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2018-10-15

decision theory: requirements of an ideal system

Also in a company: aims to give information about what we aspire to as a state. In connection with decisions and goals, and the Following are the requirements for an ideal target system to be formulated.

Completeness

The decision-makers should bear in mind all the important aspects of the consequences. What is actually important, what you want to achieve with the decision?

Redundancy freedom

The objectives should be non-overlapping, i.e., one should not set up multiple targets, which mean basically the Same, or in their strong overlap. For example. if the election of a candidate as goals: professional experience, relevant professional experience, working on a comparable place. Or in the case of the election of a house: in a quiet location, outskirts of town, no through traffic. If you do not makes use of the redundancy in the objectives is clear, it may be that a goal of ultimately more importance than you actually want. This can easily happen when targets are basically in a goal-means relationship. For example. if you reduce the capital tie-up costs to the targets “a” and “minimizing the tracked run times” side by side, they overlook the fact that the minimization of throughput times, a means for the reduction of capital commitment costs. To count the corresponding result for an Alternative is then more or less double.

Measurability (Operational)

The goal should be as precise as possible to measure, so that the decision makers know what information he is looking for and hence he also has the basis for a clear decision. The target size of “team-ability” of a candidate, for example. much less operational than the target size of the “final grade”.

Simplicity

The fewer targets a target system includes, the less complicated the procedure of the assessment. However, since the objectives are also to be recorded in full, one must consider whether individual goals are not allow to aggregate a wider size. For example. forming at alternative sites for a factory, the aggregate size of the “cost” for land price, development costs, construction costs, tax burden, and then compares the Alternatives in terms of cost and accessibility.

Coordination of justice

Sub-goals need to factually and temporally match each other. You should not pretend in the financial sector as the target of a rigorous austerity and in the area of production, the expansion of production capacity through the purchase of new machinery plan.

Preferences independence

It’s a question of whether the decision-makers in the assessment of a characteristic of an Alternative is independent of the values of other characteristics of the Alternative. Failing that, if between the characteristics of relationships. The length of a film can be, for example. be positive when he is at the same time, exciting, and negative if it is boring. You can’t actually isolated the characteristics of the other rate. Or: A bad starting salary at a place I rated less negative when the point is at the same time, exciting, and good opportunities for development. Only in the case of preference independence can be used to determine the overall value of an Alternative by the individual values simply be added up.

You can sometimes achieve preference independence, by summing up, for example, the target sizes to a higher target size. Length and tension of a film to the target size of “entertainment value”.

There is also a normative idea about an ideal educational process, i.e., what tasks and in what order to go through, so that at the end of an ideal target system.

  • Goal setting

Objectives often have to be elaborated and formulated and are not just there. There are “objective decisions”. In economic models is often simply the objective of profit maximization. In reality, companies track multiple targets at the same time, the partly monetary, partly non-monetary, as well as partly external and partly internal are (see Heinen [objective function] 21ff.). Help in the objective determination offer:

  • Analysis of acute defects and problems; for example,. high Ill target: reduction of Sick leave,; to many products in the maturity phase; goal: product innovation in the future.
  • Analysis of the competitive environment and decision-making for the strategy of cost leadership; goal: to reduce the cost of production.
  • Analysis of interests, for example. Interests of the shareholders; goal: to maximize the return on your investment. Interests of the Public demand for more sustainability in the company’s policy; objective: to improve environmental protection.

Goal clarification

Target content (which, by the decision desired size), the target extent (height preference), its scope (eg. Overall market or sub-market) and time reference (time preferences) should ideally be defined: We want to achieve on the German market within a year, with a market share of 5% for product x. We want to reduce greenhouse gas emissions from our production by 20% in the next five years.

Goal analysis and goal structuring

It is analysed for a vertical target relationship , and tried, the amount of possible destinations hierarchically to organize.

Teleological goal systems: upper and lower targets, according to their means-purpose relationship is formed. Could be the top target to run the Company successfully, you have for example. three sub-objectives are to maximize: profitability, liquidity and growth to aspire to. The growth target could be formed as sub-goals: market share of product A is 10 % and of product B to 5% increase. The objective of market share increase for product B as sub-goals fit could improve: Marketing for product B and production streamline. The goal of the improvement of marketing an appealing product design, and more Service, etc. as sub-goals

Definition logical target systems: upper and lower objectives arise logically from the Decomposition of a top indicator into its components. Key data systems then. Example: Du-Pont-metrics system, with the Supreme measure ROI.

Other structures are possible, for example. according to temporal aspects in the Near and long-term goals or organisational goals, field goals, points, company, Department, goals, objectives.

Just as important is the analysis of the horizontal target relations, i.e., how the goals on the same goal level relate to each other. One speaks in this context of the feasibility test, because it comes to determine whether or not individual goals at all compatible with each other.

Acceptable targets :

  • identical ; for example. if the entrepreneur wants to be called to maximize the profit and the return on equity (at constant capital), or if when buying a car as targets maneuverability and turning circle, which is basically the Same. You should then take only one goal.
  • complementary ; when I have a goal better achieved, then, at the other goal, the goal achievement; for example. Growth and full employment, reduction of costs and increase of Cash flow, more sports and complementary goals are to lose weight. Goals, which are in a means-purpose relationship, are always complementary.
  • neutral ; the achievement of an objective has no impact on the achievement of other goals; in a car purchase for example. Color and performance are nothing to do with each other.

Incompatible goals can:

  • konfliktär ; i.e., the better the attainment of a goal leads to poorer achievement of another objective.

    Example: The better performance of a machine leads to a higher purchase price, lower cost of production leads to more pollution, the more favourable position of a business premises with a higher rent.
  • anti year under report ; the achievement of a goal includes the achievement of the other objective.

    Example: The production increase and the absolute material consumption cut.

In the following figure, the different relations of the two objectives are represented graphically.

Target selection

At the end of a System of target set sizes, which should be the basis for the decision. In the model, is often provided by a single entrepreneur who developed the target system. This is unrealistic, because in almost every company, a majority of organization members is active, each for itself and also for the company, different goals. The target setting is often preceded by a complicated and highly political discussions, in which various coalitions try to enforce and achieve their objectives. The goal of the negotiation game can be theoretically mapped.

Image source: (c) Lupo / pixelio.de

The Text comes from the teaching and textbook of Professor Göbel: decisions in companies.

 

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