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Week 4 Management and decision-making (2) Management roles and functions Categories of management decisions Support required from MSS

Management decision-making
nature of decisions made by business managers

Business strategy
introduction to some strategic planning techniques

Consequences for management decision-making

how can strategic planning inform key management decisions?
2

Room not big enough! People sitting in the aisles

Health & Safety Problem

Solution required...
redistribute attendance between days? not popular move to main lecture theatre in same building?
already booked

find another lecture room in another building?

nothing free at the same time

change time and lecture room?

success!
3

CC6052 Assignment: Management Report

Group components (40%)

Title and contents Management summary Introduction Organisation chart Data cleansing ODDS MSS database Design Use of feedback Group critique Individual contributions Software implementation environment

1. 2. 3. 4. 5. 6. 7. 8.

CC6052 Assignment: Management Report

Individual components (60%)

9. Selected management decision 10. Data and information requirements 11. Technical design 12. Test plan and results 13. Outline solution 14. References 15. Software with printouts
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Management
functions, roles, levels, productivity

Decisions
categories, disciplines, cognitive style, etc.

Decision-making
theory, phases, approaches, models

Data and information

types, sources, processes, value, characteristics

Support for management decision-making

6

Fayols five functions of management

plan

control organise
communication

coordinate

command

Classical model: Fayol (1916)

see: http://www.provenmodels.com/3

Management: functions

Behavioural model
Based on observations of what managers actually do and this indicates that managers are less systematic, reflective, well-organised and more informal, reactive, frivolous than the classical model suggests

(Laudon & Laudon, 2004)

Management: roles
Mintzberg (1971, 1980, 1993) identified 10 roles: Interpersonal
figurehead, leader, liaison

Informational
monitor, disseminator, spokesperson

Decisional
entrepreneur, disturbance handler, resource allocator, negotiator
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Management: levels

Strategic
Determines long-term objectives, resources and policies of the organisation

Tactical
Concerned with efficient and effective use of resources in achieving objectives

Operational
Carrying out specific day-to-day 10 tasks, transactions

Management: productivity (1)

Management is a process by which organisational goals are achieved through the use of resources
(Turban, 2001)

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Management: productivity (2)

If resources = inputs and attainment of goals = outputs then

Success of organisation (and a managers job) = Outputs / Inputs = Attainment of goals / Resources = Productivity

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Management: productivity (3)

Assessing productivity using performance measurement - consider two dimensions:

Effectiveness

Efficiency

13

Management: productivity (4)

Effectiveness
the i.e.

degree to which goals are achieved

doing the right thing

Efficiency
a

measure of the use of resources to achieve these goals

i.e.

doing the thing right

14

Decisions: categories (1)

Levels (or type of control): decisions can be

Strategic
unstructured, long-term, large impact, infrequent

Tactical
semi-structured, medium-term, medium impact, not uncommon
between the two extremes of strategic and operational

Operational
structured, short-term, small impact, frequent
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Decisions: categories (2)

Type of decision:

Unstructured (or non-programmable)

fuzzy, complex problem for which no clear solution procedure exists

Semi-structured

between the two extremes; i.e. some structured elements and some unstructured elements

Structured (or programmable)

standard procedures for obtaining the best (or good enough) solution are known

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Decisions: categories (3)

Decisions can be made in the face of:

Uncertainty
Several possible outcomes for each course of action Decision-maker does not know (and cannot estimate) probabilities

Risk
Decision-maker must consider several possible outcomes for each course of action Probabilities of given outcomes are known or can be estimated

Certainty
Assumes full and complete knowledge is available Decision-maker knows the outcome of each course of action
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Decisions: cognitive styles, etc.

Cognitive style is the subjective process through which people

perceive,
organise and change information
during the decision-making process.
(Turban, 2001)
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Decisions: cognitive styles, etc.

Need to consider varying cognitive styles

Compare systematic versus intuitive decision-makers

(Laudon & Laudon, 2004)
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Making Decisions

Tempting to assume a rational model of decision making behaviour people engage in basically consistent, rational, value-maximising calculations.
(Laudon & Laudon, 2004)
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Making Decisions

But

people cannot specify all options... people do not have singular goals, many decisions are too complex... people select the first option that moves them towards their ultimate goal or adopt a policy that is most like the previous policy... decision-making is a continuous process decisions are often made by consensus...
21

Decisions and management (1)

Turban (2001): According to Simon (1977), managerial decision-making is synonymous with the whole process of management. management "=" decision-making

22

Decisions and management (2)

A problem occurs when a system does not meet its established goals or does not work as planned. Problem solving may also deal with identifying new opportunities
problem solving decision making
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Decision-making: theory

Decision-making involves selecting the correct (or best available) action from a series of choices

The business rules governing the correct action may be complex; diagrams and tables help
Flow charts Decision trees Decision tables Structured English, etc.

