MB0047 Slides Unit 10

C o n f i d e n t i a l

MB0047-Management Information System

Unit-10 Decision Making in MIS

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Program : MBA

Semester : II

Subject Code : MB0047

Subject Name : Management Information Systems

Unit number : 10

Unit Title : Decision Making in MIS

Lecture Number : 10

Lecture Title : Decision Making in MIS

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Management Information System

Objectives:

After studying this unit, you should be able to:

Explain the decision making concepts and process

Analyse decision analysis by analytical modelling

Describe behavioural concepts in decision making

Analyse organisational decision making

Evaluate MIS and decision making

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Lecture Outline

Introduction

Characteristics of Business Decision

Rational Decision Making

Dimensions of Rationality

Problems in Making Rational Decisions

Herbert Simon Model

Conditions of Decision Making System

Models for Decision Making Process

Decision Analysis

MIS and Decision Making Process

Summary

Check Your Learning

Activity

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Introduction

The word 'decision is derivation of the Latin root decido. This means

to cut.

The concept of decision, therefore, could be a settlement, a fixed action

to a conclusive result, a judgment or a resolution.

To achieve a better objective in a given situation when a choice is made

out of several options by the decision maker, it is called a decision

In this session, you will learn about the concepts of decision making,

rational decision, decision making process, types of decision making

systems, and its nature.

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Characteristics of Business Decision

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The major characteristics of business decision making are:

It is sequential in nature.

It is exceedingly complex due to risks and tradeoffs.

Influenced by personal values.

Made in institutional settings and business environment.




Rational Decision Making

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Objectively rational if it maximises the value of the objective.

Subjectively rational if it maximises the attainment of value within limitation of the knowledge and awareness of the subject.

Consciously rational to the extent the process of the decision making is deliberate and a conscious one.

Organisationally rational to the degree of the orientation towards the organisation.

Personally rational to the extent it achieves an individual's personal goals.

Simon Herbert differentiates among the types of rationality. A decision, in a given situation is:

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Dimensions of Rationality

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Three dimensions of rationality suggested by Gross Bertram M. are:

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First, the degree of satisfaction of human interest.

Second, the degree of feasibility in achieving the objectives.

Third, consistency in decision making.




Problems in Making Rational Decisions

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Problems in making rational decisions are:

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As Peter Drucker points out, "mistakes in the management decisions is the emphasis on finding the right answers rather than the right questions."

Ascertaining the problem

An important function of a manager is to determine insufficient knowledge and enough information to facilitate making a decision.

Insufficient knowledge

If time is limited, one may make hasty decisions which may not satisfy the test of rationality of the decision.

Not enough time to be rational

Sometimes, the timing of the decision is such that one is forced to make a decision but the environment is not a conducive one for it.

The environment may not cooperate

Other limitations are the need for a compromise among the different positions, judging the motives and values of people.

Other limitations




Herbert Simon Model

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Decision making is a process and according to Herbert Simon, the decisions makers use this process to arrive at decisions.




Conditions of Decision Making System

Conditions of decision making system are:

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Closed decision making system

The manager has a known set of decision alternatives and knows their outcomes fully in terms of value, if implemented.

The manager has a model, a method or a rule whereby the alternatives decisions can be generated, tested and ranked for selection.

The manager can choose one of them, based on some goal or objective criterion.

Open decision making system.

The manager does not know all the alternative decisions.

The outcome of the decision is also not fully known.

No single method, rule or model is available to study and finalise one decision among the set of alternative decisions.

It is difficult to decide an objective or a goal and therefore, the manager resorts to that decision, where his aspirations or desires are best met.

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Models for Decision Making Process

Models employed in organisations for decision making process are:

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1 Transportation model

2 Assignment model

3 Linear programming model

4 Program Evaluation Review Technique (PERT)

5 Critical Path Method (CPM)




Decision Analysis

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Decisions are made using a model of the problem for developing various solution alternatives and testing them for best choice.

What if analysis

Sensitivity analysis helps to understand the significance of variable in decision making and improves the quality of decision making.

Sensitivity analysis

In goal achieving analysis, goal is fixed and you go down to analyse the variables and values, which would help to seek that goal.

Goal achieving analysis

In a goal seeking analysis, you do not fix the goal but you try to achieve a goal of an optimum value arrived at after satisfying all the constraints operating in the problem.

Goal seeking analysis

The ways of analysing of model are:




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MIS and Decision Making Process

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Flowchart for MIS and Decision Making Process:

Incoming flow of data

Choosing the best and

implementing the decision

Manipulating the data in MIS

Information reached and

conveyed to end user

End user`s alternatives

Processing of alternatives




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Summary The major characteristics of business decision making are, It is sequential in

nature, It is exceedingly complex due to risks and tradeoffs, Influenced by personal values, Made in institutional settings and business environment. Three dimensions of rationality suggested by Gross Bertram M. Are , first, the degree of satisfaction of human interest, second, the degree of feasibility in achieving the objectives, third consistency in decision making. Herbert Simon describes the model in three phases as intelligence, design and

choice. Models employed in organisations for decision making process are transportation model, Assignment model, Linear programming model, Program evaluation review Technique (PERT), critical path method (CPM).

The model is analysed in the following four ways, what if analysis sensitivity analysis, goal seeking analysis, goal achieving analysis.

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Check Your Learning

1. List the phases used Herbert Simon to describes decision making model .

Ans: Herbert Simon describes the model in three phases:

a. Intelligence

b. Design

c. Choice

2. What are the characteristics of business decision making ?

Ans: The characteristics of business decision making are:

a. It is sequential in nature

b. It is exceedingly complex due to risks and

tradeoffs.

c. Influenced by personal values.

d. Made in institutional settings and business

environment.

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Assume that you are a manager in textile company and there are many task which you have to perform and those are dependent on some of the decision then what is the process you will follow to remember them ?

Activity

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