Making Smart Choices
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Decision Making A Fundamental Life Skill
• Making good decisions is one of the most
important factors that determines how well
you meet your responsibilities and achieve
your personal and professional goals
• Learning how to make good decisions is
therefore a fundamental life skill
• You can practice and improve this skill by
learning a good decision making process
(emphasizing how you decide, not what you
decide)
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The Elements of “Smart Choices”
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Problem
Objectives
Alternatives
Consequences
Tradeoffs
• Uncertainty
• Risk Tolerance
• Linked Decisions
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Problem
Objectives
Alternatives
Consequences
Tradeoffs
Uncertainty
Risk Tolerance
Linked Decisions
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Objectives
Objectives specify what you hope to achieve
Refine with a short phrase of a verb and an
object
Examples:
• Minimize environmental damage
• Maximize profits
• Save money
• Make my spouse happy
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Objectives: The Basics
• Objectives play a central role in decision
making (“value-focused thinking”)
– If you don’t care, you don’t have a problem
– If you don’t know where you’re going, you might
end up somewhere else
• Objectives guide all phases of the decision
making process (including what information to
seek and what other people to involve)
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Let Your Objectives Be Your Guide
• The process of thinking through and writing
down your objectives goes a long way
towards making a smart choice
• Objectives help you determine what
information to seek
• Objectives can help you explain your choice
to others
• Objectives determine a decision’s importance
and, consequently, how much time and effort
it deserves
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Value-Focused Thinking
creating
alternatives
uncovering
hidden
objectives
identifying
decision
opportunities
guiding
strategic
thinking
evaluating
alternatives
THINKING
ABOUT
VALUES
interconnecting
decisions
improving
communication
Adapted from Keeney, 1992
facilitating
involvement in
multiplestakeholder
decisions
guiding
information
collection
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The Art of Identifying Objectives
• Step 1: Write down all the concerns you hope
to address through your decision
• Step 2: Convert your concerns into succinct
objectives
• Step 3: Separate ends from means to
establish your fundamental objectives
• Step 4: Clarify what you mean by each
objective
• Step 5: Test your objectives to see if they
capture your interests
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Techniques to Identify Objectives
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Use a wish list
Think about alternatives
Imagine possible consequences
Describe problems and shortcomings
Identify goals, constraints and guidelines
Use different perspectives
Think about strategic objectives
Ask ‘why’ for each objective
Do individual thinking first
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Goals and Constraints
• A goal sets a level or a standard with respect
to a particular objective
Example: make $50 million next year
• A constraint is also a standard used to screen
out unacceptable alternatives
Example: insure per unit cost is less than
$900
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Organize Objectives
Means Objective: an objective whose importance stems
from its contributions to achieving another objective.
Fundamental Objective: objective that defines a basic
reason for caring about a decision.
Example:
• Means Objective - arrive home from work early
• Fundamental Objective - make my spouse happy
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Uses of Means and Fundamental
Objectives
• Only fundamental objectives should be used to
evaluate and compare alternatives
• Means objectives can be used to create alternatives
• Whether an objective is a means or a fundamental
objective depends on the decision context
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Fundamental Objectives Hierarchy
• Fundamental objectives can be structured in
a hierarchy
• The most general objective is at the top
• Lower-level objectives explain the meaning of
upper-level objectives
• Achievement of the lowest-level objectives
can be measured using “attributes” to
describe and evaluate the various
alternatives
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Guidelines for Structuring a Fundamental
Objectives Hierarchy from a List of Objectives
• Include only fundamental objectives (no
means objectives)
• Expand meaning of higher-level objectives
• May have more than one highest-level
objective
• Is equivalent to an outline
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Fundamental Objectives Hierarchy
CO Air Quality Standards
fatal
heart
attacks
nonfatal
health impacts
angina
attacks
peripheral
vascular
attacks
regulation
cost
capital
equipment
operations
costs
enforcement
cost
health
cost
direct
(e.g., treatment)
indirect
(e.g., lost
opportunity)
Adapted from Keeney, 1992
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Means-Ends Objectives Network
• Means objectives and fundamental (ends)
objectives can be related in a means-ends
network
• The network of means objectives shows how
the corresponding fundamental objectives
can be achieved
• A Means-Ends objectives network can be
used to generate alternatives
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Guidelines for Structuring a Means-Ends
Objective Network from a list of Objectives
• Has highest-level fundamental objectives as
ends
• Include all objectives except lower-level
fundamental objectives
• Use all direct means-ends relationships
(ask why this objective is important)
• May identify and add new objectives
(when asking why)
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Means-Ends Objectives Network
CO Air Quality Standards
CO
concentrations
health
impacts
CO
doses
breathing
rate
CO
emissions
CO
dispersion
body activity
construction
schedule
costs
maintenance
requirements
fines for
violators
Adapted from Keeney, 1992
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Summary of How to Construct
Objectives Hierarchies and Networks
To Move:
Ask:
To Move:
Ask:
Fundamental Objectives
Downward in the Hierarchy:
Means Objectives
Away from Fundamental
Objectives:
"What do you mean by that?" "How could you achieve this?"
