Mis U2

Unit - 02
Decision making process-stages in decision

making, individual and organizational; decision
making models; information system support for
decision making phases; definition,
characteristics, subsystem of MIS, MIS and top
management, structure of MIS (conceptual and
physical structure)
Objectives
 How decisions are made?
 What is decisions?
 Why decisions is important?
 Linkages between decisions and computer?
30/07/09 ( IB/SS) 2
Problem-01
A manager has taken over a
failing service center. He
commissions research to find
out why customers think that
service is poor.
Dr. Saurabh Dixit 3

 He gets the following comments back from the
customers:
 Phones are only answered after many rings.
 Staff seem distracted and under pressure.
 Engineers do not appear to be well organized.
They need second visits to bring extra parts. This
means that customers have to take more holiday
to be there a second time.
Dr. Saurabh Dixit 4

 They do not know what time they will arrive. This
means that customers may have to be in all day for
an engineer to visit.
 Staff members do not always seem to know what
they are doing.
 Sometimes when staff members arrive, the
customer finds that the problem could have been
solved over the phone.
Dr. Saurabh Dixit 5

The manager groups these problems together. He
then scores each group by the number of
complaints, and orders the list:
 Lack of staff training: items 5 and 6: 51
complaints
 Too few staff: items 1, 2 and 4: 21 complaints
 Poor organization and preparation: item 3: 2
complaints
Dr. Saurabh Dixit 6

 By doing the Pareto analysis above, the manager
can better see that the vast majority of problems
(69%) can be solved by improving staff skills.
 Once this is done, it may be worth looking at
increasing the number of staff members.
Alternatively, as staff members become more able
to solve problems over the phone, maybe the need
for new staff members may decline.
Dr. Saurabh Dixit 7

Problem-2
A young professional is deciding where to
live. Her question is 'Should she move
to the big city?'
Dr. Saurabh Dixit 8

More going on (+5) Have to sell house (-6) Easier to find new job?
(+1)
Easier to see friends (+5) More pollution (-3) Meet more people? (+2)
Easier to get places (+3) Less space (-3) More difficult to get own
work done? (-4)
No countryside (-2)
More difficult to get to

work? (-4)
Dr. Saurabh Dixit 9
he scores the table as 13 (Plus) - 18 (Minus) -
1 (Interesting) = - 6
For him, the comforts of a settled rural

existence outweigh the call of the 'bright
lights' - it would be much better for her to
live outside the city, but close enough to
travel in if necessary.
Dr. Saurabh Dixit 10
Essence of Management
Whatever a manager does, he/she does it
through DECISION-MAKING
THUS DECISION-MAKING IS AN ESSENCE

OF MANAGEMENT
-Peter Drucker
30/07/09 ( IB/SS) Dr. Saurabh Dixit 11

INPUT IN DECISION MAKING
For Decision Making
INFORMATION is the necessary and

vital input

Data
 A stream of raw facts about anything
 Examples:.
 Record of all the players in one day cricket
matches.
 Detailed Marks of all students in a class.
 Business data as obtained from various
business houses.

Information
 Processed data, which is useful to the
recipient.
 Examples:
 Profit of the company in the current year
 The highest ever score in one day cricket
 First ten toppers in a class with scores.
 The top 50 business houses of India.

Then Information is……
WHICH
 Tells something the receiver did not
know
 Reduces uncertainty
 Has a surprise value
 Has a real / perceived value in current /
prospective decision.
Data and Information

Phases in decision making
 Intelligence
 Design
 Choice

Intelligence an design
Phases
 Problem finding
 Find a different between some existing situation and some
desired state.
Pounds identified four models
1. Historical model: In which expectation is based on
an extrapolation of past experience.
2. Planning: In which plan is the expectation.
3. Models of people in the organization, which as
superiors, subordinates etc.
4. Extra-organizational models: Expectations are
derived from other organizations.

Problem Formulation
 To clarify the problem, so that design and
choice activities operate on the ‘right’ problem.
Taylor identified 04 strategies:
1. Determining the boundaries of the problem i.e. clearly
identify what is included in the problem.
2. Examining changes that may have precipitated the
problem.
3. Factoring the problem into smaller sub problem.
4. Focusing on controllable elements.
 Hypothesis.

