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Management
Information Systems
Reference Book:
Management Information Systems
MANAGING THE DIGITAL FIRM-12th
Edition,Kenneth C. Laudon & Jane P. Laudon

Chowdhury Ummeh Kulsum Tasnuva

Faculty Member
Department of Management
University of Chittagong
Email: [email protected]

Chapter 8
12.1
Enhancing Decision Making © 2007 by Prentice Hall

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.
• Evaluate the role of information systems in helping people working in a group make decisions
more efficiently.

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Decision Making and Information Systems

Types of Decisions

• There are different levels in an organization. Each of these levels has different information requirements
for decision support and responsibility for different types of decisions (see Figure 12-1). Decisions are
classified as structured, semi structured, and unstructured.
• Unstructured decisions:
 Non-routine decisions in which the decision maker must provide judgement, evaluation, and
insights; there is no agreed-upon procedure for making the decision.
 Examples: Approve capital budget; decide corporate objectives
• Structured decisions:
 Repetitive, routine, and involve a definite procedure for handling
 Examples: Re-stock inventory; determine special offers to customers
• Semi-structured decisions:
 Only part of decision has clear-cut answers provided by accepted procedures
 Examples: Allocate resources to managers; develop a marketing plan
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Decision Making and Information Systems

Types of Decisions

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Decision Making at Various Levels of Management

Business Decision Making and the Decision-Making Process

• Senior management
• Middle management and project teams
Decision-Making
• Operational management and project
Levels teams
• Individual employees

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THE DECISION-MAKING PROCESS

Stages in Decision Making

1. Intelligence: Discovering, identifying, and understanding the problems occurring in the

organization.
2. Design: Identifying and exploring solutions to the problem.
3. Choice: Choosing among solution alternatives.
4. Implementation: Making chosen alternative work and continuing to monitor how well solution
is working.
What happens if the solution you have chosen doesn’t work?
• Figure 12-2 shows that you can return to an earlier stage in the decision-making process and
repeat it if necessary.
• For instance, in the face of declining sales, a sales management team may decide to pay the
sales force a higher commission for making more sales to spur on the sales effort.
• If this does not produce sales increases, managers would need to investigate whether the
problem stems from poor product design, inadequate customer support, or a host of other
12.6causes that call for a different solution. © 2007 by Prentice Hall

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THE DECISION-MAKING PROCESS

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MANAGERS AND DECISION MAKING IN THE REAL WORLD

Managerial Roles
While information systems can support managerial decision-making and operations, they do not
replace all managerial functions. They primarily assist with data collection, analysis,
communication, and automation of routine tasks, but aspects like leadership, motivation, and
strategic thinking require human judgment.
 Classical model of management obtains five functions of managers: Planning, organizing,
coordinating, deciding, and controlling.

1.Planning: Setting goals, defining strategies, and outlining tasks.

2.Organizing: Allocating resources, assigning roles, and establishing workflows.
3.Coordinating: Ensuring smooth communication and collaboration among teams.
4.Deciding: Making strategic and operational choices based on available information.
5.Controlling: Monitoring performance, evaluating results, and making necessary adjustments.

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MANAGERS AND DECISION MAKING IN THE REAL WORLD

Managerial Roles
 More contemporary behavioral models: While classical management models present a
structured and rational view of managerial functions, contemporary behavioral models
suggest that real-world managerial behavior is less systematic, more informal, reactive, and
unstructured.
• Actual behavior of managers’: appears to be less systematic, more informal, less reflective,
more reactive, and less well organized than in classical model. Research on managerial work
reveals that managers:
• Do not always follow a well-defined, linear decision-making process. Often work in a
fast-paced, reactive manner, addressing urgent issues as they arise. Engage in frequent,
brief, and unplanned interactions rather than long, structured tasks. Rely on intuition and
experience rather than formal analysis. This challenges the classical model’s assumption
that managers always make rational, planned decisions.

*Mintzbergís behavioral model of managers: defines 10 managerial roles falling into 3

categories.
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MANAGERS AND DECISION MAKING IN THE REAL WORLD

Mintzberg’s Managerial Roles

1. Interpersonal roles: Figurehead, Leader, Liaison.

2. Informational roles: Nerve center, Disseminator, Spokesperson.
3. Decisional roles: Entrepreneur, Disturbance handler, Resource allocator, Negotiator.

