copyright © 2002 by the mcgraw-hill companies, inc. information technology & management 2 nd...

Copyright © 2002 by The McGraw-Hill Companies, Inc. Information Technology & Management2nd Edition, Thompson Cats-Baril

Chapter 8

I/S and Organizational Decision Making

Copyright © 2002 by The McGraw-Hill Companies, Inc. 2Information Technology & Management2nd Edition, Thompson Cats-Baril

Chapter Objectives

• To understand why managers do not always follow a rational decision-making process.

• To understand how information systems may be used to help make decision making more effective.


Managerial Functions

• Traditional perspective defines management as the process of accomplishing organizational goals through planning, execution, and control.

• Day-to-day management not very glamorous.• Management impacts:

– Operations

– Customer retention

– Employee retention



• Planning refers to the activities involved in defining the goals of the organization and describing how it will accomplish these goals.

• Execution is the process of assigning responsibilities and resources to accomplish a plan.

• Control is the process of monitoring activities to ensure they develop as planned making corrections when necessary.



• GIGO, or Garbage In Garbage Out emphasizes the need for relevant, accurate, timely and complete data.

• Communication is an important part of executing a plan.

• Information systems can be useful for controlling activities.

• Transaction processing systems are designed to record and process all records relating to business transactions.


Traditional Scheme for Classifying I/ S

• TPS, Transaction Processing System

• MIS, Management Information System

• DSS, Decision Support System

• ES, Expert System

• ESS, Executive Support System


Decision Making in Management

• In an ideal world, managers behave rationally and before making a decision they would– Ask all the right questions

– Obtain all necessary information

– Discuss the problem with all the interested parties

– Weigh all the factors carefully and accurately

• Rational decision making is based on optimal choice


Simon’s Rational Decision Making Model

• Intelligence– Involves gathering information from external and

internal sources.

• Design– Involves generating alternative decisions.

• Choice– Involves selecting one of the alternatives.

• Implementation– Alternative is put into action.


Decision Making

• Broad descriptions of decision making– Information Collection– Information analysis and synthesis


Characteristics of Rational Decision Making

• Accumulating information before making a decision.• Collecting information that is problem centered and goal

directed.• Documenting the existence of a problem, the need to solve it,

and the benefits to arise from its solution.• Considering several alternatives for reaching the goal or solving

the problem.• Proposing logical and consistent cause-effect relationship.• Assessing the value of costs and benefits of various alternatives.• Determining the individual and organizational values behind the

data interpretations being used.


Managers and Decision Making

• Managers perform high-volume, high speed work involving a large number of topics.

• Managers often under stress.• Managers often take shortcuts.• Satisficing is when managers do not attempt

to find an optimal decision.• Political motivations may impact decisions.• Decision should be transparent.


Limitations of Rationality

• Humans assimilate and process information slowly.

• Extensive use of overly simplistic strategies.• Interference of personal biases.• Personality characteristics.

– Cognitive styles– Dogmatism– Risk propensity– Creativity


I/S to Improve Decision Making

• Controlling– Transactional processing systems (TPS) used

extensively in this capacity.– Management Information Systems (MIS)

• Systems used to convert data recorded by a TPS into management reports.

• Reports are in standard format.



• Automated Decisions– A structure decision situation is where the

inputs, processing, and outputs are all well known.

– Situations that are highly structured can be automated.

– Information systems can help streamline the internal operations of an organization.



• Management Science has evolved to bring more structure to unstructured decision making situations.– Based on mathematical models

– Statistical analysis

• Decision support systems (DSS) is used to describe information systems that address unstructured decision situations.– Expert Systems


Augmenting Knowledge

• Expert Systems are information systems that have been designed to capture the knowledge and reasoning capabilities of a human expert and transfer this expertise to a computer system. – MYCIN– DENDRAL– Neural Networks are popular ES based on the

neural structure of the human brain.


Components of an Expert System

• Consultation Environment– User

– User Interface

– Inference Engine*

• Development Environment– Inference Engine*

– Knowledge Base

– Knowledge Engineer

– Expert and Document Knowledge


Knowledge Management

• Knowledge is gained through experience.• Knowledge allows for better decisions.• Managing knowledge can be challenging.• Organizational knowledge

– Includes the “best” way to conduct business.– Includes practices, policies, models, and experiences of

the company.– Critical resource.– Difficult to manage.– Organizational learning can minimize costly mistakes.


Strategic Planning

• Executive Support Systems (ESS) are information systems designed to support the information needs of top-level management.– Systems cut across functional areas of the organization.

– Interfaces and commands typically very easy to learn.

– Capability to browse through information on all aspects of the organization.

– Built in features to report exceptions.


Group Decision Making

• General Phases of Decision Making– Inception of a project.– Solution of technical issues.– Resolution of conflict.– Execution of the performance requirement of

the project.


Group Decision Making

• Decision Support Software has been designed for group decisions, Group Support Systems (GSS).– Groupware– Collaborative Software– Electronic Brainstorming

copyright © 2002 by the mcgraw-hill companies, inc. information technology & management 2 nd...

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