Project Decisions in Project Development & Project Decision Support Packages
"Nothing is more difficult, and therefore more precious, than to be able to decide" - Napoleon, Maxims, 1804
PART A. Project Decisions - Selecting the Process
The Key Elements in Decision Making
The decision-making process can be broken down into four main elements. Every good decision-maker
must, consciously or unconsciously, go through each of them. They are:
1. Framing
Structuring the question. This means defining what must be decided and determining in a preliminary way
what criteria would cause you to prefer one option over another. In framing, good decision-makers think
about the viewpoint from which they and others will look at the issue and decide which aspects they consider
important and which they do not. Thus they inevitably simplify the world.
For example, in deciding whom to promote you may simplify define the problem as: "Selecting the person
whose leadership is likely to produce the best performance in the work group." Note that this viewpoint
pushes other aspects of the issue into the background, such as ability to connects with other parts of the
organization, rapport with external clients, or rewarding the employee who has worked hardest or who has
most seniority.
"Seek simplicity, then distrust it." - Alfred North Whitehead
2. Gathering Intelligence
Seeking both the knowable facts and the reasonable estimates of "unknowables" that you will need to make
the decision. Good decision-makers manage intelligence-gathering with deliberate effort to avoid such failing
as overconfidence in what they currently believe and the tendency to seek information that confirms their
biases. As Will Rogers said, It's not what we don't know that causes trouble. It's what we know that ain't so."
"The test of first-rate intelligence is the ability to hold two opposite ideas in mind at the same time and still
retain the ability to function." - F. Scott Fitzgerald
3. Coming to Conclusions
Sound framing and good intelligence don't guarantee a wise decision. People cannot consistently make good
decisions using seat-of-the-pants judgment alone, even with excellent data in front of them. A systematic
approach forces you to examine many aspects and often leads to better decisions than hours of unorganized
thinking would.
For example, numerous studies have shown that novices as well as professionals make more accurate
judgments when they follow systematic rules than when they rely on their intuitive judgment alone.
"That idea is so damned nonsensical and impossible that I'm willing to stand on the bridge of a battleship
while that nitwit tries to hit it from the air." - Newton Baker, U.S. Secretary of War in 1921 (reacting to
Brigadier General Billy Mitchell's claim that airplanes could sink battleships by dropping bombs on them.)
4. Learning (of Failing to Learn) from Feedback
Everyone needs to establish a system for learning from the results of past decisions. This usually means
keeping track of what you expected would happen, systematically guarding against self-serving
explanations, then making sure you review the lessons your feedback has produced the next time a similar
decision comes along.
At minimum, managers should sit down for a few hours twice a year with their associates to look back. Have
they been collecting enough data to keep track of the lessons of experience? What have they learned in the
past six months? How should it change their future work?
These four phases provide the backbone of almost any decision process. Unlike the parts of a golf swing or
other athletic effort, however, the phases of the decision process need not be carried out one after the other.
Indeed, information discovered in the "intelligence-gathering phase should often inspire you to go back and
reframe your decision. Moreover, a complex problem (the relocation of your business, for instance) may
demand a series of smaller decisions, each of which will involve several framing decisions, several
intelligence-gathering efforts, and several coming-to-conclusions steps.
"Many complain about their memory, few about their judgment." - La Rochefoucauld
But you should think about each of these aspects of your decision separately. You can't guard against the
characteristic errors of each part unless you learn to recognize which part of the decision you are working on
at a given moment. Often avoiding these errors is easy once you have learned to recognize the stages and
traps. A good golf swing or swimming stroke is no harder to execute than a poor one. The same holds true
for a good decision process.
Most managers typically spend their time devoted to intelligence gathering and coming to conclusions, and
the least amount of time is spent on framing. Almost all experience, anxiety, frustration, and conflict with
others before a decision is reached. To make matters worse, little time is usually devoted to postmortems
and other ways of learning from experience.
"Experience is not what happens to you, it is what you do with what happens to you." - Aldous Huxley
You need to focus more time on framing and learning from experience (lessons learned). You need to
delegate most information-gathering, because you will have the frame with which to tell people what to
gather and how. With a good frame, they will be able to spend less time on the choice itself. You will
experience less aggravation and conflict, and find meetings and working relationships more productive and
enjoyable.
Decision Preliminary Screening Questions
- What's the crux or primary difficulty in this issue? In which of the key elements of the decision
process does it lie? - In general, how should decisions like this one be made (e.g. alone or in groups; intuitively or
analytically?, etc.) - Does this decision greatly affect other decisions?
- Must this decision be made at all? Does it need to be made now? Should it be made by me? What
parts can I delegate or do jointly? - How much time have decisions like this one taken in the past? How long should this decision take?
When should it be made? Are the deadlines arbitrary or real? - Can I proceed sequentially from framing to intelligence-gathering to coming to conclusions, or must I
move back and forth among the parts of the decision process on this issue? - Where should I concentrate my time and resources? How much time should I expect to spend on each
phase of the decision process? Do I face a difficult job framing this choice? Will intelligence-gathering
be the biggest challenge? Will I have difficulty making the decision rationally even after I've
completed the framing and intelligence-gathering? - Can I draw on feedback from related decisions and experiences I've faced in the past to make this
decision better? - What are my own skills, biases, and limitations in dealing with an issue like this? Do I need to bring in
other points of view? Which other points of view would be helpful? - How would a more experienced decision-maker whom I admire handle this issue?
" People sometimes stumble over the truth, but usually they pick themselves up and hurry about their
business." - Winston Churchill
What Traps Are Possible?
