cc6052 lecture wk04 decisions 2012

Week 4

Management and decision-making (2)

Management roles and functions

Categories of management decisions

Support required from MSS

1

Management decision-making

◦ nature of decisions made by business managers

Business strategy ◦ introduction to some strategic planning techniques

Consequences for management decision-making ◦ how can strategic planning inform key management

decisions?

2

Room not big enough!

People sitting in the aisles

◦ Health & Safety Problem

Solution required...

◦ redistribute attendance between days?

not popular

◦ move to main lecture theatre in same building?

already booked

◦ find another lecture room in another building?

nothing free at the same time

◦ change time and lecture room?

success! 3

CC6052 Assignment: Management Report

Group components (40%)

Title and contents

Management summary

1. Introduction

2. Organisation chart

3. Data cleansing

4. ODDS MSS database Design

5. Use of feedback

6. Group critique

7. Individual contributions

8. Software implementation environment

4

CC6052 Assignment: Management Report

Individual components (60%)

9. Selected management decision

10.Data and information requirements

11.Technical design

12.Test plan and results

13.Outline solution

14.References

15.Software with printouts

5

Management ◦ functions, roles, levels, productivity

Decisions ◦ categories, disciplines, cognitive style, etc.

Decision-making ◦ theory, phases, approaches, models

Data and information ◦ types, sources, processes, value, characteristics

Support for management decision-making

6

communication

command coordinate

control

plan

organise

Fayol’s five functions of management

Classical model: Fayol (1916)

see: http://www.provenmodels.com/3

7

Management: functions

Behavioural model

Based on observations of what managers actually do

and this indicates that managers are

less systematic, reflective, well-organised

and

more informal, reactive, frivolous

than the classical model suggests

(Laudon & Laudon, 2004)

8

Management: roles

Mintzberg (1971, 1980, 1993) identified 10 roles:

Interpersonal

◦ figurehead, leader, liaison

Informational

◦ monitor, disseminator, spokesperson

Decisional

◦ entrepreneur, disturbance handler,

resource allocator, negotiator

9

Management: levels

Strategic

Determines long-term

objectives, resources and

policies of the organisation

Tactical Concerned with efficient and

effective use of resources in

achieving objectives

Operational Carrying out specific day-to-day

tasks, transactions 10

“Management is a process by which

organisational goals are achieved

through the use of resources” (Turban, 2001)

11

Management: productivity (1)


If resources = inputs

and

attainment of goals = outputs

then

Success of organisation (and a manager’s job)

=

Outputs / Inputs

=

Attainment of goals / Resources

=

Productivity 12

Assessing productivity using performance

measurement - consider two dimensions:

◦ Effectiveness

◦ Efficiency

13



Effectiveness

the degree to which goals are achieved

i.e. “doing the right thing”

Efficiency

a measure of the use of resources to achieve

these goals

i.e. “doing the thing right” 14

Decisions: categories (1)

Levels (or type of control): decisions can be

◦ Strategic

unstructured, long-term, large impact, infrequent

◦ Tactical

semi-structured, medium-term, medium impact, not uncommon

between the two extremes of strategic and operational

◦ Operational

structured, short-term, small impact, frequent

15


Type of decision:

Unstructured (or non-programmable)

fuzzy, complex problem for which no clear solution procedure

exists

Semi-structured

between the two extremes; i.e. some structured elements and

some unstructured elements

Structured (or programmable)

standard procedures for obtaining the best (or good enough)

solution are known 16


Decisions can be made in the face of:

Uncertainty

◦ Several possible outcomes for each course of action

◦ Decision-maker does not know (and cannot estimate) probabilities

Risk

◦ Decision-maker must consider several possible outcomes for each

course of action

◦ Probabilities of given outcomes are known or can be estimated

Certainty

◦ Assumes full and complete knowledge is available

◦ Decision-maker knows the outcome of each course of action 17

Decisions: cognitive styles, etc.

“Cognitive style is the subjective process through

which people

perceive,

organise and

change information

during the decision-making process.” (Turban, 2001)

18

Decisions: cognitive styles, etc.

Need to consider varying cognitive styles

Compare systematic versus…

…intuitive decision-makers


19

Making Decisions

Tempting to assume a ‘rational model’ of

decision making behaviour

◦ “people engage in basically

consistent,

rational,

value-maximising calculations.”


