L. Robin Keller, MBA, PhD
Professor of Operations & Decision Technologies
University of California, Irvine
Editor-in-Chief, Decision Analysis
Jay Simon, PhD
Defense Resources Management Institute
Naval Postgraduate School
Yitong Wang
Operations & Decision Technologies
University of California, Irvine
1
1 Tutorial, INFORMS Annual Conference, October 2009

“Today, I’m going to tell you all you’ll need to know about ‘decision analysis.’”
BERRY’S WORLD reprinted by permission of Newspaper Enterprise Association, Inc.
From Society for Medical Decision Making Newsletter, Sept. 1996
2
2

Pr oblem
O bjectives
A lternatives
C onsequences
T radeoffs
3
3

Work on the Right Pr oblem:
The way you frame the problem determines how you find a solution
• Which bookkeeping software should we use? OR
• How should we keep our books?
Be flexible, “play” with the problem , talk to others, seek advice
Include all major stakeholders to create “buy-in”
Working on the wrong problem is one of the main reasons why a decision analysis is not implemented
4
4

Obj. 1
O
Obj. 2
A decision is a means to an end
Objectives play a central role (“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)
Be creative and think without constraints
5
5

DESCRIBE YOUR IDEAL JOB
6
6

Max. Salary
Obtain ideal job
Convenient
Location
Max. Long-term
Potential
Max.
Base
Salary
Max.
Bonus
Closest
Proximity to Friends
Min. Travel
Time in
Daily
Commute
Max.
Interest in
Job Tasks
Max.
Opportunity to Move Up
7
7

1. The objectives on the lowest level of the hierarchy can be used to evaluate possible consequences by creating a scale to measure them.
Max. SALARY
Max.
BASE
Max.
BONUS
SALARY
It is wise to specify the direction (maximize/minimize/maintain) that makes your attainment of the objective better.
A consequence with a specific job might be a salary level of $100,000 and a bonus level of
$50,000. Do not put the different possible salary levels at the bottom of the hierarchy.
2. We will see that you can attach a rating to how good the level is
(i.e., salary level of $100,000).
The rating may be qualitative (+, -, 0 in StarKist case) or numerical (from -2 to +2 in INFORMS merger).
8
8

“It’s not hard to make decisions when you know what your values are.” Roy Disney
9
9

Maximize my quality of life
1. Enjoy life
2. Be intellectually fulfilled
3. Enhance the lives of family and friends
4. Contribute to society
Keeney (1992), Value Focused Thinking
10
10

Maximize the contribution of professional activities to… my quality of life
1. Maximize enjoyment
2. Maximize learning
3. Provide service
4. Enhance professional career
5. Maximize economic gain
6. Build good professional relationships
7. Minimize the time required
7.1. Minimize time required where I live
7.2. Minimize time required away from home
Keeney (1992), Value Focused Thinking
11
11

1. Single spelling
2. Not a unisex name
3. Reasonable initials
4. Understandable pronunciation
4.2. With last name
4.3. With middle and last name
5. No obvious “unwanted” nickname
6. Not unique
7. Not extremely common
12
12

8. Not religious
9. Not named after anyone
10. Has a nice rhythm
10.1. With last name
10.2 With middle and last names
11. Nice-sounding in foreign languages
12. Appealing (i.e., you feel predisposed to talk to or meet the person)
13. No “ee” sounds
13
13

8. Not religious
9. Not named after anyone
10. Has a nice rhythm
10.1 With last name
10.2 With middle and last names
11. Nice-sounding in foreign languages
12. Appealing (i.e., you feel predisposed to talk to or meet the person)
13. No “ee” sounds
The Winning Name is
Keeney (1992), Value Focused Thinking
Gregory
14
14

A
No decision can be better than the best alternative
Use your objectives to create alternatives
Don’t get stuck with “obvious” alternatives
(they might be obvious, but they might fall short of being the best)
Look for combinations of alternatives (think win-win)
15
15

C
Do B
Knowing where you want to go ( objectives ) and having means to get there ( alternatives ) allows you to describe and understand your destinations
Lay out all consequences in a spreadsheet that describes how each alternative performs on each objective
Study the consequences , they might help you consider more objectives and create more alternatives
16
16

Usually no one alternative outperforms all others on each objective
Finding the best (albeit not perfect) alternative requires tradeoffs
Tradeoffs depend on how you prioritize your objectives
You can make these tradeoffs by weighting objectives by their importance
17
17

-identify mutually agreeable alternatives
-foresee opposition to decisions
-design new & better alternatives
-understand the evolution of past decisions from multiple perspectives
18
18

Multiple-Stakeholder Decision Making
The StarKist Tuna Fishing Decision
Stakeholders
San Diego
Tuna Fishing Fleet http://www.sandiegohistory.org/journal/81fall/images/piva.jpg
http://www.earthisland.org/index.php/donate
/
Competitors
Monika I. Winn and L. Robin Keller, “A Modeling Methodology for Multi-
Journal of Management Inquiry
19
19

Legal Quota
Maintain current practices and stay within legal limits
Limited Mortality
Step up efforts to reduce the number of dolphins killed
Zero-Mortality
No fishing associated with setting nets on dolphins
20
20

