Decision-Making Toolbox 1

Decision-Making Toolbox

Tools and Techniques for Optimized Results

Chenista Rae Straubel

Prof. Ed Robinson
MGT 350
November 1, 2004
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Decision-Making Toolbox

Tools and Techniques for Optimized Results

Abstract

As a young single (divorced) parent, my mother would remind me always to work

smarter not harder – make the best use of your time and throw the garbage out! As a

software engineer, web developer, and database administrator, I apply what is called

GIGO to my code (and to data) – garbage in, garbage out. This concept helps me to

remember to avoid spaghetti code (inefficient and cumbersome code) by using methods

and behaviors that streamline processing making the program more efficient, reliable,

durable, and thus dependably.

In my management experience portfolio I have experience facilitating time and

self-management seminars and workshops for a company out of Chandler, Arizona,

Productivity Plus. The impressive training materials provided by the company are

designed to help individuals and management teams focus on creating harmony and

balance in life consistent with personal values. It is believed that individuals equipped

with these life-management skills/tools are better able to cope with and to meet life

challenges. The techniques encourage a more cooperative corporate culture and

increase job satisfaction. It is a win-win solution for both participants and for their

organizations.

The techniques taught in the seminars and workshops emphasize the Pareto

Analysis which is the bases or foundation for Pareto Principle. Using the Pareto

Analysis, seminar / workshop participants identify and select areas of life to change

based upon their personal values. Identifying values and ranking them in order of
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importance provides participants with a meaningful perspective of life and how their

actions and decisions can be used to create balance. Participants are taught to focus

on those actions and decisions that will reap greater benefits based upon values. The

goal of the seminars and workshops is to teach individuals to focus their attention on

that 20 percent that will render an 80 percent return (in theory).

This paper discusses techniques you can apply to your life not only to make a

decision, but also to decide when and if a decision actually needs to be made (no

decision is a decision). Readers will find these tools useful when seeking inner

harmony and balance in their life. It is believed that seeking this balance in life leads to

reduced stress levels and hence, a better, more rewarding, and quality life. By applying

these techniques in a corporate culture, organizations create a sense of cooperation

and a mutuality of respect for diversity of viewpoints. These techniques are not for

everyone. If you are a person who does not need or require a balance in your life, or an

organization that does not encourage unity and teamwork, you can use this information

as a tool to understand those of us who do.

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Pareto Principle [Law] (80/20 Rule)

Simply, the Pareto Principle states that 20 percent of causes are responsible for

80 percent of the effect. In the business setting the principle is applied as follows: 20

percent of all the customers actually generate 80 percent of the sales OR that 80

percent of merchandise sold comes from 20 percent of your vendors, etc. The principle

helps you to identify the most important problem to solve by illustrating the severity of

the problem in real life numbers or values!

The principle was an observation by an Italian economist Vilfredo Pareto who

applied the technique to describe unequal distribution of wealth in society. Later

economists and business pioneers recognized the principle at work in their own fields of

expertise referring to the phenomenon as the “vital few and trivial many”. Dr. Joseph

Juran later coined the phrase “Pareto Principle” which is how we refer to this experience

today.

In time management the principle is used to determine IF you should deal with an

issue or decision, delegate the decision or issue to someone else, or disregard the

issue because it is so trivial it doesn’t matter what the resolution is – it isn’t going to

affect your life or the life of others in any meaningful way. In other words, there is no

value in resolving it. One can logically deduct that time is most effectively spent when it

focuses on the few (20 percent) of that which creates the many (80 percent) of return.

For instance, in creating life’s balance, you spend 80 percent of your time and focus on

that 20 percent of the issues that creates an 80 percent return. In theory, 80 percent of

your time should be spent doing what is important: addressing the top 20 percent of the

issues that is generating an 80 percent return.

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The principle can be used to evaluate business processes (customer or

employee feedback) as well as people (productivity and effectiveness) to establish a

priority (hierarchy) of needs based upon (values) satisfaction (customer or employee) or

for plotting a course of action to see a rapid return on an investment (resources of time

or money). It is important to use the principle wisely. “Helping the good become better

is a better use of your time than helping the great become terrific.” states F. John Reh.

In creating balance and harmony, first individuals (or organizations) identify their

core values (what is important to them). The values are rated in order of importance

(which values you would give up for the sake of another). After identifying and rating

values, list the changes you would like to make grouping related items and then classify

the changes based upon the values you have identified as important. You then focus

on changing those areas of most value to you (items listed in your most important core

value) and tackle the list in progressive order, most important to least. The applied

theory then states that as you change those items with the highest score, you reap the

greater rewards or benefits. The items with the least scores will probably never be

addressed because the solutions (burden) cost more or outweigh the benefits

(blessings).

