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Decision-Making
Rational selection of a course of action amongst alternatives, or opinion or judgement after consideration. 



The Scope and Importance of Decisions
Listed below are some of the reasons why decision making is such a critical activity within an organization:
  • Everybody at every level of the organization makes decisions of some kind.
  • Decision making has a profound impact on the allocation of capital and standard of care applied to assets.  
  • Every decision that is made has an impact on one or more stakeholders.


Parameters of Decisions
Decisions differ in terms of the following general parameters:
  • Their frequency (eg. monthly, yearly or every 10 years)
  • Their financial significance (eg. how much is the cost being approved)
  • Their risk significance (eg. coverages to protect the organization)


Attributes of Good Decisions
Listed below are some of the key attributes of a good decision.

  • The Decision is Prudent – It is made sensibly, showing care and thought for the future. For example, a decision that only focuses on short term gains and disregards longer term consequences is not considered a prudent decision. 
  • The Decision is Rational – It is derived from a sound, logical process. For example, the property manager developed a business case to explain the reasons for the new roof. The board of directors held a meeting to deliberate on the need for a new roof and arrived at a rational decision.
  • The Decision is Informed – It is based on good, defensible information. For example, the board of directors hired a subject matter expert to investigate the leaking roof and to provide findings and recommendations. The board used the report to make an informed decision on what to do with the roof.
  • The Decision is Impartial – It is based on what is in the organization’s best interest and not somebody’s personal vested interest. For example, the board of directors asked one of its members to leave the room during the decision making process as they felt that one individual had a personal conflict of interest and would not be able to contribute objectively.
However, decisions are often made by a group and the democratic process will prevail. This will be addressed under decision constraints.



Criteria for decision making
Listed below are some of the criteria for making decisions in the best interest of the organization.

A. The trade-offs between
  • Risk
  • Cost
  • Performance
B.  The triple-net bottom line of
  • People
  • Planet
  • Profit
C.  The hiearchy of purpose within an organization guides the decision making process.


Constraints Influencing Decision-Making
Listed below are some of the factors that can have an impact on decisions being rational, prudent, informed and impartial.
  • Ignorance – There is a lack of awareness and understanding of the risks facing the organization. Essentially the organization has inadequate information to make an informed decision. For example, the organization does not have a maintenance manual or a capital plan to identify the tasks and resources that are required and appropriate for its inventory of assets.
  • Apathy – There is a lack of interest on the part of the organization and its management team. The organization has not bothered to institute any procedures to make rational decisions. For example, the organization does have a maintenance plan and a capital plan but the O&M team has not looked at these documents for many months.
  • Bias – There is insufficient appreciation for the significant influence that optimism and pessimism can play. The organization is not able to detect and filter out the erroneous assumptions arising from subjective interpretations of data so it cannot make an impartial decision.
  • Dishonesty – There is a lack of disclosure of poor ethical practices on the part of some of the decision makers. Since there is no declaration of conflicts of interest, the organization is not able to make an impartial decision.
  • Ignorance - A lack of understanding of the risks facing the organization.
  • Apathy - A lack of interest of the organization 
  • Unrecognized optimism and pessimism and realism
  • Bias - of some stakeholders towards their needs
  • Subjectivity in the interpretation of data
  • Lack of disclosure of poor ethical practices on the of the decision makers. Conflicts of interest
  • Erroneous assumptions
  • Inadequate information


Types/Scope of Decisions
Listed below are some examples to illustrate the broad scope of decisions that are made within an organization.

Decisions differ in terms of the following factors:
  • Their frequency (eg. monthly or every 10 years)
  • Their significance (eg. how much is the cost)
  • Who to hire - contractors, consultants, etc?
  • When to replace an asset?
  • What type of asset to replace it with?
  • Capex - asset purchase and replacement
  • Opex - ongoing maintenance of assets.


Process of Decision Making
Decision-makers are the elected or appointed representatives of the owner group who are tasked with deliberating and making prudent and rational decisions about the allocation of resources to the assets, for activities such as: maintenance, repair and renewal.

The process of reaching decisions/resolution of the board or owners at a meeting, such as a special general meeting.

