Management 7 e Schermerhorn Prepared by Michael K

Management, 7 e Schermerhorn Prepared by Michael K. Mc. Cuddy Valparaiso University John Wiley & Sons, Inc Schermerhorn Chapter 7

COPYRIGHT Copyright 2002 © John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that named in Section 117 of the United States Copyright Act without the express written permission of the copyright owner is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein. Schermerhorn Chapter 7

Chapter 7 Information and Decision Making Ø Planning ahead—study questions – How is information technology changing the workplace? – What are the current directions in information systems? – How is information used for decision making? – How do managers make decisions? – Why are knowledge management and organizational learning important? Schermerhorn Chapter 7 3

How is information technology changing the workplace? Ø Definitions: Ø Information – Data made meaningful and useful for decision making. Ø Intellectual capital – Shared knowledge of a workforce that can be used to create wealth. Ø Computer competency/literacy – Ability to understand use computers. Ø Information competency/literacy – Ability to utilize computers and information technology for decision making. Schermerhorn Chapter 7 4

How is information technology changing the workplace? Ø Information technology – The combination of computer hardware, software, networks, and databases that allow information to be shared, stored, and manipulated. Schermerhorn Chapter 7 5

How is information technology changing the workplace? Ø Progressive organizations … – Responding to the growing importance of information technology – Use specialized organizational units headed by a chief knowledge officer or chief information officer (CIO). – Use information technology to compete more effectively in uncertain environments. Schermerhorn Chapter 7 6

How is information technology changing the workplace? Ø Intra-organizational implications of using information technology: – Facilitation of communication and information – – sharing. Flattening of organizational structures. Faster decision making. Increased coordination and control. Structural flexibility. Schermerhorn Chapter 7 7

How is information technology changing the workplace? Ø Extra-organizational implications of using information technology: – Helps organizations take care of customers. – Helps organizations work well with resource suppliers. – Helps build and manage relationships with strategic partners. Schermerhorn Chapter 7 8

What are the current directions in information systems? ØUseful information shares the following characteristics: – Timeliness – Quality – Completeness – Relevance – Understandability Schermerhorn Chapter 7 9

What are the current directions in information systems? Ø Information needs of organizations – Information exchanges with the external environment • Gather intelligence information • Provide public information – Internal information exchanges • Top management • Middle management • First level of management Schermerhorn Chapter 7 10

What are the current directions in information systems? ØInformation systems success factors: – Technical quality of the system – Participation and involvement of users in systems design – Management support of the system Schermerhorn Chapter 7 11

What are the current directions in information systems? Ø Decision support systems (DSS): – Use special software to allow people to interact directly with a computer to organize and analyze data for solving complex and sometimes unstructured problems. Ø Group decision-support systems (GDSS): – Interactive computer-based information systems that facilitate group efforts to solve complex and unstructured problems. Schermerhorn Chapter 7 12

What are the current directions in information systems? Ø Artificial intelligence (AI): – Computer systems with the capacity to reason the way people do. Ø Expert systems: – Software systems that use AI to mimic the thinking of human experts, thereby offering consistent and “expert” advice to decision makers. Schermerhorn Chapter 7 13

What are the current directions in information systems? Ø Intranets … – Use special software to allow persons working in various locations within the same organization to share databases and communicate electronically. Ø Enterprise-wide networks … – Use fully integrated IT to move information quickly and accurately within an organization. Ø Extranets … – Use the public Internet to allow communication between the organization and elements in its external environment. Schermerhorn Chapter 7 14

What are the current directions in information systems? Ø Management information systems … – Use information technology to meet the information needs of managers in making decisions. Ø Advantages of appropriate MIS utilization: – Planning – Organizing – Leading – Controlling Schermerhorn Chapter 7 15

How is information used for decision making? Ø A problem is … – The difference between an actual and a desired situation. • Performance deficiency • Performance opportunity Ø Problem solving is … – The process of identifying a discrepancy and taking action. Ø A decision is … – A choice among alternative course of action. Schermerhorn Chapter 7 16

How is information used for decision making? Ø Programmed decisions – Solutions readily available from past experiences. – Best applied to routine problems. – Commonly applied to resource use and allocation decisions. Schermerhorn Chapter 7 17

How is information used for decision making? Ø Nonprogrammed decisions – Develop novel solutions to meet the demands of a unique situation. – Problems that are commonly faced by higherlevel management. – Information requirements are high. – Decisions involve considerable human judgment. Schermerhorn Chapter 7 18

How is information used for decision making? Ø Crisis decision making – A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately. – An extreme type of nonprogrammed decision must be made. – Crisis management may be the ultimate test of problemsolving capabilities. – Proactive managers develop basic contingency plans for dealing with likely crisis situations. Schermerhorn Chapter 7 19

How is information used for decision making? Ø Decision conditions: – Certain environments • Offer sufficient information about action alternatives and their outcomes. – Risk environments • Lack complete information about action alternatives and their outcomes. – Uncertain environments • Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives. Schermerhorn Chapter 7 20

