America's cup the tension between technology and human decision makers

Chapter 12 Enhancing Decision Making

“Companies have been able to use technology to do some very cool stuff to reach

customers in new ways, to automate operations. But one thing many businesses haven’t

been able to do easily is use the data they’ve collected to find and stamp out waste across

operations. Sifting through corporate data was supposed to make executives more

efficient. Much of the time, though, it’s just made them more confused.” (Fortune, March

3, 2002)

Even though this quote is ten years old, it’s still pertinent in many companies. We’re

getting better though about turning raw data into useful information that helps improve

decision making.

12.1 What are the different types of decisions and how does the

decision-making process work? How do information systems

support the activities of managers and management decision

making?

Each of us makes hundreds of decisions every day. If just a fraction of those

decisions could be improved through better and more information and better

processes, we’d all be delighted. Businesses feel the same way. Customers would

be happier, employees would be more motivated, and managers would have an

easier job. Most of all, businesses could improve their profitability to the benefit

of all.

Business Value of Improved Decision Making

Table 12.1 provides a few examples of the dollar value that enhanced decision making

would give to firms.

12-2

Don’t be misled into thinking that the dollar value of improving decision-making

processes is limited to managers. As more business flatten their organizational structures

and push decision making to lower levels, better decisions at all levels can lead to

increased business value.

Types of Decisions

There are generally three classifications of decisions:

 Unstructured: Requires judgment, evaluation, and insight into nonroutine

situations. Usually made at senior levels of management.

 Structured: Repetitive, routine, with definite procedures for making the decision.

Usually made at the lowest organizational levels.

 Semistructured: A combination of the two. Usually made by middle managers.

Figure 12.1 couples these three types of decisions with the appropriate management level.

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Figure 12.1 Information Requirements of Key Decision-Making Groups in a Firm

 Senior management: Makes decisions based on internal business information but

also external industry and society changes; decisions affect long-term, strategic goals

and the firm’s objectives.

 Middle management and project teams: Decisions affect resource allocation, short-

range plans, and performance of specific departments, task forces, teams, and special

project groups.

 Operational management and project teams: Decisions affect subunits and

individual employees regarding the resources, schedules, and personnel decisions for

specific projects.

 Individual employees: Decisions affect specific vendors, other employees, and most

importantly, the customer.

The Decision-Making Process

Making decisions requires four steps:

 Intelligence: Discovering, identifying, and understanding problems.

 Design: Identifying and exploring solutions to problems.

 Choice: Choosing among solution alternatives.

 Implementation: Making the chosen alternative work and monitoring how well

the solution is working.

These four steps are not always consecutive and may well be concurrent or repetitive.

12-4

Managers and Decision Making in the Real World

Although information systems have gone a long way toward improving the decision-

making process, they are not the Holy Grail. They should be viewed as a way to assist

managers in making decisions, but not as the final answer.

Managerial Roles

Let’s compare the classical model of management with the behavioral model. The

former describes the five classical functions of managers as:

 Planning

 Organizing

 Coordinating

 Deciding

 Controlling

Behavioral models of managers dissect the many activities involved in the five functions

of management. That is, managers:

 Perform a great deal of work at an unrelenting pace.

 Activities are fragmented.

 Prefer current, specific, and ad hoc information.

 Prefer oral communications rather than written documentation.

 Maintain a diverse and complex web of contacts.

Now, let’s take all of these activities and categorize them into three managerial roles:

 Interpersonal: Act as figureheads, leaders, and liaisons.

 Informational: Act as nerve centers, disseminators, and spokespersons.

 Decisional: Act as entrepreneurs, handle disturbances, allocate resources,

negotiate and mediate conflicts.