PART 2 DECISIONMAKING TO REALIZE GOALS

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PART 2- DECISION-MAKING TO REALIZE GOALS

• Screening Added Value Initiatives

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Where we are on the management cycle.
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The Realities We Face

• Resources are Limited
• There is a Competition for Funds
• Sometimes the Winner is the Best Sales Person
• Financial Decision Rules Dont Always Match
  Operating Decision Rules
• Financial Returns And Efficiency Will Continue To
  Be Powerful.

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SAVI model
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Introduction to Chapter 6

• Two of the difficult issues facing todays
  manager are
• Finding the optimal solution to a problem
• Communicating the findings to a decision-maker.
• The framework for an integrated analysis in
  decision making is called
• Total Impact Business Case Analysis

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LINKING BUSINESS CASES TO STRATEGIC PLANS

• As stated previously in the context of Total
  Impact the broad objectives are to improve
  performance in the areas of
• Financial efficiency and effectiveness,
• Sustainability of the economic environment,
• Stewardship of the natural environment,
• Safety of employees and the public and
• Service to the customer.

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LINKING BUSINESS CASES TO STRATEGIC PLANS

• The Total Impact Business Case follows the
  decision making path that has been created by the
  strategic phase of the management cycle.

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Business Case and the Management Cycle

• Figure 6.1

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What is a Business Case?

• A completed business case is a report (a document
  or an oral presentation) that a decision has been
  reached regarding a particular problem or
  opportunity being faced by the organization.

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Figure 6.2, The Five Cs of business casing
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What is a Business Case Analysis?

• A business case analysis is
• a systematic process of
• evaluating a cross section of alternatives
• against criteria that match strategic goals
• to arrive at the best solution to a problem.

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Two Related Steps

• Step 1 is to find the best solution to a problem
  by preparing a complete business case analysis
  using a decision model.
• Step 2 is to put the findings of the analysis
  into a report that will be convincing for a
  decision-maker.
• We begin with the first step.

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COMPONENTS OF A BUSINESS CASE

• A structured approach
• Identifies all aspects of a proposal in enough
  detail to give a decision-maker confidence that
  the analysis is complete.
• Provides justification for the recommended
  solution by evaluating and choosing from
  alternative courses of action.

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Convince those with the authority to approve that

• the problem or opportunity is real
• the alternative chosen is the best available
• The investment makes the best use of limited
  resources.

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consider some or all of the following factors

• The possibility of multiple goals that conflict
  with each other.
• The fact that projects have life cycles.
• The range of alternatives is getting wider as
  technology improves.
• Impact of the expenditure decision across
  organizational boundaries.
• Dynamics of the change process, and the need to
  address risks and uncertainty in a rapidly
  changing world.

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PROBLEM SOLVING PROCESS

• In practice, poorly defined problems are
  subjected to faulty analysis and people sit
  around arguing about which option to choose!

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Figure 6.3 PROBLEM SOLVING MODEL
PROBLEM STATEMENT
CRITERIA
ALTERNATIVES
FINANCIAL ANALYSIS
NON-FINANCIAL ANALYSIS
MAKE A CHOICE
IMPLEMENTATION PLAN FOLLOW UP
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DEFINING THE PROBLEM/ OPPORTUNITY

• Proper problem definition or identification of an
  opportunity is the most important, and often one
  of the most neglected elements of a business case
  preparation.
• The problem statement should guide a
  decision-maker to a full analysis of all logical
  alternative solutions.

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Problem definition involves the following steps

• Identify your present position
• Identify why the present position is undesirable
• Identify the position you would like to be in,
  (set an objective)
• Identify why the new position is desirable
• A problem statement identifies, in future terms,
  the impact on the organization if the problem is
  solved.

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Four Levels of Problems and Opportunities, (Fig.
6.4)
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problem-solving activities are valuable

• They challenge thought processes and force
  creative thinking.
• They encourage us to examine situations from
  different perspectives, frequently causing new
  and better methods to be employed.
• They usually act as a catalyst for personal
  learning by the people involved.
• They quite often carry the seeds for new
  opportunities.

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IDENTIFYING PROJECT GOALS

• The goals should address both the immediate
  short-term purpose and the long-range goals of
  the expenditure. In general, goals should pass
  the SMART test.
• Specific
• Measurable
• Achievable
• Result Oriented
• Time limited

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7 types of projects

• Expand to meet an increase in customer demand.
• Introduce a new division or revenue stream.
• Maintain current technical performance.
• Decrease in future capital and/or operating
  costs.
• Change for technical improvement.
• Introduction of a new process to improve quality
  of customer service.
• Change in processes to satisfy non-financial
  factors such as public perception, environmental
  issues, employee morale etc.

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Strategies for defining goals

• Seek
• Avoid
• Build
• Restore

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Summary

• The problem/opportunity statement is the most
  important element of the decision model.
• Perhaps the best way to summarize the findings of
  his chapter is to use a Problem Statement
  Checklist, (figure 6.7).

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Closing Remarks

• This chapter begins a four part discussion of
  problem solving.
• Chapters 7, 8 9 will walk you through the
  remainder of the decision making model.
• Remember that the primary purpose of this model
  is to Screen Added Value Initiatives.