Praxophy at Palisade Regional Risk Conference in DC

Heart, Head, and Hands
A small non-profit uses PraXophy Management
System (PxMS) and Palisade’s @RISK to tackle its
existential questions, and thrive

Case Study Situation
• Landscape
– Plenty of Big Box, Wizard-Behind-Curtain solutions—but how well do they really work?
– Looking to market Blue Collar, Kitchen Table consulting: practical, facilitated, valued,
transparent, and owned
• Client’s decision opportunity
– On the order of $2M, based on annual income from donations and rents of about $150K
– Client not aware of latest in decision analysis and not loaded with cash—sound typical?
• Important considerations
– Soft skills. Anne Robinson, past President of INFORMS pointed out that while we have
distinguished ourselves on the analytics front (CAP), as a profession we are weak in soft
skills.
– Context. Prof. Eric Davis wrote “10 Myths about the Crisis in Iraq.” He stressed the
important role of context in implementing productive policy. Myths distort the crisis and
mislead policy-makers.
2PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making6/29/2014

Desired Outcomes for This Presentation
• Describe the context for the case study
– What is the opportunity we’re working on?
– What hypotheses are we testing? What data are needed?
– What is the overall scope of the effort?
• Explain the methodology
– What is PraXophy Management System (PxMS)?
– How does it work? Why is it useful? What can we do with it?
– Some benefit and effort considerations of PxMS
• Discuss Status of the Case Study with some technical details
– What are the expected outcomes of this application of PxMS?
– How might PxMS be applied to other opportunities?
– WIIFM? What’s next? Way Ahead?
• Make some new friends

Follow-up / Contact
PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making 4
• https://www.facebook.com/PraXophy
• PraXophy@Gmail.com
• https://www.linkedin.com/in/davedoane
• https://twitter.com/PraXophy @PraXophy
• http://www.slideshare.net
• https://todaysmeet.com/PraXophy
6/29/2014
c8wrbq7v

PraXophy Management System (PxMS)
PraXophy means “Practical Wisdom.” The PraXophy Management
System (PxMS) was created for
• strategic-level organizational learning and communication (value),
• enterprise performance management (quality), and
• project selection and portfolio management for continuous process
improvement (utility)
Applied Management & Decision Sciences
PxMS is a unique, simple, yet powerful extension of several
decision analysis concepts:
• Checkland (1981) Systems Thinking
• Keeney (1992) Value-Focused Thinking
• Kaplan & Norton (1996) The Balanced Scorecard
• Kirkwood (1996) Multi-objective Decision Analysis with Spreadsheets
• Parnell (2003) Future Value Analysis
• George (2007) Lean Six Sigma
• Monte Carlo Simulation with @RISK plug-in for MS Excel by Palisade

Drucker:
“All business is
either marketing
or innovation.”
PxMS Methodology Outline
6
Step 0: Marketing
1. Describe Context
2. Build the Qualitative Value Model
3. Quantify the Evaluation Measures
4. Develop the Problem Statement
5. Generate Alternative Strategies
6. Use QVM for Future Value Analysis
7. Transition
PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making6/29/2014
Demonstrate the benefits multi-objective
decision analysis
• Systematic process with well-developed analysis
techniques and computer software tools
• Appropriate for quantifying values and uncertainties
• Strong professional society and technical literature
Engage the stakeholders and decision makers
• Incorporate information from functional experts (inside)
and interested stakeholders (outside)
• Provide insight to decision-makers faced with hard
problems.
• Present objective, traceable, and robust analysis
support.

Initial Assessment of the Client’s Situation
• Leadership not engaged in D-M process; they commission a Strategic
Planning Team (SPT) to confirm a pre-determined “correct” answer
• SPT produces detailed Pro-Con analysis of alternatives, but the criteria
were different for each alternative—comparing apples and oranges and
bananas and…
• Alternative Focused vs. Value-Focused
– Where’s the context? Not modeled
– Where’s the Fundamental Objective or overarching raison d'ê·tre?
– Where’s the yardstick? Lots of data, but no metrics, no measuring system, and
no score
• Where are the value gaps? Is the SPT addressing the most pressing?
• Where is the Alternative Generation Table? How to compare and express
preferences across many options?
• When to take action? Conditions-based decision points?
6/29/2014 PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making 7

Alternatives vs. Values
Alternative Focused Thinking
• Solve problems—reaction
• Bias for self-reliance
• Generate alternatives
• Rack and stack
• Choose based on weighted
selection criteria
Value-Focused Thinking
• Qualitative, Value-focused
framework—PROACTIVE
• Bias for collaborative action,
continuous process
improvement
• Generate value gaps
• Supports a systems view
• Launch L6S projects to fill the
value gaps and optimize
portfolio
Keeney, R.L. (1992). Value Focused Thinking.

Issues and Potential Pitfalls
• Time and energy to construct the model
– Collecting meaningful, reliable data
– Maintaining the model to keep it relevant and useful
• Organizational culture
– Goal setting / Performance evaluation
– Decision making styles:
• Transparent and participating? OR
• Close-hold and secretive?
– Communication needs
• Setting and managing thresholds
– Confidence in data
– Grading on a curve
• Collaboration
– Tracking trends
– Making resource allocation decisions
• Transition
– Training
– Documentation
– Maintenance
9PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making6/29/2014 Cave
Cabin
Condo
Castle

10
Step 0: Marketing
1. Describe Context
7. Transition
• Weltanschauung: the Client’s
worldview, in particular, external forces
impacting the competitive landscape
• Milieu: the aggregation of cultural
norms to the corporate level—the way
we do things around here
• Tao: the Way, that is, the philosophical
approach of the senior leader. This is
similar to a Target Audience Profile
• Est: the Ground Truth. All of our best
analysis is but a shadow of reality

PxMS Overview
Decisions take place in a system of nested environments
Weltanschauung, or worldview
Milieu, or culture
Tao, or “The Way”
Est, or what is

Interview Questions
Target Audience Profile
1. What could go wrong with our current strategy?
2. Where are we most seriously under-resourced?
3. Which of the stakeholder’s questions can only you answer?
4. What keeps you up at night?
5. If we do this right what would it be like in 5 years?
Thank you for your participation!

