Decision Balance Sheet: Evaluating Pros and Cons for Better Decisions
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The document discusses the decision balance sheet, a tool for systematically evaluating the pros and cons of a decision to facilitate informed decision-making. It outlines the process of using the balance sheet, including collecting information and quantifying pros and cons, and introduces variations like the plus-minus-interesting (PMI) method. Additionally, it emphasizes the importance of objectivity and clarity in decision-making to achieve better outcomes.
Decision Balance Sheet: Evaluating Pros and Cons for Better Decisions
- 1. CITOOLKIT CITOOLKIT CITOOLKIT Decision Balance Sheet Evaluating Pros and Cons for Better Decisions
- 2. citoolkit.com citoolkit.com citoolkit.com Introduction When management faces an important decision for a situation, much time may be spent searching for a solution to ensure the best possible outcome. While each situation may differ, decision-making generally involves the same basic steps: Decision Balance Sheet 2 Clearly defining the problem. Collecting the information needed to analyze possible alternatives. Selecting and implementing the most feasible alternative.
- 3. citoolkit.com citoolkit.com citoolkit.com Introduction Many decision-making techniques are available . . . Decision Balance Sheet 3 Qualitative Methods Rely on intuition, experience, and judgment. Quantitative Methods Use data, algorithms, and structured analysis
- 4. citoolkit.com citoolkit.com citoolkit.com Introduction Some of the most used decision- making techniques include: Decision trees. Pareto analysis. Multi-criteria decision analysis. Force field analysis. Pairwise comparisons Simulation and scenario analysis. Decision Balance Sheet 4
- 5. citoolkit.com citoolkit.com citoolkit.com Definition It is a simple but effective tool that helps individuals and groups systematically evaluate the advantages and disadvantages of a specific idea or solution. Decision Balance Sheet 5 One of the simplest ways to make decisions! Decision Balance Sheet
- 6. citoolkit.com citoolkit.com citoolkit.com Definition It uses a table to record these advantages and disadvantages for reaching a balanced decision more quickly and confidently, either individually or collaboratively. Decision Balance Sheet 6 This table is used to record all the pros and cons for the given idea or solution. Cons Pros Alternative 1
- 7. citoolkit.com citoolkit.com citoolkit.com Definition A scoring system may be applied by assigning numerical weights to the different pros and cons. The result will help in determining whether to proceed with the decision or not. Decision Balance Sheet 7 Cons Pros
- 8. citoolkit.com citoolkit.com citoolkit.com The Other Alternatives While evaluating the pros and cons of a particular decision, also consider evaluating the other alternative options. Alternative 1 Alternative 2 This can help ensure that you are not overlooking better solutions and can lead to a more informed decision. Decision Balance Sheet 8
- 9. citoolkit.com citoolkit.com citoolkit.com Plus, Minus and Interesting A simple extension of this tool is the PMI which stands for Plus, Minus and Interesting. The “Interesting” column can be used: To capture elements of the solution that are neither clearly positive nor negative in effect. To record what is considered interesting. To record the future implications of the solution. Decision Balance Sheet 9
- 10. citoolkit.com citoolkit.com citoolkit.com Benefits Decision Balance Sheet 10 Provides a simple way to break down complex decisions Facilitates collaborative decision-making Uses scoring that supports objective evaluation
- 11. citoolkit.com citoolkit.com citoolkit.com How to Use the Decision Balance Sheet Decision Balance Sheet 11 With your team, clearly write the proposed solution at the top of a flip chart or whiteboard • If the decision impacts a team or the organization, involve relevant stakeholders in the process.
- 12. citoolkit.com citoolkit.com citoolkit.com How to Use the Decision Balance Sheet Decision Balance Sheet 12 Draw a table with two columns, labeling one “Pros” and the other “Cons” • Record all potential benefits in the "Pros" column and all possible drawbacks in the "Cons" column. • Focus on those factors that will have the most significant impact on your decision. • Take time to identify any other factors you may have missed. Cons Pros
- 13. citoolkit.com citoolkit.com citoolkit.com How to Use the Decision Balance Sheet Decision Balance Sheet 13 Assign numerical weights to the Pros and Cons by giving each item a score (e.g., 1 to 5) • Ensure that the reasoning behind each score is clear to make the analysis more reliable. • Be consistent with your scoring criteria. Cons Pros
- 14. citoolkit.com citoolkit.com citoolkit.com How to Use the Decision Balance Sheet Decision Balance Sheet 14 Add up the scores in each column, then subtract the total of the "Cons" from the total of the "Pros" • Use your common sense if you feel the result is not appropriate. Cons Pros
- 15. citoolkit.com citoolkit.com citoolkit.com How to Use the Decision Balance Sheet Decision Balance Sheet 15 Consider evaluating the pros and cons for the alternative options • Use the overall score to help decide whether to proceed with the decision. Cons Pros ALTERNATIVE 1 Cons Pros ALTERNATIVE 3 Cons Pros ALTERNATIVE 2
- 16. citoolkit.com citoolkit.com citoolkit.com Example – Should We Go for a New Website? Decision Balance Sheet 16 Pros Improves Company’s image (+5) Mobile compatible which helps reach out to new customers (+3) Easier to create and maintain dynamic content (+3) +11 Cons Implementation cost is high (-4) Requires to hire a full-time employee with certain technical skills (-3) Requires time for implementation (-1) -8 +3 The final score indicates that choosing to build a new website is a better option.
