A reduced failure rate therefore leads to a significant improvement in the results of the respective companies. 11shows the application of the decision-making procedure presented in Part II to a real decision-making situation, and thus illustrates the methodological recommendations.
Decision Problems and Decision-Making Procedures
Notion of Decision Problem
He must try to minimize the discrepancy between the current situation and the target situation (see Sanders1999, pp. 7 ff.). However, the difference between the current situation and the target situation is not in itself a decision-making problem.
Types of Decision Problems
Decision-making problems arise only when a person or a group of people - both called "actors" in decision-making methodology - has a conscious idea of the desired state. Depending on the degree of difficulty of the problem - dimension (1) - we distinguish between simple and complex decision problems.
Ways to Solve Decision Problems
The book can therefore be classified as prescriptive decision theory (see Ga¨fgen1974, pp. 50 ff.). In this case, one can speak of descriptive or explanatory decision theory (see Ga¨fgen1974, p. 52).
The Functions of Goal and Problem-Finding Systems in the
Unlike goal systems, problem-finding systems do not present a necessary condition for problem detection. From a practical point of view, however, they represent important instruments for the reliable and early identification of decision-making problems.
Goal Systems
As the following figure (adapted from Raffe'e and Fritz 1990, p. 10) shows, the 144 analyzable questionnaires reflect the population with respect to industry relationship quite well. This means that the majority of companies take a long-term perspective on the goal of generating profits (see Raffe'e and Fritz 1990, pp. 16ff.).
Problem-Finding Systems
To illustrate this, Insert 3.2 presents the early warning indicators of Parfitt and Collins (1968, pp. 131 ff.). Early warning systems usually generate significant costs to obtain information, whereas accounting-based problem detection systems can rely heavily on existing information.
Sequence of Events in Decision-Making Procedures
The decision situation includes all situation areas that are relevant to the decision. Mordasini takes care of the ordering, coordination of installation and inspection of the new lathe.
Requirements of a Rational Decision-Making Process
Rationality does not refer to the success of the chosen and realized option; rather, it refers to how thoroughly and systematically the decision-making process is carried out. The goal orientation requirement for formal rational decisions – feature (1) – affects all essential aspects in the decision-making process.
Support of Rational Decision-Making by Management
On the other hand, practical normative management science proposes decision-making procedures that the actor can apply to deal with decision problems. Finally, there are representatives of business administration who are responsible for the practical-normative vision of science.
Notion of Decision-Making Procedure
Dimensions of Decision-Making Procedures and Their
Types of Decision-Making Procedures
Since two categories of procedures can be distinguished based on both the content scope and the application conditions/solution quality, we are dealing with a total of four types of decision-making procedures. More sophisticated approaches to the formation of categories of decision-making procedures exist in the literature (e.g. Fischer 1981, p. 297; Streim 1975, p. 151).
Comparison of Heuristic and Analytic Decision-Making
- Introduction
- Example of a Specific Heuristic Decision-Making
- Example of a General Analytic Decision-Making
- Example of a Specific Analytic Decision-Making
- Comparison of the Three Examples
A General Heuristic Decision-Making Procedure
Value of a General Heuristic Decision-Making Procedure
Before giving an overview of the proposed procedure, the advantages and limitations of a general heuristic decision-making procedure should first be shown. However, the less the given problem corresponds to the problem underlying the specific procedure, the better the overall heuristic decision-making procedure works.
Proposed Sequence of Steps
For example, the problem analysis can yield a sub-problem A, parallel to two other sub-problems B1 and B2, which are themselves in a hierarchical relationship. With two consecutive sub-problems it may happen that no satisfactory solution is found during the processing of the second subordinate sub-problem.
Brief Explanation of the Steps
This overall evaluation of options can be performed summarily or with an analytical approach.
Basis of the Procedure
This knowledge was incorporated into the design of the proposed general heuristic decision procedure. These aspects are also taken into account when designing the general decision-making procedure.
Overview of the Chapter
Verifying the Discovered Decision Problem
Whether the observed difference between the target situation and the current situation is based on reliable information. In such cases, the target situation and the current situation can usually only be vaguely described.
