MANAGEMENT

INFORMATION
SYSTEM
UNIT 2
DECISION MAKING
Decision Making
The process by which mangers respond to opportunities and threats by analyzing
options and making decisions about goals and course of action.

Decisions in response to opportunities : Managers respond to ways to improve

organizational performance.

Decisions in response to threats: When Managers are impacted by adverse events to

organization.
Types of Decision Making

1) Programmed and Non-Programmed Decisions

2) Operational and Strategic Decisions

3) Organizational and Personal Decisions

4) Major and Minor Decisions

5) Individual and Group Decisions

6) Tactical and Operational Decisions

Types of Decision Making
Programmed and Non-Programmed Decisions

▪ Programmed decisions are routine and repetitive in nature. These decisions deal
with common and frequently occurring problems in an organization such as buying
behavior of consumers, sanctioning of different types of leave to employees,
purchasing decisions, salary increment, etc.

▪ Non-programmed decisions are not routine or common in nature. These are

related to exceptional situations in which guidelines or routine management is not
set. For example, problems arising from a decline in market share, increasing
competition in the business environment. The majority of the decisions taken by
managers do fall in this non programmed category.
Types of Decision Making
Operational and Strategic Decisions

▪ Operational decisions are just the normal functioning of the organization. These
decisions do not require much time and take a shorter time as compared to other
decisions taken. Ample of responsibilities are delegated to subordinates. The main
decision is to create harmony in an organization and to see whether the
management is proper or not.

▪ Strategic decisions include all present issues and problems. The main idea is to
achieve better working conditions, better equipment, and efficient use of existing
equipment, etc. These all fall under this category. Usually, strategic decisions are
taken by top-level management.
Types of Decision Making
Organizational and Personal Decision

▪ If the decision is taken collectively keeping in mind the organizational goal, it is

known as the organization goal, and if the manager takes any decision in the
personal capacity (affecting his/her life). It is known as personal decisions. These
decisions may sometimes affect the functioning of the organization as well. For
example, if the employee has decided to leave the organization, it may affect the
organization. The authority of taking personal decisions cannot be delegated and is
dependent on the individual itself.
Types of Decision Making
Major and Minor Decisions
These are classified as the type of decision-making in management where decision-related
to purchase of new premises is a major decision. These are taken by top management
whereas the purchase of stationery is a minor decision. Minor decisions can be taken by
the superintendent.

Individual and Group Decision

When the decision is taken by an individual, it is categorized as an individual decision.
Usually, routine decisions are taken by individuals within the policy framework of the
organization.

Group decisions are taken by a group of individuals in the form of a standing committee.
Generally, important types of decisions in management are shifted to this committee. The
main aim of a group decision is to involve the maximum number of individuals in the
process of decision making.
Types of Decision Making
Tactical and Operational Decision

▪ Decisions that are pertaining to various policy matters in the organization are known
as policy decisions. These are taken by top management and do have a long-term
impact on the organization. For example, decisions regarding the location of the plant
or volume of production. These are tactical decisions

▪ Operational decisions are all day-to-day decisions that need to be taken for the
proper functioning and operation of the organization. These can be taken by middle
or lower-level managers. For example, the Calculation of bonuses given to each
individual is an operational decision and is performed by middle or lower-level
managers.
Decision and Decision Making
Many decision that managers deal with every day involve at least some
degree of uncertainty and require nonprogrammed decision making.

▪ May be difficult to make

▪ Made amid changing factors
▪ Information may be unclear
▪ May have to deal with conflicting points of view
Certainty, Risk, Uncertainty, Ambiguity

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 is chance.

Certainty, Risk, Uncertainty, Ambiguity
Uncertainty
Managers know which goals they wish to achieve.
Information about alternatives and future events is in incomplete.
Managers may have to come up with creative approaches to alternatives.
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.
 Conditions that Affects the Possibility of Decision Failure
Organizational
Problem

Low Possibility of Failure High

Certainty Risk Uncertainty Ambiguity

Programmed Nonprogrammed
Decisions Decisions

Problem
Solution
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.
Decision-Making Models
✔ Classical Model Or Rational Model

✔ Administrative Model Or Bounded Rational Model

✔ Herbert Simons Model

✔ Political Model
Classical Model Or Rational Model
Logical decision in the organization’s best economic interests
Assumptions

✔ Decision maker operates to accomplish goals that are known and agreed upon.

✔ Decision maker strives for condition of certainty gathers complete information.

✔ Criteria for evaluating alternative are known.

✔ Decision maker is rational and uses logic.

Descriptions describes how a manager should and provides guidelines for reaching an ideal
decision
Classical Model Or Rational Model
Administrative Model Or Bounded Rational Model

How nonprogrammed decision are made- uncertainty/ambiguity

Two concepts are instrumental in shaping the administrative
model
Bounded Rationality : 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 if not
then evaluate next alternative solution.
Administrative Model Or Bounded Rational Model

How nonprogrammed decision are made- uncertainty/ambiguity

Managers actually make decisions in difficult situations characterized by
non-programmed decisions, uncertainty, and ambiguity.