Development of
alternatives
 Requires adequate knowledge of the
problem area and its’ boundaries
(domain knowledge)

Concept of Decision
making
 Decisions differ in a number of ways. These
differences affect the design of information
system support for decision making. Four
dimensions of decision types which are
useful for information systems are:-
1. Knowledge of outcomes
2. Level of programming
3. Criteria for decision
4. Level of Decision impact

Knowledge of outcomes…
What will happen if particular alternative
or course of action is chosen? It is
important when there is multiple
numbers of alternatives.

Knowledge of outcomes
Outcome state Explanation
Certainty Complete and accurate knowledge of the outcome of each alternative.

There is only one outcome for each alternative.
Risk Multiple suitable outcomes fo each alternative can be identified, and a

probability of occurrence can be attached to each.
uncertainty Multiple outcomes for each alternative can be identified, but there is
no knowledge of the probability to be attached to each.

Level of programming
 Programmed
 Non-programmed

Criteria for decision making
 Normative or prescriptive
 Descriptive

Case I…..
Supporting Planning Decision:
A very large multinational consumer company has 2 main
reasons for using a planning model for new product
projections- to provide an information storage bank
and to answer ‘what if’ question.
Using this company can accumulate data in central unit,
with each alternatives spelled out and noted. This
feature is specially helpful for developing income
statements using various product formulas, sales
volume and marketing programme. The other key is
speedy manipulation of alternatives.
Dr. Saurabh
S.Dixit Dixit 26
Case I…..
The company had envisioned launching a new
product that would sell 3 million units
nationally, with a marketing cost during 1 st
yr. 6 B the estimated pay out was less than
3 yrs. & rate of return was estimated 20%.
Through, the model marketing mgt.
Defined the risk to ash flow, the inventory
assumptions, & the investment spending
exposure.
Dr. Saurabh
S.Dixit Dixit 27
Case I…
The project was approved and plans to
introduce the product proceeded.
A competitor unexpectedly entered the market
with lower quality, lower priced product &
diff. mrk mix. The marketing research and
brand management department responded
with a new plan for marketing , ……….
Dr. Saurabh
S.Dixit Dixit 28
Case I
but, the new variable , when added to the
information already in the model
system, produced discouraging
prospects- 8 yr payout and 5.1%
return. The company scrapped out the
product.
( Harvard Business review)
Dr. Saurabh
S.Dixit Dixit 29
Case II
Scheduling and operational decision making
Airlines use automatic call distributors ( ACD) to
distribute calls to available agents to maintain queue
of calls waiting for service. The operational
management problem is to collect data on calls,
monitor network traffic and plan for availability of
agent. A software called employees management
and planning system ( EMPS) to summarize
activity data from ACDs estimate a near optimal
number of agents for each shift of projected volume,
and provide a suggested work schedule. ( pp-370)
Dr. Saurabh
S.Dixit Dixit 30
DECISION SUPPORT SYSTEM
 A SYSTEM WHICH SUPPORTS

DECISION making.
 Emphasis is on support.
Dr. Saurabh
S.Dixit Dixit 31
Characteristics
 Support to the manager.
 For semi structured problem.
 Effective problem solving is

interactive and enhanced by
dialogue box.
Dr. Saurabh
S.Dixit Dixit 32
Classes of decisions
making
1. Film Drawer system
2. Data Analysis System
3. Analysis Information System
4. Accounting Model
5. Representational Model
6. Optimization Model
7. Suggestion Model
Dr. Saurabh
S.Dixit Dixit 33
File Drawer System
 Immediate access to files.
 On-line version of filing.
 Use: Status enquiry of inventory, airline
reservation request, shop floor
monitoring.
( Devis, 2003, 372)
Dr. Saurabh
S.Dixit Dixit 34
Data Analysis System
 To analyse data.
 Manipulation of data .
 Use: budget analysis system,
Alternative investment opportunities.
Dr. Saurabh
S.Dixit Dixit 35
Analysis Information System
 To analysis series of database and
small models.
 Use: Marketing Decisions Support
System containing internal sales data,

