Lecture 5

Support for decision-making, business

planning & resource allocation

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Outline
1.  Basic issues in management decision-
making
2.  Types of decisions and who makes them
3.  Decision-making and prioritization (allocation
decisions)
4.  Decision-making and change (Go : No-go)

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Decision making involves making Choices

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Decision making and choices

Source: wikipedia.org
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
Location of decision-making

Source: EIRMA Working Group 47 (1995)

Courtsey: D. Twigg (B&M)

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Decision making skills and techniques
•  We use our decision making skills to solve problems
by selecting one course of action from several
possible alternatives.
•  Good decision making techniques:
1.  Identify the purpose of your decision.
2.  List different possible choices.
3.  Evaluate each choice in terms of its consequences.
4.  Determine the best alternative
5.  Put the decision into action
6.  Evaluate the outcome of your decision and action steps

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
http://www.highways.gov.uk/business/20954.htm
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
 Based Based on Based on
Based on analysis of
clearly vision,
past the situation
specified foresight,
experience (using rational
rules tools)
LT strategy

http://www.highways.gov.uk/business/20954.htm

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Tools for Decision-Making

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Tools for Decision-Making
•  Urgent/Important •  Force Field Analysis
•  Flow Charts •  Affinity Diagrams
•  Run Charts •  Tree Diagram
•  Pareto Charts •  Interrelationship
•  Fishbone Diagrams •  Matrix Diagram
•  Scatter Diagrams •  Six Hat Thinking
•  Pie Chart
•  Control Chart

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Prioritization
•  There are always more activities than we can handle
at same time
•  Prioritizing is about making choices of what to do and
what not to do.
•  It is our focus on what is important at the expense of
lower value activities.
•  Prioritizing principles can be applied to both planned
and unplanned activities.
•  The important, or high priority, tasks are the tasks
that help us achieve our long-term goals or can have
other meaningful and significant long-term
consequences.

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Prioritization scale (example)
•  High
–  a mission critical requirement; required for next
release
•  Medium
–  supports necessary system operations;
required eventually but could wait until a later
release if necessary
•  Low
–  a functional or quality enhancement; would be
nice to have someday if resources permit

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Urgent/Important matrix

•  This tool helps us to filter tasks as per

their urgency and importance. Urgent is
something that needs attention –“NOW”

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
 Urgent/Important matrix
Important
high low

high Essential/crucial Do later, or delegate

Urgent

low Plan this activity Don’t do

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Pareto Principle
•  Pareto principle is a prioritization tool which states
that:
–  80% of our revenue comes from 20% of our customers.
–  80% of our success comes from 20% of our effort.
•  Rule states that 80 percent of our typical activities
contribute less than 20 percent to the value of our
work.
•  If you do only the most important 20 percent of your
tasks you still get most of the value.

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Pareto Principle - hypothetical example

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Prioritization of risk/return
•  Alternative actions have different degrees of risk/
return
•  Risk has to be evaluated in conjunction with
probability of future outcomes/payoffs
•  Prioritisation means identifying and choosing the
‘best possible’ outcome - not necessarily the one with
min. risk or max. return
•  Tools:
–  Grid or paired-comparison analysis
–  Decision trees
–  Root-cause analysis (RCA)
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
Grid Analysis

Factor 1 Factor 2 Factor 3 Factor 4

weights w1 w2 w3 w4

Option 1 S1,2 x w2 Value 1

Option 2 s2,3 x w3 Value 2

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Tree-diagram decision-making model
Example: Decision
on construction of a
factory

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
 Root-Cause Analysis (RCA)

•  Extensively used in problem-solving

and quality management
•  Equally useful in planning and
resource-allocation

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Fishbone
diagrams

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
 Kepner-Tregoe Matrix
Strategic
Requirements
(Must have)
Req. 1 Req. 2
Weight 1 Weight 2
Alternatives Rank
Obj. 1 c1 x w1 c1 x w2 Alt. 1=sum( + ) 2
Operational
Objectives Obj. 3 Alt. 3 1
(Want to Obj. 4 Alt. 4 5
have) Obj. 5 Alt. 5 6
Obj. 6 Alt. 6 3
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
Go:No-Go Decisions

•  NPV/Cash-flow
•  Cost-benefit analysis
•  ‘What-if’ analysis
–  Decision trees
•  Force-field analysis (also change
management)

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Force Field analysis (Lewin)

•  The Force Field analysis is a graphical

tool for supporting decision making. It
can be used equally by individuals or
teams.
•  Using a simple graphical model and
having identifying the drivers and
restraining forces

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Force-field analysis model

Driving Restraining forces

forces

Lecture 5 Mgmt. Methods &Lewin (1947)

Tools (872N1)
© Aashish Velkar 2011
Elements
•  Driving forces
–  those forces affecting a situation that are pushing
in a particular direction. Those forces which are
supporting of a stated goal or objective. They tend
to initiate a change and keep it going.
•  Restraining forces
–  Those forces acting to restrain or decrease the
driving forces. These may include apathy, hostility,
and poor maintenance of equipment.

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
A process

1.  Define the target of change

2.  Identify which are driving and
restraining forces
3.  Analyse the forces to identify which
can be changed
4.  Action plan on what can be changed

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Exercise
•  You/your team has to decide whether to
make (or not) the planned upgrades to your
factory with new equipment.
1.  Identify the driving forces
2.  Identify the restraining factors

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011
Lecture 5 Mgmt. Methods & Tools (872N1)
© Aashish Velkar 2011
Summary
•  Different ways of making decisions (past
experience, rules, rational analysis, etc.)
•  Different types & levels of decisions
(prioritizing, go:no-go, etc.)
•  Tools are only effective if the decision
(choices) are clearly defined, and the
responsibility for decision making is clearly
recognised.

Lecture 5 Mgmt. Methods & Tools (872N1)

© Aashish Velkar 2011