management information systems enhancing decision making lecture notes 8

MANAGEMENT INFORMATION SYSTEMSMANAGEMENT INFORMATION SYSTEMS

ENHANCING DECISION MAKINGENHANCING DECISION MAKING

LECTURE NOTES 8LECTURE NOTES 8

DECISION MAKING AND INFORMATION SYSTEMSDECISION MAKING AND INFORMATION SYSTEMS

Decision making in businesses used to be limited to management.

Today, lower level employees are responsible for some of these decisions, as

Information Systems make information available to lower level of business.

TYPES OF DECISIONS

• Structured Decisions

• Semi -structured Decisions

• Unstructured Decisions


STRUCTURED DECISIONS

Are repetetive and routıne decısıons and have a definite procedure for

handling them.

Structured Decisions do not have to be treated as if they are new .

UNSTRUCTURED DECISIONS

Nonroutine decisions in which the decision maker must provide judgment.

Evaluation, and insights into the problem definition; There is no agreed

upon procedures for making such decisions.

SEMISTRUCTURED DECISIONS

Decisions in which only part of the problem has a clear cut answer provided

by an accepted procedure.

In general Structured Decisions are more prevalent at Lower Organizational Levels,

whereas unstructured problems are more common to Higher Levels of organization.


INFORMATION REQUIREMENTS OF KEY DECISION MAKING GROUPS\INFORMATION REQUIREMENTS OF KEY DECISION MAKING GROUPS\

Senior Managers, Middle Managers, Operational Managers and Employees have Senior Managers, Middle Managers, Operational Managers and Employees have different types of Decisions and Information requirementdifferent types of Decisions and Information requirements. s.


SENIOR MANAGEMENT DECISIONS

• Senior Executives face many unstructured decision situations, such as establishing the company’s five or ten years Goals or deciding new markets to enter.

• Senior Management decision will require information from various informal and external sources; Such as news, government reports, and industry views as well as high level summaries of firm’s performance and also manager’s own best judgment and poll other managers for their opinions.

MIDDLE MANAGEMENT DECISIONS

• Middle Management faces more Structural decısıon scenarıos but theır decısıons may ınclude Unstructural componentsç A typıcal Mıddle level Management decııson mıght be:– Why ıs the reported order fulfılment report showıng a declıne over

the past sıx months at a dıstrıbutıon center?


• Middle Manager need reports from the Enterprise System or Distribution Management System on Order activity and Operational efficiency at the Distribution center to make the structured part of the decision.

• The middle manager will have to interview employees and gather more unstructured information from external sources about local economics conditions or sales trends before arriving at an answer.

OPERATIONAL MANAGEMENT DECISIONS

• Operational Management and Rank- and- File Employees tend to make more Structural decisions.

e.g. A Supervisor on an assembly line has to decide whether an hourly paid worker is entitled to overtime pay. If the employee worked more than 8 hours on a particular day. The Supervisor would routinely grant overtime pay for any time beyond 8 hours that was clocked on that day.


OPERATIONAL MANAGEMENT DECISIONS

• A Sales Account Representative often has to make decisions about extending credit limit to customers by consulting the Customer Database that contains credit information. If a customer met the prespecified criteria for granting credit Sales Account Representative will grand the customer credit to make a purchase.

• The decisions in both examples are highly structured and are routinely made thousands of times each day.

• The answer to the first example has been preprogrammed into the firms Payroll System

• The answer to the second example has been preprogrammed into the firms Accounts Receivable System.


MANAGERS ABD THE DECISION MAKING IN THE REAL LIFE

Managers play key roles in organizations. Their responsibilities range

from making decisions, to writing reports., to attending meetings, to

arranging say parties.

• For a better understanding of Managerial functions and roles you are advised to examine the Classical and Contemporary Models of Managerial Behavior.

Managerial Roles

Managerial Roles are expectations of the activities that managers should

perform in an organization.

According to Mitzberg the Managerial Roles fell into three categories:

Interpersonal Roles, Informational Roles , and Decisional Roles.


