Sunday, April 8, 2012

Chapter 12 - Enhancing Decision Making

Decisions are made at all levels of an organization as IS has made information available to these levels.  Decisions can be classified as structured, semistructured, and unstructured.  Structured decisions are repetitive and routine and they involve a definite procedure for handling them so that they do not have to be treated each time as if they were new. Operational management focuses these types of decisions.  Unstructured decisions are nonroutine decisions in which the decision maker must provide judgment, evaluation, and insights into the problem definition, and there is no well-understood or agreed-on procedure for making them.  Middle management focuses these types of decisions.  Semistructured decisions have elements of both structured and nonstructured decisions and are where only part of the problem has a clear-cut answer provided by an accepted procedure.  Senior management focuses these types of decisions.

The decision-making process is broken down into four stages:  intelligence design, choice, and implementation.  Intelligence is discovering, identifying, and understanding the problems occurring in the organization.  Design is identifying and exploring various solutions to the problem.  Choice is choosing among solution alternatives.  Implementation is making the chosen alternative work and continuing to monitor how well the solution is working.  If the solution does not work, return to an earlier stage in the process and repeat it.

Managers play a key role in the organization with a wide range of responsibilities.  The classical model of management describes formal managerial functions but does not address what exactly managers do when they plan, decide things, and control the work of others.  The contemporary model addresses that the actual behavior of managers appears to be less systematic, more informal, less reflective, more reactive, and less well organized than the classical model.  Managers’ day-to-day behavior can be classified into 10 managerial roles.  Managerial roles are the expectations of the activities that managers should perform in an organization.  These roles fall into three categories:  interpersonal, informational, and decisional.  Managers act as figureheads, leaders, and liaisons in their impersonal role.  Managers act as the nerve centers, disseminators, and spokes person in their informational roles.  Managers act as entrepreneurs, disturbance handlers, resource allocators, and negotiators in their decisional roles. 

Investments in information technology do not always produce positive results in managerial roles where information systems might improve decision.  Three reasons for this include information quality (high-quality decisions require high-quality information), management filters (managers absorb information through a series of filters to make sense of the world around them), and organizational culture (a firm’s decisions represent a balancing of the firm’s various interest groups rather than the best solution to the problem).

Decisions today are not always made by management, but are often made by the Internet.  The class of decisions that are highly structured and automated is growing rapidly.  Organizations are making decisions faster than what managers can monitor or control.

Business intelligence is the infrastructure for warehousing, integrating, reporting, and analyzing data that comes from the business environment.  Business intelligence and analytics are about integrating all the information streams produced by a firm into a single, coherent enterprise-wide set of data, and then, using modeling, statistical analysis tools, and data mining tools, to make sense out of all these data so managers can make better decisions and better plans, or at least know quickly when their firms are failing to meet planned targets.  A business intelligent environment consists of data from the business environment, a business intelligence infrastructure, a business analytics toolset, managerial users and methods, MIS, DSS, and ESS delivery platforms, and user interface.  Analytic functionalities that BI systems deliver to achieve these ends include production reports; parameterized reports; dashboards and scorecards; ad hoc query, search, report creation; drill down; and forecasts, scenarios, and models. 

Over 80 percent of the people who use BI consist of casual users who rely largely on production reports.  Senior executives use it to monitor firm activities using visual interfaces, such as dashboards and scorecards.  Middle managers and analysts use the data and software, entering queries and slicing and dicing the data along different dimensions.  Operational employees, customers, and suppliers are looking mostly at prepackaged reports.

Pre-packaged production reports are the most widely used output of a BI suite of tools.  Examples of BI applications include predictive analytics, data visualization and geographic IS.  Predictive analytics are being built into mainstream applications for everyday decision making by all types of employees, especially in finance and marketing.  It uses data mining techniques, historical data, and assumptions about future conditions to predict outcomes of events.  Data visualization is technology for helping users see patterns and relationships in large amounts of data by presenting the data in graphical form.  Geographic information systems (GIS) helps decision makers visualize problems requiring knowledge about the geographic distribution of people or other resources.

Two different strategies for adopting BI and BA capabilities for the organization are the one-stop integrated solution and the multiple best-of-breed vendor solution.  The one-stop integrated solution is where a single vendor provides a firm’s total hardware and software solution, making the firm dependent on its pricing power.  The multiple best-of-breed vendor solution offers greater flexibility and independence, but with the risk of potential difficulties integrating the software to the hardware platform, as well as to other software.

Many different constituencies make up a modern business firm.  Each of the management groups (operational management, middle management, and senior management) has different responsibilities and different needs for information and business intelligence, with decisions becoming less structured among higher levels of management. 

Operational and middle management are usually charged with monitoring the performance of key aspects of the business and most decisions they make are fairly structured.  MIS are typically used by middle managers to support this type of decision making, and their primary output is a set of routine production reports based on data extracted and summarized from the firm’s underlying transaction processing systems.  Decision support systems (DSS) are the BI delivery platform for the managers who consider themselves “super users.” 

Senior management uses the balanced scorecard and enterprise performance management methods.  The balanced scorecard focuses on measurable outcomes on four dimensions of a firm’s performance:  financial, business process, customer, and learning and growth.  Performance on each of these dimensions is measured using key performance indicators.  These are the measures proposed by senior management for understanding how well the firm is performing along any given dimension.  The business performance management attempts to systematically translate a firm’s strategies into operational targets.  Once identified, a set of key performance indicators are developed that measure progress towards the targets.  The firm’s performance is then measured with information drawn from the firm’s enterprise database systems. 

Group decision-support systems (GDSS) have been developed to support group and organizational decision-making.  It is an interactive computer-based system for facilitating the solution of unstructured problems by a set of decision makers working together as a group in the same location or in different locations.  GDSS provide tools and technologies geared explicitly toward group decision-making.

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