Chapter II

Chapter 2: Information, Management and Decision Making:

Part A ( 1.5 hours) – Models of Decision Making - Classical, Administrative and Herbert Simon's

Models

Part B (1.5 hours) - Attributes of information and its relevance to Decision Making - Types of information

Chapter II

Chapter 2: Information, Management and Decision Making:

Part A ( 1.5 hours) – Models of Decision Making - Classical, Administrative and Herbert Simon's

Models

3

Decision Making

• Decision: a reasoned choice among alternatives• Examples:

– Where to advertise a new product– What stock to buy– What movie to see– Where to go for dinner

Decision Making: a process of choosing among alternative courses of action for the purpose of attaining a goal or goals

• Decision making vs. problem solving?

• ART or SCIENCE?

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Typical Business Decision Aspects

• Decision may be made by a group• Several, possibly contradictory objectives• Hundreds or thousands of alternatives• Results can occur in the future• Attitudes towards risk• “What-if” scenarios• Trial-and-error experimentation with the real system: may

result in a loss• Experimentation with the real system can only be done

once• Changes in the environment can occur continuously

Business Decision Aspects

LEVELS OF DECISION MAKING

1. STRATEGIC: Long-term objectives; resources; policies

2. MANAGEMENT CONTROL: Monitor use of resources; performance

3. KNOWLEDGE-LEVEL: Evaluate potential innovations; knowledge

4. OPERATIONAL: How to carry out specific day-to-day tasks

4.19

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Nature of Decision

• Structured Problems– Routine and repetitive with standard solution– Well defined decision making procedure– Given a well-defined set of input, a well defined set of output is

defined• Semi-structured Problems

– Has some structured aspect– Some of the inputs or outputs or procedures are not well defined

• Unstructured Problems– All phases of decision making process are unstructured– Not well defined input, output set and procedures

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Decisions Types

Level of decision making - Scope

Structured Unstructured

Strategic

Managerial

Operational

Following are the types of Decision1. Programmed/Structured Decisions2. Semi Programmed/Structured Decision3. Non Programmed Decisions

Programmed/Structured Decisions

Nature of Programmed/ Structure Decision:

1. They are Routine/Structure2. They are repetitive/short term3. Definite procedure is to be

followed4. There are laid down norms5. Situations are known6. They are taken at lower or

operating levels in the organization.

Techniques used for taking these decision:

1. Habit2. Standard Operating Procedures

(SOP)3. Organizational

Hierarchy/structure4. Operational research5. Computers

Semi Programmed/Structured Decision

• SEMISTRUCTURED: One or more factors not structured; risk

Non -Programmed/un-structured Decisions

Nature of Non-programmed/ unstructured Decision:

1. Innovative 2. New/complex situations3. Important and critical4. Strategic5. Long- term

Techniques used for taking these decision:

1. Judgment2. Intuition3. Business acumen4. Complex/ specially designed

computer programmes5. Training executives

INFO SYSTEMS, LEVE, DECISIONS

TPS

OAS MIS

KWS

DSS

ESS

ORGANIZATIONAL LEVELTYPE OF

DECISION OPERATIONAL KNOWLEDGE MANAGEMENT STRATEGIC

STRUCTURED ACCOUNTS RECEIVABLE

ELECTRONIC PRODUCTIONSCHEDULING COST OVERRUNS

SEMI- BUDGETSTRUCTURED PREPARATION

PROJECTSCHEDULING

FACILITYLOCATION

UNSTRUCTURED PRODUCT DESIGN NEW PRODUCTSNEW MARKETS

Decision Making Process

1. Recognizing and defining the situation2. Identifying alternatives3. Evaluation alternatives4. Selecting the best alternative5. Implementing the chosen alternative6. Follow-up and evaluation

1. RATIONAL: Comprehensive rationality; evaluate all alternatives

2. SATISFICING: Bounded rationality; choose first “good” alternative

3. MUDDLING (mixed/confused): Successive comparison; marginal changes

4. PSYCHOLOGICAL: Cognitive types; manages differ in how they make choices

INDIVIDUAL MODELS OF DECISION MAKING

1. RATIONAL ACTOR: Maximize organization’s benefits

2. BUREAUCRATIC: Follow standard operating procedures (SOP)

3. POLITICAL: Key groups compete and bargain

4. “GARBAGE CAN”: Organizations not rational; solutions accidental

5. Heuristic: is a method to help solve a problem, commonly an informal method. It is particularly used to rapidly come to a solution that is reasonably close to the best possible answer, or 'optimal solution'.