MANAGERIAL ROLES

INTERPERSONAL ROLE

Managers act as leaders, attempting to motivate , counsel, and support

subordinates. Managers act as liaisons among the members of the

management team. Managers provide time and favors, which they expect

to be returned.

INFORMATIONAL ROLES

Managers act as the nerve centers of their organization, receiving the most

concrete, up to date information and redistributing it to those who need to

be aware of it. Managers are disseminators and spokespersons for their

organizations.


DECISIONAL ROLE

Managers act as entrepreneurs by initiating new kinds of activities they

handle disturbances arising in the organization;

– Allocate resources to staff members who need them

– Negotiate conflicts and mediate between conflicting groups

According to Mitzberg‘s Role Classıfıcatıons Information Systems are not

helpful for all Managerial Roles.

Also investments in Information Systems in those Managerial Roles that

can improve decisions do not always produce positive results for the

following three main reasons:

Information Quality Management Filters Organizational Inertia and Politics


1. INFORMATION QUALITY

High Quality decisions require high Quality Information.

The Information Quality Dimensions

– Accuracy

– Integrity

– Consistency

– Completeness

– Validity

– Timelines

– Accessibility

If the Output of the Systems does not meet these Quality criteria, Decision

making will suffer.


2. MANAGEMENT FILTERS

Even with timely, accurate information, some managers make bad decisions.

• Managers absorb information through a series of Filters to make sense of the world around them.

• Managers have selective attention, focus on certain kinds of problems and solutions, and have a variety of biases that reject information that does not conform to their prior conceptions.

e.g. CISCO Systems Corporations, one of the most advanced users of Online Decision Support Systems, was forced to write off 3.4 billions USD in excess inventory in 2001 because management had not interpreter the information from systems correctly.


3. ORGANIZATIONAL INTERIA AND POLITICS

• Organizations are bureaucracies with limited capabilities and competencies for acting decisively.

• When environments change and businesses need to adopt new business models to survive, strong forces within organizations resist making decisions calling for major change.

• Decision taken by a firm often represent a balancing of the firms various interest groups rather than the best solution to the problem.

• Studies in Business Restructuring find tat firms tend to ignore poor performance until threatened by outside takeovers , and they systematically blame poor performance on external forces beyond their controls such as economic conditions, foreign competition, and rising prices, rather than blaming Senior or Middle Management for poor business judgment.


SYSTEMS FOR DECISION SUPPORT

There are four kinds of Systems for supporting the different levels and

types of decisions.

1. Management Information Systems (MIS)

2. Decision Support Systems (DSS)

3. Executive Support Systems (ESS)

4. Group Decision Support Systems (GDSS)



1. MANAGEMENT INFORMATION SYSTEMS (MIS)

Provide routine reports and summaries of transaction level data to the Middle and Operational level managers.

MIS provide answers to Structured and Semistructured decision problems.

Help managers monitor and control the business by providing

information on the firm’s performance.

produce fixed, regularly scheduled reports based on data extracted and summarized from the underlying Transaction Processing Systems (TPS).



1. MANAGEMENT INFORMATION SYSTEMS (MIS)

Sometimes MIS produce Exception Reports highlighting only exceptional conditions, such as when the sales quotas for a specific territory fall below an anticipated level or employees have exceeds their spending limits in a dental care plan.

Many MIS reports are available online through Intranet on demand.



2. DECISION SUPPORT SYSTEMS (DSS)

Provide Analytical Models or Tools for analyzing large quantities of data for Middle managers who face semistructured and unstructured decision situation.

The earliest DSS were heavily Model driven, using some type of model to perform WHAT IF and other kinds of analyses. Their analysis capabilities were based on a strong theory or model combined with good user interface that made the system easy to use.

Some contemporary DSS are Data drive, using Online Analytical Processing

(OLAP), Data Mining and Excel Spreadsheet Pivot table to analyze pools of data.

Data driven DSS support decision making by enabling users to extract useful information that was previously buried in large quantities of data.

