value of decision support - pdi 2016 – prepare to launch ... · david skinner, introduction to...

“Making the most of our dollars and sense”

Value of

Decision

Support

May 2016

Making the Most of Our Dollars and Sense

What Is Decision Support?

How would you define DS

Commercial Definitions

• “…a methodology and set of probabilistic frameworks for

facilitating high quality, logical discussions which illuminate

difficult decisions and lead to clear and compelling action by

the decision maker.” David Skinner, Introduction to Decision Analysis

• “The process of filtering, optimizing, and organizing mined

information to support decision making.” McGraw-Hill Science &

Technology Dictionary

2


Air Force FM Definition

A process that enables decision makers to

make informed decisions that better utilize

resources and improve mission effectiveness

3

Identify

Analyze

Alternatives

Evaluate

Recommend

Choose

Implement

Evaluate


Agenda

Value of Decision Support

Value by Step in the Process

Monetary Value

Non-monetary Value

Other Considerations

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Value of DS

Improved decision making

Stop or delay execution to conduct DS

• Cost of delay booked against DS costs?

• What happens if bad events occur in the interim – is DS worth

the risk?

Decision’s outcome makes a difference

• Same answer – did DS add anything?

• Different answers – DS gets credit/blame for delta

• No decision – did DS fail or is Status Quo really the decision

5


Value of DS

Same Outcome

Harder to take credit, but still possible

• Increased credibility

• Partial modifications to initial plan

• Improves probability of funding

• Identification of 2nd order effects

• Better Stakeholder buy-in/identification

Improved risk mitigation

• Identify potentially unforeseen risks – would they occur?

• Is the cost of planning worth it – do actions change?

Validates a good decision

• Credit for easing implementation

6


Value of DS

Different Outcome

Clearly value if decision is changed

• New alternatives

Is a lower cost a savings for DS??

Recommend spending more

• Solution costs more but improves overall execution

• Should this be a COST of DS or a “value”?

Stop a bad decision – no change is sometimes good

• Would someone else stop it eventually? – no funding

• Credit for reducing churn of failed implementation

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Agenda



Monetary Value

Non-monetary Value


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Value by Step

There is value in a comprehensive process

Improves credibility

Each step adds its own value to the process

Ensures a step is not forgotten

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Specific Steps in DS can Vary


AF 8 Step Process

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Sample Scenario

Spouse says “We should buy a house.”

Should we do some analysis?

What type?

Why?

Is decision made?

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Traditional path is to look at houses.

Is this market research or default solution?


Scenario Details

Currently renting – flexible lease

$100K annual income

~30 years old

1.5 children

Non-military

Other CRITICAL details at this point??

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Making the Most of Our Dollars and Sense 13

1. Identify the Issue

Define the purpose of the analysis

• What is the problem/scope?

Identify the decision maker

• Who will make the final decision?

Develop an objective statement

• Keeps from solving the wrong problem

Getting the issue right is half the battle


Buy a House Scenario

Identify the Issue

What is the value of this step?

Identify decision maker

• Joint

Common understanding of environment

• Hate wasting rent

• Current neighborhood has no playgrounds

• No pets allowed

• Want space for more kids – May require separate analysis??

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Helps eliminate future emotional input/biases

Frames the next step – analyze the issue


2. Analyze the Issue

Start gathering data

• Determine background

• Get different perspectives

Determine facts and assumptions

Determine evaluation criteria

History

Obstacles

Causes

2nd/3rd Order

Effects

May need to revise objective



Analyze the Issue


Evaluation criteria

• Balance housing quality with long term cost

• Are there thresholds – size/location/cost

Facts and assumptions

• Credit rating is good enough for all mortgages

• Housing market stable or improving

• Plan for no more kids

• Stay within 20 miles of work

• 10 year period of analysis

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Defining problem jointly may be hard


3. Develop Alternatives

Potential solutions for the problem

Want a range of possibilities

Get outsiders involved – experts and novices

• Fresh ideas

• Different perspectives

• Challenge the norm

Benchmarking

• See what other organizations are doing

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Exercise of thinking is useful