The steps to using this tool include:

1. Identifying and listing problems and available options / solutions

2. Group options / solutions that are related to or resolve the same larger

problem(s)

3. Score each group

4. Begin with the group that represents the highest score

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Decision Tree Analysis

Decision Trees form a “balanced picture” of risk and reward associated with a

course of action. The tool can help you chose options after investigating “likely”

outcomes. When used with Pareto Principle, the risks and rewards are evaluated at the

beginning of the process when you identify and list problems and solutions. Using the

Decision Tree at the beginning of and in unison with the Pareto Principle helps you

identify risks that you may not be willing to take (betrayal of values creating an

imbalance) OR the opposite, identify greater rewards and thus classify solutions more

closely related with your values.

Decision Trees are useful tools because:

1. Problems are clearly identified and options are challenged

2. Consequences are fully analyzed and weighted appropriately

3. Value and probability are visually quantified

4. Existing information, historical data, and best guesses are used

On a Decision Tree diagram, NODES are squares that represent decisions OR

circles that represent uncertainty. To use the Decision Tree, draw a small square on

the left side of a large piece of paper (I use legal size copy paper) to represent the

problem or decision that needs to be made. Represent solutions by drawing small lines

from the square to the right hand side of the paper writing the solution on the applicable

line. Leave plenty of room for expansion. At the end of the solution line, consider

possible results or outcomes and represent each with a circle (uncertainty) or square

(decision) writing out the factor above the respective figure illustrated. Leave complete

solutions blank. Follow the same process for all squares on the diagram: draw lines
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representing options and include the proper notation on the lines. For circles on the

diagram: draw lines representing possible outcomes including notations. Continue this

process until you exhaust possible options or outcomes to the original decision.

Review your diagram by brainstorming each square and circle to give you the

most complete and accurate diagram of considerations. Evaluate each option based

upon its worth to you either monetarily or intrinsically (based upon values). Inquire as to

the cost (what you are willing to give up – not always money) as compared to the

benefits (what you will reap – not always money). Examples of intrinsic corporate

values may be that a decision may affect the 20 percent of the customer (or vendor,

investor, employee) base that generates 80 percent of the corporate return (profit or

good name). The cost may be a sacrifice in the confidence of the board of directors (or

investors) or undermine the interests of a loyal customer base. Sacrificing your good

name cannot be measured by dollars or by time. Be sure you know and consider the

TRUE value AND cost of your options and outcomes!

Calculate your Decision Tree:

1. Value: Assign a cash value or score to outcomes (What is it worth?)

2. Probability (uncertainty): Estimate the probability of each outcome in

percentage (totals must equal 100 percent for each circle (use historical data

when available)

3. Calculate: Working from right to left, complete the calculations by applying the

probability to the value and record the result on each square

a. Multiply the value of the outcome by percent of probability

b. Place the calculated value of each node in a box above the node
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4. Benefit: Note the cost of each option on the appropriate decision line (from

historical data if available, if not – estimate the cost as closely as possible)

and subtract the cost of the outcome from the anticipated value. This figure

represents the estimated NET benefit and the value of the respective decision

node.

a. Sunk costs are not used in the Decision Tree analysis (amounts

already spent)

5. Select the decision node with the greatest benefit or value.

Conclusion

Common sense and critical thinking will always be the greatest asset available in

your “decision-making toolbox”. Different problems may require new tools and a fresh

approach. A wise manager and decision-maker operate best in a learning corporate

environment that values and encourages the exploration of new and better ways to find

solutions. Experience helps estimate the probability of success, but don’t discount your

gut feelings because they cannot always be quantified in measurable results. Apply

these feelings weighted as you would any other probable outcome or option.

Win-win solutions create the most harmonious and productive environment

leading to a desirable corporate culture based upon respect and mutuality. Be sure

your weighted measures consider moral and ethical values as well as monetary

rewards.
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References

Reh, F. John. Pareto’s Principle – The 80-20 Rule. Primedia Company. About, Inc.

Retrieved November 1, 2004,

http://management.about.com/cs/generalmanagement/a/Pareto081202.htm

Manktelow, James (August 2003). Pareto Analysis – Selecting the Most Important

Changes to Make. Mind Tools Ltd of Signal House, Station Road, Burgess Hill,

West Sussex, RH15 8DY, United Kingdom. ©Mind Tools, 1995-2004. Retrieved

November 1, 2004, http://www.mindtools.com/pages/article/newTED_01.htm

Manktelow, James (August 2003). Decision Tree Analysis – Choosing between Options

by Projecting Likely Outcomes. Mind Tools Ltd of Signal House, Station Road,

Burgess Hill, West Sussex, RH15 8DY, United Kingdom. ©Mind Tools, 1995-

2004. Retrieved November 1, 2004,

http://www.mindtools.com/pages/article/newTED_04.htm