1 analytic techniques for decision support asmc – pdi orlando, fl june 3, 2010 ron maccaroni...

1

Analytic Techniques For Decision Support

ASMC – PDIOrlando, FLJune 3, 2010

Ron Maccaronirmaccaroni@cox.net

2

Decision Support

Definition

Enabling decision makers to make informed decisions that wisely and better utilize resources, and improve program and

operational effectiveness.

Why is this important?

3

Why Should We Care About Good Decision Support?

Huge annual deficits contributing to a $13+ trillion, and growing, federal debt.

Trillions in unfunded liabilities. Medicare, Medicaid, and Social Security

costs will increase dramatically. Uncertain world climate can lead to future

unexpected events that increase financial burden on Federal budget/programs.

Growing financial burden on the States and Localities for services and social needs.

4

What It Means To YOU!

Today there are challenges in all areas of government.

But!

There are also opportunities for those who are prepared.

5

Objectives Of Presentation Emphasize the need for relevant,

data-driven analysis to support decision making.

Demonstrate the need and benefits of using a structured approach to analysis.

Discuss an example of a structured analytical approach.

6

The “Watchwords” Accountability and Transparency

GAO changed its name from “General Accounting Office” to “Government Accountability Office.”

Accounting and auditing professions are now referred to as the “accountability professions.”

Many politicians, academicians, private sector leaders, and “citizen intermediaries” refer to both terms.

Laws passed that call for either or both.

7

What’s Different Today? The New Playing Field

Focus on achieving and measuring results!

Agencies must demonstrate they are getting results when preparing budgets and reporting annually.

Citizens are more interested in seeing results from public expenditures and meeting their expectations.

Greater use of the Internet for public access to information on government operations.

8

Working For The People!

The American people deserve a Federal Government that: Respects their tax dollars, and uses them

effectively and efficiently. Is transparent, fair, and responsive. Is constantly looking to streamline what works

and to eliminate what does not.

Budget of the U.S. GovernmentFiscal Year 2011

9

Drivers Of Stronger Analysis To Support Decision Making

Management Reform Legislation

RESULTS

• A Broader Role for the CFO

NEW PLAYING FIELDDRIVERS

Higher Leadership and Accountability Expectations

The Management Process Has Changed

• Emphasis on More Timely and Better

Accounting for Resources

• Focus on Performance and Results--Tied To Budget Decisions

• More Difficult Decisions

Presidential Initiatives

• More and Better Data Available

• Need and Opportunity for Stronger Analysis

Ahead: Large and Growing Federal Budget Deficits

10

What Is The Focus OfDecision Making

Starts The Mission . . What should / needs to be done? For whom? Why is it important – what is the desired /

expected impact?

Which Drives Subsequent Decisions . . How should it be done? By whom? When? At what cost?

11

. . . Leading to Performance Management Decisions

Execute

Goal/Objective

Programs Outcomes – Results

Customers Outputs – Products/Services Activities Inputs – Resources

Budget

Key questions: Is resource use having intended results/impact? Is the investment worth the results? How good is the management process?

12

Typical Types Of Analysis Supporting Decisions

Problem/IssueBudgetary ResourcesFinancial ConditionBusiness ProcessesCost / BenefitPolicy / Program Design AlternativesProgram Operations or Impact

13

How Was The Analysis Done?

A decision-maker should always know how an analysis was done in order to:

Know how solid it is.

Be comfortable with and be able to defend any decision made based on the analysis.

14

So . . . What’s In YOUR Analysis?

In conducting analysis, how do you know: What question / issue / concern / need

you should focus on? How reliable, verifiable, relevant,

sufficient, and consistent the data you depend on are?

The best type of analysis to perform? Are you at risk if you don’t know?

15

Basic Guidelines For Decision Support

Ask questions; be willing to wonder.Define the problem / concern / question /

need.Examine the evidence -- data.Analyze assumptions and biases.Avoid emotional reasoning.Don’t use either / or thinking, or over

generalize.Consider other interpretations.Tolerate uncertainty / questions.

16

Structured Approach To Conducting Analysis

Objective and systematic way of collecting, examining / analyzing and reporting information to support decision-making.Conceptual way of thinking.Applies to all aspects of managing

programs, finances, and operations.

17

Structured Approach To Conducting Analysis (cont’d)

To be effective, analysts must: Understand organization’s business. Understand how analytic “need” relates to the

business. Apply sound, thorough analytical methods

specifically tied to the “need.” Provide useful information to support decision-

making. Analysis for decision-making

leads to continual line of questioning.

18

Five Step Structured Analytic Approach

Step 5 – Present Results

Step 4 – Conduct Analysis

Step 3 - Collect Data

Step 2 - Identify Data Sources

Step 1 - Define Questions

19

Step 1Defining Questions

Critical starting point -- Question will drive the entire analysis.

Analysis must zero in on user’s need. Critical considerations:

The user’s business and role in it.What the user needs / wants to

know and why.How the results will be used for

decision-making. Thoroughness requires asking 6 key

questions = “what,” “where,” “when,” “who,” “how,” and “why”

20

What Is The Question?

