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Decision-Making
Implications for the Design of IS/IT
Objectives
To explain the nature of decision-making To identify different models of the decision-
making process To examine the implications of theory and
research on decision-making for the development of IS/IT systems
To explain the role of DSS in supporting decision-making
Decision making defined
… the processes involved in making a selection between alternative courses of action
Decision-Making Has Become More Difficult
Increasing complexity of problems and bewildering array of alternatives
Decisions often have to be made under tight time constraints
Increased environmental uncertainty has made sophisticated analysis more important
Remote working has increased the difficulties of accessing information and reaching consensual decisions
Decision-Making By Level
Strategic Decisions What products and services to offer, how and where to
obtain resources, market strategies and position, pricing policies
Tactical Decisions Obtaining and using resources, allocating duties,
hiring personnel, selecting suppliers
Operational Decisions Scheduling production, allocating work, training,
dealing with employee problems and grievances
Key IT Decisions
What new systems do we need to acquire to help the company remain competitive?
Should we outsource any of our IT? Who should we appoint to manage our IT/IS systems? If we merge with another company, should we install new
systems compatible with our own? Should we invest in expensive new software to make our
systems more secure?
Decision-Making Models
Rational Model Decision-making by individuals is the
outcome of logical, rational processes
Bounded Rationality Various factors conspire to undermine
rational decision-making processes; in reality, people satisfy rather than optimise
Rational Model
People try to maximise outputs in an orderly, logical way
Identify problem
Examine alternatives
Compare and evaluate alternatives
Select best one
Bounded Rationality
People do not always behave in rational ways:
“ .. . The individual is limited by his unconscious skills, habits and reflexes; he is limited by his values and conceptions of purpose, which may diverge from organizational goals; he is limited by the extent of his knowledge and information”
(Simon, 1976, p.76)
Bounded Rationality (Contd….)
Factors undermining rationality Lack of environmental surveillance
People tend to deal with problems that require immediate attention rather than focus on the future; people select the most obvious rather than the best alternatives
Satisficing behaviour People choose the solution that will do
rather than is necessarily the best, I.e. don’t look for optimal solutions
Bounded Rationality (Contd….)Identify problem
Determine minimum criteria all alternatives must meet
Choose the alternative that best deals with the problem
If acceptable, implement it
Evaluate ease of discovering alternatives and use this to determine acceptable standards for similar problems in future
Bounded rationality (Contd…)
Other factors that limit rational behaviour People are strongly influenced by the outcomes of past
decisions People will discount information that conflicts with their beliefs
or values People tend to construct general decision-making rules and
follow them, even if they are inappropriate in a particular situation
People rationalise their choices
Organisational Decision-Making
In theory, decision-making at the organisational level is more rational since there are likely to be organisation-wide procedures for identify, evaluating and selecting alternatives
Research indicates, however, that organisational decision-making is strongly influenced by past events, the full range of alternatives is rarely considered and decisions are taken on a piecemeal basis
Computers can help
Computer-based IS have the capacity can gather vast amounts of data and present it in easy-to-understand formats, thus increasing the likely hood that more and better quality information will be taken into account in decision-making
Computer-based IS have the capacity to model alternatives and indicate the outcomes of likely courses of action. In this way they are able to simplify what, in reality, is a highly complex process and help people envisage different decision scenarios
Decision Support Systems
A“ …a computer-based information system that combines models and data in an attempt to solve semi-structured problems with extensive user involvement.”
(Turban et al, 2002)
Uses of DSS – Some Examples
Forecast passenger demand and schedule aircraft
Evaluate bids from various contractors for major projects
Discern customer buying patterns Corporate forecasting and planning Risk evaluation on major projects
Characteristics of DSSs
Turban et al (2002) identify the following key characteristics of DSSs
Can be used by individual managers and groups of managers at all levels of the organisation to solve semi and unstructured problems
Supports several interdependent and sequential decisions Supports all stages of the decision-making process and different styles
of decision-making Can be adapted over time to meet changing circumstances Easy to construct and use Promotes learning which creates demands for improvements Uses quantitative models Allows the easy execution of sensitivity analyses
Characteristics of DSSs (Contd…..)
