Guilherme Luiz Antunes Major Mischel Carmen Neyra Belderrain ALIO-INFORMS Joint International Meeting June 6 - 9, 2010 Buenos Aires, Argentina.

SCA METHOD APPLIED TO SMALL FAMILY-OWNED FIRM

Guilherme Luiz Antunes MajorMischel Carmen Neyra Belderrain

ALIO-INFORMS Joint International MeetingJune 6 - 9, 2010 Buenos Aires, Argentina

Motivation

• Good decision-making is crucial to success in any business

• It’s difficult to deal with ill-structured problems• Ill-structured problems are common in the daily life

of organizations• Small family-owned business seeking to better

structure its decision-making process

ALIO-INFORMS Joint International Meeting June 6 -9,2010 Buenos Aires , Argentina 2

Objective

Strategic Choice Approach (SCA) is applied to the problem of defining future guidelines of a small family-owned firm.


Ill-Structured Problems

Ill-structured problems are characterized by:– Multiple actors– Multiple perspectives– Conflicting interests– Important intangible aspects– Relevant uncertainty


Problem Structuring Methods

• PMS are used to deal with ill-structured problems• They are characterized by

– able to conciliate multiple different perspectives– accessible to all decision-makers, so the problem

structuring becomes a participative process– an iterative process– able to provide partial solutions or local improvements


Problem Structuring Methods

Some PSM:

– Strategic Options Development and Analysis (SODA)

– Soft Systems Methodology (SSM) – Strategic Choice Approach (SCA)


Strategic Choice Approach

Focused on managing uncertainties and complexity of real-time problems

– Sources of uncertainty:• Uncertainty about working Environment (UE)• Uncertainty about guiding Values (UV)• Uncertainty about Related decisions (IR)

– Decision-making is subject to daily life pressure and urgencies (not an isolated process)




Modified problem

Current problem

More info

More coordination

IV

IA

IR

Pressure for

decision

Time

Clearer objectives


• Complementary modes of decision-making activity:– Shaping mode: definition of what will be decided and how

are these decisions related to each other– Designing mode: generation of alternatives/courses of

action and analysis of the compatibility of these courses of action if taken together

– Comparing mode: comparison of different set of alternatives and identification of the most promissing ones

– Choosing mode: listing of uncertainties, identification of exploratory options and building of commitment package.




Comparing mode

Designing mode

Choosing mode

Shaping mode

Multiple output

Multiple input

Case study

• The firm:

– Family-owned business– Small firm (600-1200 meals/day)– Location: Pontes e Lacerda – MT


Pontes e Lacerda

Shaping mode

Shaping mode:– Define decision areas– Identify decision links– Build a decision graph– If the graph is too complicated, rearrange positions– Emphasize urgent and more relevant decision areas– Define the decision focus


Shaping mode

Decision areas– Description of any situation in which different courses of

action are believed to be possible


Decision areas Label

Open a restaurant in Cuiabá? RESTCBÁ?

Build a place to rent in Cuiabá? IMOVCBÁ?

Open a supermarket in another small town ? SUPINT?

Sell idle equipment? VENDEQ?

How to manage electronic information? INFOEL?

Take part in new bids? NOVASLIC?

Shaping mode


Decision areas Label

Buy new equipment? MODERNQ?

Change hiring policies? POLCONT?

Sell building in Nova Lacerda-MT? VENDIMOV?

Hire a driver? PROFTRANS?

Which employee qualification policy to adopt? QUALFUNC?

Shaping mode

• Decision Link– Indicates that it may be different to analyse the decision

areas together or one-by-one

• Decision Graph– Graphic representation of decision areas (circles) and of

decision links (lines)

• Decision Focus– Decision areas thought to be the most relevant and which,

in a first moment, will be kept in the decision process


Shaping mode


• Case Study decision graph

Shaping mode


• Rearranged graph• Clustered decision areas:

– Blue: New Business/Real-state– Green: Human Resources– Red: Equipment

• Classified decision areas• Established decision focus

Decision focus

Undefined alternatives

Important consequences

Urgent

Highly connected to other areas

Designing mode

Designing mode:– Identify decision options in each decision area– Identify incompability among decision options (option

