Problem Statement
The year 2010 was a huge success for my firm and as show of gratitude the company paid out performance bonuses to all cadres of workers. Based on my last year’s performance after appraisals, I was awarded the princely sum of $20,000.00
After the joy of seeing the notification early in the year, I was left with several spend options and I needed to take a quick decision of what best to spend it on.
However, the greatest challenge remains which of the options fits the monetary value and its overall benefit to me and my family.
Root Cause Analysis
Never had overseas family vacation.
Deter encroachment into my piece of land.
My car is getting old and needs replacement
The desire to attend AACE annual meeting in United States.
Alternatives:
A. Overseas vacation with family
B. Commence Substructure of Residential Development in PH
C. Buy a New Car
Analysis of Alternatives:
Alternative A: Overseas vacation with family – This involves travelling with entire family to Anaheim, California to visit Disneyland and attend AACE annual meeting.
Alternative B: Commence Substructure of Residential Development in Port Harcourt, Nigeria – This involves the start of construction of my private residential development. This is coming after the approval of estate layout by the government only this week.
Alternative C: Buy a new car – This involve the sale of my old car (3yrs old) and purchasing a new one in its place.
Comparison of Alternatives
Alternative A
Cost
Flight Return ticket local x 5 persons - $1300.00
Flight Return ticket international x 5 persons - $8500.00
Transportation local (to and fro airport) - $70.00
Transportation international (to and fro airport) - $100.00
Hotel accommodation 2 nights Lagos – $600.00
Hotel Accommodation 12 nights Anaheim – $1500.00
AACE registration for annual meeting - $1100.00
Family outings to Disneyland and other areas in interest in California State - $2000
Feeding for 12days (BF exclusive) - $2000.00
Shopping - $2500.00
Total - $19,670.00
Schedule
18 days
Merits
Work/Life balance.
New experience for family.
Competence development as a result of AACE annual meeting attendance.
Good healthy living
Demerits
Lack of rest
Unnecessary shopping spree
Lack of concentration in meeting
Possible nagging from wife for leaving kids with her alone all day
Too much outings in the evening with family
Little or no physical proof of spend after holiday
Alternative B
Cost
Substructure works as per detailed design from BOQ.
Total - $22,000.00
Schedule
25 days
Merits
Additional wealth created in family.
Provision of own shelter to family
Control spending to complete building.
Family and spouse happy about own home
Practical Competence Development with experiential learning.
Good healthy living
Respect by society.
Physical evidence of expenditure
Save annual rent/service charge of circa $10,000 when completed.
Demerits
Initial grumbling from family
So much attention and little to other activities
Security exposure due to new developing neighbourhood
Cut down of expenditure on other essential needs of family
Little use rest time as a result of site visits and procurement activities
Indebtedness (May be tempted to borrow funds to continue after substructure and jettisoning initial phases development).
Alternative C
Cost
Buy a new car to replace old one. Car dealer quote of preferred choice
Total - $27,000.00
Schedule
14 days Delivery upon payment
Merits
Additional wealth created in family.
Provision of own transportation mode
Initial happiness by family.
Respect by society (status).
Physical evidence of expenditure
Demerits
Increased maintenance cost
Security exposure due to incessant kidnap of flashy car’s occupants
Increased Insurance cost
Additional fuelling cost
Indebtedness (May be tempted to borrow funds to complete shortfall in car price).
No addition to career development
Cannot be quantified as Collateral for funds by banks.
SELECTION CRITERIA
Using Decision Matrix
| Criterion | Weight (order of Importance) | Alternative A | Alternative B | Alternative C |
| Duration under four weeks | 2 | 5 x (2) = 10 | 5 x (2) = 10 | 5 x (2) = 10 |
| Cost < $20,000.00 | 3 | 5 x (3) = 15 | 3 x (3) = 9 | 1 x (3) = 3 |
| Professional development | 4 | 5 x (4) = 20 | 5 x (4) = 20 | 1 x (4) = 4 |
| Wealth creation | 5 | 1 x (5) = 5 | 5 x (5) = 25 | 3 x (5) = 15 |
| No borrowing of funds | 3 | 5 x (3) = 15 | 3 x (3) = 9 | 1 x (3) = 3 |
| Family satisfaction | 3 | 5 x (3) = 15 | 5 x (3) = 15 | 3 x (3) = 15 |
| Total Rating | 80 | 88 | 50 | |
| Scoring: | |
| High | 5 |
| Medium | 3 |
| Low | 1 |
Selection of Preferred Alternative.
Based on the Criterion and Decision Matrix above. Alternative B ranked highest in score therefore is the preferred alternative.
Performance monitoring and post-evaluation
Use annual vacation days for critical activity to reduce lack of focus on other activities.
Own home in choice area of PH.
Perfect collateral in place for funds to sponsor family biz expansion.
Serious commitment to project and practical use as core project management competence development .
Borrow $2000 from spouse and colleagues and spread repayment coming months over salary. (To eliminate interest and bank charges).
As a financially up to date AACEI member; I’ll download all AACEI 2011 annual meeting transactions and prepare for 2012 annual meeting.
To create a monthly savings from this month end to cater for overseas vacation next summer.
References:
The memory jogger 2 ‘Tool for continuous improvement and effective planning by Michael Brassard and Diane Ritter – Second Edition 2010.
http://www.mindtools.com/
http://web2.concordia.ca/Quality/tools/10decision.pdf
Good posting, but in this particular example, is multi-attribute decision making really the BEST or ONLY tool? To be REALLY valid and meaningful, how about if you had baselined or benchmarked your decision against something like purchasing gold or Silver?
ReplyDeleteOr how about if you used cost benefit ratio instead?
There is nothing wrong with what you have done, but I want you to realize that there are other decision making tools available to us and we need to consider more than one in making our decisions.
Keep up the good work and next week, let's see if we can explore other methods as well?
BR,
Dr. PDG, Jakarta