Est
Understanding the essence of what is really real
Organizational culture is “the
way we do things around here.”
–E. Schein
“If you want to improve
the world, the place to
begin is in your own
heart, and head, and
hands.” –author R. Pirsig“Essentially, all models are
wrong, but some are useful.”
–statistician G.E.P. Box
"For a flow system to persist in time (to
survive) it must evolve in such a way that it
provides easier and easier access to the
currents that flow through it." --scientist
Adrian Bejan
"Not everything that counts can be counted,
and not everything that can be counted
counts." --Albert Einstein, from a sign he
kept in his office
"The aim of education is tolerance."
--Helen Keller
"Watch your thoughts, for they become
words. Watch your words, for they become
actions. Watch your actions, for they
become habits. Watch your habits, for they
become character. Watch your character,
for it becomes your destiny." — Unknown

14
Step 0: Marketing
1. Describe Context
7. Transition
• Fundamental Objective
• Objective Functions
• Means Objectives
• Evaluation Measures
• Value Functions

Structure of a Generic Qualitative Value Model
1
Clear and concise
description of
Purpose, e.g.,
Win the War
Calculate
and display
the System
Score
67
Objective
Functions
(not scored)
Max or Min Functions,
i.e., "stretch goals"
that go beyond
describing how to
achieve the FO.
Ends
0.40 0.35 0.25
Means Objective 1 Means Objective 2 Means Objective 3
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation Measure
1.4
Evaluation Measure
3.4
19 90
Low Color High
100 Reassess 101
90 Target 99
75 Satisfactory 89
40 Warning 74
1 Unsatisfactory 39
-1 Regroup 0
Value Function
Thresholds
Evaluation
Measures
Fundamental
Objective
Means Objectives Means
Ways
Data in,
scores out

1
Clear and concise
description of
Purpose, e.g.,
Win the War
Calculate
and display
the System
Score
67
Objective
Functions
(not scored)
that go beyond
describing how to
achieve the FO.
Ends
0.40 0.35 0.25
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation
Measures
Fundamental
Objective
Ways
16PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making
Clear and concise
description of
Purpose, e.g.,
Win the War
Calculate
and display
the System
Score
67
Objective
Functions
(not scored)
that go beyond
describing how to
achieve the FO.
Ends
0.40 0.35 0.25
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation Measure
1.4
Evaluation Measure
3.4
19 90
Evaluation
Measures
Fundamental
Objective
Ways
Clear and concise
description of
Purpose, e.g.,
Win the War
Calculate
and display
the System
Score
67
Objective
Functions
(not scored)
that go beyond
describing how to
achieve the FO.
Ends
0.40 0.35 0.25
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation Measure
1.4
Evaluation Measure
3.4
19 90
Evaluation
Measures
Fundamental
Objective
Ways
67
Objective
Functions
(not scored)
that go beyond
describing how to
achieve the FO.
Ends
0.40 0.35 0.25
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation Measure
1.4
Evaluation Measure
3.4
19 90
Low Color High
100 Reassess 101
90 Target 99
Value Function
Evaluation
Measures
Ways
Data in,
(not scored) describing how to
achieve the FO.
0.40 0.35 0.25
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation Measure
1.4
Evaluation Measure
3.4
19 90
Low Color High
100 Reassess 101
90 Target 99
75 Satisfactory 89
40 Warning 74
1 Unsatisfactory 39
-1 Regroup 0
Value Function
Thresholds
Evaluation
Measures
Ways
Data in,
scores out
6/29/2014

17
Step 0: Marketing
1. Describe Context
7. Transition
• Type of data
• Type of metrics
• Natural, Direct (shared, repeatable)
• Constructed, Proxy (must pass the Clairvoyant Test)
• Value functions convert data to score
• Ranking Methods—determining ordinal importance
• Weighting—determining the relative importance of ranked
• Thresholds—adjustable grading curves

Natural or Constructed

Quick Stats Review
# Data Scale Description
1 Categorical Nominal Names. Categorically discrete data such as
name of your school, type of car you drive or
name of a book.
2 Quantitative Ordinal Quantities that have a natural rank ordering,
but the intervals between ranks may have no
relative significance.
3 Discrete Interval Like ordinal except we can say the intervals
between each value are equally split, e.g.,
temperature in degrees Fahrenheit.
4 Continuous Ratio Discrete data with a natural zero point, e.g.,
time, since 0 time is meaningful, or degrees
Kelvin (absolute 0). In these scales, each
interval step has the same degree of
magnitude.

Example Evaluation Measures
Direct Proxy
Natural
Constructed
• Net Present Value
• System Reliability
• Force Closure Time
• Probability of Kill
• Bandwidth per Sec
• Performance Evaluation
(Promotion Potential)
• Student Grades
(Student Learning), (Teacher
Performance?)
• Church Income
(Depth of Touches)
• Mark-to-Market Value
(Resilience, Capacity, Health)
20
• Results of Public
Opinion Polls
• Natural Language
Programming
• Mohs Scale of Mineral
Hardness
• Pictograph Perceived Pain
(Actual pain)
• Subject Matter Expertise
(True state of nature)
• Church Attendance
(Breadth of Lives Touched)
• Temperature, deg F
• Consumer Price Index
• Gross Domestic Product