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Minztberg’s Managerial Role

Interpersonal
Figurehead Symbolic head; required to perform a number of routine duties of a
legal or social nature
Leader Responsible for the motivation and direction of employees
Liaison Maintains a network of outside contacts who provide favors and
information
Informational
Monitor Receives a wide variety of information; serves as nerve center of
internal and external information of the organization
Disseminator Transmits information received from outsiders or from other employees
to members of the organization
Spokesperson Transmits information to outsiders on organization’s plans, policies,
actions, and results; serves as expert on organization’s industry
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Managerial Role

Decisional
Entrepreneur Searches organization and its environment for opportunities and
initiates projects to bring about change
Disturbance Responsible for corrective action when organization faces
Handler important, unexpected disturbances
Resource Allocator Makes or approves significant organizational decisions
Negotiator Responsible for representing the organization at major negotiations

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MANAGERS AND DECISION MAKING IN THE REAL WORLD

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MANAGERS AND DECISION MAKING IN THE REAL WORLD

"Imagine a multinational corporation implementing a cutting-edge

Information System (IS) to enhance managerial efficiency. The company’s
CEO notices a significant shift in how managers perform their roles,
particularly in decision-making, communication, and team coordination.
Based on Mintzberg’s Managerial Roles framework, analyze how IS has
transformed managerial functions within the organization. Provide real-world
examples and suggest potential challenges managers might face in
adapting to this technology-driven environment."

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Sarah is a regional sales manager at GlobalTech Solutions, a fast-growing IT

company. Recently, she has faced multiple challenges:
1.Interpersonal Role Challenge: Her sales team is demotivated due to unclear
performance tracking and lack of real-time feedback.
2.Informational Role Challenge: She struggles to collect and analyze sales data
across different regions, leading to delayed decisions.
3.Decisional Role Challenge: A competitor has launched a new product, and Sarah
needs to quickly adjust sales strategies, allocate resources efficiently, and negotiate
better deals with clients.
To address these issues, Sarah’s company implemented a Management Information
System (MIS) that provides real-time performance tracking, automated reporting, and
AI-driven insights for decision-making.
Question:
Using Mintzberg’s Behavioral Model of Managers, analyze how the new MIS can help
Sarah overcome these challenges in her interpersonal, informational, and decisional
roles. Support your answer with relevant arguments and real-world business
applications. (15 Marks)
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MANAGERS AND DECISION MAKING IN THE REAL WORLD

Real World Decision Making
• We now see that information systems are not helpful for all managerial roles. And in those
managerial roles where information systems might improve decisions, investments in
information technology do not always produce positive results.
• Three main reasons why investments in information technology do not always produce
positive results
1. Information quality: High-quality decisions require high-quality information.
2. Management filters: Managers have selective attention and have variety of biases that
reject information that does not conform to prior conceptions.
3. Organizational culture [inertia and politics]: Strong forces within organizations resist making
decisions calling for major change.

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MANAGERS AND DECISION MAKING IN THE REAL WORLD

Information Quality Dimension

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High velocity automated decision making

 Automated Decision-Making (ADM) refers to the process where technology, rather than
humans, makes decisions based on data analysis and algorithms. This technology ranges
from simple automated choices in everyday gadgets to complex algorithms driving major
business decisions. Made possible through computer algorithms precisely defining steps for
a highly structured decision.
 High-velocity ADM is transforming industries by enabling real-time, data-driven decisions,
enhancing efficiency, security, and personalization. However, ethical safeguards and
regulatory oversight are crucial to ensure responsible use.
 Require safeguards to ensure proper operation and regulation
 Automated Bill Payments: Fully automated once set up, requiring minimal to no user
intervention. These systems automatically pay bills on schedule.
 E-mail Sorting and Spam Filtering: These are highly automated, continuously operating
without user input. It automatically categorizes e-mails and filters out spam.
 Social Media Feeds: Automated content curation, but influenced by user interactions. Social
media platforms use algorithms to show relevant content

