1. Enhancing Decision Making
Chapter 12
Enhancing Decision Making

2. Management Information Systems Chapter 12 Enhancing Decision Making
LEARNING OBJECTIVES
Describe different types of decisions and the decision- making process.
Assess how information systems support the activities of managers and management decision making.
Demonstrate how decision-support systems (DSS) differ from MIS and how they provide value to the business.
Demonstrate how executive support systems (ESS) help senior managers make better decisions.
Evaluate the role of information systems in helping people working in a group make decisions more efficiently.
This chapter focuses on the information systems that support decision-making in a firm and discusses the value of improved decision-making in an organization. Ask the students to describe different types of decisions and whether some types of decisions are less valuable than others. What types of decisions, in a work framework, have students encountered in their own employment situations? Ask students to reveal what decisions they made on their last job.

3. Business value of improved decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Business value of improved decision making
Improving hundreds of thousands of “small” decisions adds up to large annual value for the business
Types of decisions:
Unstructured: Decision maker must provide judgment, evaluation, and insight to solve problem
Structured: Repetitive and routine; involve definite procedure for handling so they do not have to be treated each time as new
Semistructured: Only part of problem has clear-cut answer provided by accepted procedure
This slide discusses the importance of improved decision-making and describes the three types of decisions that are made in an organization. Table 12-1 in the text illustrates how a small decision made hundreds of times a year can be just as valuable as a single decision made once a year. For example, the decision to schedule production to fill orders, made 150 times a year, with a value of $10,000 if this decision is improved, can mean an annual value of $1.5 million. The different levels in an organization tend to make different types of decisions, and require different types of support to make these decisions. Ask students to provide examples of each type of decision. Give students examples of decisions and ask what category the decision fall into and why.

4. Business value of improved decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Business value of improved decision making
This slide discusses the importance of improved decision-making and describes the three types of decisions that are made in an organization. Table 12-1 in the text illustrates how a small decision made hundreds of times a year can be just as valuable as a single decision made once a year. For example, the decision to schedule production to fill orders, made 150 times a year, with a value of $10,000 if this decision is improved, can mean an annual value of $1.5 million. The different levels in an organization tend to make different types of decisions, and require different types of support to make these decisions. Ask students to provide examples of each type of decision. Give students examples of decisions and ask what category the decision fall into and why.

5. Operational managers, rank and file employees
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Senior managers:
Make many unstructured decisions – requires judgment, evaluation, and insight into non-routine situations.
E.g., Should we enter a new market?
Middle managers:
Make more structured decisions but these may include unstructured components
E.g., Why is order fulfillment report showing decline for this quarter?
Operational managers, rank and file employees
Make more structured decisions – a repetitive, routine with definite procedures for making the decision
E.g., Does customer meet criteria for credit?
This slide describes the types of decisions being made at the different levels within an organization. Semi-structured decisions contain a portion that is unstructured and a portion that is structured. Which portion, of the example question for middle managers, is structured and which is unstructured? What would make this question a fully structured question? Ask students to come up with additional examples of decisions at the executive, middle management, and operational levels of the organization, for companies they have worked for.

6. Information Requirements of Key Decision-Making Groups in a Firm
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Information Requirements of Key Decision-Making Groups in a Firm
This graphic illustrates the three types of decision-makers within an organization. Ask students to describe in their own words how to tell what category a decision falls into. If a structured decision is given separately to two employees, should they each come up with the same answer? What about semistructured decisions? Unstructured decisions? Which of the types of decisions could most easily be handled by computer software?
Senior managers, middle managers, operational managers, and employees have different types of decisions and information requirements.
Figure 12-1

7. Four stages of decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Four stages of decision making
Intelligence
Discovering, identifying, and understanding the problems occurring in the organization
Design
Identifying and exploring solutions to the problem
Choice
Choosing among solution alternatives
Implementation
Making chosen alternative work and continuing to monitor how well solution is working
This slide describes the process of decision-making as a series of four stages. It is important to note that if an implemented solution doesn’t work, the decider can return to an earlier stage in the process and repeat as needed. Give the students an example decision, such as “what college should I apply to” and ask them to describe the actions taken at each of the four stages.