# Lo Hi
5 161 200 100 blue
4 121 160 99 green
3 81 120 89 yellow
2 41 80 74 orange
1 11 40 39 red
0 0 10 0 black
A Purpose & Limits
B Data Type & Collection Method
C Source of Data
D Type of Scale
E Function shape
Proxy for quantity of touches; subject to capacity limits
Discrete; Counts
Attendance records taken and maintained by church leaders
Weekly Attendance
ThresholdDescription
Ratio, Natural, Proxy
Increasing, Convex, Diminishing returns near limit
Bursting at seams, new people feel lost, retention may suffer
Growing yet retains small group feel and fits comfortably
Small and solid, good recruiting and retention
Small but viable, some new people stay and contribute
Too small, not self-sustaining, new people go elsewhere
Collapsing rapidly, unsustainable, abandon ship
Eliciting a Value Function

Converting a Datum to a Score
input > 80 74.00 < output
range delta
39 -81 -2.07692 1 -2.07692 96.92
39 -41 -1.05128 10 -10.5128 78.49
39 -1 -0.02564 15 -0.38462 73.62
39 39 1 35 35 74.00
29 69 2.37931 39 92.7931 92.79
10 80 8 0 0 0.00
RF 10000 Bottom Red Orange Yellow Green
Lo 0 0 0 39 35 15 11
Hi 200 10000 0 39 35 15 11
2. Scroll down
to find the first
positive delta
value (39)
1. Import the Attendance number
(80) from data worksheet
3. Read across
to the scored
value of X (74)
4. The Resolution Factor (RF) is a variable used to zoom out or add more pixels
to the color-coded background. The Peltier Tech Blog by Jon Peltier has an
excellent tutorial on background shading at http://peltiertech.com/WordPress/

Depicting Thresholds and the Score
0 50 100 150 200 250
0
20
40
60
80
100
120
Weekly Attendance
X

24
Step 0: Marketing
1. Describe Context
7. Transition
3-element Value Proposition
Customer: visionary, pragmatist, or conservative
Product: use “industrial strength” tools
Application: generate better alternatives
Use the Customer’s language
Tailor techniques to the application
Have regular interaction with the decision maker
Present understandable results

Find and Close Value Gaps
0.40 0.35 0.25
55 73 78
0.25 0.33 0.25
Evaluation Measure
1.1
Evaluation Measure
2.1
Evaluation Measure
3.1
65 87 57
0.25 0.33 0.25
Evaluation Measure
1.2
Evaluation Measure
2.2
Evaluation Measure
3.2
43 85 87
0.25 0.33 0.25
Evaluation Measure
1.3
Evaluation Measure
2.3
Evaluation Measure
3.3
92 48 78
0.25 0.25
Evaluation Measure
1.4
Evaluation Measure
3.4
19 90
Time X Attend Park Income Exp Float Cum FloatNet Worth
0 80 27 3.1 2.4 0.70 8 1.79
1 89 30 3.35 2.46 0.89 19 1.86
2 99 33 3.62 2.52 1.09 32 1.93
3 109 36 3.91 2.58 1.32 48 2.01
4 121 40 4.22 2.65 1.57 67 2.09
5 135 45 4.55 2.72 1.84 89 2.17
6 150 50 4.92 2.78 2.14 115 2.26
7 166 55 5.31 2.85 2.46 144 2.35
8 184 61 5.74 2.92 2.81 178 2.45
9 205 68 6.20 3.00 3.20 216 2.54
10 227 76 6.69 3.07 3.62 260 2.65
11 252 84 7.23 3.15 4.08 309 2.75
12 280 93 7.81 3.23 4.58 364 2.86
13 311 104 8.43 3.31 5.12 425 2.98
14 345 115 9.11 3.39 5.71 494 3.09
15 383 128 9.83 3.48 6.36 570 3.22
Close Value Gaps with the DMAIC Process
D = Define the problem or opportunity
M = Measure to objectively establish current baselines as the basis for improvement.
A = Analyze to identify, validate and select root cause for elimination.
I = Improve by identifying, testing, and implementing a solution to the problem.
C = Control by monitoring improvements to ensure continued and sustainable success.

Worksheet View
PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making 266/29/2014
Average Annualized Weekly Attendance
More people in Church = more lives touched; Measure the Quantity of Touches
80 Raw number (integer)
74.00 Score (LOOKUP from Value Function)
0.4 Weight (Sum of all MO weights equals 1)
29.60 Contribution of this MO to Total Score
EVALUATION MEASURES
1.1 Worship Attendance (includes members, friends, and visitors)
62 Current 5 year average annualized weekly attendence
80 Current 1 year average annualized weekly attendence
34 Average Membership 5 years ago
47 Average membership last 12 months
183 Peak attendence last 12 months
8 Minimum attendence last 12 months
LIMITATIONS
180 Capacity per Service (seating)
39 Capacity per Service (parking)
2 Handicap
35 Regular size
2 Visitor reserved
0 Bus reserved
Lay leader participation
Age distribution
1 Means Objective Weights must sum to 1
PROJECTIONS
0.11 Annual worship attendance growth rate last 5 years
0.11 Expected annual attendance growth rate (min, mean, and max; distribution)
135 Projected attendence at time X (mean, with 90% confidence interval)
Cell requires manual input
Cell contains a formula
Cell contains random variable
Cell contains a limitation
Legend
A total of four EMs
feed into MO 1.
(EM 1.1 is shown.)
In addition to EMs,
each MO has space
for Limitations and
Projections.@RISK to the
Rescue!

