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Unit - 02Decision making process-stages in decisionmaking, individual and organizational; decisionmaking models; information system support for

decision making phases; definition,characteristics, subsystem of MIS, MIS and topmanagement, structure of MIS (conceptual and

physical structure)

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2

Objectives How decisions are made?

What is decisions?

Why decisions is important?

Linkages between decisions and computer?

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Problem-01

A manager has taken over a

failing service center. Hecommissions research to findoutwhy customers think that

service is poor.

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He gets the following comments back from thecustomers:

Phones are only answered after many rings.

Staff seem distracted and under pressure.

Engineers do not appear to be well organized.

They need second visits to bring extra parts. Thismeans that customers have to take more holidayto be there a second time.

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They do not knowwhat time they will arrive. Thismeans that customers may have to be in all day for

an engineer tovisit. Staff members do not always seem to knowwhat

they are doing.

So

metimesw

hen staff members arriv

e, thecustomer finds that the problem could have beensolved over the phone.

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The manager groups these problems together. Hethen scores each group by the number of

complaints, and orders the list: Lack of staff training: items 5 and 6: 51

complaints

Too

few staff: items 1, 2 and 4: 21 co

mplaints Poor organization and preparation: item 3: 2

complaints

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By doing the Pareto analysis above, the managercan better see that the vast majority of problems

(69%) can be solved by improving staff skills. Once this is done, it may be worth looking at

increasing the number of staff members.Alternatively, as staff members become more ableto solve problems over the phone, maybe the needfor new staff members may decline.

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Problem-2A young professional is deciding where to

live. Her question is 'Should she moveto the big city?'

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More going on (+5) Have to sell house (-6) Easier t o find new job?(+1)

Easier to see friends (+5) More pollution (-3) Meet more people? (+2)

Easier to get places (+3) Less space (-3) More difficult to getown

work done? (-4)

No countryside (-2)

More difficult to get towork? (-4)

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he scores the table as 13 (Plus) - 18 (Minus) -1 (Interesting) = - 6

For him, the comforts of a settled ruralexistence outweigh the call of the 'bright

lights'- itwould be much better for her tolive outside the city, but close enough totravel in if necessary.

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Essence ofManagementWhatever a manager does, he/she does it

through DECISION-MAKING

THUS DECISION-MAKING IS AN ESSENCEOF MANAGEMENT

-Peter Drucker

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INPUT IN DECISION MAKINGFor Decision Making

INFORMATION is the necessary andvital input

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DataA stream of raw facts about anything

Examples:. Record of all the players in one day cricket

matches.

Detailed Marks of all students in a class.

Business data as obtained from variousbusiness houses.

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Informati

on

Processed data, which is useful to therecipient.

Examples:

Profitof the company in the current year

The highest ever score in one day cricket

First ten toppers in a class with scores.

The top 50 business houses of India.

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Then Information is

WHICH

Tells something the recei

ver did n

otknow

Reduces uncertainty

Has a surprise value

Has a real / perceived value in current /prospective decision.

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Data and Information

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Phases in decision making Intelligence

Design Choice

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Intelligence an design

Phases Problem finding

Find a different between some existing situation and somedesired state.

Pounds identified four models

1. Historical model: In which expectation is based onan extrapolation of past experience.

2. Planning: In which plan is the expectation.

3. Models of people in the organization, which assuperiors, subordinates etc.

4. Extra-organizational models: Expectations arederived from other organizations.

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Problem Formulation To clarify the problem, so that design and

choice activities operate on the right problem.

Taylor identified 04 strategies:

1. Determining the boundaries of the problem i.e. clearlyidentify what is included in the problem.

2. Examining changes that may have precipitated theproblem.

3. Factoring the problem into smaller sub problem.4. Focusing on controllable elements.

Hypothesis.

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Development of

alternatives Requires adequate knowledge of the

problem area and its boundaries(domain knowledge)

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Concept of Decision

making Decisions differ in a number ofways. These

differences affect the design of information

system support for decision making. Fourdimensions of decision types which areuseful for information systems are:-

1. Knowledge ofoutcomes

2. Level of programming3. Criteria for decision

4. Level of Decision impact

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Knowledge of outcomesWhatwill happen if particular alternativeor course of action is chosen? It isimportantwhen there is multiplenumbers of alternatives.

