Go no go decision

From CEOpedia | Management online

Go no go decision is gate at the end of each stage of the project which is understood as decision of "go" (yes, continue) or "not go" (no, discontinue). Before passing a next gate each stage should have some results delivered[1]. All go-no-go decisions should be mutually agreed by responsible parties before going to next stage of the project. Problems from the previous stages should be known and identified. Before final implementation of the project, it is worth to include tests before final go-no-go decision[2]. Go-no-go decisions are usually made by senior management[3].

Go/no-go decisions can be used to evaluate any project or venture, but they are particularly well suited for high stakes, high risk projects that have a significant financial or time commitment. The go/no-go decision is also useful for projects that have many variables that need to be weighed against each other, such as the cost of resources, the risk of failure, and the potential return on investment. By carefully evaluating each of these factors, organizations can make an informed decision about whether or not to pursue a project

Factors of go/no-go decision

The factors that are taken into consideration when making a go/no-go decision can vary, but typically include:

  • Cost: The cost of resources, such as time and money, that would be required to complete the project.
  • Benefit: The potential benefits of completing the project, such as increased profits or improved customer service.
  • Risk: The risks associated with the project, such as technical difficulties or unforeseen events.
  • Return on Investment: The expected return on investment, or the estimated amount of money that will be gained from completing the project.

Short example of Go no go decision

The go/no-go decision can be illustrated by an example. A company is considering launching a new product, but must decide if the potential rewards outweigh the costs and risks associated with the project. To make the decision, the company considers the cost of launching the product, the potential benefits if the product is successful, the risks involved in launching the product, and the expected return on investment. After evaluating all of these factors, the company decides whether to proceed with the project or not.

In conclusion, a go/no-go decision is an important part of the decision-making process, as it helps to ensure that resources are not wasted on projects that are unlikely to succeed. The factors that are taken into consideration when making a go/no-go decision include cost, benefit, risk, and return on investment. By carefully evaluating these factors, companies can make more informed decisions about whether to pursue a project or not.

Long example of go-no-go decisions

Debelak D. proposes 12 go-no-go matrix in introducing a new product to the market. The recommendation would be to answer "yes" to each of below questions before running with the new product[4]:

  1. Is it understable for potencial customers what benefit they can get from the product?
  2. Is the product different from other products in the market?
  3. Is the product beneficial for people in the way they want it to be?
  4. Is the packaging of product effective in terms of communication to customer and logistics requirements?
  5. Is the market available for inventor of one-product type company?
  6. Can be product-support costs covered?
  7. Is it easy to target potencial customers?
  8. Is there enough money for this product to make prototypes, models and first production runs?
  9. Is the manufacturer willing and able to cover some start-up costs?
  10. Are the market insiders in your network or can you easy find them to support you?
  11. Does the value of product cover at least four times the manufacturing cost?
  12. Is the market size big enough to cover spending time of expense?

Another more complex example of go-no-go decisions was shown by Chittenden J. during implementaation of outsourcing process[5]:

  1. Gate I Idea
    1. Developing concept,
    2. Preparing high-strategic overview,
    3. Developing insight reports,
    4. Analyzing situation,
    5. Identyfing outsource potencial.
  2. Gate II Assessment
    1. Identification of current process,
    2. Understanding user needs,
    3. Developing process requirements,
    4. Performing risk assessment analysis,
    5. Developing business case,
    6. Verification of board approval,
  3. Gate III Implementation
    1. Developing outsourcing contact,
    2. Finalising structure,
    3. Negotiating of contact,
    4. Executing the contact.
  4. Gate IV Transition
    1. Developing trainsition plan,
    2. Testing,
    3. Monitoring transition and implementation.
  5. Gate V Management:
    1. Validating rules,
    2. Monitoring performance,
    3. Implementing relationship management process,
    4. Assessing strategic review,
    5. Reviewing outsourcing performance.

Types of Go no go decision

There are a few different types of go/no-go decisions which can be used depending on the situation. These include:

  • Yes/No Decision: This is a straightforward decision as to whether to proceed with a project or not.
  • Cost/Benefit Analysis: This type of decision looks at the cost of the project versus the potential benefits that may be gained.
  • Risk/Return Analysis: This type of decision looks at the risks associated with the project versus the expected return on investment.

Each type of go/no-go decision is useful in different situations, and the one that should be used depends on the type of project being evaluated. Ultimately, the goal is to make an informed decision that will result in the best outcome for the organization.

Steps of Go no go decision

The go/no-go decision-making process is composed of four steps:

  • Define the problem: The first step is to define the problem or opportunity that needs to be addressed. This involves determining the scope of the project and identifying the key stakeholders involved.
  • Gather data: The second step is to gather data related to the project, such as market research, cost estimates, and competitive analysis.
  • Analyze data: The third step is to analyze the data and determine the potential risks, benefits, and expected return on investment.
  • Make a decision: The fourth and final step is to make a decision based on the analysis of the data. This involves weighing the risks and rewards and making a judgment as to whether the project should proceed or not.

Advantages of Go no go decision

  • Makes objective decisions: Go/no-go decisions are based on objective criteria, such as cost and benefit, which helps to eliminate any potential bias from the decision-making process.
  • Saves time and resources: By taking the time to evaluate a project before proceeding, it can save time and resources that would otherwise be wasted on a project that is likely to fail.
  • Reduces risk: By determining the potential risk associated with a project, it is possible to assess whether it is worth pursuing or not.

Limitations of Go no go decision

A go/no-go decision is not without its limitations, however. It can be difficult to accurately evaluate the risk and reward associated with a project, and this can lead to decisions that are based on incomplete information or incorrect assumptions. Additionally, the go/no-go decision can be biased toward certain types of projects, as some projects may be seen as more desirable than others. Finally, the decision-making process can be subject to bias from those involved, as individuals may be more likely to pursue projects that they are personally interested in.

Other approaches related to Go no go decision

Apart from the go/no-go decision, there are a few other approaches which are related to the decision-making process and may be used when evaluating a project or venture. These include:

  • Cost-benefit Analysis: This type of analysis is used to compare the costs and benefits associated with a project. It is used to determine if the potential benefits outweigh the costs and if the project is worth pursuing.
  • Sensitivity Analysis: This type of analysis looks at how changes in one or more variables, such as cost or benefit, can affect the outcome of the project. This can help to identify potential risks and rewards associated with the project.
  • Monte Carlo Simulation: This type of analysis is used to simulate various scenarios and outcomes for a project. It can be used to determine the likelihood of success for a project and to identify potential risks.

In conclusion, the go/no-go decision is an important part of the decision-making process and is used to evaluate whether or not a project or venture should be pursued. Other related approaches, such as cost-benefit analysis, sensitivity analysis and Monte Carlo simulation can also be used to assess the risks and rewards associated with a project.

Footnotes

  1. ↑ Chittenden J. (2014), p.49-50
  2. ↑ Stone T., Lindborg J., Olivier S., Grant D. (2004), p.594
  3. ↑ Chittenden J. (2014), p.29
  4. ↑ Debelak D. (2005), p.330-331
  5. ↑ Chittenden J. (2014), p.49


Go no go decision — recommended articles
Strategic portfolio analysis — Opportunity risk — Decision point — Business case development — Contribution analysis — Project business case — Operational decision — Rational decision making — Concept engineering

References

Author: Anita Bernacka

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