Decision Alternatives Rated with
TABLE 1.
StarKist’s “Business-As-Usual” Objectives Hierarchy
StarKist’s "Business-As-Usual" Objectives Hierarchy
MAXIMIZE PROFIT
B1. Minimize Cost
B1.1. Minimize Cost of Tuna
B1.2. Minimize Cost of Canning Operations
B1.3. Minimize Cost of Transportation Logistics
B1.4. Maximize Quality of Tuna and Operations
B2. Maximize Revenue
B2.1. Maintain and Expand Brand Loyalty
B2.2. Increase Customers w/ Differentiated Product Line
B3. Optimize Industry Competitive Position
B3.1. Capture "First Mover" Advantages
B3.2. Hold Market Share Leadership
B4. Minimize Legal and Regulatory Interference
B4.1. Minimize Legal Liabilities
B4.2. Minimize Regulatory Intervention
B5. Maintain Favorable Stakeholder Relations
B5.1. Maintain Good Supplier Relations
B5.2. Maintain Good Shareholder and Banking Relations
B5.3. Maintain Good Relations to Corporate Headquarters
B6. Maintain Reputation as "Good Corporate Citizen"
?
?
-
?
?
-
+
?
?
-
Keep
Status
Quo
?
+
+
+
+
Decision Alternatives
Reduce
Dolphin
Mortality
?
-
-
+
+
Go
Dolphin
Safe
?
-
-
-
-
?
0
-
0
?
0
0
?
?
-
?
0
+
+
?
+
-
?
?
+
Key for Rating Alternative’s Performance on Objective: "
+ ": favorable
" ": unfavorable
"0": neutral or balanced
"?": insufficient information
21
21

Decision Alternatives Rated for Fishing Fleet
TABLE 3. Decision Alternatives Rated for Fishing Fleet
Decision Alternatives
Objectives Hierarchy
MAINTAIN VIABLE BUSINESS
Keep
Status
Quo
+
Reduce
Dolphin
Mortality
+
Go
Dolphin
Safe
-
F1. Maintain Profitability
F1.1. Maintain Lucrative Fishing Grounds
F1.2. Maintain Lucrative Fishing Methods
F1.3. Avoid Foreign Competition
+
+
+
+
?
?
-
-
-
F2. Maintain Livelihood
F2.1. Maintain Fishing Grounds in East. Tropical Pacific
F2.2. Protect Large Investments in Boats
F2.3. Prevent Fishing Grounds from Depletion
F3. Maintain Quality of Life in Local Community
F3.1. Protect Family-Owned Small Businesses & Heritage
F3.2. Maintain Positive Image in Community
F4. Protect Positive Image as Good Global Citizen
F4.1. Legitimate Fishing Methods involving Dolphins
F4.2. Publicize Successes in Reducing Dolphin Mortality
+
+
?
+
?
?
0
+
+
+
+
+
0
+
-
-
+
-
-
-
+
22
22

Decision Alternatives Rated for
Objectives Hierarchy
PROTECT MARINE MAMMALS
E1. Stop Killing of Dolphins
E1.1. Protect Intelligent Large Marine Mammals
E1.2. Protect Species from Extinction
E2. Stop Cruelty to Dolphins
E2.1. Prevent Herding by Helicopter & Detonations
E2.2. Prevent Harm from Entangling
E3. Generate Positive Public Image for Cause
E3.1. Maximize Favorable Media Coverage
E3.2. Generate Positive Public Sentiment
E4. Improve Prestige of Special Interest Group
E4.1. Increase Financial Support
E4.2. Gain Support from Celebrity Spokespersons
Decision Alternatives
Keep
Status
Quo
-
+
+
?
+
-
-
-
-
Reduce
Dolphin
Mortality
-
+
+
?
?
?
-
?
?
Go
Dolphin
Safe
+
+
+
+
+
+
+
+
+
23
23

