Section 12.1: Bullet Text Study Guide


Decision Making and Decision-Support Systems (DDS)

Decisions are made at all levels of the firm. Some decisions are very common and routine but exceptionally valuable. Although the value of improving any single one of these decisions may be small, improving hundreds of thousands of these small decisions adds up to a large annual value.

Decisions are classified according to type:

  • Unstructured decisions are those in which the decision maker must provide judgment, evaluation, and insights into the problem definition.

  • Structured decisions, by contrast, are repetitive and routine, and decision makers can follow a definite procedure for handling them to be efficient.

  • Semistructured decisions are those 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, and unstructured decision making is more common at higher levels.

There are different types of decision-making at different levels:

  • Senior executives face many unstructured decision situations, such as establishing the firm's five or ten-year goals

  • Middle management faces more structured decision scenarios but their decisions may include unstructured components.

  • Operational management and rank-and-file employees tend to make more structured decisions.

Figure 12-1


FIGURE 12-1 INFORMATION REQUIREMENTS OF KEY DECISION-MAKING GROUPS IN A FIRM

Senior managers, middle managers, operational managers, and employees have different types of decisions and information requirements.

There are four different stages in decision making:

  1. Intelligence: Consists of identifying and understanding a problem

  2. Design: Involves exploring various solutions

  3. Choice: Consists of choosing among available solutions

  4. Implementation: Involves making the chosen alternative work and monitoring how the solution is working.

Figure 12-2


FIGURE 12-2 STAGES IN DECISION MAKING

The decision-making process can be broken down into four stages.

Although information systems supporting decision-making can lead to higher ROIs, they cannot improve all the different kinds of decision making in an organization or in all managerial roles.

The classical model of management describes 5 functions of managers: Planning, organizing, coordinating, deciding, and controlling.

Contemporary behavioral models of management state that the actual behavior of managers appears to be less systematic, more informal, and less well organized than the classical model envisions.

Managerial roles fall into three categories:

  • Interpersonal roles: Managers act as figureheads, leaders, liaisons.

  • Informational roles: Managers act as a nerve center, information disseminators, and spokespersons.

  • Decisional roles: Managers act as entrepreneurs, disturbance handlers, resource allocators, and negotiators.

In some of these roles, information systems are not helpful for improving decisions, such as for the roles of figurehead, leader, entrepreneur, or disturbance handler.

Additionally, IT investments for supporting decision making may not produce positive results for three main reasons:

  • Information quality: High-quality decisions require high-quality information regardless of information systems. There are seven dimensions of information quality when designing decision-support systems: Accuracy, integrity, consistency, completeness, validity, timeliness, and accessibility. Even with timely, accurate information, some managers make bad decisions.

  • Management filters: Managers filter by turning off information they do not want to hear because it does not conform to their prior conceptions.

  • Organizational inertia and politics: Organizations are bureaucracies with limited capabilities and competencies for acting decisively. When environments change and new business models should be followed, strong forces within organizations resist making decisions calling for major change.