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Business Intelligence in the Enterprise

• Business intelligence
 Business intelligence is a term used by hardware and software vendors and information technology
consultants to describe the infrastructure for warehousing, integrating, reporting, and analyzing data
that comes from the business environment.
 Business Intelligence (BI) refers to the infrastructure and tools that help organizations collect, store,
analyze, and visualize data for better decision-making. It enables businesses to extract meaningful
insights from vast amounts of data to improve efficiency, competitiveness, and strategy.
 Infrastructure for Data Management: 1. Databases, 2. data warehouses, 3. data marts
• Business analytics
Tools and techniques for analyzing data: OLAP, statistics, models, data mining
• Business intelligence vendors
Create business intelligence and analytics purchased by firms
Largest five providers of these products are Oracle, SAP, IBM, Microsoft, and SAS

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Business Intelligence in the Enterprise

• Infrastructure for Data Management
1. Databases
• Example: A retail store like Walmart uses a database to store customer purchase data,
inventory levels, and employee performance. This data is used to track sales and optimize
supply chain management.
2. Data Warehouses
• Example: A company like Amazon might use a data warehouse to consolidate data from its
website, customer reviews, supply chain systems, and third-party sellers. The data is stored
in a centralized location for more effective reporting and analysis.
3. Data Marts
• Example: A marketing department at Coca-Cola might have its own data mart containing
customer preferences, purchasing patterns, and campaign data. This allows the marketing
team to analyze specific customer trends without needing to access the entire company
database.
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Business Intelligence in the Enterprise

Business Analytics (Data Analysis & Processing): Tools and techniques for analyzing data:
1. OLAP (Online Analytical Processing)
• Example: In a financial institution, OLAP tools can allow managers to view monthly
performance across regions and departments, drill down into detailed transaction data, and
compare year-over-year growth. OLAP’s multidimensional analysis allows for fast querying
and decision-making.
2. Statistics & Predictive Models
• Example: Netflix uses predictive analytics to recommend movies to users based on historical
viewing patterns. By analyzing user behavior, Netflix can predict the types of shows a user is
likely to watch next and increase engagement.
3. Data Mining
• Example: Target uses data mining to uncover shopping patterns. By analyzing purchase
behavior, Target can predict when a customer might be pregnant and offer them coupons for
baby products, which helped Target increase sales in certain demographics.
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Business Intelligence in the Enterprise

Business Intelligence Vendors
• Oracle: Example: A large company like General Electric might use Oracle BI tools to manage
and analyze their global operations, from supply chain management to production efficiency,
using integrated databases and analytics to improve decision-making.
• SAP: Example: Volkswagen uses SAP Business Intelligence to analyze production data, track
vehicle performance, and optimize inventory management. SAP allows for integrated reporting
from across multiple departments, ensuring the company runs efficiently.
• IBM: Example: A company like American Express uses IBM Cognos Analytics for financial
reporting and risk management. By analyzing transaction data, they can detect fraud patterns in
real-time and optimize business operations.
• Microsoft: Example: Airbnb uses Microsoft Power BI to track bookings, customer reviews, and
host performance. The platform allows Airbnb to visualize data and generate actionable
insights for better service and platform optimization.
• SAS: Example: HSBC uses SAS Analytics for financial risk management. By analyzing data
on loans, customer behavior, and market conditions, SAS helps HSBC predict potential
defaults and manage financial risks effectively.
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Business Intelligence in the Enterprise

• XYZ Retail, a global retail company, struggles with forecasting demand,
understanding regional customer preferences, and managing inventory
effectively. The company wants to implement a Business Intelligence (BI)
solution to address these challenges.
• Question:
• As the Chief Data Officer at XYZ Retail, design a BI strategy to solve these
problems using data warehousing, predictive analytics, and data mining.
1. How would you implement this BI solution to improve customer insights and
inventory management?
2. What outcomes do you expect from this strategy?
3. How would you ensure data privacy and regulatory compliance in the BI process?

