ENHANCING DECISION MAKING

TOPIC 7

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 DECISION MAKING
Decision making is the developing
concepts leading to the selection of a course
of action among variations.
Every decision making process produces a
final choice
It can be an action or an opinion. It begins
when we need to do something but we do
not know what.

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 Decision Support in Business
Companies are investing in data-driven
decision support application frameworks to
help them respond to:
◦ Changing market conditions
◦ Customer needs
This is accomplished by several types of:
◦ Management information
◦ Decision support
◦ Other information systems

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Types of decisions

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 Types of decisions
Decisions are classified as structured, semi-
structured, and unstructured.
Unstructured decisions are those in which the
decision maker must provide judgment,
evaluation, and insight to solve the problem.
Each of these decisions is novel, important, and
non-routine, and there is no well-understood or
agreed-on procedure for making them.
Decisions, which are not well defined and have
not pre-specified procedures decision rule are
known as unstructured or non-programmed
decisions.
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 Types of decisions
Structured decisions, are repetitive and routine,
and they involve a definite procedure for handling
them so that they do not have to be treated each
time as if they were new.
Many decisions have elements of both types of
decisions.
structured are those decisions, which are well
defined and some specified procedure or some
decision rule might be applied to reach a decision.
Semi-structured, where only part of the problem
has a clear-cut answer provided by an accepted
procedure.

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The Decision-Making Process
Simon(1960) described four different
stages in decision making.
Phases of decision making process:
Intelligence
Design
Choice
Implementation

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Stages in Decision-Making
Intelligence: consists of discovering,
identifying, and understanding the problems
occurring in the organization-why a problem exists,
where, and what effects it is having on the firm.
Design: involves identifying and exploring various
solutions to the problem.
Choice: consists of choosing among solution
alternatives.
Implementation: involves making the chosen
alternative work and continuing to monitor how
well the solution is working.

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 Systems for Decision support
There are four kinds of systems for
supporting the different levels and types of
decisions :
Management information systems (MIS)
Decision-support systems (DSS)
Executive support systems (ESS)
Group-decision support systems (GDSS)

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Management Information Systems (MIS)
MIS: help managers monitor and control
the business by providing information on
the firm’s performance.
Produce regular reports on performance,
such as monthly or annual sales.
Sometimes highlight exceptional
conditions.
Reports often available online.

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 Decision Support Systems (DSS)
Support semi-structured and unstructured
problem analysis.
Characteristics
Helps the decision maker in the decision making
process.
Data from multiple sources internal and external to
organization.
Presentation flexibility.
Simulation and what-if capability.
Support for multiple decision approaches, other
analysis tools available to the decision maker.
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 Characteristics
Facilitates communication between levels of
decision making.
Flexible enough to accommodate a variety of
management styles.
Capability to interface with the corporate
database.
Interactive, user friendly system that can be
used by the decision maker with little or no
assistance from an MIS professional.
Supports decision makers at all levels, but
most effective at the tactical and strategic
levels.
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Components of DSS

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 Components of DSS
DSS Database: Collection of current or
historical data from a number of applications
or groups. Can be a small PC database or a
massive data warehouse.
DSS Software System: Collection of
software tools used for data analysis, such as
OLAP(online analytical processing) tools,
data mining tools, or a collections of
mathematical and analytical models.
Model: Abstract representation illustrating
components or relationships of a phenomenon.
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 Components of DSS
Sensitivity Analysis: Models that ask
“what-if” questions repeatedly to determine
the impact of changes in one or more
factors on the outcomes.

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 Examples of Decision-Support Systems
 General Accident Insurance: Customer buying patterns
and fraud detection.
 Bank of America: Customer profiles.
 Frito-Lay, Inc.: Price, advertising, and promotion
selection.
 Southern Railway: Train dispatching and routing.
 Texas Oil and Gas Corporation: Evaluation of potential
drilling sites.
 The Gap: Inventory stocking and merchandising.
 United Airlines: Flight scheduling, passenger demand
forecasting.
 U.S. Department of Defense: Defense contract analysis.

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 Group Decision-Support System (GDSS):

Group Decision-Support System

(GDSS): An interactive computer-based
system to facilitate the solution to
unstructured problems by a set of
decision makers working together as a
group.
Components of GDSS
Hardware: Conference facility, electronic
hardware

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Components of GDSS
 Software tools: Tools for organizing
ideas, gathering information, and ranking
and seeking priorities.
 People: Participants, trained facilitator,
staff supporting hardware and software.
 Electronic questionnaires
 Electronic brainstorming tools
 Idea organizers
 Questionnaire tools
 Policy formation tools
 Group dictionaries
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 How GDSS Can Enhance Group Decision
Making
 Number of attendees can increase hence
productivity increases.
 More collaborative atmosphere.
 Software tools follow structured methods
for organizing and evaluating ideas and
preserving the results of meetings.
 Increase the number of ideas generated.
 Can lead to more participative and
democratic decision making.

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