60 – Mini-course – Fundamentals of Decision Support

Report
Develop America's Airmen Today ... for Tomorrow
“Fundamentals of Decision
Support"
Ms. Desiree Murray and Ms. LaShunda Lewis
4 June 2010
Defense Financial Management & Comptroller School
Ira C. Eaker Center for Professional Development
Maxwell Air Force Base, AL
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Outline
Develop America's Airmen Today ... for Tomorrow


Decisions, decision making and decision
support
The role of the financial manager in decision
support

Opportunities for more on decision support
 Changing decision support culture
 A decision support model

Decision support tools

Summary
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Decision Making and Decision
Support
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To Understand Decision Support,
We Must Understand Decision-Making
Theodore Roosevelt: In any moment of decision the best thing you can do is the right
thing, the next best thing is the wrong thing, and the worst thing you can do is
nothing.
Margaret Thatcher: Standing in the middle of the road is very dangerous; you get
knocked down by the traffic from both sides.
Albert Einstein: We can't solve problems by using the same kind of thinking we used
when we created them.
Franklin D. Roosevelt: One thing is sure. We have to do something. We have to do the
best we know how at the moment...; if it doesn't turn out right, we can modify it as we
go along.
Yogi Berra: When you get to the fork in the road, take it.
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Bottom Line Up Front…
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
For decision makers to make the best decisions
they must demand the best data

A lack of quality data and analysis leads to
suboptimal decisions

The majority of significant decisions have
resourcing implications

Those of us in the resourcing community are
responsible for providing quality analysis
Decision Support - a Core Competency of the FM Community
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Reaction vs. Decision
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


Reaction – Response to some stimulus or event
Decision – Selecting a choice between
alternatives
Components of a Decision:
–
A set of alternatives or options
•
•
Alternatives have subsequent consequences
Uncertainty regarding consequences
Successful Decision Making is not a Simple Task
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Dealing with Complex Issues
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

Good decisions are seldom easy to
recognize…bad decisions are very
noticeable
Uncertainties add complexity to
decision making
–

There are many techniques for dealing
with these uncertainties
Decision makers are subject to their own
biases
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Outline
Develop America's Airmen Today ... for Tomorrow


Decisions, decision making and decision
support
The role of the financial manager in decision
support

Opportunities for more on decision support
 Changing decision support culture
 A decision support model

Decision support tools

Summary
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The Call for Effective Decision
Making and Decision Support
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
“… leaders must make the tough
decisions that produce the best possible
use of finite resources and improve the
efficiency and effectiveness of our
operations. Resource stewardship, and
the tradeoffs between cost and
performance, must become a part of every
conversation.” Honorable Nelson M. Ford, ASA(FM&C)
Taken from 2007 Army Financial Statement
Effective Decision Making is Critical to our Nation’s Future
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Where We’ve Been…
Where We’re Going
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Decision
Support
Decision Support
Decision Support
FM ROLES
SHIFT FOCUS
Control &
Reporting
Control &
Reporting
Transaction Processing
Transaction
Processing
Past
Future
(Scorekeeper Role)
(Advisor Role)
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Financial Advisors
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 Building/Strengthening Networks/Relationships
 Influencing Outcomes, Driving Decisions
 Engaging Proactively
 Analyzing Options/Developing Alternatives
 Looking Forward…Future Perspective
 Effectively Communicating
 Enhancing Value To
Decision-Making
What do you expect from your personal financial advisor?
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Decision Support Defined
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Decision Support is enabling
decision makers to make
informed decisions that better
utilize resources and improve
mission effectiveness.
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Seven Tips for Making
Good Decisions
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
Identify and focus on the most important things

Don’t jump at the first feasible solution

Choose the option you really want – unless the
data doesn’t support you

Optimize the opportunities

Project the 2nd and 3rd order effects of your plan

Don’t limit your alternatives

Turn big decisions into a series of small ones
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Outline
Develop America's Airmen Today ... for Tomorrow


Decisions, decision making and decision
support
The role of the financial manager in decision
support

Opportunities for more on decision support
 Changing decision support culture
 A decision support model

