Chapter 9: Enabling the organization – Decision making

Managerial decision making challenges

1.    Managers need to analyze large amount of information

·      Innovation in communication and globalization have resulted in a dramatic increase in the variables and dimensions people need to consider when making a decision, solving a problem, or appraising an opportunity.

2.    Manager must make decision quickly

·      Time is of the essence and people simply do not have time to sift through all the information manually.

3.    Managers must apply sophisticated analysis technique, such as Porter’s strategies or forecasting, to make strategic decisions.

·      Due to the intensely competitive global business environment, companies must offer far more than just a great product to succeed.

Operational

Employees develop, control and maintain core business activities required to run day to day operations. Operational decisions are considered structured decisions, which arise in situation where establish processes potential solutions. Structured decision are made frequently and are almost repetitive in nature.

Managerial

Employees are continuously evaluating company operations to hone the firm’s abilities to identify, adapt to, and leverage change. A company that has a competitive advantage needs to constantly adjust and revise its strategy to remain ahead of fast-following competitors. Managerial decisions cover short and medium-range plans, schedules and budgets along with policies, procedures, and business objectives for the firm. They also allocate resources and monitor the performance of organizational subunits, including departments, divisions, process teams, project teams, and other work groups. Types of decision are considered semi-structured decisions, they occurs in situations in which a few established processes help to evaluate potential solutions, but not enough to lead to a definite recommended decision.

Strategic

Managers develop overall business strategies, goals, and objectives as part of the company’s strategic plan. They also monitor the strategic performance of the organization and its overall direction in the political, economic, and competitive business environment. Strategic decisions are highly unstructured decisions, occurring in situations in situations in which no procedures or rules exist to guide decisions makers toward the correct choices. They are infrequent, extremely important, and typically related to long-term business strategy.

Decision-making process

1.    Problem Identification: define the problem as clearly and precisely as possible.

2.    Data Collection: gather problem-related data, including who, what, where, when, why, and how. Be sure to gather facts, not rumors or opinions about the problem

3.    Solution generation: detail every solution possible, including ideas that seem farfetched.

4.    Solution test: evaluate solutions in terms of feasibility (can it be completed?), suitability (is it a permanent or a temporary fix?), and acceptability (can all participants form a consensus?).

5.    Solution Selection: select the solution that best solves the problem and meets the needs of the business.

6.    Solution Implementation: if the solution solves the problem, then the decisions made were correct. If not, then the decisions were incorrect and the process begins again.

 

Support: enhancing decision making with MIS

·      A model is a simplified representation or abstraction of reality. Model helps managers calculate risks, understand uncertainty, change variables, and manipulate time to make decision. MIS support systems rely on models for computational and analytical routine that mathematically express relationship among variable.

Operational support systems

·      Transactional information encompasses all the information contained within a single business process or unit of work, and its primary purpose is to support the performance of daily operational or structured decisions. Transactional information is created, for example, when a customer purchasing stocks, making an airline reservation, or withdrawing cash from ATM. Manager use transactional information when making structured decisions at the operational level, such as when analyzing daily sales reports to determine how much inventory to carry.

·      Online transaction processing (OLTP) is the capture of transaction and events information using technology to (1) process the information according to defined business rules, (2) stores the information, (3) update existing information to reflect the new information. During OLTP, the organization must capture every details of transactions and events. A transaction processing system (TPS), is the basic business system that serves the operational level and assists in making structured decisions.

Managerial support system

·      Analytical informations, encompasses all organizational information, and its primary purpose is to support the performance of managerial analysis or semi-structured decisions. Online analytical processing (OLAP) is the manipulation to create business intelligence in support of strategic decisions making. Decisions supports systems (DSSs) model information using OLAP, which provides assistance in evaluating and choosing among different course of action. DSSs enable high-level mangers to examine and manipulate large amounts of detailed data from different internal and eternal sources.

·      What-if analysis checks the impact of a change in a variable or assumption on the models.

·      Sensitivity analysis a special case of what-if analysis, is the study of the impact on other variables when one variable is changed repeatedly.

·      Goal-seeking analysis find the inputs necessary to achieve a goal such as a desired level of output.

·      Optimization analysis an extension of goal seeking analysis, finds the optimum value for target variable by repeatedly changing other variable, subject to specified constraints.

Strategic support systems

·      An executive information system (EIS) is a specialized DSS that supports senior-level executives and unstructured, long-term, non-routine decisions requiring judgment, evaluation, and insight.

·      Consolidation is the aggregation of data from simple roll-ups to complex groupings of interrelated information.

·      Drill-down enables users to view details, and details of details, of information. This is the reserve of consolidation; a user can view regional sales data and then drill down all the way to each sales representative’s data at each office. Drill-down capability lets managers view monthly, weekly, daily, or even hourly information.

·      Slice-and-dice is the ability to look at information from different perspectives. One slice of information could display all product sales during a given promotion. Another slice could display a single product’s sale for all promotions.

The future: artificial intelligence

·      Intelligent system are various commercial applications of artificial intelligence.

·      Expert system are computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems.

·      Neural network also called an artificial neural network, is a category of AI that attempts to emulate the way the human brain works