Decision Making/Business Management Project

6/26/2019 Example using MDQ: Which House Do We Purchase? – BMGT 317 6820 Decision Making (2195)

https://learn.umuc.edu/d2l/le/content/397559/viewContent/15407807/View 1/4

Making a decision on purchasing a house using the MDQ decision making model

Using a decision making model allows us to objectively make a decision by considering all of the variables. If you want to buy a house, you must figure out what it is you wish to find in a house before going to a realtor to search for possibilities. With limited time, you would not look at every single house on the market or waste your time looking at houses that do not meet your needs.

The decision statement for this decision, that needs to be made would be:

Which house should we purchase?

Objectives need to created. What do you want in this house? What do the other people in my family want in this house? Create a wish list of all the things everyone is looking for in this house (Stakeholders). The list may have 20 things, which would need to be narrowed down to a reasonable number of objectives (wish list), by deciding what is most important and what sacrifices you are willing to make.

Let us narrow it down to six objectives, which is a reasonable number for this example. I want: at least 3 bedrooms, at least 2 bathrooms, 2 car garage, a basement area, no more than 5 miles from the elementary school (no school commute for kids), and an up to date kitchen. All of these objectives are measurable because the houses we are considering either have these things or not. There are no gray areas or subjectivity. Even the realtor is clear on what you want. Obviously, none of those houses have all six of these objectives, which is reason we are trying to decide using the MDQ Model. If one of the houses did have all six objectives, there would be no decision to make nor a need for a decision making model.

To buy a house can not be one of the objectives! Any alternative (all six of the houses) would or should accomplish the objective of buying a house. The decision statement of “which house do we purchase” already implies you are buying a house. It is obvious you are looking to buy a house based on your decision statement because the decision you are trying to make is which house to buy not whether you should buy a house. Therefore, to buy a house can not be one of the objectives because all alternatives will assumably satisfy this objective.

You should not create an alternative that does not satisfy buying a house. If you do, that means you applied the model incorrectly nor understood your decision statement. This is the reason in this course, students spend four weeks on the MDQ. You need to go step by step, understanding the reasons for the decision statement and specific objectives.

After justifying the objectives, you need to create a list of alternatives that will be used to accomplish the objectives. Brainstorm, research online, ask the realtor for applicable listings (houses that have some of your objectives) and go see some of these houses. In considering many alternatives, you decide to narrow down six possible alternatives (houses with street addresses or nicknames such as 123 Main Street, 456 Clark Road, etc.) to choose from and apply to the MDQ model.

Once you know your objectives and alternatives, it is time to create the decision matrices. The first decision matrix would include six objectives and six alternatives. That would be a reasonable decision matrix to use in evaluating the situation. The complexity in having six objectives and six alternatives is the reason you are using the decision making model.

6/26/2019 Example using MDQ: Which House Do We Purchase? – BMGT 317 6820 Decision Making (2195)

https://learn.umuc.edu/d2l/le/content/397559/viewContent/15407807/View 2/4

In creating the first matrix, rate each of the alternatives against each of the objectives in terms of their importance. In other words, come up with numbers for each of the boxes in the first matrix. Only the decision maker knows how or why an objective was rated with a specific number for each of the alternatives. Your logic as the decision maker may vary from a different decision maker. This is the reason in your project, you have to explain how the numbers were derived and support them so that your logic is clear to someone looking at the matrices. Matrices are not self-explanatory.

For example (first decision matrix table), using a scale of 0 – 3, you would rank 123 Main Street (alternative) to at least 3 bedrooms (objective). How well does 123 Main Street meet the objective of at least 3 bedrooms? 123 Main Street has 4 bedrooms. Therefore, you might rate it as a “3” and in your explanation express the fact you gave it this ranking because the house has 4 bedrooms. This house meets the objective very well because it has one additional bedroom beyond what the wish was and it more than satisfies the family. Nothing is considered obvious in the decision matrix because the table creator is the one doing the analysis. For your project, you are required to provide support and detailed explanations by using the case study facts, course material and additional research. A

Same process in creating the weights for the second matrix. The second matrix uses weights. What if I cannot find a house that meets every objective? Most likely this will happen to you. Which objectives are more critical than the others? For example, if the kids are starting elementary school, that objective may be more significant at this time than if they were in their last year of high school. Out of the six objectives, you may give the elementary school a weight of 30%, because this is most important to you. Similarly, bathrooms 20%, bedrooms 20%, basement 15%, kitchen 5%, and 2 car garage 10%. Why? This is the part you have to explain in great detail in Project 1. Each of those associated weights/percentages must be explained, justified, and supported based on facts from the palm oil case study, course articles, additional research, and MDQ application process.

Once you have completed this entire process, examine both matrices, to see what the final decision is for the decision that needs to be made. Based on the results, you would justify how the chosen alternative meets more of the objectives than the other alternatives. The matrices dictate the final decision, which is based on the final numbers.

Step-by-Step Application:

Decision statement is “Which House Do We Purchase”.

Objectives: What do you want or desire? 3 Bedrooms, 2 Bathrooms, 2 Car Garage, Basement, School Distance, Up to date Kitchen

Alternatives: How will you accomplish what you want in terms of what houses are you considering of purchasing? 123 Main Street, 456 Clark Road, etc…..

Decision Matrices

Matrix One (unweighted):

The resulting table (with the first house you visited scored): First Decision Matrix

House 3 BR 2 Baths 2 car garage Basement School Dx Kitchen Total Value

6/26/2019 Example using MDQ: Which House Do We Purchase? – BMGT 317 6820 Decision Making (2195)

https://learn.umuc.edu/d2l/le/content/397559/viewContent/15407807/View 3/4

123 Main St 3 2 0 1 2 1 7

456 Clark Rd

3rd Alternative

4th Alternative

5th Alternative

6th Alternative

For your project on PPO, you will need to explain each of the numbers in the first decision matrix by supporting how you logically scored each box. For example, the numbers showing in the first row for 123 Main Street – 3,2,0,1,2,1 – all have to be explained individually. The same will be required for 456 Clark Road, 3rd alternative, and so on.

Now you are going to add the WEIGHTS you have decided on for each of these six objectives: Total of the weights should equal 100%.

Matrix Two (weighted):

House 3 BR 2 Baths 2 car garage Basement School Dx Kitchen Total Value

123 Main St 3 x 20% 2 x 20% 0 x 10% 1 x 15% 2 x 30% 1 x 5% 1.8

456 Clark Rd

3rd Alternative

4th Alternative

6/26/2019 Example using MDQ: Which House Do We Purchase? – BMGT 317 6820 Decision Making (2195)

https://learn.umuc.edu/d2l/le/content/397559/viewContent/15407807/View 4/4

5th Alternative

6th Alternative

The first number is the value of that factor for a specific house based on the first matrix. The second number is the weight you have assigned that factor (its importance in %). Multiply the two numbers. Put the total at the end of each row.

Fill in the value for each of six houses you visit, and the highest score is the one you should buy. Why? Because the numbers in the table dictate which alternative satisfies as many of your objectives, based on your importance of each objective. This same thought process and application of the MDQ will be used for Project 1, in deciding which alternative PPO should choose (the final decision).