介紹決策作為定量方法的上下文

1、Topic 1 - Introduction to decision making as the context for quantitative methodsLearning objectivesAfter completing this topic you will be able to: · Understand the importance of decision making.· Know that decision making is a process which may involve solving problems.· Appreciate

2、the importance of information to decision making.· Appreciate that quantitative methods may aide in decision making.· Be able to identify and describe the steps involved in decision making.IntroductionThis topic introduces the subject of quantitative methods as an important part of the dec

3、ision making process of executives and managers. The process of decision making is presented to provide the context for quantitative methods in the functions required for rational decision making. The purpose of this book is then outlined, in which the distinction between decision making and problem

4、 solving is made.The process of decision makingMaking decisions is a process. According to Hebert Simon (1960, p. 1):“decision making comprises three principal phases: finding occasions for making a decision; finding possible courses of action; and choosing among courses of action”. When there are p

5、ossible courses of actions (options) available, decisions need to be made, even if the result of making a decision is to continue with the status quo. Most definitions of decision making confer that the process involves the person/people making a decision having several alternatives to choose from a

6、nd that making a choice involves evaluating the potential outcomes. The ability to make the right decisions in a timely fashion is the arguably most defining characteristic of an effective manager and executive. Cornell (1980, p.13) argues that:“the act of making a decision is without equal importan

7、ce that is to say the act of making the right decision about the right problem or opportunity”.He continues to say that this assertion is not to downgrade the many other functions that a manager has to perform or skills that he/she must have, but rather that decision making is important because it i

8、s at the heart of all interrelationships between people, processes and production. For managers or executives to be able to make “the right decision about the right problem or opportunity” (Cornell 1980, p. 13) they must first be able to identify the existence of a problem or an opportunity. This ab

9、ility is based on the knowledge, understanding and foresight of where the organisation currently is and where the organisation should be heading strategically. Therefore, a problem exists when the current state is undesirable and an alternative state is preferred. This is the case even if the desire

10、d state can not be discerned (Bass 1983). The problem may require one or more decisions to solve. Importantly, for decisions to be made there must be choice of possible solutions, because with a lack of choice there is no need for decisions. Whereas problem solving involves identifying the solutions

11、, decision making involves implementing the chosen solution. Therefore problem solving is essentially abstract while decision making requires action and commitment to change.Although we may like to think that managers and executives will make the right decisions, this is not always the case. What we

12、 need to consider here is what is the right decision. Is it simply the best choice given a set of alternatives? Such a view ignores the fact that choices have consequences (outcomes) and that these can be both good and bad. Furthermore this question assumes that one can determine the best choice fro

13、m a range of alternatives, which is rarely the case. March and Simon (1958, p. 114) developed a typology that differentiates alternatives based on expected outcomes. The typology contains the first four categories as shown in Table 1.1 and Drucker (1973) offers the fifth category.Table 1.1 A typolog

14、y of decision alternatives based on outcomesAlternativesExpected outcomeGood alternativeLikely to result in a positive valued state.Bland alternativeUnlikely to produce either a positive or a negative valued state.Mixed alternativeIs likely to result in both a positive or a negative valued statePoor

15、 alternativeIs likely to result in a negative valued stateDo nothingNo change in stateObviously the decision maker should not select poor alternatives where the negative valued state is worse than not changing the state. However, knowing the actual outcome is most often not possible before commitmen

16、t to action. In such cases the outcomes are estimated based on the amount and the use of available information to predict outcomes. Based on the analysis of available information, the decision maker has three possible states to work with. These are summarised in Table 1.2Table 1.2 Summary of states

17、related to decision makingStateOutcomesCertaintyComplete and accurate knowledge of the consequences of each alternative.UncertaintyCannot define the consequences of each alternative.RiskAssumption that accurate knowledge exists and that probabilities of outcomes can be assigned to each alternative.A

18、s mentioned, the state of certainty is very uncommon as it assumes that the decision maker is fully aware of all the possible outcomes. For decision makers to be fully aware they must have perfect information, which includes all possible influences and conditions on the situations surrounding the de

19、cision. Similarly it is also uncommon for genuine uncertainty to exist. Therefore with some information regarding the decision context and analysis of the information decision makers can assume that they are somewhere in the state of selecting alternatives with some estimate (calculated) risks.To es

