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Decision Analysis for Consensus between Holders of Stakes and Stocks (Part 1)

5 November 2007 - Features - Editor

You can use the method to choose stocks. It works equally well for executives at all levels and sizes of organizations. The versatility of Decision Analysis is indeed one of its most striking aspects. It is a skill that people from all walks of life can use for advantage. Decision Analysis clarifies thinking, and puts sequential thinking on paper. This helps to review strategic matters retrospectively, and builds consensus as well. Decision Analysis should be integrated in to operating processes of organizations as widely as basic accounting techniques.

Decision-making is both sequential and iterative. Most people do this in their minds and privately. Misunderstandings result because others do not follow our trains of thought. Decision-analysis forces us to think aloud, and to put key points, if not everything, on paper. This approach brings disagreements to the surface, and allows broad-based participation regardless of hierarchical position. The 19th century template of a person handing out instructions is replaced by a more egalitarian and participative way of husbanding resources. It may not be the best thing to do in emergencies, but is most appropriate for strategic and operational matters.

The preparation of decision statements, enumeration of objectives, categorized in to essential and desirable ones with priorities, and the creative generation on alternatives, are the three critical and most difficult phases of Decision Analysis. It is during these discussions that aggressive and over-bearing individuals may try to dominate proceedings, so it is important for facilitators to draw out reticent members of groups. The rest of the process is fairly mechanical though these steps also add value. Sensitivities and risk analysis completes the procedure.

A hypothetical example from the world of investing in stocks can help to illustrate how Decision Analysis works in real life. Let us say that a financial services firm wants to evaluate new technology areas for portfolio development. The decision statement in such a case may be:

“The decision statement is to choose between various emerging sectors of the US economy for investments in stocks of companies with extraordinary future profit potentials”.

Why is a decision statement a controversial matter? The degree of specification is the general source of confrontation. Note how the decision statement is largely qualitative: arguments are bound to start once sectors are specified and profitability and the time frame stated in numbers. The process of negotiation is healthy in itself, but there is no universal prescribed way of arriving at optimal compromises.

Decision Analysis for Consensus between Holders of Stakes and Stocks (Part 2)


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