CHAPTER 15

DECISION-MAKING MODELS
AND KNOWLEDGE
MANAGEMENT
 Accounting is all about decision making- when you’re
making decision about the design and implementation of
an accounting information system or using accounting
information as the basis for decision making or in some
other context.
INFORMATION OVERLOAD AND OTHER BARRIERS
TO GOOD DECISION
Definitions of INFORMATION OVERLOAD, according to Epher and
Mengis (2004):
The decision maker is considered to have experienced
information overload at the point where the amount of
information actually into the decision begins to decline.
Beyond this point, the individual’s decisions reflect a lesser
utilization of the available information.
Information overload occurs when the volume of the information
supply exceeds the limited human information processing
capacity. Dysfunctional effects such as stress and confusion are
the result.
INFORMATION OVERLOAD AND OTHER BARRIERS
TO GOOD DECISION
Information overload occurs when the information-processing
requirements (information needed to complete task) exceed the
information processing capacity (quantity of information once
can integrate into the decision making process.
Information overload occurs when the decision maker estimates
he or she has to handle more information than he or she
efficiently use.

OUR BRAINS HAVE A LIMITED CAPACITY FOR

PROCESSING INFORMATION
 WHAT ARE THE CAUSES OF INFORMATION
OVERLOAD?
PERSONAL FACTORS

INFORMATION INFORMATION TECHNOLOGY

CHARACTERISTICS

TASKS AND PROCESS

ORGANIZATIONAL
PARAMETERS
DESIGN
1. Personal Factors- refers to everyone’s individual
limitations to process information.
2. Information Characteristics- also play an important part in
triggering information overload. Information can be
uncertain, ambiguous, complex and intense.
3. Tasks and process parameters- are the third cause of
information overload .
4. Organizational Design- people in groups have differing
ideas and approaches for problem solving and decision
making; integrating all those different points of view can
easily lead to information overload.
5. Information Technology- provides you with information: e-
mail, instant messaging, cell phones etc.
 WHAT ARE THE SYMPTOMS AND EFFECTS OF
INFORMATION OVERLOAD?
 LIMITED INFORMATION SEARCH AND RETRIEVAL STRATEGIES
 Less systematic searching
 Increasing problems differentiating relevant and irrelevant information.
 ARBITRARY INFORMATION ANALYSIS AND ORGANIZATION
 Overlapping and inconsistent categories
 Difficulty seeing “the big picture”
 SUBOPTIMAL DECISIONS
 Inefficient work
 Reduced quality and accuracy of decisions
 STRENUOS PERSONAL SITUATIONS
 Stress, confusion, and cognitive strain
 Overconfidence.
HOW CAN MANAGERS DEAL WITH INFORMATION
OVERLOAD?
Allow more time to complete important tasks.
Compress, aggregate, categorize, and structure information.
Create small, self contained tasks rather than trying to do
everything at once.
Define decision models and rules for common decision contexts.
Focus on creating value-added information.
Formalize the language used to describe information.
Handle information as it comes to you- don’t put it off!
Improve personal time management skills and techniques.
Use graphs and other visual aids.
TWO ADDITIONAL REASONS PEOPLE DON’T MAKE
THE “BEST” DECISIONS

Satisficing refers to
Bounded Rationality is
people’s tendency to separate, but related,
stop looking for idea; it means that
solutions to a problem people will inherently
when they find a avoid uncertainty and
solution that works- rely on proven “rules” for
whether that decision problem solving
is the “best” or not. whenever they can.
 WHAT IS KNOWLEDGE MANAGEMENT?

Defined as “the organization of intellectual resources and

information systems within a business environment”
“the process through which organizations generate value from
their intellectual and knowledge based assets. Most often,
generating value from such assets involves sharing them among
employees, departments and even with other companies in an
effort to devise best practices.
 ROWLEY (1999) FOUR OBJECTIVES OF
KNOWLEDGE MANAGEMENT

To create knowledge repositories

To improve knowledge process
To enhance the knowledge
environment
To manage knowledge as an asset .
 SEVEN STEPS TO CREATE A KNOWLEDGE
MANAGEMENT SYSTEM
1. Create an organizational culture that supports the ideas of knowledge
sharing and development.
2. Define the business goals the knowledge management system will
address.
3. Perform a knowledge audit to identify any duplication, gaps, and overlaps
in an organization’s knowledge base.
4. Create a visual map that describes units of knowledge and the
relationships between them.
5. Develop a knowledge management strategy based on the content
management, integration, search mechanism, information delivery, and
collaboration.
6. Purchase or build appropriate tools for capturing, analysing, categorizing,
and distributing knowledge.
7. Periodically reassess the value of the knowledge management system
and make necessary adjustments.
 STEPS FOR BETTER THINKING

 Is a developmental problem solving and decision making process.

It is especially relevant to the kinds of problems we face today- n
complex and open ended. Without single, “correct” deterministic
process.
1. Identifying
a. Problem
b. Relevant information
c. Uncertainties
2. Exploring
a. Biases
b. Assumptions
c. Qualitative interpretation from various point of views.
d. Information organization
 STEPS FOR BETTER THINKING

3. Prioritizing
a. Ranked list of factors to consider.
b. Conclusion
4. Envisioning
a. Solution limitation
b. Information use for future decisions.
 Step 4: Envisioning- deal with limitations to solution
And use information to inform future decisions.

Step 3: Prioritizing- prioritize the factors to consider,

Choose, and implement solutions

Step 2: Exploring – interpret and organize information

Step 1: Identifying- identify the problem. Relevant information and

uncertainties

Foundation: Knowing- acquire background knowledge and skills

STEPS FOR BETTER THINKING

According to Arthur (2013), “Big data is a collection of data from traditional and
digital sources inside and outside your company that represents a source for on going
discovery and analysis.” notice the following elements of that definition:

• Collection of data.
• Inside and outside the company
• On-going discovery and analysis

Five Types of Big Data

1. Web and social media data

2. Machine to machine data
3. Big transaction data
4. Biometric data
5. Human- generated data
“Data Analytics” refers to the tools decision makers can use to analyse
Big Data.

Data Analytics is divided into three big groups:

1. Descriptive analytics- “summarize what happened”

2. Predictive analytics- “utilizes a variety of . . . Techniques to study
recent and historical data, thereby allowing analysis to make
predictions about the future”
3. Prescriptive analytics- “goes beyond descriptive and predictive
models by recommending one or more courses of actions and
showing the likely outcome of each decision.”
THANK YOU!!! 