CM

MIS Decision Making - Vocabulary Flashcards

Overview

  • Decisions occur from the moment we wake up to the time we sleep; some decisions are trivial, others critical in business. A wrong decision can have severe consequences (e.g., unsalable inventory, loss of valuable employees).
  • Managers bear the responsibility for making decisions, implementing them, and overseeing results. Decision making is a heavily studied field in management.

The Decisional Role of Managers

  • Henry Mintzberg classifies management roles into three categories: interpersonal, informational, and decisional.
    • Interpersonal roles: managers act as leaders, represent the business to external stakeholders, communicate with the public, and recognize employee performance.
    • Informational roles: managers are the central node for information within the organization.
    • Decisional roles: managers perform decisional activities for the organization.

High-Velocity Automated Decision Making

  • The volume of data generated is staggering due to the Internet and automation.
    • 1.7\ ext{MB per second} per person.
    • In the last 2 years, 90\%\, of the world’s data has been created.
    • 2.5\times 10^{18}\ ext{bytes per day} of data are produced by humans daily.
    • 95{,}000{,}000 photos and videos are shared on Instagram every day.
    • 3.07\times 10^{11}\, emails and 5{,}000{,}000 Tweets are made every day.
  • Much organizational decision-making today is performed by computers via high-velocity decision making (HVDM).
    • HVDM processes data quickly using algorithms and software.
    • Software is human-created and aims to identify issues, propose solutions, and implement programs to overcome issues with emphasis on transactional speed.

Review: Managerial Roles and High Velocity Decision Making

  • The five classical functions of managers (Henri Fayol): planning, organizing, coordinating, deciding, and controlling.
  • The need for high-velocity decision making arises from the enormous amount of data generated daily.
  • Mintzberg’s three management roles: Interpersonal, Informational, Decisional.

Management Filters

  • Many organizations provide up-to-date data to managers, but researchers note that managers are often not good at assessing risk and are risk-averse.
    • They may rely on intuition, perception, and feelings when making decisions.
    • Risk management systems are frequently developed to mitigate human biases in decision making.
  • Risks of risk management systems: if designed poorly, they can still lead to poor decisions due to human-driven design flaws.
  • Example provider: LogicGate
    • Cloud-based risk management software to aid decision making.
    • Automates routine tasks with workflow management and deadline-triggered requests.
    • Transparent tracking, notifications, and dynamic templates for input.
    • Reporting and analytics including custom analytics and heat maps for real-time enterprise risk data.

Structured Decisions

  • Structured decisions are routine and follow prescribed procedures; they are usually procedural and operational.
  • They are made by individuals or teams to avoid re-solving the same problems repeatedly.
  • Middle managers often face structured decisions, though some elements may be unstructured.
  • Semi-structured decisions: part of the problem has a straightforward answer via a predetermined process, the rest requires unstructured methods.

Unstructured Decisions

  • Unstructured decisions are typically made by higher-level management and are strategic (e.g., market entry/exit, capital budgeting, strategic goals).
  • Managers rely on personal insight and judgment in addition to data from decision-support systems to address issues.
  • Characteristics: significant, nonroutine, far-reaching implications; no predefined guidelines for handling.

The Analytic Hierarchy Process (AHP)

  • Developed by Thomas Saaty.
  • AHP is a multi-criteria programming model that uses a hierarchical decision framework for complex environments.
  • It allows many variables and conditions to be considered and prioritized to select the best alternative or project.
  • Analysis combines data from enterprise systems with qualitative input from humans, decomposing problems into a visible hierarchy for comparison.

The Balanced Scorecard Method

  • Corporate-level decisions rely on information from executive support systems (ESS).
  • ESS structures information to support management decisions and resources allocation.
  • The Balanced Scorecard (BSC) framework, developed by Robert Kaplan and David Norton, is a popular ESS methodology.
  • BSC structures strategy and goals around measurable outcomes derived from four perspectives.

Elements of the Balanced Scorecard Framework

  • The framework measures outcomes in four areas:
    • Financial outcomes: revenue, expenses, return on investment (ROI), net income, cash flow, return on equity.
    • Internal business processes outcomes: measures of operating efficiency.
    • Learning and growth outcomes: culture, including employee training, retention, satisfaction, diversity, and compensation metrics.
    • Customer outcomes: who buys, customer satisfaction and retention, delivery performance, product/service performance.

The Measurable Outcomes of the Balanced Scorecard

  • KPIs (Key Performance Indicators) are quantifiable values used to validate achievement of significant objectives.
  • The four measured areas are: ext{financial}, ext{internal business processes}, ext{learning and growth}, ext{customers}.

The Impact on Business Decisions of Information Quality

  • Data quality and analysis technologies are increasingly critical for informed decision making.
  • IBM estimates the U.S. economy loses over 3.1\times 10^{12} dollars per year due to bad data.
  • DMBOK (Data Management Body of Knowledge) defines data quality as: planning, implementation, and control of activities that apply quality management to data to ensure it is fit for consumption by data producers and consumers.

