A systematic approach to decisionmaking
LOS ANGELES — Making decisions.
It's something we do every day, all day - from the moment we wake up until we go to bed.
Should we change jobs? How should we invest our savings? What school should our children attend? What movie shall we see?
Yet decisionmaking isn't a skill we're taught. Rather we learn it from experience. And experience isn't always the best teacher.
"Making decisions is a very important life skill and to treat it as a skill can make a big difference in the quality of one's life," says Ralph Keeney, a professor at the Marshall School of Business at the University of Southern California in Los Angeles.
He and two of his colleagues at Harvard Business School, John Hammond and Howard Raiffa, have written a new book on the subject: "Smart Choices: A Practical Guide to Making Better Decisions" (Harvard Business School Press, $22.50).
The three have spent decades helping companies resolve complex situations - everything from mergers to nuclear-waste disposal. Their theory: Good decisionmaking is systematic.
From their experience, they have developed an eight-step process that can be applied to virtually any decision.
"It's a complement to common sense," says Mr. Keeney in a recent interview at his USC office. In fact, the process has helped him and his wife on everything from evaluating whether to move to picking a name for their son.
The first five steps are often all that are required for decisions that don't have a lot of uncertainty.
They are as follows:
*Problem. For starters, you need to know the problem that needs addressing.
*Objectives. Ask yourself what you most want to accomplish.
Too often, Keeney argues, people don't clarify what they hope to achieve. And they frequently think too narrowly. For example, you had a rough week at the office and you need to get away for the weekend. So you say, "We could go to the regular spot."
Instead of jumping to a solution, Keeney says, ask yourself what you hope to achieve: Do you only want to relax, or do you want to spend time with your family? Or maybe you need quiet time alone?
Now you're ready to determine what places to go to accomplish your objective.
*Alternatives. Create imaginative alternatives. Your alternatives represent the different courses of action. If you don't have different alternatives, you aren't facing a decision.
*Consequences. Understand the consequences. How well do your alternatives satisfy your objectives?
*Tradeoffs. Grapple with your tradeoffs. Because objectives frequently conflict with one another, you'll need to strike a balance.
If you are making a decision that contains some unknowns or the factors keep changing, you also will want to examine the last three steps:
*Uncertainty. You need to judge the likelihood of different outcomes and assess their possible consequences.
*Risk tolerance. Assess how much risk you're willing to take in your quest for better consequences.
*Linked decisions. Think at least one step ahead in pursuing your objectives. How will your decision today influence the alternatives available to you in the future?
And watch out for those psychological traps, Keeney warns. Among them: being too sure of ourselves and seeing patterns where none exist.
Another pointer: If more than one person is making a decision, each person should run through the process individually first.
Keeney is the first to acknowledge that this process doesn't solve every decision - no process does.
Decisionmaking is a skill that you must practice, he says, just like playing golf. And the more you practice, the better your swing.