Jerry Scherer

Jerry Scherer is a former financial officer of Northwest Industries, a Fortune 200 leader in planning, control and data systems, where he pioneered the development of computer solutions utilizing optimization and Monte Carlo simulation to facilitate management decision making.

Jerry has also been a CFO and Controller of several manufacturing firms and was the Managing Partner of a consulting firm engaged in providing decision support solutions. JB Scherer Consulting Group is a Value Added Reseller of the decision support tools of Palisade Corporation and provides those tools as well as risk modeling services to companies through PC-based strategic, tactical and financial decision models.

Jerry also works with Bayesian mathematics to improve management decision making.

 http://www.linkedin.com/in/jerryscherer1

Jerry Scherer, President 

JB Scherer Consulting Group LLC

PO Box 289

Glencoe, IL 60022-0289

http://www.jbschererconsultinggroup.com/

januerry@comcast.net

(847) 835-1175 (Phone)

(847) 835-1189 (Fax)

(708) 805-3300 (Mobile)

11. What’s Your SWOT? Can You Express It Numerically?

10. Decision Making in Excel Using a Bayesian Approach

9. What Difference Does A Distribution Make?

8. Risk Register

7. Why Should Companies Forecast and What Is The Best Method?

6. The Anatomy of a Decision

5. Decision making and an introduction to surprise via Bayes

4. Metrics Meet Monte Carlo

3. Dispelling the Myth That My Company Is Too Small For Risk Modeling

2. A Most Un(Likely) Case Scenario

1. Navigating Through Uncertain Times

Watching the Olympics these last few weeks reminded me that these superb athletes have both strengths and weaknesses. They are performing on surfaces that represent both opportunities and threats.

At the same time, the feats they are performing have varying degrees of difficulty. All of that is taken into consideration and a bewildering array of numbers emerge in an effort to determine who attains the highest score and achieves the gold medal.

In another example taken from the sports world, golf courses are rated. Each hole has a handicap rating. Thus, a high handicap golfer is not penalized when playing against a lower handicap golfer.

I could go on and on…

What’s my point?

The same thing is true in business.

It is commonplace to speak about a SWOT analysis in business parlance. Strengths, Weaknesses, Opportunities and Threats must be considered before any business will make a decision to undertake any meaningful project (in relation to its net worth).

I like to separate the S, W and T’s from the O’s.

Suppose you are trying to decide between three (or more) Opportunities that are available to you.

The Strengths, Weaknesses and Threats represent the factors that are important to you in terms of having a positive or negative impact on that decision that you are about to undertake.

For example, if one of the Opportunities involves relocating your business, that may fly directly in the face of maintaining your current staff which could be one of your Strengths.

If you are putting this on a spreadsheet, consider assigning a numeric value to each of the S,W and T’s. Consider each factor on a scale of L, M, H, and ∞. Assign a numeric value to each of those weightings (perhaps, ∞ would be 4, H would be 3, etc.).

Be realistic. If you think your current Market Share is a Strength, flaunt it and evaluate it as such. Use positive values to express your weightings even though you are considering Weaknesses as well as Strengths.

On the other hand, the O’s represent the Opportunities that have presented themselves for you to take advantage of. For each O, you will want to unbiasedly evaluate each of the O’s against each S, W and T in terms of your company’s performance (a scale of 1 at the lowest to 5 at the highest might be appropriate).

Your grid might look something like this:

 On a pure arithmetic basis, you have achieved a methodology to evaluate one O against another.

You now have a grid where some simple multiplications provide some insight into which opportunity to pursue or where dollars need to be invested to improve the unbiased rating of your performance.

It would appear that Opportunity 3, all other things being equal, is the best course of action.

The thought occurred to me to explore the importance of selecting the right probability distribution as you create your risk model.

Is it of major importance?

Our task is to find the best distribution to portray the shape of an uncertain variable.

I will present the case and give you my opinion, but, in the end, you are encouraged to reach your own conclusions