Problem Solving
References
 Smart Choices, John S. Hammond,
Ralph L. Keeney and Howard Raiffa,
Harvard Business School Press, 1999
 The Thinking Manager’s Toolbox:
Effective Processes for Problem
Solving and Decision Making, William
Altier, Oxford University Press, 1999
Objectives
Learn how to state and clarify a problem
Develop a procedure for problem solving
Learn the traps
in problem solving
What’s typical?
Self-Doubt
Over Confidence
Procrastination
Flip-flops
Desperation!
WRONG!
Six Criteria for Effective Decisions
Focus on what is important
 Be Logical and consistent
 Acknowledge objective and subjective factors,
blends analytical and intuitive thinking
Do not gather too much information
 Try to reach consensus
 Straightforward, reliable, easy to use, flexible
tools or techniques
Problem Solving Model
P roblem
O bjectives
A lternatives
C onsequences
T radeoffs
What’s the best solution?
A good solution
to a well-posed Is a
almost
problem….
always
a smarter An excellent
choice solution to a
poorly posed
than..
problem
Define the Problem
• What triggers the problem?
• State the problem
• Question the constraints of the problem
statement
• Identify the essential elements
• How does this impact other decisions?
• What is the scope of the problem?
• Gain insights from others
• Restate problem, if necessary
• Stair stepping to the point of certainty
Objectives
By stating the objectives you hope to achieve you
can:
Help determine what information to seek
 Determine the importance of, time and effort
devoted to the problem
 Write down the concerns you hope
to address:
Wish List
Worst/Best Cases
Impact on others
What’s not feasible
Alternatives
 Use your objectives and ask HOW?
 Challenge constraints to your alternatives
 Set high aspirations
Think through your alternatives before
consulting others- inquiry
 Learn from past experience
 Then ask others for suggestions
Brainstorming
Others’ Agendas
Consequences
List the consequences of each alternative
Eliminate any clearly inferior alternatives
 Organize descriptions of remaining
alternatives into a table …….
Common scale to measure consequences
 Qualitative and Quantitative data
 Get expert advice
Tradeoffs
Eliminate alternatives clearly dominated by
others
 Then swap between alternatives using
priorities
Value incremental improvements
Some additional factors to consider……
Uncertainties
 What are the key uncertainties?
 What are the possible outcomes of these
uncertainties?
 What are the changes to the outcomes, given
these uncertainties?
 What are the consequences of each outcome?….
• Probabilities
• Decision Trees
• Weighted Value Chart
Risk Tolerance
How much risk do you want to handle?
 How much are others affected by your
decision?
 Quantify the risks, if possible
 Seek to lessen the risks but avoid being
overly optimistic
 Don’t avoid making risky decisions just
because they are complex
How can you reduce the risks??????
Psychological Traps
Working on the wrong problem
 Failing to identify key objectives
Too few good, creative alternatives
 Overlooking crucial consequences
 Giving inadequate thought to tradeoffs
 Disregarding uncertainty
 Disregard or underestimate risks
Failure to see/plan for long range consequences
Common Traps
Anchoring trap
Status Quo Trap
Sunk Cost Trap
Confirming
Evidence Trap
Framing Trap
Overconfidence
Trap
Recallability Trap
 Base Rate Trap
 Prudence Trap
 Random Events
Traps for Groups/Teams
 Allowing the loudest/most senior
person to control the decisions
 Allowing the most articulate to
frame the decision
 Self interest over what’s best for the
firm
 Lack of objectivity