Kepner-Tregoe Decision Analysis
Best Business Practices -- Choosing the Best Option
Kepner-Tregoe Decision Analysis is one of the Kepner-Tregoe Business Excellence tools. It is constructed to make the decision-making process as well defined and free from emotion as possible. The great strengths of this process are to make the decision more consistent, include all relevant parties in the decision, and to minimize the possibility of "hidden agendas".
Decision Analysis: Clarify the Purpose of the Decision to be Made
The reason for the decision needs to be agreed. At this point, all those with an interest in the outcome of the decision are contacted. This is important so that there is support or “buy-in” for the decision by all of the stake-holders. At this stage, it is important not to narrow the options. For example, “Increase capacity at operation X” is less limited than “Choose machine A or machine B at operation X to increase capacity.”
Decision Analysis: Develop Objectives
The objectives are generally related to a result or goal, such as an improvement in cost, quality, sales, or safety. The objectives may relate to both long and short-term goals, and should be specific. For example, the decision may relate to choosing a strategy to cope with a change in legislation. Suitable objectives might be “maintain sales volume” or “comply with new laws.”
Decision Analysis: Classify Objectives
When the objectives have been stated and agreed, they are then categorized into MUST and WANT groups. Those objectives in the MUST group are usually mandated by third parties. For example, compliance with legislation will be a MUST, as will objectives such as staying within budget.
Decision Analysis: Weigh the WANTS
The objectives that are not in the MUST group are in the WANT group. These include objectives like “option should be as cheap as possible”, or “option should be available as soon as possible.” The WANT objectives are given a weighting, according to the participants' view of their importance. The weighting can be a number from 1 to 10, or any other range.
Decision Analysis: Evaluate Alternatives
The participants now suggest what options are available. Although they may each have a pre-defined preference, the options should all be written down, without pre-judging. Options that effectively duplicate each other should be stated as one option.
Each of the options is then tested against the MUST objectives. Any option that does not fulfill the requirements of a MUST objective is eliminated. For example, options that exceed legal effluent discharge limits are eliminated.
The remaining options are given a score against each of the WANT objectives, and the weighted score calculated. For example, if the objective "Low Cost" is weighted 10, and option A has a score of 5 for "Low Cost", then option A scores 10 x 5 = 50. The total score for each option for all of the objectives is then calculated. The best two or three options then go on to the next stage.
Decision Analysis: Assess Risks
So far, only the merits of each option have been discussed. Assessing the risks associated with each of the few remaining options allows the downside of each option to be taken into account. Particular attention is given to options that are close to a MUST limit. For example, options that are close to a budget limit, but not above it, need to be carefully scrutinized.
Decision Analysis: Make Decision
The final decision is made based on the score for each option, weighed against the risks that may occur.
Decision Analysis: Summary
The Kepner-Tregoe Decision Analysis process is a proven method used by many of the best companies in the world. It gives transparency and consistency to the decision-making process. It is one of a series of Kepner-Tregoe tools that includes Kepner-Tregoe Problem Analysis.
Decision Analysis: References
The Decision Analysis process is described in detail, with worked examples, in The New Rational Manager. A software package is available that steps through all of the Kepner-Tregoe Rational Processes is also available at this link. The Kepner-Tregoe client list is on their website.
Kepner-Tregoe Decision Analysis
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