27
Step 0: Marketing
1. Describe Context
7. Transition
• Construct Affinity Diagram
• Based on Value Table
• A subset of the overall model
• Determine functions, tasks,
and candidate evaluation
measures
• Evaluate alternatives in view
of impact on System Score

A Series of Three Instructive Issues
Relating to the Generation of Alternatives
• The Decision Matrix (Dec Mat)
– Techniques for Ranking
– Determining Relative Importance
• The Extrapolation Problem
• The Problem of Communicating Concisely

1. The Dec Mat Problem
• We all use Decision Matricies…
• Pro-Con analysis of 4 alternatives
• Converting Pros and Cons into CoAs and SoNs
• Converting comments to symbols
++,
+,
0,
-, and
–
• Converting symbols to numbers

Relative SoN
Importance
Weights Sum
to Unity
v(i1,j1) v(i2,j1) v(i3,j1) v(in,j1) Row SUM
w1*v(i1,j1) w2*v(i2,j1) w3*v(i3,j1) wn*v(in,j1) Weighted Sum
v(i1,jn) v(i2,jn) v(i3,jn) v(in,j1) Row SUM
w1*v(i1,jn) w2*v(i2,jn) w3*v(i3,jn) wn*v(in,j1) Weighted Sum
Where
i = columns
j = rows
w = weights
s = score
v = values
r = rank
Scores
Preference
(Rank of
Weighted
Sum-
Products)
i1
w1
i2
States of Nature (SoN): Criteria (Objectives, Expected Outcomes) or Attributes (Desired
Characteristics)
i3 in
wnw3w2
j1
Courses of Action
(CoA): Choices,
Alternative Solutions
j2
j3
jn
Format of a Typical Dec Mat

The four big picture options
1) Sell and Relocate somewhere else, either
rent, buy, or build
2) Tear Down and Rebuild on current site
3) Renovate/Upgrade current building
4) Partnering or other innovative alternate

Sell and Relocate somewhere else,
either rent, buy, or build
• Quick access to capital (~ 12 –
18 month delay)
• (Renting) Frees us from
building ownership issues
• Allows us to respond quickly to
market opportunities
• “Build to suit our needs”
• Over long term, this has a net
financial loss
• Few options are available
• Requires fast response on
decisions, difficult to get
• Breaks with our tradition and
“sacred space”
• Does not help gain equity
• Next phase is very expensive
• Promotes heavy land use
practices (not “green”)
• Less control in rented space
PROs CONs
32
PraXophy: Practical Wisdom for Value-
Focused and Data-Fueled Decision-Making
6/29/2014

Rebuild on current site
• Retains “sacred location”
• Avoids land market delays
• Remaining usable land
becomes more accessible
• More certainty for future
• Geographic appeal
• Clearer, surer vision
• Less change than relocating
• Maintains assets and equity
for the future
• Some loss of “sacred space”
• Higher permit scrutiny
• CBPA has severe restrictions
• Causes time away, costs $$
re: alternate location,
membership impact
• Risk of taking on a large,
unsupportable loan
PROs CONs
33
6/29/2014

Renovate/Upgrade current building
• Faster permit process
• Less ADA, etc., impact
• Shorter time away, if
any
• Can be a more limited
change, less cost
• “Constrained”
• Typically costs more to
refurbish existing than
to build new
• Requires compromise of
goals/mission/vision
PROs CONs
34
6/29/2014

Convert Pro-Con to Dec Mat, Part I
Building code (ADA) compliance and Permit process
time
Time spent away from HOME and Sacred Space;
Uncertainty; Change
Total cost of the alternative over the next 20 years
Fidelity to mission, vision, goals
Quick access to capital; Ability to respond quickly to
Building ownership issues (Maintenance & Repair)
Likely impact on membership, participation, and
giving
Design customized to our needs; Flexibility and
freedom of facility use
Impact on long-term financial health; net worth
Decision cycle incl. internal (church) and external
(legal) decisions
Sell and Relocate somewhere
else, either rent, buy, or build
Rebuild on current site
Renovate/Upgrade current
building
Partnering or other innovative
alternate
The “Do Nothing” Option
Derived States of Nature Modified Courses of Action
6 CoAs

The Ranking and Weighting Problem
• Pairwise Comparison (Ranking the States of
Nature (SoN))
• Value elicitation (Deriving Senior Leader’s opinion
on the relative importance of ranked SoN)
• Saaty Scales (Means of converting expressed
preferences or utility to continuous data on a
ratio scale)
• Using weighted states of nature to place Courses
of Action (CoA) into proper sequence with
respect to value, quality, or utility.

Buildingcode(ADA)complianceand
Permitprocesstime
TimespentawayfromHOMEand
SacredSpace;Uncertainty;Change
Totalcostofthealternativeover
thenext20years
Buildingcode(ADA)complianceand
Permitprocesstime
thenext20years
Fidelitytomission,vision,goals
A
Building code (ADA) compliance and Permit process
time
A
B
Time spent away from HOME and Sacred Space;
Uncertainty; Change
B B
C Total cost of the alternative over the next 20 years C B C
D Fidelity to mission, vision, goals D D D D
E
Quick access to capital; Ability to respond quickly to
A B C D E
F Building ownership issues (Maintenance & Repair) F B C D F F
G
Likely impact on membership, participation, and
giving
G G G D G G G
H
Design customized to our needs; Flexibility and
freedom of facility use
H B C D H F G H
I Impact on long-term financial health; net worth I B C D I F G H I
J
Decision cycle incl. internal (church) and external
(legal) decisions
A B C D E F G H I J
3 8 7 10 2 6 9 5 4 1
8 3 4 1 9 5 2 6 7 10
Impactonlong-termfinancial
health;networth
Decisioncycleincl.internal
(church)andexternal(legal)
decisions
thenext20years
Fidelitytomission,vision,goals
Quickaccesstocapital;Abilityto
respondquicklytomarket
opportunities
Buildingownershipissues
(Maintenance&Repair)
Likelyimpactonmembership,
participation,andgiving
COUNT
RANK
Designcustomizedtoourneeds;
Flexibilityandfreedomoffacility
use
Pairwise Comparison

