D and i have seen bidding strategy meetings held with

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Unformatted text preview: ncouraged, formalised and well supported, and employees are generally satisfied with their companies’ investment appraisal process. Then the decision-maker relies on the results from the analysis to make decisions. This is not to say that the decision is taken solely based on the analysis. Decision-making will always be ultimately an act of judgement. However, since the decision-maker has been involved in generating the analysis, then its results are unlikely to contradict his/her subjective judgement about the particular investment opportunity. At the very least though, the analysis informs the decision. If the analysis suggests that a project is not viable, and the decisionmaker still wants to go ahead, because of some bias or feeling that he/she has not been able to articulate and include in the analysis, they are doing so well informed about the potential consequences. In companies where managers are unconvinced about the value of decision analysis, the company is largely “opinion-driven” and the use of decision analysis is not formalised or encouraged. Decisions in these companies are perceived by the employees of the organisation to be influenced more by opinion and “feeling” than numerical analysis: “…And if you go through a structured decision process and you calculate an EMV and it is highly negative but your guts say this is a good thing to do… you’ve then got two choices … you can then go back and fiddle the numbers or you can just overrule the result and say that this is strategically good for us.” (D); and, “…I have seen …bidding strategy meetings held with senior management where you would come forward with all of these [decision analysis] evaluations and there the psychology in the meeting would override many 149 times the logic that had been developed using these probabilistic numbers. Somebody likes something and suddenly the money would double. I saw that many times.” (G). The observations above have been summarised in table 6.1. MANAGEMENT UNDERSTAND DECISION ANALYSIS The decision analysis approach used by the company is formalised. Often manuals are available to employees. The manuals detail how the limitations and gaps in the techniques (for example, the distribution shapes to be used in Monte Carlo simulation) are to be overcome. Decision analysis software available throughout the Organisation. MANAGEMENT DO NOT UNDERSTAND DECISION ANALYSIS The decision analysis that is conducted is likely to be lacking in definition, structure and sophistication. Employees are given no direction as to how to deal with the limitations of the analysis techniques. Employees know the decision policy used by the company. Consistent definitions of risk and uncertainty. All employees have the ability to understand and communicate probabilistically. Employees do not know the decision policy used by the company. No company definitions of risk and uncertainty. Definitions change within and between organisational functions. Employees prefer to communicate deterministically. Good communication between the departments compiling the analysis. Poor c...
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