Bob Travica Class 11 Decision Making Processes & Decision Support Systems MIS 2000 Instructor: Bob Travica Updated Feb. 2014

615 Management Information Systems 2 of 13 Outline Decision making and problem solving process - rational (scientific) model Other decision making models Decision Support System MIS & DSS support to rational decision making Summary Exercise

Decision making and problem solving process: Rational (Scientific) Model 1. Identify (define) problem ? 2. Define optional solutions 5. Evaluate/Adjust solution   3. Evaluate optional solutions exhaustively and select best   (Simon, 1950s) 4. Implement solution   Steps 1-3 are decision making; with steps 4-5 the whole process is problem solving. Desirable model in business and generally but its assumptions are limiting.* 615 Management Information Systems3 of 11

615 Management Information Systems Other Models: Satisfycing (Good Enough) Decision Making Decisional making made under significant constraints Simon supplanted Rational Model; necessary evil due to human & organizational limitations (e.g., cognitive capabilities, time constraints, struggles) Making a choice that is good enough More ? ? Go for low-hanging fruit! Define problem under constraints Define some optional solutions Focus on most important evaluation criterion-two Select the first solution that fits the criterion 4 of 11

615 Management Information Systems How decision making typically runs in public organizations: - different interests that balance each other, - nobody to “cut the knot”, struggles over budget and assets - “endless” decision processes, like walking through mud. What is the problem? Different things for different people! Problem defining includes negotiations and maneuvering. Optional decisions are defined tentatively. Decision maker implements just a part of a chosen option. If blocked, he switches to an alternative; if blocked again, must maneuver again (might even turn back to the first option); see diagram on next slide. Other Models: Zig-Zag Problem Solving (“Muddling Through”)* 5 of 11

Define problem Administrator External StakeholderInternal Stakeholder AND Make a compromise definition Define options tentatively Comment Adjust options Implement an option partly Implement another part Comment Switch to another option Zig-Zag Problem Solving – Process Diagram React Y N Blocked? Evaluate situation Y N Blocked? Evaluate situation Only without blocking to any part of a decision, it is completely realized. But there is usually some blocking and the loops may seem infinite. 615 Management Information Systems6 of 11

615 Management Information Systems Decision Support System (DSS)  DSS Supports higher mgt. levels. Problems to solve are less structured than in routine situations where TPS & MIS can do the work.  Time horizon of DSS: Future – from close (day, week) to far (one+ years).  DSS uses outputs from MIS and data from sources outside the company. More Outputs: Models Scenarios and outcomes Results of tests Relationships & patterns Sales Inventory ENVIRON- MENT Data modeling & Data mining MIS DSS  Managerial decision making about future is supported by DSS. 7 of 11

 Management tasks: Planning and forecasting  Visually represent key performance indicators (e.g., financial ratios); dashboards.  May have a “drill-down capability” to find what is behind aggregated figures 615 Management Information Systems8 of 11

DSS Types 615 Management Information Systems Model–driven: Processes data using different transformation methods (optimization, if-then analysis, statistical tests)* Model–driven: Processes data using different transformation methods (optimization, if-then analysis, statistical tests)* Data-driven: Looking for patterns in large data sets. Data mining** and Big Data*** MIS environment - Simulation - Scenario - Result of stats tests Data transformation models TPS MIS environment New relationships in sequence, New relationships per transaction, Groupings *** Data Warehouse Data Mining software 9 of 11

Rational Decisional Making Process and Information Systems for Decision Making  IS can help rational DM.  The role of MIS is to inform the user so that a potential problem in operations can be identified.  Model-driven DSS can help with more steps and entire DM process – best option can be automatically delivered.  People still make the final choice (decision). Learn about problem Run environment analysis Create reports Upper-level Manager (Business Analyst helping) DSS MIS Define problem (may include negotiations) Create optional solutions Deliver decision options Discuss & Negotiate Evaluate result & accept/reject Analyze options & select the best Run organization analysis IDENTIFY PROBLEMDEFINE OPTIONSSELECT OPTION Adjust inputs? Yes No 615 Management Information Systems10 of 11

Summary In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify problem, (2) create optional solutions, and (3) evaluate optional solutions exhaustively and select the best one. The full problem solving (PS) cycles includes 2 more steps: (4) implement solution, and (5) evaluate solution based on reaction of the affected party. In Simon’s rational model, decision making (DM) takes 3 steps: (1) identify problem, (2) create optional solutions, and (3) evaluate optional solutions exhaustively and select the best one. The full problem solving (PS) cycles includes 2 more steps: (4) implement solution, and (5) evaluate solution based on reaction of the affected party. Satisficing and Zig-Zag models acknowledge constraints in problem solving. Satisficing and Zig-Zag models acknowledge constraints in problem solving. DSS supports higher mgt. levels in solving less structured problems related to upcoming activities in the near to far future. It can be model- or data-driven. DSS uses data reflecting both the organization and the environment, and delivers key performance indicators, visuals, and drill- down of aggregate figures. DSS supports higher mgt. levels in solving less structured problems related to upcoming activities in the near to far future. It can be model- or data-driven. DSS uses data reflecting both the organization and the environment, and delivers key performance indicators, visuals, and drill- down of aggregate figures. Role of MIS in decision making processes is limited to informing the user in the problem definition step of rational DM. DSS can support whole DM process. Human decision makers still play the key role. Role of MIS in decision making processes is limited to informing the user in the problem definition step of rational DM. DSS can support whole DM process. Human decision makers still play the key role. 615 Management Information Systems11 of 11