Handbook of Decision Analysis

CHAPTER SEVEN

Craft the Decision Objectives and Value Measures

GREGORY S. PARNELL, TERRY A. BRESNICK, and ERIC R. JOHNSON

Management by objective works—if you know the objectives. Ninety percent of the time you don’t.

—Peter Drucker

Our age is characterized by the perfection of means and the confusion of goals.

—A. Einstein

7.1 Introduction

7.2 Shareholder and Stakeholder Value

7.2.1 Private Company Example

7.2.2 Government Agency Example

7.3 Challenges in Identifying Objectives

7.4 Identifying the Decision Objectives

7.4.1 Questions to Help Identify Decision Objectives

7.4.2 How to Get Answers to the Questions

7.5 The Financial or Cost Objective

7.5.1 Financial Objectives for Private Companies

7.5.2 Cost Objective for Public Organizations

7.6 Developing Value Measures

7.7 Structuring Multiple Objectives

7.7.1 Value Hierarchies

7.7.2 Techniques for Developing Value Hierarchies

7.7.3 Value Hierarchy Best Practices

7.7.4 Cautions about Cost and Risk Objectives

7.8 Illustrative Examples

7.8.1 Roughneck North American Strategy (by Eric R. Johnson)

7.8.2 Geneptin (by Sean Xinghua Hu)

7.8.3 Data Center Location (by Gregory S. Parnell)

7.9 Summary

Key Terms

References

7.1 Introduction

In the previous chapter, we discuss the critical role of the decision analyst in framing the decision. With this understanding of the decision frame, which may include a partial list of objectives, we next strive to identify the full list of objectives that the decision maker(s) seek to achieve with the decision. ...