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Knowledge of outcomesOutcome state Explanation

Certainty Complete and accurate knowledge of the outcome of each alternative.There is only one outcome for each alternative.

Risk Multiple suitable outcomes fo each alternative can be identified, and aprobability ofoccurrence can be attached to each.

uncertainty Multiple outcomes for each alternative can be identified, but there isno knowledge of the probability to be attached to each.

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Level of programming Programmed

Non-programmed

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Criteria for decision making

Normative or prescriptive

Descriptive

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Case I..Supporting Planning Decision:

A very large multinational consumer company has 2

main reasons for using a planning model for newproduct projections- to provide an informationstorage bank and to answerwhat if question.

Using this company can accumulate data in central unit,with each alternatives spelled out and noted. Thisfeature is specially helpful for developing incomestatements using various product formulas, salesvolume and marketing programme. The other key isspeedy manipulation of alternatives.

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Case I..The company had envisioned launching a

new product thatwould sell 3 million

units nationally, with a marketing costduring 1styr. 6 B the estimated pay outwas less than 3 yrs. & rate of return

was estimated 20%. Through, themodel marketing mgt. Defined the riskto ash flow, the inventory assumptions,& the investment spending exposure.

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Case IThe projectwas approved and plans to

introduce the product proceeded.

A competitor unexpectedly entered the marketwith lower quality, lower priced product &diff. mrk mix. The marketing research andbrand management department responded

with a new plan for marketing , .

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Case Ibut, the newvariable , when added to the

information already in the model

system, produced discouragingprospects- 8 yr payout and 5.1%return. The company scrapped out the

product.( Harvard Business review)

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Case IIScheduling and operational decision making

Airlines use automatic call distributors ( ACD) to

distribute calls to available agents to maintain queueof calls waiting for service. The operationalmanagement problem is to collect data on calls,monitor network traffic and plan for availability ofagent. A software called employees management

and planning system ( EMPS) to summarizeactivity data from ACDs estimate a near optimalnumber of agents for each shiftof projected volume,and provide a suggested work schedule. ( pp-370)

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A SYSTEM WHICH SUPPORTSDECISION making.

Emphasis is on support.

DECISION SUPPORT SYSTEM

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Characteristics Support to the manager.

For semi structured problem.

Effective problem solving isinteractive and enhanced bydialogue box.

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Classes of decisions

making1. Film Drawer system

2. Data Analysis System

3. Analysis Information System

4. Accounting Model

5.R

epresentational Model6. Optimization Model

7. Suggestion Model

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File Drawer System Immediate access to files.

On-line version of filing.

Use: Status enquiry of inventory, airlinereservation request, shop floormonitoring.

( Devis, 2003, 372)

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Data Analysis System Toanalyse data.

Manipulation of data .

Use: budget analysis system,

Alternative investmentopportunities.

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Analysis Information System Toanalysis series of database and

small models.

Use: Marketing Decisions SupportSystem containing internal sales data,promotion and pricing data plus access

to external database.Sales analysis sys. With sales data,

customer data, forecast data.

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Accounting ModelAccounting purpose

Use: to generate estimate of income,Balance Sheet, Monthly BudgetingSystem for operational decision makingand short term planning.

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Representational Model These estimate the consequences of the

action on the basis of models that represents

some non-definitional characteristics ofthe system such as probabilities ofoccurrence. They include all simulationmodels that contain elements beyond

accounting definition. Use: Risk analysis model using probability

distribution for each key factor.

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Optimization Model Provides guideline for action by generating

the optimal solution consistentwith a series

of constraints. They are used for repetitivedecision that can be described mathematicallyand where the specific objective e.g.minimizing cost is the goal.

Use: System for scheduling training classesunder a complex setof constraints.

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Suggestion models Suggestive decision for fairly structured

and repetitive decision.

Use: Insurance Renewal Ratecalculation.

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Class of DSS a comp.System Type of

ope.Type oftask ofope

user Usagepattern

Timeframe

File DrawerSys.

