1. Enhancing Decision Making
Chapter 12
Enhancing Decision Making

2. Management Information Systems Chapter 12 Enhancing Decision Making
LEARNING OBJECTIVES
Describe different types of decisions and the decision- making process.
Assess how information systems support the activities of managers and management decision making.
Demonstrate how decision-support systems (DSS) differ from MIS and how they provide value to the business.
Demonstrate how executive support systems (ESS) help senior managers make better decisions.
Evaluate the role of information systems in helping people working in a group make decisions more efficiently.

3. Management Information Systems
Chapter 12 Enhancing Decision Making
Eastern Mountain Sports Forges a Trail to Better Decisions
Problem: Outdated, manual management reporting, data difficult to access, scattered in disparate sources
Solutions: Business intelligence software to extract, consolidate, analyze sales and merchandising data; wikis and blogs
Information Builders’ WebFOCUS and iWay middleware to create data mart as basis for central series of executive dashboards showing key performance indicators
Demonstrates IT’s role in producing information that allows managers to make better decisions

4. Business value of improved decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Business value of improved decision making
Improving hundreds of thousands of “small” decisions adds up to large annual value for the business
Types of decisions:
Unstructured: Decision maker must provide judgment, evaluation, and insight to solve problem
Structured: Repetitive and routine; involve definite procedure for handling so they do not have to be treated each time as new
Semistructured: Only part of problem has clear-cut answer provided by accepted procedure

5. Operational managers, rank and file employees
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Senior managers:
Make many unstructured decisions
E.g., Should we enter a new market?
Middle managers:
Make more structured decisions but these may include unstructured components
E.g., Why is order fulfillment report showing decline in Lahore?
Operational managers, rank and file employees
Make more structured decisions
E.g., Does customer meet criteria for credit?
Inventory reorder decision

6. Information Requirements of Key Decision-Making Groups in a Firm
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Information Requirements of Key Decision-Making Groups in a Firm
it is not possible to specify in advance
Prespecified, but not enough to lead to a definite recommended decision,
specified in advance
Senior managers, middle managers, operational managers, and employees have different types of decisions and information requirements.
Figure 12-1

7. Four stages of decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Four stages of decision making
Intelligence
Discovering, identifying, and understanding the problems occurring in the organization
Design
Identifying and exploring solutions to the problem
Choice
Choosing among solution alternatives
Implementation
Making chosen alternative work and continuing to monitor how well solution is working

8. Stages in Decision Making
Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Stages in Decision Making
This graphic illustrates the four stages of decision making introduced in the previous slide, emphasizing that steps can be repeated as needed, depending on the outcome at each stage.
The decision-making process is broken down into four stages.
Figure 12-2

9. Management Information Systems
Chapter 12 Enhancing Decision Making
Decision Making and Information Systems
Three main reasons why investments in information technology do not always produce positive results
Information quality
High-quality decisions require high-quality information
E.g. What if you were making a decision about purchasing a house and found out that there were errors in your credit record that prevented you from obtaining the necessary financing? Perhaps the data was out of date or contained mistakes.
Management filters
Managers have selective attention and have variety of biases that reject information that does not conform to prior conceptions
E.g. you may suggest to your manager that the department purchase a piece of equipment from a certain manufacturer, Your manager disapproves the suggestion
Organizational culture
Strong forces within organizations resist making decisions calling for major change
E.g. likely the manager will not make decisions that will cause her to lose her job.

10. Four kinds of systems for decision support
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Four kinds of systems for decision support
Management information systems (MIS)
Decision support systems (DSS)
Executive support systems (ESS)
Group decision support systems (GDSS)

11. Management information systems (MIS)
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Management information systems (MIS)
Help managers monitor and control business by providing information on firm’s performance and address structured problems
Typically produce fixed, regularly scheduled reports based on data from TPS
E.g., exception reports: Highlighting exceptional conditions, such as sales quotas below anticipated level
E.g., California Pizza Kitchen MIS
For each restaurant, compares amount of ingredients used per ordered menu item to predefined portion measurements and identifies restaurants with out-of-line portions

12. Decision-support systems (DSS)
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Decision-support systems (DSS)
Support unstructured and semistructured decisions
Model-driven DSS
Earliest DSS were heavily model-driven
E.g., voyage-estimating DSS (Chapter 2), "what-if" analysis, such as linear programming
Data-driven DSS
Some contemporary DSS are data-driven
Use OLAP and data mining to analyze large pools of data
E.g., business intelligence applications (Chapter 6)

