Bob Travica

MIS 2000 Instructor: Bob Travica Class 11 Decision Making Processes & Decision Support Systems

Updated Feb. 2014

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 615 Management Information Systems 2 of 13

Decision making and problem solving process: Rational (Scientific) Model (Simon, 1950s) 1. Identify (define) problem • •

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5. Evaluate/Adjust solution 1 2. Define optional solutions 4. Implement solution % 0 P 3. Evaluate optional solutions exhaustively and select best 3 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.* 615 Management Information Systems 3 of 11

Other Models: Satisfycing (Good Enough) Decision Making • Decisional making made under significant constraints • Making a choice that is good enough • Simon supplanted Rational Model; necessary evil due to human & organizational limitations (e.g., cognitive capabilities, time constraints, struggles)

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

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Zig-Zag Problem Solving – Process Diagram Administrator Define problem AND Internal Stakeholder Define problem External Stakeholder Define problem Make a compromise definition Define options tentatively Adjust options Comment Comment Implement an option partly Evaluate situation React React Y Blocked?

N Implement another part Evaluate situation React React N Blocked?

Y Switch to another option 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)  Managerial decision making about future is supported by DSS.

DSS

• • • • Outputs: Models Scenarios and outcomes Results of tests Relationships & patterns  DSS Supports higher mgt. levels. Problems to solve are less structured than in routine situations where TPS & MIS can do the work.  DSS uses outputs from MIS and data from sources outside the company.

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

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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 615 Management Information Systems 8 of 11

DSS Types • Model–driven: Processes data using different transformation methods (optimization, if-then analysis, statistical tests)* MIS environment Data transformation models - Simulation - Scenario - Result of stats tests • Data-driven: Looking for patterns in large data sets.

• Data mining** and Big Data*** Data Warehouse TPS MIS New relationships in sequence, New relationships per transaction, Groupings *** environment Data Mining software 615 Management Information Systems 9 of 11

Rational Decisional Making Process and Information Systems for Decision Making

IDENTIFY PROBLEM DEFINE OPTIONS SELECT OPTION Upper-level

Manager

(Business Analyst helping) Learn about problem Define problem (may include negotiations) Create optional solutions Discuss & Negotiate Yes No Adjust inputs?

Evaluate result & accept/reject

MIS

Create reports

DSS

Run environment analysis Run organization analysis Deliver decision options Analyze options & select the best     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).

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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. 615 Management Information Systems 11 of 11