Access ofdata item

operation Non-mgr.linepersonnel

Simpleenquiry

Irregular

DataAnalysis

Sys.

Ad hoc ana.Of files

Operationalor analysis

Staff ana.Mgr. line

personnel

Manipulation & display

of data

Irregular/on req.

An. Info.Sys.

Ad. Hocana., mul.Database &mode

Anay.planning

Staff analyst Prog. of splreport, dev.of smallmodel

Irregular/onrequest


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Class of DSS a comp..System Type of

ope.Type oftask of ope

user Usagepattern

Timeframe

Accont.model

Stand cal-resultsfutureresults ona/c prn

Planning,budgeting

Analysis/mgr

i/p estm ofact, receiveestimatedmonetaryresults aso/p

Periodic e.g.weekly,m.yr

Representational mod

Est.consequences of part.act

Planning/budgeting

Staff analyst i/p possibledeciosions,receiveestimatedresultsalso/p

Periodic/adhoc


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Class of DSS a comp.Optimization mod Cal. Anoptimal

solution toacombinatory problem

Planningresourceallocation

Staffanalyst I/pconstraint& objectiveanswer

Periodic /irregular

Suggestionmod.

Performingcal. Thatgenerates asuggested

decision

operational Non-mgr.Linepersonnel

I/pstructureddescriptionof the

decisivesituation,receive asuggesteddecision aso/p

Daily orperiodic


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Task Go to the website www.avnet.com and

identify (a) How many countries it

operates in. ( b) how its revenues aredivided among the major regions inNorth America, Europe and Asia.

( Ref.: Laudon K.C., Laudon J.P., 2008,MISManaging the digital firm, Pearson, pp-640)


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DSS Users Subscription Mode

Terminal Mode

Clerk Mode

Intermediary mode

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Subscription ModeThe decision maker receives reports that

are generated automatically on regular

basis. This is a typical mode of usage for

management reporting system.

E.g. Share market, raw material prices.

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Terminal Mode

The decision maker is the direct user of

the system through online access.

E.g. Web enabled reservation.

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Clerk ModeThe decision maker uses system directly

but in offline mode. The primary

difference between this mode andterminal mode is the technologyemployed. ( Batch versus online)

e.g.: Budget compilation. ( Davis, 374)

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Intermediary modeThe decision maker uses the system through

intermediaries, who perform the analysis

and interpreted and report the result. Thedecision maker does not need to know howthe intermediary used the system to arrive

at the requested information.e.g. BSPs ( Davis, 375)

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EXP

ER

T SYSTEM.. For ill structured tasks.

Represents expertise

Very costly to develop, takes about 25 work years.

Knowledge base ( data and decision rules)

E.g. Mycin: Programme searches knowledge base

for particular symptoms. ( Davis, 375)

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Expert systemsTask domain Expert System

Oil exploration Dipmeter Advisor

Medical consulting Cadeucius, Mycin

Mineral exploration Prospector

Computer configuration R1

( Davis, pp-376)


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PROGRAMMING

LANGUAGE A HIGH LEVEL, COMPACT ALGEBRICLANGUAGE USED TO develop DSS. E.g. APL(require special keyboard for input)

Selection of language depends on:-

Availability of Language and support for it.

Amountof manipulation versus presentation of data

Need to

develop and maintain the pr

ogram

Frequency of sue and number of users

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SPREADSHEET

PROCESSOR VisiCalc

ANALYSIS PACKAGE

Includes Statistical analysis andstandard computational model.

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MODELGENERATOR Software which generates model for decision

making. It has capabilities ofProgramming

Language, SpreadsheetPROCESSOR ANDstatistical model.

Objectives of Model Generator:

Quick and easy developmentof decision model.

Feasible and adoptive to develop interactive design osystem

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TASK- Practical Create a database of students in your

class.

Generate queries to find out number ofstudents expecting to join in Delhi forsummer training.

Identify the type of decision supportsystem, you are working.


