Chapter 09Enabling the Organization

– Decision Making

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LEARNING OUTCOMES1. Explain the importance of decision

making for managers at each of the three primary organization levels along with the associated decision characteristics

1. Classify the different operational support systems, managerial support systems, and strategic support systems, and explain how managers can use these systems to make decisions and gain competitive advantages 9-2

Managerial Decision-Making Challenges

The Decision-Making Process

OThe six-step decision-making process

1. Problem identification

2. Data collection

3. Solution generation

4. Solution test

5. Solution selection

6. Solution implementation

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Decision-Making Essentials

Decision-making and problem-solving occur at each level in an organization

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Decision-Making Essentials

OOperational decision making - Employees develop, control, and maintain core business activities required to run the day-to-day operations

OStructured decisions - Situations where established processes offer potential solutions

OPERATIONAL

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Decision-Making Essentials

OManagerial decision making – Managers evaluate company operations to identify, adapt to, and leverage change

OSemi-structured decisions – Occur in situations in which a few established processes help to evaluate potential solutions, but not enough to lead to a definite recommended decision

MANAGERIAL

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Decision-Making Essentials

OStrategic decision making – Executives develop overall strategies, goals, and objectives

OUnstructured decisions – Occurs in situations in which no procedures or rules exist to guide decision makers toward the correct choice

STRATEGIC

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Three main categories of information systems

O Operational-level systems: support analysts, keeping track of the elementary activities and transactions

O Management-level systems: supports managers to serve the monitoring, controlling, decision-making, and administrative activities

O Strategic or Executive-level systems: help executives or senior management tackle and address strategic issues- Support long-range planning of senior management

Three main information systems at each level of

organizationO Transaction Processing Systems

(TPS) [operational support systems]

O Decision Support System (DSS) [managerial support systems]

O Executive Information Systems (EIS) [strategic support systems]

SUPPORT: ENHANCING DECISION MAKING WITH

MISTypes of Decision Making MIS Systems

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Operational Support SystemsOTransaction processing system

(TPS) – Basic business system that serves the operational level and assists in making structured decisions

OOnline transaction processing (OLTP) - Capturing of transaction and event information using technology to process, store, and update

OSource document – The original transaction record as an input

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Operational Support Systems

Systems Thinking View of a TPS

9-14CRUD = Create, read, update and delete

Feedback

Transaction Processing SystemsO Supports analysts by keeping track of the

elementary activities on daily basis and transactions of the organization such as sales, cash deposits, payroll, credit decisions and the flow of materials in a factory.

O To be able answer questions like:O How many parts are in inventory?O What happened to Mr. X’s payment?

O Examples: a system to record bank deposit/withdrawal from an ATM, a system that tracks the number of hours worked each day by employees, sales order entry, hotel/airline reservation, payroll, shipping systems

O Basic business systems that serve operational level

O A computerized system that performs and records daily routine activities

O Inputs: Raw Transactions

O Processing: Sorting, listing, merging, updating

O Outputs: Detail reports, lists, summaries

O Users: Operations personnel, supervisors

Transaction Processing Systems (TPS)

Example - A Payroll TPS

Typical Applications of TPS

Managerial Support Systems

ODecision support system (DSS) – Models information to support managers and business professionals during the decision-making process

OOnline analytical processing (OLAP) Manipulation of information to create business intelligence in support of strategic decision making 9-19

Decision Support System (DSS)

O Supports the monitoring, controlling, decision making, and administrative activities of managers.

O Provide periodic reports rather than instant ones

O Example: answers “what if” questions such asO What would be the impact on production schedules

if we double sales in the month of May?O What would happen to our return of investment if

our factory schedule were delayed for six months?

Decision Support Systems (DSS)

ODSS Combine data and analytical models

OINPUTS: Transaction level data (TPS) OPROCESSING: INTERACTIVE, SIMULATION, GRAPHICS OOUTPUTS: DECISION ANALYSISOUSERS: PROFESSIONALS, STAFF, MANAGERS

Decision Support SystemsFour quantitative models used by DSS include:

1. Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model

2. What-if analysis – checks the impact of a change in an assumption on the proposed solution-

1. What-if analysis is a special case of sensitivity analysis2. Excel is capable of performing what-if analysis (Scenario

Manager)

3. Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

1.Excel is capable of performing goal-seeking analysis

4. Optimization analysis - extension of goal-seeking analysis, finds optimum value for a target variable by repeating changing other variables – Example: By changing revenue and cost, managers can calculate the highest potential profits.

DECISION SUPPORT SYSTEMS What-if analysis in Excel

DECISION SUPPORT SYSTEMS

Goal-seeking analysis

Managerial Support Systems

Systems Thinking View of a DSS

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Managerial Support SystemsInteraction Between a TPS and DSS

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Strategic Support Systems

An strategic ( or Executive) Information Systems (EIS) is an specialized DSS that supports senior –level executive and unstructured, long-term, non-routine decisions requiring judgment, evaluation and insight.

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Executive Information Systems (EIS)OUse advanced graphics software to

create output for executivesOUse data from external & internal

sourcesOEg. Stock market

OInputs: Aggregate data from TPS level

OProcessing: Graphics, simulations, interactive

OOutputs: Projections, response to queries

OUsers: Senior managers

Executive Information systems

OSupports the long-term planning activities of executives

OExample: answers questions like:

OWhat will employment level be in ten years?

OWhat products should we be making in five years?

Executive Information SystemsMost EISs offering the following

capabilities:O Consolidation – involves the aggregation

of information and features simple roll-ups to complex groupings of interrelated information- Averaging is simple example of this.

O Drill-down – enables users to get details, and details of details, of information, e.g. viewing monthly, daily, or even hourly information- This is the reverse of consolidation.

O Slice-and-dice – looks at information from different perspectives e.g. All product sales during a given promotion vs. single product sales for all promotions ( e.g. Pivot Table)

Executive Information Systems

Interaction Between a TPS and EIS

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Executive Information Systems

O Executive information system (EIS) deals with:

O Granularity

O Visualization

O Digital dashboard

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Granularity•The structure of a typical organization is similar to a pyramid

•At the lower levels of the pyramid, people perform daily tasks such as processing transactions

•Moving up through the organizational pyramid, people (typically managers) deal less with the details (“finer” information) and more with meaningful aggregations of information (“coarser” information) that help them make broader decisions for the organization

•Granularity refers to the extent of detail in the information (means fine and detailed or “coarse” and abstract information)

Executive Information Systems

Information Levels Throughout An Organization

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Visualization

Visualization is graphic displays patterns of large amount of data. EIS visualizations delivers specific key information to top executives at a glance, with little or no interaction with system.

A common tool that supports visualization is a digital dashboard.

EXECUTIVE INFORMATION SYSTEMS

O Digital dashboard – integrates information from multiple components and presents it in a unified display

Digital Dashboard Demo

Demos:Demos:

• http://visudemos.ilog.com/webdemos/sales/sales.html• http://www.youtube.com/watch?v=PZORzheWv-8&feature=related

(5 min)(5 min)

Examples of Information Systems at each organizational level for each functional

areas