Decision Making Tools in Project Management Referent: Magid Al Araki 27 November 2006 400 402 403 406
Content 1. Introduction... 1 2. Plus, Minus and Interesting (PMI)... 2 3. Annalistic hierarchy process (AHP)... 4 4. Decision Tree... 5 5. Conclusion... 7 List of Sources... i Appendix... ii - I -
1. Introduction Making decisions is important everywhere. This is the reason why we have chosen to write an article about decision making tools in project management based on the article from Gidel et al (Decision-making framework methodology, 2005). Using tools in decision making processes help to make a decision easier. They can be used to find the ideal solution in a shorter time for a project or a problem. Both in private and working life you have to make decisions. There are crisis and problems in daily life: you might be up with something new or facing a conflict. Whatever the situation is you have to decide your next step. Which apprenticeship is the best for me? What shall I study? What is the best solution for my family and company? A decision is always linked with emotional and pragmatic aspects. The knowledge about own resources and decision making personality is a central and play an important role in reaching the goal. The higher the position of decision maker, the more complex are the decisions, also the knowledge demanded decreases (Dr. Jungkind s web pages). In daily business there are many confusing situations and insecurities about consequences. Nevertheless, decisions have to be competent. Not alone the rational analysis aims to good results. Decisions from the heart, intuitive perceptions, life-experiences and instinct must be considered and are helpful in times of problems, conflicts and crisis. The quality of decision making processes decides about the quality of solutions and its transformation. Thus, the increase of decision security is a keyqualification in a company, in politics, job and even in a successful private life and strengthens the personal decision making competence. Influences of motivation and disruptive elements from personal and social claims are to discover and to integrate in the decision making process. It is always important to make decisions with calmness, composure and with founded information. (Ibid) Gidel mentioned that there are a lot of various techniques used nowadays. For the identification and evaluation of risks in new product design projects for example. There was developed a model which involves several decision making tools and which can be applied for most companies with little changes to minimize the risks. But first you have to identify the risks. Together with Jean-Louis Le Moigne (1995) and H.A. Simon (1977 1980, 1993) believes Gilde et al, that [ ] decision-making can be improved by the substantial increase in human problem-solving capacities in complex nonprogrammed situations. Our work shall show what is hidden behind three free chosen decision making tools and whether it is possible to apply the tools to one and the same case and come to a reliable or even the same - 1 -
decision. We choose PMI to consider the pros and cons of a decision, AHP to illustrate a reliable decision and Decision Tree to choose and show between different courses of action. As an example of solving a problem we take a case 1.3 from A. M. Al-Araki The Octograph The case 1.3 describes a municipality Lavsletten, in which the IT manager sees many problems with the way of organisation and development of its IT. In his opinion the equipment, software and suppliers are not coordinated at all. They have a bad experience with the software but they keep using it still and only one employee has got an internet access. The IT manager has few ideas of saving money and making things easier in the municipality and suggests that he would have a full responsibility for the IT strategy and moving him to administration department. The personnel manager, who is over the IT manager in the hierarchy, is satisfied with the organisation structure and does not agree with moving his position to the administration department. (Al-Araki, A. M., The Octograph) 2. Plus, Minus and Interesting (PMI) The Aim PMI is a decision making tool codified by a lateral thinker Edward de Bono in the book Serious Creativity. This old technique, used for centuries, lets improve the process of decision making and considers the pros and cons. This thinking operation avoids subjective and unchecked decisions. The PMI is a way of treating ideas, proposals and suggestions. It helps to consider all negative and positive sides of a question or decision. The natural reaction of people is to like or dislike an idea. In case, that we feel very involved with any idea, especially when we are responsible for our own executing project, we tend to very personally and objective evaluation of our solving problem. We used to overestimate the pros of any idea instead of being non-polarized. The risk of being onesided exists when we dislike an idea as well - it is very unnatural to look for the positive aspects. (The schoolnet web pages, 2006) PMI tool gives the opportunity of matter-of-fact thinking. It ensures the decision will be considered well without any emotional reaction, which could influence the decision-making process. Equipment To use PMI you need merely: - A sheet plain A4 paper, - A pen - A watch with the ability to display seconds. - A question or problem, that needs answering or solving - 2 -
