Chapter 14 Rainmaker Solving Tools – The Rainmaker

CHAPTER 14

Rainmaker Solving Tools

Decision-Making Tools versus Strategy

The simplistic way to define the difference between strategy and decision-making tools would be as follows:

Strategic decisions are long-term, complex decisions made by CEOs, senior management, and board of directors.

Tactical decisions are medium-term, less complex decisions made by middle managers.

Decision-making tools aim to meet current objectives stated in strategic documents and plans.

As such, understand that decision techniques are critical to effective management.

Decision Making

Main Steps

Being specific: In order to find the right decision-making tool, you need to be clear on the decision that must be taken.

Details: Information is power, so gather all critical and relevant data pertinent to the task at hand, which can be conducted via questionnaires or discussion groups.

Alternatives: Always take advantage of research to assimilate various options to help you make a decision.

Determination of options: Once all data has been gathered and assessed, pick the option that suits the company’s strategy and corporate direction.

Implementation and evaluation: Once a decision has been made and reviewed, don’t hesitate and take action to implement it and continuously monitor it until the final outcome. If desired results are not being achieved, review the decision and reevaluate. If need be, stop the process immediately.

The above steps are simplistic but do enable you to be practical in decision making. Over the years, this will add to managerial experience and skill, and will help your business to grow at a faster rate. The techniques in this section help you to make the best decisions possible with the available information. These tools help you assess the likely consequences of decisions, evaluate individual factors, and choose the best alternative actions.

The following techniques help to make decisions where there are many factors to consider.

Problem-Solving

Over the years, entrepreneurs have said that tools in this section have helped them to understand complicated situations and not just methods to make informed decisions. Without these tools problems nearly always seem overwhelming.

These techniques help you look at the multitude of variables in a structured and logical way, effectively giving you a starting point in problem-solving. The starting point is to extract information from facts and then to understand associated problems in detail.

There will always be far too many factors to consider and as such far too many issues to analyze. The way around this is to drill down this information to identify the possible causes of the problem or decision issue at hand. Drill down does help you to break large, seemingly unmanageable trends and problems down into achievable parts. It also helps you to see where you lack information. It is recommended that you understand how each fact relates to another, which can be done via SWOT analysis, financial forecasts, and risk-to-reward analysis.

Forecasting shows you how to make financial models of your organization or new product launches. You can use these to work out whether projects are viable now or only in the future and ultimately use them to forecast the effects of changes in underlying factors.

Risk-to-reward analysis establishes a framework for identifying the risks you face relative to forecasted profits. It also helps you to work out a strategy for controlling such variables.

Strategic Tools

Force Field

To carry out this analysis, follow these steps:

Clearly describe your plan for a project. List all factors and potential changes to macroenvironmental factors that could influence your decision.

Assign a score to each force, from 1 (weak) to 5 (strong).

Pareto Analysis

To carry out this analysis, follow these steps:

List the expected problems you could face.

List the options that are available to you now and in the future.

Apply an appropriate score to each option and then work on the option with the highest score.

Often better known as “the 80/20 rule,” this method assists you to find where you can derive the greatest benefit by expending the least cost.

Paired Comparison

After assessing various options (the foregoing methods) you can now use paired comparison to relate and compare the best two options. For each comparison, decide which of the two options is most important and then assign a score to show how important they are.

Follow these steps to use the technique:

List the two options you wish to compare.

Assign a score to each element of the option.

Evaluate a larger set of options based on numerous criteria, then weight the importance of each criterion to derive the best choice.

Consolidate the results by adding up the total of all the values for each option.

Decision Trees

This method is an excellent tool for helping you to choose between several courses of action.

It enables you to investigate the possible outcomes of your decision. They also help you to form a balanced picture of the risks versus rewards associated with each possible course of action.

Plus, Minus, and Interesting (PMI)

PMI is a simply method of weighing the pros and cons, and implications of a decision.

When you have selected a course of action, check that your decision is worth taking. To use the technique, draw up a table with three columns headed Plus, Minus, and Interesting. Within the table write down all the positive points of following the course of action, all the negatives, and all the interesting implications and possible outcomes.

List all the pluses, minuses, and implications behind any decision, then assign a + or − numerical value to each based on your perception of the future. You are effectively identifying all forces for and against a theoretical change, weighted for amount of force exerted.

Cost–Benefit

Despite generating solutions to a problem and implementing these solutions in a rigorous manner the solution may still not be worth implementing. It may be that such implementation will be time-consuming and expensive.

Cost–benefit analysis is simple and often used by managers to decidewhether to implement a decision. To use the technique just add up the value of the benefits of an action and subtract the costs associated with it.

The techniques in this chapter help you to make the best decisions possible with the available information. With these tools you will be able to map out the likely consequences of decisions, work out the importance of individual factors, and choose the best course of action.

Rainmaker Observation: When you are overwhelmed with a deluge of available information, the tools described in this chapter help to filter information for you to decide whether a course of action is worth following. Do remember, though, that such tools are only to assist you to make logical and commonsense decision. They are not considered analytical enough for capital raising.