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Module 9: Information systems and management
In any organization, managers and staff working at different levels and performing different roles have a variety of information needs, and they use the information in various ways. Information systems can be grouped into two distinct types: operations support systems and management support systems. Operations support systems handle the routine day-to-day information processing needs of the organization, while management support systems assist managers in decision making. This module looks at information systems in the context of business management and explores the key aspects of the various types of management support systems. It begins with an introduction to the three types of management support systems: management information systems (MIS) (operational), decision support systems (DSS) (tactical), and executive support systems (ESS) (strategic). The functions of managers are analyzed to determine the type of information they need in order to perform their duties. The characteristics and functions of management information systems, decision support systems, and executive support systems are also analyzed. It is useful to know the differences between the various information systems and the different ways information systems can be used by management. The computer illustration provides hands-on experience with a simple application of a spreadsheet program in decision support.

Test your knowledge
Begin your work on this module with a set of test-your-knowledge questions designed to help you gauge the depth of study required.

Topic outline and learning objectives
9.1 Decision making and problem solving Types and functional aspects of management information systems Management information systems in perspective Decision support systems Outline and describe the stages of the problem-solving process. (Level 1)


Distinguish between operations support systems, management support systems, management information systems, decision support systems, and executive support systems. (Level 1) Describe management information systems and how they work. (Level 1)



Explain the purpose and general functions of decision support systems. (Level 1) Describe the characteristics of group decision support systems. (Level 1)


Group decision support systems Computer illustration 9-1: Using a spreadsheet for decision support Executive support systems


Use a spreadsheet program as a decision-making tool. (Level 2)


Describe executive support systems and how they work. (Level 1)

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Module 9: Test your knowledge
1. You have two bakeries in two locations that serve six food distributors and a fleet of five trucks that serve 50 local restaurants. You have 30 production employees, 10 front-office and clerical workers (who handle all accounting on two computers), and two outside sales representatives. Your business grosses close to $1 million per year and nets almost $100,000 before taxes. However, your sales representatives and drivers have reported declining orders in the past few months because of growing competition. You decide that you need an advantage over your competition to hold your market share, or perhaps you need to add some new dessert products. Briefly describe the design required for a DSS that could help improve the business: a. b. c. d. What kind of information do you need? In what form? From which source would you obtain the necessary information? What hardware and software tools would you consider using? Briefly describe the functions and features of such a DSS.

Source: Adapted from Nancy Stern and Robert Stern, Computing in the Information Age (New York: John Wiley & Sons, 1993), pages 470-471. Solution 2. Chapter 10, Review question 11, page 424 Solution 3. Chapter 10, Review question 12, page 424 Solution 4. Chapter 10, Review question 16, page 424 Solution 5. Chapter 10, discussion question 3, page 424 Solution

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9.1 Decision making and problem solving
Learning objective

Outline and describe the stages of the problem-solving process. (Level 1)
Required reading

Chapter 10, pages 382-388

Managers use information systems to help them make decisions to run the organization. Much of the information is captured by operational systems or transaction processing systems (TPS), but the information is not in a form most useful to management. Management information and support systems are designed to assist management in the decision-making process, and thus contribute to the goals of the organization and the value-added processes that support those goals. Before you study the types and levels of management support systems, you need to understand the decisionmaking and problem-solving process.

Decision making as a component of problem solving
Problem-solving abilities often separate the most valuable managers and executives from the mediocre or poor managers in terms of their contribution to the organization. The problem-solving model comprises five stages: 1. Intelligence stage: A problem or opportunity is identified and information gathered to refine the scope, resources, and constraints. 2. Design stage: Possible solutions are developed and the feasibility of each evaluated. 3. Choice stage: The most appropriate solution is selected. The decision is made. 4. Implementation stage: The problem is not solved until the selected solution has been implemented. 5. Monitoring stage: In this final stage, the decision makers assess how well the solution fits the problem and what modifications may be necessary to improve it. Notice how the systems development life cycle (SDLC) follows the stages of the problem-solving approach. This is because information systems are developed to meet the goals and objectives of the organization, to solve problems, and to take advantage of opportunities, and these objectives are identical to the purpose of management problem solving.
Problem-solving approach 1. Intelligence 2. Design 3. Choice Identify problem and gather information Develop solutions and consider feasibility SDLC Systems investigation Systems analysis

Select most appropriate solution: make decision Systems design

satisficing. Nevertheless. Only when an extraordinary case arises. Monitoring Check fit and consider modification Systems implementation Systems maintenance and review Programmed versus non-programmed decisions Programmed decision making Programmed decision making alleviates the manager's load by taking over some management tasks. For example. Thus. job. It does find a good solution by considering the alternatives most likely to give good results for reasonable time and cost. decision support systems have been developed to deal with some problems of this nature. computerized loan analysis systems can evaluate loan applications based on the amount requested and a customer's income. and time-consuming. and database query languages. Satisficing Satisficing does not necessarily find the best or optimal solution because to do so might be extremely complex. assets. Optimization A computerized decision support system using optimization will find the best solution. would the loan officer need to investigate the loan application in detail. under most circumstances. sales analysis software. Non-programmed decision making When the variables are difficult to quantify and clearly defined rules do not exist. expensive. and previous credit background. Spreadsheets such as Excel include optimizing features. using problem constraints. financial modelling software. loan obligations. Optimization. Programmed decisions must be clearly defined for each structured problem. the problem is said to be unstructured and programmed decision making is not possible. Implementation Solve problem 5. Heuristics Heuristics uses "rules of thumb" (commonly accepted guidelines) that will find a good solution but perhaps not the optimal solution. the loan officer can be relieved of handling routine cases. and heuristic approaches Management support systems are designed to assist management in making decisions. . marital status.4. one for which a programmed decision rule does not exist. Examples include spreadsheet programs.