Most decision-makers commit the same kinds of errors. This has been established through decision research
of the last three decades, regardless of industry or endeavors. So whatever kind of decision you have to
make, you can probably use the insights a small group of researchers have developed to prevent those
mistakes. Here are the ten most dangerous decision traps:
1. Plunging In - Beginning to gather information and reach conclusions without first taking a few minutes to
think about the crux of the issue you're facing or to think through how you believe decisions like this one
should be made.
2. Frame Blindness - Setting out to solve the wrong problem because you have created a mental framework
for your decision, with little thought, that causes you to overlook the best options or lose sight of important
objectives.
3. Lack of Frame Control - Failing to consciously define the problem in more ways than one or being unduly
influenced by the frames of others.
4. Overconfidence in Your Judgment - Failing to collect key factual information because you are too sure of
your assumptions and opinions.
5. Shortsighted Shortcuts - Relying inappropriately on "rules of thumb" such as implicitly trusting the most
readily available information or anchoring too much on convenient facts.
6. Shooting from the Hip - Believing you can keep straight in your head all the information you've
discovered, and therefore "winging it" rather than following a systematic procedure when making the final
choice.
7. Group Failure - Assuming that with many smart people involved, good choices will follow automatically,
and therefore failing to manage the group decision-making process.
8. Fooling Yourself About Feedback - Failing to interpret the evidence from past outcomes for what it really
says, either because you are protecting your ego or because you are tricked by hindsight.
9. Not Keeping Track - Assuming that experience will make its lessons available automatically, and therefore
failing to keep systematic records to track the results of your decisions and failing to analyze these results in
ways that reveal their key lessons.
10. Failure to Audit Your Decision Process - Failing to create an organized approach to understanding your
own decision-making, so you remain constantly exposed to all the above mistakes.
"Experience is a good teacher, but she sends in terrific bills." - Minna Antrim, Naked Truth and Veiled
Illusions, 1902------------
The Decision Support Package (DSP) ...
Must Address the Issues to be Decided "Systematically" (and in doing so... strive to make the decision-
maker indifferent to risk)
In simple decisions - say, whether to return a phone call - you probably do not need to worry about these
decision traps. Some people spend too much time on the phone with timewasters, and need to learn a few
rules of thumb that will help them keep free. They don't need to study decision traps to do that.
But in big decisions - the decisions that determine the success of your life and that of those around you (the
business, for instance) - the decision traps frequently cause havoc. In the course of a job search, for
instance, all ten decision traps could contribute to misery. Many people suffer from FRAME BLINDNESS about
what they're looking for; most suffer from OVERCONFIDENCE ABOUT JUDGMENTS regarding the kinds of
jobs that are available; many PLUNGE IN and take the first job offered without evaluating how a decision to
take a new job should be made.
People make these mistakes partly because their emotions run high when they seek a job. But great athletes
also cope with highly emotional situations. Your job search is no more stressful that what faces the football
player who must kick a game-deciding field goal. Well-coached, disciplined athletes prevail because they
learn a systematic approach to their sport; it becomes part of them, and they become good enough so that
they can trust themselves under pressure.
A well-trained decision-maker will sometimes make a mistake, just as a great athlete can lose a big game.
But if you teach yourself an excellent decision-making process and practice it, you can succeed with
consistently.
"At the day of judgment, we will not be asked what we have read, but what we have done."
- Thomas A. Kempis, The Imitation of Christ, 1420
A Decision is a State of Uncertainty... Which is Caused by the Need to Choose a Course of Action (C/A)
A decision is a state of uncertainty which is caused by the need to choose a course of action that will achieve
certain pre-determined results. This "uncertainty" can take several forms:
- The Standard Decision, where a limited, fixed range of alternatives exists.
- The Binary Decision, where the alternatives are yes or no.
- The Multi-Alternative Decision, where an excessive range of alternatives seems available.
- The Innovative Decision, where action is required, but no alternatives are readily apparent or
acceptable.
from a range of alternatives than to limit our choices. Second, the analytical steps involved in this type of
decision also apply to others.
Basic Steps in Decision Making
Basically, steps in the Decision Making Process are:
- State decision purpose.
- Establish criteria.
- Separate criteria (limits/desirables).
- Generate alternatives.
- Compare alternatives.
- Identify risks.
- Assess risks (probability/seriousness).
- Make decision.
Leaders - Managers - Decision-Makers
- Managers have sometimes been defined as "Those who do things right." (usually referring to the
handling of processes) - Leaders have sometimes been defined as "Those who do the right thing." (usually refering to the
handling of people)
right things than to do things right." (In my opinion, this indicates the 'quality of accuracy in the selection' of
the right processes, activities, etc.)
Decision-makers:
- Decision-making is based on the identification of worthwhile things to do.
- Decision-making is not an art - it is a process, and the most important part of the process is the
identification of worthwhile things to do.
1. The "STANDARD" Decision in Project Development
Step 1. Statement of Decision Purpose
Before jumping into an in-depth analysis of choice, it is important to first ask some questions about the
choice to be made. These questions serve three functions:
- To show the relationship of the decision to the need to make a choice.
- To give us direction in seeking alternatives.
