buildin! in a business
park. 'cts as investment.
-ost of movin!
;
C
;
9
=
=
C
;
=
#otal -ositie' *+ #otal 4egatie' *7
3esult B +

understand the issues and rewards of each option better and allows you to make
better intuitive decisions.
/ou can also use the results to manipulate the outcome by adjustin! the forces.
/ou may decide that the scores are too close to call, but since you understand the
issues better, you can address them in an attempt to chan!e the direction of the
eventual force. *or e#ample, you can setup a shuttle bus to city centre from the
new business park which will address several ne!ative forces such as,
Inability to do errands in the city centre at lunch break 4C point5
?eed to commute to city centre for customer meetin!s 4; points5
-an)t eat out at lunch 49 points5
$his way you can save a total of F points from the ne!ative side, brin!in! down the
ne!ative forces to a total of G. ?ow it is 9C for positive versus G for ne!ative and it
seems that movin! is beneficial, if you use a shuttle bus.
's you have seen, you can use force field analysis as a way to understand your
options better. It is not a decision maker it is simply a decision facilitator.

5 PM. !na"#sis
%b&ectie'
Systematically analyse the im!lications of taking an action so you can decide
whether to go ahead with it or not
$he techni%ue described in this session helps you to decide if a course of action is
worth takin!. It can be used in conjunction with methods that help you to choose
this action amon! other options. *or e#ample, you may use trade0off analysis to
identify the best course of action from a number of options. /ou can analyse this
option further to see if it is actually worth takin!. It is possible that you mi!ht be
better off not to take the action at all2 $his is somethin! that the trade0off
analysis mi!ht not show you and it is useful to use a techni%ue that can help you
on this. $he useful techni%ue for this purpose is known as "lus*inus*.nterestin#
or ". which is %uite easy to apply.
When to +se?
(se this techni%ue to understand the implications of your actions better. It is
effectively an improved variation of wei#hted pros and cons.
How to +se?
$o apply this techni%ue, identify the action under consideration and !o throu!h the
followin! steps,
Ste! *' Identify the o!tion.
o -hoose the option you want to analyse.
Ste! +' $reate a -MI table.
o -reate a table with three columns, "lus, inus and .%plications.
Ste! ,' -o!ulate the -MI table.
o (nder "lus state everythin! that is positive about the options. (nder
'e#ati-e state everythin! that is ne!ative about it and under
.%plications record the conse%uences of takin! that action whether it
is positive, ne!ative or neutral.
Ste! 7' Score the conce!ts.

o 'ssi!n a score to each of the points between 7 and 8. (se a hi!her
score as you feel stron!er about it. (se positive numbers of "lus
column, ne!ative numbers for 'e#ati-e column and positive or
ne!ative for the .%plications column.
Ste! 8' $alculate the total scores.
o 'dd up all the scores to!ether to come up with a total. ' positive
result indicates your interest to take the action while a ne!ative
score indicates your lack of interest in it.
?otice that while you !o throu!h the e#ercise in step ;, by simply identifyin! the
positive, ne!ative and implications of the action you may already realise what you
want to do and it may not be necessary to score each item as well. ?evertheless,
you have the option of scorin! and you can use it as necessary.
Exam"e
,te 1- .$entif# the )tion
-onsider the followin! e#ample. /ou are a producer of a new kind of iron that uses
half the ener!y, produces twice the amount of steam and wei!hts half as much as
other irons in its class. /ou have been sellin! this iron in your own country throu!h
major retail channels and based on their positive response and increasin! sales
have decided to e#pand to international markets. /ou want to carry out a :+I
analysis to evaluate this course of action.
,tes & 0 /- Create a PM. 'a3"e an$ Pou"ate it
-lus Minus Im!lications
"#panded market will lead
to e#panded market share
?eed si!nificant initial
investment to file for
overseas patents
Will have potentially more
sales
>ur e#pansion prevents
competitors from copyin!
our desi!n
?eed to invest in e#tensive
market research in various
countries
Will be reco!nised as an
international player, hence
will be easier to attract new
investors
International sales may
further boost our brand
and increase our local
sales
?eed to setup new supply
chains in unfamiliar markets
Will need to recruit more
staff as this e#pansion will
have e#tensive overhead on
mana!ement
If international sales are not
as e#pected, we may end up
with cash flow problems and
lose both international and
local markets
>nce new supply chains are
created, it will be easier to
introduce new products

,te 1 0 5- ,core the Concets 0 Ca"cu"ate 'ota"s
?e#t, score each case based on how stron! you feel about it from 7 to 8.
"#panded market will lead
to e#panded market share
C+
?eed si!nificant initial
investment to file for
overseas patents
57
Will have potentially more
sales
C,
>ur e#pansion prevents
competitors from copyin!
our desi!n
C*
?eed to invest in e#tensive
market research in various
countries
5+
Will be reco!nised as an
international player, hence
will be easier to attract new
investors
C,
International sales may
further boost our brand
and increase our local
sales
C,
?eed to setup new supply
chains in unfamiliar markets
5*
Will need to recruit more
staff as this e#pansion will
have e#tensive overhead on
mana!ement
5+
If international sales are not
as e#pected, we may end up
with cash flow problems and
lose both international and
local markets
5+
>nce new supply chains are
created, it will be easier to
introduce new products
C+
C9 5D C9
$he final score is F H I E F D ;
$he result su!!ests that !oin! ahead with the e#pansion is the preferred option.
'!ain, as with other decision makin! techni%ues, the process itself will help you to
understand your problem better and make intuitive decisions in conjunction with
the calculated score.
$otal