The Characteristics of Information Quality

  • Six factors to assess information quality:
    • Accuracy: how well data describes real-world conditions.
    • Completeness: data is well-structured and includes intended elements.
    • Relevance: data is useful and relevant to the organization.
    • Validity: data collection methodologies are valid.
    • Timeliness: data is available when needed.
    • Consistency: multiple versions of the same data item are the same.

Decision Support for Middle and Operational Managers

  • Middle and operational managers monitor many performance areas (sales, operations, employee performance, adherence to guidelines).
  • Decision making at this level is often fairly structured to align with organizational objectives.
  • MIS (Management Information Systems) provide reports to assist decision making, including:
    • Exception reports: identify outliers from the norm (e.g., production below forecast, sales performance below threshold, mandatory training overdue).
    • Production reports: current and projected production levels and whether goals will be met.
    • Forecasting reports: future expectations versus current conditions.

Pivot Tables

  • Pivot tables in Excel and other tools are used for multi-dimensional data analysis.
  • They help decision makers view patterns across datasets.

Belief Structures

  • Belief Outcome Action (BOA) framework structures research questions related to information systems and sustainability reporting.
    • Belief formation: how psychic states (beliefs, desires, opportunities) about the operating environment are formed.
    • Action formation: how those psychic states translate into organizational action.
    • Outcome terminology: methods used to measure and monitor belief and action steps within the BOA framework.

Review: Information Quality, Manager Support, Belief Structures

  • What supports middle and operational managers? MIS reports (exception, production, forecasting).
  • What is the BOA framework? A method for structuring research questions tied to information systems.
  • What are the characteristics of information quality? ext{accuracy}, ext{completeness}, ext{relevance}, ext{validity}, ext{timeliness}, ext{consistency}.

Multiple-Criteria Decision Analysis (MCDA)

  • MCDA (also MCA) is a decision analysis tool that compares multiple criteria rather than relying on a single monetary metric.
  • It combines data from diverse sources and areas (math, IT, economics, information systems).
  • MCDA is not constrained to monetary units and aims to improve decision quality by considering varied criteria.

MCDA Five-Step Process

1) Describe the context: clearly define the scope and environment of the analysis.
2) Identify available options: enumerate feasible alternatives.
3) Identify and select objectives and criteria: determine what to measure and how to weight importance.
4) Measure each criterion: assess performance across criteria, including weights indicating importance.
5) Calculate the values: compute scores to compare alternatives.

A Simple Decision Matrix: Discovering Problems (5 Whys)

  • The 5 Whys technique helps uncover root causes by repeatedly asking why a problem occurs.
  • Four basic steps, with documentation at each step:
    • Identify the current problem.
    • Ask why the problem happened.
    • Continue asking why.
    • Consult with members of the organization.
    • Establish solutions.

Example Problem Statement and 5 Whys

  • Problem: Customers are giving low ratings because products aren’t delivered timely and some do not meet specifications.
    1) Why are products not meeting specifications? Response: Sales descriptions don’t match product specifications.
    2) Why are shipping times not meeting expectations? Response: The warehouse can’t process orders in the specified timeframe.
    3) Why are customers shipped products that don’t meet specifications? Response: Disconnect between information from customers and information to manufacturing.
    4) Why do sales documents lack sales manager approval? Response: Sales manager delegated responsibility to the sales team.
    5) Why is there no follow-up with the customer? Response: Sales team has not been mandated to have follow-up discussions before shipping.

Designing Solutions

  • A solution is the response to an identified problem.
  • When investigating a solution, consider:
    • Identify what you know and don’t know.
    • Consider all outcomes.
    • Allocate resources appropriately.

How Managers Choose Among Solution Alternatives

  • Decision making involves examining well-defined solution alternatives designed to overcome a problem.
  • Managers compare alternatives against selection criteria (benefits, costs, advantages, disadvantages).
  • Decision-making can be difficult due to the challenge of measuring strengths and weaknesses of each alternative.

Recap: MCDA and a Decision Matrix

  • MCDA steps: describe context, identify options, select objectives/criteria, measure criteria, calculate values.
  • When solving problems, you should identify what is known/unknown, consider all outcomes, and allocate resources.
  • Managers compare alternatives using selection criteria and may face measurement difficulties when weighing different aspects.

The Decision Making Process (Herbert A. Simon)

  • Simon proposed a four-stage model:
    • Intelligence: discovery, identification, and cognition of the organization’s problems.
    • Design: exploring and identifying potential solutions.
    • Choice: evaluating alternatives and selecting the most viable solution.
    • Implementation: implementing the chosen solution and monitoring its effectiveness to ensure it works.

Closing

  • The material emphasizes the integration of managerial roles, data quality, structured vs unstructured decisions, and tools like AHP, Balanced Scorecard, MCDA, and BOA to support effective decision making in organizations.