Only useful for the structured elements of a decision...

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(Chaffey, 2003)

Decision-making: consider the following (sequence of) decisions

product (toaster )is passed as fit for sale if it passes: a mechanical test (slices can be lowered and raised) and an electrical test (it heats the bread) and has the correct dimensions (the slices fit the slots)

25

Decision-making: consider the following (sequence of) decisions

If

it fails
either the mechanical test or the electrical test (but not both), it is sent back to the workshop for repair

26

Decision-making: consider the following (sequence of) decisions

In

all other cases, the product is rejected as it would be too expensive to repair

27

Decision-making: consider the following (sequence of) decisions

There

are three tests

mechanical test electrical test correct dimensions

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Decision tree...
Mech. test OK?

Yes Yes
Elec. test OK?

Accept

No

Repair

Yes

Yes
No
Elec. test OK?

Repair

No
Dimensions OK?

Reject

Yes Yes No
Mech. test OK?
Elec. test OK?

Reject

No Yes No
Elec. test OK?

Reject

Reject
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No

Reject

Decision table
Each action in the decision table is equivalent to a terminal node in the decision tree: 1 accept 2 repair 5 remaining actions reject

Correct dimensions? Passed mechanical test? Passed electrical test? Accept product

Y Y Y

Y Y N X

Y N Y X

Y N N

N Y Y

N Y N

N N Y

N N N

X
X

Repair product Reject product

X
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Decision tree...
OK to have questions in a different order
Yes
Mech. test OK?

Yes
Dimensions OK?

Accept

No

Reject

Yes

Yes
No
Dimensions OK?

Repair

No
Elec test OK?

Reject

Yes Yes No
Mech. test OK?
Dimensions OK?

Repair

No Yes No
Dimensions OK?

Reject

Reject
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No

Reject

Decision tree...
OK to have questions in a different order
Yes
Dimensions OK?

Yes
Elec. test OK?

Accept

No

Repair

Yes

Yes
No
Elec. test OK?

Reject

No
Mech. test OK?

Reject

Yes Yes No
Dimensions OK?

Repair

Elec. test OK?

No Yes No
Elec. test OK?

Reject

Reject
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No

Reject

Decision tree...
OK to have questions in a different order
Yes
Elec. test OK?

Yes
Mech. test OK?

Accept

No

Repair

Yes

Yes
No
Mech. test OK?

Repair

No
Dimensions OK?

Reject

Yes Yes No
Elec. test OK? Mech. test OK?

Reject

No Yes No
Mech. test OK?

Reject

Reject
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No

Reject

Decision trees & decision tables

Decision trees

enable all possible options to be considered

enable all possible options to be considered equivalent to one another each column in the table matches a path in the tree

Decision tables

Decision trees and decision tables

different forms of representation

can be pruned to remove redundancy
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Decision tree... (original)

Mech. test OK?

Yes Yes
Elec. test OK?

Accept

No

Repair

Yes

Yes
No
Elec. test OK?

Repair

No
Dimensions OK?

Reject

Yes Yes No
Mech. test OK?
Elec. test OK?

Reject

No Yes No
Elec. test OK?

Reject

Reject
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No

Reject

Decision table
Each action in the decision table is equivalent to a terminal node in the decision tree: 1 accept 2 repair 5 remaining actions reject

Correct dimensions? Passed mechanical test?

Y Y

Y Y

Y N

Y N

N Y

N Y

N N

N N

Passed electrical test?

Accept product Repair product

Y X

N
X

Y
X

Reject product

X
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Decision tree...
Mech. test OK?

Yes Yes
Elec. test OK?

Accept

No

Repair

Yes

Yes
No
Elec. test OK?

Repair

No
Dimensions OK?

Reject

Yes Yes No
Mech. test OK?
Elec. test OK?

Reject

No Yes No
Elec. test OK?

Reject

Reject
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No

Reject

Decision table
Each action in the decision table is equivalent to a terminal node in the decision tree: 1 accept 2 repair 5 remaining actions reject

Correct dimensions? Passed mechanical test?

Y Y

Y Y

Y N

Y N

N Y

N Y

N N

N N

Passed electrical test?

Accept product Repair product

Y X

N
X

Y
X

Reject product

X
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Decision tree...
Mech. test OK?

Yes Yes
Elec. test OK?

Accept

No

Repair

Yes

Yes
No
Elec. test OK?

Repair

No
Dimensions OK?

Reject

Yes Yes No
Mech. test OK?
Elec. test OK?

Reject

No Yes No
Elec. test OK?

Reject

Reject
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No

Reject

Decision table
Each action in the decision table is equivalent to a terminal node in the decision tree: 1 accept 2 repair 5 remaining actions reject

Correct dimensions? Passed mechanical test?

Y Y

Y Y

Y N

Y N

N Y

N Y

N N

N N

Passed electrical test?

