1. Decision Making Pr. J.F. Lebraty University of Lyon April. 2014

2. What you see …What he saw

3. The example of Decision Making  Thousands sources… 3

4. Table of Contents 1. The concept of decision 2. Different kinds of decisions 3. Theoretical approaches of decision making

5. 1. The concept of decision  Action  Moment - Timeline  Rupture – Breaking off  Process Origin: 1425–75; late Middle English decisioun Middle French - Latin dēcīsiōn- (stem of dēcīsiō ) literally, a cutting off

6. 1. The concept of decision  Some Examples :  Giving the change from a 50€ note  Parking your car  Buy a flat  Hiring or Fire a CEO

7. 2. Decision or Decisions  Different kinds of decisions  Context and constraints  Group or Individual decision-making Level of structuration / Complexity Hierarchical level Emergency / Urgency RiskParticipants Structured or Semi-Structured or Non Structured Operational Middle management Strategic High Low High Low Who is responsible ? Individual or Group

8. 2. Decision or Decisions  Level of complexity SimpleComplicatedComplex

9. 2. Decision or Decisions  Hierarchical Level

10. 2. Decision or Decisions  Emergency / Urgency

11. 2. Decision or Decisions  Risk

12. 2. Decision or Decisions  Group or individual decision making

13. Three Theoretical Approaches to Decision Making  Rational  Cognitive  In natural settings

14. Introduction to the Classic Approach : An Example  A company manufactures small and large garden benches in two departments, the Machining Department and the Polishing Department. Small bench requires 2 hours in the Machining Department and 3 hours in the Polishing Department. It takes 4 hours to machine large bench and 3 hours to polish. The available time for processing the two models is 100 hours a week in the Machining Department and 90 hours a week in the Polishing Department. The contribution margin expected is 5€ for small bench and 7€ for large bench. Let's find the optimal mix of products A company should produce to maximize total contribution margin.

15. Classic Approach  X is the quantity of small benches and Y is the quantity of large benches. Let's find X, Y so that:  MAX (Z) = 5X + 7Y - objective function; 2X + 4Y = 0  Answer : maximum profit margin is 190€ and A company should produce 10 small benches and 20 large benches.

16. Classic Approach : More Examples  Installation of mobile phone masts in a dense city

17. Classic Approach : Paradigm  Under the paradigm of optimization : Decision is an optimal choice  No decision-maker – no context – no errors  Useful for problems with reducible boundary conditions (versus non-reducibility) = simple or complicated problems

18. Classic Approach Methods Operational research : (OR), also known as Operations Research or Management Science (OR/MS) looks at an organization's operations and uses mathematical or computer models, or other analytical approaches, to find better ways of doing them. Some of the primary tools used by operations researchers are statistics, optimization, stochastic, queuing theory, game theory, graph theory, and simulation. OR also has ties to computer science, and operations researchers regularly use custom- written or off-the-shelf software.

19. Classic Approach Methods Simplex Matrix Method Graphical Method

20. Classic Approach Methods Program Evaluation and Review Technique (PERT)

21. Classic Approach Methods Gantt Chart

22. Classic Approach Methods Decision Trees

23. Classic Approach Methods  Multiple Criteria Decision Aiding

24. Cognitive Approach  Just as its name implies, the cognitive approach deals with mental processes.

25. Cognitive Approach : Concept  Under the paradigm of self satisfying : Decision is a satisfying choice  Decision-maker is taken into account under his cognitive aspect  Humans and organizations are rationally bounded  Heuristic  Errors can occur (Cognitive Biases)  Lab studies – Behavioral approach  Useful for novice decision makers facing complex problems

26. General Method: A Step into a Vast Process

27. Decision Making Process

28. Problem finding  What’s the problem ?

29. Problem solving - Gathering  Gathering and Intentionality  Data and Information  Different Sources  Reliability

30. Problem solving Processing  Classification – Setting – Taxonomy  Cognitive style (Creative – Analytic)  Mental models Johnson-Laird, P.N. (1983). Mental Models: Towards a Cognitive Science of Language, Inference, and Consciousness. Cambridge: Cambridge University Press.

31. Problem solving - Potential solutions  Generating solutions

32. Problem solving Decision  Not deciding...is deciding  No turning back for this process

33. Problem solving Decision effects  Direct and Collateral Effects  Implication for the present and future decision making process

34. Cognitive Approach Methods

36. Naturalistic Decision Making Decision in Natural Settings  Iran Air 665

37. Naturalistic Decision Making Decision in Natural Settings  Naturalistic : Attempts to see the whole picture within a natural context  We can understand a decision only if we include the context in which it occurs  Context : perceived or non perceived elements by a decision maker that can imply a constraint on the dedicated task.

38. Decision in Natural Settings Concerns specific decision situations : 1. Ill-defined goals and ill-structured tasks 2. Uncertainty, ambiguity, and missing data 3. Shifting and competing between goals 4. Dynamic and continually changing conditions 5. Action-feedback loops (real-time reactions to changed conditions) 6. Time stress 7. High stakes 8. Multiple players 9. Organizational goals and norms 10. Experienced decision makers

39. Decision in Natural Settings 2 types of Decision maker : Expert vs Novice  Expert : Has lived many similar experiences – The one who knows what he does not know  Novice : First time for this kind of situation – thinks he knows everything or nothing.

40. Recognition Primed Decision making model  Importance of situation recognition and understanding  Role of Experience

44. Decision in Natural Settings  Decision appears to be no longer a choice between options. It’s the implementation of a course of action which depends on the situation recognition operated by the decision maker.

45. Decision in Natural Settings  Supporting decision making implies to focus on the beginning if the process … not the end.

46. Situation awareness Endsley, M.R. (1995a). Measurement of situation awareness in dynamic systems. Human Factors, 37(1), 65–84.

47. Situation awareness

48. Trying to use rationale methods for complex situations

49. Many questions