Develop Alternatives


Range of alternatives

• Status Quo

• Different rental

• Condo

• Starter home

• Permanent home

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Avoids anchoring


4. Evaluate Alternatives

Ensures all aspects of the issue are considered

Not always cost focused

Look at the alternatives from different angles

Eliminates biases

Provides common understanding of alternatives

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Analyze the Issue


Include all costs

• Maintenance – time and money

• Investment/tax effects

• Risk of moving soon (break even point)

Agree on benefits

• What makes a good neighborhood

• How important are some items – commute/pets

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Turns from opinions to “objective” analysis


5. Make a Recommendation

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Is there a clear “best” alternative?• Financially viable

• Optimal

• Feasible

• Implementable

Recognize limitations of recommendation

Prepare for dissenting opinions



Make Recommendation


Some alternatives are clear losers

• Permanent home too expensive

• Condo just a risky rental

Highlights key issues

• Does it really save or cost money

• Is owning more effort or value

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Summarize issues in organized manner


6. Make Decision

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I agree with the

recommendation,

go ahead and start

implementation.I like Alternative 4.

Update the

implementation

plan for this

alternative and let

me review before

pressing forward.

One last look before pressing with selected alternative



Make Decision


Discrete decision point

• Avoids early decision

• Reduces likelihood of backsliding in future

May indicate a need for further analysis

Shifts focus from decision to execution

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More complicated with multiple decision makers


7. Implement

Actions that need to be taken

Captured throughout the analysis

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How to get from A to B

Risk

mitigationCommunication

Training Funding

planSchedule



Implement


Division of duties

• Not your job alone but OUR job

Common schedule

• How fast to implement if not status quo

Agreed upon triggers for re-evaluation

• Keeps execution on track

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Prevents the “why haven’t you finished” questions


8. Evaluate

Know what GOOD is BEFORE making decision

Create performance metrics

Determine if issue was fixed/improved

Collect Lessons Learned

• Helps you improve for the next decision

• Avoid common mistakes in the future

• Share with like entities

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Adjust as Necessary



Evaluate


Clear rules on when to re-look housing decision

• Stay 2 years before relooking

Defines ROE for future decisions

• New job

• Change in vacation plans

Sets template for future decisions

• How to decide on buying new car

• Format for next housing decision

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Know when to change course

and scopes future decisions


Agenda



Monetary Value

Non-monetary Value


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Monetary Aspects of DS

Outlay reductions

Cost avoidances

Opportunity costs

Who reaps savings

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Are all costs created equal?


Outlay Reductions

Outlay reductions clearly a savings

Directly effect a budget and government outlays

Must be offset with implementation costs

Are they due to DS or would same choice have been

made otherwise?

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Few savings can be directly tied to DS


Cost Avoidances

Identify cost avoidances

• These are not necessarily real costs

• Would they really come to pass?

Preventing future costs from occurring

• Replacement costs

• Maintenance increases

• Price increases of basic materials (above inflation)

Watch for escalating costs that won’t really happen

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Would the costs actually occur?


Opportunity Costs

Not directly related to a budget

Valued at next best use – do we know what this is?

Could be a savings if asset’s life is extended

• Only a value if you need it

People’s time – only if they have other things to do

• Are there second order effects, training, or enhanced morale

Was the asset really going to be used?

• If it is surplus there is no savings

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Who Reaps Savings

Often there are savings/costs outside the scope of

the analysis

Are all costs/savings known with equal clarity?

• Direct budget vs. perceived opportunity costs

• Today vs. future costs (discounting)

Does the type/source of savings matter?

• All dollars should be the same, are they?

• Your budget, your customers time, other agencies

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Perspective Varies by Level

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Who is saving/losing Perspective

Your unitDo we care about Other

People’s Money?

DoD unit/employees Department/federal focus

OMB Value to society

Taxpayer Values corporate savings?

Human being Planet wide focus?


