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Consultation & Decision Making

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Steve Finney, Jr. MPA ★
Steve Finney, Jr. MPA ★

The document discusses decision making and risk management. It describes different levels of decision making from isolated to integrated and supported. It also discusses concepts like the black swan theory, probability distributions, and managing risk through establishing risk zones and building robustness. The overall message is that consulting can help improve decision making by providing support, expertise and helping manage complexity and risk.

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A supplement to: Consultation Increases ValueSubstantial Reinforcement© 1998-2009Steve Finney, Jr. All rights reserved.
StrategicTacticalOperationalPlanning/ThinkingOptimal Decisions© 1998Steve Finney, Jr. All rights reserved.
Undesirable ApproachPanning & ImplementationSCF98© 1998Steve Finney, Jr. All rights reserved.
DecisionsEthicsStructureModelStrategyTacticsOperationsDevelopmentDetermine Proper Courses
Identify Actions
Planning
Project Timelines
Delivery
Profitability © 1998-2009Steve Finney, Jr. All rights reserved.
Desirable ApproachPlanning & Implementation© 1998Steve Finney, Jr. All rights reserved.
BE AWAREKurtosis risk: fewer observations cluster near the average and more observations populate the extremes either far above or far below the average compared to the bell curve shape of the normal distribution.
Ludic Fallacy (Taleb): Unstructured randomness found in life resembles the structured randomness found in games.
ASSUMPTION: the unexpected can be predicted by extrapolating from variations in statistics based on past observations, especially when these statistics are assumed to represent samples from a Bell Curve.
More generally, decision theory based on a fixed universe or model of possible outcomes ignores and minimizes the impact of events which are "outside model". Known knowns: Things we know that we know. Known unknowns: Things that we know we don’t know. Unknown unknowns: Things we do not know we don’t know.Some scholars extrapolate from these three categories a fourth:4. Unknown known: Things we don't know or intentionally refuse to acknowledge that we know.
© 1998-2009 Steve Finney, Jr. All rights reserved.IsolatedTechnologyGeneralistFinanceMarketingOperationsTrainingHumanResourcesLegalAudits
© 1998-2009 Steve Finney, Jr. All rights reserved.TraditionalHuman ResourcesLegalFinanceTechnologyMarketingAuditsPrincipal(s)Business ProcessDecision ProcessOperationalTactical
Black Swan Theory (Taleb) Concerns high-impact, hard-to-predict, and rare events beyond the realm of normal expectations. Unlike the philosophical "black swan problem", the "Black Swan Theory" (capitalized) refers only to events of large magnitude and consequence and their dominant role in history. "Black Swan" events are considered extreme outliers. An outlying observation, or outlier, is one that appears to deviate markedly from other members of the sample in which it occurs.Coping with Black Swan eventsTaleb’s main idea does not attempt to predict Black Swan events, but to build robustness to the negative ones, while being able to exploit positive ones. A Black Swan event depends on the observer—a Black Swan surprise for the turkey is not a Black Swan surprise for the butcher, hence his idea is to "avoid being the turkey" by finding out where one may be exposed to being a turkey and "turn the Black Swans white".Black Swan CriteriaThe event is a surprise. The event has a major impact. After the fact, the event is rationalized by hindsight, as if it had been expected.
Normal Distribution ReminderXDark blue is less than one standard deviation from the mean. For the normal distribution, this accounts for about 68% of the set (dark blue), while two standard deviations from the mean (medium and dark blue) account for about 95%, and three standard deviations (light, medium, and dark blue) account for about 99.7%.
Recall Probability Distribution TheoryRiskKnowledgeContinuous Random Variables - Uncountable
Discrete Random Variables - Countable
Mixed Random Variables – Both Complexity
Look a Look at Decision Making

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Consultation & Decision Making