- To restrict alternatives that are outside our purpose.
must make decisions. There is a feeling of achievement whenever uncertainty is removed. There is also a
feeling of accomplishment in knowing that some action is forthcoming, which may give the comforting illusion
that we are top of the problem. Sometimes we fall into the trap of taking action without questioning the
purpose of that action. The rightness of a decision purpose is determined, therefore, by its relationship to the
situation to be resolved and to prior decisions. Thus, in attempting to assure the appropriateness of the
decision purpose, a manager/leader should ask three questions:
- What choice am I trying to make? This question simply provides a starting point. It will be sharpened
by two test questions which follow. - Why is this decision necessary? This question attempts to relate the decision to the situation being
resolved. There is always a range of reactions to a situation. It must be clear that the choice relates
to the situation to be resolved. - What was the last decision made? This question relates to the concept that all decisions represent a
chain of decisions. Locating ourselves on that chain is critical.
appropriate). It also should describe the end result desired.
Statement of Decision Purpose Example:
To choose a new site for third party dry cleaning store
Factors to be considered:
- Size of store
- Costs
- Location
- Parking
- Physical Layout
Step 2. Establish Decision Criteria
Having determined that what we are deciding is important and being made at the right level in the logic
chain, it is now time to begin the actual choice process. If a manager says, "That was a great decision you
made six months ago," what is the basis of that judgment? There are two major aspects:
- Has what was supposed to happen really occurred? In other words, did the decision achieve the
desired results? - Did it achieve those results without an excess of adverse side effects?
process of choice by considering the results required. These are called our Decision Criteria. They represent
the basis on which we will actually choose. Managers must have some concept of what they want to achieve.
They must also have an idea about the resources available to achieve those results. In a structured
approach, this step is triggered by a question. The key question here is "What factors should be taken into
consideration in making this choice?" This question generates a shopping list of factors that must be
considered in this decision. In a group situation, this would also ensure that those persons who are going to
be influenced by the decision have the opportunity to specify their requirements.
Establish Decision Criteria Example:
Size of Store
Provide a minimum of 4000 sq. ft.
- Costs
- Cost a maximum of $17,000/year
- Location
- Be in planning zone D4
- Located on a main artery - right-hand side for morning traffic
- Be close to other stores
- Provide maximum flow of pedestrian traffic
- Parking
- Provide easy access for clients
- Physical Layout
- Wired for industrial use
- Require minimum conversion for equipment
Step 3. Separate Criteria
What we now have is a list of criteria, sufficiently specific to use as a basis for comparing our alternatives.
However, each of the criteria has a different level of impact for us. For example, some of the criteria
represent absolute and mandatory limits to our choice while others simply contain desirable features.
We live in a world where mandatory limits are a normal part of our decision making. Some of these are
imposed by others and some are self-generated in an effort to assure certain minimal results. If the decision
is to be effective, we must differentiate between the limits and the desirable features that may or may not be
achieved. The key question (again, the need for questions) are these:
1. If the criterion were not fully met, would the alternative still be acceptable?
2. Is this limit clearly measurable?
The concept of separating Limits and Desirables has been around since time immemorial. This screening
process is visible every day in newspapers. Job ads blare out the minimum requirements in an attempt to
restrict the number of candidates who apply. The process of valuing Desirables is also common. Herbert
Simon, in his 1948 text, Administrative Behavior, introduces a concept of weighted variables for
administrative decision-making.
There are many techniques for allocating value. The simplest is to use a base number valuation system. This
is a simple process of choosing a base number for the highest-rated criterion and comparing the other
criteria with that standard. The number 10 is an easy number to use.
The number represents the relative value and impact each Desirable should carry in the decision. When
assigning relative values, the input of others is very important. This stage focuses the discussion on
quantitative values and increases specificity.
To this end, we have created a specification of Limits and Desirables, giving a clear picture of what a good
alternative should do. In the field of purchasing, for example, responsible purchasing agents would not
consider the sources of supply until they had clarified their purchasing specifications. No decision-maker
should consider alternatives until the criteria are made clear.
Separate Criteria Example:
Limits
- Cost a maximum of $17,000/yr. for 3 years.
- Provide a minimum of 4,000 sq. ft.
- Be in planning zone D4
- Located on a main artery right-hand side for morning traffic
- Desirables Value
- Currently wired for industrial use 10
- Require minimum conversion for equipment 9
- Provide maximum flow of pedestrian traffic 7
- Have parking available for clients 7
- Provide maximum sq. footage 7
- Be close to other stores 5
Step 4. Generate Alternatives
Because we are discussing Standard Decisions, this step is not difficult for the manager/leader. By definition,
Standard Decisions are characterized by a limited and fixed range of alternatives. In our example, we
compare different site locations for a new store. A real estate office would be able to provide a list of
comparable sites that could be used in our decision. As we explore other types of decisions, especially
Innovative Decisions, this step becomes more complex.
Step 5. Compare Alternatives
Good decision making requires a generation of a number of alternative solutions; the next stage is trying to
compare these to make the best choice.
The dilemma of a manager facing a range of possible solutions can be likened to the proverbial child in a
candy store. Sometimes all of them look good and none stand out as being significantly superior. To
proceed, the manager needs some means of comparing the alternatives. Some of the tools that can be used
for comparison are now discussed.
The obvious starting point is to gather some information about the possibilities. In many instances,
alternatives are initially described in very general terms; for example:
We cam send all the work out to be done
Or
We can hire temporary staff.
In order to be able to compare the alternatives, the decision-maker first has to understand the choices being
considered. For example:
- How much will it cost to have the job contracted out?
- Can it be done outside effectively?
- When will it be finished?
- Can we get approval?
Without sufficient data on our alternatives, we really are in no position to compare their relative merit.
Consequently, we must first collect sufficient data on each alternative.
The task of gathering data about our alternatives is directly influenced by our list of Decision Criteria (the
FRAMING). The relevant data measures the degree of satisfaction on each criterion. Thus, the decision-
maker begins to gather data purposefully. The search is a planned process rather than a reaction to
information as it surfaces.
