Chapter 11 Management Decision Making California State University, Fullerton © 2001 Business & Information Systems 2/e

Improving Management Decision-making Effectiveness Chapter 11 Improving Management Decision-making Effectiveness A decision is a selection among several courses of action. Information helps reduce the uncertainty. With better information, a decision maker is more certain about the outcome of a decision. California State University, Fullerton © 2001 Business & Information Systems 2/e

Levels of Management Decisions Chapter 11 Levels of Management Decisions Management decisions are made at several levels in an organization. Starting at the top: Strategic decisions Tactical decisions Operational decisions California State University, Fullerton © 2001 Business & Information Systems 2/e

Strategic Decisions Made by top level managers. Chapter 11 Strategic Decisions Made by top level managers. Involve setting organization policies, goals, and long-term plans. They affect the organization for many years. California State University, Fullerton © 2001 Business & Information Systems 2/e

Tactical Decisions Made by middle-level managers. Chapter 11 Tactical Decisions Made by middle-level managers. Involve implementing policies of the organization. They affect the organization for several months or a few years. California State University, Fullerton © 2001 Business & Information Systems 2/e

Operational Decisions Chapter 11 Operational Decisions Made by lower-level manager. Involve the day-to-day decisions needed in the operation of the organization. They affect the organization for a short period of time, such as several days or weeks. California State University, Fullerton © 2001 Business & Information Systems 2/e

Characteristics of Management Decisions Chapter 11 Characteristics of Management Decisions The three characteristics of management decision making Time horizon affected by the decision Frequency of repeating the same decision Degree of structure in the decision process California State University, Fullerton © 2001 Business & Information Systems 2/e

Characteristics of Management Decisions (cont’d.) Chapter 11 Characteristics of Management Decisions (cont’d.) Strategic decisions tend to be unstructured. Tactical decisions tend to be semi-structured. Operational decisions tend to be very structured. California State University, Fullerton © 2001 Business & Information Systems 2/e

Information Needs for Management Decisions Chapter 11 Information Needs for Management Decisions Two characteristics of information needed for management decision making: Source of the information Internal External Degree of detail of information Detailed Summarized California State University, Fullerton © 2001 Business & Information Systems 2/e

Information Needs for Management Decisions (cont’d.) Chapter 11 Information Needs for Management Decisions (cont’d.) Strategic decision information tends to be external and summarized. Tactical decision information tends to be both internal and external and both detailed and summarized. Operational decision information tends to be internal and detailed. California State University, Fullerton © 2001 Business & Information Systems 2/e

Information Systems for Management Support Chapter 11 Information Systems for Management Support Information systems support management in all the functions of a business at all levels. Accounting information systems provide accounting information at all levels. Financial information systems help in financial decision making at all levels. California State University, Fullerton © 2001 Business & Information Systems 2/e

Information Systems for Management Support (cont’d.) Chapter 11 Information Systems for Management Support (cont’d.) Marketing information systems provide information to marketing managers at all levels. Manufacturing information systems assist in making manufacturing and production decisions at all levels. Human resource information systems support personnel decisions making at all levels. California State University, Fullerton © 2001 Business & Information Systems 2/e

Management Information System Structure Chapter 11 Management Information System Structure A Management Information System (MIS) supports management decision making by providing information in the form of reports and responses to queries to managers at different levels of an organization. California State University, Fullerton © 2001 Business & Information Systems 2/e

Management Information System Functions Chapter 11 Management Information System Functions MIS perform the four main functions of an information system: Input function Storage function Processing function Output function California State University, Fullerton © 2001 Business & Information Systems 2/e

Decision Support Systems Chapter 11 Decision Support Systems MIS support managers make decisions by providing information from a database with little or no analysis. A Decision Support System (DSS) helps managers make decisions by analyzing data from a database and providing the results of the analysis to the manager. California State University, Fullerton © 2001 Business & Information Systems 2/e

Management Decision Support Chapter 11 Management Decision Support DSS includes several ways of analyzing data. They include: Statistical calculations – data is manipulated to determine characteristics of the data (descriptive) or to draw conclusions from the data(inferential) . Mathematical modeling – a representation of reality. Statistical calculations example – a manager has data about different types of shoes sold for each of the past five years. He or she can calculate the average yearly sales for each type, which is one way of characterizing the data. Mathematical modeling example – an inventory flow simulation so that a manager can try different inventory reordering decisions. By trying different strategies, a manager can use the model to determine the least expensive inventory reordering policy. California State University, Fullerton © 2001 Business & Information Systems 2/e

Decision Support System Structure Chapter 11 Decision Support System Structure The users of a DSS are managers, usually at the tactical and strategic levels in the organization. The DSS model base (analogous to a database) contains the mathematical models and statistical calculation routines that are used to analyze data from the database. California State University, Fullerton © 2001 Business & Information Systems 2/e

Decision Support System Functions Chapter 11 Decision Support System Functions The capabilities of a decision support system are provided by the four information system functions performed by the system. They are: Input function Storage function Processing function Output function California State University, Fullerton © 2001 Business & Information Systems 2/e

