Transcript Chapter 3: Information and Decision Making

Management, 7e
Schermerhorn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc
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Chapter 7
Information and Decision Making
 Planning ahead—study questions
– How is information technology changing the
workplace?
– What are the current directions in information systems?
– How is information used for decision making?
– How do managers make decisions?
– Why are knowledge management and organizational
learning important?
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How is information technology
changing the workplace?
 Definitions:
 Information
– Data made meaningful and useful for decision making.
 Intellectual capital
– Shared knowledge of a workforce that can be used to
create wealth.
 Computer competency/literacy
– Ability to understand and use computers.
 Information competency/literacy
– Ability to utilize computers and information technology
for decision making.
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How is information technology
changing the workplace?
 Information technology
– The combination of computer hardware,
software, networks, and databases that allow
information to be shared, stored, and
manipulated.
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How is information technology
changing the workplace?
 Progressive organizations …
– Responding to the growing importance of information
technology
– Use specialized organizational units headed by a chief
knowledge officer or chief information officer (CIO).
– Use information technology to compete more
effectively in uncertain environments.
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How is information technology
changing the workplace?
 Intra-organizational implications of using
information technology:
– Facilitation of communication and information
–
–
–
–
sharing.
Flattening of organizational structures.
Faster decision making.
Increased coordination and control.
Structural flexibility.
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How is information technology
changing the workplace?
 Extra-organizational implications of using
information technology:
– Helps organizations take care of customers.
– Helps organizations work well with resource
suppliers.
– Helps build and manage relationships with
strategic partners.
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What are the current directions in
information systems?
 Useful information shares the
following characteristics:
– Timeliness
– Quality
– Completeness
– Relevance
– Understandability
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What are the current directions in
information systems?
 Information needs of organizations
– Information exchanges with the external
environment
• Gather intelligence information
• Provide public information
– Internal information exchanges
• Top management
• Middle management
• First level of management
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What are the current directions in
information systems?
 Information systems success factors:
– Technical quality of the system
– Participation and involvement of users in
systems design
– Management support of the system
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What are the current directions in
information systems?
 Decision support systems (DSS):
– Use special software to allow people to interact
directly with a computer to organize and
analyze data for solving complex and
sometimes unstructured problems.
 Group decision-support systems (GDSS):
– Interactive computer-based information
systems that facilitate group efforts to solve
complex and unstructured problems.
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What are the current directions in
information systems?
 Artificial intelligence (AI):
– Computer systems with the capacity to reason the way
people do.
 Expert systems:
– Software systems that use AI to mimic the thinking of
human experts, thereby offering consistent and “expert”
advice to decision makers.
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What are the current directions in
information systems?
 Intranets …
– Use special software to allow persons working in
various locations within the same organization to share
databases and communicate electronically.
 Enterprise-wide networks …
– Use fully integrated IT to move information quickly
and accurately within an organization.
 Extranets …
– Use the public Internet to allow communication
between the organization and elements in its external
environment.
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What are the current directions in
information systems?
 Management information systems …
– Use information technology to meet the information
needs of managers in making decisions.
 Advantages of appropriate MIS utilization:
– Planning
– Organizing
– Leading
– Controlling
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How is information used for decision
making?
 A problem is …
– The difference between an actual and a desired
situation.
• Performance deficiency
• Performance opportunity
 Problem solving is …
– The process of identifying a discrepancy and taking
action.
 A decision is …
– A choice among alternative course of action.
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How is information used for decision
making?
 Programmed decisions
– Solutions readily available from past
experiences.
– Best applied to routine problems.
– Commonly applied to resource use and
allocation decisions.
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How is information used for decision
making?
 Nonprogrammed decisions
– Develop novel solutions to meet the demands
of a unique situation.
– Problems that are commonly faced by higherlevel management.
– Information requirements are high.
– Decisions involve considerable human
judgment.
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How is information used for decision
making?
 Crisis decision making
– A crisis involves an unexpected problem that can lead
to disaster if not resolved quickly and appropriately.
– An extreme type of nonprogrammed decision must be
made.
– Crisis management may be the ultimate test of problemsolving capabilities.
– Proactive managers develop basic contingency plans
for dealing with likely crisis situations.
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How is information used for decision
making?
 Decision conditions:
– Certain environments
• Offer sufficient information about action alternatives and their
outcomes.
– Risk environments
• Lack complete information about action alternatives and their
outcomes.
– Uncertain environments
• Information is so poor that probabilities cannot be assigned to
likely outcomes of known action alternatives.