  • 1. A supplement to: Consultation Increases ValueSubstantial Reinforcement© 1998-2009Steve Finney, Jr. All rights reserved.
  • 3. Undesirable ApproachPanning & ImplementationSCF98© 1998Steve Finney, Jr. All rights reserved.
  • 9. Profitability © 1998-2009Steve Finney, Jr. All rights reserved.
  • 10. Desirable ApproachPlanning & Implementation© 1998Steve Finney, Jr. All rights reserved.
  • 11. BE AWAREKurtosis risk: fewer observations cluster near the average and more observations populate the extremes either far above or far below the average compared to the bell curve shape of the normal distribution.
  • 12. Ludic Fallacy (Taleb): Unstructured randomness found in life resembles the structured randomness found in games.
  • 13. ASSUMPTION: the unexpected can be predicted by extrapolating from variations in statistics based on past observations, especially when these statistics are assumed to represent samples from a Bell Curve.
  • 14. More generally, decision theory based on a fixed universe or model of possible outcomes ignores and minimizes the impact of events which are "outside model". Known knowns: Things we know that we know. Known unknowns: Things that we know we don’t know. Unknown unknowns: Things we do not know we don’t know.Some scholars extrapolate from these three categories a fourth:4. Unknown known: Things we don't know or intentionally refuse to acknowledge that we know.
  • 15. © 1998-2009 Steve Finney, Jr. All rights reserved.IsolatedTechnologyGeneralistFinanceMarketingOperationsTrainingHumanResourcesLegalAudits
  • 16. © 1998-2009 Steve Finney, Jr. All rights reserved.TraditionalHuman ResourcesLegalFinanceTechnologyMarketingAuditsPrincipal(s)Business ProcessDecision ProcessOperationalTactical
  • 17. Black Swan Theory (Taleb) Concerns high-impact, hard-to-predict, and rare events beyond the realm of normal expectations. Unlike the philosophical "black swan problem", the "Black Swan Theory" (capitalized) refers only to events of large magnitude and consequence and their dominant role in history. "Black Swan" events are considered extreme outliers. An outlying observation, or outlier, is one that appears to deviate markedly from other members of the sample in which it occurs.Coping with Black Swan eventsTaleb’s main idea does not attempt to predict Black Swan events, but to build robustness to the negative ones, while being able to exploit positive ones. A Black Swan event depends on the observer—a Black Swan surprise for the turkey is not a Black Swan surprise for the butcher, hence his idea is to "avoid being the turkey" by finding out where one may be exposed to being a turkey and "turn the Black Swans white".Black Swan CriteriaThe event is a surprise. The event has a major impact. After the fact, the event is rationalized by hindsight, as if it had been expected.
  • 18. Normal Distribution ReminderXDark blue is less than one standard deviation from the mean. For the normal distribution, this accounts for about 68% of the set (dark blue), while two standard deviations from the mean (medium and dark blue) account for about 95%, and three standard deviations (light, medium, and dark blue) account for about 99.7%.
  • 19. Recall Probability Distribution TheoryRiskKnowledgeContinuous Random Variables - Uncountable
  • 21. Mixed Random Variables – Both Complexity
  • 22. Look a Look at Decision Making
  • 23. IsolatedDecision MakingNo SupportRISKR = constantKnowledgeComplexity© 1998-2007 Steve Finney, Jr. – All rights reserved.
  • 24. Level I TraditionalDecision MakingSupportedRISKKnowledgeComplexity© 1998-2007 Steve Finney, Jr. – All rights reserved.
  • 25. Level II TraditionalDecision MakingExperienced RISKKnowledgeComplexity© 1998-2007 Steve Finney, Jr. – All rights reserved.
  • 26. IntegratedSupportDecision MakingExperienced & SupportedRISKKnowledgeComplexity© 1998-2009 Steve Finney, Jr. – All rights reserved.
  • 28. Risk ZonesHigh Risk ZoneAverage Risk ZoneRiskAcceptable Level of RiskTargeted Risk ZoneComplexity© 2005-2009 Steve Finney, Jr. – All rights reserved.
  • 29. © 1998-2009 Steve Finney, Jr. All rights reserved.IntegratedHuman ResourcesLegalFinanceTechnologyMarketingAuditsPrincipal(s)Business ProcessStrategic ConsultantDecision Process
  • 30. © 1998Steve Finney, Jr. All rights reserved.
  • 31. Client© 1998-2007Steve Finney, Jr. All rights reserved.