Unit-10 Decision Making in MIS 1 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 HOME NEXT C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 2 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
HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 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
3 HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 4 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.
HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Characteristics of Business Decision 5 HOME NEXT PREVIOUS 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. C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Rational Decision Making 6 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: HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Dimensions of Rationality 7 Three dimensions of rationality suggested by Gross Bertram M. are: HOME NEXT PREVIOUS First, the degree of satisfaction of human interest. Second, the degree of feasibility in achieving the objectives. Third, consistency in decision making. C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Problems in Making Rational Decisions 8 Problems in making rational decisions are:
HOME NEXT PREVIOUS 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 C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Herbert Simon Model 9 HOME NEXT PREVIOUS Decision making is a process and according to Herbert Simon, the decisions makers use this process to arrive at decisions. C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Conditions of Decision Making System Conditions of decision making system are: 10 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. HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Models for Decision Making Process
Models employed in organisations for decision making process are:
HOME NEXT PREVIOUS 1 Transportation model 2 Assignment model 3 Linear programming model 4 Program Evaluation Review Technique (PERT) 5 Critical Path Method (CPM) C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS Decision Analysis 12 HOME NEXT PREVIOUS 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: C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 13 MIS and Decision Making Process
HOME NEXT PREVIOUS 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 C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 14 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.
HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 15 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.
HOME NEXT PREVIOUS C o n f i d e n t i a l MB0047-Management Information System Unit-10 Decision Making in MIS 16 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 ?