The businesses usually make decisions and regret them as well. If you don’t want to regret any decision then start following the technique of decision trees.
The decision tree is a technique where the business managers draw a diagram with the possible results of an investment or a project. This technique helps the investors in planning ahead. If a manager wants to take a particular step in the business then he will first think of the possible results and take a decision accordingly. It is useful for products that have to be planned. A diagram is drawn to compare the available options, for example, the decision of advertising in print media or advertising through electronic media, choosing the project X or Y. The diagram is known as a tree diagram and each branch represents one option. The comparison takes place on the basis of the expected outcome of each option and in reality, the actual results might be different.
This technique helps businesses in reducing the risk factor associated with new/different options. Decision trees play an important role in improving coordination between departments and lead to a wiser allocation of resources. It enhances the ability of a business to meet deadlines. It should be noted that the tree diagram revolves around the probability of an event taking place and therefore, absolute certainty cannot be guaranteed. The actual results might be different, there might be some variance. Variance is the difference between the planned and actual figures.
The managers usually rely on this technique to make a decision and they need to make sure that the assumptions can be incorrect as well. For example, a business wants to launch a project. The team is trying to reach a consensus as to whether they should launch the product or not. There are two options, the first one is launching the product and the second one is not launching it. There are some chances of recession as well. The managers should also try to calculate the expected monetary value of the decision before they implement it.