Information, Management

and Decision Making

 INFORMATION
 Data : Data is raw facts. Data is like raw material. Data does not interrelate
and also it does not help in decision making. Data is defined as groups of
non-random symbols in the form of text, images, voice representing
quantities, action and objects.

 Information is the product of data processing. Information is interrelated

data. Information is equivalent to finished goods produced after processing
the raw material. The information has a value in decision making.
Information brings clarity and creates an intelligent human response in the
mind.

 According to Davis and Olson : “Information is a data that has been

processed into a form that is meaningful to recipient and is of real or
perceived value in the current or the prospective action or decision of
recipient.”
Attributes of Information
i) Timeliness : Delays destroys the value of information.
The characteristic of timeliness, to be effective, should also
include up-to-date, i.e. current information.

ii) Accuracy : It means that information should be free from

mistakes, errors &, clear. Accuracy also means that the
information is free from bias.

iii) Relevance : Information is said to be relevant if it

answers especially for the recipient what, why, where, when,
who and why?

.
iv) Adequacy : MIS must provide reports containing
information which is required in the deciding processes of
decision-making. Whereas inadequacy of information leads to
crises, information overload results in chaos.

v) Completeness : The information which is given to a

manager must be complete and should meet all his needs.

vi) Explicitness : A report is said to be of good quality if it

does not require further analysis by the recipients for decision
making.

vii) Impartiality : Impartial information contains no bias and

has been collected without any distorted view of the situation
Concept of Decision-Making

Trewatha & Newport defines decision making process

as follows:, “Decision-making involves the
selection of a course of action from among two or
more possible alternatives in order to arrive at a
solution for a given problem”.
Steps in decision Making
Role of Information in Decision-making
1. Problem Solving: Information helps identify
problems and allows decision makers to evaluate
alternative solutions and choose the best course of
action.
2. Evidence-based Decision Making: Information
provides the evidence needed to make decisions that are
based on data and facts, rather than opinions or
assumptions.
3. Risk Assessment: Information helps decision
makers assess risks and make decisions that minimize
potential harm and maximize benefits.
4. Forecasting: Information helps decision makers
anticipate future events and trends, allowing them to
make plans and prepare for potential challenges and
opportunities.

5. Improved Accuracy: Information helps decision

makers make more accurate decisions by providing them
with a complete and accurate picture of a situation.
 Information Requirement in Management
Levels of Management Problems handled/ Decisions made Type of information required

Top level
Strategic information from within the
Unstructured problems. organization and outside.
Decisions are based on situations Information about likely scenarios.
not/rarely handled in the past. Information that can be analyzed in
different ways.
Decision-making variable not clearly
Middle level defined. Exception reports

Semi structured/structured problems. Regular summarized reports.

Decisions on regular issues. Information that can be drilled deeper

for insight.
Decisions on tactical issues.
Information to help find out exceptions
Structured problems so that they can be reported to top
management
Structured decision-making
Operational information
Operational level Decision-making on the basis of set
rules Rule based information, guidelines,
handbook level information
 TYPES OF INFORMATION SYSTEMS
1. Transaction Processing Systems (TPS): These systems process and record
transactions, such as sales orders, payments, and inventory changes. TPSs are
critical for the day-to-day operations of an organization.

2. Management Information Systems (MIS): MIS provides managers with reports and
dashboards that summarize operational and financial data. It helps in monitoring
performance and making informed decisions.

3. Decision Support Systems (DSS): DSS helps in decision-making by providing

interactive tools and models to analyze data and support decision-making
processes.

4. Executive Information Systems (EIS): EIS provides senior executives with easy
access to key performance indicators (KPIs) and other relevant information to
support strategic decision-making.

5. Enterprise Resource Planning (ERP) Systems: ERP integrates various business

functions, such as finance, human resources, and supply chain management, into a
single system. It helps in streamlining processes and improving efficiency.
6. Customer Relationship Management (CRM) Systems: CRM systems manage
customer interactions and relationships, including sales, marketing, and
customer service activities.
7. Knowledge Management Systems (KMS): KMS helps in capturing, storing, and
sharing knowledge and information within an organization. It includes tools for
document management, collaboration, and knowledge sharing.
8. Supply Chain Management (SCM) Systems: SCM systems manage the flow of
goods and services, from raw material suppliers to end customers. It helps in
optimizing the supply chain and improving efficiency.
9. Business Intelligence (BI) Systems: BI systems collect, analyze, and present
business data to support decision-making. It includes tools for reporting, data
visualization, and data mining.
10. Geographic Information Systems (GIS): GIS integrates geographical data,
such as maps and satellite imagery, with other types of data to support spatial
analysis and decision-making.
MIS & Decision Making Concepts

Process and Modeling in Decision Making

1. Rational models
2. Normative model
 Rational Decision Making Model

 The rational decision-making model is a systematic, step-

by-step approach to decision-making that is based on logic
and reasoning.