✔ Decision goals often are vague, conflicting and lack consensus among managers;

✔ Rational procedures are not always used

✔ Managers’ searches for alternatives are limited

✔ Managers settle for a satisficing rather than a maximizing solution

Administrative Model Or Bounded Rational Model
HERBERT SIMON’s MODEL OF DECISION MAKING

Three Stages
✔ INTELLIGENCE (Problem Identification & Data Collection)
✔ DESIGN (Alternative Solutions)
✔ CHOICE (Best Solution)
HERBERT SIMON’s MODEL OF DECISION MAKING
POLITICAL MODEL

Closely resembles the real environment

✔ Closely resembles the real environment in which most managers
and decision makers operate

✔ Useful in making non-programmed decisions

✔ Decisions are complex

✔ Disagreement and conflict over problems and solutions are

normal
Levels of Management
DECISION STYLES

Differences among people with respect to how they perceive

problems and make decisions.
Not all managers make decisions the same

✔ Directive Style
✔ Analytical Style
✔ Conceptual Style
✔ Behavior Style
DIRECTIVE STYLES

✔ People who prefer simple, clear-cut solutions to problems

✔ Make decisions quickly
✔ May consider only one or two alternatives
✔ Efficient and rational
✔ Prefer rules or procedures
ANALYTICAL STYLES

✔ Complex solutions based on as much data as they can gather

✔ Carefully consider alternatives
✔ Base decision on objective, rational data from management
control systems and other sources

✔ Search for best possible decision based on information

available
CONCEPTUAL STYLES

✔ Consider a broad amount of information.

✔ More socially oriented than analytical style.
✔ Like to talk to others about the problem and possible
solutions.
✔ Consider many broad alternatives.
✔ Relay on information from people and systems.
✔ Solve problems creatively.
BEHAVIOR STYLES

✔ Have a deep concern for others as individuals.

✔ Like to talk to people one-on-one.
✔ Understand their feelings about the problem and the effect.
of a given decision upon them.

✔ Concerned with the personal development of others.

✔ May make decisions to help others achieve their goals.
Attributes of Information
and Its relevance to
Decision Making
Overview of Information

✔ Information Systems help companies achieve their goals.

✔ By processing raw data into information
✔ IS can add value to information by enhancing the attributes
(11 of them).
Attributes of Information

Usability Delivery Quality

✔ Relevant ✔ Timely ✔ Accurate

✔ Simple ✔ Accessible ✔ Verifiable

✔ Flexible ✔ Secure ✔ Complete

✔ Economical ✔ Economical ✔ Reliable

INFORMATION SPECTRUM

▪ Data 🡪 processing 🡪 Information

▪ Information 🡪 intelligence 🡪 Knowledge
▪ Knowledge 🡪 experience 🡪 Wisdom
ACCURACY vs. RELIABILITY

▪ Accuracy – true, free from error

Precision – refers to the level of accuracy
1/3 = 1.333 is accurate
1/3 = 1.333333 is more precise
▪ Reliability – in IS, it refers to how often information is
accurate.
An information source could be error free but might not work all
the time.
WEATHER FORECASTING

▪ Are weather-persons
▫ reliable,
▫ accurate,
▫ both, or
▫ neither?
ACCURATE VS RELIABLE

▪ Weatherman A can predict tomorrows temperature to the

exact degree
▫ but only 40% of the time.
▫ other 60% he cannot interpret the raw data
▪ Weatherman B can predict tomorrows temperature but it
may be off by 5 degrees
▫ But, his system works 95% of the time
▪ Who is more accurate?
▪ Who is more reliable?
SOME ATTRIBUTES ARE ENEMY

▪ My student evaluation report includes 23 answers from all 31

students. Its hard for me to tell if my evaluations are good or
bad, but at least the data is __________.
▪ The student evaluation report includes only my average score,
which is very _______ and easy to interpret, but I’d like all
the data.
CHARACTERSTICS OF GOOD INFORMATION
Good information must be
▫ Accurate – good information is based on correct and complete data, and it has been
processed correctly as expected. Accuracy is crucial managers must be able to rely
on the results of their information systems. The IS function can develop a bad
reputation in the organization if a system is known to produce inaccurate information.

▫ Timely – Information should be given in a timely manner. A report that is 6 weeks late is
most likely useless. In that case, the information would have been received well after
decisions for that material have all ready been made. Ex: Shipping goods to a customer
when the information system says not to.

▫ Relevant – Information should be relevant both to the context and to the subject. If
you’re the CEO, you may need information that is summarized to an appropriate level for
your job. A list of hourly wage is unlikely to be useful. Instead, you would need the
average wage information by department or division. Also, make sure that it is relevant to
the subject at hand. If you need short term interest rates for a possible line of credit, than
a paper with 15 year mortgage interest rates is useless.

▫ Economical- Information is not free. It costs money to develop a system, and to

maintain it. For information for be worth its cost there must be an appropriate
relationship between the cost of information and its value.