Decision support tools

Summary
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
DFM&CS Courses
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•
Defense Financial Management Course (DFMC)
•
Defense Decision Support Course (DDSC)
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Defense Financial Management
Course
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

Designed to Develop or Enhance:
–
Decision support skill sets
–
Leadership and communication skills
–
Awareness of the multi-faceted financial
management community
–
Strategic Orientation
–
Support for Contingency Operations
Target audience GS-12, O-4 and above & E-8
and above
Air University: The Intellectual and Leadership Center of the Air Force
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Defense Decision Support Course
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
Focuses on concepts to understand Decision
Support
–
–
–
–
–

Defines Decision Support and the Decision Support
Model
Describes Analysis Tools and Techniques
Reinforces Learning through Practical Exercises
Includes Graduates of PME and PMCS
Students should already possess a broad knowledge
of the DOD FM environment, a strategic perspective
Target audience GS-12, O-4 and above & E-8 and
above Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Outline
Develop America's Airmen Today ... for Tomorrow


Decisions, decision making and decision
support
The role of the financial manager in decision
support

Opportunities for more on decision support
 Changing decision support culture
 A decision support model

Decision support tools

Summary
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
15 Reasons Why Change
Efforts Fail1
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1. People leading the change think announcing the
change is the same as implementing it.
2. People’s concerns with change are not surfaced or
addressed.
3. Those being asked to change are not involved in
planning the change.
4. There is no urgent or compelling reason to change.
The business case is not communicated.
5. A compelling vision that excites people about the
future has not been developed and communicated.
1
Ken Blanchard- “Leading at a Higher Level”
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15 Reasons Why Change
Efforts Fail
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6. The change leadership team doesn’t include early
adopters, resisters, or informal leaders.
7. The change isn’t piloted, so the organization
doesn’t learn what’s needed to support the
change.
8. Organizational systems and other initiatives aren’t
aligned with the change.
9. Leaders lose focus or fail to prioritize, causing
“death by 1,000 initiatives.“
10. People are not enabled or encouraged to build
new skills.
Air University: The Intellectual and Leadership Center of the Air Force
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15 Reasons Why Change
Efforts Fail
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11. Those leading the change aren’t credible—they
under-communicate, give mixed messages, and do
not model the behaviors the change requires.
12. Progress is not measured, and no one recognizes
the changes that people have worked hard to make.
13. People are not held accountable for implementing
the change.
14. People leading the change fail to respect the power
of the culture to kill the change.
15. Possibilities and options are not explored before a
specific change is chosen.
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Outline
Develop America's Airmen Today ... for Tomorrow


Decisions, decision making and decision
support
The role of the financial manager in decision
support

Opportunities for more on decision support
 Changing decision support culture
 A decision support model

Decision support tools

Summary
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Decision Support Model
Develop America's Airmen Today ... for Tomorrow
Identify
the Issue
Analyze
the Issue
Evaluation
Decision
Support
Implementation
Decision Made
Develop
Alternatives
Evaluate
Alternatives
Make a
Recommendation
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Integrity - Service - Excellence
Develop America's Airmen Today ... for Tomorrow
Break
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Outline
Develop America's Airmen Today ... for Tomorrow


Decisions, decision making and decision
support
The role of the financial manager in decision
support

Opportunities for more on decision support
 Changing decision support culture
 A decision support model

Decision support tools

Summary
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Six Thinking Hats
White Hat
Red Hat
Available data
Intuition, gut reaction, emotion
Yellow Hat Positive, optimistic
Black Hat
Negative, cautious, defensive
!?!
Green Hat Creative
Blue Hat
Process Control
25
Decision Support Model
Develop America's Airmen Today ... for Tomorrow
Identify
the Issue
Analyze
the Issue
Evaluation
Decision
Support
Implementation
Decision Made
Develop
Alternatives
Evaluate
Alternatives
Make a
Recommendation
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Integrity - Service - Excellence
Identify the Issue
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
Arguably, the most important part of decision
support

Provides structure to the problem
–
Indicates what is to be accomplished
–
“How do we best…”

Ensures the decision maker and the decision
support team are working toward the same
objective