StarKist’s “Strategic Planning” Objectives Hierarchy
TABLE 4. StarKist's "Strategic Planning"
Objectives Hierarchy
Objectives Hierarchy
MAXIMIZE PROFIT
S1. Minimize Operational Changes and Restrictions
S1.1. Manage Profit-Related Changes
Keep
Status
Quo
?
Decision Alternatives
Reduce
Dolphin
Mortality
Go
Dolphin Safe
? +
+ + -
S1.1.1 Minimize Restrictions on Fishing Territory
S1.1.2 Maintain Yield
S1.2. Maintain Good Supplier Relations
S1.2.1 Maintain Control over Distant Fleet
S1.2.2 Minimize Strain on Relations with Local Fleet
S2. Maintain Firm Profitability
S2.1. Minimize Cost (closely related to S1.1.)
S2.2. Maintain Revenue Stream
S2.2.1. Hold Tuna Price Down
S2.2.2. Avoid Boycotts of Canned Tuna
S3. Maintain Favorable Industry Competitive Position
S3.1. Remain Market Share Leader
S3.1.1. Hold Leadership Position
S3.1.2. Lead Industry on Pricing and Policy
S3.1.3. Hold Leadership-Related Brand Loyalty
S3.2. Capture “First-Mover” Advantages
S3.2.1. Set Industry Standard on Dolphin Policy
S3.2.2. Maximize Positive Media Coverage
S3.2.3. Maintain Profit Margin with Higher Price
S4. Minimize Government Regulation
S4.1. Minimize Regulation-Induced Cost Increases
S4.2. Minimize Constraints on Managerial Discretion
S4.2.1. Avoid Compliance or Forced Reactive Mode
S4.2.2. Avoid Regulation-Related Bureaucracy
S5. Improve Firm Reputation & Public Perception
S5.1. Enhance Image of “Good Corporate Citizen”
S5.1.1. Maximize Goodwill
S5.2.2. Ensure Perceived Legitimacy (Firm & Industry)
S5.2. Avoid Negative Press
S5.3. Minimize Uncertainty from Regulation
S6. Minimize Impact on Marine Life
S6.1. Minimize Short Term Impact
24
-
-
?
-
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
?
+
+
-
+
?
+
+
+
+
+
?
?
?
?
?
?
?
?
+
?
-
?
?
?
?
?
+
-
+
?
+
-
+
+
+
+
-
?
-
-
-
-
-
-
-
-
-
?
?
-
?
?
-
-
+
?
+
-
24

TABLE 5. StarKist's "Crisis Mode"
StarKist’s “Crisis Mode” Objectives Hierarchy
Objectives Hierarchy
Objectives Hierarchy
ENSURE FIRM SURVIVAL
C1. Sustain Profitability
C1.1. Maintain Favorable Industry Competitive Position
C1.1.1 Maintain Viable Cost Structure
C1.1.2 Maintain Revenue Stream
C1.2. Ensure Technological and Operational Feasibility
C2. Minimize Interference from Government Regulation
C2.1. Minimize Regulation-Induced Cost Increases
C2.2. Minimize Constraints on Managerial Discretion
C3. Maintain Organizational Legitimacy
C3.1. Maintain Image as "Good Corporate Citizen”
C3.1.1. Maximize Environmental Citizenship Image
C3.1.2. Maximize Social Citizenship Image
C3.2. Minimize Negative Perception at Critical Events
C3.2.1. Minimize Negative Environmental Perception
C3.2.2. Minimize Perception of Negative Social Impact
-
+
-
-
-
-
-
-
-
-
-
Decision Alternatives
Keep
Status
Quo
Reduce
Dolphin
Mortality
?
Go
Dolphin
Safe
+
-
+
+
+
?
?
?
+
?
?
?
+
?
-
-
?
+
?
+
+
+
+
+
+
+
?
StarKist’s (1991) Dolphin Safe Policy
25 dolphins in the Eastern Tropical Pacific." 25

26
26

27
27

ANALYSIS OF POTENTIAL
MERGER OF
OPERATIONS RESEARCH
SOCIETY OF AMERICA
(ORSA)
AND
THE INSTITUTE OF
MANAGEMENT SCIENCES
(TIMS)
L. ROBIN KELLER AND CRAIG W. KIRKWOOD,
“The Founding of INFORMS: A Decision Analysis Perspective,”
Operations Research, Vol. 47, No. 1, January-February 1999, 16-28.
http://www.informs.org
28
28

SEP:
SEPARATION OF ORSA & TIMS
SQ:
STATUS QUO PARTNERSHIP
SM:
SEAMLESS MERGER
M2:
MERGE WITH ORSA/TIMS AS SUB-UNITS
M3:
MERGE WITH NO ORSA/TIMS SUB-UNITS;
SUB-UNITS ARE REPRESENTED ON BOARD
29
29

FIVE MAIN CATEGORIES
IMPROVE COST EFFICIENCY
ENHANCE QUALITY OF PRODUCTS
ESTABLISH STRONG EXTERNAL IMAGE
MAINTAIN SCOPE/DIVERSITY OF FIELD
IMPROVE OPERATIONS
Elicited stakeholders’ objectives & combined them into 1 hierarchy
30

IMPROVE COST EFFICIENCY
MAINTAIN
EFFICIENT
ALLOCATE WELL MAINTAIN
REVENUES AND EFFICIENT
U SE OF FUNDS EXPENSES USE OF
TIME
EXPLOIT BALANCE DUES REMOVE
ECONOMIES RATE & FEEDOUBLED
OF SCALE FOR-SERVICE DUES
31
31

1. Improve cost efficiency of
TIMS/ORSA operations
2. Enhance the quality of ORSA and TIMS products
3. Establish a strong & coherent external image of field
4. Manage the scope and diversity of the field
5. Maintain/improve effectiveness of ORSA and TIMS operations
1.1 Maintain efficient use of funds
1.2 Allocate well revenues/expenses to activities/entities
1.3 Maintain efficient use of time of volunteers
2.1 Provide high quality main and specialty conferences
2.2 Provide high quality publications
2.3 Provide appropriate career services
2.4 Provide support for sub-units
2.5 Provide other member services
3.1 Increase visibility and clout of OR and MS
3.2 Foster professional identity
4.1 Maintain/improve membership composition
4.2 Create strong relationships with other societies
5.1 Maintain/improve quality of governance process
5.2 Maintain/improve quality of operation output
32
32