DDECISION MAKING AND INFORMATION SYSTEMSECISION MAKING AND INFORMATION SYSTEMS

Components Of DSSComponents Of DSS

The main components of the DSS are:The main components of the DSS are:

DSS Database. DSS Database. User Interface, User Interface, DSS Software System DSS Software System


Components Of DSS

• DSS DatabaseDSS Database may be a small Database residing on a PC or on a large Data Warehouse.

• DSS User Interface Permits easy interaction between Users and the DSS Software tools.

Many DSS today have Web Interfaces to take advantage of Graphic displays, interactivity, and ease of use.

• DSS Software DSS Software contains the software tools that are used for data analysis such

as OLAP tools, Data Mining Tools, or collection of Mathematical and Analytical Models (e.g. Equation), or Verbal Model (such as Description of a procedure for writing an order).


• DSS Software

– Statistical Modeling helps establish relationships, such as relating Product sales to differences in age, income, or other factors between communities

– Optimizing Models determine optimal resources allocation to maximize or minimize specified variables, such as costs or time.

A classic use of Optimizing Model is to determine the proper mix of products within a given market to maximize the profits.

– Forecasting Models are used to forecast Sales etc… The User of this model has to supply a range of historical data to project future conditions and the sales that might result from those conditions, The Decision maker can vary the future conditions to determine how new conditions might affect the sales.


– Sensitive Analysis Models ask WHAT IF questions repeatedly to determine the impact on outcomes of changes in one or more factors.

• Foreword Sensitive Analysis Software - What If Analysis works foreword form the known or assumed conditions allowing users to very certain values to test results to better predict outcomes if changes occur in those values. (Excel is oftenused for this purpose)E.g. What happens If we raise the product price by 5% OR increase advertising budget 100000 USD.

• Backward Sensitive Analysis software helps decision makers with Goal Seeking.

E.g. If I want to sell 1 million books next year , how much must I reduce the price of the book.

NOTE: MS Excel Spreadsheet Software offers many tools that are helpful for managers to solve problems Such tools like WHAT IF Analysis, Pivot Table and Pivot Chart Reporting and Goal Seeking.

A SAMPLE SENSETIVE ANALYSISA SAMPLE SENSETIVE ANALYSIS

EXCEL PIVOT TABLE WIZARDEXCEL PIVOT TABLE WIZARD


BUSINESS VALUE OF DSS

DSS have become very powerful and sophisticated, providing fine grained

information to decisions that enable the firm to coordinate both internal

and external business purposes preciously.

• Some DSS Systems are helping companies with decisions in Customer Relationship Management or Supply Chain Management.

• Some DSS Systems take advantage of Company wide data provided by Enterprise Systems.

• DSS today can also harness the interactive capabilities of the Web to provide Decision Support tools to both employees and customers.

DECISION MAKING AND INFORMATION SYSTEMSDECISION MAKING AND INFORMATION SYSTEMSDSS VARIATIONS

With the advent of data visualization technologies and the growth of Electronic

Commerce encouraged many companies to develop special categories of

Decision Support Systems such as Data Visualization GIS, and Web based

Customer DSS Systems

DATA VISUALIZATION GEOGRAPHIC INFORMATION SYSTEMS (GIS)

Geographic Information Systems (GIS) use data visualization technology

to analyze and display data for planning and decision making in the form

of digitalize maps.

The Software assembles, stores, manipulates and displays geographically referenced information, trying data to points, lines, and areas of on a map.

DECISION MAKING AND INFORMATION SYSTEMSDECISION MAKING AND INFORMATION SYSTEMSDATA VISUALIZATION GEOGRAPHIC INFORMATION SYSTEMS

GIS have modeling capabilities enabling managers to change data and

automatically revise business scenarios to find better solutions.

GIS support decisions that require knowledge about the geographic distribution

of people or other resources.

e.g. GIS might be used to help state and local governments calculate emergency response times to natural disaster. To help retail chains

identify profitable new store locations, or to help banks identify the

best locations for installing new branches or ATM terminals.