20

Making Decisions

But…

people cannot specify all options...

people do not have singular goals, many decisions are too complex...

people select the first option that moves them towards their ultimate goal or adopt a policy that is most like the previous policy...

decision-making is a continuous process…

decisions are often made by consensus...

21

Decisions and management (1)

Turban (2001): “According to Simon (1977),

managerial decision-making is synonymous with

the whole process of management.”

management "=" decision-making

22

Decisions and management (2)

“A problem occurs when a system does not meet

its established goals… or does not work as

planned.

Problem solving may also deal with identifying

new opportunities”

problem solving decision making

23

Decision-making: theory

Decision-making involves selecting the correct

(or best available) action from a series of choices

The business rules governing the correct action may be complex;

diagrams and tables help

◦ Flow charts

◦ Decision trees

◦ Decision tables

◦ Structured English, etc.

Only useful for the structured elements of a decision...

(Chaffey, 2003)

24

Decision-making: consider the following (sequence of) decisions

A product (toaster )is passed as fit for sale if it passes:

◦ a mechanical test (slices can be lowered and raised)

and

◦ an electrical test (it heats the bread)

and

◦ has the correct dimensions (the slices fit the slots)

25


If it fails either the mechanical test

or the electrical test (but not both),

it is sent back to the workshop for repair

26


In all other cases, the product is rejected

as it would be too expensive to repair

27


There are three tests

mechanical test

electrical test

correct dimensions

28

Dimensions

OK?

Mech. test

OK?

Mech. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

Decision tree...

29

Decision table

X

X X

X

Correct dimensions?

Passed mechanical test?

Passed electrical test?

Accept product

Repair product

Reject product

Y Y Y Y N N N N

Y Y N N Y Y N N

Y N Y N Y N Y N

X X X X

Each action in the decision table is equivalent to a terminal node in the decision tree:

1 accept

2 repair

5 remaining actions reject

30

Mech. test

OK?

Mech. test

OK?

Elec test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

Decision tree... OK to have questions in a different order

Dimensions

OK?

Dimensions

OK?

Dimensions

OK?

Dimensions

OK? 31

Mech. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

Dimensions

OK?

Dimensions

OK?


32

Dimensions

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes


Mech. test

OK?

Mech. test

OK?

Mech. test

OK?

Mech. test

OK? 33

Decision trees & decision tables

Decision trees

enable all possible options to be considered

Decision tables

enable all possible options to be considered

Decision trees and decision tables

equivalent to one another

each column in the table matches a path in the tree

different forms of representation

can be “pruned” to remove redundancy 34

Dimensions

OK?

Mech. test

OK?

Mech. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

Decision tree... (original)

35

Decision table

X

X X

X

Correct dimensions?



Accept product

Repair product

Reject product

Y Y Y Y N N N N

Y Y N N Y Y N N

Y N Y N Y N Y N

X X X X


1 accept

2 repair


36

Dimensions

OK?

Mech. test

OK?

Mech. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

Decision tree...

37

Decision table

X

X X

X

Correct dimensions?



Accept product

Repair product

Reject product

Y Y Y Y N N N N

Y Y N N Y Y N N

Y N Y N Y N Y N

X X X X


1 accept

2 repair


38

Dimensions

OK?

Mech. test

OK?

Mech. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

Decision tree...

39

Decision table

X

X X

X

Correct dimensions?



Accept product

Repair product

Reject product

Y Y Y Y N N N N

Y Y N N Y Y N N

Y N Y N Y N Y N

X X X X


1 accept

2 repair


40

Decision tree: removing redundancy

Dimensions

OK?

Mech. test

OK?

Mech. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Elec. test

OK?

Accept

Repair

Repair

Reject

Reject

Reject

Reject

Reject

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Yes

No

Reject If dimensions are wrong, we don’t need mechanical & electrical tests: just reject

A single

line with

“No”

replaces

this part of

the tree 41

Y Y N N N Y N N -

Decision table: removing redundancy

X

X X

X

Correct dimensions?