2: SEEN BY AVERAGE MEMBER AS
IMPROVED
1: SEEN BY OFFICERS AS IMPROVED
BUT NOT BY AVERAGE MEMBER
0: NO CHANGE
-1: SEEN BY OFFICERS AS WORSE
-2: SEEN BY AVERAGE MEMBER AS
WORSE
33
33

INTERPRETATION OF
“MEASURABLE” VALUE RATINGS
STRENGTH OF PREFERENCES IS REFLECTED
IN DIFFERENCES OF VALUES
DEGREE OF IMPROVEMENT
FROM 0 TO 1
IS THE SAME AS
FROM 1 TO 2
34
34

OBJECTIVES
JUDGED VALUE RATING
ON ALTERNATIVES
SEP SQ SM M2 M3
1. IMPROVE COST EFFICIENCY
1.1 MAINTAIN EFFICIENT USE OF FUNDS
1.1.1 EXPLOIT ECONOMIES OF SCALE
1.1.2 BALANCE DUES RATE AND
FEE-FOR-SERVICE
1.1.3 REMOVE DOUBLED DUES
-2 0 1 -1 1
-2 0 1 -1 1
-1 0 2 1 2
35
35

SUM OF WEIGHTS IS 1OO% FOR ALL LOWEST LEVEL
OBJECTIVES
OBJECTIVE’S WEIGHT DEPENDS ON RANGE
ATTAINABLE ON OBJECTVIVE
Use a SWING WEIGHT Interpretation
Assume a weighted Additive Model
(check independence conditions required for additive model)
DECISION MAKER JUDGES WEIGHTS ON OBJECTIVES
36
36

Evaluation
Considerations
1. Improve cost efficiency of TIMS/ORSA operations
Judged
Cooperation Alternative
Weight SEP SQ SM M2 M3
1.1 Maintain efficient use of funds
1.2 Allocate well revenues/expenses to activities/entities
1.3 Maintain efficient use of time of volunteers
2. Enhance the quality of ORSA and TIMS products
2.1 Provide high quality main and specialty conferences
2.2 Provide high quality publications
2.3 Provide appropriate career services
2.4 Provide support for sub-units
2.5 Provide other member services
3. Establish a strong & coherent external image of field
3.1 Increase visibility and clout of OR and MS
3.2 Foster professional identity
4. Manage the scope and diversity of the field
4.1 Maintain/improve membership composition
4.2 Create strong relationships with other societies
5. Maintain/improve effectiveness of ORSA and TIMS operations
5.1 Maintain/improve quality of governance process
5.2 Maintain/improve quality of operation output 37
37

MULTIPLY OBJECTIVE’S WEIGHT TIMES
VALUE RATING ON EACH OBJECTIVE
SUM UP OVER ALL OBJECTIVES
(Use SUMPRODUCT function in Excel)
RECOMMENDED OPTION IS ONE WITH
HIGHEST OVERALL VALUE
38
38