8. Stages in Decision Making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Stages in Decision Making
This graphic illustrates the four stages of decision making introduced in the previous slide, emphasizing that steps can be repeated as needed, depending on the outcome at each stage.
The decision-making process is broken down into four stages.
Figure 12-2

9. Classical model of management
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Information systems can only assist in some of the roles played by managers
Classical model of management
Five functions of managers
Planning, organizing, coordinating, deciding, and controlling
More contemporary behavioral models
Actual behavior of managers appears to be less systematic, more informal, less reflective, more reactive, and less well organized than in classical model
Mintzberg’s behavioral model of managers defines 10 managerial roles falling into 3 categories
This slide discusses the idea that, while information systems can assist in making decisions by providing information and tools for analysis, they cannot always improve on decisions being made. Ask the students to provide examples of decisions that an information system might not be able to assist in. Is there any similarity among these example decisions, and what does this say about the types of decisions an information system can help with?
You can understand the complexity and breadth of some of the decisions being made within an organization by looking at the activities of its managers. While the classical model of management sees five functional roles of managers, real-life observation of managers sees far more complexity in managerial activities. Ask the students to recall the five attributes listed in the book as differing greatly from the classical description. Managers (1) perform a great deal of work at an unrelenting pace (2) managerial activities are fragmented; lasting for less than 9 minutes (3) managers prefer current, specific, ad hoc information; (4) manager prefer oral forms of communication and (5) managers give high priority to maintaining a complex web of contacts as an informal information system. Ask students to explain attributes 3, 4, and 5.

10. Mintzberg’s 10 managerial roles
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Mintzberg’s 10 managerial roles
Interpersonal roles: Figurehead
Leader Liaison
Informational roles: Nerve center
Disseminator
Spokesperson
Decisional roles: Entrepreneur
Disturbance handler
Resource allocator
Negotiator
This slide expands on the behavioral model of managers and lists Mintzberg’s 10 managerial roles that fall into three categories. Which of these roles can be assisted by information systems and which cannot?

11. Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
The table below shows the support systems exist for only some of the managerial behaviors but not all of them
This slide expands on the behavioral model of managers and lists Mintzberg’s 10 managerial roles that fall into three categories. Which of these roles can be assisted by information systems and which cannot?

12. Organizational culture
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Three main reasons why investments in information technology do not always produce positive results
Information quality
High-quality decisions require high-quality information – accurate, consistent, complete, valid, timely, accessible and high integrity are the factors to downgrade the quality of information
Management filters
Managers have selective attention and have variety of biases that reject information that does not conform to prior conceptions
Organizational culture
Strong forces within organizations resist making decisions calling for major change
Even in decision-making situations that can be helped by information systems, the information system may fail in helping to solve the problem or lead to a better decision. This slide describes the three main reasons why investments in information systems do not always produce positive results. What is meant by information quality? The text lists seven quality dimensions: accuracy, integrity, consistency, completeness, validity, timeliness, accessibility. Ask students to identify and/or describe these dimensions?
Ask students to provide an example of what a management “filter” might be. Have they ever witnessed someone in a managerial position be unable to recognize or handle a problem because of a “filter?”
Ask students why people within an organization would resist using an information system.

13. Organizational culture
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Three main reasons why investments in information technology do not always produce positive results
Information quality
High-quality decisions require high-quality information – accurate, consistent, complete, valid, timely, accessible and high integrity are the factors to downgrade the quality of information
Management filters
Managers have selective attention and have variety of biases that reject information that does not conform to prior conceptions
Organizational culture
Strong forces within organizations resist making decisions calling for major change
Even in decision-making situations that can be helped by information systems, the information system may fail in helping to solve the problem or lead to a better decision. This slide describes the three main reasons why investments in information systems do not always produce positive results. What is meant by information quality? The text lists seven quality dimensions: accuracy, integrity, consistency, completeness, validity, timeliness, accessibility. Ask students to identify and/or describe these dimensions?
Ask students to provide an example of what a management “filter” might be. Have they ever witnessed someone in a managerial position be unable to recognize or handle a problem because of a “filter?”
Ask students why people within an organization would resist using an information system.

