6-1 Managerial Decision Making and Information Technology Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved. Chapter 6

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-2 Learning Objectives 1. Explain why decision making is an important component of good management. 2. Explain the difference between programmed and non programmed decisions and the decision characteristics of risk, uncertainty, and ambiguity. 3. Describe the classical, administrative, and political models of decision making and their applications. 4. Identify the six steps used in managerial decision making.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-3 Learning Objectives (contd.) 5. Explain four personal decision styles used by managers. 6. Discuss the advantages and disadvantages of participative decision making. 7. Identify techniques for improving decision making in today’s turbulent environment. 8. Describe the importance of information technology (IT) for organizations and the attributes of quality information.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-4 Decisions and Decision Making  A decision is a choice made from available alternatives.  Decision making is the process of identifying problems and opportunities and then resolving them.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-5 Types of Decisions Programmed decisions  situations that occur often enough to enable decision rules to be developed. Nonprogrammed decisions  are made in response to situations that are unique, are poorly defined and largely unstructured.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-6 Decision Making Conditions  Certainty all the information the decision maker needs is fully available.  Risk decision has clear-cut goals. good information is available. future outcomes associated with each alternative are subject to chance.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-7 Decision Making Conditions (contd.)  Uncertainty managers know which goals they wish to achieve. information about alternatives and future events is incomplete. managers may have to come up with creative approaches to alternatives.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-8 Decision Making Conditions (contd.)  Ambiguity by far the most difficult decision situation. goals to be achieved or the problem to be solved is unclear. alternatives are difficult to define. information about outcomes is unavailable.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved. 6-9 Ex. 6.1 Conditions That Affect the Possibility of Decision Failure Organizational Problem Solution LowHighPossibility of Failure CertaintyRiskUncertaintyAmbiguity Programmed Decisions Nonprogrammed Decisions

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Three Decision Making Models  Classical Model  Administrative Model  Political Model

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Selecting a Decision Making Model Depends on the manager’s personal preference. Whether the decision is programmed or non- programmed. Extent to which the decision is characterized by risk, uncertainty, or ambiguity.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Classical Model Based on economic assumptions Is considered to be normative

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Assumptions of the Classical Model  Accomplishes goals that are known and agreed upon.  Strives for certainty by gathering complete information.  Criteria for evaluating alternatives are known.  Decision maker is rational and uses logic.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Administrative Model  How managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity.  Two concepts are instrumental in shaping the administrative model. bounded rationality: means that people have limits or boundaries on how rational they can be. satisficing: means that decision makers choose the first solution alternative that satisfies minimal decision criteria.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Political Model Closely resembles the real environment in which most managers and decision makers operate. Decisions are complex. Disagreement and conflict over problems and solutions are normal. Coalition building is important.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex. 6.2 Characteristics of Classical, Administrative, and Political Decision-Making Models Classical Model Administrative Model Political Model Clear-cut problem and goals. Condition of certainty. Full information about alternatives and their outcomes. Rational choice by individual for maximizing outcomes. Vague problem and goals. Condition of uncertainty. Limited information about alternatives and their outcomes. Satisficing choice for resolving problem using intuition. Pluralistic; conflicting goals. Condition of uncertainty/ambiguity. Inconsistent viewpoints; ambiguous information. Bargaining and discussion among coalition members.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex. 6.3 Six Steps in the Managerial Decision-Making Process

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Diagnosis Questions (Kepner & Tregoe)  What is the state of disequilibrium affecting us?  When did it occur?  Where did it occur?  How did it occur?  To whom did it occur?  What is the urgency of the problem?  What is the interconnectedness of events?  What result came from what activity?

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex. 6.5 Personal Decision Framework Situation: ·Programmed/non-programmed ·Classical, administrative, political ·Decision steps Decision Choice: ·Best Solution to Problem Personal Decision Style: ·Directive ·Analytical ·Conceptual ·Behavioral

© 2006 by South-Western, a division of Thomson Learning. All rights reserved The Vroom-Jago Model The Model  Helps gauge the appropriate amount of participation for subordinates. Leader Participation Styles  Five styles available, depending on the situation.  Participation in decision making ranging from highly autocratic to highly democratic.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Participation in Decision Making Diagnostic Questions  Decision significance  Importance of commitment  Leader expertise  Likelihood of commitment  Group support for goals  Group expertise  Team competence

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Information Technology The hardware, software, telecommunications, database management, and other technologies used to store data and make them available in the form of information for organizational decision making.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex. 6.8 Characteristics of High-Quality Information Time Timeliness Currency Frequency Time Period Content Accuracy Relevance Completeness Conciseness Scope Performance Form Clarity Detail Order Presentation Media Source: Adapted from James A. O’Brien, Introduction to Information Systems, 8th ed. (Burr Ridge, Ill, Irwin, 1997),

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex. 6.9 Types of Information Systems Operations Information Systems  Transaction-processing systems.  Process control systems.  Office automation systems. Management Information Systems  Information-reporting systems.  Decision support systems.  Executive information systems.  Groupware.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Ex Basic Elements of Management Information Systems Operations Information Systems Management Information Systems Reporting Systems Decision Support Systems Executive Information Systems Groupware Systems Corporate and External Databases SOURCE: Adapted from Ralph M. Stair and George W. Reynolds, Principles of Information Systems: A Managerial Approach, 4 th ed. (Cambridge, Mass.: Course Technology, 1999), 391.

© 2006 by South-Western, a division of Thomson Learning. All rights reserved Management and Technology Implications  Improved employee effectiveness.  Increased efficiency.  Empowered employees.  Information overload.  Enhanced collaboration.