bars)– Build the decision schemes


Designing mode

• Decision Options– Any course of action, related to a decison area, thought to

be feasible


Decision areas Options Label

NOVASLIC? ●Take part only in regional bids LICIREG

●Take part in bids in the state of Mato Grosso LICIMT

●Don’t take part in new bids ÑLICI

POLCONT? ●Hire only people who have experience in the sector CONTEXP

●Hire only people who already live in the region CONTREG

Designing mode


Decision areas Options Label

POLCONT? ●Hire only people who have experience in the sector

and already live in the region

CONTEXR

EG

●Don’t estabilish a hiring policy ÑPOLÍTICA

INFOEL? ●Hire someone fully dedicated to the electronic

information

FUNCESP

●Keep to manage these informations without a fully

dedicated person

ÑFUNC

Designing mode

• Option bar– Graphic representation of the incompatibility between two

distinct decision options related to two different decision areas


Option barsUncertain option bars

Designing mode

• Decision Scheme– Combinação de opções viáveis, cada uma delas tomada de

uma área de decisão dentro do foco do problema


Designing mode


FUNCESP

LICIREG

CONTEXP

CONTREG

CONTEXREG

LICIMT

CONTEXP

CONTREG

CONTEXREG

ÑLICI

ÑPOLÍTICA

ÑFUNCÑLICIÑPOLÍTICA

Esquema A

Esquema B

Esquema C

Esquema D

Esquema E

Esquema F

Esquema G

Esquema H

• Decision Scheme– Set of feasible decision

options each coming from a different decision area within the decision focus.

– INFOEL– NOVASLIC– POLCONT

Comparing mode

Comparing mode you:– Define the comparison areas– Define the assessment method for each comparison area

(e.g. profits , employee satisfaction rate, etc.)– Assess courses of action relative to their flexibility– Build a shortlist of decision schemes (choose the most

promissing ones)– Make relative assessments of the shortlisted schemes– Make advantage comparisons– Assess the overall advantage balance


Comparing mode

Comparison area– Area of concern in which it is believed to be relevant to

consider the possible outcomes of the different courses of action


Comparison area Label

Revenue and profit RECLUC:

Administrative difficulty ADM:

Risks RISCOS:

Long-term perspectives LPRAZO:

Level of investment INVEST:

Comparing mode


Comparison areas Label

Customer satisfaction SATISCOM:

Employee satisfaction SATISFUNC:

Qualidade dos vínculos empregatícios VINCULOS:

Required time of the owners TEMPOEMP:

Dedicated employee salary SALARIO:

Comparing mode

• Pre-selection of decision schemes– Selection of most promissing decision schemes


Scheme RECLUC: ADM: RISCOS: LPRAZO: Dominated by:

A 4º 5º 4º 2º B, C

B 4º 4º 3º 2º

C 4º 3º 4º 1º

D 1º 8º 7º 5º E, F

E 1º 7º 6º 5º

F 1º 6º 7º 4º

G 7º 1º 1º 7º

H 7º 2º 1º 7º G

Comparing mode

• Relative Assessment– Comparison of the difference of the outcomes of two

decison schemes regarding one specific comparison area


Comparing mode


Sche

me

B Scheme C

E: ExtremeS: SignificantC: ConsiderableM: MarginalN: Negligible

NM M SC ESE C• Relative Assessments and

Advantage Comparison

Comparing mode

• Balanço Geral de Vantagens– Condensação em um único índice da comparação de

vantagens em todas as áreas de comparação


NM M SC ESE C

Comparing mode


NM M SC ESE C

Comparing mode


NM M SC ESE C

Choosing mode

Choosing mode:– Indentify uncertainty areas– Classify them according to their nature – UE, UR and UV– Assess the importance of the uncertainty areas– Find exploratory options to investigate the uncertainty

areas– Define action scheme for the most urgent decision areas– Establish a commitment package defining courses of

actions and further exploratory options to be taken


Choosing mode

• Uncertainty area– Any source of uncertainty that affects the final decison


Uncertainty areas Labels Recognition

? Possibility of winning the bids ?VENCLIC Shaping mode

? Necessity of recruiting policy ?NECPOLCONT Shaping mode

? Worker/Labor availability ?DISPMÃO Designing mode

? Standarizing data format with suppliers ?DADOS Designing mode

? Feasibility of operating in the whole MT ?MTVIÁVEL Designing mode

Choosing mode



? Brazilian economy in the upcoming years ?ECONOMIA Comparing mode

? Food price ?PREÇOALI Comparing mode

? Client locations ?LOCAL Comparing mode

? Importance of ADM: ?IMPADM Comparing mode

? Importance of RISCOS: ?IMPRISCOS Comparing mode

? Importance of LUCREC ?IMPLUCREC Comparing mode

? Long-term results ?RESLPRAZO Comparing mode

Choosing mode



? Dificuldade administrativa adicional

ao se trabalhar em todo o MT e não

apenas na região

?DIFICILMT Comparing mode

? Número e tipo de refeições que serão

contratados

? REFEIÇÕES Comparing mode

? Prazo dos contratos futuros ?PRAZOCONT Comparing mode

Choosing mode

• Exploratory Option– Actions for decreasing the uncertainty level


Uncertainty Areas Exploratory Option Assessment

?IMPADM

?IMPRISCOS

?IMPLUCREC

•Decision-maker group

meeting to rediscuss the

issue

Confidence: Confidence in the balance

between C and F considerably higher

Resources: few hours of discussion

Delay: a few days

Choosing mode


Uncertainty Areas

Exploratory Option Assessment

?DIFICILMT Investigate infrastructure

of potential clients’