Once a manager clearly specifies the alternatives, the concern becomes, "How do I arrange and compare
the data?" Here a fundamental principle is necessary. Always relate the solutions back to the criteria.
Solution blindness can cause a situation known as "Buyer's Remorse." This is the feeling that is best
expressed by the phrase, "It seemed like a good idea at the time." Normally this is accomplished by a long
description of the solution's appropriateness at the time.
The affliction "paralysis of analysis" can also be diagnosed at this stage. This occurs when the gathering of
information about alternatives becomes an end in itself. Decision-making is the process of making the best
choice based on the best available data (or information or knowledge) at the time. There will never be a
situation when ALL the facts are available. The process of relating alternatives to criteria is an attempt to
assist the decision-maker by focusing on key information sources. Both of the above decision maladies can
be corrected by focusing on criteria rather than the alternatives.
The process of eliminating alternatives via Limits is a protective device for the decision-maker. The
alternatives that fail to provide minimum performance should be screened out early so that full attention can
be paid to those alternatives still considered feasible. The Limits were created and determined by the
decision-maker and, therefore, must be managed by the decision-maker. It is critical to continually reassess
the validity of the Limits.
In many situations the list of criteria (including Limits) is created or developed in the initial stages of the
decision-making process. By the time the Limits are utilized by the decision-maker, a significant period of
time may have elapsed. This makes it critical for the Limits to be reassessed for their current validity. For
example, a manager might establish a Limit such as 15% growth in gross sales. A month later that Limit
might be entirely unrealistic because of a market downturn or a competitor's action. Survival could be more
important than meeting out-of-date limits. The concept of Limits in Decision Criteria guarantees that at least
perceived minimal performance is met.
In evaluating alternatives, use of the Desirables characteristics is applied. These facts represent the basis on
which we can evaluate performance. The facts are the key. However, we still have to log our judgments
about how well each meets our criteria.
We must now score our data relative to our Desirables. To do this, we simply ask the question, "Which
alternative best meets that criterion?" That alternative receives a score of 10. The other alternatives receive
a score based on the answer to the question, "How much better is the best alternative, compared to this
one?" This are multiplied by weighted values previously applied to each area of concern. (See Screening
Capital Projects for more details.)
"Stupidity consists in wanting to reach conclusions. We are a thread, and we want to know the whole cloth." -
Gustave Flaubert
Step 6. Identify Risks
A prime basis for evaluating decision effectiveness is how well adverse side effects that would reduce the
overall effectiveness of the action were avoided. "The operation was a success - but the patient died." Good
decision-makers take a check step, called Risk Analysis, prior to finalizing choice. In most decision-making
theories, some element of risk analysis is included. It may range from the complexities of probability
analysis in Operations Research Modeling to the gut level, "What do you think they'll do when we announce
the price increase?" Our approach is closer to the last statement. We are concerned about a working tool for
managers that can be used quickly and effectively and doesn't require mathematical sophistication.
Identification of the risk is based on two sources. As managers/leaders, we usually make decisions under
time pressure. Consequently, we can often overlook criteria that later appear to be critical. Also, our
increasing knowledge about alternatives frequently brings to light new information that could not have been
predicted. In the identification of risk, we should look at both sources.
To apply risk properly, we should take one alternative at a time and predict those concerns we may have
about the alternative's ultimate effect. The question, "What could go wrong if we choose Site One?" will
generate some risks. In doing this, it is critical to consider one possibility at a time. What could go wrong
with Alternative One usually has nothing to do with what could go wrong with the other alternatives.
Site One - Tentative Choice
If building is not finished on time, then we will have to delay opening.
If the university business falls off in summer, then we will have cash flow difficulties.
These risks illustrate some typical side effects to be considered. The first should have been anticipated (a
"known unknown" - you can influence and know that if it happens, there will be a negative result ). Perhaps a
criterion for availability should have been included. The second risk could not have been foreseen in the
criteria but should be considered nevertheless (an "unknown known" - you cannot influence but you know
that if it happens there will be a negative result).
Step 7. Assess Risk
Knowing a risk is important, but it is not enough. We now have to apply some meaning to that risk. Every
statistical assessment of risk considers two factors: probability and seriousness. If it is good enough for
statisticians, we should be able to reduce it sufficiently for a workable, managerial application.
Probability (the language of uncertainty) attempts to describe the manager's judgment about the likelihood
that an event will occur. Seriousness attempts to describe the judgment about the impact of that event if it
did occur. To keep life as simple as possible (KISS), the same scale we used in the earlier process should be
used. This gives us the following scale:
Probability Seriousness
10 - certainty 10 - decision will fail
1 - very unlikely 1 - almost no effect
If we applied these assessments to our example of risks, in our judgment, we would have the results listed
below:
Alternative A P / S
IF: Not finished in time (probability) 6
THEN: Delay in opening (seriousness) 8
IF: Low volume in summer (probability) 9
THEN: Cash flow problem (seriousness) 2
These numbers mean we predict a fairly high likelihood of not opening on time, and this will have a very
adverse effect on our success. Our second risk is very different. The interpretation of P-9/S-2 is the low
volume is almost inevitable; but its effect will be minimal, possibly because of the ability to reduce staff or
manage the problem in other ways. This process is completed for each alternative, until one is perceived to
be the best alternative. In management it is sometimes necessary to accept a little less performance in
order to assure a more positive implementation.