it also provides a variety of reports to assist managers in making tactical decisions. management information systems. There are three kinds of management support systems: management information systems (MIS). Types of information systems Information systems in any organization can be grouped into two major types: operations support systems. management support systems. Information systems help managers to perform all of these functions by providing appropriate information to the proper person at the right time. or comparing actual sales to budget. Many of the issues dealt with at this level are semi-structured or unstructured and cannot be automated. DSS. (Level 1) LEVEL 1 To understand what is required of MIS. Tactical decisions Middle-level managers. extending credit to customers and restocking inventory items from an alternative supplier. Operational decisions Lower-level managers oversee the day-to-day operations. inventory control systems. MIS extends beyond the routine handling of operational information. Most accounting systems. decision support systems (DSS). For instance. These functions consist of planning. Nevertheless. and payroll systems perform this function. and executive support systems (ESS). Reports from MIS form only part of the total information requirements of senior management. Examples of such management activities include reviewing back orders for inventory items. decision support systems. and executive support systems. examining detailed expense schedules to track expenditures. Strategic decisions Top-level managers or executives are particularly concerned with strategic decisions. Many traditional transaction processing systems (TPS) are designed for this level of management. when you run Accpac Sage ERP to keep track of transactions and generate financial statements. designed to help management control the business and make decisions. DSS and ESS are computerbased tools that top-level management can use in their strategic planning and decision making. concerned with meeting short-term objectives. the program serves as an operations support system to handle the routine operations of the business. . leading. Most of the information and decision frameworks at this level of management are reasonably well structured. and controlling. organizing. make tactical decisions. Levels of decision making Another way to look at management is in terms of the levels at which decisions are made. and management support systems. designed to handle the day-to-day operations of the business. you should recognize the functions of management. making routine operational decisions — for example.2 Types and functional aspects of management information systems Learning objective Distinguish between operations support systems.Course Schedule Course Modules Review and Practice Exam Preparation Resources 9. and ESS.

databases. Keen and Morton provides this explanation for decision support systems: a. predefine objectives. A decision support system concentrates on supporting specific decisions or decision processes that are semistructured. The relevance for managers’ decision making is mainly indirect. c. under their own control. and information flows can be reliably predefined. procedures. it is necessary to categorize the types of activities typically found in an organization. b. Because of this open-ended nature. for example. software. and by replacing clerical personnel. ESS are designed to help executives find information when they need it. c. which automates routine management functions. The main impact is on structured tasks where standard operating procedures. you can identify a range of activities. b. The text (page 21) defines MIS as follows: A management information system (MIS) is an organized collection of people. which does not attempt to automate the decision process. The payoff is in extending the range and capability of managers’ decision processes to help them improve their effectiveness. procedures. The relevance for managers is the creation of a supportive tool. software. databases. compared to a management information system. turnaround time. The main payoff is in improving efficiency by reducing costs. and devices that support problem-specific decision making. and so on. To decide which of the previously described systems is appropriate for a particular circumstance. Categorizing activities in an organization On analyzing the operations of any organization. and devices that provides routine information to managers and decision makers. ESS are typically implemented as systems that provide online query or report generation. Executive support systems (ESS) Executive support systems are less specific in nature and work in longer time frames. and in the form they need it. including a. The impact is on decisions in which there is sufficient structure for computer and analytical aids to be of value but where managers’ judgment is essential. or impose solutions. Decision support systems (DSS) The text (page 22) defines DSS as follows: A decision support system (DSS) is an organized collection of people. but the American National Standards Institute’s (ANSI) definition provides a starting point: A management information system (MIS) is an information system designed to aid in the performance of management functions. without any preset format or operations. Keen and Morton 1 provides this explanation for management information systems: a. decision rules. They support decisions involving unstructured problems and decisions. routine operational activities. ESS are also commonly referred to as executive information systems. such as placing a purchase order or recording a sale .Management information systems (MIS) There is no commonly accepted definition of a management information system. by providing reports and access to data.

such as reviewing staff absence reports or inventory back-order lists d. such as generating an aged accounts receivable report or quarterly financial statements c. such as analyzing the return potential of capital projects f. such as planning inventory levels. Many organizations have automated these activities in operations support systems. computers can be used to support these activities. however. financial forecasting. such as projecting five-year market potential or economic trends h.b. A computer system used to support this type of decision-making and strategic planning activities could come under the definition of a DSS. preparing a budget for the next fiscal year. are designed to provide information to support these kinds of activities and are clearly a type of MIS. 1 Peter Keen and Michael Morton. Items (c) and (d) are examples of less structured activities that cannot be routinely computerized. routine reporting activities. usually beyond the capabilities of management information systems. investing activities. such as identifying a niche in the market or setting long-term goals for the organization Items (a) and (b) are structured activities and are readily computerized. Items (e) and (f) are examples of semi-structured activities. However. such as determining the best investment vehicle for temporary short-term surplus cash g. Some information systems. 1978) . financing activities. ESS can be applied in part to assist in such activities. planning activities. strategic planning. Massachusetts: Addison-Wesley. or evaluating the returns on a capital investment e. Items (g) and (h) are examples of unstructured activities. requiring information from external sources. monitoring activities. Decision Support System (Reading.

