Week 2 Reference (chapter 2 in text book (1)) Dr. Fadi Fayez Updated by: Ola A.Younis Decision and Decision Makers

Decision Making Process Stimulus Decision Maker Problem Definition Alternative Selection Implement ation

The Decision Making Process Stimulus (opportunities, feedback, threats) Decision Maker (external pressures) Problem Definition (risks, biases, costs, etc) Alternative Selection (reframing strategy, creativity) Implementation (acceptance, evaluation and control)

Classes of the Decision Maker Individual Decision Maker Multiple Decision Makers Group Decision Makers Team Decision Makers Organisational and Metaorganisational Decision Makers

Decision Styles Decision style: A term used to describe the manner in which a manager makes decisions. Factors Effecting the decision style: Context : External and individual forces Perception : Managers perceive the problem context and its potential. Values (personal Values): they forms a permanent framework that impacts a person behaviours and manner in making a decision.

Decision Styles Types of Decision styles Directive: low tolerance of context ambiguity. Does not requires large volumes of information and verbal communication Analytical: High tolerance of context ambiguity and requires great values of information. Not quick in taking decisions. Conceptual: The “people person” and they tend to be thinkers rather than doers. Behavioural: It requires low amount of input data and demonstrate a short-rang vision

Decision Styles (Cont.) How decision styles are used in the design process of the DSS? We cannot expect a manager neatly fits into one style category There is a dominate style and backup ones for a manager Knowing the dominant and backup styles of a manager yield a great deal of information useful in the interface design The key point is the manager reactions to stress and methods in which the problem are solved Not knowing the decision style during the DSS design process can result in biases and weaknesses in the decision makers approach to solving the problem.

Decision Effectiveness A good decision : is a decision results in the attainment of the objectives that gave arise to the need of decision Decision Forces that impact the selection of a decision Personal and emotional forces: decision maker feeling, health, security, cognitive limitation, etc, can effect him in making decisions Economical/Environmental force: resources, governmental regulation, competitive pressures of market, etc, Organisational force: policies, procedures, culture, etc, can impact the nature of the decision process Contextual and emergent forces : the problem context (time requirement, motivation to reach a decision)

How can a DSS Helps Common types of support provided by DSS Explore multiple perspectives of a decision context Generate multiple and higher quality alternatives for consideration Explores and tests multiple problem-solving strategies Facilitates brainstorming and other creative problem- solving techniques Increase decision maker ability to tackle complex problems Improve response time of decision maker

Why are Decisions Hard Key areas that determine the difficulties of a decision: Structure Cognitive limitations Uncertainty Alternatives and multiple objectives

Simons DSS Problem Solving Model Intelligence : In this phase, the decision makers is looking for information or knowledge suggesting the presence of the problem. Design: the decision maker starts activities related to the information and analysis of the alternatives intended to serve as potential solutions to the problem. Potential solutions are analysed and compared to all others in terms of the expected outcome, cost, success probability, etc. The decision maker must select a problem solving strategy Choice One potential solution is selected by the decision maker The decision maker must consider all constraints in hand to ensure that the selected solution is still the best among the available potential ones. For example the price of Oil in Gas industry

Rational Decision Making Optimisation : is a decision making strategy that will choose the alternative that is clearly the best possible one providing the best overall outcome. An optimal solution: A solution that achieves the best outcome of all possible solutions. Optimisation can be considered as a rational behaviour since it is rational to make a decision that, after reviewing of all possible alternatives, brings the maximum satisfaction. Problems associated with optimisation in managerial decision making: 1. Many decision are qualitative in nature and not quantitative ones and thus cannot be associated with optimisation 2. It is not always possible to search for every possible alternative for a problem and in many cases it will be very costly. 3. The human ability to keep track of all possible alternatives and compare them is beyond their capacity.

H. Simon Bounded Rationality Traditionally, we look for an optimal solution in the problem space and compare every derived solution with all other available solutions. This is sometimes problematic. In bounded rationality, one sets characteristics of an acceptable solution before search starts. Then he/s looks for a good solution match while searching the problem space. Bounded rationality approach definitely reduces the time required to find the satisfied solution and overcomes some of the limitations of rational decision making There must be a measure to be used by the decision maker to compare each alternative with the preconceived solution Simon Suggested to use heuristics (“rules of thumbs”) to manage the search for the solution. These heuristics represents simple human rules, which was collected from experience, opinion, training, etc.

H. Simon Bounded Rationality

Cognitive Processes Factors contribute to cognitive limitations : Human can retain only few bits of information in short-term memory Decision makers display different types of intelligence Decision makers that embrace closed belief systems tend to inordinately restrict information search Decision makers that employ a concrete thinking approach tend to be limited information processors Perception: a special kind of cognitive limitation Perception Blocks 1. Difficulty in isolating the problem 2. Delimiting the problem space too closely (think in the box) 3. Inability to see the problem from various prospective 4. Stereotyping

Bias and Heuristics in DSSs Heuristics are often built through trail-and-error experience If heuristics are well tested, they can serve as a reliable tool for reducing the search space for alternatives Search directed by heuristics is usually less costly and more efficient than blind search Heuristics can provide solutions close to those produced by a comprehensive blind search with regards to quality Advantages of using heuristics in problem solving Simple to understand Easy to implement Requires less time Require less cognitive effort Can produce multiple solutions When to use Heuristics The input data are limited The computation time for the optimal solution is excessive Problems that are being solved frequently Symbolic rather than numerical processing is involved The efficiency of an optimisation process can be improved

Bias and Heurisrics in DSSs (Cont.) Heuristic Bias: If the rules are arbitrary developed, then the choice of good solutions may fail. By arbitrary we mean: – Random choice of the starting point when the search starts – The sequence in which assignments or other decisions are made – The resolution of ties – The choice of criteria for specifying the procedures – The level of effort expended to demonstrate that the final decision is in fact best or nearly so.

Effectiveness and Efficiency Contribution of effectiveness and efficiency from the DSS use: Effectiveness Easier access to relevant information Faster and more efficient problem recognition Easier access to computing tools Greater ability to produce and evaluate large choice sets Efficiency Reduction in decision cost Reduction in decision time Better quality in feedback supplied to the decision maker