New York Police developed a System called CompStat for controlling crime. CompStat use GIS Software to capture data about crime incidents and enforcement activities at each of the citys precincts. GIS display data about where crimes are occurring and is credited with reducing crime rates in new York and other cities.


WEB-BASED CUSTOMER DECISION-SUPPORT SYSTEMS (CDSS)

The growth of e-Commerce has encourage many companıes to develop DSS for customers that use Web Informatıon resources and capabılıtıes for ınteractıvıty and personalization to help users select products and services.

People can use more information from multiple sources to make purchasing decisions before they interact with the product or sales staff.

e.g. Many automobile companies use Web-based Customer Decision Support Systems (CDSS) that allow Web site visitors to configure their desired car.

People interested in purchasing a product or service can use Internet search engines, Intelligent Agents, Online catalog, Web directories,

News group discussions, email and other tools to help them locate the information they need to help with their decision.


WEB-BASED CUSTOMER DECISION-SUPPORT SYSTEMS (CDSS)

Companies have developed specific Customer Web Site where all the information. models or other analytical tools for evaluating alternatives are concentrated in one location.

Web –based DSS have become especially popular in Financial Services because so many people are trying to manage their own assists and retirement savings.

e.g. RiskMetriks Group runs a web site (RiskGrades.com) that lets users input all their stock, bonds and mutual fund holdings to determine how much their portfolios might decline under various conditions. Users can see how the addition or subscription of a holding might affect overall portfolio volatility and risk



3. EXECUTIVE SUPPORT SYSTEMS (ESS)

ESS help managers with unstructured and semi structured problems by focusing on the information needs of Senior management.

ESS combine data from internal and external sources and help senior executives monitor organizational performance, track activities of competitors, spot problems, identify opportunities, and forecast trends.

Use of ESS has migrated down several organizational levels so that the executive and subordinates are able to look at the same data in the same way.

ESS try to avoid the problem of data overload because the data can be filtered or viewed in graphic format.



ESS have the ability to Drill Down, moving from a pieces of a summary data to lower and lower levels of detail. OLAP tools for analyzing large Database have Drill Down capability.

A major challenge of ESS has been to integrate data from several systems designed for very different purposes so senior executive can review organizational performances. From a firm wide prespective.

Today Enterprise Systems are able to provide managers with timely, comprehensive and accurate firm wide information. ESS based on such data can be considered logical extension s of Enterprise Systems functionality.

Executives also need a wide range of external data, from current Stock Market news to Competitor firms information, Industry trends and even projected legislative action.



Through the ESS many managers have access to news services, financial market databases, Economic information, and whatever other public data they may require.

Contemporary ESS include tools for modeling and analysis. Most managers with a minimum experience can use these tools to create graphic comparisons of data by time, region, product, price range etc,

ESS however, needs to have some facility for environmental scanning.

A key information requirements of managers at the strategic level is the ability to detect signals of problems in the organizational environment that indicate strategic threats and opportunities

ESS need to be designed so that both external and internal sources of information can be used for Environmental Scanning purpose.


BUSINESS VALUE OF EXECUTIVE SUPPORT SYSTEMS (ESS)

Much of the value of ESS is found in their flexibility and their Ability to analyze , capture and highlight trends.

The easy use of graphics enable the user to lock at more data in less time with greater clarity and insight than paper based Systems provide.

Executives are using ESS to monitor key performance indicators for the entire firm and to measure firm performance against changes in the external environment.

The timelines and availability of the data result in needed actions being identified and carried out earlier than previously could have been done. Problems can be handled before they become too damaging; opportunities can also be identified earlier.

ESS can thus help business move toward a ‘Sense-and-Respond’ strategy


BUSINESS VALUE OF EXECUTIVE SUPPORT SYSTEMS (ESS)

A well desıgned ESS could dramatıcally ımprove management performance and ıncreas upper management’s span of control.

Immediate access so much data increases executives ability to monitor activities of lower units reporting to them. That very ability could enable decision making to be decentralized and to take place at lower operating levels.