the computer can notify the project manager of the status of an ongoing project at predetermined points or when specific activities have been completed. an organization should never lose sight of the key goal of an MIS. Outputs of an MIS Information systems support managers by providing a number of different reporting and modelling capabilities. (Level 1) Required reading Chapter 10. databases of external data. but an MIS often provides output to other decision support systems. primarily in the form of predetermined reports. Scheduled reports In a scheduled report. information is often reduced (summarized or aggregated) as it is passed up the traditional organizational hierarchy from operational through tactical to strategic management. The data is summarized. Key-indicator reports A key-indicator report summarizes the previous day’s critical activities (as defined by the manager).3 Management information systems in perspective Learning objective Describe management information systems and how they work. and can provide a list of the tasks to be done. While it is important to increase overall MIS efficiency. pages 388-406 LEVEL 1 An MIS has the primary purpose of providing managers with insight into the regular operations of the organization so that they can perform their functions more effectively. which is to provide the right information to the right person at the right time. and manipulated to meet management needs. Demand reports . Inputs to an MIS Although the primary input to an MIS is internal transactions via a TPS. in a production environment. an MIS uses internal databases and. The threshold or tolerance for detail at each level should not be exceeded if effective decision making is to result. It could also be available at the end of each shift if a plant is operating round the clock. where necessary. For example. Managers do not necessarily rely solely on an MIS.Course Schedule Course Modules Review and Practice Exam Preparation Resources 9. filtered. Scheduled reports relieve the manager of some routine administrative tasks. For example. An MIS uses transaction details of a transaction processing system (TPS) to provide summarized or other information needed by a manager. and is available at the beginning of the following day. Filtering The purpose of filtering in an information system is to reduce the volume of data at various levels of management. allowing only relevant information to pass through. Following are examples of the reporting capabilities typically found in an MIS. the computer releases information at specific times or after specific conditions have arisen.

The standardization makes reports easy to read by more than one user. The user could obtain listings of data elements based on given conditions (such as all salespeople with monthly sales of over $10. a manager would be informed only if the production cost of an item is out of control by more than two standard deviations from the standard cost. and if the reason for producing it no longer exists. Many predictive reports are the results of what-if modelling. some type of modelling capability is necessary. for example. which enable them to perform the following functions: Provide reports with fixed and standard formats. Developing effective reports Reports must be designed to meet the needs of individual managers. or even define the contents and format of a comprehensive management report. are not generated at specific times such as scheduled reports. The database management systems and the powerful query languages (such as Microsoft Access) now available even on personal computers make it possible to conduct complex searches and to retrieve and manipulate information stored in databases. unlike reports from the ESS that tend to summarize information at the strategic level.Demand reports. Exception reports Exception reports are provided only when unusual conditions have arisen that require a manager’s action.1 on page 393 offers guidelines to follow when designing and developing reports in order to obtain the best results. or defined by the manager at the time the report is requested. In situations where many items are under a control system. and this must be done with care. Similarly. Using the statistical concepts of means. . as the name implies. Drill-down reports Any of the reports above could take the form of a drill-down report. This method attempts to isolate significant problems from simple. Trigger points are parameters that are set to produce an exception report. Also. Models that are abstract in structure and detail but represent real-world situations can be valuable tools for the decision maker. variances. which provides increasingly detailed data. Table 10. Their format or content can be predefined. statistical analyses call for this type of monitoring. random disturbances. a commercial loan-tracking system can notify the loan officer of delinquent loan repayments on a monthly basis for follow-up and investigation. The loan officer of a bank could use this technique to study the risks involved in a specific loan application by trying out several scenarios and determining the risks associated with each outcome. demand reports from the MIS tend to be detailed and provide operational information. the loan officer could study the impact of rising interest rates on the loan applicant’s ability to service the debt. it will not be used. or under pre-specified conditions such as exception reports.000). Predictive reports To make informed predictions for either projecting into the future or determining the outcome of different scenarios. obtain statistics (such as average sales). The guidelines include some advice to be followed after a report is implemented. and standard deviations. but at the request of the manager. if the report is not useful initially. The main difference between demand reports generated by the MIS and ad hoc reports generated by the ESS is that the information provided by the former are based entirely on internally generated data. Characteristics of a management information system MIS characteristics could be described primarily in terms of the reports produced. For example. such as reviewing the report to determine whether it can be improved or even discarded. then there is no need to retain the report. In a bank. whereas the information provided by the latter may come from external sources.

Most MIS organizations require a formal request for report development to be signed by a manager because reports require systems personnel’s time and effort. it is used to assist engineers and designers to make decisions. both in determining what funds are available or needed and in analyzing investment opportunities. Allow end-users to develop custom reports. Computer-assisted design (CAD) software is an example of how an information system assists in design and engineering. While it is important to allow end-users to develop their own reports. because many decisions relate to internal operations.Produce hard-copy and soft-copy reports. Although very little of the CAD software is an MIS. you are aware of the importance of managing funds and assets to maximize return on investment. an exception report that indicates a situation requiring immediate action could be announced on-screen by a flashing red light and with a sound that the manager would recognize). the prime source of data for an MIS is data from TPS and internal databases. but also utilizes data from these operational systems to produce cash flow projections. As accountants. and/or to offer assistance in developing reports. you are expected to understand the functions and subsystems in a typical financial MIS. Require user requests for reports developed by systems personnel. Auditing. Uses and management of funds. especially in the following functions: Design and engineering . some reports are best displayed on a screen (for example. These systems organize revenue and cost data by various categories. However. Functional aspects of MIS Management information systems are often divided along functional lines whose structure follows the organizational structure. and three-dimensional . Internal and external auditors can use the financial MIS to assist in performing their functions. and cost centres. accounts receivable. some use external sources such as the Internet. with the computer used at all levels and the Internet streamlining all aspects of manufacturing. the accounting MIS is almost inevitably integrated as part of the financial MIS because it not only provides management reports on accounts payable. Accounting MIS The accounting MIS is often part of the financial MIS and certainly the accounting TPS provides data to both. MIS is important throughout the manufacturing cycle. Financial MIS As a future CGA. The report also offers some form of control. it is equally important to exercise some form of control by checking requests to ensure that the reports wanted do not already exist. A financial MIS can assist in this activity in many ways. In small firms. and the like. investment analyses. As stated earlier. revenue centres. While many managers like hard-copy reports. payroll and others. Use internal data stored in the computer system . Some important features of a financial MIS are Profit/loss and cost systems. which may be departmental. profit centres. Manufacturing MIS Technology has had a dramatic impact on the manufacturing function.

