DECISION MAKING

Traditionally in many organisations decision making was the job of management. However it is now common for lower level employees to be responsible for some decision making. This is in part made possible because information systems have made information available to lower levels of the business.

Decisions are made at all levels of the firm. Some decisions are very common and routine but very valuable. Although the value of improving any single one of these decisions may be small, improving hundreds of these small decisions can add up to a very large annual value.

Types of Decisions – Unstructured, Structured and Semi-Structured

Decisions can be classified according to type: Unstructured, structured and semi-structured (see Figure 12.1).

Unstructured decisions are non-routine decisions where the decision-maker must provide judgement and evaluations for which there is no standard procedure for the solution. These decisions are non-routine requiring unique solutions. Examples are an airline deciding on whether to start a new route, or a book retailer deciding whether to close the book shop and move to selling on-line.

Structured decisions are repetitive and routine where the decision maker can follow standard procedures for solutions. These tend to occur at the operational level of the organisation and are generally low risk. An example of a structured decision would be a supermarket manager deciding how many staff to have on duty on a Saturday.

Semi-structured decisions are those where only part of the problem has a clear answer which is provided by a standard procedure (structured part) and other components of the problem are the unstructured part. There is a level of human judgement required in the decision making process.

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These different types of decisions tend to be required at different levels in the organisation which can be summarised as follows:

 Senior management have to make many unstructured decisions.

 Middle management faces more structured decisions but these decisions may include an unstructured part and are generally referred to as semi-structured decisions.

 Operational management and operational staff tend to make more structured decisions.

Figure 12.1: Decision Types at the different Management Levels

The Decision Making Process

The following are the four stages in the decision-making process (see Figure 12.2) and how each can be supported by information systems:

1) Intelligence: This stage involves identifying and understanding the problems that are present in the organisation and their root cause and effect. MIS systems that provide a wide range of detailed reports and information can help in identifying problems. MISs that provide exception reports are particularly useful for identifying problems.

2) Design: This stage involves identifying and investigating a number of possible approaches and solutions to the problem. DSSs are ideal in this stage for exploring Decision Type

Senior Management

Semistructured

Key Decision-Making Groups in an Organisation

Middle Management

Operational Management Unstructured

Structured

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alternatives because they include tools for analysing and modelling data, thus enabling users to explore various options quickly.

3) Choice: This stage involves choosing from alternative solutions. DSSs can support managers in choosing the optimal solution. These DSSs can use complex analytic models to look at the various potential outcomes.

4) Implementation: This stage involves implementing the chosen solution and monitoring to establish if the solution works. An MIS can be used to provide managers with routine reports on the progress of the solution.

Figure 12.2: The stages in the Decision making process

In the real world, the stages of decision-making do not necessarily follow the serial four stage path described above. For example, during the implementing stage you may discover that the solution is not working. In such cases you will be forced to repeat the design choice stages and sometimes even the intelligence stage.

Managers and Decision Making

The classical model of management (Fayol, 1916) saw managers perform five management functions: planning, organising, commanding, controlling and co-ordinating. A contemporary model of management (Mintzberg, 1973) suggested that rather than looking at the functions of managers that we should look at the roles they perform. Mintzberg identified ten roles that all managers perform and grouped these roles into three categories as shown in Figure 12.3.

Category Role

Interpersonal Role

Figurehead Leader Liaison

Information Role

Monitor (nerve centre) Disseminator

Spokesperson

Decisional Role

Entrepreneur

Disturbance Handler Resource Allocator Negotiator

Figure 12.3: Mintzberg roles of management

Intelligence Design Choice Implementation

Page 117 Interpersonal Role

A key aspect of a managers job involves interacting with other people. As a figurehead managers represent the organisation by performing ceremonial and symbolic activities. As a leader managers must be able to motivate, communicate with and influence people. In the role of a liaison a manager needs to be able to develop relations with groups both inside and outside the organisation. These groups could include customers, trade unions and government departments.

Information Role

Information is a very important resource of any organisation. The monitor role refers to the acquiring of information from internal and external resources. The disseminator role refers to the transmitting of information to those who require it. As a spokesman a manager delivers information to groups outside the organisation such as the media.

Decisional Role

As an entrepreneur a manager must seek out new ways to deal with problems and find opportunities for the organisations. The disturbance handler role involves resolving conflicts between individuals and teams.

As a resource allocator the manager must make decisions on how to allocate resources such as people, materials and time, to best achieve the objectives of the organisation. As a negotiator a manager will negotiate with various interest groups such as customers, suppliers and other managers.

Information systems can support managers in some of these roles while in other roles no support exists. There is little information support for the roles of figurehead, leader, entrepreneur, disturbance handler and negotiator. The following roles are supported:

 The role of liaison is supported by electronic communication system,

 The role of monitor is supported by management information systems (MIS) and ESS

 The role of disseminator is supported e-mail, office systems,

 The role of spokesperson is supported by office and professional system,

 The role of resource allocator is supported by DSSs (define)

While information systems can be helpful in improving decision making in some roles, it should be noted that even in these areas, investment in information systems does not always produce positive results. Laudon & Laudon (2012) suggests three main reasons:

1. Information quality: High-quality decisions require high-quality information. There are seven dimensions of information quality that are important when designing decision-support systems: Accuracy, integrity, consistency, completeness, validity, timeliness, and accessibility.

2. Management filters: Managers filter by turning off to information they do not want to hear because it does not conform to their prior views.

3. Organisational inertia and politics: Organisations are bureaucracies with limited capacity and skills for acting decisively. When environments change and new business

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models should be followed, strong forces within organisations resist making decisions which require major change.