Stages of Decision Making - PDF Document

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  1. Stages of Decision Making ? Decision-making phase is the first part of problem-solving process: ? Intelligence – The military sense of gathering information ? Design – Identifying the alternatives, structuring how the decision will be made ? Choice – Picking an alternative or making the judgment Chapter 15: Decision Support System and Executive Information System B2001 @ Peter Lo 2007 1 B2001 @ Peter Lo 2007 2 Structured vs. Unstructured Decision Stages Structured, Semi-structured, and Unstructured Decisions ? Each stage can be Structured (automated) or Unstructured ? Structured means that there is an algorithm, mathematical formula, or decision rule to accomplish the entire stage. The algorithm can be implemented manually or it can be computerized, but the steps are so detailed that no little or no human judgment would be needed. ? Any decision stage that is not structured is unstructured. ? In a Structured Decision all three stages are structured ? In a Unstructured Decision all three stages are unstructured ? A Semi-structured Decision is one in which part, but not all, of the decision is structured. B2001 @ Peter Lo 2007 3 B2001 @ Peter Lo 2007 4

  2. Decision Support System (DSS) What is a Decision Support System? ? A Decision Support Systems (DSS) is an interactive, highly “user-friendly” system that supports management decisions that are semi structured or that cannot be specified in advance. ? The most important considerations in the creation of DSS is the recognition of “information overload”. ? Decision Support Systems (DSS) have a diversity of users in the analysis of problems and the modeling of solutions. ? To be effective, DSS must be sufficiently easy-to-use and managers must know what and why they are doing something. B2001 @ Peter Lo 2007 5 B2001 @ Peter Lo 2007 6 DSS & Decision Making Level Components of DSS ? Decision Support System, though skewed towards top level management, are used at all levels ? Managers at all levels face unstructured decisions ? Quantity and magnitude of unstructured decisions increases with management level ? A Decision Support System is composed of the following: External Data Model Component Database Component ? User Interface ? Data Management Internal Data Communications Component ? Model Management User Interface Component Users B2001 @ Peter Lo 2007 7 B2001 @ Peter Lo 2007 8

  3. Components of DSS – Data Management Components of DSS – User Interface ? Users interact with a DSS through the user interface. ? It is important therefore that user interfaces are easy to learn and to use. ? The method of interfacing may vary with each DSS. ? A typical DSS will access more than one database. These may contain both internal and external data. ? Data is extracted from these databases and updated into a DSS database. B2001 @ Peter Lo 2007 9 B2001 @ Peter Lo 2007 10 Components of DSS – Model Management Selected DSS Applications ? The Model Management subsystem contains the model base. ? Models are software programs that support the user in a particular decision making situation. B2001 @ Peter Lo 2007 11 B2001 @ Peter Lo 2007 12

  4. Business Applications Benefits ? Financial Investment ? Fast Response to Unexpected Situations ? New Insights and Learning ? Cost Savings ? Some investment banks and brokerage firms use DSS in taking market positions with their own assets. ? The decision-making support comes in the form of the software’s ability to identify trends or disturbances in the market prices of securities and options. ? Ship Loading and Unloading ? DSS can be used to load and unload ships in an optimal fashion. This is important as a ship could be picking up and dropping off cargo at many different ports. B2001 @ Peter Lo 2007 13 B2001 @ Peter Lo 2007 14 Benefits - Fast Response to Unexpected Situations Benefits - New Insights and Learning ? Fast Response to Unexpected Situations ? New Insights and Learning ? A DSS enables a thorough, quantitative analysis in a short time. ? The user can be exposed to new insights throughout the composition of the model and an extensive sensitivity “what-is” analysis. ? This results in the user being able to handle rapid changes in business situations without waiting for the IT department to perform programming changes as would be the case in an IRS. ? The new insights can help in training inexperienced managers and other employees as well. B2001 @ Peter Lo 2007 15 B2001 @ Peter Lo 2007 16