Elicit Weights
Given rankings from 1 to 10 as shown, determine Relative Importance
among those States of Nature by eliciting weights. Ask the D-M:
“Starting from zero, add 100 units of utility one at a time. Where would
you apply the first unit? The second? The 100th?”
The resulting distribution of relative importance translates into weights
D Fidelity to mission, vision, goals 3 10 20
G Likely impact on membership, participation, and giving 2 8 15
B
Time spent away from HOME and Sacred Space; Uncertainty;
Change 1 7 10
C Total cost of the alternative over the next 20 years 1 5 10
F Building ownership issues (Maintenance & Repair) 1 5 10
H
Design customized to our needs; Flexibility and freedom of
facility use 1 5 10
I Impact on long-term financial health; net worth 1 5 10
A Building code (ADA) compliance and Permit process time 0 3 5
E
Quick access to capital; Ability to respond quickly to market
opportunities 0 2 5
J
Decision cycle incl. internal (church) and external (legal)
decisions 0 0 5
10 50 100

4
Phased Rebuild in Place
(Rebuild on current site)
Renovate the existing facility, replacing existing structures
over time in accordance with a master plan. This involves a
long-term solution to the parking constraint, such as a
code variance, or some kind ofstacked parking structure
($$$).
Retains “sacred location”
Avoids land market delays
Remaining usable land becomes more
accessible
More certainty for future
Geographic appeal
Clearer, surer vision
Less change than relocating
Maintains assets and equity for the future
Some loss of“scacred space”
Higher permit scrutiny
Ches Bay Preservation Area (CBPA) board
has severe restrictions
Causes time away, costs $$ re: alternate
location, membership impact
Risk oftaking on a large, unsupportable loan
1 0.2 1 0.15 2 0.2
2.1
Relocate (Build It) & They
Will Come
(Sell and Relocate
somewhere else, either
rent, buy, or build)
Purchase a new site and build a new facility there, with a
50-year lifecycle. Offer the current facility as collateral.
Use the current facility until the new one is ready. Finish
the sale ofthe existing facility when the move is complete.
Use the proceeds to reduce new debt.
Quick access to capital (~12 –18 month
delay)
Allows us to respond quickly to market
opportunities
“Build to suit our needs”
Over long term, this has a net financial loss
Few options are available
Requires fast response on decisions,
difficult to get
Breaks with our tradition and “sacred
space”
Next phase is very expensive
Promotes heavy land use practices (not
“green”)
1 0.2 1 0.15 1 0.1
1
Defer and Save
(Renovate/Upgrade
current building)
Maintain the current location (building and grounds) for
another 20 years while saving for a replacement. Requires
extra maintenance and repairs on the older facility, and
may require a second service ifattendance continues to
grow. Requires a solution to the parking situation (shuttle?)
Faster permit process
Less ADA, etc., impact
Shorter time away, ifany
Can be a more limited change, less cost
“Constrained”
Typically costs more to refurbish existing
than to build new
Requires compromise of
-2 -0.4 1 0.15 2 0.2
2.2
Relocate (Buy It) & They
Will Come
(Sell and Relocate
Use our networth and any other collateral to purchase an
existing facility (buildings and grounds) and renovate to
suit our purposes. Interest rates are low. It may take some
luck to find a suitable place in our catchment area. What
happens to our old facility after we sell and move away?
delay)
opportunities
difficult to get
space”
0 0 0 0 -2 -0.2
0.1
Time spent
away from
HOMEand
Sacred Space;
Uncertainty;
Change
0.15
Fidelity to
mission, vision,
goals
#
Name
(Pro-Con Chart Name)
Description and discussion Pro Con
Likely impact
on
membership,
participation,
and giving
0.2
Convert Pro-Con to Dec Mat, Part II
Sign Points
++ 2
+ 1
0 0
- -1
-- -2

Weighted Dec Mat
4
Phased Rebuild in Place
(Rebuild on current site)
Renovate the existing facility, replacing existing structures
over time in accordance with a master plan. This involves a
long-term solution to the parking constraint, such as a
code variance, or some kind ofstacked parking structure
($$$).
Retains “sacred location”
Avoids land market delays
Remaining usable land becomes more
accessible
More certainty for future
Geographic appeal
Clearer, surer vision
Less change than relocating
Maintains assets and equity for the future
Some loss of“scacred space”
Higher permit scrutiny
Ches Bay Preservation Area (CBPA) board
has severe restrictions
Causes time away, costs $$ re: alternate
location, membership impact
Risk oftaking on a large, unsupportable loan
2.1
Relocate (Build It) & They
Will Come
(Sell and Relocate
Purchase a new site and build a new facility there, with a
50-year lifecycle. Offer the current facility as collateral.
Use the current facility until the new one is ready. Finish
the sale ofthe existing facility when the move is complete.
Use the proceeds to reduce new debt.
delay)
opportunities
“Build to suit our needs”
difficult to get
space”
Promotes heavy land use practices (not
“green”)
1
Defer and Save
(Renovate/Upgrade
current building)
Maintain the current location (building and grounds) for
another 20 years while saving for a replacement. Requires
extra maintenance and repairs on the older facility, and
may require a second service ifattendance continues to
grow. Requires a solution to the parking situation (shuttle?)
Faster permit process
Less ADA, etc., impact
Shorter time away, ifany
Can be a more limited change, less cost
“Constrained”
Typically costs more to refurbish existing
than to build new
Requires compromise of
2.2
Relocate (Buy It) & They
Will Come
(Sell and Relocate
Use our networth and any other collateral to purchase an
existing facility (buildings and grounds) and renovate to
suit our purposes. Interest rates are low. It may take some
luck to find a suitable place in our catchment area. What
happens to our old facility after we sell and move away?
delay)
opportunities
difficult to get
space”
0
The Do Nothing Option
(Not part ofthe original
Pro-Con work)
Let's take a look at what happens ifwe decide to do nothing. Avoid all the hassles ofCapital Campaign
Facility continues to decay, eroding Net
Worth
Attendance will decline, and income with it
Options will only get more expensive
3
The (Nothing is Ever)
Temporary (Non) Solution
(Partner, lease, share, or
other innovative
alternative)
Sell the current facility now, pay offall debts, and lease a
temporary facility (School? Theater? Existing Church?) until
a permanent replacement can be located and procured
(build, rent, buy)
Short term balance sheet boon (at the
expense oflong term financial health)
No change in net worth
Simply kicks the decision can down the road
oftime
Has the feel ofliquidating our dreams
2.3
Relocate (Rent It) & They
Will Come
(Sell and Relocate
Use our credit rating to qualify for a lease to an exisitng
space. Perhaps the landlord will renovate to suit ifthe
terms are favorable. There is a large vacant grocery store
in Penn Daw Plaza, near new condos and townhomes.
Renting frees us from building ownership
issues
Less control in rented space
Does not help gain equity
Analysis
#
Name
(Pro-Con Chart Name)
Description and discussion Pro Con
Courses ofAction
TOTAL RANK
1 0.2 1 0.15 2 0.2 2 0.2 0.2 0.02 2 0.2 2 0.2 2 0.1 1 0.05 2 0.1 1.42 1
1 0.2 1 0.15 1 0.1 2 0.2 -2 -0.2 2 0.2 1 0.1 1 0.05 2 0.1 1 0.05 0.95 2
-2 -0.4 1 0.15 2 0.2 1 0.1 -2 -0.2 0 0 1 0.1 2 0.1 -2 -0.1 -2 -0.1 -0.15 3
0 0 0 0 -2 -0.2 0 0 -2 -0.2 0 0 0 0 0 0 1 0.05 1 0.05 -0.3 4
-1 -0.2 -1 -0.15 2 0.2 -2 -0.2 -1 -0.1 -1 -0.1 0 0 2 0.1 -1 -0.05 -1 -0.05 -0.55 5
-2 -0.4 -2 -0.3 -1 -0.1 0 0 0 0 0 0 -1 -0.1 0 0 1 0.05 -1 -0.05 -0.9 6
-2 -0.4 -2 -0.3 -2 -0.2 -2 -0.2 1 0.1 0 0 -1 -0.1 1 0.05 0 0 1 0.05 -1 7
Building code
(ADA)
compliance
and Permit
process time
0.050.1
Time spent
away from
HOMEand
Sacred Space;
Uncertainty;
Change
0.15
Total cost of
the alternative
over the next
20 years
Fidelity to
mission, vision,
goals
0.1
Quick access to
capital; Ability
to respond
quickly to
market
opportunities
States ofNature
1
Decision
0.1 0.1 0.05
Building
ownership
issues
(Maintenance
& Repair)
Likely impact
on
membership,
participation,
and giving
Design
customized to
our needs;
Flexibility and
freedom of
facility use
Impact on long-
term financial
health; net
worth
Decision cycle
incl. internal
(church) and
external (legal)
decisions
0.10.2 0.05

