CBA is a structured decisionmaking process that starts when a decision must be made, and ends when the decision is implemented and the results evaluated. CBA's basic rule of sound decisionmaking is: decisions must be based on the importance of advantages only. (Pros and cons are not used).
CBA avoids decisions based on:
- Gut feel, guesses, personal agendas, and "pet" ideas and suppliers
- Emotion, intuition
- Jumping to solutions, conclusions
- Pros and cons analysis
CBA Leans out the decisionmaking process:
- The diverse Lean team decision is the best decision (a Lean teamwork principle)
- The structured CBA process provides "Standard Work" for the decisionmaking process so that everyone in the organization will use the same format (like Lean A3 problem solving, A3 reports, and A3 proposals)
- People who participate in the decisionmaking process are more committed to its successful implementation (a Lean kaizen principle)
CBA has seven decisionmaking methods based on the complexity of the decision. The list below shows the CBA methods in order of complexity (simple decisions = Instant CBA, complex decisions = Tabular method).
- Instant CBA
- Recognition-Response process
- Simplified two-list method
- Simplified tabular method
- Two-list method
- Tabular method
- Money decision methods
Each of the CBA methods follows six similar steps, however, as one might imagine, as the method becomes more capable of handling complexity, the individual steps become more complex. The six similar steps in CBA are:
- A decision needs to be made - must and want criteria are developed
- A decisionmaking team creates a list of alternatives and identifies their attributes
- Summarize the attributes (characteristics) of each alternative
- Decide the advantages of each alternative
- Decide the importance of each alternative
- Choose the alternative with the greatest total importance of advantages
Terms used in CBA
Criterion - is an instruction, guideline, measure or rule for the decisionmaking process. Decisionmaking criteria come in two formats:
- Must Criterion
- Want Criterion
Criteria are developed in CBA step #1, and are used to exclude alternatives in step #2.
Alternatives - alternatives represent the decision options that remain after we have applied our criterion (both must and want) to the available choices from our original proposal. For example, if the original proposal is to buy a car, the two alternatives might be Car "A" and Car "B".
Attribute - a characteristic, feature, or distinction (of possibly many) of one of the alternative decisions. In our car example, an attribute would be 2 or 4 doors for each model. Attributes are neither good or bad, except in comparison to other alternative decision attributes. Other car attributes include: miles per gallon (mpg), horsepower (HP), front or rear wheel drive, transmission type, color, etc.
Must Criterion - an attribute that the alternative must have or it is eliminated as a potential alternative. In our car example, a must criterion might be all-wheel drive. All cars without this capability would be excluded in step #2 - creating a list of alternatives.
Want Criterion - an attribute that the decisionmaking team prefers in an alternative. In our car example, a want criterion might be the highest gas mileage.
Advantage - a favorable dissimilarity between the attributes of two alternatives. In our car example, let's assume car "A" has an attribute of 35 mpg and car "B" has an attribute of 25 mpg. If we asked, which car has the advantage in mpg, the answer would be car A.
CBA Decisionmaking Process Example
The following is an example of number three on the CBA Method's list of seven methods - the Simplified Two-List Method.
This method is used for simple two option, monetary or nonmonetary decisions, where the list of advantages per alternative is limited to perhaps no more than 4-5. The importance of each advantage can be mentally judged (versus numerical scales that are used and added together in the more complex methods) and the total importance of advantages mentally decided.
Simplified Two-List Method
Note that the form used to display the data is similar for all CBA Methods. In this method, the Simplified Two-List Method, total importance is a mental judgement versus a calculation that will be performed in the methods used for more complex decisions.
For the Simplified Two-List Method, numerical ratings for the advantages are not created and the total importance is not calculated. The decision is made by mental comparison. It is interesting to note that for the data shown, the additional air bags for car A, a "want" criterion, does not improve its safety test results. In this case, the decisionmakers must decide which of the four advantages - mpg, HP, towing capacity, or safety - is the overriding or paramount advantage in this car A or car B decision.
If we add money to the process (car A and car B are different prices), the decision may change.
If we assumed that the overriding advantage in this decision is towing capacity, then it appears that car A is the sound decision.
To relieve the discomfort we might then feel about paying the extra $1,000.00 for car A, we change the comparison to an "equal money" decision. To accomplish this, we must determine if spending an additional $1,000.00 on car B could get additional towing capacity. If spending that additional money produced an additional 500 pounds in towing capacity, car B would be the sound "equal money" decision.
Next Edition - Part 2, Complex Decisions using the Tabular Method
Suhr, Jim. The Choosing By Advantages Decisionmaking System. Quorum Books, 1999.