Robin Keller's Evaluation, 12/21/93
Evaluation of ORSA/TIMS Cooperation Alternatives
Evaluation Consideration
1. Improve cost efficiency of TIMS/ORSA
1.1 Maintain efficient use of funds
1.1.1 Exploit economies of scale
1.1.2 Balance dues rate and fee-for-services
1.1.3 Remove doubled dues
1.2 Allocate well revenues/expenses
1.3 Maintain efficient use of time
2. Enhance quality of ORSA/TIMS products
2.1 Provide high quality conferences
2.1.1 Provide quality program
2.1.2 Manage balance between acad./prac.
2.1.3 Set fair cost to member
2.2 Provide high quality publications
2.2.1 Maintain successful editorial oversight
2.2.2 Maintain/increase circulation
2.2.3 Maintain reputation of journals
2.2.4 Improve readability of tech. journals
2.2.5 Provide outlet for applied papers
2.2.6 Provide forum for prof. comm.
2.2.7 Maintain fair subscription costs
2.3 Provide appropriate career services
2.3.1 Support degree/cont. education
2.3.2 Facilitate networking
2.3.3 Provide successful job placement
2.3.4 Increase job opportunities
2.3.5 Stimulate research/applications
2.4 Provide support for sub-units
2.4.1 Provide start-up financial support
2.4.2 Maintain loose/tight mgt. of sub-units
2.4.3 Provide business office support
2.4.4 Support sub-unit tracks in main confer.
2.4.5 Support sub-unit conferences/journals
2.4.6 Retain current/potential sub-units
2.5 Provide other member services
2.5.1 Take lead in use of info. Technology
2.5.2 Improve quality of trans. With offices
2.5.3 Outreach to affiliate with related prof. act.
2.5.4 Provide improved support for practitioners
2.5.5 Provide improved support for lone pract.
2.5.6 Provide improved support for academics
3. Establish a strong/coherent ext'l image of field 0.100
3.1 Increase visibility & clout of OR/MS
3.1.1 Clarify image of OR/MS and ORSA & TIMS
3.1.2 Make name & activities known to press
3.1.3 Support develop./retention of OR units
3.1.4 Improve liaison role
3.2 Foster professional identity
3.2.1 Closeness of job title match to name of org.
3.2.2 Maintain OR/MS & ORSA/TIMS name rec.
3.2.3 Make membership signal prof. Identity
4. Manage the scope and diversity of the field
4.1 Maintain appropriate member. comp.
4.1.1 Maintain/increase number of members
4.1.1.1 Retain current members
0.050
4.1.1.2 Attract young people to the field
4.1.1.4 Attract non-members to the field
4.1.2 Manage diversity of members
4.1.2.1 Foster International memberships
4.1.2.2 Strike balance bet. business/engineering
4.1.2.3 Support institutional members (Roundtable)
4.2 Create strong relations. w/ other soc.
5. Improve effectiveness of operations
5.1 Improve quality of govern. process
5.1.1 Streamline governance structure
5.1.2 Improve sub-units' representation
5.1.3 Speed up decision making process
5.2 Improve quality of operations
5.2.1 Focus collective resources on import.. act.
5.2.2 Decrease overlap in offices' responsibilities
5.2.3 Decrease overlap in activities, sub-units, etc.
0.080
Top
Level
2nd
Level
3rd
Level
4th
Level Judged
Judged Score on
Cooperation Alternatives
Weights Weights Weights Weights Weights SEP SQ
0.050
0.015
SM M2 M3
0.005
0.030
0.005
0.005
0.005
0.005
0.005
0.005
0.005
0.030
-2.0
-2.0
-1.0
-1.0
-1.0
0.0
0.0
0.0
0.0
0.0
1.0
1.0
2.0
-1.0
-1.0
1.0
1.0
-1.0
2.0
-1.0
1.0
1.0
2.0
1.0
2.0
0.720
0.240
0.170
0.050
0.020
0.170
0.050
0.020
-2.0
-1.0
-1.0
0.0
0.0
0.0
0.0
-1.0
0.0
-1.0
0.0
-1.0
0.0
1.0
1.0
0.240
0.080
0.105
0.055
0.080
0.020
0.045
0.005
0.020
0.060
0.020
0.010
0.040
0.030
0.040
0.080
0.020
0.020
0.020
0.020
0.010
0.010
0.005
0.005
0.010
0.040
0.040
0.005
0.020
0.005
0.005
0.010
0.010
0.005
0.010
0.020
0.040
0.010
0.001
0.010
0.009
0.020
0.025
0.010
0.005
0.005
0.030
0.020
0.010
0.010
0.005
0.005
0.010
0.005
0.010
0.020
0.010
0.040
0.030
0.040
0.080
0.020
0.020
0.020
0.020
0.010
0.010
0.005
0.005
0.010
0.040
0.040
0.005
0.020
0.005
0.005
0.010
0.010
0.005
0.010
0.020
0.040
0.010
0.001
0.010
0.009
0.010
0.005
0.005
0.010
0.005
0.010
0.005
0.010
0.005
0.005
0.030
0.020
0.010
-1.0
-1.0
-1.0
0.0
0.0
-1.0
-1.0
-1.0
-2.0
-2.0
-1.0
-1.0
-1.0
-1.0
-1.0
-1.0
1.0
-1.0
-1.0
-1.0
-1.0
-0.5
-0.5
-0.5
-2.0
-2.0
-1.0
-1.0
0.0
-0.5
-0.5
-0.5
-0.5
-2.0
-0.5
-1.0
-0.5
-1.0
-2.0
-2.0
1.0
-2.0
-2.0
-2.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.0
0.0
0.0
0.0
0.0
1.0
0.0
0.0
0.0
1.0
0.5
0.5
0.0
0.0
0.0
0.5
0.5
0.0
0.0
0.0
0.0
-1.0
-1.0
-0.5
-0.5
-0.5
-0.5
1.0
-1.0
1.0
-1.0
0.5
0.5
0.0
0.0
0.0
0.5
0.5
0.5
0.0
0.0
0.0
0.0
2.0
0.0
2.0
2.0
1.5
2.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-1.0
0.0
-1.0
0.0
-1.0
0.0
-1.0
-1.0
-1.0
-1.0
-1.0
-1.0
-1.0
0.0
0.0
0.0
1.0
1.0
0.0
0.0
1.0
1.0
1.0
1.0
0.0
0.0
1.0
1.0
2.0
2.0
1.0
2.0
1.0
1.0
1.0
1.0
2.0
1.0
-1.0
0.0
-0.5
0.0
-0.5
-0.5
-0.5
0.0
0.0
0.0
0.0
-2.0
-2.0
-2.0
-2.0
-2.0
-2.0
0.5
1.0
1.0
1.0
0.0
1.0
0.0
1.0
1.0
2.0
2.0
2.0
2.0
2.0
1.0
1.0
2.0
0.5
0.5
0.5
Total sum of judged weights, should = 1.00
Calculated weighted average of overall value for each alternatives, based on judged weights
1.000
1.000
OVERALL VALUE
OF ALTERNATIVE
1.000 -1.130 0.000 0.345 -0.695 0.856
SEP SQ SM M2 M3
Formula =
SUMPRODUCT($F11:$F78,G11:G78)
39
39

