UNIT 2

Decision making and information

Meaning and definition of Decision making

A decision is an act of selection or choice of one action from several alternatives.

Decision-making can be defined as the process of selecting a right and effective course of action
from two or more alternatives for the purpose of achieving a desired result. Decision-making is
the essence of management.

George Terry defines decision-making “as the selection of one behavior alternative from two
or more possible alternatives.”

Models of Decision Making: Rational, Administrative and Retrospective

Decision Making Models.
1. The Rational/Classical Model:
The rational model is the first attempt to know the decision-making-process. It is considered by
some as the classical approach to understand the decision-making process.

Features of Classical Model:

1. Problems are clear.

2. Objectives are clear.

3. People agree on criteria and weights.

4. All alternatives are known.

5. All consequences can be anticipated.

6. Decision makes are rational.

i. They are not biased in recognizing problems.

ii. They are capable of processing ail relevant information

iii. They anticipate present and future consequences of decisions.

iv. They search for all alternatives that maximize the desired results.

2. Bounded Rationality Model or Administrative Man Model:

Decision-making involve the achievement of a goal. Rationality demands that the decision-
maker should properly understand the alternative courses of action for reaching the goals.

He should also have full information and the ability to analyze properly various alternative
courses of action in the light of goals sought. There should also be a desire to select the best
solutions by selecting the alternative which will satisfy the goal achievement.

Herbert A. Simon defines rationality in terms of objective and intelligent action. It is

characterised by behavioural nexus between ends and means. If appropriate means are chosen to
reach desired ends the decision is rational.Bounded Rationality model is based on the concept
developed by Herbert Simon. This model does not assume individual rationality in the decision
process.Instead, it assumes that people, while they may seek the best solution, normally settle for
much less, because the decisions they confront typically demand greater information, time,
processing capabilities than they possess. They settle for “bounded rationality or limited
rationality in decisions. This model is based on certain basic concepts.

a. Sequential Attention to alternative solution:

Normally it is the tendency for people to examine possible solution one at a time instead of
identifying all possible solutions and stop searching once an acceptable (though not necessarily
the best) solution is found.

b. Heuristic:
These are the assumptions that guide the search for alternatives into areas that have a high
probability for yielding success.
c. Satisfying:
Herbert Simon called this “satisficing” that is picking a course of action that is satisfactory or
“good enough” under the circumstances. It is the tendency for decision makers to accept the first
alternative that meets their minimally acceptable requirements rather than pushing them further
for an alternative that produces the best results. Satisfying is preferred for decisions of small
significance when time is the major constraint or where most of the alternatives are essentially
similar.

Herbert Simon’s Model

Herbert Simon Model on Decision Making

Herbert Simon, the Nobel Prize winning researcher, showed that humans went through three
essential stages in the act of problem solving. He called these the Intelligence, Design, and
Choice stages.

Decision making can also be considered as a type of problem solving. In the first stage, that of
intelligence, they collect information about the issue from the environment and the surrounding
context.
Information Meaning and Definition

“Information is an assemblage of data in a comprehensible form capable of communication.

This may range from content in any format – written or printed on paper, stored in electronic
databases, collected on the Internet etc. -to the personal knowledge of the staff of an
organization.” – Harrods Librarian’s Glossary and Reference Book.

“The data are potential information but when data are actually used they are called Information.”
– Davis & Johnson.
Types of Information.

1. Conceptual information: Information which is based on ideas, concepts, theories, hypothesis

etc, and might be used in future or not. It does not always mean the actual meaning. Such
information does not have scientific foundation.

 e.g. Charles Darwin’s Theory of Evaluation.

2. Empirical Information: The word empirical information denotes information acquired by

means of observation or experimentation. This information have scientific foundation.

 e.g. H2+O2=H2O (Water)

3. Procedural Information: The methodology which enables the investigators to operate more
effectively. Procedural information relates to means by which the data of investigation are
obtained, manipulated, and tested.

 e.g. police officer > Inform to public > Reason of investigation > To find out actual
criminal.

4. Stimulatory Information: Information which creates stimulation among the people are called
to be the stimulatory information.

 e.g. Victory day celebration.

5. Policy Information: This type of information focuses on the decision making process. It can
be obtained from description, picture, diagram etc.

 e.g. Law and Justice.

6. Descriptive information: Information which deals with providing direction is called directive
information.
  e.g. Mode of operation in any organization.

Attribute of Information and relevance to Decision Making

1) Timeliness

Timeliness means that information must reach the recipients within the prescribed time frame.
Timely information can ensure correct executive action at an early stage. The characteristic of
timeliness, to be effective, should also include current information.

2) Accuracy

Accuracy is another key-attribute of management information. It means that information is free

from mistakes and errors, is clear and accurately reflects the meaning of data on which it is
based. It conveys an accurate picture to the recipient, who may require a presentation in
graphical form rather than tabular form.

3) Relevance

Relevance is yet another key attribute of management information. Information is said to be

relevant if it answers specifically for the recipient what, why, where, who and why? In other
words, the MIS should serve reports to managers, which are useful, and the information helps
them make decisions.

4) Adequacy

Adequacy means information must be sufficient in quantity. MIS must provide reports
containing information, which is required in deciding processes of decision-making.

5) Completeness

The information, which is provided to a manager, must be complete and should meet all his
needs. Incomplete information may result in wrong decisions and thus may prove costly to the
organization.

6) Explicitness

A report is said to be of good quality if it does not require further analysis by the recipient for
decision-making. Thus the reports should be such that a manager does not waste any time on the
processing of the report, rather he should be able to extract the required information directly.
7) Exception based.

Top managers need only exception reports regarding the performance of the organization.
Exception reporting principle states that only those items of information, which will be of
particular interest to a manager, are reported. This approach results in saving precious time of
the top management and enables the managers to devote more time in pursuit of alternatives for
the growth of the organization.