2. The Extrapolation Problem
• Weekly Attendance Trend
• Weekly Income Trend

Weekly Attendance Trend
TOTAL Attend
Mean 62.19792
Standard Error 2.058019
Median 60
Mode 59
Standard Deviation 20.16439
Sample Variance 406.6025
Kurtosis 13.09452
Skewness 2.336839
Range 175
Minimum 8
Maximum 183
Sum 5971
Count 96
This 3-year attendance graph was used to show an 11% annual growth rate.
Attendance in was estimated to hit 118 in Y5 exceed capacity in Y6 (2020).
Based on that projection, and in light of maintenance issues, the leaders
wanted to build a new church.
Would you advise a client to make a $2M decision based on this information?
Small risk if Net Worth is, say, $200M, but…
What if that $2M is 10 to 15 times current income?

@RISK to the Rescue!
Created a model that captures the volatility
inside the 3-year period and portrays the data
gaps. After 1000 iterations, we can be 90%
certain that the Y5 Attendance will be between
86 and 147, with a most-likely value of 113.
We can also begin productive conversations
around reducing variation and moving mean.
(8%)
49%
(13%)

Weekly Income Trend
This 3-year income graph was used to show an 6% annual growth rate. This
compares to a projected 11% growth in attendance over the same period.
GRAND TOTAL
Mean 2702.394
Standard Error 102.7634
Median 2537
Mode 2345
Standard Deviation 1343.806
Sample Variance 1805815
Kurtosis -0.50008
Skewness 0.546222
Range 5968
Minimum 510
Maximum 6478
Sum 462109.4
Count 171

again…
(8%)
4%
7%
Attendance Rate
Low Growth -0.1
Most Likely Growth 0.1
Max Growth 0.3
Income Rate
Low Growth -0.1
Most Likely Growth 0.05
Max Growth 0.2
After 1000 iterations, we can be 90% certain that
the Y5 Income will be between $2.9 and 4.4K,
with a most-likely value of $3.6K.
We can also work to close the “giving gap.” Giving
should keep pace with attendance, in theory.

Revised estimates of future states
118
3.9
147
113
86
4.4
3.6
2.9

Breadth, Quantity of Touches, looking at such things as
annualized monthly attendance, lay participation in
services, and participation in programs and other key
processes
Application, Impact of Touches, looking at the capacity of
the organization to carry on living out its vision.
Resilience, Preservation of Options, etc., as indicated, in
part, by financial health.
Depth, Quality of Each Touch, looking at the relationship
between receiving the services and giving back in
appreciation.
3. Communicating Clearly and Concisely
47
Attend-
ance
40%
Net
Worth
25%
Income
35%
Three Means Objectives
Touching Lives