OFFICERS TENDED TO PREFER MERGER3
ALTERNATIVE, WITH SUB-UNIT BOARD
REPRESENTATION
VOCAL OPPONENTS WOULD COMPROMISE ON
SEAMLESS MERGER, WITHOUT SUB-UNIT
BOARD REPRESENTATION , AS LONG AS NEW
NAME RETAINS “ OPERATIONS RESEARCH ”
40
40

OFFICERS PRESENTED SEAMLESS MERGER
RECOMMENDATION TO MEMBERS
MEMBERS VOTED TO MERGE
MERGER TOOK PLACE JAN. 1ST, 1995
NAME IS INSTITUTE FOR OPERATIONS
RESEARCH AND THE MANAGEMENT
SCIENCES (INFORMS)
41
41

Sell Land?
Feng, T., L. R. Keller, X. Zheng. 2008.
Modeling Multi-Objective Multi-Stakeholder
Decisions: A Case-Exercise Approach. INFORMS Transactions on Education 8 (3)
103-114,
(online: http://ite.pubs.informs.org/ ). http://www.informs.org/site/ITE/article.php?id=66 , supplemental files: HomeDepotTeachingNote.pdf (for instructors),
HomeDepotCase.xls , SummaryofHomeDepotCase.xls
.
42
42

Home Depot proposed to open a retail store in San
Juan Capistrano, CA to offset Lowe’s move to
San Clemente.
The new store would be located on a 15.26 acre property in a strip of industrial land.
Home Depot had purchased two acres of this land.
The rest of the land was owned by the city, and would need to be acquired.
43
43

The city would get $9 Million if it sells Home
Depot the 13 acres.
Many were concerned that a “big box store” would destroy its historical small town feeling.
Nearby residents also worry that a Home Depot would cause traffic jams, pollute the air, produce noise and block ocean breezes.
44
44

The city of San Juan Capistrano : likes the potential revenue, but concerned with interests of multiple stakeholders
Competing local small businesses : will be influenced by the arrival of Home Depot in terms of profit, etc.
Complementary local small businesses : will definitely be affected in terms of profit, etc.
Home Depot
Nearby residents : concerned with the possible adverse impacts on their quality of life
Other area residents : will enjoy the convenience, but may
45 suffer from the possible increased traffic flow 45

•
•
•
•
46
46

Spreadsheet Structure for Each Stakeholder
Questions for the City of San Juan Capistrano
A.
Brainstorm what the objectives of the City of San Juan Capistrano would be. To save time, finish ONLY the corresponding Excel spreadsheet for the city. Fill in the objectives on the spreadsheet.
B.
Rate the options’ performance on each objective on a scale from 0 to 10, with 10 best.
C.
Make your own judgment of the “raw swing weights” to put on the lowest level objectives.
D.
You can use the slider to adjust the raw swing weights assigned to each lowest level objective. (Note: Do not use the slider until you fill out the corresponding lowest level objective in the same row.)
E.
Calculate the overall value of each option.
F.
A bar graph based on the overall value of each option and a partial hierarchical tree of the objectives for the City of San Juan Capistrano will be created automatically on the bottom of the spreadsheet when your group completes all the steps above.
G.
Is there an option which is dominated (which is worse than one other “dominating” option on each objective)?
H.
Save the completed spreadsheet file under the name of “CityofSanJuanCapistrano” and post/email it to our course’s discussion forum. Choose one person to report your results
OVERALL OBJECTIVES
A1.1 Promote job creation
A1.2 Keep the city's retail base competitive
A1.3 A1. Support the city and its residents A1.4
A1.5
A2. Enhance viability of community
A3. Optimize social impact on the city
A1.6
A2.1 Provide community service
A2.2
A2.3
A2.4
A2.5
A3.1 Minimize disruption to daily life
A3.2 Minimize crime (day laborer congregation)
A3.3
A3.4
A4. Minimize adverse environmental impact
A3.5
A3.6
A4.1 Minimize noise
A4.2 Minimize hazardous material spills
A4.3
A4.4
A4.5
A5.1 Minimize impact from possible earthquake
A5. Minimize health and safety impact
A5.2
A5.3
A5.4
A5.5
OVERALL VALUE (SUMPRODUCT OF
NORMALIZED WEIGHTS TIMES RATINGS)
Calculated
Weights for
Major
Objectives
Caculated
Normalized
Weights
Slider
Rating on Each Objective
0 - 10 = best
Fill in Raw Swing
Weights (0-
100)
Option 1
"Build Home
Depot"
Option 2
"Don't develop the land"
Option 3
"Build RV
Park"
Option 4
"Build specialty retail"
The City of San Juan Capistrano
10
9
8
7
6
5
2
1
0
4
3
Option 1 "Build Home
Depot"
Option 2 "Don't develop the land"
Option 3 "Build RV Park" Option 4 "Build specialty retail" overall values
A1. Support the city and its residents
A1.1 Promote job creation
A1.2 Keep the city's retail base competitive
A1.3
A1.4
A1.5
A1.6
A2. Enhance viability of community
Improve the
City of San
Juan
Capistrano
A3. Optimize social impact on the city
A4. Minimize adverse environmental impact
A2.1 Provide community service
A2.2
A2.3
A2.4
A2.5
A3.1 Minimize disruption to daily life
A3.2 Minimize crime (day laborer congregation)
A3.3
A3.4
A3.5
A3.6
A4.1 Minimize noise
A4.2 Minimize hazardous material spills
A4.3
A4.4
A4.5
A5. Minimize health and safety impact
A5.1 Minimize impact from possible earthquake
A5.2
A5.3
A5.4
A5.5
47
47

