A Decision Tree is a thinking tool you use to help yourself or a group make a decision by considering all of the possible solutions and their outcomes. It looks like a tree on its side, with the branches spreading to the right. Each branch is a possible solution with its outcomes branching out from it. If you use this tool with a group, it is best to draw it on a board so everyone can see it while you talk.
State the Decision
Draw a square halfway down the left side of the paper or board. This represents the decision to be made. Draw lines branching out from the square, one for each alternative. Make sure you space the lines to leave room for other lines to branch out from each of them. Write an alternative on each line.
Example: You may need to decide whether to purchase a new computer or repair an old one. You will have two lines branching from the square. Write "new computer" on one line, "repair old one" on the other.
Possible Solutions and Outcomes
Look at each alternative and determine solutions to that alternative. Draw a line branching out from the end of each alternative line and write a solution on each line. Your diagram will now look like a tree on its side. The next set of lines represent possible outcomes. List all possible outcomes for each solution on lines branching out from the end of the solution line. Outcomes are the results of choosing a certain solution.
Example: Two solutions for buying a new computer are to purchase from a store or to have one built for you. Outcomes for each of these could be: software is available or not available; the warranty is long term or short term; local service is available or not. List similar outcomes for the custom-built computer.
Evaluate the tree diagram after you complete it by deciding the value of each outcome. This may be monetary, or whatever factor determines the value you place on the decision. If the value is not numeric, assign a value to it on a scale of 1 to 10. At the end of each outcome line, write the value of that outcome. Look at each outcome again and ask the probability of its occurrence. Assign the probability as a percentage, with 100% being "totally probable".
Multiply the value of each outcome by the probability of the outcome. Write the resulting number beside each outcome and compare the numbers. This will help you decide which solution will give you the best value.
Example: A purchased computer will cost $2000, but the probability that it will have all the software you require is only 40%. 2000 times .4 is 800. A custom computer will cost $3000, but the probability it will have your software is 100%. 3000 times 1 is 3000. Because 3000 is higher than 800, the custom computer will meet your needs better than one purchased at a store.