Decision Making

&
Information Systems
• Good decision-making and problem-solving skills are the
key to developing effective information and decision
support systems

• Define the stages of decision making

• Discuss the importance of implementation and
monitoring in problem solving

Principles of Information Systems, Seventh Edition 2

• The management information system (MIS) must provide
the right information to the right person in the right
fashion at the right time

• Explain the uses of MISs and describe their inputs and

outputs
• Discuss information systems in the functional areas of
business organizations

Principles of Information Systems, Seventh Edition 3

• Decision support systems (DSSs) are used when the
problems are unstructured

• List and discuss important characteristics of DSSs that give

them the potential to be effective management support
tools
• Identify and describe the basic components of a DSS

Principles of Information Systems, Seventh Edition 4

• Specialized support systems, such as group support
systems (GSSs) and executive support systems (ESSs),
use the overall approach of a DSS in situations such as
group and executive decision making

• State the goals of a GSS and identify the characteristics

that distinguish it from a DSS
• Identify the fundamental uses of an ESS and list the
characteristics of such a system

Principles of Information Systems, Seventh Edition 5

Decision Making and Problem Solving:
Decision Making as a Component of
Problem Solving

• Decision-making phase: first part of problem-solving

process
• Intelligence stage: potential problems or opportunities are
identified and defined

• Design stage: alternative solutions to the problem are

developed

• Choice stage: requires selecting a course of action

Principles of Information Systems, Seventh Edition 6

 Figure 10.1: How Decision Making
Relates to Problem Solving

Principles of Information Systems, Seventh Edition 7

 Decision Making as a Component of
Problem Solving (continued)
• Problem solving: a process that goes beyond decision
making to include the implementation stage

• Implementation stage: a solution is put into effect

• Monitoring stage: decision makers evaluate the

implementation

Principles of Information Systems, Seventh Edition 8

 Programmed V/s Nonprogrammed
Decisions

• Programmed decisions

• Decision made using a rule, procedure, or quantitative

method

• Easy to computerize using traditional information systems

Principles of Information Systems, Seventh Edition 9

Programmed Versus Nonprogrammed
Decisions (continued)

• Nonprogrammed decisions

• Decision that deals with unusual or exceptional situations

• Not easily quantifiable

Principles of Information Systems, Seventh Edition 10

Optimization, Satisficing, and Heuristic
Approaches
• Optimization model: a process to find the best solution,
usually the one that will best help the organization meet
its goals

• Satisficing model: find a good—but not necessarily the

best—problem solution

• Heuristics: commonly accepted guidelines or procedures

that usually find a good solution

Principles of Information Systems, Seventh Edition 11

 An Overview of Management
Information Systems: Management
Information Systems in Perspective
• A management information system (MIS) provides
managers with information that supports effective
decision making and provides feedback on daily
operations

• The use of MISs spans all levels of management

Principles of Information Systems, Seventh Edition 12

 Figure 10.3: Sources of Managerial
Information

Principles of Information Systems, Seventh Edition 13

 Inputs to a Management Information
System
• Internal data sources (TPSs and ERP systems and related
databases; data warehouses and data marts; specific
functional areas throughout the firm)

• External data sources (Customers, suppliers, competitors,

and stockholders whose data is not already captured by
the TPS; the Internet; extranets)

Principles of Information Systems, Seventh Edition 14

 Outputs of a Management Information
System
• Scheduled report: produced periodically, or on a
schedule
• Key-indicator report: summary of the previous day’s
critical activities
• Demand report: developed to give certain information at
someone’s request
• Exception report: automatically produced when a
situation is unusual or requires management action
• Drill-down reports: provide increasingly detailed data
about a situation

Principles of Information Systems, Seventh Edition 15

 Characteristics of a Management
Information System
• Fixed format, standard reports

• Hard-copy and soft-copy reports

• Uses internal data

• User-developed reports

• Users must request formal reports from IS department

Principles of Information Systems, Seventh Edition 16

 Functional Aspects of the MIS
• Most organizations are structured along functional lines
or areas

• MIS can be divided along functional lines to produce

reports tailored to individual functions

Principles of Information Systems, Seventh Edition 17

Figure 10.5: MIS is an integrated collection
of functional information systems

Principles of Information Systems, Seventh Edition 18

 Financial Management Information
Systems
• Financial MIS: provides financial information to all
financial managers within an organization