Sets the stage for success
Establishes Focus on Desired End State
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Issue Identification Tools
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Brainstorming
Identify the Issue
WHY?
Why?
Analyze the Issue
Why?
Why? Why?
Mind Mapping
Fishbone Diagram
Develop Alternatives
Affinity Diagram
Evaluate Alternatives
Make a Recommendation
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Develop America's Airmen Today ... for Tomorrow

Brainstorming is a method for generating ideas
Use when:
–
–
–

ROE: No criticizing!
–
–

Creativity & quantity of new ideas is the focus
Build on the ideas of others
Conduct: Open, closed, or round robin
–

Identifying the Issue
Determining Evaluation Criteria
Developing Alternatives
Record and display ideas to energize other ideas
Prioritize ideas, sort into common themes
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Five Why’s (more or less)
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
Repeatedly asking “Why” can help you
determine the real issue.
–
–

A very simple tool, easy to use.
Useful when the issue involves human interactions
ROE: Answer the question – “How do we
best…”
–
–
Write or precisely state the issue (for focus)
Ask why. If the answer is not the root issue, repeat
process.
"If you don't ask the right questions, you don't get the right
answers. A question asked in the right way often points to its own
answer. Asking questions is the ABC of diagnosis. Only the
Air University:
Theproblems."
Intellectual and -Leadership
Center
of the Air Force
inquiring mind
solves
Edward
Hodnett
Integrity - Service - Excellence
What is the Real Issue
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Analyze the Issue
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




Attempt to further understand the issue
Break the issue down into subordinate parts
Identify external actors, influencers and their
relationships
Diversity in the analytical team helps
expand the analysis
Need to recognize time available for
analysis
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Issue Analysis Tools
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Identify the Issue
Analyze the Issue
Quantitative Tools
Time Series Plots
Scatter Plots
Correlation & Regression
Control Charts
Descriptive Statistics
Pareto Chart
Decision Trees
Develop Alternatives
Evaluate Alternatives
Qualitative Tools
Flow Charting
The “Q” Box™
Cause & Effect
Force Field Analysis
Make a Recommendation
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Issue Analysis Tools
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
Flowchart a process or service
–

Pareto charts
–

Losing weight example
Decision Trees
–

Where should you focus your effort?
Force Field Analysis
–

Aids in understanding the process
Shows likely impact of different scenarios
The Q-box
–
Systematically dissecting the issue
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Flow Chart Example: Getting
Up
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Delay
Hit Snooze
For 5 Min.
Button
No
Start
Alarm
Ready to
Rings
Get Up?
Yes
Get
Up
End
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Example of a Pareto Chart:
Lunch Options
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70
60
50
40
30
20
10
0

Issue: New boss wants to know
why we can’t get faculty to go to
Variety
lunch together
Transportation
–
Transportation
– Cost
– Food Choice
Problems
– Time
Cost
Time
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Force Field Analysis:
Losing Weight
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Driving Forces
Restraining Forces
Improve Health
Lack of time
Lack of knowledge
Clothes are tight
Negative self image
Bad habits
Upcoming event
Great Tool for Identifying Major Forces Acting on the Issue
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Four Square Protocol
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Gather
Facts
Examine
Responses
Measure
Similarity
Analyze
Situation
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38
Decision Tree – Fixin’ My Old
Diesel Truck
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No
$0
Replace
Engine
$3000
p=0.5
Drive On!
$0
p=0.4
Plugs OK
$0
p=0.4
Plugs Need
Replaced
$250
Something
Else?!?
$1000
Belt Fails?
Perform
Maintenance?
Yes
$750
p=0.5
Additional
Work?
p=0.2
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Decision Tree – Observations
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


If we choose not to replace the belt…
–
Average cost = (0.5 x $0) + (0.5 x $3k) = $1,500
–
Range of costs = $0 to $3000
If we have the belt replaced…
–
Up front cost = $750 for belt replacement
–
Plus (0.4 x $0)+(0.4 x $250)+(0.2 x $1k) = $300
–
Average cost = $750 + $300 = $1,050
–
Range of costs = $750 to $1,750
What do you recommend?
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Example: Stimulating
the Economy
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


