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© 2001 Business & Information Systems 2/e2 Chapter 11 Management Decision Making

© 2001 Business & Information Systems 2/e3 Our Agenda Improving Management Decision- Making Effectiveness Management Decisions Management Information Systems Decision Support Systems Executive Support Systems

© 2001 Business & Information Systems 2/e4 Our Agenda (cont’d.) Expert Systems Knowledge Management Systems

© 2001 Business & Information Systems 2/e5 Learning Objectives Explain how information systems can improve management decision-making effectiveness. Describe the characteristics of information needed by managers for decision making at different levels of an organization.

© 2001 Business & Information Systems 2/e6 Learning Objectives (cont’d.) Describe the structure of management information systems. Describe the structure of decision support systems. Explain the purpose of executive support systems.

© 2001 Business & Information Systems 2/e7 Learning Objectives (cont’d.) Explain how an expert system can provide expert advice. Describe what organizational knowledge is an what knowledge management systems do.

© 2001 Business & Information Systems 2/e8 Improving Management Decision-Making Effectiveness Management Decision Making

© 2001 Business & Information Systems 2/e9 Improving Management Decision-making Effectiveness A decision is a selection among several courses of action. Information helps reduce the uncertainty. With better information, a decision maker is more certain about the outcome of a decision.

© 2001 Business & Information Systems 2/e10 Management Decisions Management Decision Making

© 2001 Business & Information Systems 2/e11 Levels of Management Decisions Management decisions are made at several levels in an organization. Starting at the top: Strategic decisions Tactical decisions Operational decisions

© 2001 Business & Information Systems 2/e12 Strategic Decisions Made by top level managers. Involve setting organization policies, goals, and long-term plans. They affect the organization for many years.

© 2001 Business & Information Systems 2/e13 Tactical Decisions Made by middle-level managers. Involve implementing policies of the organization. They affect the organization for several months or a few years.

© 2001 Business & Information Systems 2/e14 Operational Decisions Made by by lower-level manager. Involve the day-to-day decisions needed in the operation of the organization. They affect the organization for a short period of time, such as several days or weeks.

© 2001 Business & Information Systems 2/e15 Characteristics of Management Decisions The three characteristics of management decision making 1.Time horizon affected by the decision 2.Frequency of repeating the same decision 3.Degree of structure in the decision process

© 2001 Business & Information Systems 2/e16 Characteristics of Management Decisions (cont’d.) Strategic decisions tend to be unstructured. Tactical decisions tend to be semi-structured. Operational decisions tend to be very structured.

© 2001 Business & Information Systems 2/e17 Information Needs for Management Decisions Two characteristics of information needed for management decision making: Source of the information Internal External Degree of detail of information Detailed Summarized

© 2001 Business & Information Systems 2/e18 Information Needs for Management Decisions (cont’d.) Strategic decision information tends to be external and summarized. Tactical decision information tends to be both internal and external and both detailed and summarized. Operational decision information tends to be internal and detailed.

© 2001 Business & Information Systems 2/e19 Information Systems for Management Support Information systems support management in all the functions of a business at all levels. Accounting information systems provide accounting information at operational, tactical, and strategic levels. Financial information systems help in financial decision making at all levels.

© 2001 Business & Information Systems 2/e20 Information Systems for Management Support (cont’d.) Marketing information systems provide information to marketing managers at different levels. Manufacturing information systems assist in making manufacturing and production decisions at all levels. Human resource information systems support personnel decisions making at all levels.

© 2001 Business & Information Systems 2/e21 Management Information Systems Management Decision Making

© 2001 Business & Information Systems 2/e22 Management Information System Structure A Management Information System (MIS) supports management decision making by providing information in the form of reports and responses to queries to managers at different levels of an organization.

© 2001 Business & Information Systems 2/e23 Management Information System Functions Management information systems perform the four main functions of an information system: Input function Storage function Processing function Output function

© 2001 Business & Information Systems 2/e24 Decision Support Systems Management Decision Making

© 2001 Business & Information Systems 2/e25 Decision Support Systems A management information system helps managers make decisions by providing information from a database with little or no analysis. A Decision Support System (DSS) helps managers make decisions by analyzing data from a database and providing the results of the analysis to the manager.

© 2001 Business & Information Systems 2/e26 Management Decision Support A decision support system includes several ways of analyzing data. They include: Statistical calculations – data is manipulated to determine characteristics of the data or to draw conclusions from the data. Mathematical modeling – a representation of reality.

© 2001 Business & Information Systems 2/e27 Decision Support System Structure The users of a DSS are managers, usually at the tactical and strategic levels in the organization. The DSS model base (analogous to a database) contains the mathematical models and statistical calculation routines that are used to analyze data from the database.

© 2001 Business & Information Systems 2/e28 Decision Support System Functions The capabilities of a decision support system are provided by the four information system functions performed by the system. They are: Input function Storage function Processing function Output function

© 2001 Business & Information Systems 2/e29 Decision Support System Software A decision support system is usually developed using general software that is adapted for a specific decision. An example of DSS software is spreadsheet software.