 It assumes that decision-makers have complete

information, can identify all alternatives, evaluate them
accurately, and choose the optimal solution.
A rational decision making model takes the following
steps:

Identifying the problem

Identifying the important criteria for the process and
the result
Considering all possible solutions
Calculating the consequences of all solutions and
comparing the probability of satisfying the criteria
Selecting the best option
 Bounded Rationality Model
The bounded rationality model acknowledges that decision-makers
have limited time, information, and cognitive capacity, leading them
to satisfice (select the first satisfactory option) rather than maximize
(select the best option).

 Example: Consider a manager tasked with hiring a new

employee. Due to time constraints and limited information, the
manager may review a few resumes, conduct brief interviews
with a handful of candidates, and then select the candidate who
meets the minimum requirements and seems like a good fit,
rather than exhaustively evaluating all potential candidates to
find the absolute best fit.
 DYNAMIC DECISION MAKING
 Dynamic decision-making in Management Information Systems (MIS)
refers to the ability of MIS to support and facilitate real-time or near-
real-time decision-making in dynamic and rapidly changing
environments.

1. Real-time Data Processing: MIS collects, processes, and analyzes data

in real-time, allowing decision-makers to access up-to-date information
for making decisions.

2. Interactive Dashboards: MIS often includes interactive dashboards

that display key performance indicators (KPIs) and other relevant
information in a visually appealing and easy-to-understand format.

3. Scenario Analysis: MIS can perform scenario analysis, allowing

decision-makers to simulate different scenarios and their potential
outcomes.
4. Predictive Analytics: MIS can use predictive analytics to forecast future
trends and events based on historical data.
5. Automated Decision Support: MIS can provide automated decision
support, where certain routine or repetitive decisions are made
automatically based on predefined rules and criteria.
6. Collaboration Tools: MIS often includes collaboration tools that allow
decision-makers to communicate and collaborate in real-time, facilitating
faster and more effective decision-making processes.
7. Mobile Access: With the increasing use of mobile devices, MIS often
provides mobile access to decision-makers, allowing them to access
information and make decisions from anywhere at any time.
8. Integration with Other Systems: MIS is often integrated with other
systems, such as ERP (Enterprise Resource Planning) systems, CRM
(Customer Relationship Management) systems, and supply chain
management systems, to provide a comprehensive view of the organization's
operations and facilitate integrated decision-making.
 SENSITIVITY ANALYSIS
 Sensitivity analysis in Management Information Systems (MIS) is a technique used
to determine how changes in input variables affect the output of a model or
system.

1. Identifying Key Variables: Sensitivity analysis starts by identifying the key variables
or parameters that have the most significant impact on the output of a model or
system. These variables are often referred to as "critical factors" or "key drivers."

2. Changing Input Values: The next step is to systematically change the values of
these key variables within a certain range to see how the output of the model or
system changes. This is done by varying one variable at a time while keeping all
other variables constant.

3. Assessing Impact: Sensitivity analysis assesses the impact of changes in input

variables on the output, typically by calculating metrics such as the percentage
change in the output for a given percentage change in the input variable.
4. Interpreting Results: The results of sensitivity analysis help decision-
makers understand which variables have the most significant impact on the
output and which are less influential. This information can be used to
prioritize resources and focus on managing the most critical risks and
uncertainties.
5. Scenario Planning: Sensitivity analysis is often used in scenario planning,
where different possible scenarios are analyzed to understand the range of
potential outcomes and develop strategies to deal with them.
6. Risk Management: Sensitivity analysis is a key tool in risk management,
helping organizations identify and mitigate risks by understanding how
changes in key variables can affect their operations and decisions
Normative model of decision-making
According to this model, decision-making is
characterized by:

1. Limited information processing: A person can

manage only a limited amount of information.
2. Judgmental heuristics: A person may use shortcuts
to simplify the decision making process.
3. Satisfying: A person may choose a solution that is
just “good enough”.
 Group Decision Making and GDSS
Group Decision Support System (GDSS) is a decision
support system that provides support in decision
making by a group of people.

