Measurement And Quantification of Alternatives

If alternatives are to provide the best payoff in a given situation, they should be quantifiable and measurable. Also, if several objectives are being sought, measurement is vitally important in establishing priorities among them. Realistically, when objectives cannot be stated in quantifiable  terms, alternatives courses of action cannot be measured as effectively. Even if alternatives are quantifiable, of course, each one has a different degree of utility or desirability associated with it. This explains why there managers may arrive at different conclusions to the same problem. The perceived utility of each alternative differs among them.

Since subjective utility values cannot be compared, some type of natural measure is needed for evaluating various outcomes. For cash transactions, one such measure utilizes monetary values. For example, in deciding how you will return from work in the evening, the cost of each method of transportation can be considered. Money, however, cannot provide an exact measurement for comparing alternatives since more dollars do not always imply greater utility. Time, convenience, peace of mind, and other considerations may be involved and cannot always be converted to a monetary scale. Consequently, it is best to treat the amount of money as a substitute for utility in a particular decision only when the amount of funds is relatively small compared to the total assets of an organization or individual.

In the general, overcoming difficulties in measurement requires the manager to state problems so that progress toward their solution can be observed, measured, and evaluated. Here, again, the importance of quantification cannot be overemphasized. This is not to imply that all decisional problems can be quantified, but managers often make better decisions when quantitative measures can be applied in the evaluation of alternatives.