Decision Support System Software Chapter 11 Decision Support System Software DSS are usually developed using general software that is adapted for a specific decision. An example of DSS software is spreadsheet software. California State University, Fullerton © 2001 Business & Information Systems 2/e

Group Decision Support Systems Chapter 11 Group Decision Support Systems A Group Decision Support Systems (GDSS) is a system designed to support group decision making. GDSS are typically used in a network. California State University, Fullerton © 2001 Business & Information Systems 2/e

Geographic Information System Chapter 11 Geographic Information System A Geographic Information System (GIS) is an information system that provides information for decision making based on geographic location. A GIS includes a database in which all data is organized by geographic location. California State University, Fullerton © 2001 Business & Information Systems 2/e

Executive Support Systems Chapter 11 Executive Support Systems An Executive Support System (ESS) is designed specifically for the information needs of strategic managers. Also called an Executive Information System (EIS). California State University, Fullerton © 2001 Business & Information Systems 2/e

Executive Information Needs Chapter 11 Executive Information Needs While strategic level managers generally need summarized information, occasionally they need detailed information. The detailed information is available through a process called drilling down. California State University, Fullerton © 2001 Business & Information Systems 2/e

Executive Support System Structure Chapter 11 Executive Support System Structure ESS may include any of the following: On-line access to reports. The ability to query the MIS database for information not usually received in reports. The ability to access external databases. The ability to analyze and summarize data from reports and queries, and to view the results of the analysis graphically. California State University, Fullerton © 2001 Business & Information Systems 2/e

Executive Support System Functions Chapter 11 Executive Support System Functions An executive support system provides its capabilities through the four information system functions: Input function Storage function Processing function Output function California State University, Fullerton © 2001 Business & Information Systems 2/e

Chapter 11 Expert Systems An Expert System (ES) is a type of information system that gives expert advice to the decision maker. The system accomplishes this task by incorporating human expert knowledge and using this knowledge to analyze specific problems. An expert system mimics the way a human expert would analyze a situation and then recommends a course of action. Expert systems use techniques from the field of Artificial Intelligence (AI). The goal of AI is to mimic human intelligence by using a computer. California State University, Fullerton © 2001 Business & Information Systems 2/e

Chapter 11 Expert Advice Expert advice is used at all levels of a business, but is most commonly required for structured problems at the operational and tactical levels. Problems in research and development, engineering, production, finance, computer systems, accounting, and other areas use expert advice. California State University, Fullerton © 2001 Business & Information Systems 2/e

Expert System Structure Chapter 11 Expert System Structure The knowledge base is a database of expert knowledge. Different types of expert systems use different techniques for storing knowledge. One technique is to use rules. A rule is an if-then structure. California State University, Fullerton © 2001 Business & Information Systems 2/e

Expert System Structure (cont’d.) Chapter 11 Expert System Structure (cont’d.) The expert system software consists of a user interface and an inference engine. The inference engine analyzes rules in the knowledge base to draw conclusions. California State University, Fullerton © 2001 Business & Information Systems 2/e

Expert System Functions Chapter 11 Expert System Functions Expert system capabilities are provided by the four information system functions: Input function Storage function Processing Function Output Function California State University, Fullerton © 2001 Business & Information Systems 2/e

Organization Knowledge Chapter 11 Organization Knowledge Explicit knowledge can be stated or written in a form someone else can understand. Implicit (tacit) knowledge cannot be expressed easily but is understood by the individual. Explicit knowledge example – an athletic store manager’s knowledge of what to do when the quantity of shoes is too low. Implicit knowledge example – an athletic shoe store manager’s knowledge that a certain quantity of a particular type of shoe is too low. California State University, Fullerton © 2001 Business & Information Systems 2/e

Chapter 11 Knowledge Management Knowledge management is the process of managing organizational knowledge. An organization must determine what knowledge it has and acquire the knowledge that it is lacking. California State University, Fullerton © 2001 Business & Information Systems 2/e

Knowledge Management Organizational knowledge may include: Chapter 11 Knowledge Management Organizational knowledge may include: Formally documented internal knowledge such as product manuals & research reports. External Knowledge such as competitive intelligence. Tacit Knowledge such as expertise of organizational members that has not been formally documented yet. California State University, Fullerton © 2001 Business & Information Systems 2/e

Knowledge Management (cont’d.) Chapter 11 Knowledge Management (cont’d.) Explicit knowledge needs to be organized and recorded in a way that makes it usable by others in the organization who do not have that knowledge. Implicit (tacit) knowledge needs to be codified in order to be preserved and shared. California State University, Fullerton © 2001 Business & Information Systems 2/e

Knowledge Management (cont’d.) Chapter 11 Knowledge Management (cont’d.) Knowledge needs to be created/captured, codified/ stored/organized/ maintained, and communicated to those who need it and share among the employees in an organization. Chief Knowledge Officer (CKO) California State University, Fullerton © 2001 Business & Information Systems 2/e