It facilitates the free flow and exchange of ideas and

information among the group members. Decisions are
made with a higher degree of consensus and
agreement resulting in a dramatically higher
likelihood of implementation.
 TYPES OF COMPUTER BASED
GDSS
 Decision Network: This type helps the participants to communicate
with each other through a network or through a central database.
Application software may use commonly shared models to provide
support.
 Decision Room: Participants are located at one place, i.e. the decision
room. The purpose of this is to enhance participant’s interactions and
decision-making within a fixed period of time using a facilitator.
 Teleconferencing: Groups are composed of members or sub groups that
are geographically dispersed; teleconferencing provides interactive
connection between two or more decision rooms. This interaction will
involve transmission of computerized and audio visual information.
 The Classical Model
On confrontation of a manager with a certain
decision making situation, the manager would
collect all the critical information and the data
that is required for performing a particular activity
and also would take the decision that will
certainly be for the betterment of the
organization
STEPS IN CLASSICAL MODEL
1. Identification of the Problem: Clearly define the issue that needs
to be addressed.
2. Gathering Information: Collect relevant data and information that
will help in making an informed decision.
3. Developing Alternatives: Generate a range of possible solutions or
courses of action.
4. Evaluating Alternatives: Assess the pros and cons of each
alternative, often using quantitative and qualitative analysis.
5. Making the Decision: Choose the best alternative based on the
evaluation.
6. Implementing the Decision: Put the chosen alternative into action.
7. Monitoring and Feedback: Continuously monitor the
implementation and make adjustments as necessary.
 The Administrative Model
a. In such a model, the manager has more concern for
himself.

b. On confrontation of a manager with a certain decision

making situation, the manager would collect what ever
information or the data that will be available and then will
take a decision, which may not be in the best interests of
the organization but will certainly be good for fulfilling his
personal interests.

c. Expediency and the opportunism, both act as the

hallmarks of the Administrative Model.
 The Herbert Simon Model
a. This model is linked with the decision making
process.
b. Explains the core of the decision making.
c. Used as the base for explaining the decision making
process.
PHASES OF DECISION MAKING
A) The Intelligence Phase
 Extensive and the comprehensive database is must for the intelligence phase, making this
phase very suitable for searching or scanning of the environment.

 In this phase, the type of the environment forms a very major factor and hence the types
of the environment can be categorized as the follows:

1. The Societal Environment: Mainly includes the economic, the legal and the social
environment and it is this type of the environment in which the organization operates.
2. The Competitive Environment: Includes the understanding and the analyzing of the
characteristics, the trends and the behavior of or at the market place and also the various
players of the market in which the organization operates.
 The Organizational Environment: Includes the various capabilities, the strengths,
the weaknesses, the constraints and the various other factors that affect the ability of the
organization to discharge or operate its various types of the activities
B) The Design Phase
The inventing, the developing and the analyzing of the various alternatives or the
solutions to the particular problem forms a major part of this phase. The various steps
that are to be followed in this phase can be summarized as the follows:
 Support in getting the in depth knowledge of the problem.
A correct model of the situation can be made and the assumptions of the model
need to be tested.

 Support for the generation of the solutions can be obtained by:

I. Manipulation of the model for the development of the insights.
II. Creation of the database retrieval system.

 Support for testing the feasibility of the solutions.

 C) The Choice Phase
 The selection of a specific alternative or the course of the action from the ones
which have been generated and considered during the design phase, takes place
during this phase. The choice procedure and the implementation of the chosen
alternative form a very major part of the Choice phase.
 Limitations of the Simon Model
1. This model does not go further than the choice model.

2. Does not include the cognizance of the implementation and also of the feedback
aspects.

Management Support System (MSS )
These systems provide information to manage for
planning and decision making. The information
provided by these systems is based on both the internal
and external data using various data analysis tools.
There are three types of management support
systems, namely:

a) Decision Support Systems,

b) Executive Information (support) Systems and
c) Expert Systems.
 Decision Support Systems
The primary purpose of using a DSS is to present
information to the customer in a way that is easy to
understand.