*inal Score D JJJJJJJJJJ
*&ACTICE4 *MI S5enario
/ou recently attended an e#hibition within your industry. ' -"> of another
company showed !reat interest in your work. 'fter an hour of discussion with him
over lunch, which was more like an informal interview, he decided to offer you a
job and promised to !ive you 87A more salary than you currently receive. $he job
will re%uire you to move to the other side of the country. /ou are now faced with
the decision to take the offer or refuse it. /ou have a few days to think about this
before replyin!.
:erform a :+I analysis considerin! your current lifestyle and the conse%uences of
acceptin! this offer so you can decide whether to !o for it or not.
$otal

6 Cost <ene=t !na"#sis
Decide what you want0 decide what you are willing to e6change for it.
Establish your !riorities and go to work."
E. L. Eunt
%b&ectie'
Make decisions based on !roblem analysis using a common currency and
calculate the net benefits
Sometimes instead of makin! %ualitative decisions, you may need to resort to
/uantitati-e decision makin!. $his facilitates the process since you can convert
everythin! to numbers and then carry out a numerical analysis. $his makes the
whole process much easier to handle. 'n a!e old techni%ue on %uantitative
decision makin! is known as +ost-0enefit Analysis 1+0A2 which is descri$ed in this
session. -.' in principle is very simple. "ffectively, you calculate the cost of
everythin! and subtract it from the benefit of your actions. $he final result
su!!ests if what you are about to do will cost you or will benefit you financially.
When to +se?
-.' is common in financial domains thou!h you can easily use it for any other field
as lon! as you can convert everythin! to a common unit of currency. *or e#ample,
you can apply cost benefit analysis to ti%e since some tasks can take a lot of time
4cost5 and other tasks can increase your productivity and save you time 4benefit5.
*or the remainder of this session we will consider money as the common currency
as it is easier to follow and understand.
How to +se?
*irst, notice that costs and benefits are sli!htly different in respect with time.
-osts are usually one0off or on!oin! such as bills. 1owever, benefits are often
received over a period of time. .ecause of this, in -.' you also need to consider
time as a primary dimension alon! with currency.
'nother issue with -.' is that you need to convert everythin! to money. $his may
not always be easy especially when you are dealin! with intan!ible assets. *or
e#ample, what is the benefit of reducin! traffic for the masses? What is the

financial benefit of reduction of ->
C
emissions if you cycle to work instead of
drivin! your car? 's a result, you may need to rely on subjective analysis while
!oin! throu!h -.' and need to clarify e#actly what assumptions to make in order
to know how much you can rely on the final results.
-.' has many varieties and can become %uite comple#. ' simplified e#ample that
shows the core concept is e#plained in this session. *or further details please
consult the references.
$o carry out cost0benefit analysis follow these steps,
Ste! *' Identify the -roblem.
Ste! +' Identify costs.
o Identify one0off costs
o Identify costs over time
o -alculate the total of these costs
Ste! ,' Identify benefits.
o Identify the benefits over time
o -alculate the total of these costs over a common unit of time
Ste! 7' $alculate !ayback time.
Exam"e
Let)s !o throu!h an e#ample.
,te 1- .$entif# the Pro3"em
/ou are in char!e of introducin! a new time lo!!in! system for your staff.
"mployees will be able to use the software to lo! the time they spend on various
projects or other duties which can be used for project mana!ement, resourcin!
and monitorin! staff productivity. /ou want to know if introducin! this system will
cost you more than it benefits you. /ou have a feelin! that at some point in the
future, you may recoup your costs and start benefitin! from the scheme. In other
words, you want to know how lon! it would take to break even.
,te &- .$entif# Costs
One-o Costs
$ime lo!!in! software with 87 licences BK,777
$wo new servers to run the software BC,777
Staff trainin! to use the software B977 per employee DL B8,777
!O!"# $14%000

On&oin& Costs
$ime lo!!in! software support B9777 M /ear
"mployee time lost due to spendin!
time to fill in time lo!s
Spendin! an avera!e of 97 minutes per
day
'vera!e cost of each employee includin!
overhead per day is B977
DL $otal cost for 87 employees D B999
per day
D BCG,GF7 per year
I$ support BG77 M year
!O!"# $30%660 'er (ear
#%#.L $%S#S B *70FFF C ,F099F B G77099F for the first year
,te /- .$entif# <ene=ts
Beneits
Increased productivity since everyone)s
time is now lo!!ed
B877 per person per year DL BC8,777 per
year
"fficient project mana!ement will
result in reduced penalties for late
deliveries
B9G,777 per year
'bility to draw new strate!y based on
this data, so staff)s time is distributed
correctly between development, sales,
marketin! and internal support
BC7,777 per year
!O!"# $63%000 'er (ear
,te 1- Ca"cu"ate Pa#3ack 'ime
:ayback $ime D $otal -osts M $otal .enefits D ==,FF7 M F;,777 D 7.K7 year D G.8
months.
In other words, you will !et back your ori!inal investment in about G.8 month. $his
is known as the $rea3-e-en point. ' !reat way to see this trend visually is to !raph
the costs and the benefits as shown below.
Total +osts
Total 0enefits
.reak0"ven
:oint
$ime
B
+akin!
Loss
+akin!
:rofit

;ariations
's you saw in the e#ample, estimatin! cost and benefits can sometimes be
subjective and as the parameters !et more comple# you may need to use more
sophisticated analysis to calculate the benefits and costs before movin! on to do
-.'.
's the si&e of the project and the amount of money involved is increased you need
to consider many new parameters, such as the cost of the interest, ta# rules,
hidden char!es, insurance and so on. $he calculations can easily become comple#
as you need to consider local laws which is a field in its own ri!ht. Interested
readers should look into financial analysis, accountin! and bud!etin! literature for
further details.

