humble decisions for uncertain times fmi pd workshop
DESCRIPTION
HUMBLE DECISIONS FOR UNCERTAIN TIMES fmi PD WORKSHOP. Hana Carbert, CMA, FCMA. Decisions, decisions . What decisions do you make?. Past decisions Future decisions. Business or personal Successful or not. Agenda. Decision context Decision process Environment & uncertainty Human factors - PowerPoint PPT PresentationTRANSCRIPT
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HUMBLE DECISIONS FOR UNCERTAIN TIMES
FMI PD WORKSHOP
Hana Carbert, CMA, FCMA
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Decisions, decisions
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What decisions do you make? Past decisions Future decisions
Business or personal
Successful or not
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk3. Managing risks
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Decision Process: this?
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Decision Process: or this?
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Decision 1:
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Decision 2:
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Problem-Solving Steps
Recognize Problem Define Alternative Courses Evaluate Alternatives and Decide Implement Decision and Monitor
What is the problem with this? Anything missing? What is assumed?
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The rational model
“Evidence-based decision making” Good – if we have the right evidence and
know how to use it Assumes decision maker wants to be
rational Assumes clear/single criteria Assumes relative certainty of outcomes
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BUT…
Clear goal? Clear decision
criteria?
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List goals and criteria for your decisions
Exercise
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Types of Decisions
Programmed Experience Routine Information Decision-rules
exist
Non-programmed Poorly defined Unique situation Often combined
with lack of information and uncertainty or risk
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Categorize your decisions: programmed or not?
Exercise
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk3. Managing 4. risks
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What causes uncertainty?
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Environment of uncertainty
Risk regarding decision environment Economic risk: e.g. growth, commodity
prices, deflation/inflation; interest rates Leadership direction Weather & Nature Technology Human behaviour
Lack of information or poor information Validity of assumptions Ambiguity of goals and criteria
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List uncertainties related to the decisions
Exercise
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Four ways of knowing
We know what we know We know what we don’t know We don’t know what we know We don’t know what we don’t know
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What are the (known) unknowns of the decisions?
Exercise
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk3. Managing risks
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Critical thinking
What forms our assumptions and experience?
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Discussion
How can you reduce ‘what you do not know’?
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Reducing what we don’t know
Edward de Bono: Six Thinking Hats Defined but separate focus of team
members Diverse teams: backgrounds, training,
types Critical thinking: questioning
assumptions, explicit reasoning Culture People awareness
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How does your mind work?
How do you gather information? Sensing vs.
Intuitive How do you
evaluate information and make decisions? Thinking vs.
Feeling
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Information Processing
What is YOUR Cognitive Style (Jung/Slocum)?
Sensing Thinker
Intuitive Thinker
SensingFeeler
Intuitive Feeler
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Discussion:
Relate Jung’s/Slocum’s framework to decisions made Do you recognize people you know? What does new insight suggest for future approaches?
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk1. Adapt process steps2. Select decision model3. Communicate goals, criteria and risks
3. Managing risks
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How does this Doctor decide?
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Humble decisions (Etzioni)
Focused trial and error Tentativeness Procrastination Decision-staggering
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More humble decision tactics.. Fractionalization Hedging bets Maintaining reserves Reversible decisions
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Reversible decisions
Final sale?
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List ways the humble tactics could have been used
Exercise
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BUT…..
Clear objective/goal?
Clear decision-criteria?
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk1. Adapt process steps2. Be aware of decision model3. Communicate goals, criteria and risks
3. Reducing risks
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Decision Models (Harrison)
Rational Organizational Political Process
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Rational Model
Seeks perfection/optimization - a decision-making prescription
Requires (almost perfect) information Requires clear decision
objectives/criteria - shared by all Uses MS tools such as decision-trees,
CPM, etc. Problems?
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Rational model
“Illusion of precision”
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Organizational Model
Challenges assumption of perfect information
Recognizes limitations of decision-makers
Seeks rational, rather than perfect, decisions
Quick, satisfactory decisions
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Political Model
Recognizes a variety of goals, agendas Organizational power is the key driver
impacting decisions
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Process Model
Focus on the process, as opposed to end objective
Interdependence of steps: process will impact exhaustiveness of choices
Objective-oriented outcome, long-term focus
Recognizes behavioural impacts Open to external environment
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Which decision model applied?How did it affect the decision?
Exercise
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk1. Adapt process steps2. Be aware of decision model3. Communicate goals, criteria and risks
3. Reducing risks
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More than one goal
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Decision Matrix - example
Criteria Alternative A
Alternative B
Alternative C
Financial outcome
$ XXX $ XXXX $XXXX
Service Reliability
Community Acceptance
Environmental Risk
Timeliness of completion
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Decision Matrix – Example +
Criteria A1- worst A2 – most likely
A3 - best
Financial outcome
$ XXXX $ XXX $XXX
Service Reliability
Community Acceptance
Environmental Risk
Timeliness of completion
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Decisions with uncertainty
Communicate range of outcomes Communicate sensitivities Communicate at what point does the
preferred decision changes Outcomes Criteria changes Decision process changes
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Decisions with uncertainty
Segment decision elements Identify points of no return Revisit decision through implementation Communicate and manage risks
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When is the decision point?
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Show variability
Growth 0 Growth 2% Growth 4%0
10000
20000
30000
40000
50000
60000
70000
Alternative A Alternative B Alternative C
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Was range of outcomes understood?If not, how could it have been communicated?
Exercise
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk1. Adapt process steps2. Be aware of decision model3. Communicate goals, criteria and risks
3. Managing risks
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To quote a genius...
“Anyone who has never made a mistake has never tried anything new”
Albert Einstein
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Anticipate and plan for risks
Good judgment comes from experience, experience comes from bad judgment
Author unknown
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Communicate: Risk Register
Category Risk Likelihood Impact Response
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Types of Risk
Strategic – choice of strategies Operational – risk to assets & ability to execute
strategy Compliance – people/organizations will not do
what they are supposed to do Reporting – reliability and accuracy of information
Categorization helps the identification process: checklist
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Risk Management Process
Anticipate – what can happen? Assess – what would be consequences? Plan – how can we respond? Control - is the process working?
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Risk Management Responses
Accept E.g. delays due to weather
Share or Transfer E.g. P3’s transfer risk of cost overruns
Reduce or Mitigate E.g. response plans to accidents/disasters
Avoid E.g. don’t engage in conflict
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List risks related to the decisions.How could they be managed?
Exercise
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Too much agreement?
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Role of Communication
Communication skills and style can enhance of encumber group decision-making
Culture can enhance or encumber Clear goals and criteria will enhance
decision-making
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Agenda
1. Decision context Decision process Environment & uncertainty Human factors
2. Adapting for uncertainty & risk3. Managing risks4. Conclusion
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Role of financial managers
You can improve the effectiveness of decision making: Defining and providing relevant information Clarifying goals, criteria Providing balanced evaluations Communicating associated risks
Applying decision process skills Managing risks
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How can you use this?
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Questions?
THANK YOU!