Bob Travica

Class 11

Decision Making Processes & Decision Support Systems

MIS 2000Instructor: Bob Travica

Updated Feb. 2014

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Outline

• Decision making and problem solving process - rational (scientific) model

• Other decision making models

• Decision Support System

• MIS & DSS support to rational decision making

• Summary

• Exercise

Decision making and problem solving process: Rational (Scientific) Model

1. Identify (define) problem

?

2. Define optional solutions

5. Evaluate/Adjust solution

3. Evaluate optional solutionsexhaustively and select best

(Simon, 1950s)

4. Implement solution

• Steps 1-3 are decision making; with steps 4-5 the whole process

is problem solving. • Desirable model in business and generally but its

assumptions are limiting.*615 Management Information Systems 3 of 11

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Other Models: Satisfycing (Good Enough) Decision

Making

• Decisional making made under significant constraints

• Simon supplanted Rational Model; necessary evil due to human & organizational limitations (e.g., cognitive capabilities, time constraints, struggles)

• Making a choice that is good enough

More

?

?

Go for

low-hanging

fruit!

Define problem under constraints

Define some optional solutions

Focus on most important evaluation criterion-two

Select the first solution that fits the criterion

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• How decision making typically runs in public organizations: - different interests that balance each other, - nobody to “cut the knot”, struggles over budget and assets - “endless” decision processes, like walking through mud.

• What is the problem? Different things for different people!

• Problem defining includes negotiations and maneuvering.

• Optional decisions are defined tentatively.

• Decision maker implements just a part of a chosen option. If blocked, he switches to an alternative; if blocked again, must maneuver again (might even turn back to the first option); see diagram on next slide.

Other Models: Zig-Zag Problem Solving (“Muddling Through”)*

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Define problem Define problemDefine problem

Administrator

External StakeholderInternal Stakeholder

AND

Make a compromise definition

Define options tentatively

CommentAdjust options

Implement an option partly

Implement another part

Comment

Switch to another option

Zig-Zag Problem Solving –ProcessDiagram

React React

React React

Y

N Blocked?

Evaluate situation

Y

N Blocked?

Evaluate situation

Only without blocking to any part of a decision, it is completely realized. But there is usually some blocking and the loops may seem infinite.

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Decision Support System (DSS)

DSS Supports higher mgt. levels. Problems to solve are less structured than in routine situations where TPS & MIS can do the work.

Time horizon of DSS: Future – from close (day, week) to far (one+ years).

DSS uses outputs from MIS and data from sources outside the company.

More

Outputs: •Models •Scenarios and outcomes•Results of tests•Relationships & patterns

SalesInventory

ENVIRON- MENT

Data modeling &Data mining

MIS

DSS

Managerial decision making about future is supported by DSS.

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Management tasks: Planning and forecastingManagement tasks: Planning and forecasting

Visually represent Visually represent key performance indicators key performance indicators (e.g., financial (e.g., financial

ratios); dashboards.ratios); dashboards.

May have a “drill-down capability” to find what is behind May have a “drill-down capability” to find what is behind

aggregated figuresaggregated figures

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DSS TypesDSS Types

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• Model–drivenModel–driven: Processes data using different : Processes data using different transformationtransformation methods (optimization, if-then analysis, methods (optimization, if-then analysis, statistical tests)*statistical tests)*

• Data-driven: Looking for patterns in large data sets.• Data mining** and Big Data***

MIS

environment

- Simulation- Scenario- Result of stats tests

Data transformation

models

TPSMIS

environment

New relationships in sequence, New relationships per transaction, Groupings ***

Data Warehouse

Data Mining software

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Rational Decisional Making Process and Information Systemsfor Decision Making

IS can help rational DM.

The role of MIS is to inform the user so that a potential problem in operations can be identified.

Model-driven DSS can help with more steps and entire DM process – best option can be automatically delivered.

People still make the final choice (decision).

Learn about problem

Run environm

ent analysis

Createreports

Upper-levelManager(Business

Analysthelping)

DSS

MIS

Define problem

(may include negotiations)

Create optional solutions

Deliver decision options

Discuss & Negotiate

Evaluate result &

accept/reject

Analyze options & select the bestRun

organization

analysis

IDENTIFY PROBLEM DEFINE OPTIONS SELECT OPTION

Adjust inputs?

Yes

No

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SummarySummary

In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify problem, (2) create optional solutions, and (3) evaluate optional solutions problem, (2) create optional solutions, and (3) evaluate optional solutions exhaustively and select the best one. The full problem solving (PS) cycles exhaustively and select the best one. The full problem solving (PS) cycles includes 2 more steps: (4) implement solution, and (5) evaluate solution based includes 2 more steps: (4) implement solution, and (5) evaluate solution based on reaction of the affected party.on reaction of the affected party.

Satisficing and Zig-Zag models acknowledge constraints in problem solving.Satisficing and Zig-Zag models acknowledge constraints in problem solving.

DSS supports higher mgt. levels in solving less structured problems related to DSS supports higher mgt. levels in solving less structured problems related to upcoming activities in the near to far future. It can be model- or data-driven. upcoming activities in the near to far future. It can be model- or data-driven. DSS uses data reflecting both the organization and the environment, and DSS uses data reflecting both the organization and the environment, and delivers key performance indicators, visuals, and drill-down of aggregate delivers key performance indicators, visuals, and drill-down of aggregate figures.figures.

Role of MIS in decision making processes is limited to informing the user in the Role of MIS in decision making processes is limited to informing the user in the problem definition step of rational DM. DSS can support whole DM process. problem definition step of rational DM. DSS can support whole DM process. Human decision makers still play the key role. Human decision makers still play the key role.

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