Improving Decision Making &

Information System

Mark Boadu (PhD)

 Student Learning Objectives
• What is decision making and decision making
process?
• What are the classifications of information?
• What are the different types of decisions, and
how does the decision-making process work?
• How do information systems help people
working individually and in groups make
decisions more effectively?
 What is decision making?
• Decision making is one of the most crucial activities
of management.

• A decision is a conscious choice among alternatives,

followed by action to implement the choice.

• Decision making involves making a choice among

several alternative courses of action.

• In management, several issues crop up which

necessitate a choice. Decision making makes this
choice possible.
 What is decision making?
• In business, there are absolutely no permanent right or
wrong decisions but intelligent choices
• The effectiveness and quality of those decisions determine
how successful a manager will be.
• What one considers a right decision in a particular time
frame may turn out to be an unintelligent decision if the
circumstances change.
• This is particularly so in some industries,
– where the total production is unknown,
– the consumption pattern is not clear,
– the total population is a guess work,
– supply of raw materials is influenced by political consideration and
the lead time for the supply of raw material is most unpredictable.
 Decision making and Information system

• Intelligence computer software is helping

managers and other decision makers to be
more effective and efficient.
• Several diverse industries such as energy,
health care, transportation, and
telecommunications are relying on applied
intelligence software to help make decisions
• Can anything ever replace the decision making
process utilized by humans?
 Decision making
• Decision making is part of all four managerial
functions - managers are often called decision
makers.
• The decisions that management has to take are
sometimes simple and in other instances, complex
and overwhelming.
– A decision to increase production in a particular industry
can necessitate the employment of more labour, increase
in plant capacity, acquisition of more equipment,
borrowing of money and the mastering of new
technological know-how.
 Time To Think
• What kinds of decisions have you made on
your previous or current jobs.

– You will observe that the employees perform their

jobs?
– the success of the company rests upon employees
making a large number of seemingly minor
decisions, small decisions, that add up to billions
of dollars in firm revenue.
 Decision Making and Information Systems

• Possible to measure value of improved decision making.

• Decisions made at all levels of the firm.
• Some are common, routine, and numerous.
• Although value of improving any single decision may be
small, improving hundreds of thousands of “small”
decisions adds up to large annual value for the business.
• In other words, systems that make ordinary employees
better decision makers can be as valuable or more
valuable as systems that improve decision making of
senior executives.
 Decision Making and Information Systems
Decision Maker Decision Value of Annual value
Type decision to firm

Allocate support to most Accounts manager 12 $100,000 $1,200,000

valuable customers.

Predict call center daily Call Center 4 150,000 600,000

demand. management

Decide parts inventory level Inventory manager 365 5,000 1,825,000

daily.

Identify competitive bids Senior 1 2,000,000 2,000,000

from major suppliers. management

Schedule production to fill Manufacturing 150 10,000 1,500,000

orders. manager
 Decision Making and Information Systems
Types of Decisions
• Unstructured/Non-Programmable
• Decision maker must provide judgment to solve problem
• Important, non-routine
• No well-understood or agreed-upon procedure for making
them
• Structured/Programmable
• Repetitive and routine
• Involve definite procedure for handling them so do not have
to be treated as new
• Semi-structured
• Only part of problem has clear-cut answer provided by
accepted procedure
 Types of Managerial Decision making
• Programmed Decisions are those
made in routine, repetitive, well- • Non-Programmed Decisions are
structured situations through the use those for which predetermined
of predetermined decision rules. decision rules are impractical
• Many programmed decisions are because the situations are novel
derived from established practices and/or ill-structured.
and procedures or habit.
• In non-programmed decisions,
• Computers are an ideal tool for
dealing with several kinds of complex
the procedures for handling
programmed decisions. problems are not structured.
• In programmed decisions there are • There is no established
defined procedures for handling procedure for handling the
repetitive and routine situations or problem because of its
problems. complexity or its extreme
• Decisions are made based on a importance.
predetermined way of doing things. • Such decisions deserve special
attention.
 Types of Managerial Decision making
• Decisions under programmed • Non-programmed decisions
decision making are routine in involve searching for
nature and are made more information and alternatives
often than non-programmed that lie outside the routine
decisions. decision making process.
• In addition, decisions are usually • These decisions are often
taken where the decision can be time-consuming (unlike
taken with much certainty and routine decisions) and demand
are simplified in nature and help that employees be prepared to
actions to be quickly taken.
create alternative solutions,
• Most of the decisions made by analyze them critically and
first-line managers and many by choose a course of action.
middle managers are
•
Programmed decisions.
 Proactive versus Reactive Decisions:
• A proactive decision is a • However, reactive
decision made in decision is made in
anticipation of an response to external
external change or changes.
other conditions.
Managers who engage
in systematic, proactive
decision making can
prevent problems from
developing.
 Types of Managerial Decision making - Intuitive
versus Systematic Decisions:
• intuitive decision making involves
the use of estimates or guesses to • Systematic decision making
decide among alternative causes on the other hand is an
of action. organized, exacting, data
• Many decisions of managers are driven process. It requires
influenced to a great extent by developing a clear set of
intuition. objectives; a relevant
• Intuitive decisions are based on
information base; team
experience with similar situation
and training or practice in based; consensus sharing
systematic decision making, and of ideas; creativity;
are usually made in situations exacting implementation;
where there is little time for and assessment.
analysis. They are merely choices
that seem reasonable to a
manager.
 Classification of Decision Making
• Decision making under certainty
– Certainty is a situation in which a manager can make
accurate decisions because the outcome of every
alternative is known.
– They are made under the condition of certainty when the
manager has perfect knowledge of the information
needed to make a decision.
– This condition is ideal for problem solving in which the
challenge is simply to study the alternatives and choose
the best solution.
– When problems tend to arise on a regular basis, a manager
may address them through standard or prepared
responses called programmed decisions.
– These solutions are already available from past
experiences and are appropriate for the problem at hand.
 Classification of Decision Making
• Decision making under risk
– Risk is the possibility that a chosen action could lead to
losses rather than the intended results.
– At risk environment, the manager lacks complete
information - this condition is more difficult.
– Manager may understand the problem and the alternatives,
but has no guarantee how each solution will work.
– When new and unfamiliar problems arise, non-programmed
decisions are specifically tailored to situation at hand.
– The information requirements for defining and resolving
non-routine problems are typically high.
– Most problems faced by higher-level managers demand
non-programmed decisions.
– This fact explains why the demands on a manager’s
conceptual skills increase as he or she moves into higher
levels of managerial responsibility
 Classifications of Decision making
• Decision making under uncertainty
– Uncertainty is a condition in which the decision maker chooses
a course of action without complete knowledge of the
consequences that will follow implementation.
– When information is so poor that managers can’t even assign
probabilities to the likely outcomes of alternatives, the manager
is making a decision in an uncertain environment - this condition
is the most difficult for a manager.
– Uncertainty forces managers to rely heavily on creativity in
solving problems.
– It requires and often totally innovative alternatives to existing
processes.
– Groups are frequently used for problem solving in such
situations. In all cases, the responses to uncertainty depend
greatly on intuition, educated guesses, and hunches – all of
which leave considerable room for error
 Decision Making and Information Systems