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

1. Data from the business environment (both structured and unstructured data)
2. Business intelligence infrastructure
3. Business analytics toolset (A set of software tools)
4. Managerial users and methods
5. Delivery platform – MIS, DSS, ESS (Executive support systems)
6. User interface (data visualization tools, such as rich graphs, charts, dashboards, and maps.)

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

Business Intelligence (BI) environments consist of several interconnected components that work
together to collect, process, analyze, and present data to help organizations make informed
decisions. Here are the six key elements:
1. Data from the Business Environment (Structured and Unstructured Data)
• Structured Data: Data that is organized in a predefined manner, such as databases (e.g., sales
transactions, inventory records).
• Unstructured Data: Data that doesn’t have a fixed format, such as customer reviews, emails,
social media posts, or images.
• Example: A retail company may analyze structured sales data alongside unstructured customer
feedback to gain insights into consumer preferences.

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

2. Business Intelligence Infrastructure

• The foundational layer that collects, stores, cleans, and integrates the data to make it accessible
for analysis.
• Example: A data warehouse or cloud storage system that consolidates data from various
sources, such as CRM systems, financial records, and external databases.
3. Business Analytics Toolset
• A set of software tools that help analyze the data and generate insights. This includes statistical
analysis, data mining, and predictive modeling tools.
• Example: Tools like SAS, IBM Cognos, or Tableau that allow managers to perform in-depth
analyses, create visualizations, and make forecasts.

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

4. Managerial Users and Methods

• The managers who use BI tools to make strategic decisions, including operations, finance,
marketing, and HR managers.
• They apply various methods like OLAP, data mining, and predictive analytics to turn data into
actionable insights.
• Example: A marketing manager might use BI to identify customer segments and tailor
campaigns accordingly.

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

5. Delivery Platform (MIS, DSS, ESS)

• MIS (Management Information Systems): Provides routine reports and summaries for
operational decision-making.
• DSS (Decision Support Systems): Helps managers analyze complex, non-routine problems and
generate ad hoc reports.
• ESS (Executive Support Systems): Offers high-level reports and visual dashboards for senior
executives to monitor overall performance.
• Example: An executive uses an ESS dashboard to view high-level metrics on company
performance and strategic goals.

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Business Intelligence in the Enterprise

Six elements in the Business Intelligence Environment

6. User Interface (Data Visualization Tools)

• Tools that help users interact with data and present it visually, such as rich graphs, charts,
dashboards, and maps.
• Example: A sales manager uses a dashboard with interactive charts to monitor sales
performance in real time and adjust strategies accordingly.
• The Business Intelligence environment integrates these six elements to help organizations
make data-driven decisions. From collecting data and analyzing it with sophisticated tools to
delivering insights through interactive interfaces, BI environments enable effective decision-
making at all organizational levels.

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Business Intelligence in the Enterprise

Business intelligence and analytics capabilities
Goal is to deliver accurate real-time information to decision-makers
Main functionalities of BI systems
 Production reports (based on industry specific requirements)
 Parameterized reports (several parameters as in a pivot table to filter data)
 Dashboards/scorecards (visual tools for presenting performance data)
 Ad hoc query/search/report creation (to create their own reports based on queries and
searches.)
 Drill down (move from a high-level summary to a more detailed view)
 Forecasts, scenarios, models (ability to perform linear forecasting, what-if scenario analysis)

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Business Intelligence in the Enterprise

Business intelligence users

80% are casual users relying on production reports

Senior executives
 Use monitoring functionalities
Middle managers and analysts
Operational employees
 Pre-packaged reports
 E.g. sales forecasts, customer satisfaction, loyalty and attrition, supply chain backlog,
employee productivity

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Business Intelligence in the Enterprise

Examples of BI applications

Predictive analytics
 Use patterns in data to predict future behavior
 E.g. Credit card companies use predictive analytics to determine customers at risk for
leaving
Data visualization
 Help users see patterns and relationships that would be difficult to see in text lists
Geographic information systems (GIS)
 Ties location-related data to maps

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Business Intelligence in the Enterprise

Examples of BI applications

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Business Intelligence Constituencies

Decision Support Systems (DSS)
• Decision-support for senior management
Help executives focus on important performance information
Balanced scorecard method: Measures outcomes on four dimensions: Financial, Business process,
Customer & Learning & growth.
 Key performance indicators (KPIs) measure each dimension.
 Key performance indicators (KPIs), which are the measures proposed by senior management for
understanding how well the firm is performing along any given dimension. For instance, one key
indicator of how well an online retail firm is meeting its customer performance objectives is the
average length of time required to deliver a package to a consumer. If your firm is a bank, one
KPI of business process performance is the length of time required to perform a basic function
like creating a new customer account.