promotion and pricing data plus access
to external database.
Sales analysis sys. With sales data,
customer data, forecast data.
Dr. Saurabh
S.Dixit Dixit 36
Accounting Model
 Accounting purpose
 Use: to generate estimate of income,
Balance Sheet, Monthly Budgeting
System for operational decision making
and short term planning.
Dr. Saurabh
S.Dixit Dixit 37
Representational Model
 These estimate the consequences of the
action on the basis of models that represents
some non-definitional characteristics of
the system such as probabilities of
occurrence. They include all simulation
models that contain elements beyond
accounting definition.
 Use: Risk analysis model using probability
distribution for each key factor.
Dr. Saurabh
S.Dixit Dixit 38
Optimization Model
 Provides guideline for action by generating
the optimal solution consistent with a series
of constraints. They are used for repetitive
decision that can be described mathematically
and where the specific objective e.g.
minimizing cost is the goal.
 Use: System for scheduling training classes
under a complex set of constraints.
Dr. Saurabh
S.Dixit Dixit 39
Suggestion models
 Suggestive decision for fairly structured
and repetitive decision.
 Use: Insurance Renewal Rate
calculation.
Dr. Saurabh
S.Dixit Dixit 40
Class of DSS a comp….
System Type of Type of user Usage Time
ope. task of ope pattern frame
File Drawer Access of operation Non-mgr. Simple Irregular

Sys. data item line enquiry
personnel
Data Ad hoc ana. Operational Staff ana. Manipulatio Irregular/

Analysis Of files or analysis Mgr. line n & display on req.
Sys. personnel of data
An. Info. Ad. Hoc Anay. Staff analyst Prog. of spl Irregular/on
Sys. ana., mul. planning report, dev. request
Database & of small
mode model
Class of DSS a comp…..
System Type of Type of user Usage Time
ope. task of ope pattern frame
Accont. Stand cal- Planning, Analysis/mg i/p estm of Periodic e.g.

model results budgeting r act, receive weekly,m.yr
future estimated
results on monetary
a/c prn results as
o/p
Representati Est. Planning/bu Staff analyst i/p possible Periodic/adh
onal mod consequenc dgeting deciosions, oc
es of part. receive
act estimated
results
also/p
Class of DSS a comp.
Optimizatio Cal. An Planning Staff I/p Periodic /
n mod optimal resource analyst constraint irregular
solution to allocation & objective
a answer
combinator
y problem
Suggestion Performing operational Non-mgr. I/p Daily or

mod. cal. That Line structured periodic
generates a personnel description
suggested of the
decision decisive
situation,
receive a
suggested
decision as
o/p
Task
 Go to the website www.avnet.com and
identify (a) How many countries it
operates in. ( b) how its revenues are
divided among the major regions in
North America, Europe and Asia.
( Ref.: Laudon K.C., Laudon J.P., 2008,MIS Managing the digital firm, Pearson, pp-640)

DSS Users
 Subscription Mode
 Terminal Mode
 Clerk Mode
 Intermediary mode
Dr. Saurabh
S.Dixit Dixit 45
Subscription Mode
The decision maker receives reports that

are generated automatically on regular
basis. This is a typical mode of usage for
management reporting system.
E.g. Share market, raw material prices.
Dr. Saurabh
S.Dixit Dixit 46
Terminal Mode
 The decision maker is the direct user of
the system through online access.
E.g. Web enabled reservation.
Dr. Saurabh
S.Dixit Dixit 47
Clerk Mode
The decision maker uses system directly
but in offline mode. The primary
difference between this mode and
terminal mode is the technology
employed. ( Batch versus online)
e.g.: Budget compilation. ( Davis, 374)
Dr. Saurabh
S.Dixit Dixit 48
Intermediary mode
The decision maker uses the system through
intermediaries, who perform the analysis
and interpreted and report the result. The
decision maker does not need to know how
the intermediary used the system to arrive
at the requested information.
e.g. BSPs ( Davis, 375)
Dr. Saurabh
S.Dixit Dixit 49
EXPERT SYSTEM..
 For ill structured tasks.
 Represents expertise
 Very costly to develop, takes about 25 work years.
 Knowledge base ( data and decision rules)
 E.g. Mycin: Programme searches knowledge base
for particular symptoms.
( Davis, 375)
Dr. Saurabh
S.Dixit Dixit 50
Expert systems
Task domain Expert System
Oil exploration Dipmeter Advisor
Medical consulting Cadeucius, Mycin
Mineral exploration Prospector
Computer configuration R1
( Davis, pp-376)