How effective is the highway patrol at increasing safety?

21

What Are The RealReal Questions? How effective is the highway patrol . . .

Do resources used give adequate security? Are fatalities per 100,000 miles going down? Is ratio of convictions/violations going up?

. . . at increasing safety? Is the number of accidents going down? Are there fewer safety-related incidents? Is there less crime on the roads?

22

Step 2Identify Data Required

Key question = “What data do you need to answer the question?”

Data collected from:Primary sources = you collectSecondary sources = others collected

Sources and quantity of data gather depend on:The questions to be answered.The availability of data.The time allowed for the analysis.

If data doesn’t exist, revisit questions.

23

Consider Three Data Categories Budgetary

Prospective Retrospective

Program Strategic and annual plans and performance Program design, operation, and results

Financial Cost of operations and financial position

(assets, liabilities, net worth, revenue, expenses)

Cost data by office, program, function, output (product or service), or outcome (result)

24

The Data Quality AxiomAssumption = All decision are data

driven.

The quality of the decisioncan be no better than

the quality of the data supporting the decision!

25

Step 3Collecting The Data

(Sound like the easy step?) Key questions in deciding how to collect data:

Where and how are you going to get the data?Will it enable you to answer the questions?

Common data sources:Records = reports, manual/automated files.People = within and outside the organization.

Time available key to source and amount. Verification important = reliability, completeness,

accuracy, relevancy.

26

Data Collection Hierarchy TIME REQUIREMENT

Standard Agency Reports Low

Automated Systems

Manual Files

Personal Interviews

Focus Groups

Surveys High

27

Step 4Analyzing The Data

Analytic method = steps taken to understand, display, or interpret data.

Methodology dependent on question(s).Methods numerous and varied.

Important to know purpose / function of each and when to use them.

Review results of analysis:Did it address question(s)?How sensitive is it to internal / external

influences?

28

Analysis Axiom

The rigor of the analysis must reflect the risk / significance of

the potential impact of the decision!

29

Conduct Analysis Methods Screening

There Categories - Which fits question(s)? Descriptive = What exists?

How was the high-tech training program implemented?

Normative = What exists compared to what was expected? Were job-placement goals of the high-tech training

program met?

Impact = Did the initiative achieve the intended results? Did the high-tech training program have an effect on

job-placement rates?

30

Determining The Type Of Analysis

Primary Data Analysis You collect, assemble, and analyze data.

Secondary Data Analysis You use data gathered and in some cases

analyzed prior to your own analysis. Evaluation Synthesis

You use the combined results from two or more previous analysis.

31

Analytical Methods And Their Uses

Category Content Trend

Statisti-cal

Case Study

Bench-marking

Before-After

Field Experiment

Problem/Issue X X X X X - -

Financial Condition and Operations X X X X X - -

Budgetary Resources X X X X - - -

Business Processes X X X X X X -

Cost-Benefit and Cost-Effectiveness X X X X X X -

Policy and Program Design Alternatives X X X X X X X

Program Operations X X X X X - -

Program Impact X - X X - X X

32

Putting The Steps Together - Example

Step 1Should $5M be added to inoculation

program advertising for face-to-face contact to enhance its effectiveness?Is current approach meeting its goals?

If not, why and what can/needs to be done?If yes, can more aggressive goals be

set/met?What additional benefits are expected

from face-to-face approach?

33

Putting The Steps Together – Example (cont’d)

Step 2 Program, budgetary, and financial

Step 3 Reports, systems, files, and interviews

Step 4 Normative and impact Primary, secondary, and evaluation synthesis Content, trend, statistical, case study,

benchmarking, before-after, field experiment

34

Step 5Reporting Analytic Results

Important phase of process.Impact decision-making; bring about change.

Reporting methods (written vs. oral vs. video) have different advantages.

Goal = convince audience that work done and results reported is reasonable, appropriate, and actionable.

Answering analytic objective, i.e. question, is most critical goal.

Remember what drove the analysis – customer’s need / interest / role, and planned use of results.

35

Structured Approach Steps Interactive And Overlapping

36

Revalidating Questions(Continuous throughout analysis!)

DefineQuestions

IdentifyData

Sources

CollectData

Conduct Analysis

ReportResults

Regularly re-check and validate questions. Questions may need to be modified, dropped, redefined or added.

Analysis Feedback Loop

37

Key Points to Remember Accountability expectations drive need for “hard”

decisions, and therefore critical analysis. Structured approach = objective/systematic way

of collecting, examining, and reporting information.

Five step structured approach: Identify question(s) Identify data Collect data Analyze data Report results

Steps highly interrelated – drives need to revisit results of each step throughout process.

38

Summary

AnalysisGrowing need = support difficult decisions.Growing importance = support

performance and financial accountability.Best if:

Follows a structured approach.Based on user’s/customer’s

questions/need.Impacts decision-making/results.

39

Remember . . .

African Proverb Every morning in Africa, a gazelle wakes

up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle, or it will starve to death. It doesn’t matter whether you are a lion or a gazelle. When the sun comes up, you’d better start running!