6-1

Managerial Decision Making and Information

Technology

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Chapter 6

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Learning Objectives1. Explain why decision making is an important component of

good management.

2. Explain the difference between programmed and non programmed decisions and the decision characteristics of risk, uncertainty, and ambiguity.

3. Describe the classical, administrative, and political models of decision making and their applications.

4. Identify the six steps used in managerial decision making.

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Learning Objectives (contd.)

5. Explain four personal decision styles used by managers.

6. Discuss the advantages and disadvantages of participative decision making.

7. Identify techniques for improving decision making in today’s turbulent environment.

8. Describe the importance of information technology (IT) for organizations and the attributes of quality information.

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Decisions and Decision Making A decision is a choice made from available

alternatives.

Decision making is the process of identifying problems and opportunities and then resolving them.

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Types of Decisions

Programmed decisions situations that occur often enough to enable

decision rules to be developed.

Nonprogrammed decisions are made in response to situations that are unique,

are poorly defined and largely unstructured.

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Decision Making Conditions Certainty

all the information the decision maker needs is fully available.

Risk decision has clear-cut goals. good information is available. future outcomes associated with each

alternative are subject to chance.

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Decision Making Conditions (contd.) Uncertainty

managers know which goals they wish to achieve.

information about alternatives and future events is incomplete.

managers may have to come up with creative approaches to alternatives.

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Decision Making Conditions (contd.) Ambiguity

by far the most difficult decision situation. goals to be achieved or the problem to be

solved is unclear. alternatives are difficult to define. information about outcomes is unavailable.

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Ex. 6.1 Conditions That Affect the Possibility of Decision Failure

OrganizationalProblem

ProblemSolution

Low HighPossibility of Failure

Certainty Risk Uncertainty Ambiguity

ProgrammedDecisions

NonprogrammedDecisions

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Three Decision Making Models

Classical ModelClassical Model

Administrative ModelAdministrative Model

Political ModelPolitical Model

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Selecting a Decision Making Model

Depends on the manager’s personal preference. Whether the decision is programmed or non-

programmed. Extent to which the decision is characterized

by risk, uncertainty, or ambiguity.

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Classical Model

Based on economic assumptions Is considered to be normative

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Assumptions of the Classical Model Accomplishes goals that are known and agreed upon. Strives for certainty by gathering complete information. Criteria for evaluating alternatives are known. Decision maker is rational and uses logic.

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Administrative Model

How managers actually make decisions in situations characterized by non-programmed decisions, uncertainty, and ambiguity.

Two concepts are instrumental in shaping the administrative model. bounded rationality: means that people have limits or boundaries

on how rational they can be. satisficing: means that decision makers choose the first solution

alternative that satisfies minimal decision criteria.

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Political Model Closely resembles the real environment in which

most managers and decision makers operate. Decisions are complex. Disagreement and conflict over problems and

solutions are normal. Coalition building is important.

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Ex. 6.2 Characteristics of Classical, Administrative, and Political Decision-Making Models

Classical Model Administrative Model Political Model

Clear-cut problem and goals.

Condition of certainty.

Full information about alternatives and their outcomes.

Rational choice by individual for maximizing outcomes.

Vague problem and goals.

Condition of uncertainty.

Limited information about alternatives and their outcomes.

Satisficing choice for resolving problem using intuition.

Pluralistic; conflicting goals.

Condition of uncertainty/ambiguity.

Inconsistent viewpoints; ambiguous information.

Bargaining and discussion among coalition members.

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Ex. 6.3 Six Steps in the Managerial Decision-Making Process

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Diagnosis Questions(Kepner & Tregoe)

What is the state of disequilibrium affecting us? When did it occur? Where did it occur? How did it occur? To whom did it occur? What is the urgency of the problem? What is the interconnectedness of events? What result came from what activity?

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Ex. 6.5 Personal Decision Framework

Situation:· Programmed/non-programmed· Classical, administrative,

political· Decision steps

Decision Choice:·Best Solution to Problem

Personal Decision Style:·Directive·Analytical·Conceptual·Behavioral

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The Vroom-Jago ModelThe Model Helps gauge the appropriate amount of participation for

subordinates.

Leader Participation Styles Five styles available, depending on the situation. Participation in decision making ranging from highly

autocratic to highly democratic.

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Participation in Decision MakingDiagnostic Questions

Decision significance Importance of commitment Leader expertise Likelihood of commitment Group support for goals Group expertise Team competence

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Information Technology

The hardware, software, telecommunications, database management, and other technologies used to store data and make them available in the form of information for organizational decision making.

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Ex. 6.8 Characteristics of High-Quality Information

TimeTimelinessCurrency

FrequencyTime Period

Content Accuracy Relevance

Completeness Conciseness

ScopePerformance

Form ClarityDetailOrder

PresentationMedia

Source: Adapted from James A. O’Brien, Introduction to Information Systems, 8th ed. (Burr Ridge, Ill, Irwin, 1997),284-285.

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Ex. 6.9 Types of Information Systems

Operations Information Systems Transaction-processing systems. Process control systems. Office automation systems. Management Information Systems

Information-reporting systems. Decision support systems. Executive information systems. Groupware.

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Ex. 6.10 Basic Elements of Management Information Systems

Operations Information Systems

Management Information Systems

Reporting Systems

Decision Support Systems

Executive Information Systems

Groupware

Systems

Corporate and External Databases

SOURCE: Adapted from Ralph M. Stair and George W. Reynolds, Principles of Information Systems: A Managerial Approach , 4th ed. (Cambridge, Mass.: Course Technology, 1999), 391.

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Management and Technology Implications

Improved employee effectiveness.

Increased efficiency.

Empowered employees.

Information overload.

Enhanced collaboration.