Step 8. Make Decision
The profile of risks helps us make a calculated decision. Now we have a picture with which to compare our
profile of performance. These two pictures have to be assessed. The numbers in each profile have no
relationship with each other, and there is no formula for equating numbers. The question now is "Is the
performance I am obtaining worth the risk I am accepting?" One may be tempted, but should not multiply
seriousness by risk. To do so can cloud the real issue. A 10x1 risk is very different in profile from a 1x10
threat.
We are not looking for minimal risk; we are looking for manageable and acceptable risk. If Site One was
better than the other two, but had one major risk - probable delay in opening - the decision-maker might
decide that this doesn't overshadow the performance, and thus decide on Site One. If, however, the risks
are perceived as major, the relative risk to Site Four (for example) can be evaluated. The second-best in
performance might be chosen because the risk involved in more manageable.
In making a choice, managers make a whole series of judgments. It is critical to log these judgments. The
decision is a composite of value judgments. The process is very simple. It says:
- Know what you have to decide.
- Describe what criteria should be used to make the choice.
- Separate the criteria into Limits and Desirables.
- Generate the alternatives.
- Compare the performance of each alternative against the criteria.
- Identify the possible risks.
- Assess the probability and seriousness of each risk.
- Make the best-balanced decision.
Decision Making Variations
The process of Decision Making described above is appropriate for a vast majority of situations faced by
managers. In most situations a known set of alternatives exists and the key task is differentiating relative
performances. Unfortunately, one of the cruelest myths existing in management philosophy is that a single
logical process "a process panacea." applies in all situations. As the natures of the alternatives differ, the
requirements for an applicable process must differ. This principle initiated the separation of decisions into the
various types earlier mentioned: Standard Decision Making, The Binary, Multi-Alternative, and the Innovative
types of decisions.
2. The "BINARY" Decision in Project Development
The "Yes" or "No" Decision
A Binary Decision presents two diametrically opposed alternatives for consideration. The alternatives are
usually competitive in nature and force a yes/no take-it-or-leave-it choice. These decisions rank very high
on the anxiety and uncertainty scale. The extreme nature of the alternatives forces a decision-maker or
group to polarize and sometimes paralyze. When a decision is relatively clear-cut, and the alternatives are
similar and aim toward the same purpose, the situation is fairly safe for the decision-maker. The question is,
"Which one meets our requirements best?" In Binary Decisions, however, that security does not exist. Some
examples of Binary Decisions are (1) Do I go on for an MBA at night school or not? (2) Do we open a third
office or not? (3) Do I hire another salesperson or not?
As a basic premise, Binary Decisions reflect an unnatural state of affairs for a decision-maker. The
unnaturalness is characterized by the limitations on choice. The restrictions of yes/no, do/don't alternatives
are very limiting. There are very few decisions that should be considered in these terms. It is my belief that
most Binary situations are not being analyzed properly if they are left in the Binary mode. In my experience,
I have discovered very few real (valid) Binary situations.
There are several reasons why managers paint themselves into a Binary corner:
1. A major cause of Binary Decisions is the upward delegation of decisions. It is common for subordinates,
suppliers, or others who wish to influence the decision, to present the decision required in Binary terms. This
attempt, either unconscious or conscious, is made to force a choice supportive of their position. If a decision-
maker is restricted in the alternatives being considered, there is a potential for stacking the deck.
A consequence of leaving a decision in this form is to increase the inevitability of a win-lose situation. These
decisions are usually labeled "opportunities." Such labeling places pressure on the decision-maker to accept
the type of decision as Binary and thus restrict the choice. Salespersons are trained to present alternatives
in the form of opportunities as a technique to manipulate the buyer. The acceptance of the situation as an
opportunity increases the probability of the buyer accepting the proposal.
2. Second, Binary Decisions are not created from a manipulative mode, but rather are a result of Superficial
analysis. Because tradition, history, and habit are so ingrained in most organizations, there is a tendency not
to open up decisions to the conscious consideration of a wide range of alternatives. Questioning whether
there are different ways to achieve the same ends is not seen as healthy, socially acceptable behavior in
many organizations. As a result, Binary Decisions become a way of life. "Do we do it or not?" The
consideration of the decision is predicated on the existence of one known alternative. If that is decided on,
nothing is changed.
3. A third reason for the existence of Binary Decisions is time. Under the pressures of time (combat for
example), it is frequently quicker to simply decide on a course of action rather than explore the validity of
the decision. Decisiveness is an admired trait in modern management (and a critical trait in combat leaders).
The high profile ability to accept responsibility for saying "Yes" or "No" is one that is cultivated and rewarded.
The danger of excessive rewards for decisiveness is that it can soon replace decision-making. Making a
decision, to be seen making a decision, can become an end in itself. Proper analysis of facts become labeled
plodding and over-cautious. In these instances Binary Decisions become perceived as high profile, decisive
examples of a manager's effectiveness.
4. Valid Binary Decisions can exist. There are instances where the manager/leader has progressed along the
decision chain and reached the lowest decision level: yes or no. In my experience this has usually occurred
following a series of consciously made decisions and is a concluding decision in a chain of events. An
example of a valid Binary is a Make or Buy Decision. This is particularly true when dealing with a single
source situation.
Because of the competitive nature of alternatives, it is clear that an application of the Standard Decision
Making techniques leads to frustration. It is necessary to modify the standard process to accommodate
Binary Decisions.
It is essential to begin by stating as clearly and simply as possible the intention of making the decision.
Make sure that it is Binary and not just worded incorrectly.
It is virtually impossible to know how to handle any decision if you do not understand how you arrived at the
Decision Making point. In looking at the above four (4) reasons or causes for being in a Binary situation, if
any of the first three (3) causes (manipulative, superficiality, or time pressures) exists, it is critical to assess
the validity of the Binary mode. The questioning of the Binary validity is done by reviewing the Decision
Purpose.