A Sample Spreadsheet to Evaluate the Home Depot Case
Excel file (HomeDepotCase.xls)
Make sure to choose "enable the macros" when you open the spreadsheet. If you still have the problem of adjusting the sliders due to the security level after that, please go to the menu of
"tools->macro->security", switch the security level from high to medium, save the file, then close the file and finally reopen the file and it should work.
48
48

OVERALL OBJECTIVES
A1.1 Promote job creation
A1. Support the city and its residents
A1.2 Keep the city's retail base competitive
A1.3
A1.4
A1.5
Promote convenience of shopping
A1.6
Calculated
Weights for
Major
Objectives
Caculated
Normalized
Weights
Slider
Rating on Each Objective
0 - 10 = best
Fill in Raw Swing
Weights (0-
100)
Option 1
"Build Home
Depot"
Option 2
"Don't develop the land"
Option 3
"Build RV
Park"
Option 4
"Build specialty retail"
Improve the
City of San
Juan
Capistrano
A1. Support the city and its residents
A1.1 Promote job creation
A1.2 Keep the city's retail base competitive
A1.3 Promote convenience of shopping
A1.4
A1.5
A1.6
49
49

Complementary Local Small Businesses-
Representative Hierarchy of Objectives
Calculated
Weights for
Major
Objectives
Caculated
Normalized
Weights
Slider
Ratings on Each Objective
0 - 10 =best
Fill in Raw
Swing
Weights (0-
100)
Option 1
"Build Home
Depot"
Option 2
"Don't develop the land"
Option 3
"Build RV
Park"
Option 4
"Build specialty retail"
OVERALL OBJECTIVES
B1. Maintain market share
B2. Minimize costs
B1.1 Maintain prices competitive
B1.2 Remain competitive by providing nearby convenience
B1.3
B2.1 Minimize labor costs
B2.2 Minimize Rent
B2.3 Minimize Inventory Costs
B2.4
OVERALL VALUE (SUMPRODUCT OF NORMALIZED WEIGHTS
TIMES RATINGS)
0.35
0.65
1.00
0.10
0.25
0.00
0.35
0.25
0.05
0.00
1.00
10
25
35
25
5
100
5
10
3
4
10
5.55
5
5
10
10
5
8.00
8
8
8
5
8
7.70
6.30
6
6
8
3
8
50
50

Moving Sliders on Weights
Dynamically Changes Graph
Decision Alternatives Rated for the City of San Juan Capistrano
OVERALL OBJECTIVES
A1. Support the city and its residents
A1.1 Promote job creation
A1.2 Keep the city's retail base competitive
A1.3 Promote conveniance of shopping
A1.4
A1.5
A2. Enhance viability of community
A3. Optimize social impact on the city
A4. Minimize adverse environmental impact
A5. Minimize health and safety impact
A1.6
A2.1 Provide community service
A2.2 Maintain small town feel
A2.3 Increase tax revenue
A2.4 Min. impact on local businesses
A2.5
A3.1 Minimize disruption to daily life
A3.2 Minimize crime (day laborer congregation)
A3.3 Min. traffic
A3.4
A3.5
A3.6
A4.1 Minimize noise
A4.2 Minimize hazardous material spills
A4.3 Min. air pollution
A4.4
A4.5
A5.1 Minimize impact from possible earthquake
A5.2 Min. traffic accidents
A5.3 Min. impact on existing infrastructure
A5.4
A5.5
OVERALL VALUE (SUMPRODUCT OF
NORMALIZED WEIGHTS TIMES RATINGS)
Calculated
Weights for
Major
Objectives
Caculated
Normalized
Weights
0.30
0.27
0.20
0.19
0.04
1.00
0.07
0.07
0.00
0.00
0.01
0.01
0.01
0.00
0.00
0.06
0.09
0.05
0.00
0.00
0.00
0.05
0.10
0.10
0.10
0.00
0.00
0.00
0.10
0.02
0.10
0.05
0.00
1.00
Slider
Fill in Raw Swing
Weights (0-
100)
Rating on Each Objective
0 - 10 = best
Option 1
"Build Home
Depot"
Option 2
"Don't develop the land"
Option 3
"Build RV
Park"
100
100
100
10
10
10
0
0
0
2
0
0
Option 4
"Build specialty retail"
5
5
5
100
20
100
50
63
90
51
51
75
66
15
15
15
1011
5
4
3
2
1
0
10
9
8
7
6
4
0
10
0
0
0
0
0
0
0
0
0
4.35
Depot"
0
10
0
10
10
10
10
10
10
10
10
10
10
5.05
0
5
10
8
3
8
8
8
5
5
5 the land"
4.59
4
10
7
5
1
8
8
8
8
5
5
0
5.59
Option 3 "Build RV Park" Option 4 "Build specialty
0 overall values retail"
51
51