Listed below are some of the key elements for establishing an effective decision-making framework for an organization.
  • Formalize the Policies & Objectives – The organization needs to articulate its policies and objectives so that they can guide future decisions. Policies are like the “rules of engagement” for the organization and objectives are the “outcomes to be achieved”. Policies and objectives need to be derived from (aligned with) the organization’s mission statement and values – they need to be written down and serve as the formal commitment of the organization.  Policies and plans are addressed in further detail in another topic of FOAM 104.
  • Identify the Decision-Making Criteria - The organization needs to identify and formalize the criteria that it considers to be important to its decision-making procedures. These criteria should be in alignment with the policies and objectives. Decisions cannot be defensible unless they measurable against criteria that are meaningful to the organization.
  • Establish Clear Roles & Responsibilities - Decision-makers are the elected or appointed representatives of the organization who are tasked with deliberating and making prudent and rational decisions about the allocation of resources to the assets, for activities such as: maintenance, repair and renewal. The organization needs to identify its decision makers and formalize their respective authorities. This is addressed in detail in another topic of FOAM 104.
  • Procedures & Control – As part of its outsourcing strategy, the organization needs to know when to hire experts to help it make informed decisions. These subject matter expert should be expected to assist in gather information, presenting their findings and developing recommendations that will form part of the business case to support the decision rationale. Also as part of its procedures, the organization will establish protocols for holding meetings and recording minutes with the deliberations of all significant decisions.
  • Review and Improvement – There is always room for improvement; particularly when dealing with something as complicated as group decision-making. The organization needs to set up procedures for monitoring of its decisions and periodic evaluation of its decisions. 
Listed below are some of the key steps in establishing decision making procedures for an organization.
  • Develop clear policies and plans for the organization that can guide decision-making
  • Know the organization's criteria for making decisions (eg. the trade-offs between risk, cost and performance)
  • Identify the organization's decision makers and their respective authorities
  • Know when to outsource (hire experts) to help  the organization make an informed decision
  • Develop the business case(s) to support the decision rationale (recognize the 7 stages of grief and loss)
  • Hold the Annual General Meetings (AGMs) and Special General Meetings (SGMs) to gain approval (on large decision)
  • Records minutes with the deliberations and outcomes of all significant decisions

The 7 stages of making big decisions:
"Anger is a wind which blows out the lamp of the mind (intelligence)" - Robert Green Ingersoll.

The bigger -- and more expensive -- the decision, the more emotions play a role and the more explosive things can become.

  • Stage 1 - DISBELIEF ("What...?")  This first stage represents the stunned feeling one gets at big news, bad news, potentially expensive news. Many people report numbness where they don’t feel anything in the first few moments. The numbness is soon replaced with a jarring sense of something out of alignment. This is our brain chemistry reacting to news of the large project needed on our building and the financial hardship that may result.
  • Stage 2 - DENIAL ("You are wrong!") As the initial shock wares off, we move into the denial stage. This is where owners make a knee-jerk (uninformed) declaration that something is not true. There is a blind refusal to accept the reality of the situation. As a defence mechanism, the mind imagines a false, preferable reality. But our minds also get comfort from the cool and calm logic of a sound argument backed by empirical data - so an internal conflict arises. Our mind is caught in a tug-of-war between emotion and reason.
  • Stage 3 - ANGER ("Who is to blame?") Faced with mounting information, the owners start to recognize that denial cannot continue. People naturally becomes frustrated, especially at proximate individuals. Certain psychological responses of a person undergoing this phase would be: "It's not fair" and "How could this happen to me?" Some people become angry at themselves ("Why did I buy into this place?") or the person who they feel caused the situation they are left to face ("Who is to blame for this?"). Having worked in the consulting field for 10+ years, I have witnessed the shoot-the-messenger" syndrome played out many times. The consultant delivers bad news and the owners blame the consultant. They hire another consultant hoping that the news will change.Since ignorance and naivety are often the first domino in a chain of events leading to misunderstandings, a good consultant will educate the owners and present the necessary and sufficient data to support a compelling case for the capital project.
  • Stage 4 - BARGAINING ("There must be options")\ As information continues to flow and rational minds absorb the gravity of the situation, hope emerges that the impending decision or situation can be mitigated somehow. We start to seek compromises, to make concessions. This is what I have often heard: "What if we just put a band aid on it and then can fix it later" or "I have a friend who says we can fix the problem much cheaper". I cannot tell you how many times I have heard those words: "I know someone who _____ (fill in the blank)." Invariably, these "friends" and "somebodies" never step forward with a truly compelling and defensible solution. The owners slowly come face-to-face with the stark reality of the situation and wishful thinking is put to the side.
  • Stage 5 - GUILT ("If only we had...") As the bargaining process starts to point the owners in the direction of an appropriate fix for their building, some feelings of guilt start to arise. This is where the owners have regrets about things they did or did not do in getting themselves into their current predicament. People start to ask: "Did we fail to maintain our building properly?" There is a wish to turn back the clock and do some things differently. But there is a recognition that the clock cannot be turned back and we need to face our future.
  • Stage 6 - DEPRESSION ("What's the point?") During this stage, the owners become saddened by the emerging certainty of the project (read: big expense). Some individuals may become silent, reluctant to communicate and sullen. Some may express the sentiment: "Why bother with anything?" It is important that the manager, consultant and other professionals help the owners move the one final step towards completion of the decision making process.
  • Stage 7 - ACCEPTANCE ("Let's get on with it!") In this last stage, the decision-makers embrace their inevitable future, which typically comes with a calm, retrospective view and a stable condition of emotions. There is hope that life will go on. There is recognition that the capital project will be over and that there will be a return on the investment. The financial hardship in completing the capital project will be offset by other returns, such as preservation of the real estate investment, peace of mind, resale value, long-term reliability of the asset, and so on.
We have arrived at an informed decision.