Situation – Rising fuel costs are eating up
my budget
–
Gas guzzling vehicle
–
Basic maintenance deferred
Economic stimulus dollars to the rescue
Issue: What is the best way to leverage
recently received funds to reduce my long
term fuel costs
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Analyzing the Issue:
The “Q” Box™
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Ask
Time
People
Flexibility
what is the
opportunity cost of
driving?
else do I use the
vehicle for?
is the next major
service due?
do I use the vehicle?
else makes the
commute?
Who
What
other options are
available?
When
are the times of my
commute?
other family members
use the vehicle?
do I go for fuel,
service?
Where
do I have to drive?
Why
How
Money
far/long to get to
work?
do other people get to
work?
should I finance this
purchase?
many miles are on the
vehicle?
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Tools for
Developing Alternatives
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Identify the Issue
Analyze the Issue
Capabilities and Competencies
aka SWOT Analysis
Develop Alternatives
Evaluate Alternatives
Analogies and
Benchmarking
Make a Recommendation
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Develop Alternatives
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
Identify multiple plausible alternatives

Answers: Who, What, When Where, Why and How

Characteristics

Suitable - accomplish mission and meets guidance

Feasible - accomplish mission given constraints

Acceptable - balance cost with objectives

Distinguishable - significantly different from other COAs

Complete - planned out
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Develop Evaluation Criteria
& Alternatives
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Juxtapose Attributes
1. Pick pairs of attributes associated with
the issue (from previous steps)
2. Place each attribute on one of the axes
of a nine unit grid box
3. Consider alternatives that incorporate the
various degrees and combinations of the
attributes being displayed
 Example: Technical ability & money
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Develop Evaluation Criteria &
Alternatives (continued)
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Ask:
• Does it matter?
• Can I gather
data about this
attribute?
• Is it distinct
enough in the
alternatives
considered?
Technical ability
• Is this a good
criterion for
alternative
evaluation?
∞
Develop
Evaluation
Criteria &
Alternatives
Take the
Subway
Repair
Current
Vehicle
Buy a
Helicopter
Take the
Bus
Carpool
Buy a New
Car
Ride Bike
Obtain a
Chauffer
Service
Walk
0
Cost
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∞
Decision Support Tools
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Identify the Issue
Analyze the Issue
Develop Alternatives
Evaluate Alternatives
Make a Recommendation
Evaluation Matrix
Lean 6σ, TOC, BCA, etc.
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Evaluate Alternatives
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
Establish evaluation criteria prior to alternative
development
 At least 3 Evaluation Criteria
 Weighted and Non-Weighted
 Generally along these dimensions





People
Money
Material
Time
Risk/Flexibility
Prioritize Criteria Based on Decision Maker’s Guidance
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Alternative Matrix Example
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Alternative
Up
Front
Cost
Weight
20%
Sustained
Costs
Weight
30%
Flexibility
Weight
50%
Total
Weighted
Total
Buy a New Car
1
.2
8
2.4
8
4
17
6.6
Fix Old Truck
7
1.4
5
1.5
8
4
20
6.9
Carpool
10
2
9
2.7
4
2.0
23
6.7
Ride a Bike
9
1.8
10
3
3
1.5
22
6.3
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Make a Recommendation
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

Communication and briefing skills
KISS principle
–
Be comprehensive, but focus on essentials
–
Know the personality of the decision maker
–
Consider what you want to show and what
you want to hold in back-up
Make sure you ask
for a decision!!!!
Air University: The Intellectual and Leadership Center of the Air Force
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Decision Support Model
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Identify
the Issue
Analyze
the Issue
Evaluation
Decision
Support
Implementation
Decision Made
Develop
Alternatives
Evaluate
Alternatives
Make a
Recommendation
Air University: The Intellectual and Leadership Center of the Air Force
Integrity - Service - Excellence
Observations Regarding
Decision Support
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



True decision support is not a panacea – it is
hard work
Using decision support requires commitment
to making a difference
Timing is everything – Often the decision
maker won’t ask for decision support
A good recommendation in a timely fashion
is better than a perfect recommendation
after-the-fact
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DS - It Ain’t Always Easy
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Questions?
Develop America's Airmen Today ... for Tomorrow
The Defense Financial
Management &
Comptroller School
Air University: The Intellectual and Leadership Center of the Air Force
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