Chapter 8

• Good decision-making and problem-solving skills

  Key to developing effective information and decision support systems
• Management information system (MIS)


  Must provide the right information to the right person in the right format at the right time
• Decision support systems (DSS)

  Support decision-making effectiveness when faced with unstructured or semi-structured business problems
• Specialized support systems

  Such as group support systems (GSS) and executive support systems (ESS), use the overall approach of a DSS in situations such as group and executive decision making
• Decision making


  Key to every organization
• Strategic planning and the overall goals of the organization

  Set the course for decision-making
• Information systems

  Can assist with strategic planning and problem-solving
• Decision-making phase

  1. First part of problem-solving process

  2. Intelligence stage: potential problems or opportunities are identified and defined

  3. Design stage: alternative solutions to the problem are developed

  4. Choice stage: requires selecting a course of action
• Problem-solving

  • Goes beyond decision-making to include implementation and monitoring stages
  • Implementation stage: a solution is put into effect
  • Monitoring stage: decision makers evaluate the implementation
• Fictional scenario involving a retail company facing a decline in sales in one of its key product categories: outdoor equipment

  • Intelligence Stage: The company's management has noticed a significant decline in sales figures for outdoor equipment over the past few quarters. Market research and customer feedback reveal that there has been a shift in consumer preferences towards eco-friendly and sustainable outdoor products. Additionally, there's a growing trend of customers preferring to purchase outdoor equipment online rather than in-store.
  • Design Stage: Management brainstorms potential solutions to address the decline in sales and meet the changing consumer demands. Alternative solutions considered include: Launching a new line of eco-friendly outdoor equipment, Enhancing the company's online presence and e-commerce platform to cater to the shifting purchasing behaviour, Collaborating with environmental organizations to promote the company's commitment to sustainability.
  • Choice Stage: After careful evaluation of the alternative solutions, management decides to pursue all three options simultaneously to address the decline in sales comprehensively.
  • Problem-Solving (Implementation Stage): The company allocates resources and forms cross-functional teams to execute each chosen solution. The new eco-friendly outdoor equipment line is developed, with an emphasis on sustainable materials and manufacturing processes. The IT department works on enhancing the company's website and e-commerce platform to improve user experience and optimize online sales channels. Marketing and PR teams collaborate with environmental organizations to launch a marketing campaign highlighting the company's commitment to sustainability.
  • Problem-Solving (Monitoring Stage): Throughout the implementation phase, regular progress reviews are conducted to ensure that each solution is being effectively executed. Key performance indicators (KPIs) such as sales figures, website traffic, and customer feedback are monitored closely to gauge the impact of the implemented solutions. Adjustments are made as necessary based on the ongoing evaluation of the implementation process.
• Programmed decision


  Decision made using a rule, procedure, or quantitative method. Easy to computerize using traditional information systems.
• Non-programmed decision


  Decision that deals with unusual or exceptional situations, not easily quantifiable.
• Optimization model


  Find the best solution, usually the one that will best help the organization meet its goals. It aims to maximize benefits or minimize costs to help the organization achieve its goals.
• Satisficing model


  Find a good – but not necessarily the best – problem solution. This approach acknowledges that in many real-world situations, finding the perfect solution may be impractical or too time-consuming.
• Heuristics


  Commonly accepted guidelines or procedures that usually find a good solution. Unlike optimization models, heuristics do not guarantee the best solution but aim to find a reasonably good solution efficiently.
• Management Information System (MIS)


  A computerized database of financial information that is organized and programmed in such a way that it produces regular reports on operations for every level of management in a company. It is typically used to collect, process, store, and disseminate information to support decision-making and control within an organization.
• MIS


  • Integrated collection of people, procedures, databases, and devices
  • Provides managers and decision-makers with information to help achieve organizational goals
  • Can give the organization a competitive advantage
  • Providing the right information to the right people in the right format and at the right time
  • Provides managers with information that supports effective decision-making and provides feedback on daily operations
• Inputs to an MIS