PROGRAMMING
LANGUAGE
 A HIGH LEVEL, COMPACT ALGEBRIC
LANGUAGE USED TO develop DSS. E.g. APL
(require special keyboard for input)
Selection of language depends on:-
 Availability of Language and support for it.
 Amount of manipulation versus presentation of data
 Need to develop and maintain the program
 Frequency of sue and number of users
Dr. Saurabh
S.Dixit Dixit 52
SPREADSHEET
PROCESSOR
 VisiCalc
 ANALYSIS PACKAGE
 Includes Statistical analysis and
standard computational model.
Dr. Saurabh
S.Dixit Dixit 53
MODEL GENERATOR
 Software which generates model for decision
making. It has capabilities of Programming
Language, Spreadsheet PROCESSOR AND
statistical model.
 Objectives of Model Generator:
 Quick and easy development of decision model.
 Feasible and adoptive to develop interactive design o
system
Dr. Saurabh
S.Dixit Dixit 54
TASK- Practical
 Create a database of students in your
class.
 Generate queries to find out number of
students expecting to join in Delhi for
summer training.
 Identify the type of decision support
system, you are working.

Decision Support System
I.T. can be used to support decision making in
the organization as well s process
transactions. Managers running spreadsheet
programme on their microcomputer to decide
whether to launch a new product or particular
investment are using computer for decision
support.
(Lucas, 1990, Information Systems Concepts for management, McGraw Hills, pp-47)

Situations
 To give bonus to employees. (programmed deices)
 A hotel chain with Hotels in major cities around the
world is analyzing the decisions in building a hotel in
a newly independent developing country. (Decision
tree)
 People who have bought a certain make of car will
tend to read the advertisement for that Car and not
read competitive advertisement. Sales procedure that
follow-up sales with congratulatory information make
us of the ‘bolstering’ effect of cognitive dissonance
maker.

DECISION MAKING
Decision making is an essential element of
management,. Information system is basically
helps in decision making in the light of
relevant information available to the
manager. Decision can be divided in to
following classes:-
 Programmed and non-programmed decisions.
 Historical versus current decisions.
 Strategic versus operational decisions

Managers and Decision
Making
 Operational control: Determines how to
perform specific tasks set by strategic and
middle-management decision makers
 Knowledge-level decision making:

Evaluates new ideas for products,
services, ways to communicate new
knowledge, ways to distribute
information
Manager
s and De
Making cision
Decisions are classified as:
 Unstructured: Non routine, decision maker
provides judgment, evaluation, and insights
into problem definition, no agreed-upon
procedure for decision making
 Structured: Repetitive, routine, handled
using a definite procedure

Method of Decision making
Type of Decision Old New
Programmed Habit (standard operating MIS ( includes mgt. Sc.

procedure Organization Techniques and the
Structure Policy etc…) computer)
Non-programmed One Judgment, Intuition, Systematic approach to

shot ill structured Insight Experience, Problem Solving &
Training and Learning Decisions Making

Decision making
Decision making can be regarded as an
outcome of mental processes (cognitive
process) leading to the selection of a
course of action among several
alternatives. Every decision making
process produces a final choice. [James Reason (1990).
The output can be an

Human Error. Ashgate. ISBN 1840141042.]
action or an opinion of choice.

Decision making processes
According to behavioralist Isabel Briggs Myers, a person's decision making process
depends on a significant degree on their cognitive style.
(Source: Isabel Briggs Myers|Myers, I. (1962) Introduction to Type: A description of the theory and applications of the Myers-Briggs type indicator, Consulting
Myers developed a set of four bi-polar dimensions,
Psychologists Press, Palo Alto Ca., 1962. )
called the Myers Briggs Type Indicator (MBTI). The terminal points
on these dimensions are: thinking and feeling; extroversion and
introversion; judgment and perception; and sensing and intuition.
She claimed that a person's decision making style is based largely on
how they score on these four dimensions. For example, someone who
scored near the thinking, extroversion, sensing, and judgment ends of
the dimensions would tend to have a logical, analytical, objective,
critical, and empirical decision making style.
Other studies suggest that these national or cross-cultural differences
exist across entire societies. For example, Maries Martinsons has
found that American, Japanese and Chinese business leaders
each exhibit a distinctive national style of decision making.
( Source: Martinsons, Maris G., Comparing the Decision Styles of American, Chinese and Japanese Business Leaders. Best Paper Proceedings of Academy of
Management Meetings, Washington, DC, August 2001)

