Information Technology for Managerial Decision Making Management Levels & Management Activities Types of Decision Problems Decision Making Process What is a DSS? The Role and Characteristics of DSS Components of a DSS What is an EIS? Benefits of EIS

Anthony’s Management Activities Framework Strategic Planning top management determines business goals & strategies and decides on required resources Management Control middle management acquires and executes resources to achieve the goals and strategies Operational Control low-level management manages day-to-day operations to ensure resources are properly used

Types of Decision Probelms Well-structured decisions routine, repetitive problems there usually is a procedure to automate problem solving Semi-structured decisions half-way between well-structured and unstructured decisions Unstructured decisions ‘novel’ problems need to devise a new solution to a problem there is uncertainty/risk in decision making

Simon’s Decision Making Process Model Intelligence Stage Design Stage Choice Stage Implementation Stage

What is a DSS? DSS refers to a decision support system DSS is defined as a computer-based system that provides analytical modes and data to assist a manager to solve decision problems in an interactive manner The system ‘supports’ the decision making process, but the user (or the manager) is responsible for making the decision using his/her insights and judgments. DSS is typically suited to quantitative decisions relieves the user of the computational/analytical burden, and improves the speed and accuracy of decision making

The Role and Purpose of DSS The Role of a DSS assists a manager in making semi-structured decisions supports, not replace, managerial decision making improves the effectiveness, rather than efficiency, of decision making Efficiency vs. Effectiveness Efficiency: - saved time: cycle time, time-to-market, etc. - saved cost: labor cost, production cost, raw materials cost, etc. - most TPS focus on improving the operational efficiency Effectiveness: - directly linked to factors influencing the organizational outcomes. - e.g., market share, sales, profit, competitiveness, growth rate - often the prime objective of a DSS

Components of a DSS User Interface Data Management Subsystem Model Base Model Base

What is an EIS? EIS refers to executive information systems EIS is defined as a computer-based system to provide executives with easy access to both internal and external information related to a company’s critical success factors (Watson et al. 1991) What is a critical success factor(CSF)? factors that the executives consider important in succeeding in their industry e.g., CSF’s for automotive industry: style, dealer system, cost control, energy efficiency

Information Support for Executives Quick information updates Observation of internal and external environments Data access Strategic analysis Use of decision models Reduction of information overload Data summarization

Without EIS With EIS Data and info. In business envir. Top Management EIS Marketing Info. System Production Info. System Financial Info Sysem Marketing Info. System Production Info. System Financial Info Sysem Data and info. In business envir. Data and info. In business envir.

Characteritics of EIS typically tailored to the individual user may extract, filter, focus, and organize business data easy to use, and is used by the executive supports the ‘management by exception’ functinos have ‘drill-down’ capabilities supports the need for external data provides various types of information, including graphs, tables, text, etc.

Management by Exception Corporate Profitability by Division Can compare actual performance against budgeted performance EIS can highlight the areas of ‘exception’ Corporate Profitability by Division As of June 30, 1994 Budget Actual Variance %Variance ------ ------ -------- --------- Automotive 1200 1280 80 6.7 Electronics 337 158 (179) (53.1) Aerospace 700 712 12 1.7 Corporate 2237 2150 (87) (3.9)

Drill-Down Function Can adjust the level of detail in the information displayed Information is presented hierarchically (cf. Hypercard) Begins with a summary information, and then moves gradually into more specific information Useful when exploring fundamental causes of a business problem

Factors Leading to EIS Failure Lack of executive support Undefined system objectives Poorly defined information requirements Inadequate support staff Poorly planned evolution