Moving Sliders on Weights
Dynamically Changes Graph
Decision Alternatives Rated for the City of San Juan Capistrano
Calculated
Weights for
Major
Objectives
Caculated
Normalized
Weights
Slider
Rating on Each Objective
0 - 10 = best
Fill in Raw Swing
Weights (0-
100)
Option 1
"Build Home
Depot"
Option 2
"Don't develop the land"
Option 3
"Build RV
Park"
OVERALL OBJECTIVES
A1.1 Promote job creation 0.11
91 10 0 2
A1. Support the city and its residents
A1.2 Keep the city's retail base competitive
A1.3 Promote conveniance of shopping
A1.4
0.26
100
25
10
10
0
0
0
0
A2. Enhance viability of community
A3. Optimize social impact on the city
A4. Minimize adverse environmental impact
A5. Minimize health and safety impact
A1.5
A1.6
A2.1 Provide community service
A2.2 Maintain small town feel
A2.3 Increase tax revenue
A2.4 Min. impact on local businesses
A2.5
A3.1 Minimize disruption to daily life
A3.2 Minimize crime (day laborer congregation)
A3.3 Min. traffic
A3.4
A3.5
A3.6
A4.1 Minimize noise
A4.2 Minimize hazardous material spills
A4.3 Min. air pollution
A4.4
A4.5
A5.1 Minimize impact from possible earthquake
A5.2 Min. traffic accidents
A5.3 Min. impact on existing infrastructure
A5.4
A5.5
0.21
0.25
0.23
0.05
0.00
0.00
0.00
0.06
0.09
0.08
0.00
0.00
0.02
0.02
0.02
0.00
0.00
0.12
0.03
0.00
0.00
0.00
0.02
0.02
0.10
0.06
0.00
0.08
0.11
0.06
20
20
84
50
63
90
51
51
75
66
15
15
15
10
9
8
7
6
5
4
3
2
1
0
4
0
10
0
0
0
0
0
0
0
0
10
0
10
10
10
10
10
10
10
0
0
10
10
0
Option 4
"Build specialty retail"
The City of San Juan Capistrano
7
0
5
10
8
8
5
8
3
8
4
10
7
8
8
5
1
8
8
5
5
5
5
5
5
5
0
5 the land"
0
Option 3 "Build RV Park" Option 4 "Build specialty retail" overall values
OVERALL VALUE (SUMPRODUCT OF
NORMALIZED WEIGHTS TIMES RATINGS)
1.00
1.00
831 3.71
6.15
4.80
5.78
52
52

Sell Land?
(City voters voted on this issue in November 2002.) 53
53

Option 1
Build
Home
Depot
Overall Values
Option 2
Don't develop the land
Option 3
Build
RV
Park
Option 4
Build specialty retail
City of San Juan Capistrano
Competing Local Small
Businesses
Complementary Local Small
Businesses
4.5
0.6
4.2
3.0
4.2
5.0
5.6
8.0
10.0
5.0
5.7
3.5
9.4
1.0
1.0
1.0
Home Depot
Nearby Residents 1.0
5.2
1.4
4.2
Other Area Residents
Data from Executive Education session, February 2009. UC Irvine Merage
6.2
3.8
0.8
3.6
54
54

Overall Values for Each Option
4
3
6
5
10
9
8
7
2
1
0
Option 1 "Build Home
Depot"
Option 2 "Don't develop the land"
City of San Juan Capistrano
Complementary Local Small Businesses
Nearby Residents
Option 3 "Build a RV
Park"
Option 4 "Build specialty retail"
Competing Local Small Businesses
Home Depot
Other Area Residents
55
55

Overall Values for Each Stakeholder
5
4
3
7
6
2
1
0
10
9
8
City of San Juan
Capistrano
Competing Local
Small
Businesses
Complementary
Local Small
Businesses
Option 1 "Build Home Depot"
Option 3 "Build a RV Park"
Home Depot Nearby
Residents
Option 2 "Don't develop the land"
Option 4 "Build specialty retail"
Other Area
Residents
56
56

Feng, T., L. R. Keller. 2006. A multiple-objective decision analysis for terrorism protection: Potassium iodide distribution in nuclear incidents. Decision Anal. 3(2) 76–93.
Hammond, J. S., R. L. Keeney, H. Raiffa. 1999. Smart Choices:
A Practical Guide to Making Better Decisions .
Harvard Business School Press.
Keeney, R. L. 1992. Value-Focused Thinking—
A Path to Creative Decision Making . Harvard University Press,
Cambridge, MA.
Keller, L. R., C. W. Kirkwood, N. S. Jones. 2009.
Assessing stakeholder evaluation concerns: An application to
The Central Arizona water resources system,
Systems Engineering (Forthcoming- Expect in Vol. 12(4)).
57
57