© 2001 Business & Information Systems 2/e30 Group Decision Support Systems A Group Decision Support Systems (GDSS) is a system designed to support group decision making. A GDSS is typically used in a network.

© 2001 Business & Information Systems 2/e31 Geographic Information System A Geographic Information System (GIS) is an information system that provides information for decision making based on geographic location. A GIS includes a database in which all data is organized by geographic location.

© 2001 Business & Information Systems 2/e32 Executive Support Systems Management Decision Making

© 2001 Business & Information Systems 2/e33 Executive Support Systems An Executive Support System (ESS) is designed specifically for the information needs of strategic managers. Also called an Executive Information System (EIS).

© 2001 Business & Information Systems 2/e34 Executive Information Needs While strategic level managers generally need summarized information, occasionally they need detailed information. The detailed information is available through a process called drilling down.

© 2001 Business & Information Systems 2/e35 Executive Support System Structure An ESS may include any of the following: On-line access to reports. The ability to query the MIS database for information not usually received in reports. The ability to access external databases. The ability to analyze and summarize data from reports and queries, and to view the results of the analysis graphically.

© 2001 Business & Information Systems 2/e36 Executive Support System Structure (cont’d.) The ability to drill down to detailed information. Electronic mail ( ) to communicate with employees. An electronic appointment calendar. Basic word processing capabilities for writing notes, memos, and other simple communications.

© 2001 Business & Information Systems 2/e37 Executive Support System Functions An executive support system provides its capabilities through the four information system functions: Input function Storage function Processing function Output function

© 2001 Business & Information Systems 2/e38 Expert Systems Management Decision Making

© 2001 Business & Information Systems 2/e39 Expert Systems An Expert System (ES) is a type of information system that gives expert advice to the decision maker. The system accomplishes this task by incorporating human expert knowledge and using this knowledge to analyze specific problems.

© 2001 Business & Information Systems 2/e40 Expert Advice Expert advice is used at all levels of a business, but is most commonly required for structured problems at the operational and tactical levels. Problems in research and development, engineering, production, finance, computer systems, accounting, and other areas use expert advice.

© 2001 Business & Information Systems 2/e41 Expert System Structure The knowledge base is a database of expert knowledge. Different types of expert systems use different techniques for storing knowledge. One technique is to use rules. A rule is an if-then structure.

© 2001 Business & Information Systems 2/e42 Expert System Structure (cont’d.) The expert system software consists of a user interface and an inference engine. The inference engine analyzes rules in the knowledge base to draw conclusions.

© 2001 Business & Information Systems 2/e43 Expert System Functions Expert system capabilities are provided by the four information system functions: Input function Storage function Processing Function Output Function

© 2001 Business & Information Systems 2/e44 Expert System Software Expert system software is very complex. Knowledge engineers usually do the development of the rules and the knowledge base. Programming languages include: LISP PROLOG

© 2001 Business & Information Systems 2/e45 Other Artificial Intelligence Applications Neural networks consist of artificial neurons, which are software elements that act like human neurons. An intelligent agent is a program that acts on behalf of an individual, based on preferences that are given to the agent.

© 2001 Business & Information Systems 2/e46 Knowledge Management Systems Management Decision Making

© 2001 Business & Information Systems 2/e47 Organization Knowledge Explicit knowledge can be stated or written in a form someone else can understand. Implicit knowledge cannot be expressed easily but is understood by the individual. Making decisions involves the use of both explicit and implicit knowledge.

© 2001 Business & Information Systems 2/e48 Knowledge Management Knowledge management is the process of managing organizational knowledge. An organization must determine what knowledge it has and acquire the knowledge that it is lacking.

© 2001 Business & Information Systems 2/e49 Knowledge Management (cont’d.) Explicit knowledge needs to be organized and recorded in a way that makes it usable by others in the organization who do not have that knowledge. Knowledge needs to be communicated to those who need it and share among the employees in an organization.

© 2001 Business & Information Systems 2/e50 Management Decision Making Key Terms

© 2001 Business & Information Systems 2/e51 Key Terms Ad Hoc Report Artificial Intelligence (AI) Decision Support System (DSS) Demand Report Drilling Down Executive Information System (EIS) Executive Support System (ESS) Expert System (ES) Geographic Information System (GIS) Group Decision Support System (GDSS) Inference Engine Intelligent Agent

© 2001 Business & Information Systems 2/e52 Key Terms (cont’d.) Knowledge Knowledge Base Knowledge Management Knowledge Management System Management Information System (MIS) Model Base Neural Network Organizational Knowledge Query Rule Scheduled Report

© 2001 Business & Information Systems 2/e53 Summary Improving Management Decision- Making Effectiveness Management Decisions Management Information Systems Decision Support Systems Executive Support Systems

© 2001 Business & Information Systems 2/e54 Summary (cont’d.) Expert Systems Knowledge Management Systems

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