7 Decision 'rees
If you donHt design your own life !lan0 chances are youHll fall into someone
elseHs !lan. .nd guess what they hae !lanned for youI 4ot much"
Jim 3ohn
%b&ectie'
1ra!h your decisions and the corres!onding outcomes isually and calculate
the best course of action
When analysin! a problem, sometimes you need to consider many options and their
implications. /ou may want to evaluate each case)s risk and put it in perspective
with other options. 's always, if you can carry out a %uantitative analysis, your
decision makin! becomes easier.
Indeed, there is a techni%ue to achieve this. It is known as decision trees. /ou can
create a tree of decisions alon! with associated risks, rewards and costs for each
option.
When to +se?
(se this techni%ue to make a balanced decision and choose a course of action
appropriate for the level of risk you are willin! to take. It is also helpful when you
have limited resources and want to make an optimal decision. Decision tree helps
you understand alternative courses of actions better, so when you make the final
decision you understand your !ains and sacrifices.
How to +se?
$o use a decision tree follow these steps,
Ste! *' Identify the -roblem.
Ste! +' $reate a tree of choices.
o Draw a number of potential decisions.
o *or each decision, identify possible outcomes or further decisions to
make.
Ste! ,' Identify the costs0 benefits and !robabilities.

o Identify probabilities of each outcome and record the cost or benefit
of each one of these possible outcomes.
Ste! 7' -arse the tree.
o :arse throu!h the tree startin! from the leaves and work backwards
to calculate the cost of each branch based on its probability and cost
value. >nce the entire tree is traversed, you will end with a value for
each decision which you can use to decide which decision is the most
ideal for you.
Exam"e
Let)s !o throu!h an e#ample to better illustrate this,
,te 1- .$entif# the Pro3"em
/ou have made a new invention and are considerin! various manufacturin! options.
/ou want to know the best course of action !iven the probabilities of each
outcome for each decision and choose an option that would benefit you most.
,te &- Create a 'ree of Choices
Start from the left side of the pa!e and draw a small s%uare. .ranch out of this
s%uare based on a number of decisions. 't each branch you have two choices,
Draw more decisions usin! a small s%uare
Identify a number of outcomes by drawin! a small circle and branchin! out.
*or e#ample, your decision tree may look like the followin!.

,te /- .$entif# the Costs> <ene=ts an$ Pro3a3i"ities
?ow !o throu!h the tree and identify the followin!,
-robabilities of each outcome. @emember, outcomes are drawn from small
circles so it is easy to see which branches need a probability. Write these as
percenta!e or as a number out of one. $he sum of all outcomes should
become 9 or 977A.
(enefits of each outcome. @ecord these in front of each outcome branch.
/ou need to use a common currency for all of your calculations in re!ard
with costs and benefits. *or this e#ample, a representative value is used for
each outcome showin! the profit made over a specific amount of time in
case that outcome is realised. In reality, you need to carry out appropriate
research to %uantify each outcome in this way.
$ost of each decision. $his is a value that represents how much a particular
decision costs you. Decisions are drawn as branches connected to s%uares.

B977,777
BC7,777
B9G7,777
B9C7,777
G7,777
B87,777
B8,777
BC77,777
B977,777
BC7,777
-ost D B;77,777
-ost D B87,777
-ost D B9;7,777
-ost D BI7,777

,te 1- Parse the 'ree
?e#t, calculate the cost versus benefit for each decision. $o do this, for each
circular node calculate a value usin! the probabilities and the benefits. $his value
represents the total benefit if you made that decision whatever the outcome.
?e#t, subtract the cost of the decision you identified in the previous step from the
benefit you just calculated and write this ne#t to each decision 4branches
connected to s%uares5. -alculations are shown below in the decision tree.
's you can see, two decisions actually lead to loss while two others lead to profit.
$he most profitable option is to use local contract manufacturin!. $he least
profitable option, which in facts leads to a loss of BCC=,777, is to build a local
plant. It seems that the best option to roll out this invention is not to use other
manufacturers) services.
$he decision tree is a !reat tool to use to lo!ically or!anise your options and
outcomes for each decision. It is %uite powerful even if used just as a tree without
probability or costMbenefit. It can open up areas you mi!ht not have thou!ht of
before much like usin! %ind %aps.
-alculatin! the probabilities and costMbenefit values is not always strai!ht
forward, thou!h even estimates can !uide you towards better areas of the decision
tree where you can spend more time to fine tune your decisions or increase the
accuracy of your estimates.

B977,777
BC7,777
B9G7,777
B9C7,777
G7,777
B87,777
B8,777
BC77,777
B977,777
BC7,777
7.K N 977,777
E 7.; N C7,777
D KF,777
7.F N 9G7,777 E
7.C N 9C7,777 E
7.9 N G7,777 D
9=7,777
7.G N 87,777 E
7.8 N 8,777 D
=C,877
7.8 N C77,777 E
7.; N 977,777 E
7.C N C7,777 D
9;=,777

B977,777
BC7,777
B9G7,777
B9C7,777
G7,777
B87,777
B8,777
BC77,777
B977,777
BC7,777
KF,777
9=7,777
=C,877
9;=,777
-ost D B;77,777
-ost D B87,777
-ost D B9;7,777
-ost D BI7,777
KF,777 H ;77,777 D
0 CC=,777 4L>SS5
KF,777 H ;77,777 D
0 CC=,777 4L>SS5
=C,877 H 9;7,777
D 0GK,877 4L>SS5
=C,877 H 9;7,777
D 0GK,877 4L>SS5
9=7,777 H 87,777 D
I7,777 4."?"*I$5
9=7,777 H 87,777 D
I7,777 4."?"*I$5
9;=,777 H I7,777 D
==,777 4."?"*I$5
9;=,777 H I7,777 D
==,777 4."?"*I$5

;ariations
Decision trees can be %uite comple# and as more nodes are added more
calculations are re%uired. Dedicated software tools are available that can
facilitate the process of drawin! up the tree, easy modification and parsin! based
on your values.

