Bob Travica

Class 11

Decision Making Processes & Decision Support Systems

MIS 2000Instructor: Bob Travica

Updated Feb. 2014

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Outline

• Decision making and problem solving process - rational (scientific) model

• Other decision making models

• Decision Support System

• MIS & DSS support to rational decision making

• Summary

• Exercise

Decision making and problem solving process: Rational (Scientific) Model

1. Identify (define) problem

?

2. Define optional solutions

5. Evaluate/Adjust solution

31

3. Evaluate optional solutionsexhaustively and select best

0P

(Simon, 1950s)

4. Implement solution %

1

• Steps 1-3 are decision making; with steps 4-5 the whole process

is problem solving.

• Desirable model in business and generally but its assumptions are limiting.*

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Other Models: Satisfycing (Good Enough) Decision

Making

• Decisional making made under significant constraints

• Simon supplanted Rational Model; necessary evil

due to human & organizational limitations (e.g., cognitive capabilities, time constraints, struggles)

• Making a choice that is good enough

More

?

?

Go for

low-hanging

fruit!

Define problem under constraints

Define some optional solutions

Focus on most important evaluation criterion-two

Select the first solution that fits the criterion

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• How decision making typically runs in public organizations:

- different interests that balance each other, - nobody to “cut the knot”, struggles over budget and assets - “endless” decision processes, like walking through mud.

• What is the problem? Different things for different people!

• Problem defining includes negotiations and maneuvering.

• Optional decisions are defined tentatively.

• Decision maker implements just a part of a chosen option.

If blocked, he switches to an alternative; if blocked again, must maneuver again (might even turn back to the first option); see diagram on next slide.

Other Models: Zig-Zag Problem Solving (“Muddling Through”)*

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Define problem

Define problem

Define problem

Administrator

External StakeholderInternal Stakeholder

AND

Make a compromise

definitionDefine options

tentativelyComme

ntAdjust options

Implement an option partly

Implement another part

Comment

Switch to another option

Zig-Zag Problem Solving –ProcessDiagram

React React

React React

Y

N Blocked?

Evaluate situation

Y

N Blocked?

Evaluate situation

Only without blocking to any part of a decision, it is completely realized. But there is usually some blocking and the loops may seem infinite.

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Decision Support System (DSS)

DSS Supports higher mgt. levels. Problems to solve are less structured than in routine situations where TPS & MIS can do the work.

Time horizon of DSS: Future – from close (day, week) to far (one+ years).

DSS uses outputs from MIS and data from sources outside the company.

More

Outputs: • Models • Scenarios and outcomes• Results of tests• Relationships & patterns

SalesInventory

ENVIRON-

MENT Data modeling &Data mining

MIS

DSS

Managerial decision making about future is supported by DSS.

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Management tasks: Planning and forecasting

Visually represent key performance indicators (e.g., financial

ratios); dashboards.

May have a “drill-down capability” to find what is behind

aggregated figures

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DSS Types

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• Model–driven: Processes data using different transformation methods (optimization, if-then analysis, statistical tests)*

• Data-driven: Looking for patterns in large data sets.• Data mining** and Big Data***

MIS

environment

- Simulation- Scenario- Result of stats tests

Data transformation

models

TPSMIS

environment

New relationships in sequence, New relationships per transaction, Groupings ***

Data Warehouse

Data Mining software

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Rational Decisional Making Process and Information Systemsfor Decision Making

IS can help rational DM.

The role of MIS is to inform the user so that a potential problem in operations can be identified.

Model-driven DSS can help with more steps and entire DM process – best option can be automatically delivered.

People still make the final choice (decision).

Learn about proble

m

Run environm

ent analysis

Createreports

Upper-levelManager(Business

Analysthelping)

DSS

MIS

Define problem

(may include

negotiations)

Create optional solution

s

Deliver decision options

Discuss & Negotiate

Evaluate result &

accept/reject

Analyze options & select the

best

Run organizati

onanalysis

IDENTIFY PROBLEM DEFINE OPTIONS SELECT OPTION

Adjust inputs?

Yes

No

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Summary

In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify problem, (2) create optional solutions, and (3) evaluate optional solutions exhaustively and select the best one. The full problem solving (PS) cycles includes 2 more steps: (4) implement solution, and (5) evaluate solution based on reaction of the affected party.

Satisficing and Zig-Zag models acknowledge constraints in problem solving.

DSS supports higher mgt. levels in solving less structured problems related to upcoming activities in the near to far future. It can be model- or data-driven. DSS uses data reflecting both the organization and the environment, and delivers key performance indicators, visuals, and drill-down of aggregate figures.

Role of MIS in decision making processes is limited to informing the user in the problem definition step of rational DM. DSS can support whole DM process. Human decision makers still play the key role.

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