Decision Tree Analysis
Choosing Among the Options
• Decision Blinders
•Listening &reading Skills
Decision Tree Analysis
Choosing Among the Options
•Decision Trees are useful tools for helping you
to choose between several courses of action.
•They provide a highly effective structure within
which you can explore options and investigate
the possible outcomes of choosing those options.
•They also help you to form a balanced picture
of the risks and rewards associated with each
possible course of action.
• This makes them particularly useful for
choosing between different strategies,
projects or investment opportunities, social
upliftment particularly with your resources are
limited.
• You start a Decision Tree with a decision that
you need to make.
• Draw a small square to represent this on the left
hand side of a large piece of paper, half way
down the page.
• From this box draw out lines towards the right for
each possible solution, and write a short
description of the solution along the line.
• Keep the lines apart as far as possible so that
you can expand your thoughts.
• At the end of each line, consider the results. If
the result of taking that decision is uncertain,
draw a small circle.
• If the result is another decision that you need to
make, draw another square. Squares represent
decisions, and circles represent uncertain
outcomes.
• Write the decision or factor above the square or
circle. If you have completed the solution at the
end of the line, just leave it blank.
• Starting from the new decision squares on your
diagram, draw out lines representing the options
that you could select.
• From the circles draw lines representing
possible outcomes.
• Again make a brief note on the line saying what
it means.
• Keep on doing this until you have drawn out as
many of the possible outcomes and decisions as
you can see leading on from the original
decisions.
Evaluating Your Decision Tree
• This is where you can work out which
option has the greatest worth to you.
• Start by assigning a cash value or score to
each possible outcome.
• Make your best assessment of how much
you think it would be worth to you if that
outcome came about.
Calculating Tree Values
• Start on the right hand side of the decision tree,
and work back towards the left.
• As you complete a set of calculations on a node
(decision square or uncertainty circle), all you
need to do is to record the result.
• You can ignore all the calculations that lead to
that result from then on.
Calculating The Value of Uncertain Outcome
Nodes
Where you are calculating the value of uncertain outcomes (circles on the
diagram), do this by multiplying the value of the outcomes by their probability.
The total for that node of the tree is the total of these values.
0.4 (probability good outcome) x $1,000,000 (value) = $400,000
0.4 (probability moderate outcome) x £50,000 (value)
$20,000
=
0.2 (probability poor outcome) x £2,000 (value) = $400
+ $420,400
Calculating the Value of Decision
Nodes
Key Points
• Clearly lay out the problem so that all options
can be challenged.
• Allow us to analyze the possible consequences
of a decision fully.
• Provide a framework to quantify the values of
outcomes and the probabilities of achieving
them.
• Help us to make the best decisions on the basis
of existing information and best guesses.
• Delphi Method
Tree diagram (alternative details)
The systems flow / tree diagram is used to systematically
map out the full range of activities that must be
accomplished in order to reach a desired goal. It can be
also used to identify all the factors contributing to a
problem under consideration. One of the strengths of this
method is that it forces the user to examine the logical
and chronological link between all the tasks.
The example of the tree diagram for Safety performance
is shown on the next slide.
Tree Diagram example
Benchmarking Assign benchmarking team
New
Consultant Seek references
Approach
Library research
Research
Internet / Trade associations
Check work areas
Inspection
Safety Modify “Safety watch” squad
Performance Behavior
Training Specialized training
Safety newsletter
Publicity
Regular safety meets
Focus
attention
Involvement Safety rewards to employees