Accept product Repair product

Y X

N
X

Y
X

Reject product

X
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Decision tree: removing redundancy

Mech. test OK?

Yes Yes
Elec. test OK?

Accept

No

Repair

Yes

Yes
No
Elec. test OK?

Repair

No No
Dimensions OK?

Reject Reject If dimensions are wrong, we dont need mechanical & electrical tests: just reject

Yes Yes No
Mech. test OK?
Elec. test OK?

Reject

A single line with No replaces this part of the tree

No Yes No
Elec. test OK?

Reject

Reject
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No

Reject

Decision table: removing redundancy

Each action in the decision table is equivalent to a terminal node in the decision tree: 1 accept 2 repair If dimensions are wrong, we 5 remaining actions reject dont need mechanical & Now add dont care condition (-) electrical tests - just reject it doesnt matter whether it is Y or N

Correct dimensions? Passed electrical test? Passed mechanical test? Accept product Repair product Reject product

Y Y Y X

Y Y N X

Y N Y X

Y N N N N Y N N N

N N N N Y N

N -

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Decision table: components (1)

Correct dimensions? Passed electrical test?

1. Conditions

Passed mechanical test?

Accept product Repair product

2. Actions

Reject product
3. Number of rules = 2N where N is the number of conditions, i.e.

43

Decision table: components (2)

4. Condition entries

Correct dimensions? Passed electrical test?

Y Y

Y Y

Y Y N N N N Y Y

N N

N N

Passed mechanical test?

Accept product Repair product

Reject product

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Decision table: components (3)

Correct dimensions? Passed electrical test?

Y Y

Y Y

Y Y N N N N Y Y

N N

N N

Passed mechanical test?

Accept product Repair product

Y X

N
X

Y
X

Reject product

5. Action entries

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Decision table: components (4)

Decision table with redundancy identified and removed Correct dimensions? Passed electrical test? Y Y Y Y Y Y N N N -

Passed mechanical test?

Accept product Repair product

Y X

N
X

Y
X

Reject product

6. Redundancy identified and removed (- = dont care conditions)

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Decision-making: phases

Intelligence
Problem/Opportunity exists Decision must be made

Design
Identify and examine possible solutions

Choice
Rank solutions and select best option

Implementation (do it!)

...and evaluate success of decision
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Decision-making: intelligence phase

Problem Problem Problem Problem

identification classification decomposition ownership

Problem statement
identification and impact
48

Decision-making: design phase

Trial and error Modelling

Simulation Goal-seeking Optimisation What-if? analysis Heuristics Like SSM
(see Checkland)

Real-world problem (physical)

Logical problem (model)

Real-world solution (physical)

Logical solution (model)

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Decision-making: choice phase

Criteria of choice Search for best option (based on comparison with criteria of choice)
Blind search - complete or partial Heuristic search

Search until you find a good enough solution (known as satisficing)

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Decision-making: implementation phase

Test the solution

Is

it working?
not, may need to return to design, choice or intelligence stage

If

Perhaps

we are solving the wrong problem

the solution

Can

it be improved?

Fine-tune

Monitor

progress
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Data and information: types, sources

Types of data:
qualitative quantitative internal external private

Managers need information to support their decision-making

i.e. any management decision will have associated information needs

Sources of data:

Information:

data processed for a purpose reduces uncertainty about a situation

52

(Chaffey, 2003)

Data is processed to produce information Examples of data processes:

classification rearranging / sorting aggregating performing calculations selection exceptions presentation (graph / table / chart / diagram)

Information produced can be used to support decision-making

(Chaffey, 2003)

53

Information is a resource with value for the manager and the organisation
tangible value intangible value

As well as value, information comes at a cost:

Value of information - Cost of gathering information
or

Improvements in decision behaviour

- Cost of gathering information

(Chaffey, 2003)

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Information supports decision-making at all levels in an organisation:

Strategic Wide time period, infrequent, primarily external, less certain, wide in scope, summarised Tactical Medium time/frequency/source/certainty/scope/detail between the two extremes Operational Narrow time period, frequent, primarily internal, more certain, narrow in scope, detailed
55

Chaffey, D. (ed.), 2003, Business Information Systems, 2nd ed., FT Prentice Hall Laudon, K. & Laudon, J., 2004, Management Information Systems, 8th ed., Pearson Prentice Hall Lucey, T., 2009, Management Information Systems, 10th ed., Continuum Turban E. & Aronson J.E., 2001, Decision Support Systems and Intelligent Systems (6th edition), Prentice Hall Business Publishing Turban, E., Sharda, R., Delen, D., 2010, Decision Support and Business Intelligence Systems, 9th edition, Pearson, ISBN-10 0132453231, ISBN-13 978-0132453233
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Whiteley, D., 2004, Introduction to Information Systems, Palgrave