Executives are often willing to push decision making further down into the organization as long as they can be assured that all is going well.

Alternatively, ESS based on Enterprise wide data could potentially increase Management centralization enabling senior executives to monitor the performance of subordinates across the company and to take appropriate action when conditions change.


EXECUTIVE SUPPORT SYSTEMS (ESS) AND DIGITAL FIRMS

ESS can be configured to summarize and report on Key Performance

Indicators for senior management in the form of a Digital Dashboard.

Otherwise known as Executive Dashboard.

The dashboard displays on a single screen all of the Critical Measurements for

piloting a company , similar to the cockpit of a plane or a car dashboard.

The dashboard presents Key Performance Indicators (KPI) as graphs and

charts in a Web Browser format, providing a one page overview of all the

critical measurements necessary to make Key executive decisions.

Dashboard for example may display summaries from point-of-sales Systems

and from General Ledger Accounts to show how the business is performing on

a daily basis and whether staffing levels are appropriate on the areas where

the company is making profits.


EXECUTIVE SUPPORT SYSTEMS (ESS) AND DIGITAL FIRMS

Senior Management also drill down to compare the performance of fitness

centers or see whether activity on a golf course experiencing a slowdown has

been picking up.

Companies have traditionally measured value using Financial Metrics, such as

Return On Investment (ROI).

Many firms have implemented a Balanced Scoring Model that supplements

traditional Financial measures with measurements from additional

perspectives such as Customers, Internal Business processes, and Learning

and Growth. The Goals and Measures for the Balanced Scorecard vary from

company to company.

Companies are developing Systems to populate the Scorecard for management.


4. GROUP DECISION SUPPORT SYSTEMS (GDSS)

A Group Decision Support System (GDSS) is an interactive, computer based system used to facilitate the solution of unstructured problems by a set of decision makers working together as a group.

• GDSS is developed to support group and organizational level decision making. It provide tools and technologies geared explicitly toward group decision making and developed in response to a growing concern over the quality and effectiveness of meetings.

• The underlying problems in group decision making have been the explosion of decision maker meetings , the growing length of those meetings, and the increased number of attendess.

(Estimates on the amount of manager’s time spent in a meeting ranges from 35% to 70%.)


4. GROUP DECISION SUPPORT SYSTEMS (GDSS)

Components of GDSS

GDSS make meetings more productive by providing tools to facilitate planning. generating. organizing and evaluating ideas, establishing priorities and documenting meeting proceedings for others in the firm.

GDSS consist of three basic elements:

i. Hardware

ii. Software Tools

iii. People


Components of GDSS

i. Hardware: Reeds to the conference facility itself, including the room. Tables and chairs as well as some electronic equipment such as electronic display board, audiovisual, computer and networking equipment to facility and supports group collaboration.

ii. Software Tools: GDSS Software tools were originally developed for managing meetings in which all participants are in he same room, but also they can be used for networked meetings in which participants are in

different locations across the world. Specific GDSS Software Tools include: Electronic Questionnaires,

Electronic Brainstorming Tools, Idea Organizer , Questionnaire tools, Voting or Priority Setting tools, Stake Holder Identification and Analysis Tools, Policy Formatting Tools, Group Dictionaries.


Specific GDSS Software Tools:

Electronic Questionnaires, Aid the meeting organizers in premeeting planning by identifying issues of concern and by helping to ensure that the key planning information is not overlooked.

• Electronic Brainstorming Tools Enable individuals, simultaneously and anonymously, to contribute ideas on the topics of the meeting.

• Idea Organizer Facilitate the organized integration and synthesis of ideas generated during brainstorming session.

• Questionnaire tools, Support the facilitators and Group leaders as they gather information before and during the process of setting priorities.

• Voting or Priority Setting Tools Make available a range of methods from simple voting to ranking in order to a range of weighted techniques for setting priorities or voting.


