Ch 07 information and decision making

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Decision Making

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Ch 07 information and decision making

  1. 1. Chapter 7 Information and Decision Making
  2. 2. Planning Ahead — Chapter 7 Study Questions <ul><li>How is information technology changing the workplace? </li></ul><ul><li>What in the role of information in the management process? </li></ul><ul><li>How do managers use information to make decisions? </li></ul><ul><li>What are the steps in the decision-making process? </li></ul><ul><li>What are the current issues in managerial decision making? </li></ul>
  3. 3. Study Question 1: How is information technology changing the workplace? <ul><li>Information and knowledge — basic linkages: </li></ul><ul><ul><li>Knowledge and knowledge workers provide a decisive competitive factor in today’s economy. </li></ul></ul><ul><ul><li>Knowledge worker. </li></ul></ul><ul><ul><ul><li>Someone whose value to the organization rests with intellect, not physical capabilities. </li></ul></ul></ul><ul><ul><li>Intellectual capital. </li></ul></ul><ul><ul><ul><li>Shared knowledge of a workforce that can be used to create wealth. </li></ul></ul></ul>
  4. 4. Study Question 1: How is information technology changing the workplace? <ul><li>Information and knowledge — basic linkages (cont.): </li></ul><ul><ul><li>Knowledge and intellectual capital are irreplaceable organizational resources. </li></ul></ul><ul><ul><li>The productivity of knowledge and knowledge workers depends on: </li></ul></ul><ul><ul><ul><li>Computer competency. </li></ul></ul></ul><ul><ul><ul><li>Information competency. </li></ul></ul></ul>
  5. 5. Study Question 1: How is information technology changing the workplace? <ul><li>Electronic commerce. </li></ul><ul><ul><li>The process of buying and selling goods and services electronically through use of the Internet. </li></ul></ul><ul><ul><ul><li>B2C e-commerce. </li></ul></ul></ul><ul><ul><ul><li>B2B e-commerce. </li></ul></ul></ul><ul><ul><li>Stages of development in e-commerce: </li></ul></ul><ul><ul><ul><li>Secure an online identity. </li></ul></ul></ul><ul><ul><ul><li>Establish a Web presence. </li></ul></ul></ul><ul><ul><ul><li>Enable e-commerce. </li></ul></ul></ul><ul><ul><ul><li>Provide e-commerce and customer relationship management. </li></ul></ul></ul><ul><ul><ul><li>Utilize a service application model. </li></ul></ul></ul>
  6. 6. Study Question 1: How is information technology changing the workplace? <ul><li>Implications of IT within organizations: </li></ul><ul><ul><li>Facilitation of communication and information sharing. </li></ul></ul><ul><ul><li>Operating with fewer middle managers. </li></ul></ul><ul><ul><li>Flattening of organizational structures. </li></ul></ul><ul><ul><li>Faster decision making. </li></ul></ul><ul><ul><li>Increased coordination and control. </li></ul></ul>
  7. 7. Figure 7.1 Information technology is breaking barriers and changing organizations.
  8. 8. Study Question 1: How is information technology changing the workplace? <ul><li>Implications of IT for relationships with external environment: </li></ul><ul><ul><li>Helps with customer relationship management. </li></ul></ul><ul><ul><li>Helps organizations with supply chain management. </li></ul></ul><ul><ul><li>Helps in monitoring outsourcing and other business contracts. </li></ul></ul>
  9. 9. Study Question 1: How is information technology changing the workplace? <ul><li>How IT is changing the office … </li></ul><ul><ul><li>Progressive organizations actively use IT to help achieve high performance in uncertain environments. </li></ul></ul><ul><ul><li>IT has dramatically changed nature of offices. </li></ul></ul><ul><ul><li>Key developments in networked offices: </li></ul></ul><ul><ul><ul><li>Instant messaging. </li></ul></ul></ul><ul><ul><ul><li>Peer-to-peer file sharing (P2P). </li></ul></ul></ul>
  10. 10. Study Question 2: What is the role of information in the management process? <ul><li>What is useful information? </li></ul><ul><ul><li>Data. </li></ul></ul><ul><ul><ul><li>Raw facts and observations. </li></ul></ul></ul><ul><ul><li>Information. </li></ul></ul><ul><ul><ul><li>Data made useful for decision making. </li></ul></ul></ul><ul><ul><li>Information drives management functions. </li></ul></ul><ul><ul><li>Characteristics of useful information: </li></ul></ul><ul><ul><ul><li>Timely. </li></ul></ul></ul><ul><ul><ul><li>High quality. </li></ul></ul></ul><ul><ul><ul><li>Complete. </li></ul></ul></ul><ul><ul><ul><li>Relevant. </li></ul></ul></ul><ul><ul><ul><li>Understandable. </li></ul></ul></ul>
  11. 11. Study Question 2: What is the role of information in the management process? <ul><li>Information needs of organizations. </li></ul><ul><ul><li>Information exchanges with the external environment: </li></ul></ul><ul><ul><ul><li>Gather intelligence information </li></ul></ul></ul><ul><ul><ul><li>Provide public information </li></ul></ul></ul><ul><ul><li>Information exchanges within the organization: </li></ul></ul><ul><ul><ul><li>Facilitate decision making. </li></ul></ul></ul><ul><ul><ul><li>Facilitate problem solving. </li></ul></ul></ul>
  12. 12. Figure 7.2 External and internal information needs of organizations.