and wage and salary administration. Process control . Because of the high costs of carrying inventory. The wage and salary administration subsystem is integrated with TPS such as the payroll system. Human resource MIS A human resource/personnel MIS and its subsystems include human resource planning. promotion and advertising. This key aspect of cost effectiveness uses many computer programs: economic order quantity (EOQ) determines how much to order reorder point (ROP) states when to order material requirements planning (MRP) determines what materials are needed and when to have finished products available when needed manufacturing resource planning (MRPII) has a wider scope and uses network scheduling Just-in-time (JIT) inventory and manufacturing. There are many important uses for this type of information. Master production scheduling. training and skills inventory. a geographic information system (GIS) deals with geographically referenced information (information that has spatial coordinates or location referents) and displays it in a graphic form. Geographic MIS Typically. including where to locate retail stores or other facilities. and product pricing. A number of technologies are available: computer-assisted manufacturing (CAM) system controls machines computer-integrated manufacturing (CIM) system links all components of production systems or even all organizational subsystems flexible manufacturing system (FMS) allows rapid and efficient change from one product to another Quality control and testing. scheduling and job placement. Software developers of commonly used tools such as Excel now include mapping tools so you can plot spreadsheet data as a demographic map. product development. and some programs provide a form of sensitivity analysis (what-if scenarios) usually associated with a DSS. . the JIT approach delivers parts and materials to the manufacturing process just before they are needed. Information generated by these systems can also be used to locate problems in manufacturing equipment or to design better products. Inventory control . personnel selection and recruiting.models help to make management decisions. MIS uses current demand and estimates of future demand to produce detailed production schedules. Marketing MIS Marketing MIS contains functions and subsystems that include marketing research.

and financial analysis capabilities. Relevance . A DSS rather than an MIS is generally used by a higher level of management. before issuing the REVENUE formula. DSS software packages that offer spreadsheet (column-and-row) structures to develop applications have been popular because this format (as in spreadsheet programs) is familiar to users on the managerial level. Some DSS software such as IFPS use English-like statements or formulas such as REVENUE = PRICE × QUANTITY SOLD. DSS software can be used to solve decision-support problems. financial routines such as net present value and internal rate of return calculations are usually provided in DSS software. users should look for the following characteristics in DSS software: Ease of use Ease of use is the key to a successful DSS. For example. For example. there are also many general DSS on the market. or in electronic form. managers will avoid using it. EIS (Executive Information Services) marketed by Boeing. Whether it is presented in a command language. it should be able to conduct what-if analyses with relative ease by changing a few parameters. procedures. on-screen menus. statistical analysis..4 Decision support systems Learning objective Explain the purpose and general functions of decision support systems. but it can be used by different levels of management. A successful DSS should not require extensive problem specification each time one or two parameters are changed for a new scenario. However. If the software is difficult to use. (Level 1) Required reading Chapter 10. the user would not be required to define QUANTITY SOLD and PRICE. and devices used to support problem-specific decision making and problem solving. software databases. They do not require statements to be sequenced in a strictly-ordered fashion. the user interface should be familiar to the managers. Characteristics of DSS Overall. thus making the problem formulation easier. Most DSS software contains a host of forecasting. These variables can be defined at a later point in the model. and EXPRESS from Tymshare Corporation. The focus is on unstructured or semi-structured problems. Query-by-example (QBE) is another style that is favoured by managers. Flexibility A successful DSS should be able to handle variations of the problem statement with relative ease. That is. such as IFPS (Interactive Financial Planning System) from Comshare Inc. Many DSS are custom-designed for specific business problems. pages 406-413 LEVEL 1 A decision support system (DSS) is an organized collection of people.Course Schedule Course Modules Review and Practice Exam Preparation Resources 9.