Is a Dollar Saved

Really a Dollar?

Money multiplier effects

$1 in DoD savings = 1.X dollars in fewer taxes

(costs money to collect and spend dollar)

Does $1 in lower taxes increase GDP more than $1?

Supply side economics

Does $1 in government expenditures result in

increased GDP? Opposite effect

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Housing Scenario

Revisited

What is the monetary value and what type of money?

Outlays

• Rent

• Mortgage

• Maintenance

• Commute costs

Cost avoidance

• Investments

• Rent increases

Opportunity costs

• Commute time

• Maintenance time

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Agenda



Monetary Value

Non-monetary Value


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Not All Value is Financial

Don’t want to price all “value”

• Saving lives

• Avoiding wars

• Improved morale

New technology/research for it’s own sake

• Implementation often has indirect benefits

• Value of space exploration

Non-military or alternate uses

• Assets employed in alternate roles – disaster relief

• Surplus capacity has value – sell or donate to society

• Can adapt for other uses – demilitarization of HMMMV

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Housing Scenario

Revisited

What is the non-monetary value?

Positive

• Recreation opportunities

• Owned space can be customized

Negative

• Increased risk of major cost changes

• Less time for interaction with children

Some can go either way

• Access to friends – for whom? parents or children

• School quality

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Agenda



Monetary Value

Non-monetary Value


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DS Value Exists Even When

Solution is Known

Some value to analysis for analysis sake

• Improve analytical capability

• Influence future decisions

• Lessons learned

Improves credibility of Decision Maker

Avoids questions/answers critics

Prepares for implementation

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What if Decision Maker Picks

a Different Alternative?

Can DS still claim savings?

What is the value of practicing analytical skills?

Increased DM awareness of the issue

Was DS a waste of time?

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Others?


What if You Get

the Wrong Answer?

“Good” analysis makes it harder to revector

• Stay with wrong answer longer

• Throw good money after bad

Who’s fault is the error?

• Bad analysis or poor execution

• Improper scope set by Decision Maker

• Interference by outside party

• Bad luck

Re-visit analysis

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Who is charged with the error?


DS will not Solve

All Problems

Not a checklist to be “completed”

Recognize when people are taking a linear or

compliance approach to decision making

Understanding the process is good, but you must

incorporate flexibility and adaptability

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Summary

DS value is hard to fully capture

More than monetary savings

Scope and perspective matter

DS has value even if decision is unchanged

Must resist urge to quantify everything

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“Making the most of our dollars and sense”

QUESTIONS?

https://go.usa.gov/KWGh

[email protected]

(720) 847-2100

DSN: 847-2100


DS Examples

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Doing Now

Community Center

Dorm

Generic Facility Project

Doing But Can Improve

Gate Ops

Bowling Alley Changes

Marina

Library

Travel Card

NAF Vehicles

E Readers

Potential Areas

ID Card Issuance

Marquees

TDY/Mil Pay Transactions

Overhire Request

Finance Weekly Training

Simulators vs. Jets

Crowded Gym (CC tasking)

Failing PT Test

Bad OPR Rate

DUIs

Write down 3-5 examples


Objective Statement

Sets the stage for the analysis

Couple sentences

Doesn’t point to a solution

Focuses on problem, not issue

Must be unbiased

Be reviewed by decision maker

Takes time to determine

Getting the issue right is half the battle


Level to Capture Savings

Who is saving/losing

• Your unit

• DoD unit/employee

• Other gov’t worker/program

• IRS/Treasury

• Generic Taxpayer

• Government contractor

• Allies/foreign suppliers

Scope varies how savings are treated

• Unit – do we care about OPM

• DoD – traditionally DoD only/ maybe federal

• OMB – value to society

• Taxpayer – care about corporate savings???

• Human being – planet wide focus??

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Value Varies by Level

Value can vary by level

Analyst

First level management

DM (mid level management)

Senior Leadership

Public

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value of decision support - pdi 2016 – prepare to launch ... · david skinner, introduction to...

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