  13. 13. Study Question 2: What is the role of information in the management process? <ul><li>Basic information system concepts: </li></ul><ul><ul><li>Information system. </li></ul></ul><ul><ul><ul><li>Use of the latest IT to collect, organize, and distribute data for use in decision making. </li></ul></ul></ul><ul><ul><li>Management information system (MIS). </li></ul></ul><ul><ul><ul><li>Specifically designed to meet the information needs of managers in daily decision making. </li></ul></ul></ul>
  14. 14. Study Question 2: What is the role of information in the management process? <ul><li>Basic information system concepts (cont.): </li></ul><ul><ul><li>Decision support system (DSS). </li></ul></ul><ul><ul><ul><li>An interactive information system that allows users to organize and analyze data for solving complex and sometimes unstructured problems. </li></ul></ul></ul><ul><ul><ul><li>Group decision support system (GDSS) facilitates group efforts to solve complex and unstructured problems. </li></ul></ul></ul><ul><ul><ul><li>GDSSs use groupware. </li></ul></ul></ul>
  15. 15. Study Question 2: What is the role of information in the management process? <ul><li>Basic information system concepts (cont.): </li></ul><ul><ul><li>Artificial intelligence (AI) </li></ul></ul><ul><ul><ul><li>Computer systems with the capacity to reason the way people do. </li></ul></ul></ul><ul><ul><li>Expert systems (ES). </li></ul></ul><ul><ul><ul><li>Software systems that use AI to mimic the thinking of human experts. </li></ul></ul></ul>
  16. 16. Study Question 2: What is the role of information in the management process? <ul><li>Basic information system concepts (cont.): </li></ul><ul><ul><li>Intranets and corporate portals. </li></ul></ul><ul><ul><ul><li>Allow employees, by password access, to share databases and communicate electronically. </li></ul></ul></ul><ul><ul><li>Extranets and enterprise portals. </li></ul></ul><ul><ul><ul><li>Allow communication and data sharing between the organization and the external environment. </li></ul></ul></ul><ul><ul><li>Electronic data interchange (EDI). </li></ul></ul><ul><ul><ul><li>Uses controlled access to enterprise portals and supporting software to enable electronic transactions between businesses. </li></ul></ul></ul>
  17. 17. Study Question 2: What is the role of information in the management process? <ul><li>Managerial advantages of IT utilization: </li></ul><ul><ul><li>Planning advantages. </li></ul></ul><ul><ul><ul><li>Better and more timely access to useful information. </li></ul></ul></ul><ul><ul><ul><li>Involving more people in planning. </li></ul></ul></ul><ul><ul><li>Organizing advantages. </li></ul></ul><ul><ul><ul><li>More ongoing and informed communication among all parts of the organization. </li></ul></ul></ul><ul><ul><ul><li>Improved coordination and integration. </li></ul></ul></ul>
  18. 18. Study Question 2: What is the role of information in the management process? <ul><li>Managerial advantages of IT utilization (cont.): </li></ul><ul><ul><li>Leading advantages. </li></ul></ul><ul><ul><ul><li>Improved communication with staff and stakeholders. </li></ul></ul></ul><ul><ul><ul><li>Keeping objectives clear. </li></ul></ul></ul><ul><ul><li>Controlling advantages. </li></ul></ul><ul><ul><ul><li>More immediate measures of performance results. </li></ul></ul></ul><ul><ul><ul><li>Allows real-time solutions to performance problems. </li></ul></ul></ul>
  19. 19. Figure 7.3 The manager as an information-processing nerve center.