20、tablish a risk state rather than an uncertainty state, the decision maker must adopt several functions as part of the decision making process. These functions include: § establishing objectives;§ searching for information; and§ evaluating the alternatives. Following these are the rema

21、ining functions of the decision making process: § choosing an alternative;§ implementing the decision; and§ controlling the outcomes to ensure they meet the objectives. Although all of these functions are important to decision making, the focus of this book is on the evaluation of alt

22、ernatives, in particular where quantitative analysis can be applied to the evaluation. Nevertheless, to be able to evaluate alternatives they must first be established and information must be collected to measure the potential outcomes. Establishing objectives and searching for informationOnce a pro

23、blem has been identified the decision maker normally establishes a set of objectives. The objectives are important because they are essentially the foundation of the decision making process. They provide purpose and direction for the process. Importantly, the objectives can be evaluated to ensure th

24、at any decisions that may follow from pursuing the objectives are consistent with the organisational goals and objectives, and whether the objectives can be measured and evaluated. The objectives should have the following characteristics:§ relevance to the organisation;§ recognise obvious

25、constraints;§ can be measured in a quantifiable way;§ are applicable to the given situations; and§ are the objectives cost effective and will they provide for a more desirable state.The next integral part of the decision making process is the search for information from which alternat

26、ives may be formed. The number of alternatives the decision maker develops is dependent on the amount of effort put into the search process. Even after an extensive search there may exist some alternatives that the decision maker is unaware of. Similarly there will be some alternatives that the deci

27、sion maker will discard without consideration. Where an information search is superficial, gross errors can occur in the decision making. Such errors and a superficial process occurs when:§ information is gathered but not used;§ more information is requested and ignored;§ decisions ar

28、e made and then an information search is performed as a secondary action; or§ much of the information gathered is irrelevant to the current decision making situation. It should be noted here that searching for information can be costly and that it is not possible to search for all the informati

29、on necessary to have perfect information. This is because to search for information takes time and money, which is usually constrained. Therefore there is only so much effort that can be devoted to a search.The decision maker is an important ingredient in the decision making process. Not only are th

30、e skills and knowledge of the decision maker important in making decisions, but so are his/her personality and aversion or preference for risk (Alexis & Wilson 1967). Personality traits such as the propensity to solve problems and propensity to search for information together with the level of r

31、isk aversion will influence the use of information, set of potential choices and ultimately the solution chosen. The amount of search for information undertaken can often be attributed to the decision makers personality traits and levels of risk aversion.The information acquired from an information

32、search can be in many forms. Sometimes such information is contained within numerical data sets which may be formed from a range of sources such as:§ sales records;§ procurement records;§ industry data; and§ other internal and external sources to the organisation. Often the data

33、and information acquired has to be converted into information that is suitable for evaluating appropriate alternatives for the established objectives. There are a range of quantitative methods that can be employed for this function. The application of these methods is the primary focus of this book.

34、The importance of information to decision makingExecutives and managers make many decisions that can impact on the future of organisations, business growth and strategic direction. Making informed decisions is important, and having information to support the rationale for decisions can strengthen ar

35、guments for the choice made. In most cases selecting a choice of action based on available information does not guarantee a desired outcome. Actually in most situations there is the potential that a desired outcome may not occur despite the use of available information. The reason that outcomes cann

36、ot be guaranteed is that information has limitations and extraneous influences can affect the outcome. Despite the limitations of information in decision making, the process of evaluating alternative actions for decisions requires information and in some cases the solving of problems. The informatio

37、n required can be sourced from various locations that include the decision makers knowledge and intuition, secondary data sources and primary data sources, which will be discussed in detail in Topic 2. A model of decision makingThe process of decision making can be complex and can involve many funct

38、ions and steps. When we investigate the process of making a decision, sometimes we see a linear progression through defined steps and other times we can see an iterative process where some of the steps are repeated. For example, searching for information and revising the problem based on the informa

39、tion found and then searching for more information. Although researchers have provided several models of decision making and each may seem to fit different types of decisions with level of complexity the following eight step process serves to illustrate the tasks involved in the process of decision

40、making.Figure 1.1 Model of the decision making processStep 1: Identify the management decision problemStep 2: Determine the information requirementsStep 3: Define the information requirementsStep 4: Research designStep 5: Data collectionStep 6: Data preparation and analysisStep 7: Report and present

