How to do decision tree analysis step by step

9 of August, 2022

When working in project management, you are often faced with important decisions to make about complex projects. Laying out all the possible choices and outcomes in a clear representation by using a decision tree can help you make those difficult decisions. Keep reading and find out how to do decision tree analysis.

What is a decision tree analysis?

A decision tree is a diagram that determines the potential results of a series of choices and clearly lays them out. By using a decision tree, project managers can easily compare different courses of action. For each course, decision tree analysis evaluates the chance of success as well as the risks, and predicts the benefits.

To present its conclusions in the clearest possible manner, a decision tree contains 4 key elements:

• Decision nodes: Each decision node signifies that there is a choice to make;
• Branches: Branches signify potential choices and connect all the nodes together;
• Chance nodes: Chance nodes represent non guaranteed outcomes;
• End nodes: Found at the end of the tree, end nodes show a final outcome.

For what type of projects is a decision tree analysis useful?

Decision trees are useful to analyze projects with multiple possible outcomes. The great thing about the decision tree technique is that you can apply it to any project that has a certain level of complexity, for instance to project management in HR. You can also expand it as you think of new ideas or as new opportunities appear.

Steps in a decision tree project

In order to correctly conduct a decision tree analysis, you must follow these 4 steps:

1. Lay out all your options

The first thing to do is to identity all the options you have to complete your project. Indeed, there are always several ways to get the result you need, but some of them are quicker and more effective than others. The decision tree will help you recognize the best course of action, but first you need to make sure that you have included all the existing options.

2. Predict potential outcomes

Now that you’ve got all your options laid out, you need to evaluate the results that each option will bring. Projecting yourself in the future is never easy and your projections most probably won’t be totally accurate. Nevertheless, it is important to give it your best effort so that the conclusions of your decision tree analysis are as reliable as possible.

3. Analyze the results

By now, your decision tree contains all the branches representing your different options with the outcomes you predicted. So the next step is the analysis part. Analyze each one of the results presented in the decision tree. By taking into account the limitations and objectives of your project, determine how acceptable the different outcomes are.

4. Optimize your decisions

Finally, you should optimize your decisions. This means determining which option will best fit your project. The decision tree you have created should by now present all the possible choices and their outcomes in a clear and visual way. Use it to decide which option has the biggest probability of success and the greatest benefits. Once you have identified the best course of actions, you can use Sesame’s task tracking software to assign task to your team members.