Of the sampled companies none exhibit all of the

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Unformatted text preview: ommunication between the departments compiling the analysis. Motivation to conduct analysis is high. Decision analysis perceived to be a useful tool for quantifying risk and uncertainty. Motivation to conduct analysis is low. Decision analysis perceived, particularly by management, to be a threat. Each prospect is subjected to peer review. There is no peer review system for prospect evaluation. Decision analysis is part of the organisation’s culture. Decision analysis is not part of the organisation’s culture. Employees trust the results of the analysis. Employees do not trust the results of the analysis. Every employee required to attend training in decision analysis. There is no training in decision analysis. Management committed to decision analysis. Management not convinced by the value of decision analysis. Management involved in generating the analysis. Analysis conducted low down organisation. Management only presented with decision-making criteria. Management less likely to follow the decision alternative suggested by the analysis. They believe their judgement in superior to the analysis. Management likely to follow the decision alternative suggested by the analysis. Restricted access to decision analysis software. Table 6.1: Organisations’ use of decision analysis This table investigates the different ways decision analysis is used by organisations in the upstream. It distinguishes between use of decision analysis where managers 150 understand decision analysis and the use of the techniques when managers do not. Of the sampled companies, none exhibit all of the attributes of either column. Most are placed somewhere on a continuum between the two extremes. The table clearly highlights that decision-makers’ attitudes towards decision analysis are one of the main determinants of an organisation’s use of decision analysis techniques. As such, the decision-makers’ attitude toward decision analysis can be identified as one of the factors that directly causes the gap between current theory and current practice in use of decision analysis in investment appraisal decision-making by the upstream oil and gas industry. This assertion is supported by a similar observation from Kunreuther and Shoemaker (1980): “When decision theory analysis is viewed as a multi-stage model for rational choice among alternative options, its impact on organisational theory and managerial behaviour tends to be less than might have been hoped for or expected.” (Thomas and Samson, 1986 reproduced in French, 1989 p177) This section has provided an overview of the investment appraisal decision-making process in the upstream. In particular it has highlighted that: • There is a relationship between the culture of the organisation and the decisionmaker’s perceptions of decision analysis; • there is a relationship between the use of decision analysis and organisational culture; • there is a relationship between the culture of the organisation and the extent to which decision analysis is encouraged; • there is a relationship between the level of formalisation of the investm...
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