Why the Best Executives Sometimes Fail to Make the Best Decisions
Are there ways for executives to improve their odds of making better decisions? Executives everywhere are being held to ever increasing standards of accountability in their decisions. And yet, in spite of vast investments in information systems, sophisticated analysis, and expert technologies, it seems it has never been more difficult to make successful decisions.
Businesses and organizations are continually faced with making decisions concerning complex problems with a myriad of variables and factors, many of which are uncertain.
In such cases, an executive or manager might solicit, or an analyst might propose, a detailed analysis of the problem. The traditional approach would begin by carefully identifying all the variables or factors that apply to the problem. Each of the variables is explained in great detail and relationships are established among them. These relationships are then combined at increasingly high levels of aggregation until eventually all are linked to form some reasonably complete model of “reality.” The hope then is that this model of reality will subtend the decision to be made so that the analysis will yield “answers.”
Unfortunately, the appeal of such an approach often leads to a long and costly analysis which, as best, produces “answers” that are misunderstood and give little insights. The Top-Down approach to problem solving is designed to give the necessary understanding of the trade-offs and impacts involved in the decision. Learn More
The Top-Down approach to problem solving is discussed in the article above. This approach is designed to give the necessary understanding of the trade-offs and impacts involved with a decision. Top-Down analysis takes the decision maker out of a passive role and places him in a position to apply his judgement and expertise to the decision. Often, a Top-Down analysis requires the analyst to develop a computer model to help examine options. In this article, Top-Down modeling will be discussed and compared with the traditional “bottoms-up” approach to developing and using models and simulations.
Quantified Decision Framing (QDF) is a methodology that satisfies all the criteria of Top-Down principles. It is an approach to analysis that is focused on the decision to be made, is elegant in its simplicity, yet can be constructed to be as rigorous as required for the decision being considered. In minimizes the necessary expenditure of time and money while providing a means of knowing if further analysis is warranted. Further, it puts the decision maker at the heart of the analysis. It permits him to see the sensitivity of his decision to his judgments about the unknowns of the problem. QDF is a methodology whose sole objective is to help the decision maker chose the best decision possible.
Executives, analysts, economists, and accountants employ a number of criteria to determine the relative attractiveness of capital investments. Unfortunately, some of these criteria give erroneous results and may lead to poor investment decisions. The following discusses several alternative investment criteria, illustrates when they can (and cannot) be used, and demonstrates that Net Present Value is the only safe criteria for correct results in all cases.
One of the primary functions of military force planning and programming in peacetime is to provide the military capabilities needed to underwrite future military strategies.
An element of the force planning and programming effort which has great potential, but which has historically made a disappointingly small contribution, is the analysis of the effectiveness of tactical fighter forces. Analyses which attempt to find the best mix, or even a good mix, of resources with which to prosecute a future armed conflict have not been particularly helpful to those who must decide what to buy.
To be useful to those who perform the planning and programming fuctions, methods of analysis used in evaluating effectiveness of tactical fighter forces must consistently and correctly treat the factors which determine the outcomes of battles, campaigns, and wars.
At the higher levels at which forces structure must be traded for force characteristics, the dominant factors by far are those which concern how forces are used in combat. How forces are presumed to be used is generally treated as simple input rather than viewing the subject itself as being an integral part of the analysis. Because this is demonstrably inadequate, most of the higher level analyses performed today are of limited usefulness.
The following discusses the specifications of the above charge in terms of what is primarily wrong and what needs to be done to fix it.