13. Too Many Bumped Fliers: Why?
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Too Many Bumped Fliers: Why?
Read the Interactive Session: Management, and then discuss the following questions:
Is the decision support system being used by airlines to overbook flights working well? Answer from the perspective of the airlines and from the perspective of the customers.
What is the impact on the airlines if they are bumping too many passengers?
What are the inputs, processes, and outputs of this DSS?
What people, organization, and technology factors are responsible for excessive bumping problems?
How much of this is a “people” problem? Explain your answer.

14. Business Intelligence Turns Dick’s Sporting Goods Into a Winner
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Business Intelligence Turns Dick’s Sporting Goods Into a Winner
Read the Interactive Session: Technology, and then discuss the following questions:
What problems did Dick’s face with its data tracking and reporting? How did they affect decision making and business performance?
What did the company do to remedy those problems?
Was MicroStrategy an appropriate selection for Dick’s? Why or why not?
Has improved reporting solved all of this company’s problems? Explain your answer.

15. Components of DSS Database Used for query and analysis
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Components of DSS
Database
Used for query and analysis
Current or historical data from number of applications or groups
May be small database or large data warehouse
User interface
Often a Web interface
Software system
With models, data mining, other analytical tools

16. Overview of a Decision-Support System
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Overview of a Decision-Support System
This graphic illustrates the components of the DSS, and emphasizes the source of DSS data- primarily TPS data and external data, typically in a database separate from production databases.
The main components of the DSS are the DSS database, the user interface, and the DSS software system. The DSS database may be a small database residing on a PC or a large data warehouse.
Figure 12-3

17. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Model:
Abstract representation that illustrates components or relationships of phenomenon; may be physical, mathematical, or verbal model
Statistical models
Optimization models
Forecasting models
Sensitivity analysis models

18. Using DSS Activities and Examples Sensitivity analysis
Types of Analytical Modeling
Activities and Examples
What if analysis
Observing how changes to selected variables affect other variables
Ex: What if we cut advertising by 10 %?
What would happened to sales?
Sensitivity analysis
Observing how repeated changes to a single variable affect other variables.
Ex: Let’s cut advertising by $100 repeatedly so we can see its relationship to sales.
Goal Seeking analysis
Making repeated changes to selected variables units a chosen variable reaches a target value
Ex: Let’s try increase in advertising until sales reach
$ 1 million?
Optimization analysis
Finding optimum value for selected variable, given certain constraints.
Ex: What’s the best amount of advertising to have, give our budget and choice of media?

19. Using spreadsheet pivot tables to support decision making
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Using spreadsheet pivot tables to support decision making
Records of online transactions can be analyzed using Excel
Where do most customers come from?
Where are average purchases higher?
What time of day do people buy?
What kinds of ads work best?
Pivot table:
Categorizes and summarizes data very quickly
Displays two or more dimensions of data in a convenient format

20. Sample List of Transactions for Online Management Training
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Sample List of Transactions for Online Management Training
This graphic shows a Microsoft Excel spreadsheet with sales data from a hypothetical online training company. Data captured includes customer ID, region, payment type, advertising source, amount of purchase, product purchased, and time of day. Excel’s PivotTable function allows you to sort and analyze this data to create meaningful information. Types of questions that you might want to find out from this data include “Where are our customers from?” “What form of payment is more common?” and “Are there regional differences in the average purchase?”
This list shows a portion of the order transactions for Online Management Training Inc. (OMT Inc.) on October 28, 2008.
Figure 12-5

21. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
A Pivot Table that Determines Regional Distribution of Customers
Figure 12-6
This PivotTable report was created using Excel 2007 to quickly produce a table showing the relationship between region and number of customers
This graphic shows the same Microsoft Excel spreadsheet with a PivotTable with one dimension – it shows where customers come from in terms of region.

22. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
A Pivot Table that Examines Customer Regional Distribution and Advertising Source
This graphic shows the same Microsoft Excel spreadsheet with a PivotTable with two dimensions – it shows where customers come from in terms of region and advertising source.
Figure 12-7
In this pivot table, we are able to examine where customers come from in terms of region and advertising source. It appears nearly 30 percent of the customers respond to campaigns, and there are some regional variations

23. Data visualization tools:
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Data visualization tools:
Help users see patterns and relationships in large amounts of data that would be difficult to discern if data were presented as traditional lists of text
Geographic information systems (GIS):
Category of DSS that use data visualization technology to analyze and display data in form of digitized maps
Used for decisions that require knowledge about geographic distribution of people or other resources, e.g.:
Helping local governments calculate emergency response times to natural disasters
Help retail chains identify profitable new store locations

24. Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
South Carolina used a GIS-based program called HAZUS to estimate and map the regional damage and losses resulting from an earthquake of a given location and intensity. HAZUS estimates the degree and geographic extent of earthquake damage across the state based on inputs of building use, type, and construction materials. The GIS helps the state plan for natural hazards mitigation and response.

25. GIS
Geographic analysis of ATM usage creates this visualization showing high and low areas of usage based on foot traffic and densities.

26. Web-based customer decision-support systems (CDSS):
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Web-based customer decision-support systems (CDSS):
Support decision-making process of existing or potential customer, purchasing decisions
Use Web information resources and capabilities for interactivity and personalization to help users select products and services
E.g., search engines, intelligent agents, online catalogs, Web directories, newsgroup discussions, other tools
Automobile companies that use CDSS to allow Web site visitors to configure desired car
Financial services companies with Web-based asset-management tools for customers, e.g. riskgrades.com

27. Group decision support systems (GDSS)
Management Information Systems
Chapter 12 Enhancing Decision Making
Systems for Decision Support
Group decision support systems (GDSS)
Interactive system to facilitate solution of unstructured problems by group of decision makers
Hardware – computer and networking hardware, overhead projectors, display screens
GDSS software collects, documents, ranks, edits and stores participant ideas, responses
May require facilitator and staff
Enables increasing meeting size and increasing productivity
Promotes collaborative atmosphere, guaranteeing anonymity
Follow structured methods for organizing and evaluating ideas and preserving meeting results
E. g. videoconferencing

28. Executive support systems (ESS)
Management Information Systems
Chapter 12 Enhancing Decision Making
Executive Support Systems (ESS)
Executive support systems (ESS)
Designed to help executives focus on important performance indications
Balanced scorecard method:
Measures outcomes on four dimensions:
Financial
Business process
Customer
Learning & growth
Key performance indicators (KPIs) measure each dimension
In developing an ESS, first concern is for senior executives and consultants to develop scorecard and then to automate flow of information for each KPI

29. Role of ESS in the firm Management Information Systems
Chapter 12 Enhancing Decision Making
Executive Support Systems (ESS)
Role of ESS in the firm
Used by both executives and subordinates
Drill-down capability: Ability to move from summary information to finer levels of detail
Integrate data from different functional systems for firmwide view
Incorporate external data, e.g. stock market news, competitor information, industry trends, legislative action
Include tools for modeling and analysis
Primarily for status, comparison information about performance

30. Business value of executive support systems
Management Information Systems
Chapter 12 Enhancing Decision Making
Executive Support Systems (ESS)
Business value of executive support systems
Enables executive to review more data in less time with greater clarity than paper-based systems
Needed actions identified and carried out earlier
Improves management performance
Increases upper management’s span of control
Also enables decision making to be decentralized and take place at lower operating levels
Increases executives’ ability to monitor activities of lower units reporting to them

31. Digital Dashboard

32. Improving Decision Making: Using a Web-Based DSS for Retirement Planning
Software skills: Internet-based software
Business skills: Financial planning
This project will help develop your skills in using Web-based DSS for financial planning.
The Web sites for CNN Money and MSN Money Magazine feature Web-based DSS for financial planning and decision making. Select either site to plan for retirement. Use your chosen site to determine how much you need to save to have enough income for your retirement. Assume that you are 50 years old and plan to retire in 16 years. You have one dependent and $100,000 in savings. Your current annual income is $85,000. Your goal is to be able to generate an annual retirement income of $60,000, including Social Security benefit payments.
1.To calculate your estimated social security benefit, use the Quick Calculator at the Social Security Administration Web site (
2.Use the Web site you have selected to determine how much money you need to save to help you achieve your retirement goal.
3.Critique the site — its ease of use, its clarity, the value of any conclusions reached, and the extent to which the site helps investors understand their financial needs and the financial markets.