Decision making processes
Some of the decision making techniques that we use in everyday life
include:
1. listing the advantages and disadvantages of each option, popularized by
Plato and Benjamin Franklin
2. Flipping a coin, cutting a deck of playing cards, and other random or
coincidence methods
3. accepting the first option that seems like it might achieve the desired
result
Prayer, Tarot astrology, revelation or other forms of divination.
acquiesce to a person in authority or an "expert"
4. choosing the alternative with the highest probability-weighted utility for
each alternative.

DECISION-MAKING & ROLE OF MIS
 To select one alternative out of various
alternatives.

Characteristics - MIS
 It deals effectively with increased complexity
of Management
 it helps to take better decisions due to the
ability to obtain, store, process, retrieve, and
display the right information for the right
decision.
 It keeps information feedback system
 It builds foundation to decision making.
 It helps to control organization efficiently.

Limitations of MIS
 Human Intervention is required.
 Time requirement.
 Expirtise to use it.
Dr. Saurabh
S.Dixit Dixit 67
End of unit-II
 Internal test II
 Marks 20
 Subjective

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Unit - 02

Decision making process-stages in decision

 Why decisions is important?

 Linkages between decisions and computer?

Dr. Saurabh Dixit 3

Dr. Saurabh Dixit 4

Dr. Saurabh Dixit 5

 Poor organization and preparation: item 3: 2

Dr. Saurabh Dixit 6

Dr. Saurabh Dixit 7

Dr. Saurabh Dixit 8

More difficult to get to

For him, the comforts of a settled rural

THUS DECISION-MAKING IS AN ESSENCE

30/07/09 ( IB/SS) Dr. Saurabh Dixit 11

INFORMATION is the necessary and

30/07/09 ( IB/SS) Dr. Saurabh Dixit 12

30/07/09 ( IB/SS) Dr. Saurabh Dixit 13

30/07/09 ( IB/SS) Dr. Saurabh Dixit 14

 Has a surprise value

 Has a real / perceived value in current /

30/07/09 ( IB/SS) Dr. Saurabh Dixit 16

Dr. Saurabh Dixit 17

Dr. Saurabh Dixit 18

Dr. Saurabh Dixit 19

Dr. Saurabh Dixit 20

Dr. Saurabh Dixit 21

Dr. Saurabh Dixit 22

Certainty Complete and accurate knowledge of the outcome of each alternative.

Risk Multiple suitable outcomes fo each alternative can be identified, and a

Dr. Saurabh Dixit 23

Dr. Saurabh Dixit 24

Dr. Saurabh Dixit 25

 A SYSTEM WHICH SUPPORTS

 For semi structured problem.

 Effective problem solving is

 Use: budget analysis system,

Alternative investment opportunities.

System containing internal sales data,

File Drawer Access of operation Non-mgr. Simple Irregular

Data Ad hoc ana. Operational Staff ana. Manipulatio Irregular/

Accont. Stand cal- Planning, Analysis/mg i/p estm of Periodic e.g.

Suggestion Performing operational Non-mgr. I/p Daily or

Dr. Saurabh Dixit 44

The decision maker receives reports that

E.g. Share market, raw material prices.

 The decision maker is the direct user of

the system through online access.

E.g. Web enabled reservation.

Oil exploration Dipmeter Advisor

Medical consulting Cadeucius, Mycin

Mineral exploration Prospector

Dr. Saurabh Dixit 51

 Amount of manipulation versus presentation of data

 Need to develop and maintain the program

 Frequency of sue and number of users

Dr. Saurabh Dixit 55

Dr. Saurabh Dixit 56

Dr. Saurabh Dixit 57

 Historical versus current decisions.

 Strategic versus operational decisions

Dr. Saurabh Dixit 58