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Business Intelligence Constituencies

THE BALANCED SCORECARD FRAMEWORK

In the balanced scorecard
framework, the firm’s
strategic objectives are
operationalized along four
dimensions: financial,
business process, customer,
and learning and growth.
Each dimension is
measured using several
KPIs.

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Business Intelligence Constituencies

Decision Support Systems (DSS)

• Decision-support for senior management

• Business performance management (BPM)
 Translates firm’s strategies (e.g. differentiation, low-cost producer, scope of operation) into
operational targets
 KPIs developed to measure progress towards targets
Data for ESS
 Internal data from enterprise applications
 External data such as financial market databases
 Drill-down capabilities

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Business Intelligence Constituencies

Group Decision Support Systems (GDSS)

• A Group Decision Support System (GDSS) is an interactive software system designed to help
groups of people make decisions collaboratively. GDSS enhances group productivity by
providing tools for effective communication, idea generation, and decision-making. It is
especially useful for solving unstructured problems, where there is no single right answer, and
a group of participants needs to evaluate multiple solutions.
• Examples of GDSS tools include online collaboration platforms like Google Workspace,
Microsoft Teams, and Slack; brainstorming and idea management tools like Miro and Trello;
and polling and voting platforms like SurveyMonkey and Mentimeter.
• Key Features of GDSS:
1. Interactive System for Group Decision-Making
– GDSS allows multiple participants to interact with the system, contribute ideas, and work
together towards a decision in a structured environment.
– Example: A project team uses a GDSS to collaboratively brainstorm solutions to a product
design challenge.
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Business Intelligence Constituencies

Group Decision Support Systems (GDSS)

• Key Features of GDSS:

2.Specialized Hardware and Software
1. GDSS often includes hardware like overhead projectors and display screens to display
ideas, ranking, and analysis. The software helps participants collect, rank, and edit ideas
during the decision-making process.
2. Example: During a meeting, the software displays the ranked ideas on a large screen,
ensuring all participants are on the same page.
3. Tools for Collecting, Ranking, and Editing Ideas
• The software allows participants to input their ideas, rank them based on importance, and make
revisions if necessary. This process ensures that all ideas are considered equally and evaluated
systematically.
• Example: A team brainstorming solutions for an organizational problem uses the GDSS to rank
ideas, ensuring the best solutions are prioritized.
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Business Intelligence Constituencies

Group Decision Support Systems (GDSS)

• Key Features of GDSS:

4. Facilitator and Staff Involvement
• While the system itself facilitates the decision-making process, a facilitator or staff may
be needed to guide the group, ensure smooth communication, and manage the process.
• Example: A facilitator helps a team stay focused during a GDSS session, ensuring they
stick to the agenda and make efficient decisions.

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Business Intelligence Constituencies

Group Decision Support Systems (GDSS)

• Examples of GDSS Tools:

1. Google Workspace (Docs, Sheets, Meet)
1. Facilitates collaboration among participants by allowing real-time editing, video
conferencing, and idea sharing.
2. Microsoft Teams
1. A platform for communication and collaboration, allowing group chats, meetings, file
sharing, and collaborative work on documents.
3. Slack
1. A messaging platform that supports group discussions and file sharing, making it easier for
teams to work together remotely.

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Business Intelligence Constituencies

Group Decision Support Systems (GDSS)

 Specialized hardware and software; typically used in conference rooms

 Overhead projectors, display screens
 Software to collect, rank, edit participant ideas and responses
 May require facilitator and staff
 Enables increasing meeting size and increasing productivity
 Promotes collaborative atmosphere, guaranteeing anonymity
 Uses structured methods to organize and evaluate ideas

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