Decision
Making
Under
Uncertainty
Building quality into
decision making
– Unilever’s story
Andrew Evans
Think Clearly – Act Decisively – Feel Confident
What we will cover
Introduction to Unilever
and the role of
Decision Analysis
What is decision
quality?
Steps to build quality
into decision making
Unilever is a large, culturally diverse and
complex organisation
Global presence
2011 Turnover > 46 billion
Americas 15 bn
• 171,000 employees
• Products sold in more than
190 countries
• Large degree of cultural
diversity
Europe 12 bn
Asia / Africa 19 bn
“2 billion consumers
worldwide use a
Unilever product on
any day”
The size, diversity and complexity in Unilever
present particular challenges for decision making
High
Rigorous
Organisational
Complexity
Facilitative
Leadership
Different functions,
perspectives and
agendas
Full Decision
Process
Conscious
Cultural and
language differences
Casual
Common
sense & rules
of thumb
Different attitudes to risk
Low
Low
Many time zones
Multiple
uncertainties
?
Analytical
Tools
Analytical Complexity
Many
alternatives
Interelated
factors
© 2005 by Strategic Decisions Group. All rights reserved. Used by permission.
High
Many
Products
A key objective of DMUU is to improve the
quality of Unilever’s decisions
A good
outcome
+
A good
decision
= ?
Overall decision quality depends on achieving
quality in each of six elements:
Meaningful,
Reliable
Information
Clear
Creative,
Doable
Alternatives
Elements
of Decision
Quality
Decision Criteria
and
Trade-offs
Logically
Correct
Appropriate
Frame
Reasoning
Commitment
to Action
Like a chain, overall quality is no stronger than the weakest link.
© 2005 by Strategic Decisions Group. All rights reserved. Used by permission.
The frame sets the scene for the decision
Two key questions:
• What are we going to do?
• Why are we going to do it?
Problem:
Overwhelm
Results:
• Non-decisions
• Oversight
• Difficult to implement
Problem:
Blindness
Results:
• Good answer to wrong
question
• Unforeseen threats
• Lost opportunities
Generating a range of creative, doable
alternatives is a vital element of decision quality
Strategies have been explored and the
team would be prepared to adopt
whichever one proves superior.
Strategies are so compelling that we
need to analyse them in order to choose
between them.
Some questions to generate alternatives:
• How else could we create value for the
organisation?
• Could this be undertaken by a third
party (Open Innovation)?
• What would we do with less investment?
• What would we do with more
investment?
Obtaining meaningful, reliable,
information requires an awareness of
biases…
We sold 50,000
units
Dozen cases of
20 x 8oz
bottles
Litres?
Wow! $40 million
– that’s great!
I’m forecasting a
40 million turnover
If we don’t know what we want to maximise
(criteria) we wont know what to evaluate!
Volume?
Gross Margin?
IRR?
1st to market?
Sustainability?
Market Share?
Strategic Advantage?
Waste reduction?
NPV?
Payback?
We need to use logically correct reasoning
to evaluate the alternatives effectively
Issues
•Aim for a one-way ‘flow of calculations
•Build the model assuming that you will need to hand it over to someone else
•Colour code the model to signal different sections
We need to understand who the decision maker
is, and what they need to commit to action
Have they addressed the
problem I wanted them to?
Have external factors such
as competitors and consumer
reaction been considered?
Who has been in involved
in making this recommendation?
Frankly, can I believe this?
Or is it all wishful thinking?
If the decision maker will not commit to action, it is usually
because we have failed in one or more of the other dimensions
of decision quality.
Decision complexity will drive the optimum way
of applying decision quality elements
Low complexity – DQ ‘quick test’:
High complexity – full process:
• What problem are we trying to solve?
• Cross functional team.
• What are our alternatives?
• Formal decision making process.
• What information do we need, and
where can we get it from?
• Select appropriate tools and
approaches according to the
decision problem.
• What are we trying to maximise?
• How will we choose between
alternatives?
• Who is the decision maker?
For complex decisions a process to address all
components of decision quality is required
Decision Makers
Review 1
Review of framing
and structuring.
IDENTIFY
PROBLEM
FRAME
Review 2
Review of key data
and confirm frame is
still valid.
STRUCTURE
Review 3
Discussion of
analysis, agree
decision and actions.
ANALYSE
Evaluation Team
RECOMMEND
The best recommendation is useless unless
competently communicated!
The MMR vaccine is used in over 60
countries to inoculate children against
measles, mumps and rubella.
In UK, the use of this vaccine became the
subject of controversy following a paper in
The Lancet alleging a link with Autism.
Nationwide inoculation of children with the
MMR vaccine was the consistent
recommendation from the UK government.
Confused communication resulted in reduced
uptake of the vaccine in the UK and an
increase in the incidence of measles,
including some fatalities.
Focus on the points that will influence
your decision maker
48% chance of negative NPV
Mean = W$ 7.7m
NPV (W$m )
J.E.E.P.
Our goal is to build quality into all decisions
Decision Quality can be assessed – and its not about the outcome!
We need to understand the complexity of a decision and
employ an appropriate process and the correct tools.
All components of decision quality need to be considered.
But our work to build in decision quality is
wasted unless we can communicate our
recommendations effectively!