and heuristic approaches. and incorporate the data into a pre-specified model is also integral to decision support. and display solutions in a variety of ways. which can help managers to understand the problem and the solution. it delivers the right information to the right person at the right time. Consolidate information . Sensitivity (what-if) analysis is a key component of almost all DSS software. The Scenario Manager in Excel is designed for what-if analysis. Microsoft PowerPoint and Apple's Keynote are examples of computer programs designed to provide managers with easy access to business graphics. Changing the values of these variables yields different scenarios without the need to construct multiple copies of the same spreadsheet. The report generators in Microsoft Access. Perform complex. using numerous computer programs. Programs such as Access. Cognos PowerPlay. Provide report and presentation flexibility . a DSS can access data from different databases or the Internet. Functions There are many DSS software on the market. In other words. programs such as F9 can be used to consolidate the financial results from multiple general ledgers of many accounting programs into one set of reports. and then ask for the value of variables that would achieve this goal. The ability to access information from other databases. Generating reports and performing data queries requested by managers are therefore important features of DSS. which is essential for the implementation of the final solution. although the initial solution does not require excessive detail for comprehension. Goal seeking is the capability to specify a goal (outcome variable). and Paradox are designed to meet such needs. A DSS can drill down to different levels of detail. Support drill-down analysis. and Cognos Impromptu are examples of such DSS functions. Typically. A DSS can produce graphics. Some may not have all of the tools with these functions: Handle large amounts of data from many sources . These tools enable the user to specify one or more cells as variables. The object-linking and embedding capabilities in Microsoft Windows can be used to facilitate the management of information stored in a variety of formats. sophisticated analysis and comparisons using advanced software packages . For example. Support optimization. Spreadsheet programs are particularly suitable for such purposes. Offer both textual and graphical orientation . Goal seeking . Consolidation features allow data from multiple models or spreadsheets to be integrated and summarized. Simulation allows a user to duplicate the features of a real-world situation and then manipulate it. The DSS may bring together a number of standalone programs to assist the decision maker. such as "What should sales price and .A successful DSS should provide relevant information for decision making. A DSS gives the manager flexibility to choose the approach best suited to the nature of the problem. It is important that managers obtain the information they want in the format and medium that suit their purpose. satisficing. enter external data. Simulation. Spreadsheet programs with linking capabilities or three-dimensional capabilities can be used to consolidate information from several spreadsheets. and numbers. The ability to store information for reports and queries is important for decision support. The file-linking (dynamic data exchange) capabilities of Microsoft Windows can be used for consolidating information from multiple files under Windows. text. Consolidation features are particularly useful when an organization has a hierarchical management structure and many decisions are made relating to a large number of product lines. FileMaker. Sensitivity analysis.

. would be handled by an institutional DSS. Support for different problem structures . A decision that is required frequently. Decisions occur in a continuum ranging from once to many times.000?" Many popular spreadsheet programs can perform goal seeking. There are many ways in which a DSS can generate profits (through better trading decisions).) Statistical analysis models Statistical analysis models provide considerable statistical information such as trend projections and hypothesis testing in addition to the usual computations and correlations. would be handled by an ad hoc DSS. Canadians are not well protected and the firms for which these traders work tend to protect their own interests. poorly used DSS) sales be to achieve a net profit of $100. Financial DSS help companies in online trading. and data requirements may not be known. Support for different decision frequencies. Financial models Financial models are used for cash management and investment. but a specific DSS might support only one or two of these phases. but there are significant downsides. Support for various decision-making levels. Capabilities of a DSS Different DSS have different capabilities. and strategic levels. (Probably not legally. for example. There are also questions as to whether a company that aggressively advertises successful stock trading should be responsible for the activities of its clients. where relationships are unclear. Excel provides Goal Seek and Solver under the Tools menu to conduct goal-seeking activities. often using model management software (MMS). A situation that may never arise again. Components of a DSS The database The DBMS facilitates qualitative analysis on internal and external databases. generally utilizing a spreadsheet. CAD and other sophisticated graphical analysis are also available. A DSS typically handles unstructured or semi-structured decisions. which is modified over a period of time. tactical. although more powerful software is available. A DSS supports these phases. recurring perhaps several times a year. Graphical models Software packages such as OmniGraffle and Visio assist a decision maker to design and develop displays. and so legislation is in process to prevent fraud. DSS can help managers at operational. or that is totally unexpected. The potential capabilities of DSS include the following: Support for problem-solving phases. Yet if the buyers are following advice touted as great. and the motto of caveat emptor — let the buyer beware — certainly applies here. the data is in a variety of formats. it opens the door to possible compensation. The model base The model base offers the decision maker a choice of models to use for a particular problem. but potential problems (fraud. SPSS and SAS have been popular in this field for a long time.

Project management models Project management models are useful for large or complex projects. They can be used to assist the project manager in determining critical paths. resource allocation and conflicts. Examples include Microsoft Project and FastTrack Scheduler. the dialogue manager is the DSS because it is the communications media between the user and the system. critical resources. . and particularly in identifying where corrective action must be taken. The dialogue manager To most people. scheduling.

The Delphi approach encourages diversity and creativity. The advantage is that the group can concentrate on the ideas without being influenced by knowing who originated an idea. A GDSS allows anyone to comment on or address an issue when a thought occurs by entering it into a workstation. However.5 Group decision support systems Learning objective Describe the characteristics of group decision support systems. Every manager in the group may have a somewhat different style that must be incorporated into the group process. by promoting new approaches for groups. as well as automatic voting and ranking features. followed by feedback. all of which waste time and prevent effective decision making. consists of DSS elements plus GDSS software (sometimes called groupware ). including working with direct face-to-face interaction or meetings. A key element in GDSS is the elimination of counterproductive or harmful behaviour. because if a GDSS is not easy to use. Ease of use. Automated record keeping. Anonymous input . such as allowing a strong individual to dominate. or omitting to consider alternatives before coming to a conclusion. This is even more important than in a DSS designed to suit an individual. In the group consensus approach. rather than waiting for one or more people to finish addressing an issue and perhaps losing their own thought or idea. and assists the decision-making process in a group decision-making environment. Decision-making support . each member participates. and then voting. getting sidetracked or losing focus. A group decision support system (GDSS). also called a group support system or a computerized collaborative work system . some members of the group will not participate. Flexibility. Several different approaches are supported by a GDSS. a unanimous decision must be reached. These additional characteristics include Special design . Parallel communication. Brainstorming encourages freethinking and freewheeling ideas to be tossed around. . Reduction of negative group behaviour . Most GDSS keep detailed records of comments automatically and anonymously. Special procedures are needed to promote creative thinking and group decision making. Characteristics of GDSS Developers of a GDSS incorporate characteristics that go beyond the DSS. pages 413-417 LEVEL 1 The DSS works well for individual managers. groups or committees also make many decisions.Course Schedule Course Modules Review and Practice Exam Preparation Resources 9. In the nominal group technique. (Level 1) Required reading Chapter 10. and group members may be located anywhere.

