A strategic decision-making model that helps underpinning your gut feelings

The decision-making process in organisations is often solely based on financial aspects However, in a world that is becoming even more sustainable, profit is not the only thing that counts. PwC and Nyenrode Business University cooperatively developed a strategic decision-making model that helps organisations to quantify and quality both financial and non-financial impact of their decisions – such as environmental and social impact.

A book about this strategic decision-making model will be published in the summer of 2017. The model was developed by Jacques de Swart (partner at PwC and professor at Nyenrode Business University), Annemieke Roobeek (professor at Nyenrode Business University), and Myrthe van der Plas (Data Analytics specialist at PwC). The book contains seven case studies presenting an extremely wide variety of situations in which the strategic decision-making model has proved useful. De Swart: ‘The model enables organisations to take decisions based on more than pure gut feelings. They can now test those feelings and gear their decisions to the results.’

Circular economy

‘Previous models used to decide on strategic questions, were usually financial models’, explains De Swart. ‘But do financial models really lend themselves to a strategic dialog? Often they don’t. The strategic decision-making model that we developed was specifically designed to facilitate that strategic dialogue. It takes into account the ‘triple bottom line’, the three ‘P’s – People, Planet, Profit. In other words, the model takes into account social and environmental aspects in the decision making process, instead of basing it strictly on the profit factor. Organisations in the world we live in, a world in which the focus is on sustainability and the circular economy, want to integrate these factors in their decision-making process.’

Municipalities and the refugee question

One very topical example of the possibilities the decision-making model may offer is the refugee-related issues many municipalities are facing. Up to now, PwC has offered many Dutch municipalities pro bono assistance with these issues, which is now being extended to several Swedish and Italian municipalities. How does that work? ‘Municipalities have a certain budget they can spend to provide for status holders – refugees who have residence permits. That budget can be used in all sorts of ways. Often, it is allocated based on gut feelings, on hunches people get about making certain intuitive choices. Budgets for housing, language courses, labour mediation, buddy support, and the like are all allocated in that way.’

‘But how can municipalities best allocate their budget thereby not taking into account only financial aspects, but also social aspects? We assist municipalities in their decision-making process concerning the allocation of the budget by using the strategic decision-making model. First, we met with the municipality and all of the various stakeholders in that municipality to discuss the issues.Those discussions enabled us to ascertain which effects of providing for refugees were considered the most important. These effects included economic effects, criminality, quality of life, etc. The strategic decision-making model predicts what the effects will be of the various methods of allocating the budgets, based on literature study and existing investigations. Based on a dialogue, we determine together with the municipality which effects are considered the most important to be taken into account in the final decision.. Finally, we use optimisation techniques to calculate the optimal allocation for that particular municipality. This results in a policy that the stakeholders know is based on a solid foundation.’

Relevance for every sector

The decision-making model is no one-trick pony, however; it goes far beyond the refugee question. ‘The model can be used in every sector, for every strategic decision. For example, we have used the decision-making model to help a chemical conglomerate that operates in the fields of health, nutrition, and materials to reduce their carbon footprint. But we’ve done completely different things as well. For example, we helped the NEMO Science Museum decide how to renovate their iconic roof such that the building would not only be more sustainable, but would offer more outdoor space as well. We also assisted the Dutch Football Association (KNVB) with optimising investments in sport, and we have used the model to deal with issues ranging from combating malaria, to waste processing, to health care.’

Would you like more information? Please contact Jacques de Swart.