41、ationStep 8: Select action and act on itAlthough the steps are presented sequentially from one to eight, it is likely that steps are repeated due to feedback from later stages. For example, the decision maker might be collecting data when he/she finds that it is necessary to revise the research desi

42、gn due to unforeseen limitations of collecting the data. There may be much iteration of the steps in decision making process before the decision maker reaches step 8. For example, an exploratory design may be employed at step 4 to provide information useful in step 1 and therefore following step 5,

43、where data is collected or step 6 when it is analysed, the process may return to step 1 in light of the new information. Step 1: Identify the management decision problemCertainly decision making would commence with identifying and defining the management decision problem otherwise there would not be

44、 a purpose for making a decision. As mentioned earlier, the distinguishing attribute of a successful executive is the ability to identify the need to make decisions and be able to construct a set of alternatives.Step 2: Determine the information requirementsOften the need to make a decision is ident

45、ified from receiving new information and then determining whether a disparity exists between the current state and a desired state. Despite having new information which has initiated the decision making process, there may be a requirement to have more information from other sources. Such sources may

46、 include:§ having discussions with other decision makers and colleagues;§ interviews and discussions with industry experts;§ reviewing existing information;§ secondary data analysis (desk research); and§ exploratory qualitative research.Exploratory research may involve consi

47、dering the environmental context of the problem, which includes considering:§ prior information regarding forecasts for the firm and the industry;§ the resources and constraints of the firm;§ buyer behaviour;§ the legal environment;§ the economic environment; and§ techn

48、ology.It is important to review these factors and identify aspects that may have changed or had been over looked previously. A different perspective applied to old information can often reveal new ideas. In Topic 2 the various sources of information will be identified and discussed. The amount of in

49、formation required and the cost of acquiring it needs to be considered. Topic 4 discusses the need to collect information to minimise uncertainty and risk associated with decision making. Methods are also presented which permit the decision maker to determine the amount he/she would be prepared to p

50、ay for additional information to increase the chance of making an optimal choice of alternatives. These methods are part of the techniques of decision analysis.Step 3: Define the information requirementsTo efficiently gather and collect appropriate information it is necessary to conceptualise the pr

51、oblem situation and identify the key variables that can be used to measure the inputs to the scenario and potential outcomes. In particular the independent and dependent variables need to be defined and measured. It is also important to determine the type of measurements that need to be made to meet

52、 the objectives of addressing the problem. A broad statement of the problem and objectives, which contains detailed and specific requirements, would be established in this step. The statement would contain some of the following clauses:§ To measure§ To rate§ To rank§ To compare&#

53、167; To record§ To determine§ To establish.These clauses state the direction and type of the analysis required to address the problem. The broad statement is a guide for setting the direction for the remaining steps and can be used as a reference for checking that the outcomes achieved fro

54、m each step are consistent with the intent of this statement.An essential outcome from step 2 that is required in step 4 is to determine how the data collected is to be used. Basically the data will be used for two broadly defined purposes, either to inform on the situation (exploratory) or assist t

55、he decision maker in choosing a course of action, in which case the information gained must be conclusive in nature. The way in which the data is to be use will determine the research design that is to be employed.Step 4: Research designAs mentioned above, there are two broadly classified research d

56、esigns available to collecting data for decision making, these are exploratory or conclusive. Exploratory research is mainly used to gain insight to a problem so that it can be defined more precisely, so that courses of action can be identified before developing approaches to solving problems and ma

57、king decisions. The first iteration of the decision making process may involve exploratory research and the analysis and findings of exploratory data may be used to inform in the identification of the management decisions in step 1. Exploratory research is flexible and versatile. The methods can inv

58、olve surveying experts, conducting pilot studies, analysing published data that has not been collected specifically for the problem at hand (use of secondary data), observations and other forms of qualitative research. For decision making, conclusive findings are required on which to make decisions.

59、 Conclusive findings are usually obtained from more formal and structured research methods than those used in exploratory research. Conclusive research is used to assist the decision maker in determining, evaluating and selecting the best course of action to take for a given situation. Conclusive findings may describe the characteristics of entities under investigation, estimate the proportions of groups or parameters in a population, count the occurrences of events, compare the characteristics between groups and po