My Slideshare Example of a Decision Tree
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Transcript of 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 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.