Smart Choices (3) | Comparing using Consequence Table

 

In order to construct a consequence table, we must list out objectives (on rows) and alternatives (on columns) to be able to build a consequence table.  

Objectives Setting

Objectives are the criteria and your guide for your decision, so they are important in your decision process. Think about: 

• What are the things you most want,
• The concerns you want to address, 
• The outcomes you most want to avoid, 
• Always ask "why" can help you to find out the fundamental objectives. 
• Using the fundamental objectives to evaluate and compare alternatives,
• From the fundamental objectives, you can think about some mean objectives to achieve those fundamental ones.
• Or you can grow some sub-objectives from one fundamental objectives (see Figure 1).
• Ask yourself, "are you happy with the alternative that satisfies the objectives you've listed?" If no, there may be some objectives missing,
• Ask yourself, "are the objectives you wrote just the means or the end?". 
• Despite the authors do not agree the objectives should have different importance, I think the opposite. I think you need to assign beforehand which objective is relatively more significant to you by putting a weight on it.

 

Example objectives in business decision making are in terms of cost-and-benefits or risk-and-return:

• Maximise net return and minimise cost
• Maximise net return by increasing market shares, and minimise cost, and minimise risk of financial loss
• Maximise net return, and minimise cost, and minimise debt 
• Get 80% market shares in the shortest time frame
  

             ...  etc

Alternatives 

Alternatives are the options and potential choices you list out for yourself to choose from, so if too few alternatives you could provide, of course it may limit your choice. 

Be creative in thinking about alternatives. Don't live with status quo by thinking about the usual alternatives by default. Identifying more new alternatives will give you a wider options. At the point of creating the alternatives, you shouldn't judge or evaluate them. Just leave the evaluation later

Alternatives could be broadened by: 

• starting from asking "how to achieve your objectives" to search for alternatives
• think as if there are no constraints for alternatives. Say, if lack of money is the constraint, think about if money is not a problem, what could you do? Then, you could think about more possible alternatives. 
• setting a goal higher than your reach. If the goal is beyond your capability, you may come up with more alternatives.
• asking experts or people around. Before doing that, you should do your own thinking first in order to avoid the framing effect that other people especially experts may impose on you.
  
• analysing other peoples' decision problem (if your decision problem is related to other people). Try to create a win-win alternative to both of you. 
• gathering necessary information to reduce uncertainty. The information that is just enough to make the current decision, you don't need a huge data and information but sufficient. 
• whenever you are not sure, don't make a hasty decision. Defer the decision making in order to buy time to think about some better new alternatives if situation allows.

 

Consequences

Using the common scale of consequences through all alternatives to make decision, you can see how well each of the objectives be met in each alternative.

Assigning Consequences:

• Scenario Analysis: Imagine you have already chosen the alternative, what are the consequences with respect to objectives. Just put yourself in future will help you think about the future consequence. You will have a clearer picture to what it it is like in future if you've really have chosen that alternative now.
• Consequence Descriptors: Describe the key features of the consequence as much as possibly near the reality using words, number, graphics, symbols, whatever is best describe the consequence for comparison. 
• To put consequence in a consequence table:
• it would be better if you have experienced the consequence of the alternative, you can put down the consequence with firsthand experience. So try to explore opportunity to get yourself try the alternative before decide.
  
• use the common and meaningful scale to describe the consequence:
• Quantitative measures: 
• e.g. % percentage, $ dollars, hour, X mins of walk, sq. feets, acres, litre, number of people, etc. 
• Qualitative measures: emotional energy consumed, descriptive measures such as: 
• Broad scale: High, Medium, Low; or 
• Grades A to F, or rating like Standard & Poor. 
• Others: pleasant, spacious, dirty, smelly, comfortable, scare, abundant, etc.
• Don't just rely on hard data for consequence description just because it seems objective, because there may have data errors, model errors, wrong assumption, forecasting errors, leading to high uncertainty. Sometimes, hard data may not be able to tell the things that are most important to your decision.
• Try to gather information in order to minimise the error of your subjective judgement.
• Ask expert for possible consequences, and be able to understand any uncertainty included, and how their derive the consequences.
  
