As noted in the previous newsletter, 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 (such as 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
In part 1 we discussed how to use the Simplified Two-List Method. In part 2 we will discuss the Tabular Method.
Again, 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. As we will mention several times, it is important to understand the customer's/stakeholder's "want" preferences. If there are 10 want criterion, how do they rank, high to low?
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 - Tabular Method
The Tabular Method is used for more complex multi-option, monetary or nonmonetary decisions. It is used when a simplified CBA method does not point to a preferred alternative. The Tabular Method introduces the use of "importance of each advantage" and the "total importance" (this is now a calculation, not a mental judgment).
Note that this is the same "must" and "want" criterion from the previous Two-List Simplified Method example.
A list of alternatives is developed and their attributes identified. The Tabular Method template is then populated.
Start by underlining the "least" preferred attribute in each factor. Determine the advantages of the remaining attributes and circle the most important advantage.
Next we determine the "weighting" of the most important advantages. Considerations in determining this weighting include:
- Understanding the reason, purpose, and conditions surrounding the decision
- Knowing the requirements and "want" preference rank of the customer and/or stakeholders
- Clearly defined "attribute" magnitudes
- Clearly defined "advantage" magnitudes
Understand that weighting is a somewhat subjective exercise. It starts with determining the paramount advantage using the challenger-defender strategy.
Challenger-defender strategy for determining importance weighting
Make list of important advantages:
- 8 more mpg, 1150 lbs towing capacity, 13 more HP, fewer injuries, 4 more airbags
Pick one advantage as the defender and one as the challenger and ask the question: Which of the following advantages is the most important one: 8 more mpg or 1150 lbs. more towing capacity? Answer: 8 more mpg (knowing your customer or stakeholder preferences is important here).
Continue the defender and challenger questions: Which of the following advantages is the most important one: 8 more mpg or 13 more HP? Answer: 8 more mpg - until only one defender advantage, the paramount advantage, is left (in this example): Fewer injuries.
Establish an importance score scale - usually 0-100. The paramount advantage of "fewer injuries" is then assigned a score of 100. The decisionmaking team then, using consensus or the challenger-defender strategy (to determine an order), weighs the remaining advantages.
The scores are then posted and a total importance of each alternative calculated. The alternative with the highest value of total importance is then underlined.
If all costs were equal, car "D" would be the sound decision. If we add money to the decisionmaking process the Tabular Method chart looks like:
To relieve the discomfort we might then feel about paying the extra $1,000.00 for car D (versus car E), we change the comparison to an "equal money" decision. To accomplish this, we must determine if spending an additional $1,000.00 on car E could change the "most important advantage" of any of the attributes. If spending that additional money produced an additional 26 HP, car E would then be the sound "equal money" decision as shown below.
Suhr, Jim. The Choosing By Advantages Decisionmaking System. Quorum Books, 1999.