My Slideshare Example of a Decision Tree

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cost per 2-bdrm unit (in dollars $)=$400 per bdrm+$150 per bath=$1100.00 1 labor hours & labor cost to paint 1 unit=1 office staff member, 3 hours@$16.00/hr.=$48.00 2 quality of finished product (excellent, above avg., average, below avg., unacceptable)=excellent 3 total project length (in business days)=5 1 amount of paperwork required (# of forms to be processed)=8 1 probability of exposure to legal liabilities/occupational hazards, etc.=low 3 (zero, low, medium, high, very high) Outside vendor is licensed, insured, bonded 11 cost per 2-bdrm unit ($): paint/supplies/equipment=$200.00+1 licensed/skilled painter charges $300 per bdrm+$100 per bath=$800.00 2 labor hours & labor cost to paint 1 unit=1 office staff member, 2 hours@$16.00/hr.+1 maintenance staffer, .5 hours@$12.00/hr.=$38.00 3 quality of finished product (excellent, above avg., average, below avg., unacceptable)=above avg. 2 total project length (in business days)=4 2 amount of paperwork required (# of forms to be processed)=6 2 probability of exposure to legal liabilities/occupational hazards, etc.=medium 2 (zero, low, medium, high, very high) Outside vendor is licensed, insured, bonded/Maintenance Staff have minimal health insurance coverage 13 cost per 2-bdrm unit (in dollars $)=10 gals. of paint@$14.00/gal.+misc. supplies@$60.00+compressor/equipment(fixed assets)@$0.00=$200.00 3 labor hours & labor cost to paint 1 unit=1 office staff member, 1 hour@$16.00/hr.+1 maintenance staffer, 3 hours@$12.00/hr.=$52.00 1 quality of finished product (excellent, above avg., average, below avg., unacceptable)=average 1 total project length (in business days)=3 3 amount of paperwork required (# of forms to be processed)=4 3 probability of exposure to legal liabilities/occupational hazards, etc.=high 1 (zero, low, medium, high, very high) Maintenance Staff have minimal health insurance coverage 12 Decision Tree Scenario: My business partners and I began a regional property management company 5 years ago. We manage several thousand multi-family rental units throughout California and Arizona. Recently, we acquired 500 two-bedroom, two-bath units. My partners and I have generated three options (alternative solutions) for painting the interiors of the units: 1. Outsource the work to a vendor (Our property management company will hire a painting company to provide the supplies & labor) 2. Do the work in-house (Our property management company will purchase the supplies and have our maintenance staff do the painting) 3. A combination of the two options above (Our company will provide the supplies & equipment; we will hire an outside vendor to provide the skilled labor) My partners and I generate 6 major factors (criteria) upon which we will base our business decision: 1. Cost to paint 1 unit--labor costs excluded 2. Labor hours & labor costs to paint 1 unit 3. Quality of the finished product (painted unit) 4. Length of the project--from start to finish 5. Amount of paperwork involved in the project 6. Probability of on-the-job accidents, liabilities, etc. Outsource it to a vendor (painting company); Painting company provides everything. Turn-key painting of five-hundred 2-bdrm 2-bath upscale apartment rental units that my property management company recently acquired from a group of real estate investors My Co. provides supplies & equipment; Outside vendor provides skilled labor. Have painting done in-house by maintenance staff; My property management Co. provides everything. We compare each of the six criteria across all three options and assign it a number (rating)--with a higher number indicating a relatively more favorable outcome. We add up each of the three sets of six criteria. The highest number indicates the optimal option, relative to the other two options--at this level of analysis. I emphasize, "at this level of analysis" because there are many different methods of analysis that can be used to analyze a problem, a decision or a process. Each method has its own advantages and disadvantages as well as its own level (or depth) of analysis. A Decision Tree is a relatively low-level method of analysis. It is easy to use and it yields results fairly quickly. For a more in-depth analysis of this same scenario, see my example of a series of Prioritization Matrices (weighted tables). Knowing which analysis method--or combination of methods--to use in a given situation is a matter of skill and practice. It is situational. That is, it involves a number of variables that change from situation to situation--variables such as time constraints, accuracy of the data being analyzed, completeness of the data being analyzed, the minimum results needed, and so on.