The paper should be marked up in 3 columns with Plus, Minus and Interesting. In addition to that we need a question. (The whom web pages, 2006) Question: Should the organisation of the municipality and the position of the IT manager in the hierarchy be changed? Whether as an agent of change or a director of the municipality using PMI tool you should write for 2 minutes all the positive points you can consider in the Plus column despite you agree with them or not. According to the rules taught by Edward de Bono you should write as many points as you can within 2 minutes and no longer. (Ibid) Each point will be evaluated. At the end there will be all points +/- from each field counted and the amount shows if it is useful (+) or not. The probably answers could be: Plus - a better, suitable software, (+5) - an internet access for all municipality employees (+2) - satisfied employees (+3) - motivated IT manager (+3) ------------------------------------- (Altogether +13 scores) After 2 minutes we repeat the same rules by finding the negative sides of our question. The probably answers written down in the column Minus: Minus - more expensive supplier (-6) - new software, which must be taught by all employees (-4) - employees instead of working, surfing in internet (-4) ------------------------ (Altogether -14 scores) In the last column we put our reflections concerning above stated question. You should write some possible outcomes of taking the action. Interesting - lots of additional costs and expenses by eventually changing the organisational structure (-4) - better efficiency and satisfied customers (+6) ---------------------- (Altogether +2) After you wrote down all points and it is still not obvious, what kind of decision you should implement, you can assign a positive or negative subjective score to every point. A strongly positive - 3 -
score means the need of taking the action and strongly negative score shows, that an action should be avoided. (The mind tools web pages, 2006) To get the final results of implemented exercise you have to add all the points you scored together. The Director of municipality scored the table as 13 (Plus) 14 (Minus) + 2 (Interesting) = +1 For him or her, the advantages of a new IT system outweigh the negatives of high costs. He is aware of the need of break the status quo in the IT field and accepts the hard and expensive changes of organisational structure. PMI is a very simple tool and by implementation of really important decisions it should be considered using it along with other tolls. 3. Annalistic hierarchy process (AHP) AHP is a decision making tool developed in late 70 s that helps to pick the best decision using experience, intuition, and experimentation-based decision making. (Bhushan and Rai 2004, VIII) AHP is most beneficial in multi-criteria decision making, in planning and resource allocation and in conflict resolutions. In other words mastering AHP can be beneficial when large projects are the case. Evaluation happens with the help of several criteria. The decision making is done by simple pair wise comparison judgments. These judgments are used for developing overall priorities for ranking the alternatives. AHP is connecting inconsistency and consistency in judgments. (Vargas and Saaty 2001, 3) As the name suggests, AHP is hierarchical approach to structure the problem. This makes it possible to divide a problem into many sub problems that are more easily understood and evaluated. Doing AHP First step is creating the hierarchy of three or four levels; the overall goal, Objectives/Criteria and Alternatives. Also Sub-objectives/Sub-Criteria can be added in order to give further details to problem objectives. (Appendix, Figure 6) In our chosen case example, the author chose only three criteria in order for the example to be easier to understand. The overall goal of an example can be Efficient hierarchy. Again objectives can be 1) Less hierarchy in order to make better decisions 2) More employees equipped with internet 3) Overall costs and so on. - 4 -
Next step is to set relative weight to each criterion of respected objective, in according to the importance of that criterion for the goal. Example of the case: Criteria 1 (fast decisions): 0,2 Criteria 2 (employee effectiveness) 0,5 Criteria 3: (cost effectiveness) 0,3 The process continues with the comparison of alternatives. Alternatives can be 1: IT manager stays in the current position 2) IT manager is moved into administration department 3) IT manager is given more authority for the IT software purchasing. The idea is to compare each alternative pair wise with others. E.g. in case example 1.3 compare under Criteria 1 (Fast decisions) alternative 1 (position will not be changed) with alternative 2 (IT manager will be in administration). The result is that alternative two is preferred as decisions are probably faster done if IT manager will be moved to administration department. Then continuing alternative 1 with alternative 3, here again alternative three wins. Now we see that in the first objective the preferred alternative is No. 2, meaning that IT manager will be in administration department. Continue comparing alternatives connected with second criteria (Employee effectiveness) and so on until each criterion s alternatives are compared in pair with all others. The result is done by looking which alternatives were most successful by scoring the alternatives in relative basis, not in absolute basis. (The quality portal web pages) 4. Decision Tree Decision Tree by Vroom and Yetton is a helpful instrument for all the uncertain situations, allowing you to choose between several options in order to identify the best decision to make. By doing this one can have a clear view of all the different courses of action with their strengths and weaknesses. Drawing a Decision Tree includes tree main steps. The first step consists of drawing the Tree. The starting point is represented by a small square, meaning decision that you need to make. The possible solutions are a series of lines which come out of the square towards the right, with the different options written on their tops. The end of each line tells us when the moment to consider the results is. If the result of taking that decision is uncertain, you will draw a small circle. If the result is another decision that you need to make, you will draw another square. Squares represent decisions, and circles represent uncertain outcomes. You will write your decision or doubt above the square or circle, starting another time to discuss from the new square. The process will continue like this until you have discussed as many of the possible - 5 -