14. Summary of decision making and information systems
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Summary of decision making and information systems
Everyone makes decisions at all levels of an organization. The goal is to match the four decision-making organizational levels along with the three types of decisions to the appropriate kind of decision support system. It’s important to understand the roles and activities associated with management decision-making and that information systems can only assist in the process.
Even in decision-making situations that can be helped by information systems, the information system may fail in helping to solve the problem or lead to a better decision. This slide describes the three main reasons why investments in information systems do not always produce positive results. What is meant by information quality? The text lists seven quality dimensions: accuracy, integrity, consistency, completeness, validity, timeliness, accessibility. Ask students to identify and/or describe these dimensions?
Ask students to provide an example of what a management “filter” might be. Have they ever witnessed someone in a managerial position be unable to recognize or handle a problem because of a “filter?”
Ask students why people within an organization would resist using an information system.

15. Types of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Types of systems for decision support
Management information systems (MIS)
Decision support systems (DSS)
Executive support systems (ESS)
Group decision support systems (GDSS)
This slide introduces the four types of systems that are designed to support decision-making. Some of these systems were briefly introduced in chapter 2. GDSS are specialized systems that provide a group electronic environment for collective decision making. Ask students to distinguish between MIS, DSS, and ESS. Why are TPS not considered a decision-support system?

16. Types of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Types of systems for decision support
1. Management information systems (MIS)
Routine reports and summaries of transaction-level data for middle and operational-level mangers.
Help managers monitor and control business by providing information on firm’s performance and address structured problems
Typically produce fixed, regularly scheduled reports based on data from TPS
E.g., exception reports: Highlighting exceptional conditions, such as sales quotas below anticipated level
E.g., California Pizza Kitchen MIS
For each restaurant, compares amount of ingredients used per ordered menu item to predefined portion measurements and identifies restaurants with out-of-line portions
This slide describes MIS, which were discussed at longer length in chapter 2. Other examples of MIS discussed in the text include PharMark’s extranet MIS, identifying patients with drug-use patterns that place them at risk for adverse outcomes; Black & Veatch’s intranet MIS that tracks construction costs for various projects across the U.S., and Taco Bell’s TACO system that provides information on food, labor, and period-to-date costs for each restaurant.

17. Types of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Types of systems for decision support
2. Decision-support systems (DSS)
Combine analytical models with operational data for middle mangers making semistructured and unstructured decisions.
Model-driven DSS
Earliest DSS were heavily model-driven – “what-if” analysis
E.g., voyage-estimating DSS (Chapter 2) – analysis the customers behaviors so to determine the value, revenue potential and loyalty of each customer by using analytical model (p.79)
This slide discusses DSS, which were introduced in Chapter 2. Ask students to differentiate between ESS and DSS. What types of decisions might be handled better by using a model, and what types better by mining data?

18. Types of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Types of systems for decision support
2. Decision-support systems (DSS)
Data-driven DSS
Some contemporary DSS are data-driven
Use OLAP (online analytical processing) and data mining to analyze large pools of data
E.g., business intelligence applications (Chapter 6) (p.255)
This slide discusses DSS, which were introduced in Chapter 2. Ask students to differentiate between ESS and DSS. What types of decisions might be handled better by using a model, and what types better by mining data?

19. Components of DSS Database Used for query and analysis
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Components of DSS
Database
Used for query and analysis
Current or historical data from number of applications or groups
May be small database or large data warehouse
User interface
Often a Web interface
Software system
With models, data mining, other analytical tools
This slide describes the three main components of a DSS. It is important to note that, because of the need for analyzing and manipulating data, DSS typically operate with extracts or copies of production databases so that using the DSS does not interfere with critical operational systems.

20. Overview of a Decision-Support System
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Overview of a Decision-Support System
This graphic illustrates the components of the DSS, and emphasizes the source of DSS data- primarily TPS data and external data, typically in a database separate from production databases.
The main components of the DSS are the DSS database, the user interface, and the DSS software system. The DSS database may be a small database residing on a PC or a large data warehouse.
Figure 12-3

21. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Model:
Abstract representation that illustrates components or relationships of phenomenon; may be physical, mathematical, or verbal model
Statistical models
Optimization models
Forecasting models
Sensitivity analysis models
This slide describes what models are. Ask students what types of situations each are used in. A statistic al model helps establish relationships, such as relating product sales to differences in age, income or other factors. Optimization models determine optimal resource allocation to maximize or minimize specific variables such as cost and time. Forecasting models are used to forecast future conditions, such as sales, given a range of historical data. Sensitivity analysis models ask “what if” questions to determine the impact of changes in one or more factors.

