Decision Theory and Performance Measurement Systems

Planning Methods

• Analysis techniques:
  • Obtaining excitation information
  • System and problem analysis
  • Examples: indicator systems, SWOT analysis, portfolio analysis, turnover analysis, benchmarking
• Creativity techniques:
  • Techniques for generating alternative courses of action
  • Especially in complex and novel problem situations
  • Examples: brainstorming, brainwriting, morphological box, synectics

Overview of Methods

• Analysis techniques:
  • Obtaining excitation information
  • System and problem analysis
  • Examples: indicator systems, SWOT analysis, portfolio analysis, turnover analysis, benchmarking
• Creativity techniques:
  • Techniques for generating alternative courses of action
  • Especially in complex and novel problem situations
  • Examples: brainstorming, brainwriting, morphological box, synectics

Phases of Planning

• Ideal typical process:
  • Problem determination
  • Determination of alternatives
  • Evaluation and selection
• Subphases:
  • Problem awareness
  • Problem analysis
  • Problem formulation
  • Search for suitable measures
  • Alternative search
  • Alternative analysis
  • Determination of alternatives
  • Final evaluation and decision

Alternative Courses of Action

• Quantity of resource-conforming alternatives
• Quantity of environmentally compliant alternatives
• Set of alternatives that conform to the target system

Planning Dilemma

• Short-term planning:
  • Low uncertainty, high level of detail
  • Low resource commitment
• Long-term planning:
  • Large amount of alternative actions
• Solution: Different planning ranges (long-term, medium-term, short-term)

Strategic, Tactical and Operational Planning

• Strategic planning:
  • Defines the corporate strategy at the highest level
  • Usually long-term
• Tactical planning:
  • In corporate medium construction
  • Usually medium-term
• Operational planning:
  • At the implementing base
  • Usually short-term

Security and Insecurity

• Security situation:
  • The situation that will occur is known
  • Deterministic decision model
• Uncertainty situation:
  • The situation that occurs is not fully known
  • Certain environmental conditions are not known or occur with probabilities

Types of Uncertainty

• Risk situation:
  • Probabilities of occurrence for environmental states are known
  • Stochastic decision model
• Uncertainty situation:
  • Environmental conditions are known
  • Probabilities of occurrence are not known
• Game situation:
  • Uncertainty results from a rationally acting adversary (e.g. competition)

Models and Modelling

• Principle: A model is the representation of reality through another medium
• Example: Stone house is depicted by paper model

Example: Tanaland

• Source: Dörner, The Logic of Failure

• Content: Choosing the optimal strategy for the development of Tanaland in East Africa### Decision Theory and Performance Measurement

• Decision Theory is a component of Business Administration, which is the science of economic activities of companies.

• The object of experience is the company as a problem-solving unit, and the object of knowledge is efficiency and economic action.

• Decision Theory is the "core" of Business Administration, and without a decision, no Business Administration is possible.

Planning and Decision-Making

• Planning is a cross-sectional task that involves the development of measures to achieve a desired state.
• The task of planning is triggered by the deviation of desired and actual variables, and the preconditions are the perception of the deviation as a problem.
• Planning involves future orientation, design orientation, subjective process, information process, systematic process, and preparation of decisions and actions.

Decision Problem

• A decision problem involves an initial situation, alternatives for action, interdependencies, objectives, and action results.
• The initial situation is the circumstances that cannot be influenced by the planner, and alternatives for action are the design options for achieving the objective.
• Interdependencies are the relations between data and variables, and the objective is the goal to be achieved by the alternative courses of action.

Features of Planning

• Planning is a future-oriented process that involves the selection of alternatives.
• It is a subjective process that depends on personal preferences and is based on imperfect information.
• Planning requires the collection of information and is a systematic process that prepares decisions and actions.

Definition of Planning

• Planning is a fundamentally systematic and rational process carried out by planners to solve decision-making problems while taking subjective goals into account.
• Planning is prospective thinking in the form of mental anticipation of future action with the aim of achieving strategic competitive advantages.

Systematics and Intuition

• Systematics involves the planning process, data collection, and other systematic aspects of planning.
• Intuition involves generating alternatives and overcoming uncertainty, and it is not contradictory to systematics.

Phases of Planning

• The phases of planning include planning, implementation, and control.
• Planning is the starting point of all operational action in a static conversion system.
• Control is feedback control and serves to verify plan fulfillment.

Basic Terms

• Planning range refers to the scope of planning, including the areas of the company that are affected by the plan.
• Phases of planning refer to the stages of planning, including planning, implementation, and control.

Value and Target Systems

• A value system is a set of values that guide decision-making, and it is developed through a process of goal-setting and prioritization.

• A target system is a set of specific, measurable goals that are derived from the value system.

• The development of a target system involves the identification of objectives, the specification of targets, and the allocation of resources.### Decision Theory

• Descriptive decision theory focuses on describing and explaining people's decision-making behavior.

Models and Concepts

• Control loop model: includes disturbance, size, rule, leadership, and control.
• Steering, management, and leadership: involves fulfillment of function, meaning, vision, and mission.
• Functional view of management: includes planning, organization, personnel management, and control.
• Ideal-typical management cycle: consists of planning, implementation, control, and feedback.

Corporate Management

• Management concepts: include scheduled, control-determined, organization-oriented, and corporate management as coaching.
• Corporate management involves performance and financial management, including planning, implementation, and control.

Dynaxity

• Dynaxity zones: range from static to turbulent, with increasing complexity and dynamic relationships.
• Dynaxity and system regime: relate to complexity, chaos, and time.

Side Effects and Consequences

• Side effects, repercussions, and consequences: involve primary effects, retroactivity, and consequential effects.

Decision Making

• Decision making involves considering alternatives, evaluating costs, and assessing quality and reliability.
• Example: choosing between alternatives A, B, and C for laundry services at a youth center, considering factors such as costs, job security, and quality.

This quiz covers decision theory and the development of evaluation and performance measurement systems, specifically focused on the lecture notes from the Bavarian Business School's Sommersemester 2024 course with Prof. Dr. Markus Kleinschwärzer.