8 Decision Making
Princi"es
(y three methods we may learn wisdom' First0 by reflection0 which is
noblestK Second0 by imitation0 which is easiestK and third by e6!erience0
which is the bitterest"
$onfucius
%b&ectie'
#ake adantage of many age old !rinci!les0 guidelines and heuristics to make
the wisest decisions
'lthou!h it is essential to be familiar with a set of decision makin! tools, you must
be aware that not all decisions must be made. Some decisions are more important
than others and interestin!ly optimum decisions may not always lead to your
benefit.
In this session, we will e#plore a number of principles in re!ard with decision
makin! that you must always consider before attemptin! any of the tools you learn
in this course or others you learn anywhere else.
)ccams ?a@or
>ccam)s ra&or can be best described as follows,
/hen confronted with two com!eting theories that make e6actly the
same !redictions0 the sim!ler one is the better"
$he principle is attributed to William of >ckham, 9=
th
century "n!lish lo!ician.
>ther than its philosophical implications 4such as refutin! the e#istence of !od and
(*>)s5, when it comes to everyday decision makin! this principle effectively leads
to the followin!,
/hen you hae seeral acce!table e6!lanations for a !articular
!henomenon0 the sim!lest solution that best describes the !henomenon
without any contradiction is the !referred o!tion"
In other words, if you have carried out some research and have found two
alternative e#planations where one is %uite simple and the other is e#tremely

elaborate and involves many fields and assumptions, the simpler option is
preferred. $he name ra4or su!!ests that you cut the search space of possibilities
and leave out comple# solutions in favour of simpler ones. In short, si%plicity is
practical.
@emember, >ccam)s ra&or is used as a heuristic 4rule of thumb5 which can help you
choose between possible e#planations or eventual outcomes.
O55am9s &a:or in Disg7ise
$he principle has been e#pressed and named in many ways and has inspired
numerous variations which effectively e#plain the same idea. 1ere are a
number of common variations or namin!.
4ames
OPISS :rincipleQ 4Peep It Simple, Stupid5
O:arsimony of :ostulatesQ
O:rinciple of :luralityQ
O:rinciple of SimplicityQ
-rinci!le
O"ntities should not be multiplied beyond necessityQ
O:luralities ou!ht not be posited without necessityQ
O"ntities are not to be multiplied without necessityQ
OWhen decidin! between two models which make e%uivalent
predictions, choose the simpler oneQ
OSimplicity is the ultimate sophisticationQ 4Leonardo da <inci5
O$he simplest answer is usually the correct answerQ
O+ake everythin! as simple as possible, but not simplerQ 4'lbert
"instein5
OWe are to admit no more causes of natural thin!s than such as are
both true and sufficient to e#plain their appearancesQ 4Isaac ?ewton5
O>f two e%uivalent theories or e#planations, all other thin!s bein!
e%ual, the simpler one is to be preferredQ
Rand for Latin enthusiasts, Oentia non sunt %ultiplicanda praeter
necessitate5
O55am9s &a:or in Disg7ise
$he principle has been e#pressed and named in many ways and has inspired
numerous variations which effectively e#plain the same idea. 1ere are a
number of common variations or namin!.
4ames
OPISS :rincipleQ 4Peep It Simple, Stupid5
O:arsimony of :ostulatesQ
O:rinciple of :luralityQ
O:rinciple of SimplicityQ
-rinci!le
O"ntities should not be multiplied beyond necessityQ
O:luralities ou!ht not be posited without necessityQ
O"ntities are not to be multiplied without necessityQ
OWhen decidin! between two models which make e%uivalent
predictions, choose the simpler oneQ
OSimplicity is the ultimate sophisticationQ 4Leonardo da <inci5
O$he simplest answer is usually the correct answerQ
O+ake everythin! as simple as possible, but not simplerQ 4'lbert
"instein5
OWe are to admit no more causes of natural thin!s than such as are
both true and sufficient to e#plain their appearancesQ 4Isaac ?ewton5
O>f two e%uivalent theories or e#planations, all other thin!s bein!
e%ual, the simpler one is to be preferredQ
Rand for Latin enthusiasts, Oentia non sunt %ultiplicanda praeter
necessitate5

Pareto Princi"e
:areto principles states that,
LFM of the effects come from +FM of the causes"
$his principle, also known as 67-87 rule, was discovered by <ilfredo :areto from
his ori!inal observation of land ownership in Italy. 1e discovered that G7A of the
land was owned by C7A of the population. 1owever, further research and
observation shows that this rule is universal and applicable to many fields. *or
e#ample,
OG7A of your sales come from C7A of your clients.Q
OG7A of faults found in an electronic board come from C7A of the
componentsQ
OG7A of the world)s income is controlled by C7A of the world)s populationQ
OG7A of the software faults ori!inate from C7A of software bu!sQ
OC7A of your effort leads to G7A of your incomeQ 4'n e#tremely important
productivity principle5
When makin! decisions, always consider the :areto principles and pay the
appropriate amount of attention to each option and outcome. -rucial decisions
may lead to si!nificant outcomes which you need to consider in the conte#t of your
decision makin! process.
@emember, the principle holds when the data under observation is sufficiently
lar!e to be statistically meanin!ful. Don)t just apply the rule to everythin! hopin!
for miracles2 *or e#ample, you mi!ht wron!ly decide that a project)s development
must fit the G70C7 rule and so you only need to allocate C7A of the resources to !et
!ood results2 Instead, use the principle as an observation of a lar!e data set so you
can make strate#ically wise decisions to streamline your process and focus on the
C7A that matters most.
4otes'
$here is nothin! special about G7. It is just that most observations end up
around G7 and hence the principle is e#pressed as G70C7 rule.
It is possible to have G7097 or G70;7. $he numbers don)t have to add up to
977.
Parkinsons Law
"ar3insons 9aw states that,
/ork e6!ands to fill the time aailable for its com!letion"
It was first articulated by -yril :arkinson in the "conomist in the 9I87s when
reportin! on the si&e of bureaucracies.
When makin! decisions you many need to think of resources, plans and schedules.
(se the :arkinson)s Law to increase the efficiency of your decisions and plans.
>ther ways to e#press the law or its variations are as follows,
O$he demand upon a resource seems to e#pand to match the supply of the
resource.Q

