PowerPoint Presentation to Accompany Management, 9/e John R. Schermerhorn, Jr. Prepared by: Jim LoPresti University of Colorado, Boulder Published by: John Wiley & Sons, Inc. Chapter 7: Information and Decision Making

Management 9/e - Chapter 72 Study Question 1:What is the role of information in the management process?  Information and knowledge — basic linkages: Knowledge and knowledge workers provide a decisive competitive factor in today’s economy. Knowledge worker.  Someone whose value to the organization rests with intellect, not physical capabilities. Intellectual capital.  Shared knowledge of a workforce that can be used to create wealth.

Management 9/e - Chapter 73 Study Question 1:What is the role of information in the management process?  Information and knowledge — basic linkages (cont.) Knowledge and intellectual capital are irreplaceable organizational resources. The productivity of knowledge and knowledge workers depends on:  Computer competency.  Information competency.

Management 9/e - Chapter 74 Study Question 1:What is the role of information in the management process?  Implications of IT within organizations: Facilitation of communication and information sharing. Operating with fewer middle managers. Flattening of organizational structures. Faster decision making. Increased coordination and control.

Management 9/e - Chapter 75 Study Question 1:What is the role of information in the management process?  Implications of IT for relationships with external environment: Helps with customer relationship management. Helps organizations with supply chain management. Helps in monitoring outsourcing and other business contracts.

Management 9/e - Chapter 76 Study Question 1:What is the role of information in the management process?  How IT is changing the office … Progressive organizations actively use IT to help achieve high performance in uncertain environments. IT has dramatically changed nature of offices. Key developments in networked offices:  Instant messaging.  Peer-to-peer file sharing (P2P).

Management 9/e - Chapter 77 Study Question 2: How do managers use information to make decisions?  What is useful information ? Data.  Raw facts and observations. Information.  Data made useful for decision making. Information drives management functions. Characteristics of useful information:  Timely.  High quality.  Complete.  Relevant.  Understandable.

Management 9/e - Chapter 78 Study Question 2: How do managers use information to make decisions?  Basic information system concepts (cont.): Decision Support System (DSS).  An interactive information system that allows users to organize and analyze data for solving complex and sometimes unstructured problems.  Group decision support system (GDSS) facilitates group efforts to solve complex and unstructured problems.  GDSSs use groupware.

Management 9/e - Chapter 79 Study Question 2: How do managers use information to make decisions?  Basic information system concepts (cont.): Artificial intelligence (AI)  Computer systems with the capacity to reason the way people do. Expert systems (ES).  Software systems that use AI to mimic the thinking of human experts.

Management 9/e - Chapter 710 Study Question 2: How do managers use information to make decisions?  Basic information system concepts (cont.): Intranets and corporate portals.  Allow employees, by password access, to share databases and communicate electronically. Extranets and enterprise portals.  Allow communication and data sharing between the organization and the external environment. Electronic data interchange (EDI).  Uses controlled access to enterprise portals and supporting software to enable electronic transactions between businesses.

Management 9/e - Chapter 711 Study Question 2: How do managers use information to make decisions?  Managerial advantages of IT utilization: Planning advantages.  Better and more timely access to useful information.  Involving more people in planning. Organizing advantages.  More ongoing and informed communication among all parts of the organization.  Improved coordination and integration.

Management 9/e - Chapter 712 Study Question 2: How do managers use information to make decisions?  Managerial advantages of IT utilization (cont.): Leading advantages.  Improved communication with staff and stakeholders.  Keeping objectives clear. Controlling advantages.  More immediate measures of performance results.  Allows real-time solutions to performance problems.

Management 9/e - Chapter 713 Study Question 2: How do managers use information to make decisions?  A performance deficiency is … Actual performance being less than desired performance.  A performance opportunity is … Actual performance being better than desired performance.  Problem solving is … The process of identifying a discrepancy between actual and desired performance and taking action to resolve it.  A decision is … A choice among possible alternative course of action.

Management 9/e - Chapter 714 Study Question 2: How do managers use information to make decisions?  Programmed decisions. Apply solutions that are readily available from past experiences to solve structured problems. Structured problems are ones that are familiar, straightforward, and clear with respect to information needs. Best applied to routine problems that can be anticipated.

Management 9/e - Chapter 715 Study Question 2: How do managers use information to make decisions?  Nonprogrammed decisions. Develop novel solutions to meet the demands of unique situation that present unstructured problems. Unstructured problems are ones that are full of ambiguities and information deficiencies. Commonly faced by higher-level management.

Management 9/e - Chapter 716 Study Question 2: How do managers use information to make decisions?  Crisis decision making. A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately. Rules for crisis management:  Figure out what is going on.  Remember that speed matters.  Remember that slow counts, too.  Respect the danger of the unfamiliar.  Value the skeptic.  Be ready to “fight fire with fire.”

Management 9/e - Chapter 717 Study Question 2: How do managers use information to make decisions?  Decision environments: Certain environments.  Offer complete information about possible action alternatives and their outcomes. Risk environments.  Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives. Uncertain environments  Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives.

Management 9/e - Chapter 718 Figure 7.3 Three environments for managerial decision making and problem solving.

Management 9/e - Chapter 719 Study Question 2: How do managers use information to make decisions?  Problem-solving approaches or styles: Problem avoiders.  Inactive in information gathering and solving problems. Problem solvers.  Reactive in gathering information and solving problems. Problem seekers.  Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage.

Management 9/e - Chapter 720 Study Question 2: How do managers use information to make decisions?  Systematic versus intuitive thinking. Systematic thinking approaches problems in a rational, step-by-step, and analytical fashion. Intuitive thinking approaches problems in a flexible and spontaneous fashion. Multidimensional thinking applies both intuitive and systematic thinking. Effective multidimensional thinking requires skill at strategic opportunism.

Management 9/e - Chapter 721 Study Question 3: What are the steps in the decision-making process? Five-step decision-making process: Identify and define the problem. Generate and evaluate possible solutions. Choose a preferred course of action and conduct the “ethics double check.” Implement the decision. Evaluate results.

Management 9/e - Chapter 722 Figure 7.4 Steps in managerial decision making and problem solving.

Management 9/e - Chapter 723 Figure 7.5 Differences in the classical and behavioral models of managerial decision making.

Management 9/e - Chapter 724 Study Question 4: What are the current issues in managerial decision making?  Escalating commitment. The tendency to increase effort and apply more resources to a course of action that is not working.  Ways to avoid the escalation trap: Set advance limits and stick to them. Make your own decisions. Carefully determine why you are continuing a course of action. Remind yourself of the costs. Watch for escalation tendencies.

Management 9/e - Chapter 725 Study Question 4: What are the current issues in managerial decision making?  Potential advantages of group decision making: Greater amounts of information, knowledge, and expertise are available. More action alternatives are considered. Increased understanding and acceptance of outcomes. Increased commitment to implement final plans.

Management 9/e - Chapter 726 Study Question 4: What are the current issues in managerial decision making?  Potential disadvantages of group decision making: Pressure to conform. Minority domination may occur. Decision making takes longer.