Today’s data analytics class was quite interesting and highly interactive. We were introduced to a new topic called Decision Analysis. We were made to understand the importance of decision making in our day to day lives and as mangers.
In evaluating a leader, one of the criteria to evaluate is the quality of his decisions .
We were made to understand that decision making a skill that must be learnt if we all want to be great leaders. Dr. Bongo shared some inspiring quotes with the class.
- The hardest part of solving a problem is accurately defining it
- Before you dream about the view from the summit,
- ask yourself if you’re willing to keep your head down,
- focus on the path and spend your life walking up the side of a very big hill.
- It takes years of walking to earn a minute at the top
These quotes set the tone for class discussions.
We started by defining Decision analysis: We said this can be defined as a strategy, approach, or tool used in solving problems. The problems can either be complex or high level.
We also stated that decision making can be hard, especially where there is a high level of uncertainty. We also noted that even when a careful decision analysis has been done, there can still be some level of uncertainties in the decisions made.
As individuals we make decisions every day and our goal when making these decisions is to maximise utility. As managers to an organisation, our aim is to maximise profit.
When looking at decision making, we need to ask ourselves what the decision problem is .
Decision problems are characterised by decision alternatives, state of nature and resulting payoffs.
What is the alternative decision? These are the different possible options an individual or firm can consider before deciding. An example: An individual who wants to buy a house. His options or alternatives can be to either buy a house on the mainland or Island.
State of Nature: These are future external or environmental forces beyond the control of the decision makers which may occur. Examples are interest rate, exchange rate & inflation.
Pay-off: These are possible outcomes that can occur when you need to decide.
How do we make decisions without probabilities?
We were informed that the type of decisions we make without probabilities informs the type of person we are. What shapes or influences our decisions are :The personality of the individual, their perspectives, and years of experience.
We also learned that there are three commonly used criteria for decision making when probing information regarding the likelihood of a state of nature is unavailable
•The optimistic approach
•The conservative approach
•the minimax regret approach
How do you estimate the likelihood of the various outcomes of the decision you want to make? You can use the following tools:
- The influence chart is a graphical device showing the relationships among the decisions, the chance ,events, and the consequences.
- Pay-off Table: A table showing payoffs for all combinations of decision alternatives and states of nature is a payoff table
We also had some interesting discussions about the state of the nation and how it is important for us to be actively involved in the state of affairs of our dear Country.