O"#penditures rise to meet your incomeQ 4When stated this way, it becomes
similar to law of supply and de%and5
.mortance versus +rgenc#
When makin! decisions, you may need to consider a variety of tasks used to reach
a decision or e%ually need to identify and schedule these tasks as part of a
project. When processin! these tasks, you must be aware of two distinct
dimensions, i%portance and ur#ency. $hese two dimensions lead to the followin!
four %uadrants,
In practice, many tasks tend to end up in S9, ur!ent and important. "#amples are,
returnin! customer phone calls, sendin! prototype out before deadlines and so on.
$asks in S; and S= are not important. Don)t bother with tasks in S= and bin them.
's for S;, since they need to be done, but are not important, simply dele!ate
them. $hese could be postin! mails, printin! documents and so on.
When makin! decisions, focus on what matters most. .ased on these dimensions,
the most important tasks are those that fall into SC, not ur!ent but important.
"#amples are lon! term strate!y thinkin!, plannin! and so on that don)t need to be
done immediately but are just as critical with si!nificant impact on your life.
/ou should always aim to do more SC activity than any other, since by definition, it
leads to a more proactive life. $he SC tasks are usually those that are lon! term
!uidin! you towards your ultimate !oal and mission statement. .y doin! more SC,
you will effectively reduce the likelihood of S9 tasks which constantly interfere
with your life. (se this time to further spend it on SC tasks in a virtuous cycle.

Aame 'heor#
Decisions can be captured mathematically usin! #a%e theory. "ffectively, each
decision has a payoff and these payoffs can be set a!ainst the payoff of other
individuals makin! decisions a!ainst you. 6ame theory was e#tensively researched
durin! the cold war to understand the effect of decisions made on deployin!
nuclear weapons. $he subse%uent results helped many fields includin! natural
sciences as well as business decision makin!.
$he best way to e#amine this is with an e#ample, Suppose there are two countries
where one has an abundance of banana and the other has plenty of oran!es. $hese
two countries can trade with each other and both benefit from this transaction.
$his is known as a non-4ero su% #a%e. In other words, if you add the benefits of
both parties, you end up with a positive benefit which is not &ero. +akin! decision
in this case is not that difficult as the relationship will benefit both sides.
In contrast, you may have a situation where if you win you !et all the benefits and
the other party doesn)t, or if the other party wins, you !et nothin!. If you now add
up all the benefits, the result would be &ero as the benefits will cancel each other
out. $his is called a 4ero-su% #a%e. *or e#ample, cuttin! a pie is a &ero0sum !ame
since if you take a lar!er pie, others will receive smaller amounts. Tero0sum !ames
lead to conflicts and are also known to be stron#ly co%petiti-e.
' conflict can have a payoff %atri! which is illustrated below. Suppose there are
two people makin! decisions, @ed 4.old5 and .lue 4?ormal5. @ed has a choice
between 'ction 9 and 'ction C while .lue has a choice of 'ction ' and 'ction ..
' .
1 )20, 0C7 -10, E97
2 )10 , 097 )30, 0;7
*or e#ample, if @ed selects 'ction 9 and .lue selects 'ction ', @ed wins C7 and
.lue loses C7. Suppose they want to cast their votes secretly, what should they do
to win the ma#imum amount of points?
@ed looks at the matri# and follows this reasonin!, If I choose 'ction 9, I may lose
97, but if I choose 'ction C, I win either 97 or ;7. So I will !o for 'ction C. Similarly
.lue thinks that choosin! 'ction ' means losin! either C7 or 97 while with 'ction C,
at least there is hope of winnin! 97. If .lue chooses 'ction . and @ed chooses
'ction C, @ed wins ;7 and . loses ;7. $he situation !ets interestin! if .lue thinks a
bit more and tries to be deceptive. .lue may decide to choose 'ction ' instead
hopin! to only lose 097, assu%in# that @ed will choose 'ction 9. 1owever, @ed may
also anticipate this and choose 'ction 9 which means @ed wins C7 and .lue loses
C7.
's you can see both parties have to consider the other person)s choices,
aspirations and reasonin!. $he solution, as was ori!inally su!!ested by Uon von
?eumann and later e#tensively elaborated by Uohn ?ash is to use probability.

'n interestin! situation in !ame theory is prisoners dile%%a. "ffectively, these
series of e#periments and analysis show that followin! self0interest by everyone
while ne!otiatin! may lead them to sub0optimal solutions while cooperation may
lead to better results for all those involved.
$he interested reader should refer to classic works in !ame theory for further
details. ' !ood start would be en.wikipedia.or!MwikiM6ameJtheory. ' !ood book is
O(elfish GeneQ by @ichard Dawkins which e#plains !ame theory in detail and also
its si!nificance and application in nature and evolutionary strate!ies.
'he 'rage$# of the Commons
So far in this course you have been introduced to many tools to improve your
decision makin! process. 'fter all, the intention is to make decisions with
outcomes that improve your situation and is beneficial to you.
.ut is it always better to make decisions thinkin! solely about your own benefits?
It turns out that if you are the only person makin! the decision, it is best to focus
on personal benefit. 1owever, if you have a !roup of people who are armed with a
toolbo# of decision makin! tools and are capable of makin! almost perfect
decisions, then it is possible that no one may !et optimal results2 In other words, it
is possible for you to make a decision that is most ideal based on your own
circumstances and calculations, but still end up with sub0optimal results. >n post
analysis, you may discover that you deserved better despite havin! made the
perfect choice2
1ow is this possible?
$his seemin!ly parado#ical concept was first e#plored and popularised by 6arrett
1ardin in his 9IFG science essay OThe tra#edy of the co%%ons5.
$he problem is best described by an e#ample. 1ardin stated that suppose you have
a community with access to a common land for the !ra&in! of animals. Since the
resource is limited, it is to everyone)s benefit to add more and more animals to the
land and take advanta!e of the resource. $here is a lar!e incentive for people to
act selfishly. $he problem is that the pasture is sli!htly de!raded by each
additional animal. If people keep addin! animals, it will eventually e#haust the
resource and ruin everythin!. 's 1ardin stated,
:Therein is the tra#edy. ;ach %an is loc3ed into a syste% that co%pels hi%
to increase his herd without li%it& in a world that is li%ited. <uin is the
destination toward which all %en rush& each pursuin# his own $est interest
in a society that $elie-es in the freedo% of the co%%ons. ,reedo% in a
co%%ons $rin#s ruin to all.5
$he crucial fact is that one individual may !ain all the advanta!es, but the
disadvanta!e is shared between all the individuals usin! the resource.
1ence, everyone keeps e#ploitin! the resource until no one can benefit from it
anymore. 3*ree rider) is sometimes used as the terminolo!y to describe the
behaviour of such e#ploitin! individuals. *ree riders are people who consume more
than their fair share of a resource, or shoulder less than a fair share of the costs of
its production.