outcomes and decisions as you can see leading on from the original decision (Appendix, Figure 1). Once you have finish building the structure of the Tree you can continue to the second step: evaluating your Decision Tree. By evaluating the Decision Tree it is possible to work out which option has the greatest worth to you. A cash value or score will be assigned to each possible solution at the end of each line. In addition, next to each circle (representing an uncertainty point), will appear the relative probability referred to the eventuality that a certain event will occur. If you use percentages, the total must come to 100% at each circle. If you use fractions, these must add up to 1 (Appendix, Figure 2). The third step consists of calculating the value of uncertain outcome nodes by multiplying the value of the outcomes at the end of each line by their probability previously written next to the circles. The total for that node of the tree is the sum of these values. (Appendix, Figure 3) When you are evaluating a decision node, write down the cost of each option along each decision line. The cost from the outcome value that you have already calculated were followed subtracted. This will give you a value that represents the benefit of that decision. Note it next to each possible decision you can make (square). (Appendix, Figure 4) (The mind tool web pages) Doing Decision Trees As far as practical application is concerned, this tool offers a wide range of fields in which it can be used solving complex problems step by step. It presents the decision-analysis process for both public and private decision-making, using different decision criteria, different types of information, and information of various qualities. It describes the elements in the analysis of decision alternatives and choices, as well as the goals and objectives that guide decision-making. It handles missing data, generates a set of decision rules and rule plot. In our case 1.3 the tool can be used in order to draw a sketch of the different options e.g. whether the municipality has to promote the IT manager. We will have a square in correspondence to the two options change the present organization or not. Than starting from the line where change is involved we could have another square for the internet access and a circle with three various options not only for one employee with the correspondent outcomes related to this possibility (e.g. giving the access to some employees or to all of them). In the same way we will have the different options linked to the decision of improving the position of the IT manager or to the opposite side linked to the choice of maintaining the same organization. (Appendix, Figure 5) - 6 -
5. Conclusion It is very difficult to say, which tool is the best for a specific decision. There are different starting points on which each tool depends on and therefore we receive various solutions and would make different decisions. But every reached decision has a consequence. The Decision Tree shows this very well and illustratively. PMI and AHP based both on weighting methods. These are good but they are always containing individual evaluations which are mostly being irrational. PMI is a useful tool of weighing the pros, cons and implications of a decision. It seems to be a good technique for checking the correctness of a decision. AHP is most effective in complex decisions as it breaks the goal into many small objectives in order for easy processing. It is not possible to cover and to discern all consequences and you can not make decisions from assembly line at all. There are always risks which you can t predict in advance. Decisions from heart are also very important and illustrate the complexity in this field. In many cases the first decision is the right! Managers must have a good nose for the right decision. In the future and already now there are more and more computer aided support to make decisions. There are over 1000 writings about the AHP Decision making tool for instance and also many computer programs are available for complex decisions for corporations. Most used one is Expert Choice, used in 60 countries. There are two well known IT programs to create Decision Trees. These are C4.5 (Quinlan 1993) and CART (Classification and Regression Tree). (The American association for artificial intelligence web pages) But you can never be absolutely sure, that these programs guide you to the perfect decision. - 7 -
List of Sources Al-Araki, A. M., The Octograph with cases in Organization Development and Project Management, Leadership and Human Resource Management (May, 2006 Oslo University College) Dr Jungkind web pages 2006. http://www.dr-jungkind.de/decision/index.php?id=1 Visited on 31.10.2006 Gidel, T. Gautier, R. and Duchamp, R. 2005. Decision-making framework methodology: an original approach to project risk management in new product design L, Vargas and T, Saaty. 2001. Models, Methods, Concepts & Applications of the Analytic Hierarchy Process. Springer Le Moigne, J.-L., La Modélisation des Systèmes Complexes, 1990 1995 (Dunod: Paris) N, Bhushan and K, Rai. 2004. Strategic Decision Making. Springer Simon, H.A., Libres propos sur la prise de la décision et son apprentissage. In Revue Française de Gestion, 1993, juin julliet août, 94, 112 116 Simon, H.A., The new science of management decision. In Traduit en Français: Le Nouveau Management: la Prise de Décision par les Ordinateurs, 1977 1980 (Economica: Paris) Swanson, R. 1995. The Quality Improvement Handbook. CRC Press The American association for artificial intelligence web pages 2006. http://www.aaai.org/aitopics/html/trees.html Visited on 25.10.2006 The mind tool web pages 2006. http://www.mindtools.com/dectree.html Visited on 25.10.2006 The mind tool web pages 2006. http://www.mindtools.com/pages/article/newted_05.htm Visited on 5. Nov. 2006 The Palisade web pages 2006. http://www.palisade-europe.com/precisiontree/ Visited on 25.10.2006 The quality portal web pages 2004. http://thequalityportal.com/q_ahp.htm Visited on 22.10.2006 The schoolnet web pages 2006. http://schoolnet.gov.mt/thinkingskills/thinkingtools.htm Visited on 5. Nov. 2006 The whom web pages 2006. http://www.whom.co.uk/html/dbonopmi.htm Visited on 5. Nov. 2006 - i -
Appendix - ii -
6.100 NOK All employees 0,40 10.000 NOK 1.100 NOK Change Maintain 3.100 NOK Internet Access Cost = 5000 NOK Position Cost = 7000 NOK 10.100 NOK Directors 0,30 2.000 NOK 50% of employees Maintain 0,45 New Department 0,30 5.000 NOK 15.000 NOK More Influence 0,20 8.000 NOK 0,35 5.000 NOK Figure 5: Decision Tree for Case 1.3 Figure 6: Analytic Hierarchy Process table - iii -