Upward in the Hierarchy:
Toward Fundamental
Objectives:
"Of what more general
objective is this an aspect?"
"Why is this important?"
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Example: Fundamental Objectives
Related to Internet Commerce
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Maximize product quality
Minimize cost
Minimize time to receive product
Minimize time spent
Maximize shopping enjoyment
Maximize privacy
Maximize safety
Minimize environmental impact
Maximize convenience
From Keeney, “The Value of Internet Commerce to
the Customer,” Management Science, 45, 1999, pp
533-542.
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Example: Means Objectives
Related to Internet Commerce
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Minimize fraud
Assure system security
Maximize access to information
Maximize product information
Minimize misuse of credit card
Minimize misuse of personal information
Assure reliable delivery
Limit impulsive buying
Maximize accuracy of transaction
Enhance comparison shopping
Making better purchase choices
Maximize product variety
Maximize product availability
Minimize personal travel
Maximize ease of use
Offer personal interaction
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Example: Means-Ends Objectives
Network for Internet Commerce
Product
Availability
Reliable
Delivery
Product
Variety
Impulsive
Buying
Better Purchase
Choices
Fundamental
Objectives To Maximize
Customer Satisfaction
•Product Quality
Ease of Use
Access to
Information
Comparison
Shopping
•Cost
Accuracy of
Transaction
•Time to Receive Product
Product
Information
•Convenience
Misuse of
Credit Card
Fraud
•Privacy
System
Security
Personal
Travel
•Time Spent
Misuse of
Personal
Information
•Shopping Enjoyment
Personal
Interaction
•Environmental Impact
•Safety
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Take Charge of Your Decision
Making
Who should make your decisions?
Who should choose the decision problems you face?
Decision problems are typically brought about by:
• Others (competitors, bosses, family)
• Circumstances (nature, accidents, markets)
Proactively create your own decision problems.
• These problems are really decision opportunities.
• Facing (appealing) decision opportunities may negate the need to face
(unappealing) decision problems.
• Value-focused thinking helps you be systematic about creating decision
opportunities.
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Value-Focused Thinking In Practice
Medical decisions
today
You feel
You visit
You get
You are
sick
doctor
diagnosis
well again
Alternatives:
Alternatives:
Alternatives:
see doctor
test A, B,
treatment
or not
or C
X, Y, or Z
Your decision
problem
Doctor’s
decision problem
time
life
Another decision
problem
Descriptively
life goes on
Alternative-focused thinking prevails
life goes on
prevention
Maybe you wouldn’t be sick; if sick, cure
prevention
Prescriptively
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Value-Focused Thinking In Practice
Other decisions
today
You lose
You apply
You choose
You are
Your job
for jobs
a job
working again
Alternatives:
Alternatives:
Alternatives:
job
hire or not
select offer
possibilities
Your decision
problem
Company’s
decision problem
time
life
Your decision
problem
Descriptively
life goes on
Alternative-focused thinking prevails
life goes on
use value-focused thinking
to identify decision
opportunities
Maybe you won’t lose your job; if so, use valuefocused thinking to create additional alternatives
and/or to convert problem to a decision opportunity
keep thinking
Prescriptively
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Value Focused Thinking and You
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Value focused thinking can help you
Clarify your strategic objectives
– Guide your decisions
– Help create decision opportunities
Articulate fundamental objectives for specific decisions
– Better understand the decision
– Create fruitful alternatives
Thinking about objectives is hard, but it gets easier
– Practice makes perfect (better at least)
– You learn more about yourself
– You begin to see a coherent pattern
Why bother?
– To recognize and identify decision opportunities
– To create better alternatives for yourself
– To have an enduring set of guiding principles for your life
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The Most Important Point
The only way to exert control over your life is
through your decision-making. The rest just
happens to you. Be proactive, take charge of
your decision-making, strive to make good
decisions and to develop good decisionmaking habits. You’ll be rewarded with a
fuller, more satisfying life.
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References
Smart Choices, with J.S. Hammond and H.
Raiffa, Harvard Business School Press, 1999.
Value-Focused Thinking, Harvard University
Press, 1992.
Decisions with Multiple Objectives, with A.
Raiffa, Cambridge University Press, 1993
(previously with Wiley, 1976).
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