• Eliminate Alternatives: After assigning consequences in the consequence table, you are able to see the weak alternatives. Then, eliminate the weak alternative by comparing two alternatives in pair at a time. Using the status quo to start with. Use the survived alternative to compare another alternative and eliminate the weak one. Repeat the process until you can pick one. By doing so, you can eliminate alternative vertically from the consequence table one by one. Leaving only the most preferable alternative.
  

Consequence Table

By drawing fundamental objectives, may be with sub-objectives (on rows), and alternatives (on columns) to create a matrix, consequence descriptions are placed inside the matrix. This is called "consequence table" (see an example in Figure 1* below).

Decision Making by Elimination 

Just as mentioned above, 

• Decision can be made by comparing the alternatives in pair vertically systematically, two at a time. 
• Comparing the pros and cons for each pair of the alternatives, drop the weaker alternative each time. 
• Repeat the process until you cannot eliminate alternatives any further. 
• For the simplest situation, you will leave with only one alternative, then you can easily pick that one.
• For a more complex situation, you may leave with several alternatives, and you can't decide. Or you feel uncomfortable to choose the survived alternative, this means there are some things you have not considered in such comparison, such as uncertainty, your own risk tolerance, or the objectives do not tell what you really want.

Example

In Figure 1, the consequence table depicts the four potential places to move, you now can compare the places one by one using the principle suggested above. 

 

Figure 1. An example of a consequence table for choosing a place to move. Rows: objectives and sub-objectives. Columns: Potential places to move.

Before you do this, you have to have in mind with which criteria must be satisfied first. For example, 

• if you spend most of the time staying at home, you probably would concern about the quality of the house and quietness of neighbourhood more than anything else. Then, Place D should be the choice.
  
• If you concern your kid's well being more than others, then you would raise up the quality of school catchment, suitability of the house for kids. Also, Place D should be chosen.
  
• If this house is just a temporary stay, you plan to move to a nicer house in  near future, you probably would weigh higher in future price growth. Then, you should work a little more on the numbers: 
• Below: Place: Asking price + refurbishment cost (accounting for the estimated growth in 3 years; net gain)
  
• Place A: £202,500 (estimated rise to £232,500 in 3 yrs; Net Gain = £30,000); 
• Place B: £185,000 (estimated rise to £218,750 in 3 yrs; Net Gain = £33,750); 
• Place C: £272,500 (estimated rise to £297,000 in 3 yrs; Net Gain = £24,500); 
• Place D: £305,500 (estimated rise to £329,400 in 3 yrs; Net Gain = £23,900)
• So, in view of gains, Place B should be chosen.
  

Having the most significant criteria (objectives) in mind, comparison would become much easier.

However, in reality, we usually need to balance ALL concerns in one single decision, say we need to balance the potential gains, concerns about kids, neighbourhood etc. Then, the following ranking table or my multiple table (which is the modified version of the ranking table I worked out) may be helpful for you.

 

Decision Making by Ranking Table

Another way to set up a consequence table is constructing a ranking table. This is done by simply putting a ranking, according to your own subjective judgement, on how preference in each objective amongst all alternatives would be. By comparing row by row, objective by objective, you can work out a number ranking through how the alternative can fulfills the objective: 

• Best fulfills: 5
• Second best: 4

            ...

• Least fulfills: 1
  

By summing up the overall weights of each alternatives, as in Figure 2*, you can then rank the alternatives from low to high. In theory, you should pick the alternative with the highest overall weight.  

 

I however would not just look at the overall weight, rather I would ensure the alternative fits what I really want by doing the following:

• Firstly, rank the alternatives with overall weight from low to high, and take out the alternative with the highest weight (initially the best alternative) for further assessment.
  