48
Table 0. This is the generic model table. It tabulates the current, changeable results of the model worksheet.
Build separate tables for each scenario (Current, Do Nothing, Build New, Buy Existing, etc.).
Copy each scenario and "paste special values and source formatting" into separate labeled scenario tables
Time X Attend Park Income Exp Float Cum FloatNet Worth Score
0 80 27 3.1 2.4 0.70 8 1.79 54.31
1 89 30 3.35 2.46 0.89 19 1.86
2 99 33 3.62 2.52 1.09 32 1.93
3 109 36 3.91 2.58 1.32 48 2.01
4 121 40 4.22 2.65 1.57 67 2.09
5 135 45 4.55 2.72 1.84 89 2.17
6 150 50 4.92 2.78 2.14 115 2.26
7 166 55 5.31 2.85 2.46 144 2.35
8 184 61 5.74 2.92 2.81 178 2.45
9 205 68 6.20 3.00 3.20 216 2.54
10 227 76 6.69 3.07 3.62 260 2.65
11 252 84 7.23 3.15 4.08 309 2.75
12 280 93 7.81 3.23 4.58 364 2.86
13 311 104 8.43 3.31 5.12 425 2.98
14 345 115 9.11 3.39 5.71 494 3.09
15 383 128 9.83 3.48 6.36 570 3.22
16 425 142 10.62 3.56 7.06 655 3.35
17 472 157 11.47 3.65 7.82 748 3.48
18 523 174 12.39 3.74 8.64 852 3.62
19 581 194 13.38 3.84 9.54 967 3.76
20 645 215 14.45 3.93 10.52 1,093 3.92
21 716 239 15.60 4.03 11.57 1,232 4.07
22 795 265 16.85 4.13 12.72 1,384 4.24
23 882 294 18.20 4.24 13.97 1,552 4.40
24 979 326 19.66 4.34 15.32 1,736 4.58
25 1087 362 21.23 4.45 16.78 1,937 4.76

Currently at an estimated 54% of full realization of our Fundamental Objective
Getting to 100% means maximizing all 3 Means Objectives and their supporting Evaluation Measures
If we do nothing, the value of the property will fall, and behind it will fall attendance and income
We looked at 5 major alternatives to the Do Nothing scenario
• Relocate & Rent or Share
• Relocate & Buy an Existing Facility
• Relocate & Build a New Facility
• Stay & Renovate the Current Facility
• Stay & Conduct a Phased Expansion
Chart compares the expected outcomes of the alternatives after a period of 5 years

50
Step 0: Marketing
1. Describe Context
7. Transition
• Monte Carlo Simulation
• Sensitivity Analysis (Risk)
• Resources: new from the environment, or
reallocated from within?
• Project selection and portfolio management
• Always show your work!

Future Value Analysis
Future
Opportunities
and Challenges
Hopper of
Alternative
Projects
Portfolio
Structured
Interviews
Get the values
right or the
numbers don’t
matter
Optimization
Model
Get the
numbers right
or the results
don’t matter
Generate
alternatives to
get results that
matter
Strategic
Assessment
Multi-Objective Decision Analysis Portfolio
Analysis
Vision
Mission
Strategy
Resources and
Programmatic
Constraints
Value
Opportunities Value Gaps
Quantitative
Value
Functions
Value
Feedback
Sensitivity Analysis
Qualitative
Value Model
Dr. Gregory S. Parnell, Innovative Decisions Inc. 516/29/2014

Explorations
# Metric Definition
1 Assets The mark-to-market value of bldngs, grnds, furn & equip
2 Liabilites The value of all outstanding debts
3 Reserves Cash reserves, usually a multiple of operating budget
4 Income Avg monthly from all sources (pledge, plate, rent)
5 Expenses Avg monthly all operating expenses
6 Float Income available for discretionary spending
7 Capital Capital campaign requirements
# Variable Definition
1 Growth CPI, Inflation, equity growth factor for Assets
2 Payoff Annual debt service (Prin & Int), reduction for liabilites
3 Reserve Multiple of Operating Budget for Cash Reserve
4 Payment Montly loan payment amount
5 Deferred Deferred maintenance and repairs (20 year model)
6 Asset / Liability Ratio of Assets to Liabilities, bigger is better
7 Debt / Income Ratio of Debts to Income, smaller is better
# Topic Question
1 Debt Service What if we start paying more on the loan?
2 Liquidation What options open / close if we sell the property?
3 Income Suppose we were able to get average pledges up 20%?
4 Income Does income track proportionately with attendance?
5 Flexible Use What if we convert the parsonage to classrooms?
6 Engagement How can we better engage Millenials in the "business"?
7 Conditions What conditions must be met before we can renovate?
4 Payment Montly loan payment amount
5 Deferred Deferred maintenance and repairs (20 year model)
6 Asset / Liability Ratio of Assets to Liabilities, bigger is better
7 Debt / Income Ratio of Debts to Income, smaller is better
# Topic Question
1 Debt Service What if we start paying more on the loan?
2 Liquidation What options open / close if we sell the property?
3 Income Suppose we were able to get average pledges up 20%?
4 Income Does income track proportionately with attendance?
5 Flexible Use What if we convert the parsonage to classrooms?
6 Engagement How can we better engage Millenials in the "business"?
7 Conditions What conditions must be met before we can renovate?

53
Step 0: Marketing
1. Describe Context
7. Transition
Training
Documentation
Maintenance

The Common Language Problem
• Model Nomenclature
• Analysis Types and their Questions,
Perspectives, TTPs, and Modes
• Terms of Art
• Key Phrases
• Acronyms
• Data Dictionary
PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making 546/29/2014

