The scientific method for management is growing in popularity because it allows for organizational decisions—whether by business or government—to be formulated under more rigorous considerations. The quantitative approach to risk and decision making, with tools such as Palisade’s DecisionTools Suite, is one method for making management decisions with the aid of data and science.
In contrast, traditional ad hoc methods, whether for day-to-day operations management or monumental management decisions, are being exposed as amateur approaches. We’ve seen so many companies, governments, and economies in trouble as artificial pillars of value have crumbled. Risk assessment was devalued, ignored, or applied haphazardly.
The challenge for accurate decision making remains. In the presence of uncertainty and unknowns (lack of information), the scientific method for management decision-making allows for more defendable decisions. Sensitivity and scenario analyses in the context of probabilistically-defined Monte Carlo models can be applied to paint a picture of where an organization sits in an apparent asteroid field of risk.
The practice of quantitative risk management and decision making has been widely adopted in the U.S., the U.K. and many parts of the western world, and now the Chinese government has planted the seed. We’re seeing examples of the “Scientific Method for Management” in leading companies such as CNPC and Sinopec as a new wave of protocol in China. Statistical software that is able to help with decision making under uncertainty will play a large part in helping to implement better decision making in the future.
Managing Director, Palisade Asia-Pacific Pty Ltd.