• Then, I would assess this alternative to see if it fulfills the most important criteria (objectives). If it doesn't, I would drop this one and assess the second highest and so on, until I get the one with a high overall weight and can satisfy the most important criteria (objectives).
  

Sometimes, a highest weight alternative may fit one criterion but not fulfill other equally important criteria. This measure is to ensure the alternative can be in an overall good shape, and can specifically fit my most wanted criteria. 

Figure 2. Ranking the consequence in a ranking table for job decision. (Hammond et al, Smart Choices, pp 83)
 

Modified Ranking Table by Assigning a Weight

As said early on, I don't agree with the authors said about all objectives should be equal weighting. I think we would prefer some criteria to the other. That means, we can put a weight on the objective to reflect this significance for comparison. You may refer this weight as "Utility".  We can assign the weight, similar to the ranking number above, in ascending order of significance, i.e. the higher weight you assign, the more the significance of the objective to us:

• Most important: 5
• More than moderate importance: 4
• Moderately important: 3

        ...

• Least important: 1

A multiple for each objective in each alternative can be calculated by multiplying the previous ranking with the weight importance we assigned here, as in Eq (1). 

    Multiple  = Rank × Weight      Eq (1)

Sum up all multiples in an alternative for a grand total multiple, as in Eq (2)

    Grand total multiple of an alternative = ∑ multiples       Eq (2)

Figure 3* is an example of calculating multiples based on the ranking made in Figure 2. The logic is the similar to the above ranking table, by just comparing the grand total multiples, we can make our decision for the highest grand total of multiple value.

Remember, this ranking and weight assignment are based on our subjective judgement. This implies that it may subject to errors.

Figure 3. Modified ranking table by putting a weight on each objective.  

 

* Note: Figures 1 to 3 are the works of mine with reference to the examples in the book, which are not exactly the approach the authors suggested.  

 

 

How do I know when to stop searching?

It is time to stop searching more alternatives and make decision:

• If you can be satisfied with one of your existing alternatives as the final decision.
• If spend more time on creating more alternatives or gathering more information doesn't make a better decision.

Then, you should stop and make decision.

Conclusion

We can make decision systematically by three ways:

1. Comparing the alternatives vertically in a consequence table: Compare two alternatives at a time, kick out the weaker one, repeat the process until you leave one. 
2. Comparing the objectives horizontally in a ranking table: Rank the alternatives by how the alternative can satisfy the objective. Work out all ranking in each of the objectives, then sum up the ranking for each alternatives. Pick the one with the highest number.
3. Comparing the multiples which is calculated from multiplying the weight importance with the ranking, sum up the multiples for each alternatives. Pick the one with the highest multiple.

One further step you can do to examine if the decision is really right for you, which is thought experiment (scenario analysis mentioned above). This is to put yourself ahead of time, as though you had already chosen this decision and think about what is like, and see if you are happy and comfortable with the outcome. If no, you should go back to check whether you have missed any objectives or alternatives in your decision making process, or whether the problem is correctly addressed. Sometimes, people may not realise that they have been working on the wrong problem all long until the outcome pops out. 

Up to this stage, it has already been useful for many who wanted to make systematic comparison for options/alternatives. Even though, for some complex situations, the above three methods may not be sufficient to let a good decision arrives, they do simplify the alternatives and objectives by elimination. For elimination options using a trade-off mindset, as well as other complicated issues such as uncertainty and risk, I'll have more on the articles to come. 

More Topics:

Smart Choices (1) | Focus and Defining Problem

Smart Choices (2) | Eight Elements in PrOACT Approach

Trade-offs in Decision Making

Uncertainty and Assigning Chance

Decision Tree

Assessing Risk Tolerance for Decision Making

Subjective Probability Estimation

Reference

John S. Hammond, Ralph L. Keeney, Howard Raiffa, Smart Choices - A Practical Guide to Making Better Life Decisions, Broadway Books, 1999.

 

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