Information Support for Decision Making Process

DECISION MAKING AND MIS

It is an indispensable component of management process

Managers see it as their central job because they constantly choose what is to be done, who is to do, and how to do.

TYPES OF DECISION MAKING

Programmed/structured Non-programmed/unstructured Semi structured

Different Classes of Decisions

Class Operational Control Management Control Strategic Planning

Structured

Order processing

Budget Analysis

Warehouse Location

Semi structured

Inventory Control /Production Scheduling

Cash Management

Analysis of Variance Introduction of new Product

Budget Formulation, R & D Planning Long term forecast

Unstructured

DECISION MAKING CONDITIONS

CERTAINTY:-There is only one outcome for each alternative and fully known. Decision maker required to compute the optimal alternatives. Optimization techniques are used for such decisions

DECISION MAKING CONDITIONS

RISK There is possibilities of multiple outcomes Instead of optimising outcomes here the general rule is to be optimise the expected outcome. The decision maker has to be rational. e.g. calculating profit margin and deciding the expected value. Outcome * Probability= Expected Value S1 1,00,000 * 0.02= 2,000 S2 10,000 * 0.08= 8,000

DECISION MAKING CONDITIONS

UNCERTAINTY When there are no. of outcomes of each alternatives and probabilities of their occurrences are not known. Optomisation criteria can not be applied as no knowledge of the probabilities Different people take decision applying different decision rules. e.g. maximax and maximin criteria, minimise regret.

DECISION MAKING PROCESS

Intelligence (problem identification) Design (alternative generation) Choice (choosing an Alternative)

Implementation (putting alternative In action)

Simons model for decision making

INTELLIGENCE
It involves searching the environment for conditions calling for decisions It is related with the identification and formulation of the problem which is to be solved by the decision A problem is the gap between present and the desired state of affairs When a problem is identified it remains vague at the initial stage, in order to make it more clear and specific problem formulation is required Strategies for reducing complexity and formulating a problem: Determining the boundaries Examining changes that may have precipitated the problem Factoring the problem into smaller sub-problems Focusing on controllable elements For this phase of decision making information requirement is in the form of exception reporting i.e. What kind of deviation exists between desired state of affairs and actual state of affairs.

1. 2. 3. 4.

DESIGN
This involves generation of possible alternatives through which the problem can be solved. A problem can be solved in several ways ,however all the ways cannot be equally satisfying The decision maker must try to find out the various alternatives available in order to get the most satisfactory result of a decision It should be kept in mind that all the alternatives cannot be considered for selection because of obvious limitations of the decision maker or information about all the alternatives may not be available. A decision maker can use several sources for identifying alternatives-his own experience, practices followed by others, using creative techniques. This phase may require more intelligence so that the manager can decide if a particular alternative is suitable for solving the problem.

CHOICE
It involves the choice of an alternative which can be put into action to solve the problem. For choosing an alternative which aims at solving the problem in the most appropriate way in a given situation, the manager must evaluate all the alternatives generated at the design stage. Having narrowed down the alternatives which require serious consideration, the decision maker will go for evaluating how each alternative may contribute towards the solution of the problem or objectives supposed to be achieved by implementing the decision. Evaluation of various alternatives presents a clear picture as to how each of these contributes to solution of the problem. The chosen alternative should be acceptable in the light of organizational objectives, and it is not necessary that the chosen alternative is the best one. At this phase managers require information tools that can keep track of the consequences ,costs, and opportunities by each alternative generated at the design phase.

IMPLEMENTATION
Once al alternative is chosen, it is implemented , it is put into action. The actual process of decision making ends with the choice of an alternative through which the objectives can be achieved However, decision making being a continuous and ongoing process must ensure that the problem has been solved and the objectives have been achieved by the chosen alternatives. Implementation of a decision requires the communication to subordinates , getting acceptance of subordinates over the matters involved in the decision, and getting their support for putting the decision into action. The decision should be implemented at appropriate time and in proper way to make it more effective