$ra!edy of the commons su!!ests that we should not rely on conscience as a means
of policin! the resource. @elyin! on morality favours selfish individuals over those
that are more farsi!hted which throu!h their ideal decision makin! brin! ruin to
all.
When makin! decisions, you should always be aware of the limitation of resources
and free access to such resources. In other words, just because the decision you
make is !oin! to benefit you now, it doesn)t mean it is an ideal choice. If everyone
is selfishly e#ploitin! the company resources, the company will be bust soon and
no one will be able to benefit any more.
$he conclusion is that always take steps to re#ulate access to co%%ons so that
selfish decisions made by people who access it 4such as your team members or
staff in your company5 do not lead to its ruin 4and indirectly to your ruin5.

9 %omina" Arou 'echniBue
%b&ectie'
Make o!timal decisions in grou!s by using eeryoneHs in!uts and !reent
indiiduals from dominating the decision making !rocess
Suite often you may need to make decisions in !roups. In this and subse%uent
sessions, you will be introduced to a number of techni%ues that will help you !et
the best out of your meetin!s and take advanta!e of everyone)s uni%ue inputs.
'hinking in Arous
Suppose a !roup of people !et to!ether to make a decision. -an they always make
an optimal decision? "#perience shows that sometimes 4in fact more often that
desired5 the !roup interaction actually reduces the %uality of the decisions made.
$here are many reasons behind this phenomenon. Some are as follows,
$he !roup criticise each other continuously and novel ideas !et killed before
they have a chance to be e#amined.
' senior member or a dominant individual imposes his or her opinion on
others.
Uunior members may feel shy to e#press their views in fear of lookin! stupid
or simply !ettin! a backlash from seniors.
$he !roup may fall into #roupthin3. "veryone is so ea!er for the !roup to
reach consensus that the decision is made without thorou!h analysis.
+embers avoid presentin! views which they think mi!ht be outside the
comfort &one of the !roup.
Is there a way to avoid these issues when thinkin! in !roups? It turns out that by
usin! a systematic method to isolate decision makin! and emotional setup of the
!roup you can si!nificantly increase the efficiently of !roup decision makin!.
$here are a number of tools developed specifically to address these issues and also
help the !roup to come up with new ideas rather than fallin! back on what they
already know.
Let)s start with the 'o%inal Group Techni/ue.

%omina" Arou 'echniBue
$his techni%ue commonly abbreviated as ?6$ helps to overcome problems
encountered when people attempt to make decisions as a !roup. In particular, it
addresses a common problem in !roup thinkin! where the votes of the lar!est
!roup or most talkative individual come to influence the outcome
disproportionately. ?6$ helps to normalise the process of votin! so everyone)s
views are heard and their votes are counted.
When to +se?
(se ?6$ when,
/ou suspect some members mi!ht not fully participate.
/ou want to !enerate as many ideas as possible.
/ou have individuals who are more dominant than others.
/ou have a mi# of senior and junior members.
/ou have introverts in the !roup who prefer to think in silence, but are
capable of comin! up with !reat solutions if !iven a chance.
$he problem under consideration is seen as controversial and you e#pect
heated debates which may lead to conflicts.
/ou have some new members in the !roup who mi!ht be shy or reluctant to
talk over others to e#press their own opinion. @ecent !raduates usually brin!
wealth of novel ideas to a company thou!h they can be hesitant to !o
a!ainst the norms fearin! potential backlashes.
How to +se?
*ollow these steps to carry out ?6$,
Ste! *' Identify the !roblem.
o $he !roup is introduced to each other and the problem is defined.
$his step should not be used to discuss potential solutions instead it
should be used to make sure everyone understands the true problem.
$o streamline the process, a facilitator should be nominated. $he
problem can be distributed on paper 4memo or email5 to all
individuals in the !roup to prevent premature debates.
o Allocated ti%e ) 17 %inutes
Ste! +' 1enerate ideas silently.
o In this step, individuals should work in isolation and write their ideas
and solutions on paper. $hey should !enerate as many ideas as they
can think of. 6roup members are not allowed to debate or share their
ideas with each other.
o Allocated ti%e ) 17 to 37 %inutes
Ste! ,' 1rou! discussion.
o $he facilitator asks each member in turn to present his or her
solution to the !roup. >thers are encoura!ed to seek further details if
necessary to fully understand the proposed solution. $he facilitator

