Today I am giving you another decision-making tool. The Consequence Table, a tool for small and big life decisions. In my previous article, I explored the payoff table as a decision-making tool to reduce risks in uncertain times.
It’s a great decision-making tool for:
- Two options decisions
- Multiple options decisions
- Daily life decisions
- Probability decisions
A consequence table is used to compare decision alternatives in relation to specific objectives. This is helpful when you’re deciding to make any kind of purchase, such as a car or house, and you have set aims and objectives for the item. For example:
When using consequence tables, you need to avoid word descriptions that are subjective. Try to use uniform scaling, such as high/low or small/medium/big or simply 1/2/3. Eliminate subpar alternatives by comparing different objectives. In the example shown in the table, Car 1 has lower gas consumption and is more affordable than Car 3. Both have average reliability, so Car 3 will be excluded according to these objectives.
However, many people don’t rely as much on objective criteria, and they focus on subjective criteria, for example, when car shopping, the look of the car and comfort. In that case, your decision will be based on intuition and likeability. You may improve the decision making in this process by adding an extra row in the consequence table for the look and comfort, where one star is for low likeability, and 3 stars are for maximum likeability.
Assess risks and probabilities
Consequence tables can also be used to assess risks and probabilities. The following table compares two companies’ earnings and product success estimates for you to choose a stock. You may add other objectives to compare.
What if you have two alternatives that are very similar, and you can’t reach a decision? In this case, use the Even Swap Method. In this method, you think of the value of an objective regarding the other.
In the car shopping example, Car 1 and Car 2 are clear winners compared to Car 3. However, Car 2 is more expensive than Car 1 and is more reliable. Now you need to think about the value of this extra reliability. Is it worth the extra £5,000? If you’re going to sell the car within the next 3 years, then you probably won’t need the extra reliability. But if you’re planning to keep the car for the next 7 years or more, then you’ll probably pay more than 5k in maintenance, so it’s worth paying for extra reliability. Hammond JS, Keeney RL, Raiffa H. Smart Choices: A Practical Guide to Making Better Decisions. Harvard Business Review Press; 2015.