Class 11 Decision Making Processes & Decision Support Systems

1. MIS 2000 Instructor: Bob Travica Class 11 Decision Making Processes & Decision Support Systems Updated Feb. 2014

2. Outline • Decision making and problem solving process - rational (scientific) model • Other decision making models • Decision Support System • MIS & DSS support to rational decision making • Summary • Exercise 615 Management Information Systems 2 of 13

3. 1. Identify (define) problem ? 5. Evaluate/Adjust solution 2. Define optional solutions P 0 1 3 3. Evaluate optional solutions exhaustively and select best Decision making and problem solving process: Rational (Scientific) Model (Simon, 1950s) 1 4. Implement solution % • Steps 1-3 are decision making; with steps 4-5 the whole process • is problem solving. • Desirable model in business and generally but its assumptions are limiting.* 615 Management Information Systems

4. Other Models: Satisfycing (Good Enough) Decision Making • Decisional making made under significant constraints ? • Making a choice that is good enough • Simon supplanted Rational Model; necessary evil • due to human & organizational limitations • (e.g., cognitive capabilities, time constraints, • struggles) ? Go for low-hanging fruit! Focus on most important evaluation criterion-two Select the first solution that fits the criterion Define some optional solutions Define problem under constraints More 615 Management Information Systems

5. Other Models: Zig-Zag Problem Solving (“Muddling Through”)* • How decision making typically runs in public organizations: • - different interests that balance each other, • - nobody to “cut the knot”, struggles over budget and assets • - “endless” decision processes, like walking through mud. • What is the problem? Different things for different people! • Problem defining includes negotiations and maneuvering. • Optional decisions are defined tentatively. • Decision maker implements just a part of a chosen option. • If blocked, he switches to an alternative; if blocked again, • must maneuver again (might even turn back to the first option); • see diagram on next slide. 615 Management Information Systems

6. Zig-Zag Problem Solving – Process Diagram Administrator Internal Stakeholder External Stakeholder Define problem Define problem Define problem Make a compromise definition AND Blocked? Blocked? Define options tentatively Comment Comment Adjust options Implement an option partly Evaluate situation Y N React React React React Y N Implement another part Evaluate situation Only without blocking to any part of a decision, it is completely realized. But there is usually some blocking and the loops may seem infinite. Switch to another option 615 Management Information Systems

7. Decision Support System (DSS) • Managerial decision making about future is supported by DSS. MIS • Outputs: • Models • Scenarios and outcomes • Results of tests • Relationships & patterns Data modeling & Data mining DSS • DSS Supports higher mgt. levels. Problems to solve are less structured than in routine situations where TPS & MIS can do the work. Sales Inventory ENVIRON- MENT • DSS uses outputs from MIS and data from sources outside the company. • Time horizon of DSS: Future – from close (day, week) to far (one+ years). More 615 Management Information Systems

8. 615 Management Information Systems • Management tasks: Planning and forecasting • Visually represent key performance indicators (e.g., financial ratios); dashboards. • May have a “drill-down capability” to find what is behind aggregated figures

9. DSS Types Data transformation models TPS MIS environment MIS environment - Simulation - Scenario - Result of stats tests New relationships in sequence, New relationships per transaction, Groupings *** • Data-driven: Looking for patterns in large data sets. • Data mining** and Big Data*** Data Warehouse Data Mining software 615 Management Information Systems • Model–driven: Processes data using different transformationmethods (optimization, if-then analysis, statistical tests)*

10. Rational Decisional Making Process and Information Systems for Decision Making IDENTIFY PROBLEM DEFINE OPTIONS SELECT OPTION Yes Upper-level Manager (Business Analyst helping) Evaluate result & accept/reject Adjust inputs? Define problem (may include negotiations) Discuss & Negotiate Learn about problem Create optional solutions No Create reports MIS DSS Analyze options & select the best Run environment analysis Run organization analysis Deliver decision options • IS can help rational DM. • The role of MIS is to inform the user so that a potential problem in operations can be identified. • Model-driven DSS can help with more steps and entire DM process – best option can be automatically delivered. • People still make the final choice (decision). 615 Management Information Systems

11. Summary 615 Management Information Systems In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify problem, (2) create optional solutions, and (3) evaluate optional solutions exhaustively and select the best one. The full problem solving (PS) cycles includes 2 more steps: (4) implement solution, and (5) evaluate solution based on reaction of the affected party. Satisficing and Zig-Zag models acknowledge constraints in problem solving. DSS supports higher mgt. levels in solving less structured problems related to upcoming activities in the near to far future. It can be model- or data-driven. DSS uses data reflecting both the organization and the environment, and delivers key performance indicators, visuals, and drill-down of aggregate figures. Role of MIS in decision making processes is limited to informing the user in the problem definition step of rational DM. DSS can support whole DM process. Human decision makers still play the key role.