6. Analytic7. Autocratic 8. Democratic 9. Consultative (with individuals or groups)10. Combinations and variations

ORGANIZATIONAL MODELS OF DECISION MAKING/ Decision Making Styles

Decision Making Models

A. Classical Model: Collecting all required information and taking the decision in the best interests of the organization.

B. Administrative Model: Collecting all required information and taking the decision may not be in the best interests of the organization but it will be in the best interest of managers.

C. Herbert Simon Model:

The Herbert Simon’s Model

The decision Making process consists of following phases:1. Intelligence phase: thinking of the problem as it comes

a) Societal Environmentb) Competitive Environmentc) Organizational Environment

2. Design Phase: this consists for inventing, developing and analyzing the likely solutionsa) Understanding the problemb) generating the solutionc) Testing the feasibility of solution

3. Choice Phase: Selecting the specific alternative or solution4. Implementation : Put decision into effect; allocate resources; control

*Relevance of this model:1) Provide the decision process2) It provide the base for designing the MIS

Limitation of this model:3) It is specifies the decision process and will not go beyond choice4) This model does not includes the feedback phase and corrective action.

Chapter II

Chapter 2: Information, Management and Decision Making:

Part B (1.5 hours) - Attributes of information and its relevance to Decision Making - Types of information

Information

David and Olson Defines,“Data that has been processed into a form that is meaningful to the recipient and it is of real or perceived value in current or prospective actions or decisions”

INPUT OUTPUTPROCESS

FEEDBACK

Overview

Information Systems help companies achieve their goals.

How do they do it?

1. By processing raw data into information2. IS can add value to information by enhancing

the attributes (11 of them).

UsabilityUsability DeliveryDelivery

1. Relevant2. Simple3. Flexible4. Economical

1. Timely2. Accessible3. Secure

11 Attributes of Information

Quality

1. Accurate2. Verifiable3. Complete4. Reliable

Information Spectrum

• Data processing Information • Information intelligence Knowledge • Knowledge experience Wisdom

Information Process

1. Capturing - recording of events and transactions2. Verifying - validation and checks for correctness3. Classifying – specific categories4. Arranging/Sorting – building sequencing 5. Summarizing – combining and aggregate6. Calculating –Arithmetical and logical computation7. Storing –storage media8. Retrieving – searching and accessing the information9. Reproducing – duplicating or copying of data.10.Communication – transferring the data from one to another11.Deleting/purging – removal or deleting the data

A. Hierarchical1. Information needed for Strategic Level2. Information needed for Tactical Level3. Information needed for Operational Level

B . Planning and Controlling Perspective4. Information needed for Planning 5. Information needed for Controlling6. Information needed for solving problems4. Information needed for execution

Types of Information

Sources of Information

1. Primary Source : a) First hand information received directly from the users, customers,

employees ( survey , meeting, discussion, interviews etc.)

2. Secondary Sources

a) Published :Government publications, Journals, Newspapers, Monographs and textbooks, Reference works, Audio Visual, Electronic media etc

b) Unpublished: Human sources, Dissertations / Theses, Reports, Grey literature, Information on the Internet Email

Input fromSensory

ReceptorsChannels

memory

MentalProcessing

Channels Outputresponse

OutputsInputs

Human as information Processor

Computer information processing system

input Processor output

storage

Functions of an Information System

Information requirement

Information requirement is a detailed statement of the information needs that a system must satisfy. It involves identifying who needs what information, where, when and how.

Information required at different level in the organization:1. Organizational Level information requirements - Organization level information for

planning, controlling and managing purpose. To get the information we need to a) Defining sub-systems,b) Developing managers sub system , and c) Defining and evaluating the information requirement by sub system

2. Data Base Requirements: Organizing and defining the data class, data types in the computer system

3. Application level information requirements: Unit level , department level, process level, information, form level information.

a) Behaviors or role based requirementsb) Technical requirements

Techniques for Assessing information Requirements

1. Asking questions

2. Deriving From an existing information system

3. Ends-means analysis : analyzing the end use of the information and then getting the information requirements

4. Critical Success Factors (CSFs): Collecting all the factors affecting and then collect the information requirement

5. Business System Planning (BSP): this is the organization wise information requirements which includes all units, functions, processes and data elements.