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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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Unit-10 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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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





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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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Unit-10 Decision Making in MIS
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.
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Unit-10 Decision Making in MIS
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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Unit-10 Decision Making in MIS
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.
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Unit-10 Decision Making in MIS
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
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Unit-10 Decision Making in MIS
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.
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Unit-10 Decision Making in MIS
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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Unit-10 Decision Making in MIS
Models for Decision Making Process

Models employed in organisations for decision making process are:


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Transportation model
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Assignment model
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Linear programming model
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Program Evaluation Review Technique (PERT)
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Critical Path Method (CPM)
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Unit-10 Decision Making in MIS
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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Unit-10 Decision Making in MIS
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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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Unit-10 Decision Making in MIS
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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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Unit-10 Decision Making in MIS
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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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