Accept product

Repair product

Reject product

Y Y Y Y N N N N N

Y N Y N N N Y N -

X X X X


1 accept

2 repair

5 remaining actions reject Now add “don’t care” condition (“-”) it doesn’t matter whether it is Y or N

If dimensions are wrong, we don’t need mechanical & electrical tests - just reject

X 42

Decision table: components (1)

Correct dimensions?



Accept product

Repair product

Reject product

1. Conditions

2. Actions

3. Number of rules = 2N

where N is the number

of conditions, i.e….

43


Correct dimensions?



Accept product

Repair product

Reject product

4. Condition entries

Y Y Y Y N N N N

Y Y N N Y Y N N

Y N Y N Y N Y N

44


Correct dimensions?



Accept product

Repair product

Reject product

5. Action entries

Y Y Y Y N N N N

Y Y N N Y Y N N

Y N Y N Y N Y N

X

X X

X X X X X

45


Correct dimensions?



Accept product

Repair product

Reject product

6. Redundancy identified and removed

(“-” = don’t care conditions)

Y Y Y Y N

Y Y N N -

Y N Y N -

X

X X

X X

Decision table with redundancy identified and removed

46

Decision-making: phases

Intelligence

◦ Problem/Opportunity exists

◦ Decision must be made

Design

◦ Identify and examine possible solutions

Choice

◦ Rank solutions and select best option

Implementation… (do it!)

◦ ...and evaluate success of decision

47

Decision-making: intelligence phase

Problem identification

Problem classification

Problem decomposition

Problem ownership

Problem statement

◦ identification and impact 48

Decision-making: design phase

Trial and error

Modelling

◦ Simulation

◦ Goal-seeking

◦ Optimisation

◦ What-if? analysis

◦ Heuristics

◦ Like SSM…

(see Checkland)

Real-world problem

(physical)

Logical problem (model)

Logical solution (model)

Real-world solution

(physical)

49

Decision-making: choice phase

Criteria of choice

Search for best option

(based on comparison with criteria of choice)

◦ Blind search - complete or partial

◦ Heuristic search

Search until you find a “good enough” solution

(known as satisficing)

50

Decision-making: implementation phase

Test the solution

Is it working?

If not, may need to return to

design, choice or intelligence stage

Perhaps we are solving the “wrong” problem

Can it be improved?

Fine-tune the solution

Monitor progress

51

Data and information: types, sources

Types of data: ◦ qualitative ◦ quantitative

Sources of data: ◦ internal ◦ external ◦ private

Information: ◦ data processed for a purpose ◦ reduces uncertainty about a situation

Managers need information to support their decision-making

i.e. any management decision will have associated ‘information needs’

(Chaffey, 2003)

52

Data is processed to produce information

Examples of data processes: ◦ classification ◦ rearranging / sorting ◦ aggregating ◦ performing calculations ◦ selection ◦ exceptions ◦ presentation (graph / table / chart / diagram)

Information produced can be used to support decision-making

(Chaffey, 2003) 53

Information is a resource with value for the manager and the organisation ◦ tangible value ◦ intangible value

As well as value, information comes at a cost:

Value of information - Cost of gathering information

or

Improvements in decision behaviour - Cost of gathering information

(Chaffey, 2003)

54

Strategic ◦ Wide time period, infrequent, primarily external, less certain, wide in scope, summarised

Tactical ◦ Medium time/frequency/source/certainty/scope/detail between the two extremes

Operational ◦ Narrow time period, frequent, primarily internal, more certain, narrow in scope, detailed

Information supports decision-making at all levels in an organisation:

55

Chaffey, D. (ed.), 2003, Business Information Systems, 2nd ed., FT

Prentice Hall

Laudon, K. & Laudon, J., 2004, Management Information Systems, 8th ed.,

Pearson Prentice Hall

Lucey, T., 2009, Management Information Systems, 10th ed., Continuum

Turban E. & Aronson J.E., 2001, Decision Support Systems and Intelligent

Systems (6th edition), Prentice Hall Business Publishing

Turban, E., Sharda, R., Delen, D., 2010, Decision Support and Business

Intelligence Systems, 9th edition, Pearson, ISBN-10 0132453231, ISBN-13

978-0132453233

Whiteley, D., 2004, Introduction to Information Systems, Palgrave

56

cc6052 lecture wk04 decisions 2012

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