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Decision Support SystemI.T. can be used to support decision making in

the organization as well s process

transactions. Managers running spreadsheetprogramme on their microcomputer to decidewhether to launch a new productor particularinvestment are using computer for decision

support.(Lucas, 1990, Information Systems Concepts for management, McGrawHills, pp-47)

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Situations To give bonus to employees. (programmed deices)

A hotel chain with Hotels in major cities around theworld is analyzing the decisions in building a hotel in

a newly independent developing country. (Decisiontree)

People who have bought a certain make of car willtend to read the advertisement for that Car and notread competitive advertisement. Sales procedure thatfollow-up sales with congratulatory information makeus of the bolstering effectof cognitive dissonancemaker.

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DECISIO

N MAK

ING

Decision making is an essential elementofmanagement,. Information system is basically

helps in decisio

n making in the lighto

frelevant information available to themanager. Decision can be divided in tofollowing classes:-

Programmed and non-programmed decisions.

Historical versus current decisions.

Strategic versus operational decisions

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Operational control: Determines how toperform specific tasks set by strategic and

middle-management decision makers

Knowledge-level decision making:Evaluates new ideas for products,

services, ways to communicate newknowledge, ways to distributeinformation

Managers and Decision

Making

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Decisions are classified as:

Unstructured: Non routine, decision makerprovides judgment, evaluation, and insightsinto problem definition, no agreed-uponprocedure for decision making

Structured: Repetitive, routine, handledusing a definite procedure

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Method of Decision makingType of Decision Old New

Programmed Habit (standard operatingprocedure OrganizationStructure Policy etc)

MIS ( includes mgt. Sc.Techniques and thecomputer)

Non-programmed Oneshot ill structured

Judgment, Intuition,Insight Experience,Training and Learning

Systematic approach toProblem Solving &Decisions Making

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Decision makingDecision making can be regarded as anoutcome of mental processes (cognitive

process) leading to the selection of acourse of action among severalalternatives. Every decision making

process produces a final choice.[James Reason (1990).

Human Error. Ashgate. ISBN 1840141042.] The output can be anaction or an opinion of choice.

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Decision making processesAccording to behavioralist Isabel Briggs Myers, a person's decision making process

depends on a significant degree on their cognitive style.(Source: Isabel Briggs Myers|Myers, I. (1962) Introduction to Type: A description of the theory and applications of the Myers-Briggs type indicator, Consulting

Psychologists Press, Palo Alto Ca., 1962. ) Myers developed a set of four bi-polar dimensions,called the Myers Briggs Type Indicator (MBTI). The terminal points

on these dimensions are: thinkingand feeling; extroversion andintroversion;judgmentand perception; and sensingand intuition.She claimed that a person's decision making style is based largely onhow they score on these four dimensions. For example, someone whoscored near the thinking, extroversion, sensing, and judgment ends ofthe dimensions would tend to have a logical, analytical, objective,critical, and empirical decision making style.

Other studies suggest that these national or cross-cultural differencesexist across entire societies. For example, Maries Martinsons hasfound that American, Japanese and Chinese business leaderseach exhibit a distinctive national style of decision making.

( Source: Martinsons, Maris G., Comparing the Decision Styles of American, Chinese and Japanese Business Leaders. Best Paper Proceedings of Academy ofManagement Meetings, Washington, DC, August 2001)

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Decision making processesSome of the decision making techniques thatwe use in everyday life

include:1. listing the advantages and disadvantages of each option, popularized byPlato and Benjamin Franklin

2. Flipping a coin, cutting a deck of playing cards, and other random orcoincidence methods

3. accepting the firstoption that seems like it might achieve the desiredresult

Prayer, Tarot astrology, revelation or other forms of divination.

acquiesce to a person in authority or an "expert"4. choosing the alternative with the highest probability-weighted utility for

each alternative.

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DECISION-MAKING & ROLE OF MIS

To selectone alternative outofvariousalternatives.

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Characteristics - MIS Itdeals effectively with increased complexityofManagement

it helps to take better decisions due to theability toobtain, store, process, retrieve, anddisplay the right information for the rightdecision.

It keeps info

rmatio

n feedback system Itbuilds foundation to decision making.

It helps tocontrol organization efficiently.

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Limitations

ofMIS

Human Intervention is required.

Time requirement.

Expirtise to use it.

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Endof unit-II

Internal test II

Marks 20

Subjective

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