  5. Group Decision Support System (GDSS) Benefits - Cost Savings ? Group Decision Support System (GDSS) is a decision support system which provides support for problem formulation and solution and decision making by groups or teams of people ? GDSS is designed to support effective group communication and good decision making techniques, as well as creative thinking. ? GDSS software must be especially user friendly, since often groups have less patience with bad software than do individuals. ? Cost Savings ? Routine applications of a DSS may result in consideration cost reduction, or in reducing the cost of wrong decisions. B2001 @ Peter Lo 2007 17 B2001 @ Peter Lo 2007 18 Configuration of a GDSS Characteristics of a GDSS ? Special Design ? Effective communication ? Group decision making ? Ease of Use ? Flexibility ? Accommodate different perspectives ? Anonymous Input ? Individuals’ names are not exposed ? Parallel Communication B2001 @ Peter Lo 2007 19 B2001 @ Peter Lo 2007 20

  6. Characteristics of a GDSS (cont’) Examples of GDSS Software ? Decision-making Support ? Lotus Notes ? Delphi approach: Decision makers are scattered around the globe ? Store, manipulate, distribute memos ? Microsoft Exchange ? Brainstorming: Say things as you think---think out loud ? Keep individual schedules ? Group consensus approach: The group reaches a unanimous decision (everybody agrees) ? Decide on meeting times ? NetDocuments Enterprise ? Nominal group technique: Voting ? Reduction of Negative Group Behavior ? Two people can review the same document together ? A trained meeting facilitator to help with sidetracking ? Automated Record Keeping B2001 @ Peter Lo 2007 21 B2001 @ Peter Lo 2007 22 GDSS Alternatives The GDSS Decision Room B2001 @ Peter Lo 2007 23 B2001 @ Peter Lo 2007 24

  7. Executive Information Systems (EIS) Executive Information Systems ? An Executive Information Systems (EIS) is a system that serves the information needs of top executives by providing rapid access to timely information with “drill-down” capabilities. ? The EIS can support multiple levels of investigation, depending on the level of drill down that is required. B2001 @ Peter Lo 2007 25 B2001 @ Peter Lo 2007 26 Executive Information Systems (cont’) Information Presentation in EIS ? It is intended that the senior executive has the latest details about the company’s key performance indicators as well as economic and industrial indicators. ? The information presented through an EIS come from both internal and databases and external sources. ? Strategic decisions can be made based on up-to-date facts. ? The executive is able to define his or her own personalized range of deviations in expected performance levels. ? When a particular report is displayed, variables falling outside the defined range appear in specified colors. ? The information allows the executives to monitor the financial temperature of the organization. ? The user of such a system can define the input to be placed into such a system and have “warning” indicators come out when there are significant deviations from an expected response. ? These are information that a top executive requires to monitor the health of a large organization. B2001 @ Peter Lo 2007 27 B2001 @ Peter Lo 2007 28

  8. Executive Problem Analysis Drill-down Capabilities ? Having identified a significant variance, the executive needs to view the data from a number of different perspectives. ? It is not enough to know that an unfavorable profit variance of 10% has occurred in one of the subsidiaries. ? Some divisions within that subsidiary may have increased profits while other divisions have deviations of more than 10%. ? An EIS can support multiple levels of investigation. ? By selecting the highlighted variance on the screen, it is possible to obtain more details of causes, “drilling-down” to get lower levels of details. ? An analytical operation which accesses and evaluates detail data which has been aggregated into interrelated data. B2001 @ Peter Lo 2007 29 B2001 @ Peter Lo 2007 30 Differences between DSS and EIS ? DSS is for middle managements whereas EIS is for top management ? DSS consumes operational data. EIS uses only high-level performance indicators from the organization as well as data from outside the organization. ? EIS is for long-term decision-making whereas DSS is for middle-term or short-term decision-making. ? EIS is more user-friendly and interactive, as executives generally have limited time and computing background. B2001 @ Peter Lo 2007 31