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appraisal process and employees’ satisfaction with the process; and • the actual decision (the “is”) generally, only deviates from that recommended by
decision analysis models (the “ought”), when the analysis is poorly implemented,
unsophisticated and the decision-makers are unconvinced of the value of decision
analysis. It has also suggested that at least part of the reason for the gap between practice and
capability is that: 151 • There are theoretical gaps in some of the techniques (for example, the lack of
prescription in Monte Carlo simulation of the shape of the probability distribution
to be used to model the reservoir parameters of reservoir rocks of similar lithology
and water depth); • decision-makers’ perceptions of decision analysis are closely aligned to the earlier
definitions of decision analysis and decision-makers’ perceive decision analysis to
be a threat; and • decision-makers are not convinced of the value of decision analysis. The section has also indicated that current situation is exacerbated since there has
been no study conducted that has found a link between use of decision analysis and
good organisational performance.
6.4 A MODEL OF CURRENT PRACTICE
The observations expressed in the previous sections are captured here by a model of
current practice in investment appraisal in the upstream oil and gas industry. The
model presented has been modified and developed by abstracting from the insights
into decision-making at different levels within operating companies gained from the
research interviews discussed in sections 6.2 and 6.3, and is informed by the
behavioural decision theory literature which was presented in Section 2.4 of Chapter
2. Variations of the model have been shown to interviewees and the version that is
presented here has been acknowledged by employees in the oil and gas industry to be
an accurate description of current practice in investment appraisal. The respondents
from Companies C and D said of the latest version:
“I think you’re right. You’ve basically captured it.” (C);
“I saw this diagram and I can see a lot of what I’ve come across in here” (D)
In this section, the current version of model will be presented. The model is twodimensional. The axes of the model will be explained and justified using quotes from
the research interviews. The interviewed companies will be plotted on the two-axes. 152 These results can then be interpreted and this confirms many of the observations made
in section 6.3. In particular it highlights the need for a study to investigate the
relationship between the use of decision analysis and organisational performance.
The x-axis in the model relates to the number of decision analysis techniques used for
investment appraisal decisions. The quotes from the interviews presented above
clearly indicate that there is variation in the number of decision analysis tools used by
companies for investment appraisal decisions. Some are aware of al...
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This document was uploaded on 03/30/2014.
- Summer '14
- The Land