A632.3.3.RB - Framing Complex Decisions

A632.3.3.RB - Framing Complex Decisions

Decisions are often complex, multi-faceted, and involve many different stakeholders with different priorities or objectives – presenting exactly the type of problem that decision research shows humans are typically quite bad at solving, unaided. Most people, when confronted with such a problem will attempt to use intuitive or experimental approaches to simplify complexity until the problem seems more manageable, not thinking of the framing of the complex decision. In the process, important information may be lost, opposing points of view may be discarded, elements of uncertainty may be ignored -- in short, there are many reasons to expect that, on their own, individuals (either lay or expert) will often experience difficulty making informed, thoughtful choices about complex issues.

A systematic methodology to combine these inputs with cost/benefit information and stakeholder views to rank project alternatives has not yet been developed. As a result, the decision maker may not be able to utilize all available and necessary information in choosing between identified remedial and abatement alternatives.

Complex Environments

Fundamental challenges are presented by decision complexity. Focus has shifted from making an optimal decision for an isolated contract to providing an infrastructure that will support an on-going set of decisions on bulk-power contracting as a business. Fueled by the profitability. Modern technology has allowed the development of an information and decision infrastructure that provides for a much closer coordination of supply, demand and customer value than was previously possible. Efficiency gains have been significant, enhancing knowledge of the environment, response flexibility, and value of future options.

Inter-connectivity of the different forms of available data, access to data on a Just in time JIT basis by decision makers, inter-connectivity is built upon new tools. Refining decision models is less important than being able to assure oneself that tomorrow will bring a full plate of interesting choices. These choices can be evaluated at the moment of choice in a prudent manner.

Multiple Stakeholder

A major source of complexity results from the interactions of multiple stakeholders, including competitors, regulators, and public interest groups. Leaders need to look at the stakeholders and see their different points of view on the issues that the company faces. This requires considerably more cooperation to provide the basis for market competition. This triggers new approaches to decision making, just as with data and systemic complexity. Leaders are held accountable by the stakeholders which in turn make the company integrates several elements into their decisions. New approaches like cross-industry working groups and technical committees to scenario planning and experimental economics.

Environmental

By using behavioral approaches like blending analyzed data and human behavior or trends, managers can get a better understanding of the environment in which they are competing. The environment is not the physical environment, it is based on trends, politics, travels, anything around that could possibly change the outcome of the decision. Legitimate alternative points of view that must be understood, tracked and perhaps influenced but which can’t be completely controlled. The key is to link this external stakeholder mapping process to company strategy and coupled with detailed knowledge of historical trends and outcomes provided by data and systems modeling.

Example

When putting together a home loan financial aid package, there is a lot of information that is involved, that has to be taken into consideration prior to finalizing their packaging.  In order to successfully package a home loan to prior to the closing deadline, we need to look at different frames to ensure we obtain all of the necessary information. There is a lot of input from other areas on what will be best for all involved. The packaging (computer) program we use holds warehouse data which can then be sorted and organized. It is up to the human element to decide in the end what will work according to the information provided. These decisions also involve multiple stakeholders including other departments, such as the Underwriter, Loan Office, Records & Registration, etc. The deciding solution should take in to account how others will be affected and what steps need to be taken to ensure a smooth transition. The current environment also in a way dictates the direction of a home loan packaging, as it is directly impacted by income based figures. If the economy is in a recession for example, this can greatly impact type of awards that are included in a package.

References

Hoch, S. J., Kunreuther, H. C., & Gunther, R. E. (2001). Making Decisions.Hoboken, NJ: John Wiley & Sons, Inc.