22. Sensitivity Analysis Management Information Systems Figure 12-4
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Sensitivity Analysis
This graphic illustrates the results of a sensitivity analysis of changing the sales price of a necktie – it answers the question “What happens to the break-even point if the sales price and the cost to make each unit increase or decrease?”
This table displays the results of a sensitivity analysis of the effect of changing the sales price of a necktie and the cost per unit on the product’s break-even point. It answers the question, “What happens to the break-even point if the sales price and the cost to make each unit increase or decrease?”
Figure 12-4

23. Using spreadsheet pivot tables to support decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Using spreadsheet pivot tables to support decision making
Records of online transactions can be analyzed using Excel
Where do most customers come from?
Where are average purchases higher?
What time of day do people buy?
What kinds of ads work best?
Pivot table:
Categorizes and summarizes data very quickly
Displays two or more dimensions of data in a convenient format
Even without complex, advanced enterprise software, small businesses can use spreadsheet software and data analysis tools to create information meaningful to the firm. This slide introduces the use of Pivot Tables to analyze data along multiple dimensions. Pivot Tables are one function of the Microsoft Excel spreadsheet software. Refer students to the Pivot Table Learning Track which has a full illustrated chapter on how to use Pivot Tables.

24. Sample List of Transactions for Online Management Training
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Sample List of Transactions for Online Management Training
This graphic shows a Microsoft Excel spreadsheet with sales data from a hypothetical online training company. Data captured includes customer ID, region, payment type, advertising source, amount of purchase, product purchased, and time of day. Excel’s PivotTable function allows you to sort and analyze this data to create meaningful information. Types of questions that you might want to find out from this data include “Where are our customers from?” “What form of payment is more common?” and “Are there regional differences in the average purchase?”
This list shows a portion of the order transactions for Online Management Training Inc. (OMT Inc.) on October 28, 2008.
Figure 12-5

25. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
A Pivot Table that Determines Regional Distribution of Customers
Figure 12-6
This PivotTable report was created using Excel 2007 to quickly produce a table showing the relationship between region and number of customers
This graphic shows the same Microsoft Excel spreadsheet with a PivotTable with one dimension – it shows where customers come from in terms of region.

26. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
A Pivot Table that Examines Customer Regional Distribution and Advertising Source
This graphic shows the same Microsoft Excel spreadsheet with a PivotTable with two dimensions – it shows where customers come from in terms of region and advertising source.
Figure 12-7
In this pivot table, we are able to examine where customers come from in terms of region and advertising source. It appears nearly 30 percent of the customers respond to campaigns, and there are some regional variations

27. Data visualization tools:
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Data visualization tools:
Help users see patterns and relationships in large amounts of data that would be difficult to discern if data were presented as traditional lists of text
Geographic information systems (GIS):
Category of DSS that use data visualization technology to analyze and display data in form of digitized maps
Used for decisions that require knowledge about geographic distribution of people or other resources, e.g.:
Helping local governments calculate emergency response times to natural disasters
Help retail chains identify profitable new store locations
This slide discusses data visualization, which can greatly help in the user comprehending patterns and relationships within data. When the data visualization tool analyzes data to present in relation to digitized maps, this is a GIS, a type of DSS. What kind of information could a GIS produce that would be useful to a pizza chain? What about a hospital?

28. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
South Carolina used a GIS-based program called HAZUS to estimate and map the regional damage and losses resulting from an earthquake of a given location and intensity. HAZUS estimates the degree and geographic extent of earthquake damage across the state based on inputs of building use, type, and construction materials. The GIS helps the state plan for natural hazards mitigation and response.
This graphic shows a map from a GIS-based program that estimates damage from an earthquake. What makes this map more effective than a printed report or a graph? Think speed of comprehension, and decision making.