accidents
8
Means Objectives aka
Strategies
How will we recognize when the Fundamental Objective has
been met? 100% on time, $0 for violations, etc. Fundamental
Objective score is the weighted sum product of means
objectives.
9 Evaluation Measures
Specific data source (speedometer), performance range (0 to
120 mph) used to contribute to a Means Objective score
10 Value Functions
y = f (x). Convert data (engine RPM, horse power, tire traction)
to scores (mph) on a scale based on quality, value, or utility
(preference)
11
Thresholds / Rubric /
Grading Curve
Rules for determining the relative merit of a particular score,
e.g., Fines for going too slow or too fast, e.g., $25 for 5 over, $50
for 10 over, $100 for 20 over
12 Metric
a unit of measurement, e.g., mph. Can be lagging (after the fact,
confirming) or leading (before the fact, predictive). Can be a
Measure of Performance (efficiency) or a Measure of Effect
(outcome)
13 Measure a reading taken on a scale, e.g., 40 mph on a speedometer
14 Standard / Target / Rubric
The particular measure of a metric which defines success, e.g.,
35 mph. Can be seen as a yes / no check. Tolerance level
determened by the accuracy of observations and sensitivity to
Type I and Type II errors.
15 Analysis / Analytics
Consider 4 Types (Descriptive, Comparative, Proscriptive, or
Predictive).
16 Milestones
A checkpoint in time and space. In modeling, a milestone may
be a periodic review or a scheduled rest stop on a road trip.
17 Decision Point
In a conditions-based model, decisions can be triggered when
certain thresholds are crossed. When the fuel gauge gets to 1/4,
start looking for a filling station, or when I have saved up $20K I
can trade in the Honda for a Lexus.
18 Resources
Normally limited (constrained, bounded) quantities of time,
talent, treasure
19
Constraint / Limits /
Boundary
Physical boundaries, financial limits, maximum utilization rates.
Analogous to the rules of operating a motor vehicle on a public
street.
20
Performance /
Compliance / Efficiency
Fuel efficiency, horsepower
21 Effect / Outcome / Results Actual (or expected) results of actions (or proposed actions)
22 Variable
23
Feedback / Assessment /
Grade
Whether the measure is good or bad, e.g., 5 mph over the
posted speed limit. Rewards for meeting or exceeding
objectives and penalties for missing the mark. Consider four
"voices" of feedack: Customer, Strategy, Process, and Business.
55
# Model Nomenclature Definition and Examples
1 Weltanschauung
World view. External environment. Factors that are largely out
of our control but will impact our options and choices.
2 Milieu
Culture. Internal environment, seen as something that can be
influenced. "The way we do things around here," Ed Schein.
3
Fundamental Objective
aka Purpose
The answer to the 5th Why?, e.g., mobility. Mission First.
"Harmony" is alignment with Purpose.
4 People
People Always. Value-Focused Thinking. People are our most
precious resource. "Heart" is putting Values first.
5 Process
Every activity is a process, and every process can be improved.
Better, faster, cheaper. "Head" is planning and continuous
process improvement.
6 Product
Goods or Services. Results of effort. What we provide to add
value. "Hands" refers to applied skills, knowledge, abilities and
other characteristics.
7 Objective Functions
Max or Min functions define How, e.g., max fuel economy, min
traffic tickets, max getting to appointment on time, min
accidents
8
Means Objectives aka
Strategies
How will we recognize when the Fundamental Objective has
been met? 100% on time, $0 for violations, etc. Fundamental
Objective score is the weighted sum product of means
objectives.
9 Evaluation Measures
Specific data source (speedometer), performance range (0 to
120 mph) used to contribute to a Means Objective score
10 Value Functions
y = f (x). Convert data (engine RPM, horse power, tire traction)
to scores (mph) on a scale based on quality, value, or utility
(preference)
11
Thresholds / Rubric /
Grading Curve
Rules for determining the relative merit of a particular score,
e.g., Fines for going too slow or too fast, e.g., $25 for 5 over, $50
for 10 over, $100 for 20 over
12 Metric
a unit of measurement, e.g., mph. Can be lagging (after the fact,
confirming) or leading (before the fact, predictive). Can be a
Measure of Performance (efficiency) or a Measure of Effect

Analysis Types
#
Analysis Types and Their
Questions
Distinguishing Analysis Types by Their Perspectives; Tactics,
Techniques, and Procedures; and Modes
1
Descriptive
What is going on in there?
Perspective: Est (Existence). TTPs: Basic Counts, Frequencies,
Percentages, Ratios, Ranges, Histograms, Venn Diagrams.
Mode: Survival (Cave)
2
Comparative
Why does it matter? What
can we do better?
Perspective: Tao (Philosophy). TTPs: Trends, Inference, Cause
and Effect Diagrams, Value Stream Maps, SWOT Analyses, SIPOC
Diagrams, Process Flow Charts, 4 Voices Feedback Loops,
Continuous Process Improvement (CPI) Project Identification.
Mode: Stability (Cabin)
3
Proscriptive
What is best? What
should (or should not) be
there?
Perspective: Mileu (Culture). TTPs: Optimization (Maximize or
Minimize), Fundamental Objective (5th Why?), Qualitative
Value Map, Scorecard, CPI Project Selection. Mode: Success
(Condo)
4
Predictive
What is next? What might
be there in possible
future states?
Perspective: Weltanschauung (World View). TTPs: Experiments,
12 dimensions, Synergy, Syzygy, Dashboard, Dynamic System
Model, CPI Portfiolio Management. Mode: Significance (Castle)
Cave
Cabin
Condo
Castle

• Before
– All or nothing
– Alternative focus
– No yardstick
– Extrapolations
Heart, Head, and Hands: a Summary
• During
– Communicate Strategic Intent
• Create an assessment framework, aka Qualitative Value Model
• Measure success (system score)
– Engage a Community of Practice
• Share success stories, standards, and best practices
• Looking for value gaps / opportunities
– Improve Overall Impact
• Select better Lean Six Sigma projects
• Manage portfolios of process improvement projects
• Identify critical resource shortfalls
• Simulate proposed interventions
• After
– Stakeholders know what is being measured
– Decision points are defined
– What if? and What’s best? questions can be explored
– A sense of awareness comes from putting values first
– Found the 3rd Way

Shameless Commerce
PraXophy: Practical Wisdom for Value-Focused and Data-Fueled Decision-Making 58
• Questions / Discussion
• Follow-up / Contact
 Business Cards (AFSC)
 https://www.linkedin.com/in/davedoane)
 https://www.facebook.com/PraXophy
 PraXophy@Gmail.com
 https://twitter.com/PraXophy @PraXophy, #RRCDC2014
 http://www.slideshare.net < one month
 https://todaysmeet.com/PraXophy < one week
?
6/29/2014

Praxophy at Palisade Regional Risk Conference in DC

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