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 Multi-objective
Decision Analysis is a tool to help you ensure that
operating decisions, including priority setting in the
budget process, tie to your mission.
Resource Allocation - Establish objectives and
set priorities for your operating budget based on your
mission. Senior management, or the board, participate
as policy makers, defining objectives and assigning
weights to those objectives in a "poker chip"
exercise. Staff and managers participate as technical
experts, using their expertise to implement policies
set by the board by determining optimal use of funds
available to them. This decision aid is particularly
helpful for budgets that span very different activities,
such as from advertising to tree trimming.
Key benefits
- It clarifies roles.
- It forces policy makers to articulate clearly what
is important and why.
- It captures all benefits from proposed programs,
not just financial benefits.
- It provides a defensible process for determining
the dollar value of program benefits.
- It captures judgments of experts regarding needs
and effectiveness of proposed programs.
- It builds accountability because program managers
must go on record to say who they will impact performance
with their budget and programs.
- It enables managers to demonstrate the impact of
a loss in budget on their areas and to the whole organization.
By doing these things, it helps participants spend
more time evaluating program alternatives and less time
arguing that their funding should not be decreased.
Other Resources
The following documents require
Adobe
Acrobat Reader.
Resource
Allocation Case Study 1
Perpich Center for Arts Education Budget Process Presentation
at MASBO Conference, May 2003
Resource
Allocation Case Study 2A
Electric Utility Resource Allocation Presentation
at EPRI Asset Management Workshop, June 2003
Resource Allocation Case Study
2B
Electric Utility Resource Allocation Paper for
EPRI Asset Management Workshop, June 2003
For more examples and an in-depth explanation of priority systems using this method, visit Lee Merkhofer Consulting.
Frequently Asked Questions
How long does it take?
Developing a resource allocation model requires the
three to a dozen 2-hour sessions described for Strategic
Planning AND, in addition, a dozen or more two-hour
meetings over several months. It also requires "behind
the scenes" work by the consultant to create the
spreadsheet optimization program. Most resource allocation
models require several months lapsed time.
Why should I use a new method?
By taking away the scaffolding of today, we give new
context and people have to operate in a new framework.
This method gives participants a new way of thinking
about old problems, re-imagining them from a different
perspective.
What people need to be involved?
Board members or a policy setting body, such as senior
management, budget area leaders (such as department
heads), technical experts (such as managers and staff),
representatives of other key stakeholders.
What resources are required?
Meeting room with easel, flip chart paper, markers &
tape, overhead projector or laptop projector, email,
MS Excel, various data on program cost and effectiveness.
What are the deliverables?
Deliverables are defined as part of the project scoping.
The work is completed in phases, with evaluation of
each step before proceeding with the next. Examples
of deliverables include:
- Objectives Hierarchy
- Influence diagram and performance scales for each
fundamental objective
- Influence diagram for each key uncertainty
- Poker chip exercise for weight assessment of value
objectives
- Table that includes multiple funding cases for each
program area
- Benefit-cost chart of each program area
- Recommended allocation of funding in tables and
graphs
- Sensitivity testing
- Lessons learned findings
How much does it cost?
Cost depends on the scope of the project and number
of steps completed.
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