• Profit/loss and cost systems

• Auditing

• Uses and management of funds

Principles of Information Systems, Seventh Edition 19

 Figure 10.6: Overview of a Financial
MIS

Principles of Information Systems, Seventh Edition 20

 Manufacturing Management
Information Systems
• The manufacturing MIS subsystems and outputs monitor
and control the flow of materials, products, and services
through the organization

• Design and engineering

• Master production scheduling and inventory control

• Process control

• Quality control and testing

Principles of Information Systems, Seventh Edition 21

 Figure 10.7: Overview of a
Manufacturing MIS

Principles of Information Systems, Seventh Edition 22

 Marketing Management Information
Systems
• Marketing MIS: supports managerial activities in
product development, distribution, pricing decisions, and
promotional effectiveness

• Marketing research

• Product development

• Promotion and advertising

• Product pricing

Principles of Information Systems, Seventh Edition 23

Figure 10.10: Overview of a Marketing
MIS

Principles of Information Systems, Seventh Edition 24

 Human Resource Management
Information Systems
• Human resource MIS: concerned with activities related
to employees and potential employees of an organization

• Human resource planning

• Personnel selection and recruiting

Principles of Information Systems, Seventh Edition 25

 Human Resource Management
Information Systems (continued)
• Training and skills inventory

• Scheduling and job placement

• Wage and salary administration

• Outplacement

Principles of Information Systems, Seventh Edition 26

 Figure 10.13: Overview of a Human
Resource MIS

Principles of Information Systems, Seventh Edition 27

 Other Management Information
Systems
• Accounting MIS: provides aggregate information on
accounts payable, accounts receivable, payroll, and many
other applications

• Geographic information system (GIS): capable of

assembling, storing, manipulating, and displaying
geographic information

Principles of Information Systems, Seventh Edition 28

 Figure 10.4

Principles of Information Systems, Seventh Edition 29

 Figure 10.4 cont’d

Principles of Information Systems, Seventh Edition 30

Functional Aspects of the MIS
 Functional Areas
• Finance
• Manufacturing
• Marketing
• Human Resources

Principles of Information Systems, Seventh Edition 32


MIS is an integrated collection
of functional systems, each
supporting particular
functional areas.
Principles of Information Systems, Seventh Edition
•Financial statements
•Uses and managements
of funds
Figure 10.5 •Financial stats for control
•Quality Control reports
•Process Control reports
•JIT reports
•Production Schedule
•CAD output
•Sales by customer
•Sales by salesperson
•Sales by product
•Pricing report
•Total service calls
•Customer satisfaction
•Benefit reports
•Salary surveys
•Scheduling report
•Job applicant profiles
•Needs and planning report
33
 An Overview Of Decision Support
Systems
• A DSS is an organized collection of people, procedures,
software, databases, and devices used to support problem-
specific decision making and problem solving

• The focus of a DSS is on decision-making effectiveness

when faced with unstructured or semistructured business
problems

Principles of Information Systems, Seventh Edition 34

 Characteristics of Decision Support
Systems

• Handle large amounts of data from different sources

• Provide report and presentation flexibility

• Offer both textual and graphical orientation

• Support drill-down analysis

Principles of Information Systems, Seventh Edition 35

 Characteristics of Decision Support
Systems (continued)

• Perform complex, sophisticated analysis and comparisons

using advanced software packages

• Support optimization, satisficing, and heuristic

approaches
• Simulation

• What-if analysis

• Goal-seeking analysis

Principles of Information Systems, Seventh Edition 36

 Capabilities of a Decision Support
System
• Support all problem-solving phases

• Support different decision frequencies

• Support different problem structures

• Support various decision-making levels

Principles of Information Systems, Seventh Edition 37

The DSS Focuses on Semistructured Problems

Computer Manager + Computer Manager

Solution (DSS) Solution
Solution

Structured Semistructured Unstructured

DEGREE OF PROBLEM STRUCTURE
Principles of Information Systems, Seventh Edition 38
 Peter Keen Believes That
a DSS Should:
1. Assist in solving semistructured
problems
2. Support, not replace, the manager
3. Contribute to decision effectiveness, rather than
efficiency

Principles of Information Systems, Seventh Edition 39

A DSS Model
Environment
Individual Other
problem group
solvers members

Report GDSS
Mathematical GDSS
writing software
Models software
software

Database

Decision
support
system
Environment
Data Communication Information
Legend:
Principles of Information Systems, Seventh Edition 40
 Figure 10.15: Decision-Making Level