should make sure that all views are !iven e%ual time and everyone is
heard. $he discussions should be free of criticism and jud!ement.
o 's a result of these discussions, new ideas mi!ht be !enerated which
should be captured and recorded in the pool of all possible solutions.
o Duplicate solutions are removed so that by the end of this session, all
the representative ideas are captured systematically.
o Allocated ti%e ) 37 to =7 %inutes
Ste! 7' >oting.
o ' desi!nator is identified for each solution. "ach participant ranks the
solution as 9
st
, C
nd
, ;
rd
and so on.
o >nce all the rankin!s are recorded, the facilitator collects the
proposed rankin!s from everyone and calculates a total by addin! the
ranks for each solution.
o $he solutions are sorted in order of these totals from low to hi!h. $he
lowest total is the best ranked solution and can be chosen as the
ideal solution.
o +any variations e#ist in this step where the total ranks may identify
potential solutions that mi!ht become the ultimate solution with
further work or fine tunin!.
o Allocated ti%e ) 37 %inutes
's you can see, this method encoura!es everyone to present their views without
fear of others so all views are heard. In addition, because solutions are presented
individually without interference from others, members will not be afraid of
creatin! conflicts. $he votes will fully capture the opinion of the participants
without the risk of interference from others or the risk of upsettin! someone else
throu!h a heated debate.

1: De"hi Metho$
%b&ectie'
2se a structured method to collect and !rocess o!inions of a !anel of e6!erts
while aoiding common grou! discussion issues
When makin! decisions, sometimes you mi!ht need to make a forecast. *orecastin!
may involve a number of e#perts who will provide their opinion on a variety of
fields and work to!ether corporately. 's you have seen, unstructured !roup
thinkin! can lead to a suboptimal outcome and when it comes to forecastin!, this
can have !rave conse%uences. In business, !ettin! your forecastin! wron! is like
!oin! throu!h a slow death and not knowin! where you have been hit. In this
session, you will be introduced to a powerful techni%ue popular in the business
world that helps you increase the accuracy of your forecastin! and decision makin!
substantially when makin! decisions as a !roup.
Histor#
$he Delphi method was developed durin! the cold war and was used to forecast
the technolo!ical pro!ress of warfare. "ffectively, the system seeks the opinion of
e#perts in the field usin! a structured approach and facilitates information flow
while allowin! e#perts to remain anonymous 4if desired5 so they can present their
views without fear of criticism and jud!ement.
When to +se?
(se this techni%ue when,
/ou want to allow all e#perts to present their views freely
:articipants want to remain anonymous
:articipants want to correct themselves easily so they are encoura!ed not to
stick to their ori!inal idea even when they realise they were wron!
How to +se?
(se the followin! steps to apply the Delphi +ethod,
Ste! *' Identify a facilitator.

o $he facilitator is in char!e of the process and coordinates all the
activities in the Delphi +ethod.
o $he facilitator defines the problem and prepares %uestionnaires and
surveys.
o ' panel of e#perts are identified who will participate in the
forecastin! or decision makin!. $he panel is either identified by the
facilitator or the facilitator is informed who will participate in this
process.
Ste! +' Send @uestionnaires.
o $he facilitator sends these %uestionnaires to the panel of e#perts.
$he e#perts proceed to fill them in and send them back to the
facilitator.
o $he participants usually remain anonymous, so the process of sendin!
and receivin! these %uestionnaires should allow this anonymity. $hese
days, a popular method is to use online %uestionnaires with lo!in
credentials.
Ste! ,' -rocess collected res!onses.
o $he facilitator collects all the responses and processes them by
removin! the duplicates and summarisin! the consensus.
o $he facilitator sends back this consensus to the e#pert as the current
!roup consensus.
o $he e#perts are encoura!ed to comment on the consensus, modify
their own positions or !enerate new ideas. $hese ideas are recorded
by the e#perts and sent back to the facilitator for the ne#t round.
Ste! 7' 3e!eat until criteria is met.
o $he facilitator repeats the process in as many rounds as necessary
until a criterion is met. It is believed that the ran!e of answers is
reduced in each round until the !roup conver!es on a correct
solution. $he criteria to stop the rounds can be,
@eachin! a fi#ed number of rounds
-onver!ence of consensus
Stability of results
+ean or median of final results reachin! specific presets
It is possible that a consensus mi!ht not be reached. *or e#ample, there could be
two schools of thou!ht and each vote for its own preferred solution. $he facilitator
can conclude that there are a number of potential solutions so that the e#perts
know that they need to work towards a common solution if they want to reach a
common consensus, otherwise there will be no a!reement.
!$vantages
$his method has the followin! advanta!es,
It structures the information flow. (nrelated content is filtered out
efficiently, similar ideas are !rouped to!ether for consistency and solutions
are evaluated easier.
$he !roup is free from emotional discussions seen in unstructured !roup
discussions.

:articipants are encoura!ed to revisit their own positions and chan!e it if
necessary. .ecause the process is anonymous, it is much easier for e#perts
to chan!e position without worryin! about their e!o.
:articipants remain anonymous even after a final consensus has been
reached. $his allows e#perts to freely e#press opinion and not to be
affected by authority or ridicule.
$he process reduces the herd mentality seen in !roup discussion where most
of the talk seems to be around a few ideas that were initially proposed and
the !roup as a whole seem stuck in one corner of the search space.
.ecause participants may not know what others will su!!est, the need to
conform to !roupthink is also reduced, allowin! !eneration of more ideas.
In !eneral, when usin! any decision makin! method, be aware of pitfalls. -are
must be taken to use this method correctly to !et optimum results. $he choice of
e#perts is important in evaluatin! the %uality of their consensus. If they are
i!norant about certain topics which is not brou!ht into the discussion, the Delphi
+ethod can only increase their confidence in their i!norance. 'n amateur outsider
mi!ht be able to beat the e#perts) forecasts easily due to e#tra knowled!e that
mi!ht not have been considered in the !roup. In any case, the method brin!s many
advanta!es over unstructured !roup discussion which makes it an ideal tool for
certain applications.

