Decision Making in Business
Decisional Role of Managers
- Managers make critical decisions for organizational success.
- Henry Mintzberg categorized management roles into: Interpersonal, Informational, and Decisional.
High-Velocity Automated Decision Making
- High-velocity decision making involves computers using algorithms to quickly process data and make decisions.
- Software identifies issues, finds solutions, and implements programs for transactional speed.
Management Filters
- Managers often base decisions on intuition and feelings and are generally risk averse.
- Risk management systems can mitigate human impact but may have flaws if designed incorrectly.
Structured Decisions
- Structured decisions are routine tasks with definite procedures, often made by individual employees and teams.
- Some decisions are semi-structured, combining predetermined processes with unstructured solutions.
Unstructured Decisions
- Unstructured decisions are significant, nonroutine, and executed by higher-level management.
- They rely on manager's insight and judgement without predefined guidelines.
Analytic Hierarchy Process (AHP)
- AHP is a multi-criteria model for decision making, prioritizing variables and conditions.
- It deconstructs problems into hierarchies analyzed through comparison, using both enterprise data and qualitative human input.
Balanced Scorecard Method
- The balanced scorecard is an Executive Support Systems (ESS) methodology that structures information using measurable outcomes.
- Key Performance Indicators (KPIs) validate how well an organization achieves strategic objectives.
Elements of the Balanced Scorecard Framework
- Financial outcomes: revenue, ROI, net income, etc.
- Internal business processes: efficiency of operations.
- Learning and growth: employee training, retention, satisfaction, etc.
- Customer outcomes: satisfaction, retention, service delivery, etc.
- Organizations need high-quality information to avoid costly errors.
- Data Quality (DQ) is ensuring data is fit for consumption and meets consumer needs.
- Accuracy: data describes real-world conditions well.
- Completeness: data is well-structured with intended elements.
- Relevance: data is useful to the organization.
- Validity: data collection methods are valid.
- Timeliness: data is available when needed.
- Consistency: multiple data versions are the same.
- Decision-making is fairly structured to align with organizational objectives.
- Management Information Systems (MIS) reports include: exception, production, and forecasting reports.
- Pivot tables are used for multi-dimensional data analysis.
Belief Structures
- The belief outcome action (BOA) framework structures research questions related to information systems.
- Belief formation includes beliefs, desires, and opportunities.
- Action formation translates psychic states into action.
- Outcome terminology explains how belief and action steps are measured.
Multiple-Criteria Decision Analysis (MCDA)
- Multiple-criteria decision analysis (MCDA), also known as multi-criteria analysis (MCA), is an analysis tool used for decision making
- MCDA compares varied criteria, using data from mathematics, IT, economics, etc.
MCDA Process
- Describe the context.
- Identify available options.
- Select objectives and criteria.
- Measure each criterion.
- Calculate the values.
Simple Decision Matrix: Discovering Problems
- The 5 Whys methodology: Identify the problem, ask why repeatedly, consult, and establish solutions.
Designing Solutions
- Consider what you know/don’t know, all outcomes, and allocate resources.
Choosing Among Solution Alternatives
- Compare alternatives using selection criteria (benefits, costs, advantages/disadvantages).
Decision-Making Process (Herbert Simon)
- Intelligence: problem discovery.
- Design: solution exploration.
- Choice: alternative consideration and selection.
- Implementation: solution implementation and monitoring.