So Net Present value calculates what is the current value of the future income or expense. I will not go deeper into financial calculation since this is not the purpose of the article. You can find here additional information about other monetary coefficients as Internal Rate of Return and Discounted Cash Flow.
Opportunity Cost is the benefit of the second best alternative which is not selected. This is not a direct expense but it shows what you miss gaining as a benefit. As you can see on the diagram if you select Vendor 1 you will have average 18 USD profit and if you select Vendor 2 you will have average 17 USD profit.
But there is software which can ease decision-making and makes it automatical. There are methods embedded in the software which defines the path to the decisions. Most popular of them is multi-criteria decision making MCDM. I will not go very deep into description here but the problem is broken into hierarchy sub-problems, alternatives are defines and compares, a numeric score is applied, and etc.
The software defines alternatives to be considered by decision-makers , criteria by which the alternatives are compared and weight represented the importance of criteria. Link to the official site — Mind s. D-Sight is decision support software in the domains of projects and alternatives prioritization, a vendor selection and group decision-making.
The company offers consultancy services to all kind of customers as IT companies, health-care companies, building enterprices, etc. Official D-sight website. It offers prioritization of the technologies that provide better business decision-making, enhance Big Data analysis, increase IT security. Decision Lens provides performs dynamic analysis of money flows, budget and resource allocation scenarios in order to reduce long-term costs.
This software helps to define most profitable alternatives, to defend your decisions and to have maximum benefits. It is excellent tools when you need to choose innovation selection with fast scenario planning, trade-off analysis, and powerful visual analytics. Official site of Decision Lens. Expert Choice has comparison solution for prioritization of alternatives and resources allocation. The software compares alternatives, projects, vendors, products, marketing strategies, trade studies, and many others.
Link to the official Expert Choice site. There are many group decision-making technique and here I will mention some of the most popular ones:. Focus Group — It is a useful qualitative decision-making technique. Just remember that the focus group should have experts from different areas. Facilitated Workshops — similar techniques as Focus Groups.
Facilitated Workshop brings together key stakeholders involved in an important decision and reaches agreements. This is especially critical for consensus building and when selecting alternative is required with inputs from multiple experts.
Group Creativity technique — The most common creativity techniques are Brainstorming, Nominal Group technique, Mind mapping, Delphi technique, Affinity diagrams. The purpose of all of them is to generate as many alternatives as possible and to prioritize them. Group Decision-making:. Group Decision-making — Once you have the alternatives you need to make a decision. There are some basic ways:. During an alternative discussion, you can expect some conflict to arise.
Different stakeholders might have different interests. According to PMI there are some common general ways to handle conflict situation:. If it doesn't work, we choose another likely option and do that instead. He first described his recognition primed model in relation to critical decisions made by medical staff and firefighters.
And he quickly realized that his description of our decision tools and techniques actually applies to everyday decisions as well. Don't worry - your e-mail address is totally safe.
I promise to use it only to send you this newsletter. Decision Making. Decision Making Tools And Techniques Decision making tools and techniques are often spoken about together, but here we will make a distinction. A quick mention! A decision making pros cons table might look like this: Others And, of course, there are combinations of both types.
Tips for dealing with psychopaths and narcissists Fortnightly newsletter with practical tips and ideas Learn more Enter Your E-mail Address. Enter Your First Name. I am at least 16 years of age. They come from many sources in one company and we have many of them in our day-to-day job usually.
General techniques here are to keep track of the major risk and best opportunities you have. Gather information — so we have some information which we need to keep in mind. It can be internal corporate culture or external legal requirements.
Define alternative solutions — this process can be individual or group. More about the group decision-making technique here. Individual definition of alternatives usually needs analytical skills. Evaluate and select alternative solution — this is the big one.
This article is mainly about the process of evaluating alternative solutions and selecting it. Act and follow up — obviously, you need to act as decided and to check what is the impact of the implemented decisions.
Back to top. There are some decision-making tools and techniques which can help you to select alternatives based on their qualities without taking into consideration pure monetary impact.
One of the simple methods especially if we need to fix issues and find beneficial opportunities fast. Example — we are a software company and need to decide how to improve our products. For that reason, we make questionnaire survey with our customers. The results go into Pareto diagram. One of the best decision-making tools is called cause-and-effect diagram, also known as fishbone diagram or Ishikawa diagram. The fishbone of the diagram can vary each time.
But there are some typical types of bones depending on your business. As you can see the Ishikawa diagram is great decision-making techniques in many, many business areas. You can use control chart in order to decide if a process in within the predefined range. As you can see control chart has an upper limit, down limit and mean.
On the diagram, we have an example of a process within a range. These diagrams really help to define all the decisions which will be made in a process and their consequences.
This diagram displays relations between 2 variables. Which can really help the decision-making process. On a diagram example, you see that a little change of Variable 1 leads to a massive change to Variable 2. It can be a risk, it can be an opportunity but in any case, scatter diagram will be a useful technique for supporting decisions.
There are many different options for scatter diagrams — point relationship, trends, 3D scatter chart, and etc. There are many different types of statistical sampling but most important ones are probability vs non-probability sampling.
Some of them are excluded from sampling. Monetary decision-making techniques. We all live a material world so making decisions based on their monetary impact is something normal. There are many monetary-based decision-making tools and techniques and here I will explain the most popular of them.
You simply calculate the benefits and divide them into calculated costs. You have a coefficient for each alternative and you can select the highest coefficient. First — it is not so easy to calculate correct amount for benefits and costs. You can utilize this tool by just entering fixed and variable costs, selling price per unit, etc. It enables you to calculate it with just a single mouse click.
Pugh Matrix is a diagram that is used to evaluate alternative solutions for business. It helps you to determine which solutions are more valuable than the others. This method does not require a massive amount of quantitative data. Psychologia is a tool that provides a score for every option you have entered. This app enables you to find the highest score. It helps individuals to find the importance of specific criteria over others.
Ratio analysis is a term used for comparison of items available in the financial statements of a business. It used to evaluate a number of problems with an entity, like its liquidity, efficiency of operation, and more. Finstanon is a solution for financial analysis. It helps you to interpret profit ratio, liquid ratio, debt ratio, and more. This tool enables you to analyze more than 15 different types of metrices. Finstanon generates data in tables and diagrams.
Decision Making tools are software applications that help you to map out all the possible alternatives to your decision, its cost, as well as chances of success or failure.
These applications provide a useful way to make the right choice by simplifying the decision-making process and by drawing a diagram that helps you to make a better decision. Skip to content. Here are the 7 steps of the decision-making process:. Report a Bug.
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