selection of a course
amongst alternatives, or opinion or judgement after
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.
decisions are often made by a group and the democratic process will
prevail. This will be addressed under decision constraints.
- 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
- 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.
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
B. The triple-net bottom line of
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.
– 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
- 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.
– 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.
– 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
- 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
with deliberating and making prudent
and rational decisions
about the allocation of resources to the assets,
for activities such as: maintenance, repair
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.
Listed below are some of the key steps in establishing decision making procedures 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
- 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.
- 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.
We have arrived at an informed decision.
- 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.
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
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.
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
Techniques for persuading owners in making decisions:
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
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.
Alignment across different decision-making criteria (such as risk, cost
and performance) is required for ISO 55000 conformity.
Annual timeline to illustrate the relationship beween the
different types of meetings during the same calendar year.
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 positions that are
dichotomized as: reactive vs. proactive; optimistic vs. pessimistic;
short-sighted vs. long-sighted; etc.
Fig. I. Care is trying to select the most efficient course of action to achieve his objectives.
I. Care is strategizing in order to efficiently and effectively
allocate the limited resources across a portfolio of buildings.
Fig. I. Care is trying to get the owners to reach a decision at their general meeting.
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.
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.