Since the existence of the Binary Decision has been made evident by the Decision Purpose, we must
consider changing that if we want to change the nature of our decision. A basic pressure is to "whenever
possible attempt to get the decision out of the Binary mode." All decisions exist as part of a chain of
decisions. A Binary Decision reflects the absolutely lowest level of decision in the chain. It is a go/no go
point. If we want to avoid this forced choice, we have to change or elevate the level of the decision.
For example, if a decision purpose is phrases "Do I go to Chicago to take this course"" it is very restricting.
You have only two choices: going or not going. If we examined the statement by using the questions from
the Standard Decision Making earlier, we might be able to modify the statement to increase the range of
alternatives and thus make a more objective decision. The questions follow:
1. Why is this decision necessary? Why do you want to go to the course? What problems will it solve? What
skills will it develop? These questions will attempt to force the consideration of a cause/effect relationship
between the decision and the need for any decision.
2. What was the last decision made? This question will attempt to track this decision in accordance with prior
decisions. In this instance, an acceptable answer would be "There is a need to learn some skills and a course
is the right way to do it." If that decision has not been made, then perhaps we should back off from the
present decision.
We could then change our statement from "Do I take this course in Chicago or not?" to "How can I best learn
the skills required to improve my performance?"
Going to Chicago and taking a course is still an alternative; however, we have opened up a wider range of
alternatives, such as on-the-job training, other courses, job assignments, university/technical courses, etc.
This decision becomes easier to make and standard techniques can be applied to differentiate the relative
performance of the alternatives. These preliminary steps have tried to change the Decision Purpose to a
more open decision. This will not always be possible.
Despite the attempt to take decisions out of a Binary mode, there will be instances where it will not be
possible. Hopefully this will be because they are valid Binary choices. The existence of two competitive
alternatives places increased pressure on the Decision Criteria. The tendency is to simply list the pros and
cons of each alternative and see if they cancel each other out (typical in combat when time is limited). This
can lead to difficulty because normally in a Binary Decision there are proponents for each side of the coin.
Basically the same steps used in Standard Decision Making are applied, though they have to be developed
more critically. The key step is the development of the criteria. Since the decision will be based on the
criteria, it is imperative that the decision-maker not subjectively bias the list of criteria.
To make a Binary Decision properly, the list of criteria should avoid data that describes only one alternative.
If it is essential to include data about one alternative, you should compensate by including data about
characteristics of the other alternative. To do so increases the objective framework.
To develop the list of criteria, many managers recommend that the positive and negative features of both
alternatives be listed. These are really the pros and cons of each course of action (typical staff work of a
combat staff in making a combat recommendation for the unit commander to make a decision from). From
these lists, the criteria can be developed to ensure that a complete and objective picture has been
established. It is difficult to make the decision based simply on pros and cons. They do not necessarily
cancel each other out and thus need some conversion (weighting usually) to assist the decision-maker.
In summary, Binary Decisions are different from other types of decisions because they force a decision-
maker to operate in a restricted manner. The polarization created by the nature of the alternatives can result
in data being biased rather than objective. In all instances a manager or group should attempt to change the
decision being made from a Binary to a standard type of decision.
3. The "MULTI-ALTERNATIVE" Decision in Project Development
Just as being unnecessarily restricted in making decisions leads to frustration, so the opposite can be
frustrating. There are times when the number and range of alternatives seem endless. The Standard
Decision Process suggests that the manager create a set of criteria and then compare the performance of
every alternative with every other alternative. Can you imagine 300 alternatives laid out in a row for cross
comparison! This is hardly viable or desirable. For this reason, it is necessary to modify the information
processing technique for Decision Making. While the multi-alternative variation does not occur frequently, it
is worthy of consideration. A manager will often abandon the use of the logical process when the variation
causes a feeling of futility. Rather than abandoning the process, managers can modify it.
The first two steps in this type of decision are exactly the same as the Standard Decision Making: develop a
statement of decision purpose and create a list of criteria to be used in making the decision. These criteria
should be classified into Limits and Desirables and the Desirables assessed in terms of relative value. This
process is especially valuable if a manager does not want to eliminate alternatives with the Limits.
The variation required for this type of decision is introduced at this stage. Obviously, the criteria cannot be
used for determining relative performance, that is, which alternative best meets the criteria in relation to the
others. The physical task of comparing fifty or more alternatives would be overwhelming. What is required is
conversion of this list into an absolute scale so that each alternative can be scored as a single entry.
4. The "INNOVATIVE" Decision in Project Development
Criteria Optimization Technique
The three types of decision-making above are all rational by nature. They represent techniques for sorting
out masses of fact and evaluating data. In Innovative Decision Making, we are presented with a decision that
has to be made without any readily apparent alternative. As we move to Innovative Decisions now, we must
change the use of the brain from rational to creative. We must use what is known as the right brain rather
than the left brain.
The difficulty of effective alternative generation lies in the need to combine some rational processes, move
to a creative process, and then return to a rational process. It is this phasing in and out that causes difficulty.
Even creative processes have to be structured within some framework to be useful. A fallacy exists that
groups have to be either creative or rational. These approaches are treated as opposite ends of the
spectrum. In fact, groups have to be able to operate in both modes to be effective. The totally non-goal-
oriented creative think tanks are a luxury most managers cannot afford on an ongoing basis. Good creativity
is goal-oriented and is focused on specific concern resolution.
A superficial comparison of rational and creative would show similarities and the differences.