A DSS system is beneficial because it can be programed to

generate many types of reports, all based on user
specifications

A DSS can generate information and output it graphically,

such as a bar chart that represents projected revenue, or as a
written report.
 Attributes of a DSS
 Adaptability and flexibility
 High level of Interactivity
 Ease of use
 Efficiency and effectiveness
 Complete control by decision-makers
 Ease of development
 Extendibility
 Support for modeling and analysis
 Support for data access
 Standalone, integrated, and Web-based

Characteristics of a DSS
Support for decision-makers in semi-structured and unstructured
problems.
 Support for managers at various managerial levels, ranging from top
executive to line managers.
 Support for individuals and groups. Less structured problems often
requires the involvement of several individuals from different
departments and organization level.
 Support for interdependent or sequential decisions.
 Support for intelligence, design, choice, and implementation.
 Support for variety of decision processes and styles.
 DSSs are adaptive over time.
 Benefits of DSS
 Improves efficiency and speed of decision-making activities.
 Increases the control, competitiveness and capability of futuristic
decision-making of the organization.
 Facilitates interpersonal communication.
 Encourages learning or training.
 Since it is mostly used in non-programmed decisions, it reveals new
approaches and sets up new evidences for an unusual decision.
 Helps automate managerial processes.
 Components of a DSS
 Database Management System (DBMS): To solve a problem the
necessary data may come from internal or external database. In an
organization, internal data are generated by a system such as TPS
and MIS. External data come from a variety of sources such as
newspapers, online data services, databases (financial, marketing,
human resources).
 Model Management System: It stores and accesses models that
managers use to make decisions. Such models are used for designing
manufacturing facility, analyzing the financial health of an
organization, forecasting demand of a product or service, etc.
 Support Tools: Support tools like online help; pulls down menus,
user interfaces, graphical analysis, error correction mechanism,
facilitates the user interactions with the system.
 Classification of DSS
 Text Oriented DSS
 Database Oriented DSS:
 Spreadsheet Oriented DSS: The most popular tool is Excel and
Lotus 1-2-3.
 Solver Oriented DSS: It is based on a solver, which is an algorithm
or procedure written for performing certain calculations and
particular program type.
 Rules Oriented DSS: It follows certain procedures adopted as
rules.Export system is the example.
 Compound DSS: It is built by using two or more of the five
structures explained above.

Types of DSS
Status Inquiry System: It helps in taking operational, management level, or
middle level management decisions, for example daily schedules of jobs to
machines or machines to operators.
 Data Analysis System: It needs comparative analysis and makes use of formula or
an algorithm, for example cash flow analysis, inventory analysis etc.
 Information Analysis System: In this system data is analyzed and the information
report is generated. For example, sales analysis, accounts receivable systems,
market analysis etc.
 Accounting System: It keeps track of accounting and finance related information,
for example, final account, accounts receivables, accounts payables, etc. that keep
track of the major aspects of the business.
 Model Based System: Simulation models or optimization models used for
decision-making are used infrequently and creates general guidelines for operation
or management.
 Group Decision Support
A communications-driven group decision support system:

 Is a type of hybrid computer-based interactive decision

support system
 That uses communications and network technologies
 To facilitate communication, resource/information sharing,
face-to-face meetings and collaboration
 Among a group of decision makers that are separated by a
distance

Group Support Tools
Groupware: A software system to enhance collaboration among
participants/ decision makers and support group/s in completing tasks.
 Multimedia Decision Support: An integration of computer, video
and decision-support technologies, facilitating information sharing,
group decision tasks, collaboration and coordination. It offers a smart
decision support in which decisions are directly affected by the way
decision makers interact, review information, make choices and take
actions.
 Electronic Meeting System: A software system to facilitate creative
problem solving and decision making using electronic technologies.
 Collaborative Workgroup Software: A web-based team
collaboration and project management software facilitating group
tasks and live discussions for better decision making.
Group Decision Support Situations
 Same time, same place
 Same time, different place
 Different time, same place
 Different time, different place
A communications-driven GDSS for a virtual organization
makes use of various knowledge management technologies,
including:

 Personal computers
 Intranet and extranet
 Wireless technologies
 Collaborative technologies
 Web conferencing
 Groupware
 Worldwide Web
 Executive Information System

Executive support systems are intended to be used

by the senior managers directly to provide support to
non-programmed decisions in strategic management
Features of Executive Information System
Advantages of ESS
 Easy for upper level executive to use
 Ability to analyze trends
 Augmentation of managers’ leadership capabilities
 Enhance personal thinking and decision-making
 Contribution to strategic control flexibility
 Enhance organizational competitiveness in the market place
 Instruments of change
 Increased executive time horizons.
 Better reporting system
 Improved mental model of business executive
 Help improve consensus building and communication
 Improve office automation
 Disadvantage of ESS
 Functions are limited
 Hard to quantify benefits
 Executive may encounter information overload
 System may become slow
 Difficult to keep current data
 May lead to less reliable and insecure data
 Excessive cost for small company