Curtis (1998) identifies the following key characteristics of DSSs
Supports rather than usurps the role of the decision-maker
Give flexible and interactive access to data Fragmented – DSS tend to be developed in an ad
hoc way to support the needs of particular individuals or groups
Components of a DSS
Data Management Component Contains data that is extracted from various sources and
then entered into DSS database or entered into DSS as required
Model Management Component Contains standard and customised models used to
develop decision support applications Contains Model Base Management System that can create
DSS models easily and quickly, stores and manages different models, allows users to manipulate models thus enabling them to conduct sensitivity analyses
Components of a DSS (Contd…)
User Interface and Users Every aspect of the communications between the
system and the user Most modern user interfaces are Web based. Users are viewed as part of the system. Typically
comprise managers and specialists
Knowledge Management Component For very complex problem situations requiring expert
knowledge, DSS may include special various expert or intelligent decision
Group Decision Support Systems (GDSS)
“ … an interactive computer-based system to facilitate the solution of unstructured problems by a set of decision-makers working together as a group”
(Laudon and Laudon, 2001)
Aims of GDSS
Aim is to improve the effectiveness of group meetings
Supports the exchange of ideas, opinions, information etc within the group
Early systems were designed to support face-to-face meetings; more recent systems cater for networked meetings of participants in different locations
How Can GDSS Help?
How Can GDSS Help?
Providing group with rapid access to external and internal sources of data
Permit non-sequential discussion of issues
Create instant, anonymous voting results Structure the planning process Record proceedings of meetings for
future analysis
GDSS Components
Hardware The conference facility, i.e. room which will include electronic display
boards, audiovisual and networking equipment or GDSS facility specifically designed for electronic meetings, e.e. group-to-group video or teleconferencing
Software Usually includes ten or more tools and packages integrated into a
comprehensive system. Software includes electronic questionnaires, electronic brainstorming tools, ideas organisers, tools for voting, policy formation tools, stakeholder analysis tools
People Usually consists of group members and a facilitator Enterprise Decision Support Systems
Enterprise Decision Support Systems
Organisational Decision Support Systems Used mainly by specialists such as planners, analysts
and researchers Used for an organisational task that involves a
sequence of operations and decision-makers, e.g constructing a marketing plan
DSS cut across organisational levels and units because it addresses corporate wide problems
Enterprise Decision Support Systems
Enterprise Decision Support Systems (Contd…)
Executive Information System Serves the information needs of top executives Provides access to management reports, provides
exception reporting and drill down facilities, graphics and is very user-friendly
Executive Support Systems offer enhanced capabilities, including analysis, office automation, business intelligence
Common Features of EIS
Drill down Critical Success Factors (CSFs) Trend analysis Ad hoc analysis Exception reporting
Web-Based DSS
Many DSS are now available on the Web, making them available to anyone in the organisation who needs them
Web-based DSS can be accessed remotely, thus making them more flexible and easy to use
Facilitates development and maintenance of DSS
Summary
Decision-making is a key part of the role of management Evidence suggests that people have limited information
processing capabilities. IT has an important role to play in providing access to information, helping decision-makers analyse information and evaluate alternatives in problem situations
DSS exist for specialists and managers at every level of the organisation
Development of Web-based DSS is making DSS an enterprise-wide facility
Reading
Cooke, S. and Slack, N. (1991) Making Management Decisions, Prentice-Hall.
Laudon, K. C. and Laudon, J. P. (2002) Management Information Systems: Managing the Digital Firm, Prentice Hall.
Simon, H. A. (1967) Administrative Behavior, The Free Press.
Turban, E. and Aronson, J. (2001) Decision Support Systems and Intelligent Systems, Prentice-Hall