Rational Process
Creative/Innovative Process
Starting Point: A problem or need to resolve a situation A problem or need to resolve a situation
Problem Statement: Usually very sporadic Can be more general in some techniques
Process: Requires trained group members
Basic approach is logical Requires trained group members.
Many different approaches - synthesis, brainstorming, morphology, etc.
Aids: Visibility via flip charts or easels is important Visibility of process is important
Results: Normally one "best" choice or solution Several possible solutions or none at all
Group roles: Members should be there for a purpose:
i.e., problem ownership, data source, etc. People need not know or own the problem
Input: Dependent on validity of data Dependent on imagination and creativity of members
This overview indicates similarities and highlights differences between rational and creative processes. It is
critical to note that all approaches to creativity represent structure. All creative processes dictate a specific
sequence of group activity toward a validated result. It is not an unorganized approach with a hope for a
"Eureka" response.
Creativity is a frequently misused and misunderstood term in management. Creativity has a socially
accepted definition that seems to imply original discoveries such as those by Alexander Graham Bell,
Marconi, Edison, and other truly creative geniuses. In reality, very little pure research into totally new
directions in implemented. The breakthroughs that occur are usually extensions of variations of existing
databases. Most management creativity is focused on improving existing products, procedures, and
practices. To separate it from the less disciplined creative process, we refer to this focus as innovation.
A major research and development laboratory in the telecommunications industry spends ninety percent of
its research funds on "mission-oriented research." This is a search aimed at achieving specific results on pre-
specified products or systems. Only ten percent is spent on non-directed research. Thus, innovation is
favored nine to one over creativity. The results are such that this lab is recognized worldwide as being one of
the foremost in its field. Managers are similarly mission-oriented and thus need innovation processes that
lead them to specific results. Although the form of the solution may totally unspecified, the goal must be
clearly defined. Managers are most often in a situation where they must come up with better and different
ways of resolving problems or achieving results. This is best accomplished through innovation rather than
unbridled creativity. Before describing several techniques for assisting the manager there are several overall
principles that should be explored in innovation.
Principle 1. Establish an Innovative Climate
Much has been written about the difficulties of operating in a creative group situation. Theorists have
developed detailed lists of perceptual blocks, cultural blocks, and emotional blocks that exist in groups and
individuals who restrict the full use of their innovative skills. Thus, it is imperative to consciously establish a
climate that allows mistakes, illogic, diversions, unsupported ideas, and other normally undesired group
behavior. Without a set of ground rules that encourage freedom (within the structure), innovation will not
flourish. Of all the principles in innovation, this one is paramount. Without the freedom and the proper
climate, no tool will be effective. In most innovation training programs a tremendous amount of time is spent
teaching the skills of climate setting.
Principle 2. Start with Easy and Available Alternatives
In most problem-solving situations, we are not "reworking the world." At best, we are trying to make a
modest improvement or correction. First of all, one should consider known solutions that have worked before
or are in use in other parts of the organization. Sometimes it is simpler to stand on a chari to change a light-
bulk than it is to design a "folding, multiple-length ambidextrous bulb replacement device."
Principle 3. Avoid a Preliminary Search for an Ideal
Since most workable solutions usually result in taking the best from several compelling solutions, it might be
unrealistic to expect an alternative to be perfect at first glance. A favorite device used by people who are
dedicated organization obstacles is known as the "it won't work approach." They always find a flaw
somewhere in the proposal. Their ambition is to discount the entire credibility of the solution for the sake of a
minor point (thus providing them with an individual feeling of accomplishment, but often at the expense of
any progress.) When searching for possible solutions, we should have an open, non-judgmental attitude and
not eliminate choices that are not ideal. This elimination will come later, in a more disciplined manner, when
we compare alternatives.
Principle 4. Use Other People
Encourage others to help you generate a wide range of alternatives. Although a group may not always be
the most effective forum for problem solving, it can be effective in creating a wide range of solutions.
Synergy, in the form of building on others' ideas or reacting to the inputs of others, can provide a more
creative and, perhaps, more useful solution than any single individual could produce. Because individuals
tend to limit themselves to single tracks and single definition, groups' suggestions can be helpful. For
example, when completing a cross-word puzzle, if you attach an interpretation to a clue word too quickly,
you may never get the answer.
Criterion Optimization Technique (COT)
This process-oriented technique can be used to explore variations or alternatives. This normally is applied
when none of the known alternatives seems to be appropriate. A fundamental principle of COT is that
combinations of the best features of known alternatives can lead to a more effective solution. This process is
one that The Alamo Consulting Group has developed to help in situations where traditional alternative
generation has not yielded acceptable solutions.
To apply COT the first step is to generate a complete list of desired end results of the decision (criteria).
Since the alternatives are not yet going to be evaluated, these are know as Design Criteria. This list of
criteria should include the entire range of known desired end results. They represent stimulus for our
creative generation of ideas. They provide the direction necessary for productive creativity.
The second step is to take each criterion in turn and optimize an ideal solution to that single factor. All other
criteria are pushed out of mind at this point. No alternatives are evaluated at this point. The key question to
be used is "What would an alternative that performed perfectly on this criterion look like?" This is repeated
for each criterion until a list of optimum alternatives exists.
The process of generating solutions from criteria is where innovation is required. Our experience suggests
that this is best achieved through some form of brainstorming, green lighting, or group creativity. The
application of the key principles of Innovation, mentioned earlier in this section, have their application during
this step. The free-wheeling development of ideas increases the possibility of generating the components of
an ultimately feasible solution.