Problem Analysis
- Introduction
- If Possible: Framing and Structuring the Decision
- Determining the Problem Causes in the Case of a
- Confirming the Opportunity in the case of an
- Defining Sub-problems and Determining Their
The main reason is the different temporal reference of the considerations: the causes of a threat problem lie in the past. Secondly, if the order of tackling sub-problems is not determined by actual interdependencies, the urgency of the sub-problems is taken into account.
Overview of the Chapter
Developing Solution Options
- Introduction
- If Necessary: Determining Boundary Conditions
- If Necessary: Gaining an Overview of the Solution
- Developing Few, but Significantly Different Options
Good coverage of the solution space does not mean an enormous number of possibilities. At the same time, the quality of the solution selected in step 7 increases only slightly.
Determining the Decision Criteria
- Introduction
- Clarifying the Pursued Goals
- Fixing One or Several Criteria Per Goal
- Eliminating Overlappings
The decision criteria are determined in step 4 in three substeps, as shown in Figure 8.4. Depending on the decision criteria, the consequences of the options can be measured using a ratio scale (eg “investment expenditure” for evaluation.
Determining Environmental Scenarios
- Introduction
- Clarifying the Need for Environmental Scenarios
- If Necessary: Developing Few, but Significantly
- If Possible: Determining Probabilities
If there are uncertain environmental variables: Do the uncertain environmental variables influence the ranking of the options? Normally, there are few environmental variables that are uncertain and at the same time have a major influence on the ranking of the options.
Determining the Consequences of the Options
- Introduction
- Determining the Decision Matrix
- Determining the Quality Level of the Consequences
- Determining the Consequence Values
Determining the consequences of the options constitutes step 6 of the general heuristic decision-making process. A univalent decision problem occurs when the evaluation of the options is done on the basis of a single decision criterion.
Introduction
In the case of a decision in polyvalence and risk, the maxim for overcoming polyvalence is combined with the maxim for overcoming risk. Finally, decisions under polyvalence and uncertainty need a combination of maxims for overcoming polyvalence and maxims for overcoming uncertainty.
Decision Maxims for Overcoming Polyvalence
- Utility Value Maxim
- Quasi-Univalent Decision Maxim
It is recommended to choose the value “1” as the sum of the utility values of a consequence type. The sum of the utility values of a consequence type is 1. The consequence types are then weighted.
Decision Maxims for Overcoming Risk
- Expectation Value Maxim
- Utility Expectation Value Maxim
- Problems with the Application of the Decision
In the second step, the utility values are then transformed into the expected utility values of the options, in the same way as was done for the expected value. These five utility values can now be used to calculate the expected utility values of the options in the original decision problem.
Decision Maxims for Overcoming Uncertainty
Finally, the actor decides in favor of the option where the highest possible regret is the lowest. The zero for option A is the best of the lowest consequence values of the three options.
Combining Decision Maxims to Overcome Polyvalence
Starting first with the decision matrix, uncertainty is overcome using the maxim of equal probability. Discounted cash flow is weighted at 0.67 and job creation in Poland at 0.33.
Evaluation of the Decision Maxims
The third figure shows the utility values, the weighted utility values and the total consequences of the three options. It does not make sense for a risk-averse actor to miss opportunities to profit from option A in other situations simply because the worst-case scenario is 1% worse for the option.
Introduction
Eliminating Irrelevant Options
Technological profit Accumulated profits over the next five years in Swiss francs Project costs.
Choosing Whether to Proceed Analytically or Summarily
If an actor cannot make a clear decision based on a summary evaluation of the options, he can still proceed analytically to identify the overall consequences of the options and compare them. If the actor is a group, the choice of procedure may be influenced by the corporate culture.
Establishing the Overall Consequences or Determining
In practice, the decision to use an analytical or a summary procedure does not depend only on considering the advantages and disadvantages of the two approaches. If the actor is an individual, it will also depend on his temperament and his attitude towards analytical methods.
Making the Decision
From a practical point of view, it is important that the decision-making procedure ends with a clear decision. For those involved in the decision-making process and for those affected by the decision, it is important to know whether a decision has been made and how it was arrived at.
Initial Situation
Production planning Forestry vehicle assembly Road maintenance vehicle assembly Vehicle assembly Sports field + golf course Facility maintenance After sales services.