Specific GDSS Software Tools:

• Stake Holder Identification and Analysis Tools Use structured approaches to evaluate the impact of an emerging proposed on the organization and to identify stakeholders and evaluate the potential impact of those stakeholders on the proposed project.

• Policy Formatting Tools, Provide structured support for developing agreement on the wording of policy statement.

• Group Dictionaries. Document group agreement on definition of words and terms central to the project.


Components of GDSS

iii. People Refers not only to the participants but also to a trained Facilitator and often to the Staff that supports the Hardware and Software.

The three components of GDSS (Hardware, Software Tools and the

People) have led to the creation of a range of different kinds of GDSS,

from simple electronic boardrooms to collaboration laboratories.


OVERVIEW OF A GDSS MEETING

• Electronic meeting rooms have seating arrangements in semicircles and are tiered in legislative style to accommodate a large number of attendees

• In an electronic GDSS meeting , each participant has a Workstation.

• The Workstations are networked and connected to the Facilitator’s Workstation and to the meeting’s File Server.

• All data forwarded by the participants’ workstations to the group are collected and saved on the File Server.

• Electronic Whiteboards are visible on either side of the projection screen.

• The Facilitator controls the use of tools during the meeting

• Attendees have full control of their own



GENERAL GDSS MEETING ROOM ARRANGEMENT

Electronic meeting rooms have seating arrangements in semicircles and are tiered in legislative style to accommodate a large number of attendees

Each GDSS meeting participant has a Workstation. The Workstations are networked and connected to the Facilitator’s Workstation and to the

meeting’s File Server.

DURING THE MEETING

The Facilitator controls the use of GDSS Tools during the meeting Attendees have full control of their own Desktop Computers. All data forwarded by the participants’ workstations to the group are collected and saved

on the File Server and the participants’ work is kept confidential. Electronic Whiteboards are visible on either side of the projection screen.



END OF THE MEETING

A full record of the GDSS meeting (Both raw material and resultant output) is made available to the attendees and can be made available to anyone else with a need for access.


Figure below illustrates the Sequence of activities and the Collaborative Support

Tools used in an Electronic meeting System, which facilitates communication

among attendees and generate a full record of the meeting.


BUSINESS VALUE OF GDSS

• A Traditional Decision making meetings (without GDSS support), the optimal meeting size is 3 to 5 attendees. Beyond the optimal size, the process begins to break down.

• Using GDSS Software, the number of attendees at a meeting can increase while productivity also increases. One reason for this is that attendees contribute to the meeting simultaneously rather than one at a time, which makes more efficient use of the meeting.

• GDSS Contributes to a more collaborative atmosphere by guaranteeing contributors’ anonymity.

– Attendees can contribute without fear of personally being criticized or having their ideas rejected because of the identity of the contributor.

DECISION MAKING AND INFORMATION SYSTEMSDECISION MAKING AND INFORMATION SYSTEMSBUSINESS VALUE OF GDSS

• GDSS Software tools follow structured methods for organizing and evaluating ideas and for preserving the results of meeting, enabling nonattendees to locate needed information after the meeting.

• The documentation of a meeting by one group at one site can also be used as input to another meeting on the same project at another site.

• If properly designed and supported, GDSS meeting can increase the number of ideas generated and the quality of decisions while producing the desired results in fewer meetings in both face-to-face and distributed environment.

• However GDSS outcomes are not necessarily better than face-to-face meetings, and electronic brainstorming has not been widely adopted. – GDSS seem most useful for tasks involving idea generation, complex problems,

and large groups


BUSINESS VALUE OF GDSS

• A GDSS can be configured in a variety of ways. However, the outcome of a group meeting depends on many factors as listed below:

Composition of the group, Manner in which the problem is presented to the group, Facilitator’s effectıveness. Organization’s culture and environment, Quality of the planning, Cooperation of the attendees, Appropriateness of tools selected for different types of meetings and decision problems.

management information systems enhancing decision making lecture notes 8

Documents

unstructured information

information available

information systemsdecision

decision maker

distribution management

structural decisions

general structured decisions

operational managers