  • Internal data sources: TPSs and ERP systems and related databases, Data warehouses
  • External data sources: Customers, suppliers, competitors, and stockholders whose data is not already captured by the TPS, Internet
• Outputs from an MIS

  • Scheduled report: produced periodically or on schedule, such as daily, weekly, or monthly
  • Key-indicator report: summary of the previous day's critical activities
  • Demand report: developed to give certain information at someone's request
  • Exception report: automatically produced when a situation is unusual or requires management action
  • Drill-down reports: provide increasingly detailed data about a situation
• Characteristics of an MIS


  • Provide reports with fixed and standard formats
  • Produce hard-copy and soft-copy reports
  • Use internal data stored in the computer system
  • Allow users to develop custom reports
  • Require user requests for reports developed by systems personnel
• Financial MIS


  Provides financial information to executives and others. It focuses on collecting, processing, analyzing, and disseminating financial data to support decision-making related to financial management and control.
• Financial MIS subsystems and outputs


  • Profit/loss and cost systems: Profit and loss systems track the revenues and expenses associated with various activities, departments, or products within the organization.
  • Auditing: internal and external. Evaluating compliance with policies and procedures and the reliability of financial reporting.
  • Uses and management of funds: Financial MIS provides information on the sources and uses of funds within the organization.
• Manufacturing MIS


  Monitors and controls the flow of materials, products and services throughout the organization
• Manufacturing MIS subsystems and outputs


  • Design and engineering: CAD systems. Computer-Aided Design (CAD) systems are software tools engineers and designers use to create, modify, and analyze detailed digital models of products or systems.
• Marketing MIS


  Supports managerial activities in product development, distribution, pricing decisions and promotional effectiveness
• Marketing MIS subsystems


  • Marketing research
  • Product development
  • Promotion and advertising
  • Product pricing
  • Sales analysis
• Human Resource MIS


  Concerned with activities related to employees and potential employees
• Human Resource MIS subsystems


  • Human resource planning
  • Personnel selection and recruiting
  • Training and skills inventory
  • Scheduling and job placement
  • Wage and salary administration
  • Outplacement: Outplacement is a service provided by organizations to support employees who are leaving the company due to reasons such as downsizing, restructuring, or job elimination. The primary goal of outplacement is to assist departing employees in transitioning to new employment opportunities outside of the organization.
• Decision Support Systems (DSS)


  An organized collection of people, procedures, software, databases, and devices used to help make decisions that solve problems. The focus of a DSS is on decision-making effectiveness regarding unstructured or semi-structured business problems. Used by managers at all levels.
• Characteristics of a DSS 1


  • Supports decision-making (vs MIS that assists with monitoring and controlling organizational activities)
  • Provide rapid access to information
  • Handle large amounts of data from different sources
  • Provide report and presentation flexibility
  • Offer both textual and graphical orientation
  • Support drill-down analysis
  • Perform complex, sophisticated analysis and comparisons using advanced software packages
• Characteristics of a DSS 2


  • Support optimization, satisficing, and heuristic approaches
  • What-if analysis: making hypothetical changes to problem data and observing impact on results
  • Goal-seeking analysis: determining problem data required for a given result
• Capabilities of a Decision Support System

  • Support problem-solving phases
  • Support different problem structures: Highly structured problems, Semistructured or unstructured problems
  • Support various decision-making levels
• Executive support system (ESS)


  Specialized DSS. Includes hardware, software, data, procedures, and people used to assist senior-level executives. Also called an executive information system (EIS).
• ESS Characteristics


  • Tailored to individual executives
  • Easy to use
  • Drill-down capabilities
  • Support need for external data
  • Can help with situations that have a high degree of uncertainty
  • Future-oriented
• Capabilities of ESS


  • Support for defining overall vision
  • Support for strategic planning
  • Determining long-term objectives through analysis of current organization and prediction of future trends
  • Support for strategic organizing and staffing
  • Support for strategic control
  • Support for crisis management