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.

Figure 11-1
 Decision Making Process
• Decision making process is defined as a set of
different steps that begins with:
– identifying a problem and decision criteria and allocating
weights to those criteria;
– moves to developing, analyzing, and selecting an
alternative that can resolve the problem;
– implements the alternative;
– and concludes with evaluating the decision’s
effectiveness.
• The decision process is influenced by:
– the unique environment of the decision maker,
– his organisational position,
– available knowledge and
– experience in decision-making.
 Decision Making and Information Systems
The Decision-Making Process
1. Intelligence
• Discovering, identifying, and understanding the
problems occurring in the organization—why is there a
problem, where, what effects it is having on the firm
2. Design
• Identifying and exploring various solutions
3. Choice
• Choosing among solution alternatives
4. Implementation
• Making chosen alternative work and monitoring how
well solution is working
 Decision Making and Information Systems

• Quality of decisions, decision making

• Accuracy
• Comprehensiveness
• Fairness
• Speed (efficiency)
• Coherence
• Due process
 A Model of the Problem-Solving Process

• Problem solving: four-step process

1. Problem identification

2. Solution design

3. Choice

4. Implementation
 A Model of the Problem-Solving Process
• Typical technology problems
1. Problem identification includes: • Insufficient or aging hardware
• Agreement that problem • Outdated software
exists • Inadequate database capacity
• Definition of problem • Insufficient telecommunications
• Causes of problem capacity
• What can be done given • Incompatibility of old systems
resources of firm with new technology
• Typical organizational problems • Rapid technological change
• Outdated business • Typical people problems
processes • Lack of employee training
• Unsupportive culture and • Difficulties of evaluating
attitudes performance
• Political in-fighting • Legal and regulatory compliance
• Turbulent business • Work environment, ergonomics
environment, change • Poor or indecisive management
• Complexity of task • Lack of employee support and
• Inadequate resources participation
 A Model of the Problem-Solving Process

2. Solution design
Why are there so many solutions to a problem? How many
solutions can be seriously examined and explored?
• Often many possible solutions
• Consider as many as possible to understand range of
solutions
3. Solution Evaluation and Choice: Factors include
• Cost
• Feasibility given resources and skills
• Length of time needed to implement solution
 A Model of the Problem-Solving Process
4. Implementation
• Building or purchasing solution
• Testing solution, employee training
• Change management
• Measurement of outcomes
• Feedback, evaluation of solution
• Why should implementation be considered in the problem solving
process? One reason is that you want to avoid solutions that cannot
be easily implemented.

• Problem solving is a continuous process, not a single event

• Sometimes chosen solution doesn’t work or needs adjustment
• Why aren’t problems solved once and for all? Some problems might
be “solved” and forgotten, and lack of attention leads to the problems
arising again.
 Problem Solving Is a Continuous Four-Step Process

During implementation and

thereafter, the outcome must be
continually measured and the
information about how well the
solution is working is fed back to
the problem solvers. In this way, the
identification of the problem can
change over time, solutions can be
changed, and new choices made, all
based on experience.
What makes problem solving
continuous is that most solutions
don’t always work perfectly and
need fine tuning. Some decisions
result in actions that don’t work at
all, or work perfectly (at least for a
period of time). In any case, you
need continuous feedback from the
environment to track how well
solutions are working. Figure 1-4
THE END

• THANK YOU