11 ,te"a$$er 'echniBue
%b&ectie'
2se a sim!le techni@ue to encourage grou! !artici!ation and increase the
likelihood of free e6!ression of ideas
's you know, unstructured !roup thinkin! can easily lead to suboptimal results. /ou
have e#plored a number of techni%ues to use in !roups to help you facilitate the
process and increase the %uality of your decisions. In particular, you always want
to encoura!e those members who mi!ht participate less or are unwillin! to present
their ideas in fear of causin! conflicts. Some others in contrast mi!ht be dominant
and want to take over the decision makin! process.
$he techni%ue described in this session, known as the (tepladder Techni/ue, can
help you achieve this. @esearch shows that !roups that use this techni%ue
outperform those who use conventional methods instead.
When to +se?
(se this method when,
/ou have a small !roup of = to 8 people.
/ou want to encoura!e everyone to talk and be heard
/ou want to reduce the effect of dominant personalities or authority
/ou need to carry out a face0to0face discussion
/ou are communicatin! with audio conferencin! or video conferencin!.
@esearch shows that this method increases the %uality of discussions made
usin! these kinds of communication systems.
How to +se?
(se the followin! steps to use this method,
Ste! *' Introduce the !roblem before the meeting.
o Introduce the problem to all participants $efore meetin! with each
other. $his could be a separate !atherin! some time before the !roup
thinkin! meetin! or it could be throu!h distributin! %uestionnaires or
memos. 'sk the participants to think about the problem and come up

with solutions they can present to others in the meetin!. ?otice that
this is not just sendin! a memo out. /ou re%uire the participants to
have thou!ht about the solutions and to brin! supportin! resources to
the meetin! to present their ar!ument.
Ste! +' Form a core grou!.
o >n the day of the meetin!, select two people to form a core #roup.
'sk them to discuss the solution with each other.
Ste! ,' .dd a !erson to the core grou!.
o 'dd a third person to the core !roup and ask him to present his case
to the !roup $efore hearin! what the current !roup thinks. ?e#t, the
core !roup presents their ideas and all three discuss the options
to!ether.
Ste! 7' .dd another !erson to the grou!.
o 'dd another person to the current !roup and repeat the process one
person at a time. +ake sure that the timin! is fair every time a new
person is added.
Ste! 8' $ontinue to 3each $onsensus.
o $he !roup carries on discussin! the options until a consensus is
reached.
's you can see, the method helps the participants to avoid !roup think and
encoura!es constructive discussion.
*or best results, use the Stepladder $echni%ue with a small !roup of = to 8 people.
's the number of people in a !roup is increased 4beyond I or 975, reachin!
decisions becomes e#ponentially more difficult due to the necessary increase in
interaction and increased number of people to satisfy.
Di*erences with the De"hi Metho$
$he Stepladder $echni%ue may appear similar to some e#tent to the Delphi +ethod
you saw earlier.
$he followin! are a number of differences between the two methods,
$he Stepladder $echni%ue is %uicker than the Delphi +ethod.
$he Delphi +ethod is suitable for a lar!e number of people while the
Stepladder $echni%ue is ideal for smaller !roups.
$he Delphi +ethod is suitable for major decisions and forecasts where
formality of the process is important. $he Stepladder $echni%ue can be used
for simpler problems.
$he Delphi +ethod re%uires a facilitator who is in char!e of the process. It
also re%uires a lot more formal facilitation such as sendin! and receivin! the
anonymous %uestionnaires. $he Stepladder $echni%ue does not re%uire a
facilitator and all members are treated e%ual. $he initial core !roup and the
se%uence to add participants can be randomised as well to make the process
completely fair.
$he participants in the Delphi +ethod do not know each other and the
solutions are declared anonymously. In the Stepladder $echni%ue,
participants hold face0to0face discussions and the information flow is no
lon!er controlled throu!h a facilitator.

?eferences
-ovey S., 49IGI5 :> ?a$its of hi#hly ;ffecti-e people5, WS .ookwell.
Dawkins, @. 49IGI2 :(elfish Gene5, >#ford :aperbacks Cnd @evised edition, IS.?,
IKG079ICGF7ICK.
De .ono, "., 49II85 :(erious +reati-ity@ Usin# the "ower of 9ateral Thin3in# to
+reate 'ew .deas5, 1arper-ollins :ublishers Ltd, IS.?, IKG0777F;KI8G=
1ardin, 6., 49IFG5 :The Tra#edy of the +o%%ons5, Science, <ol. 9FC, ?o. ;G8I
4December 9;, 9IFG5, pp. 9C=;09C=G.
Poch, @. 4C7795 O$he G7MC7 :rinciple, $he Secret of 'chievin! +ore with LessQ,
?icholas .realey :ublishin! 4London5.
>rpen, -. 49II85 :Usin# the stepladder techni/ue to i%pro-e tea% perfor%ance5
$eam :erformance +ana!ement, 94;5, C=0CK.
:arkinson, -.?., 49II;5 :"ar3insons 9aw5, .uccaneer .ooks, IS.?, IKG098FG=I7989
:opper, P. 49IIC5 OThe 9o#ic of (cientific Disco-ery5& @outled!e, C
nd
ed., London.
pp. 9C9H9;C. IS.?, IKG07=98CKG==K
@owe V Wri!ht 4C7795 :;!pert Apinions in ,orecastin#. <ole of the Delphi
Techni/ueQ. :rinciples of *orecastin!, ' 1andbook of @esearchers and
:ractitioners, .oston, Pluwer 'cademic :ublishers.
@ussell, S., ?orvi!, :. 4C77;5 :Artificial .ntelli#ence@ A odern Approach5, :earson
"ducation, IS.?, IKG079;7G7;7C;

Workbook DecisionMaking

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1.1 What is Decision?

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