In addition to Lotus Notes. Comments can be typed directly into each individual topic. packages such as Microsoft Exchange. Novell GroupWise. TeamTalk offers a unique way to share ideas and data throughout the organization — TeamTalk members communicate through named conversations. known as topics. Each conversation appears as one continuous document instead of a list of messages.0 and later versions. Essentially.GDSS software GDSS software is often called groupware or workgroup software. and the wide area decision network. Thus. One major advantage of this type of technology is that it provides toll-free conferencing over long distances. and broadcast presentations remotely via modems or LAN-to-LAN connections. the local area decision network. These are the decision room. Products such as TeamTalk from Trax SoftWorks. share applications. teleconferencing. Whiteboard software is a relatively new type of program that allows users from different parts of the country to collaborate on reports. Microsoft's NetMeeting software. supplied as part of Internet Explorer 4. depending on the location of the group members and the frequency of the decision making. SuSE Linux Openexchange Server. Radvision's videoconferencing system is popular. can be used to hold conversations and share applications over the Internet. a group of field auditors might use whiteboard software to consult with the senior partner and support staff in the auditors' home office. . GDSS network alternatives There are four network alternatives that can be used for group decision making. Inc. AT&T's Telemedia Personal Video System allows two parties to work together in real time via modems. and Collabra Share can assist in group decision making. enable groups to hold meetings without the participants leaving their offices. this technology enables meetings to be held and participants to join in according to their own schedule by participating from their own offices. This provides continuity not possible in bulletin board and e-mail systems. For example. particularly with home users. Electronic conferencing software is becoming popular as a computerized meeting tool. members do not need to be online concurrently. Desktop videoconferencing is a PC-based low-cost electronic conferencing system that enables knowledge workers to have face-to-face meetings without the expense of travelling. For example.

000 60.000 60.000 40.000 40. Lease: .000 50. .000 25.000 $ 135. In real life. Exhibit 9-1 Vendor proposals Vendor A Initial investment Cash flows: Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Net cash flow $ (100. Fred has given his list to Alice Kwong.000 $ 135. They all quoted the same cost ($100. Exhibit 9-1 shows the proposals from the three vendors. Fred has had difficulty deciding which proposal should be awarded the contract because the proposals appeared equal from a technical and financial standpoint.000 60.000 Vendor C $ (100.000 Vendor B $ (100. the MIS manager of Alice's Used Cars (AUC). you will complete a simple decision support model using a spreadsheet program in order to obtain insight into how managers can use computer software to assist in their decision making.Course Schedule Course Modules Review and Practice Exam Preparation Resources 9.000) 20. Description Fred Dimsum.000).000 After reviewing the worksheet model prepared by Fred. Explain how to build a DSS using a spreadsheet program to help management make financing decisions.000 50.000).000 15. has short-listed the proposals received from three vendors to supply a new computer system to the company.000) 60. the president of AUC.000 30. decision support systems are used for much more complex problems. Alice decided that she needed to analyze the acquisition of this new computer system for each of the following scenarios: . Put the acquisition on a lease plan at 12% per annum interest.6 Computer illustration 9-1: Using a spreadsheet for decision support Learning objective Use a spreadsheet program as a decision-making tool. (Level 2) LEVEL 2 In this computer illustration.000) 15.000 30.000 40.000 35. Fund the acquisition from internal funds at a cost of 8% per annum.000 40. Borrow: . and the net cash flow from each of the proposals was about the same ($135. Fund: Borrow money from the bank at 10% per annum interest. Learning objectives Describe how a spreadsheet program can be used for decision support.000 $ 135.000 35.

Ensure you use absolute referencing for cell B7 (that is. Again. $B$7). you will see that the proposal from vendor B has the highest NPV and IRR. This illustration demonstrates. you would conclude that vendor B's proposal provides the best return. add the appropriate labels and formulas for internal rate of return analysis. Procedure 1. the NPV can be misleading when there is alternating cash inflow and outflow over the project's life. the proposal from vendor B is superior. using the NPV function.Your task is to evaluate the three proposals under each of the three scenarios and determine which of the proposals is economically sound. . Ensure you use absolute referencing for cell B7 (that is. Change the value in cell B7 to 12%. It is important for users to understand the underlying logic in their analysis and not to place blind faith in the computer output.237 instead. by examining the net present value results. and using the value in cell B7 for the initial guess. 3. 7. This file contains two worksheets: M9P1 (partially completed for you to work on) and M9P1S (solution worksheet). In row 20. using the IRR function. and using the value in cell B7 for the discount rate. Ensure that the value in cell B7 on the M9P1S tab is the same rate as you are working with on the M9P1 tab. you will get different answers. 2. Change the value in cell B7 to 8%. 6. the proposal from vendor B is superior to the other two in terms of both net present value analysis and internal rate of return analysis. If you have difficulty obtaining the results described in the following steps. $B$7). In row 19. in very simple terms. how computer software can be used to assist managers in their decision making. For example. By analyzing the three proposals using a spreadsheet. add the appropriate labels and formulas for net present value analysis. Your assessment of the situation must include both a net present value and an internal rate of return analysis. The NPV value in cell C19 now shows $64. 5. 4. Review the layout of the worksheet and confirm that Fred entered the information correctly. If you correctly designed your formulas. If the rates are different. click the sheet tab M9P1S to review the solution. Start Microsoft Excel and open the workbook MS1M9P1. Again.

