July 24, 2011

Thawing ‘Decision Freeze’ With Decision Trees

Mary MahoneyBY Mary Mahoney

J. Robinson Group Blog

Choice is the great human contradiction. We all say we want choices, but then panic when we are asked to select the best option from among many — a phenomenon known as decision freeze.

You know how difficult it can be to pick a new pair of shoes: Flats or heels, loafers or sandals, black or brown, slip-on or ties.  That’s decision freeze at a profoundly basic level, albeit one with minimum negative consequences.

Consider that same affliction in the executive suite, where the stakes typically are considerable higher — think millions and billions of dollars and potentially the very existence of the enterprise.

Large corporations have departments dedicating to researching hundreds of options for presentation to the senior leadership team.  But small, mom-and-pop companies need help, too, when they find themselves awash in choices.

The challenge is how to make intelligent choices (as in, not arbitrary) when facing with multiple, varied possibilities.  One solution is to evaluate each choice using a decision tree.

According to MindTools.com, decision trees provide a methodology for deciding between several courses of action. They also provide a structure within which options can be compared and possible outcomes investigated. They also help form a balanced picture of the risks and rewards associated with each possible course of action.

Rafael Olivas, author of Decision Trees: A Primer for Decision-Making Professionals, said decision trees offer the following four advantages over other methods of analyzing alternatives:

  • They’re graphic:
    Decision alternatives, possible outcomes and chance events can be represented as schematics
  • They’re efficient:
    Complex alternatives can be expressed clearly, and decision trees can be modified as new information becomes available
  • They’re revealing:
    Competing alternatives can be compared in terms of risk and probable value (known as the expected value, or EV), a single numerical value that combines relative investment costs, anticipated payoffs and uncertainties
  • They’re complementary:
    Decision trees can be used in conjunction with other project management tools including schedulers

Decision trees use a graphical approach to compare competing alternatives and assign values to those alternatives by combining uncertainties, costs and payoffs into specific numerical values.

As described in the Primer, a completed decision tree is a diagram with nodes and connecting branches. Nodes indicate decision points, chance events or endpoints. Branches correspond to each decision alternative or event outcome.

Decision trees can be created manually on paper or generated using Microsoft Excel or other spreadsheet programs.  TreePlan Software offers a decision tree add-in for Windows and Mac versions of Excel.

Dedicated decision tree programs are offered by Microsoft, IBM, TreeAge Software and AIspace, among others. Due to the learning curve and complexity of these programs, companies lacking requisite internal resources might consider hiring a consultant.

J. Robinson Group offers turnkey decision tree development and support.  We welcome the opportunity to evaluate your company’s needs and develop a thorough decision-making protocol.  Please contact us at your earliest opportunity.

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