location

Confidence: confidence in the

relative assessment of C and F

relative to ADM: reasonably higher

Resources: web reasearch, informal

talk with people who know the

locations and visits

Delay around 2 weeks (after list of

potential client is ready)

Choosing mode


Uncertainty Areas Exploratory Option Assessment

?REFEIÇÕES • Prospective potentials

customers about

number and ype of

meals. s

Confidence: confiança um pouco

maior na avaliação relativa de C e F

quanto à RECLUC: e RISCOS:.

Resources few hours for searching,

calls and eventuals meetings. Delay:

about 2 weeks

Choosing mode

Commitment Package

– Defining courses of actions and further exploratory options to be taken


Choosing mode


A.D.

Decisões Imediatas Espaço de Decisões Futuras

Ações Explorações Decisões AdiadasPlanos de

ContingênciaI

NFOEL?

FUNCESP

Se a contratação não se provar compensadora, analisar se problema é o colaborador ou a sua função

Choosing mode


A.D.


Ações ExploraçõesDecisões Adiadas

Planos de Contingência

POLCONT?

CONTEXREG

Não havendo de mão-de–obra, flexibilizar política de contratação

Choosing mode


A.D.


Ações Explorações Decisões AdiadasPlanos de

ContingênciaN

OVASLIC?

Conduzir reuniões para reduzir incertezas sobre a importância de ADM:, RISCOS: e LUCREC:.

EM 1 SEMANA•Se ainda não for possível escolher entre C e F, realizar a listagem e sondagem de empresas

EM 3 SEMANAS•Caso tenha sido necessário a sondagem, efetuar pesquisa sobre infra-estrutura

Conclusions

• The results showed that the SCA is easy to apply and able to deal with uncertainty, even in complex problems, contributing to the decision group process.


References• FRANCO, L.A.; CUSHMAN, M.; ROSENHEAD, J. (2002). Project review and

learning in the construction industry: Embedding a problem structuring method within a partnership context. European Journal of Operational Research, 2004, v.152, p.586-601

• FRIEND, J. K & Hickling, A. Planning under pressure: the strategic choice approach. Oxford: Pergamon, 1ª reimpressão. 1988. 338 p.

• GOMES, M. C. Os fundamentos do strategic choice approach no contexto de transformação das organizações.In: ENCONTRO NACIONAL DE ENGENHARIA DE PRODUÇÃO, 17., 1997 . Disponível em <http://www.abepro.org.br/biblioteca/ENEGEP1997_T5106.PDF>. Acesso em 29 de maio de 2009

• PINHEIRO, P.R.; SOUZA, G. G. C.; CASTRO, A. K. A. Estruturação do problema multicritério para a produção de jornal. Pesquisa Operacional, 2008, v.28, n.2, p. 203-216.


References• STERNADT, J. M. A utilização da abordagem "strategic choice" para o

aperfeiçoamento de um centro de prestação de serviços. 1997.87 f. Dissertação (Mestrado em Engenharia). Departamento de Engenharia de Produção, Universidade Federal de Santa Catarina, Florianópolis. 1997

• VON WINTERFELDT, D,. FASOLO, B. Structuring decision problems: A case study and reflections for practitioners. European Journal of Operational Research, 2009, v.199, p.857-866

• MINGERS, J.; ROSENHEAD, J. Problem structuring methods in action. European Journal of Operational Research, 2004, v.152, p.530-554

• UNIVERSITY OF CAMBRIDGE. Institute for Manufacturing. Strategic Options Development and Analysis. Disponível em http://www.ifm.eng.cam.ac.uk/dstools/con trol/soda.html. Acesso em: 25/10/2009.


References

• KRUJIF, J. Problem structuring in interactive decision-making processes; How interaction, problem perceptions and knowledge contribute to a joint formulation of a problem and solutions. 2007. Faculty of Civil Engineering, Department Water Engineering and Management, University of Twente, Enchede, 2007.


Guilherme Luiz Antunes Major Mischel Carmen Neyra Belderrain ALIO-INFORMS Joint International Meeting June 6 - 9, 2010 Buenos Aires, Argentina.

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