which is often imprecise or fuzzy and is unstructured. An ESS must provide information specific to the decision-making problem. but these module notes will consider ESS as support for top-level management. For example. A DSS provides many tools that analyze problems — that is. (Level 1) Required reading Chapter 10. senior executives need information from within the organization as well as from external sources for their ESS. to get the right information at the right time to the right person in the right format.7 Executive support systems Learning objective Describe executive support systems and how they work.Course Schedule Course Modules Review and Practice Exam Preparation Resources 9. The ESS must be able to extract data from external sources. also known as executive information systems (EIS). and extract the information. suited to the executive's preferences. This can be done using bots. An ESS allows an executive to get as much detail as desired. The best way to design an ESS is to work closely with the user. Many ESS are in fact technically very complicated. Characteristics of ESS ESS are usually designed with the following characteristics: Tailored to individual executives. For example. Drill-down capabilities. pages 417-420 LEVEL 1 Executive support systems (ESS). Easy to use. but the technical complexity must be shielded from the users. they allow users to ask questions. It typically . the faster the user can access the information needed to make specific management decisions. president. An ESS is an information system custom-built for individual senior executives. access to external information should be completely transparent to the user — the user should not need to dial up an external information service to access. In general. The key to a successful ESS is its ease of use. such as the board of directors. search. Support the need for external data . are used to solve unstructured problems at the senior management level. the ESS must be designed to summarize or condense the information required for the specific executive decision. they allow users to answer questions. and others. so that it provides only the information needed for making decisions in an accessible form. There is an important distinction between a DSS and an ESS. That is. it must be designed so that the user need not log onto these services. instead of requiring the executive to select from a large amount of information. Because of the strategic nature of their decisions. if the ESS requires information from CompuServe or Dow Jones News/ Retrieval. the more customized the system. An ESS presents key information that senior executives consider to be important in a structured fashion — that is. Management at lower levels also use ESS. An ESS must be custom-designed to support the activities of an individual or a small group of executives and tailored to the executive's mode of operation. This characteristic epitomizes the goal of an information system — that is.

Disasters. Senior executives create the organization's mission statement and direction. Some analysts and managers at BC Housing use ACL (Audit Command Language) to extract information from the databases for analysis. and other crises can and do occur. objectives of labour negotiations. (For this purpose. downsizing. the models and other tools in an ESS must help assess the risk. Support for strategic control .supports unstructured decision making. Exhibit 9-2 summarizes the key characteristics of the five main types of information systems. is responsible for managing low-income housing in British Columbia. Linked with value-added business processes . The nature of many strategic decisions is such that there is no definite answer. strategic staffing. Some computer programs are used as ESS although they are not designed originally for this purpose. Exhibit 9-2 Comparing information systems TPS . Most high-level decisions are strategic and will have an impact for years or decades to come. Capabilities of ESS ESS are designed to assist with problem solving or decision making directed toward the organization's overall profitability and direction. Support for crisis management . Example 9.1 CAAT software used as ESS BC Housing Management Commission. The designers of ACL did not anticipate that their software could be used as an ESS tool by non-auditors and for non-audit purposes. Top-level executives are involved in decisions about organizational structure. ACL is designed as a computer-assisted audit technique (CAAT) software for auditors. An ESS helps determine long-term objectives. Future orientation . emergencies. a provincial government agency. and the ESS can help create and implement contingency plans. This underscores that ESS are required for essential information that affects key decisions. This entails monitoring and managing the overall operations. This software can extract data from a variety of file formats. Key ESS capabilities include Support for defining an overall vision . therefore. Example 9. Help where there is a high degree of uncertainty .1 illustrates such a case. GDSS is considered a subset of DSS). Support for strategic planning. Support for strategic organization and staffing. and management organization.

b.a. some capable of "learning" . b. d. c. senior-management level Output designed to assist in making specific decisions Unstructured or semi-structured Non-specific. c. DSS a. management in nature Middle-management level Management reports focus on management functions Provides information for routine management decisions Unstructured. c. analytical in nature Middle. Capable of making decisions on their own. ESS/EIS a. problem is domain specific Any level of worker or management Simple output in the form of an answer or a decision Built-in intelligence. b. front-line supervisors Routine reports focus on operational results Preprogrammed decisions in accordance with established policies and procedures Reports oriented. d. b. c. high-level summaries. MIS a. d. d. d. often graphical in nature Senior management Output designed for strategic decisions Unstructured. b. operational in nature Worker level. Process oriented. ad hoc Expert systems a.