Transcript of My Slideshare Example of a Decision Tree

Page 1: My Slideshare Example of a Decision Tree

cost per 2-bdrm unit (in dollars $)=$400 per bdrm+$150 per bath=$1100.00 1

labor hours & labor cost to paint 1 unit=1 office staff member, 3 hours@$16.00/hr.=$48.00 2

quality of finished product (excellent, above avg., average, below avg., unacceptable)=excellent 3

total project length (in business days)=5 1

amount of paperwork required (# of forms to be processed)=8 1

probability of exposure to legal liabilities/occupational hazards, etc.=low 3

(zero, low, medium, high, very high) Outside vendor is licensed, insured, bonded 11

cost per 2-bdrm unit ($): paint/supplies/equipment=$200.00+1 licensed/skilled painter charges $300 per bdrm+$100 per bath=$800.00 2

labor hours & labor cost to paint 1 unit=1 office staff member, 2 hours@$16.00/hr.+1 maintenance staffer, .5 hours@$12.00/hr.=$38.00 3

quality of finished product (excellent, above avg., average, below avg., unacceptable)=above avg. 2

total project length (in business days)=4 2

amount of paperwork required (# of forms to be processed)=6 2

probability of exposure to legal liabilities/occupational hazards, etc.=medium 2

(zero, low, medium, high, very high) Outside vendor is licensed, insured, bonded/Maintenance Staff have minimal health insurance coverage 13

cost per 2-bdrm unit (in dollars $)=10 gals. of paint@$14.00/gal.+misc. supplies@$60.00+compressor/equipment(fixed assets)@$0.00=$200.00 3

labor hours & labor cost to paint 1 unit=1 office staff member, 1 hour@$16.00/hr.+1 maintenance staffer, 3 hours@$12.00/hr.=$52.00 1

quality of finished product (excellent, above avg., average, below avg., unacceptable)=average 1

total project length (in business days)=3 3

amount of paperwork required (# of forms to be processed)=4 3

probability of exposure to legal liabilities/occupational hazards, etc.=high 1

(zero, low, medium, high, very high) Maintenance Staff have minimal health insurance coverage 12

Decision Tree Scenario: My business partners and I began a regional property management company 5 years ago. We manage several thousand multi-family rental units throughoutCalifornia and Arizona. Recently, we acquired 500 two-bedroom, two-bath units. My partners and I have generated three options (alternative solutions) for painting the interiors of the units:

1. Outsource the work to a vendor (Our property management company will hire a painting company to provide the supplies & labor)2. Do the work in-house (Our property management company will purchase the supplies and have our maintenance staff do the painting)3. A combination of the two options above (Our company will provide the supplies & equipment; we will hire an outside vendor to provide the skilled labor)

My partners and I generate 6 major factors (criteria) upon which we will base our business decision:1. Cost to paint 1 unit--labor costs excluded2. Labor hours & labor costs to paint 1 unit3. Quality of the finished product (painted unit)4. Length of the project--from start to finish5. Amount of paperwork involved in the project6. Probability of on-the-job accidents, liabilities, etc.

Outsource it to a vendor (painting company);Painting company provides everything.

Turn-key painting offive-hundred 2-bdrm

2-bath upscaleapartment rental units

that my propertymanagement

company recentlyacquired from a group

of real estateinvestors

My Co. provides supplies & equipment; Outside vendor provides skilled labor.

Have painting done in-house by maintenance staff;My property management Co. provides everything.

We compare each of the six criteria across all three options and assign it a number (rating)--with a higher number indicating a relatively more favorable outcome. We add up each of the three setsof six criteria. The highest number indicates the optimal option, relative to the other two options--at this level of analysis. I emphasize, "at this level of analysis" because there are manydifferent methods of analysis that can be used to analyze a problem, a decision or a process. Each method has its own advantages and disadvantages as well as its own level (or depth) of analysis.A Decision Tree is a relatively low-level method of analysis. It is easy to use and it yields results fairly quickly.For a more in-depth analysis of this same scenario, see my example of a series of Prioritization Matrices (weighted tables).Knowing which analysis method--or combination of methods--to use in a given situation is a matter of skill and practice. It is situational. That is, it involves a number of variables that changefrom situation to situation--variables such as time constraints, accuracy of the data being analyzed, completeness of the data being analyzed, the minimum results needed, and so on.