The range of alternatives in the Optimum Criteria column should be assessed for a design package that
could that could incorporate several approaches that would not have been visible without using the Criterion
Optimization Technique. Combinations of the best features of known alternatives can lead to a more
effective solution.
The first task in combining the Optimum Criteria into a comprehensive alternative is to test for mutual
exclusivity (the McKinsey & Company methodology - "MECE" - Mutually Exclusive Comprehensively
Exhaustive). Because each Optimum Criterion has been generated independently, it is conceivable there
could be mutually excluding characteristics. Each Optimized Solution is then combined with every other
Optimized Solution to check for potential contradictions. Judgment is required at this stage. If two criteria are
contradicting, then a conscious choice must be made regarding which one to include in the initial combination.
The next task is to compare each Optimized Solution for mutual support. There may be natural combinations
that will reinforce each other. These should be immediately connected as the basis for a feasible alternative.
The end result sought is a combination of ideas that produce an innovative, "synergistic" alternative.
It may also be possible to put together different combinations of Optimized Solutions to create more than
one alternative. Solutions that evolve out of different combinations can exist independently of each other and
provide a basis for a relative choice.
If more than one alternative is created by using the Criterion Optimization Technique, then the decision-
maker should return to Step Five of the Standard Decision Making Process and compare alternatives. When
only one alternative comes from the use of COT the initial design criteria becomes the basis for evaluation.
It is now critical to apply the absolute scoring/weighing process (as described in Multi-Alternative Decision
Making) to the newly created alternative to ensure a guaranteed minimal performance level. This protects
the decision-maker from compromising to the point of ineffectiveness.
Part B - The Project Decision Support Package (DSP)
After selecting and using the Decision Making Variation that is applicable at the time, one must present the
information and recommendation for a decision. In doing so, it is wise to support the recommendation (and
the resulting decision) with a Decision Support Package. The package should contain the critical information
leading up to the recommendation and really should support the resulting decision by creating an
environment where the decision can be made in confidence and is deemed to be rational.
Depending on the decision to be made, the package will vary in its content and look. Let's take a few
examples and explore what the Decision Support Package (DSP) should contain to meet the above
requirements. These requirements are driven by what the decision-maker "needs to know" or "have a
comfort with" prior to the decision being made in confidence.
Another feature that I like to develop is the Decision Follow-up Package (DFP). These packages report on the
result of the decision and how events that have taken place after the decision have effected or continue to
effect the quality and rightness of the decision. These are especially useful in projects where managing
communications with senior management are critical to continued support. They also prevent the CYA
(Cover Your A**) Syndrome and the SML (Selective Memory Loss) Syndrome that appear on projects when
things start to go wrong. By being pro-active in managing expectations and maintaining alignment on
projects through this method, one can normally continue to get the support of others when things do go
wrong. You will need this when and if you get into a project "turnaround management" mode.
How would one measure the "quality" of a decision, much less monitor that quality over time on a project?
The approach I use is one of risk mitigation assessment and quality of project health. I use the report card
method of giving a score from 0 to 100. I place the score in the upper right-hand corner of the both the DSP
and the DFP. This score is adjusted from time to time based on events or changes on the project which may
or do impact its quality and/or the quality of the decision. It is not meant to be a 'critique' but more designed
to create action and additional support on the project when its needed. This score is carried on the cover
page which gives the other critical information about the project as well as a succinct overview on the project
status, quality and upcoming needs. This is also where the specific event or change that impacted the "score"
of the project is briefly described. Behind this 'one-pager' are the various support documents, such as risk
matrix, critical assumptions matrix, financial pro-forma status, project critical schedule component, etc.
Each of the support documents, such as those above, should only be included in the DFP when they have
changed or been impacted by the event or change on the project. It is not necessary to have all the support
documents in a DSP to be carried in each DFP unless required as mentioned earlier.
In the packages, I use various computer tools (applications) for a comprehensive but succinct (a
contradiction in terms, but useful for describing what I do with these) presentation of the project health
aspects. The tools I use are a 'modified' scheduler *(normally Microsoft Project 98, Project Scheduler 7, P3,
Suretrak, etc.) depending on the client's or partners' preferences; a decision-tree tool (normally Palisades
Precision Tree modeler); a project finance assessment and measurement tool (Promoter); a calculation
component explanation tool (Decision Pro); risk assessment and continuous measurement tools (RiskTrak
for quality of risk, @Risk for probability and impact of risk); and, of course, many others as appropriate
(Excell, PowerPoint, etc.) and my decision 'project screening' tools for project pursuit assessement and
financing capacity and capability.
* What I mean by a 'modified' scheduler is that I put all critical decision points (DPs) and contingency points
(CPs) on the schedule itself in addition to other basic schedule information. By this method, those who are
responsible for making various decisions can see when those decisions must be made without fail or the
project will be impacted. For project development, this is an added method of good communications as well
as during project execution. For contingencies, I identify contingency points along the schedule so that
everyone can see what and when they are entering an 'area of concern' by the nature of having the
contingency, and when that area is past. This is a very good communication method for managing
expectations and maintaining alignment of stakeholders.
By automating the decision aspects going into the decision, it is much easier 'tracking' the performance
results of that decision over time. Again, these are support applications used to reinforce the
recommendation for the decision and allow effective monitoring for the DFPs to follow-up on such decision.
There are various aspects to projects that require thorough thought and planning. These aspects must also
be captured for decison-makers in support of project execution, managing expectations and maintaining
alignment of the project teams, sponsors, lenders, and other shareholders and stakeholders in the project.
AllenWeb Site - since 1995
Project Decisions in Project Development & DSPs - Feb 2000
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