Decision analysts reiterate that it is not their aim

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Unformatted text preview: lysis. Decision analysts reiterate that it is not their aim to predict what the decision-maker will do, but rather to suggest to the decision-maker what they ought to do, if the decision-maker wishes to be consistent. To behavioural theorists this argument is weak. Tocher (1976 reprinted in French, 1989 p139) writes: “…any theory which is worth using predicts how people will behave, not how they should, so we can do our mathematics.” Recently researchers such as Clemen and Kwit (2000) have attempted to circumvent this discussion by focussing not on whether people naturally follow the axioms of decision analysis, but on whether learning to do so can lead them to better choices and consequences. The relationship between performance and the investment decision-making process has attracted much theoretical attention (for example, Bailey et al., in press; Simpson et al., 2000; Wensley, 1999 and 1997; McCunn, 1998; Otely, 1997; Nutt, 1997). In 1977 Hambrick and Snow advanced a model of interaction between current and past performance and the investment decision-making process, but concluded that the effects of the investment decision-making process on performance were not well articulated and that the available evidence was insufficient to support specific theories (Papadakis, 1998). Although many other studies (for example, Dean and Sharfman, 1996; Hart, 1992; Quinn, 1980) have described and explained the investment decision-making process, little consensus has emerged as to the expected relationship between organisational performance and investment decision-making processes (for example, Priem et al., 1995; Rajagopalan et al., 1993). Specifically, whilst it is well established that management science and operations research add value to organisations when used well (Clemen and Kwit, 2000), the value of decision analysis 29 remains less well documented. Although many successful applications have been performed and published (for example, Otis and Schneiderman, 1997; Nangea and Hunt, 1997), the evidence remains largely anecdotal and unsystematic (Clemen and Kwit, 2000). Despite over four decades of research developing decision analysis techniques, gaining an understanding of the behavioural and psychological aspects of decision-making, and the application of decision analysis to real organisational decisions, no research has been able to show conclusively what works and what does not (Clemen, 1999). It is highly likely that being unable to document the value of a decision analysis approach to investment appraisal decision-making has hampered some proponents as they have tried to gain acceptance for decision analysis within their organisations (see Section 6.3 of Chapter 6 and Clemen, 1999). This could be seen as contributing directly to the gap between current practice and current capability in investment appraisal. If decision analysis could be shown to be definitively of value, and that this value easily overwhelms the typical costs of compiling the modelling and analysis, decision analysis would become much more attractive to organisation...
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