Verifying the Discovered Problem
Problem Analysis
Augsburger does not believe that investment is the way forward: in addition to equity of 45 million Swiss francs on the balance sheet – effective equity is at least 60 million – the group has debts of 65 million francs. Signer believes that the forest vehicle market will continue to grow in the medium term.
Developing Solution Options
Monning's proposal: Convert the facilities that have been used for the construction of sports and golf maintenance vehicles to the production of dam cars. Option 3b finally intends to introduce double shifts for the production of dam cars in addition to what is proposed in option 3a.
Determining the Decision Criteria
In addition, unprofitable chassis products would be abandoned and replaced with chassis with an attractive contribution margin.
Determining the Consequences of the Options
3 million from the discontinuation of sport utility vehicles and golf carts; from the negative contribution margin II, only depreciation remains 1.2 million from the discontinuation of trailer chassis and chassis for sports and golf vehicles 3 million additional contribution margin from 400 dump trucks. 3 million from the discontinuation of sport utility vehicles and golf carts; of the negative contribution margin II, only depreciation of 1.2 million remains from the discontinuation of trailer chassis and chassis for sport utility vehicles and golf carts.
Overall Evaluation of the Options and Decision
Augsburger responds with regard to the property in the Zurich area: If the property cannot be sold within a month and can be delayed for up to 2 years, she considers 20 million Swiss francs to be an absolute minimum. Strengthen the already strong position in the attractive submarket for dam trucks, maintain the strong position in the attractive submarket for forest vehicles.
Special Problems and Approaches to Solve Them
Decision Sequences and Their Differentiation from Decisions
Since effective incentives can only be determined once the objectives are clear, the sales objective subproblem must be solved before the sales force compensation subproblem. Once the sales objective subproblem is solved, the actor can move without delay to solving the sales force compensation subproblem.
Visualizing Decision Sequences with the Help of Decision
Choosing the Best Option in a Decision Sequence
The starting point for selecting the best option for the current decision is the decision tree. If the decision problem is polyvalent, this polyvalence must be overcome directly at the ends of the tree.
Case Example of a Decision Sequence
Businesses in Switzerland and in the EU should be conducted as separately as possible. The consequences of all three options depend on the development of the number of orders in the EU.
Information Procurement Decisions as Decisions at the
Recommendations for Making Information Procurement
The evaluation of the benefits of information procurement in step 3 essentially depends on two things:. As the decision tree shows, the expected value of the survey required for the decision is missing.
Collective Decisions and Their Importance in Companies
Participation in the decision-making process also offers employees the opportunity to assert their own interests (see Brauchlin 1990, p. 254). The growing popularity of collective decision-making in business is often justified by the claim that it leads to better decisions.
Group Goal Systems and Group Decision Behavior as
- Group Goal Systems
- Group Decision Behavior
Group membership not only leads to a desire for homogeneity, but also brings about changes in the individual group member's sense of responsibility. The sense of responsibility of the individual group members must be strengthened as much as possible.
Rules for Making Collective Decisions
- Differing Individual Orders of Preference as a Starting
- Requirements for Forming a Collective Order of
- Classic Rules for the Formation of a Collective Order of
- More Complex Procedures to Form the Collective Order
The figure determines the sum of the preference intensities that underlie all 24 possible preference orders. In this case, decision maxims can be used to summarize these into the overall consequences of the options.
Study by Raffe´e and Fritz on Pursued Goals
Early Warning Systems of Parfitt and Collins
Three Lines of Research in Management Science
Well-Structured Problem as Condition for Using an Analytic
Heuristic Principles and Their Use
Approaches for Backward-Moving Problem Indication
Transforming Consequence Values into Utility Values
Determining Utility Values by Means of Fictive Games
Distorted Recording of the Attitude to Risk Through
Determining the Overall Consequences in a Polyvalent
Bayes’s Approach for Establishing the Value
Asch’s Experiment on Group Members’ Pursuit
The Independence of Irrelevant Options as a Requirement
Condorcet’s Voting Paradox
Blin and Whinston’s Preference Intensities
Saaty’s Analytical Hierarchical Process