Principles of Information Systems, Seventh Edition 41

 Table 10.3: Comparison of DSSs and
MISs

Principles of Information Systems, Seventh Edition 42

 Table 10.3: Comparison of DSSs and
MISs (continued)

Principles of Information Systems, Seventh Edition 43

 Components of a Decision Support
System
• Model base: provides decision makers access to a variety
of models and assists them in decision making
• Database
• External database access
• Access to the Internet and corporate intranet, networks,
and other computer systems
• Dialogue manager: allows decision makers to easily
access and manipulate the DSS and to use common
business terms and phrases

Principles of Information Systems, Seventh Edition 44

 Figure 10.16: Conceptual Model of a
DSS

Principles of Information Systems, Seventh Edition 45

 Group Support Systems
• Group support system (GSS)

• Consists of most elements in a DSS, plus software to

provide effective support in group decision making

• Also called group support system or computerized

collaborative work system

Principles of Information Systems, Seventh Edition 46

Characteristics of a GSS That Enhance
Decision Making (continued)
• Anonymous input

• Reduction of negative group behavior

• Parallel communication

• Automated record keeping

Principles of Information Systems, Seventh Edition 47

 Executive Support Systems
• Executive support system (ESS): specialized DSS that
includes all hardware, software, data, procedures, and
people used to assist senior-level executives within the
organization

Principles of Information Systems, Seventh Edition 48

 Executive Support Systems in
Perspective

• Tailored to individual executives

• Easy to use

• Drill-down capabilities

• Support need for external data

Principles of Information Systems, Seventh Edition 49

 Executive Support Systems in
Perspective (continued)

• Can help when uncertainty is high

• Future-oriented

• Linked to value-added processes

Principles of Information Systems, Seventh Edition 50

 Capabilities of Executive Support
Systems
• Support for defining an overall vision

• Support for strategic planning

• Support for strategic organizing and staffing

• Support for strategic control

• Support for crisis management

Principles of Information Systems, Seventh Edition 51

 Summary
• The decision-making phase of the problem-solving
process includes three stages: intelligence, design, and
choice
• A management information system (MIS) provides
managers with information that supports effective
decision making and provides feedback on daily
operations
• A financial MIS provides financial information to all
financial managers within an organization

Principles of Information Systems, Seventh Edition 52

 Summary (continued)
• The manufacturing MIS subsystems and outputs monitor
and control the flow of materials, products, and services
through the organization
• A marketing MIS supports managerial activities in
product development, distribution, pricing decisions, and
promotional effectiveness
• A human resource MIS is concerned with activities
related to employees and potential employees of an
organization

Principles of Information Systems, Seventh Edition 53

 Summary (continued)
• A DSS is an organized collection of people, procedures,
software, databases, and devices used to support decision
making and problem solving
• A group support system (GSS) consists of most elements
in a DSS, plus software to provide effective support in
group decision making
• An executive support system (ESS) is a specialized DSS
that includes all hardware, software, data, procedures, and
people used to assist senior-level executives within the
organization

Principles of Information Systems, Seventh Edition 54

 Review
• The decision making process.
• MIS provides feedback on daily operations.
• 5 types of MIS reports.
• MIS is used in functional units of an organization.
• DSS supports problem-specific non-programmed decision
making.

Principles of Information Systems, Seventh Edition 55

1-34

Summary (continued)
• We are indeed in the information age.
• All businesses must coordinate their use of IT,
information, and people (The MIS Challenge).
• The many forces shaping business today include:
• Globalization
• Competition
• Information as a key resource
• The virtual workplace and telecommuting
• Electronic commerce
• Knowledge worker computing.

Principles of Information Systems, Seventh Edition 56

1-35

Summary (continued)
• Businesses are using information technology (IT) in three
ways:
• to support information-processing tasks
• as an enabler of innovation
• as a collapser of time and space
• Information is also a key resource in business today. The
value of information can be defined according to its
dimensions:
• Time (when)
• Content (what)
• Form (how)

Principles of Information Systems, Seventh Edition 57

1-36

Summary (continued)
Finally, people are the most important
resource in any organization. As an
information-literate knowledge worker, you
have 5 charges:
1.Define what information you need
2.Know how and where to obtain information
3.Understand the meaning of information
4.Act appropriately based on information
5.Use information legally and ethically
Principles of Information Systems, Seventh Edition 58