How is information used for decision making? Ø How managers approach decisions: – Problem avoiders • Inactive in decision making – Problem solvers • Reactive in gathering information and solving problems – Problem seekers • Proactive in anticipating problems before they occur Schermerhorn Chapter 7 21

How is information used for decision making? Ø How managers approach decisions: – Systematic thinking • Approaching problems in a rational, step-by-step, and analytical fashion. – Intuitive thinking • Approaching problems in a flexible and spontaneous fashion. – Multidimensional thinking • Applying both intuitive and systematic thinking Schermerhorn Chapter 7 22

How is information used for decision making? Ø How managers approach decisions: – Strategic opportunism • The ability to remain focused on long-term objectives while being flexible enough to resolve short-term challenges in a timely manner. Schermerhorn Chapter 7 23

How do managers make decisions? Ø Five-step decision-making process: – Identify and define the problem. – Generate and evaluate possible solutions. – Choose a preferred solution and conduct “ethics double check. ” – Implement the solution. – Evaluate results. Schermerhorn Chapter 7 24

How do managers make decisions? Ø Step 1—identify and define the problem – Problem symptoms signal a performance deficiency or opportunity. – Problem finding focuses on identifying performance gaps and their causes. – Avoid the following: • Defining the problem too broadly or too narrowly. • Focusing on symptoms instead of causes. • Choosing the wrong problem. Schermerhorn Chapter 7 25

How do managers make decisions? Ø Step 2—generate and evaluate possible solutions – Avoid the following: • Selecting a particular solution too quickly. • Choosing a convenient alternative that may have damaging side effects. – Criteria for evaluating alternatives: • • • Benefits Costs Timeliness Acceptability Ethical soundness Schermerhorn Chapter 7 26

How do managers make decisions? Ø Step 3—choose a solution and conduct the “ethics double check” – Classical decision model • Views manager as acting in a certain world. • Results in an optimizing decision. – Behavioral decision model • Views manager as acting in situations of limited information and bounded rationality. • Results in a satisficing decision. Schermerhorn Chapter 7 27

How do managers make decisions? Ø Step 4—implement the solution – Establish appropriate action plans. – Managers need to have willingness and ability to implement action plans. – Avoid lack-of-participation error. Schermerhorn Chapter 7 28

How do managers make decisions? Ø Step 5—evaluate results – Involves comparing actual and desired results. – Positive and negative consequences of chosen course of action should be examined. – If actual results fall short of desired results, return to earlier steps in the decision-making process. Schermerhorn Chapter 7 29

How do managers make decisions? Ø Types of heuristics for simplifying decision making: – Availability heuristic • People use information “readily available” from memory as a basis for assessing a current event or situation. – Representativeness heuristic • People assess the likelihood of something happening based upon its similarity to a stereotyped set of occurrences. – Anchoring and adjustment heuristic • People make decisions based on adjustments to a previously existing value or starting point. Schermerhorn Chapter 7 30

How do managers make decisions? Ø Escalating commitment – The tendency to increase effort and apply more resources to a course of action that is not working. Ø Ways to avoid the escalation trap: – Set advance limits. – Make your own decisions. – Carefully determine why you are continuing a course of action. – Reminds yourself of the costs. – Watch for escalation tendencies. Schermerhorn Chapter 7 31

How do managers make decisions? Ø Advantages of group decision making: – Greater amounts of information, knowledge, and expertise – More action alternatives are considered – Greater understanding and acceptance of outcomes – Increased commitment to final plans Schermerhorn Chapter 7 32

How do managers make decisions? Ø Disadvantages of group decision making: – Pressure to conform – Minority domination – Decision making takes longer Schermerhorn Chapter 7 33

How do managers make decisions? Ø Ethical decision making – Any decision should meet “ethics double check. ” • How would I feel if my family finds out about this decision? • How would I feel if this decision were published in the local newspaper? – Should be done during step 3 of decision-making process. – May result in better decisions and prevention of costly litigation. Schermerhorn Chapter 7 34

Why are knowledge management and organizational learning important? Ø Knowledge management … – Processes through which organizations develop, organize, and share knowledge to achieve competitive advantage. Ø Chief Knowledge Officer (CKO) – Energizes learning processes – Manages organization’s intellectual assets Ø Knowledge management requires understanding of and commitment to IT. Schermerhorn Chapter 7 35

Why are knowledge management and organizational learning important? Ø Core ingredients of learning organizations – Mental models – Personal mastery – Systems thinking – Shared vision – Team learning Schermerhorn Chapter 7 36

Why are knowledge management and organizational learning important? Ø Creativity is … – The display or use of ingenuity and imagination to create a novel approach to things or a unique solution to problems. – Essential for a learning organization. – Essential for mastering the demands of complex and changing environments. Schermerhorn Chapter 7 37