Not every organization follows this prescribed order when dealing with big decisions. Some members of the board (owner group) may move through the stages at a different pace than others, and this makes it very difficult to make collective decisions until everyone is on the same page.

If we can recognize our evolving emotional responses to difficult situations, we can develop the necessary coping strategies to help us make it all the way from denial-to-acceptance.

What techniques have you seen used effectively to help move through these stages in reaching an informed decision on a large capital project?

I wish to acknowledge Elizabeth Kübler-Ross for the development of the grief cycle, from which this blog post drew inspiration.


Theories of decision making
Recognizing the limitations of human cognition, there are three broad types of decision-making styles (or models), as follows:
Each of these models has its own merits and limitations, which are addressed on their respective pages.


Tools/Artifacts for Decision Making
Listed below are some of the tools that can help organizations make informed decisions.
  • Decision Tree - These are diagrams that list the different stages in a decision-making process with clearly defined milestone points of “go/no-go”. A decision tree is sometimes prepared by a subject matter expert and is used to incrementally guide the organization through each stage of a complex decision process
  • Decision-Support Tool, such as investigation reports
  • Expert System
  • Urgency-Importance Matrix - This is a four quadrant matrix that lists the thing that are both urgent-and-important and separates these from the things that are important-but-not-yet-urgent. Organizations may sometimes find themselves in the difficult situation where everything seems important and it is difficult to identify the right things to be done at the right time.
  • Prioritization Schemes -

Techniques for persuading owners in making decisions:


People + Planet + Profit is the triple bottom line of sustainability in ISO 55000 ISO 55001
Fig. People + Planet + Profit is the triple bottom line of sustainability.


The principles of ISO 55001 help to ensure that optimization is achieved through mindful balance and measured trade-offs between decision-making criteria
Fig. The principles of ISO 55001 help to ensure that optimization is achieved through mindful balance and measured trade-offs between decision-making criteria.


Subjectivity and bias always play a role when people are involved in decision-making
Fig. Subjectivity and bias always play a role when people are involved in decision-making.


People + Planet + Profit is the triple bottom line of sustainability in ISO 55000 ISO 55001
Fig. People + Planet + Profit is the triple bottom line of sustainability.


Alignment across different decision-making criteria (such as risk, cost and performance) is required for ISO 55000 conformity
Fig. Alignment across different decision-making criteria (such as risk, cost and performance) is required for ISO 55000 conformity.


Illustration of the relationship between different types of meetings within the same calendar year
Fig.  Annual timeline to illustrate the relationship beween the different types of meetings during the same calendar year.


A maintenance manual is a decision support tool
Fig. A maintenance manual is an example of a decision support tool.


I. Care is reconciling the conflicting opinions and interests of the different owners and stakeholders, including reactive vs. proactive; optimistic vs. pessimistic
Fig. I. Care is reconciling the conflicting opinions and interests of the different owners and stakeholders, including positions that are dichotomized as: reactive vs. proactive; optimistic vs. pessimistic; short-sighted vs. long-sighted; etc
.


I. Care is trying to select the most efficient course of action to achieve his objectives.
Fig. I. Care is trying to select the most efficient course of action to achieve his objectives.


I. Care is strategizing in order to allocate limited resources across a portfolio of buildings
Fig. I. Care is strategizing in order to efficiently and effectively allocate the limited resources across a portfolio of buildings.


I. Care is trying to get the owners to reach a decision at their general meeting.
Fig. I. Care is trying to get the owners to reach a decision at their general meeting.




Reaching complex decisions can feel like a rollercoaster ride.
Fig. I. Care is nervous because he knows that there are surprises in store for him (in the fomr of a roller coaster ride) as the owners make complex decisions about their building.


I. Care is working out how far the decision makers for his building have moved through each of the sequential stages of coming to acceptance with their challenges
Fig. 
I. Care is working out how far the decision makers for his building have moved through each of the sequential stages of eventually reaching acceptance of their circumstances.

See also:






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