Managers and Decision Making Complicated business environment Decisions

Managers and Decision Making • Complicated business environment • Decisions satisfy number of conflicting criteria relating to shareholders, regulators etc. • Monitoring effective or efficient usage of resources and performance of operational units; • Determining how to perform specific tasks; • Evaluating new ideas for products, services; • Availability of right information at the right time.

Levels of Management Decision Making • Strategic Management: - develop overall organizational goals, strategies, policies as a part of strategic planning. - Monitor the strategic performance in the political, economic and competitive business environment;

Levels of Management Decision Making • Tactical Management - Mangers develop short and medium range plans, schedules and budgets; - Specify procedures and business objectives for their subunits, - Allocate resources and monitor the performance. • Operational Management - Develop short range plans; - Direct the use of resources;

Managers and Decision Making Decisions are classified as: Unstructured: Non-routine, no procedure for decision making. pre specified Semi structured - decision procedures that can be pre-specified, but not enough to lead to a definite recommended decision Structured: Repetitive, routine, handled using a definite procedure.

Simon’s Model of Decision Making • Intelligence phase: - Problem is identified -Information collected concerning the problem - Problem situation and opportunities identified. - Monitoring the organization procedures and its environment.

Simon’s Model of Decision Making • Design Phase - Develops several possible solutions for the problem - Developing and evaluating possible courses of action. - Various alternatives explored. • Choice phase: - finally choosing the solution. - Searching, evaluating and finding the appropriate solution.

Mintzberg’s Model of Decision Making • Identification: - identifying the need to make a decision - diagnosing the situation and clarifying the issues. • Development: - search for readily available solutions - modifying the existing solution or develop new ones.

Mintzberg’s Model of Decision Making • Selection - possible alternatives screened. - various possibilities are evaluated. - Final course of action chosen.

Data vs Information • Data a raw fact or an opinion • Data is processed analyzed to generate information. • Knowledge is a body of facts and principles accumulated in the course of time. – has highest level of meaning as it is the information that can be potentially useful in deceion making.

Management Information System (MIS) • Computer based information processing system • Process that provides information necessary to manage organization effectively. Inputs: database, computer H/W and S/W Processing: Simple models Outputs: Summary reports Users: Middle managers Example: Annual budgeting

Management Information System

Transaction processing System (TPS) • Process the data generated from day to day business transactions. • Transaction may be events occurring during the business routines. • Involves capturing, processing and up-dation of data and production of results. • Batch and Real time processing

Decision support System (DSS) • Provide analytical models and tools for analyzing large amount of data. • Handle semi-structured and unstructured problem analysis. • MIS provides fixed reports and addresses structured problems.

MIS vs. DSS

Data Mining for Decision Support • Analyzes the vast stores of historical business data in warehouses. • Tries to discover patterns, trends, and correlations hidden in the data that can help a company improve its business performance. • Perform regression, decision tree, neural network, cluster detection for business scenario.

Group Decision support system (GDSS) • Each participant’s workstation is networked and connected to facilitator’s workstation. • All the data forwarded by participants are collected and saved on file server. • Each participant’s work kept confidential. • Full record of e-meeting available.

Business value of GDSS • Large number of participants can attend the meeting and enhance the productivity. • Contribute to more collaborative environment by ensuring anonymity. • Contribute without the fear of being criticized or having their ideas rejected. • If properly managed, number of ideas generated can be increased and quality enhanced.

Executive support System (ESS) • Support senior managers with an easy access to information about a firm’s key factors • Provides external information like news, stock analysis, industry trends, high level summaries of firm performance. • Output in the form of projections Example: 5 -year operating plan

Executive Support System (ESS):

Business value of ESS • Information is analyzed and presented in graphical displays, trends etc. • Executives quickly retrieve required information to the lowest level of details. • Monitor the extent to which critical factors are deviating from expected results.

Knowledge Management Systems • Creating knowledge • Discovering and codifying knowledge • Sharing knowledge • Distributing knowledge

Managers, Decision making and Information systems

Enterprise Information Portal (EIP) • Web based interface and integrates MIS, DSS, ESS and other technologies. • Provides Intranet users and selected extranets users an access to variety of internal and external business applications. • Internal applications may include access to discussion groups, inventory, customer and other corporate databases. • External applications- links to customer and supplier Internet and extranet websites.

Case#1: Hertz corp. • The largest company in car rental industry. • Several marketing decisions need to be made instantaneously. • The amount of information was huge and how to provide accessibility to such information and use it properly.

Case#1: Hertz corp. • A mainframe base DSS was developed abut marketing manager found the process lengthy and cumbersome. • A PC based ESS system was combined with DSS. • The combined system gave executives tools to analyze the huge stored information and make real time decisions without the help of assistants.

Summary • Information systems can support a variety of management decision-making levels -including strategic, tactical and operational as well as structured, semi structured and unstructured. • Decision support in business is changing, driven by rapid developments in end user computing and networking.

Summary • DSS are interactive, computer-based information systems; • Uses DSS software and a model base and database to provide information tailored to support semi structured and unstructured decisions faced by individual managers

Summary • MIS provide pre-specified reports and responses to managers on a periodic basis to meet their need for information to support decision making. • Online analytical processing interactively analyzes complex relationships among large amounts of data stored in multidimensional databases.

Summary Executive support systems are easy to use and enable executives to retrieve information tailored to their needs and preferences.