and constraints. resources. Outline and describe the stages of the problem-solving process. Distinguish between operations support systems. . decision support systems. Choice stage — The most appropriate solution is selected. the decision makers assess how well the solution fits the problem and what modifications may be necessary to improve upon it. Monitoring stage — In this final stage.Course Schedule Course Modules Review and Practice Exam Preparation Resources Module 9 summary Information systems and management This module looks at information systems from a management context. The final two stages transform the decision-making phase into the problem-solving model: Implementation stage — The solution is built. Management information systems are used for routine reporting to monitor and control business. decision support systems. Management information systems (MIS) and decision support systems (DSS) deal with structured or semi-structured problems. and executive support systems. It begins with an introduction to the three types of management support systems: management information systems. The first three stages of problem solving comprise the decision-making phase: Intelligence stage — A problem or opportunity is identified and information gathered to refine the scope. and executive support systems. Management support systems are designed to assist management in decision making. IS can be grouped into operations support systems management support systems Operations support systems are also called transaction processing systems. Describe management information systems and how they work. Design stage — Possible solutions are developed and the feasibility of each evaluated. A management information system (MIS) has the primary purpose of providing managers with insight into the regular operations of the organization so that they can perform their functions more effectively. The computer illustration provides hands-on experience with a simple application of Excel in decision support. The decision is made. tested. The characteristics and functions of management information systems. and put into operation. management information systems. MIS characteristics could be described primarily in terms of the reports produced. Various types of management support systems serve different groups and interests in the firm: Executive support systems (ESS) deal with unstructured problems. and explores the key aspects of management support systems. Their main function is to process day-to-day transactions. management support systems. and executive support systems are also analyzed. decision support systems.

text. Targeted at managers who are non-technical users. Executive support systems (ESS) are used to solve unstructured problems. and communication technology ESS are designed to assist with problem solving or decision making directed toward the organization's overall profitability and direction.Examples of reports are scheduled listing. demand reports. reporting. and predictive reports. DSS should be easy to use. Decision support systems (DSS) are interactive systems under user control that are used in solving unstructured or semi-structured problems. Examples of DSS activities are data modelling. Group decision support systems (GDSS) enable a set of decision makers working together as a group to solve unstructured problems. sensitivity analysis. Management information systems are often divided along functional lines and they include financial MIS accounting MIS manufacturing MIS marketing MIS human resource MIS Explain the purpose and general functions of decision support systems. and provide relevant information for decision making. Characteristics of ESS: designed explicitly for the purposes of senior management used by senior management without technical intermediaries require a greater proportion of information outside the business contain both structured and unstructured data use integrated advance graphics. Describe the characteristics of group decision support systems. and graphics. Key capabilities include support for defining an overall vision strategic planning strategic organization and staffing strategic control . They also enhance group decision making by minimizing problems posed by group meetings. goal seeking. consolidation. Characteristics of GDSS: special design ease of use flexibility decision-making support brain storming anonymous input reduction of negative group behaviour parallel conversion automated recordkeeping Describe executive support systems and how they work. exception report. information management. flexible.

o crisis management .

particularly over the past few months of declining sales. modelling. or other relevant sources. the effect of product packaging on sales and costs. A business graphics program may also be gainfully used. Information about budgets and sales projections should be obtained from the sales representatives or the sales manager. The modelling and simulation component could offer management the ability to construct a model of sales and production to determine if there are bottlenecks that can be removed. and forecasting software. The statistical analysis component could be used to analyze both sales and production trends so as to pinpoint the problem areas. statistical analysis. You will need information about the current sales and production of your own products as well as sales information of your competitors.Course Schedule Course Modules Review and Practice Exam Preparation Resources Solution 1 a. sales. c. All of this information should be in machine-readable form so that it can be analyzed using computer programs. b. Information about competitors' sales can be obtained from trade journals. you will need to know all ordering. and all cost and production figures. including demographic information about customers. The sales information should be organized by sales territories and in chronological order so that you can establish trend lines. A computer and printer is probably all that is necessary. The forecasting component could provide the means for management to make predictions and to perform what-if analyses to answer questions such as the elasticity of demand. You will need information about sales projections as well. Information about consumer demands and demographics can be obtained by marketing surveys. Statistics Canada. and the possible outcome of introducing new products. simulation. Information about sales and production can be obtained from the accounting records. Such a DSS could have three major components: modelling and simulation. industry groups. . You will also need information about consumers' demand of bakery products in general. or if procedures can be simplified to cut costs. For software. d. For your own sales and production statistics. and forecasting. consider statistical analysis.

design. In addition to the intelligence.Course Schedule Course Modules Review and Practice Exam Preparation Resources Solution 2 Decision making is a component of problem solving. . problem solving also includes implementation and monitoring. and choice steps of decision making.

Course Schedule Course Modules Review and Practice Exam Preparation Resources Solution 3 A geographic information system (GIS) is a computer capable of assembling. and displaying geographic information (that is. storing. . manipulating. data identified according to location).

Goal-seeking analysis is the process of determining the problem data required for a given result.Course Schedule Course Modules Review and Practice Exam Preparation Resources Solution 4 What-if analysis is the process of making hypothetical changes to problem data and observing the impact on the results. .

In these ways. Traditionally. A properly implemented MIS supports functional management and executive decision making. . However. recent successes have demonstrated various ways these systems can be applied and used to support corporate missions. organize and plan more effectively.Course Schedule Course Modules Review and Practice Exam Preparation Resources Solution 5 Management information systems can be used to support the objectives of a business in many different ways. an MIS system was not considered intrinsic to the development of a competitive advantage. MISs can provide a method of maintaining control and understanding what events are occurring in the day-to-day operations of an organization. By providing feedback and monitoring capabilities. a strong MIS can provide a competitive advantage. First. identify problem areas. Managers are able to gain valuable insights. an organization is able to compare actual results to corporate goals. Adjustments can be made on this basis. Knowing how to apply the capabilities of the MIS is the key to long-term advantage.