- 17. citoolkit.com citoolkit.com citoolkit.com Personal Decision-Making The decision balance sheet can also be used for personal decision-making. Decision Balance Sheet 17 Buying a new laptop Going back to school Moving to a new city It helps you make well-balanced choices that fit your goals and values, especially when you are facing a big decision.
- 18. citoolkit.com citoolkit.com citoolkit.com Example – Should I Consider the New Job Offer? Decision Balance Sheet 18 Plus (+) Gain new experience (+2) Get a higher salary (+4) Meet new people (+1) +7 Minus (-) Need to relocate to another city (-4) Increased stress (-3) Uncertainty about job stability or cultural fit (-2) -9 -2 Interesting Professional networks (+1) Experience a new city (+1) Higher exposure to pollution and traffic (-1) Need to find new schools for children (-1) 0 The final score suggests that not pursuing the new opportunity might be the best choice.
- 19. citoolkit.com citoolkit.com citoolkit.com Decision Making Matrix The decision balance sheet can also be represented in a four-field matrix. This approach is particularly valuable when the decision at hand is of a strategic nature. Decision Balance Sheet 19 Short-term Pros Short-term Cons Long-term Pros Long-term Cons This matrix helps decision-makers see the full range of outcomes and make better choices. Strategic decisions often involve complex trade-offs, where short-term disadvantages may be offset by long-term advantages or vice versa.
- 20. citoolkit.com citoolkit.com citoolkit.com Example – Should We Hire Six Sigma Black Belts? Decision Balance Sheet 20 Short-term Pros Short-term Cons Long-term Pros Long-term Cons Immediate availability for day-to- day tasks Deep familiarity with company culture Dedicated focus on company- specific issues Longer onboarding period Higher hiring costs Consistent process improvement expertise in-house Stronger alignment with long- term strategy Internal capabilities for continuous improvement Salary and benefits are ongoing costs Limited exposure to diverse industries' best practices Potential turnover and loss of expertise if they leave Option 1: Hiring Six Sigma Black Belts (In-House)
- 21. citoolkit.com citoolkit.com citoolkit.com Example – Should We Hire Six Sigma Black Belts? Decision Balance Sheet 21 Option 2: Engaging a Consulting Company Short-term Pros Short-term Cons Long-term Pros Long-term Cons Access to specialized, high-level expertise Can quickly assess and address key issues Exposure to best practices across industries Access to updated tools and methodologies External, objective perspective on processes No ongoing salary commitments May require re-engagement for new issues Risk of dependency on external expertise Limited knowledge transfer to internal teams Potentially high consulting fees Less direct control over methods used Temporary commitment, lacks long-term presence
- 22. citoolkit.com citoolkit.com citoolkit.com Decision Balance Sheet 22 Example – Should We Hire Six Sigma Black Belts? Each pro and con item can then be given a score, and the scores can be totaled within each quadrant to create a clear visual summary of the short-term versus long-term advantages and disadvantages for each option. Short-term Pros Short-term Cons Long-term Pros Long-term Cons Immediate availability Familiarity with company culture Focus on company- specific issues Longer onboarding period Higher hiring costs Consistent expertise in- house Alignment with long-term strategy Internal capabilities for continuous improvement Salary and benefits are ongoing costs Limited exposure to best practices Loss of expertise if they leave Option 1: Hiring Six Sigma Black Belts (In-House) Option 2: Engaging a Consulting Company Short-term Pros Short-term Cons Long-term Pros Long-term Cons Access to high-level expertise Can quickly address key issues Exposure to best practices across industries Access to updated tools & methodologies External perspective on processes No ongoing salary commitments May require re-engagement for new issues Risk of dependency on external expertise Limited knowledge transfer to internal teams Temporary commitment Potentially high consulting fees Less direct control over methods used
- 23. citoolkit.com citoolkit.com citoolkit.com Further Information – Overloading Pros and Cons Avoid creating an overwhelming list of pros and cons. Focus on the most important points that directly impact the decision. Too many items can create confusion and make it harder to weigh the significance of each factor. Decision Balance Sheet 23
- 24. citoolkit.com citoolkit.com citoolkit.com Further Information – Use Clear and Specific Criteria When listing pros and cons, try to make each point specific and measurable. For example, instead of saying "increased cost" as a pro, quantify it if possible, such as "increase in cost by 10% over the next year.“ This adds clarity and helps in making a more informed decision. Decision Balance Sheet 24
- 25. citoolkit.com citoolkit.com citoolkit.com Further Information – Stay Objective Decision-making should be objective. Ensure that your decision balance sheet is based on facts and logical reasoning rather than personal biases or emotions. This can help in making more rational and sound decisions. Decision Balance Sheet 25
- 26. citoolkit.com citoolkit.com citoolkit.com Paired Comparison Decision Trees Multi-Criteria Decision Analysis Further Information - Limitation Decision balance sheet is one of the simplest ways to make decisions! When it is required to compare different options or explore some options in more details, other decision- making techniques may be more suitable than a simple pros-and-cons list such as: Decision Balance Sheet 26
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