29. Types of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Types of systems for decision support
Web-based customer decision-support systems (CDSS):
Support decision-making process of existing or potential customer
Use Web information resources and capabilities for interactivity and personalization to help users select products and services
E.g., search engines, intelligent agents, online catalogs, Web directories, newsgroup discussions, other tools
Automobile companies that use CDSS to allow Web site visitors to configure desired car
Financial services companies with Web-based asset-management tools for customers
This slide discusses a type of DSS, one that is geared to customer decision-making and is typically offered over the Web. What CDSS have students encountered online? Did they find them useful? Why or why not? Are there any drawbacks to using a CDSS?

30. Types of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Types of systems for decision support
Group decision support systems (GDSS)
Interactive system to facilitate solution of unstructured problems by group of decision makers
Hardware – computer and networking hardware, overhead projectors, display screens
GDSS software collects, documents, ranks, edits and stores participant ideas, responses
May require facilitator and staff
Enables increasing meeting size and increasing productivity
Promotes collaborative atmosphere, guaranteeing anonymity
Follow structured methods for organizing and evaluating ideas and preserving meeting results
This slide discusses GDSS, a third type of system that support decision-making. What types of problems might a group encounter, when trying to make a decision as a group? What kinds of decisions might need to be made as a group?

31. Decision support system
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Decision support system
Well-built decision support systems help managers and executives make better decisions by providing data that’s easy to acquire and analyze. In addition to data, the components of a DSS include effective software tools and a user-friendly interface. Group decision support systems, comprised of hardware, software, and people, help streamline group meetings and communications by removing obstacles and using technology to increase the effectiveness of decisions.
This slide discusses GDSS, a third type of system that support decision-making. What types of problems might a group encounter, when trying to make a decision as a group? What kinds of decisions might need to be made as a group?

32. Types of systems for decision support Executive support systems (ESS)
Management Information Systems
Chapter 12 Enhancing Decision Making
Executive Support Systems (ESS)
Types of systems for decision support
Executive support systems (ESS)
Designed to help executives focus on important performance indications
Balanced scorecard method:
Measures outcomes on four dimensions:
Financial
Business process
Customer
Learning & growth
Key performance indicators (KPIs) measure each dimension
In developing an ESS, first concern is for senior executives and consultants to develop scorecard and then to automate flow of information for each KPI
This slide describes ESS, the fourth type of system used to support decision-making. ESS are designed to give managers an overview of their company. What is “balanced” about the balanced scorecard method? An example of a KPI for an online retail firm is the average length of time to deliver a package to a consumer. Ask students to come up with KPIs for sample companies, for example, a laundromat, a university, a video game software manufacturer.

33. Role of ESS in the firm Management Information Systems
Chapter 12 Enhancing Decision Making
Executive Support Systems (ESS)
Role of ESS in the firm
Used by both executives and subordinates
Drill-down capability: Ability to move from summary information to finer levels of detail
Integrate data from different functional systems for firmwide view
Incorporate external data, e.g. stock market news, competitor information, industry trends, legislative action
Include tools for modeling and analysis
Primarily for status, comparison information about performance
This slide describes the functions of an ESS, and its role as giving management an overview of the firm and its environment. Ask students why the drill-down capability would be important to management.

34. Business value of executive support systems
Management Information Systems
Chapter 12 Enhancing Decision Making
Executive Support Systems (ESS)
Business value of executive support systems
Enables executive to review more data in less time with greater clarity than paper-based systems
Needed actions identified and carried out earlier
Improves management performance
Increases upper management’s span of control
Also enables decision making to be decentralized and take place at lower operating levels
Increases executives’ ability to monitor activities of lower units reporting to them
This slide describes the business value of ESS. Much of the value of ESS is found in their flexibility and ability to analyze, compare, and highlight trends. Using an ESS brings a much greater amount of information about the company and external influences, and in a timelier fashion, to management, and greatly improves management performance. It can also change the role of management, in enabling decisions to be made at lower levels as well as the ability to review lower-level performance more easily. In what cases would pushing decisions to a lower level be an advantage and in what scenarios might this prove unwise?

35. End of chapter