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How is information used for decision
making?
 How managers approach decisions:
– Problem avoiders
• Inactive in decision making
– Problem solvers
• Reactive in gathering information and solving
problems
– Problem seekers
• Proactive in anticipating problems before they occur
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How is information used for decision
making?
 How managers approach decisions:
– Systematic thinking
• Approaching problems in a rational, step-by-step, and
analytical fashion.
– Intuitive thinking
• Approaching problems in a flexible and spontaneous fashion.
– Multidimensional thinking
• Applying both intuitive and systematic thinking
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How is information used for decision
making?
 How managers approach decisions:
– Strategic opportunism
• The ability to remain focused on long-term
objectives while being flexible enough to resolve
short-term challenges in a timely manner.
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How do managers make decisions?
 Five-step decision-making process:
– Identify and define the problem.
– Generate and evaluate possible solutions.
– Choose a preferred solution and conduct “ethics
double check.”
– Implement the solution.
– Evaluate results.
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How do managers make decisions?
 Step 1—identify and define the problem
– Problem symptoms signal a performance
deficiency or opportunity.
– Problem finding focuses on identifying
performance gaps and their causes.
– Avoid the following:
• Defining the problem too broadly or too narrowly.
• Focusing on symptoms instead of causes.
• Choosing the wrong problem.
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How do managers make decisions?
 Step 2—generate and evaluate possible solutions
– Avoid the following:
• Selecting a particular solution too quickly.
• Choosing a convenient alternative that may have damaging
side effects.
– Criteria for evaluating alternatives:
•
•
•
•
•
Benefits
Costs
Timeliness
Acceptability
Ethical soundness
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How do managers make decisions?
 Step 3—choose a solution and conduct the
“ethics double check”
– Classical decision model
• Views manager as acting in a certain world.
• Results in an optimizing decision.
– Behavioral decision model
• Views manager as acting in situations of limited
information and bounded rationality.
• Results in a satisficing decision.
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How do managers make decisions?
 Step 4—implement the solution
– Establish appropriate action plans.
– Managers need to have willingness and ability
to implement action plans.
– Avoid lack-of-participation error.
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How do managers make decisions?
 Step 5—evaluate results
– Involves comparing actual and desired results.
– Positive and negative consequences of chosen
course of action should be examined.
– If actual results fall short of desired results,
return to earlier steps in the decision-making
process.
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How do managers make decisions?
 Types of heuristics for simplifying decision
making:
– Availability heuristic
• People use information “readily available” from memory as a
basis for assessing a current event or situation.
– Representativeness heuristic
• People assess the likelihood of something happening based
upon its similarity to a stereotyped set of occurrences.
– Anchoring and adjustment heuristic
• People make decisions based on adjustments to a previously
existing value or starting point.
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How do managers make decisions?
 Escalating commitment
– The tendency to increase effort and apply more
resources to a course of action that is not working.
 Ways to avoid the escalation trap:
– Set advance limits.
– Make your own decisions.
– Carefully determine why you are continuing a course of
action.
– Reminds yourself of the costs.
– Watch for escalation tendencies.
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How do managers make decisions?
 Advantages of group decision making:
– Greater amounts of information, knowledge,
and expertise
– More action alternatives are considered
– Greater understanding and acceptance of
outcomes
– Increased commitment to final plans
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How do managers make decisions?
 Disadvantages of group decision making:
– Pressure to conform
– Minority domination
– Decision making takes longer
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How do managers make decisions?
 Ethical decision making
– Any decision should meet “ethics double check.”
• How would I feel if my family finds out about this decision?
• How would I feel if this decision were published in the local
newspaper?
– Should be done during step 3 of decision-making
process.
– May result in better decisions and prevention of costly
litigation.
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Why are knowledge management and
organizational learning important?
 Knowledge management …
– Processes through which organizations develop,
organize, and share knowledge to achieve competitive
advantage.
 Chief Knowledge Officer (CKO)
– Energizes learning processes
– Manages organization’s intellectual assets
 Knowledge management requires understanding
of and commitment to IT.
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Why are knowledge management and
organizational learning important?
 Core ingredients of learning organizations
– Mental models
– Personal mastery
– Systems thinking
– Shared vision
– Team learning
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Why are knowledge management and
organizational learning important?
 Creativity is …
– The display or use of ingenuity and imagination
to create a novel approach to things or a unique
solution to problems.
– Essential for a learning organization.
– Essential for mastering the demands of complex
and changing environments.
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