  20. 20. Study Question 3: How do managers use information to make decisions? <ul><li>A performance deficiency is … </li></ul><ul><ul><li>Actual performance being less than desired performance. </li></ul></ul><ul><li>A performance opportunity is … </li></ul><ul><ul><li>Actual performance being better than desired performance. </li></ul></ul><ul><li>Problem solving is … </li></ul><ul><ul><li>The process of identifying a discrepancy between actual and desired performance and taking action to resolve it. </li></ul></ul><ul><li>A decision is … </li></ul><ul><ul><li>A choice among possible alternative course of action. </li></ul></ul>
  21. 21. Study Question 3: How do managers use information to make decisions? <ul><li>Programmed decisions. </li></ul><ul><ul><li>Apply solutions that are readily available from past experiences to solve structured problems. </li></ul></ul><ul><ul><li>Structured problems are ones that are familiar, straightforward, and clear with respect to information needs. </li></ul></ul><ul><ul><li>Best applied to routine problems that can be anticipated. </li></ul></ul>
  22. 22. Study Question 3: How do managers use information to make decisions? <ul><li>Nonprogrammed decisions. </li></ul><ul><ul><li>Develop novel solutions to meet the demands of unique situation that present unstructured problems. </li></ul></ul><ul><ul><li>Unstructured problems are ones that are full of ambiguities and information deficiencies. </li></ul></ul><ul><ul><li>Commonly faced by higher-level management. </li></ul></ul>
  23. 23. Study Question 3: How do managers use information to make decisions? <ul><li>Crisis decision making. </li></ul><ul><ul><li>A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately. </li></ul></ul><ul><ul><li>Rules for crisis management: </li></ul></ul><ul><ul><ul><li>Figure out what is going on. </li></ul></ul></ul><ul><ul><ul><li>Remember that speed matters. </li></ul></ul></ul><ul><ul><ul><li>Remember that slow counts, too. </li></ul></ul></ul><ul><ul><ul><li>Respect the danger of the unfamiliar. </li></ul></ul></ul><ul><ul><ul><li>Value the skeptic. </li></ul></ul></ul><ul><ul><ul><li>Be ready to “fight fire with fire.” </li></ul></ul></ul>
  24. 24. Study Question 3: How do managers use information to make decisions? <ul><li>Decision environments: </li></ul><ul><ul><li>Certain environments. </li></ul></ul><ul><ul><ul><li>Offer complete information about possible action alternatives and their outcomes. </li></ul></ul></ul><ul><ul><li>Risk environments. </li></ul></ul><ul><ul><ul><li>Lack complete information about action alternatives and their consequences, but offer some estimates of probabilities of outcomes for possible action alternatives. </li></ul></ul></ul><ul><ul><li>Uncertain environments </li></ul></ul><ul><ul><ul><li>Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives. </li></ul></ul></ul>
  25. 25. Figure 7.4 Three environments for managerial decision making and problem solving.
  26. 26. Study Question 3: How do managers use information to make decisions? <ul><li>Problem-solving approaches or styles: </li></ul><ul><ul><li>Problem avoiders. </li></ul></ul><ul><ul><ul><li>Inactive in information gathering and solving problems. </li></ul></ul></ul><ul><ul><li>Problem solvers. </li></ul></ul><ul><ul><ul><li>Reactive in gathering information and solving problems. </li></ul></ul></ul><ul><ul><li>Problem seekers. </li></ul></ul><ul><ul><ul><li>Proactive in anticipating problems and opportunities and taking appropriate action to gain an advantage. </li></ul></ul></ul>
  27. 27. Study Question 3: How do managers use information to make decisions? <ul><li>Systematic versus intuitive thinking. </li></ul><ul><ul><li>Systematic thinking approaches problems in a rational, step-by-step, and analytical fashion. </li></ul></ul><ul><ul><li>Intuitive thinking approaches problems in a flexible and spontaneous fashion. </li></ul></ul><ul><ul><li>Multidimensional thinking applies both intuitive and systematic thinking. </li></ul></ul><ul><ul><li>Effective multidimensional thinking requires skill at strategic opportunism. </li></ul></ul>
  28. 28. Study Question 4: What are the steps in the decision-making process? <ul><li>Five-step decision-making process: </li></ul><ul><ul><li>Identify and define the problem. </li></ul></ul><ul><ul><li>Generate and evaluate possible solutions. </li></ul></ul><ul><ul><li>Choose a preferred course of action and conduct the “ethics double check.” </li></ul></ul><ul><ul><li>Implement the decision. </li></ul></ul><ul><ul><li>Evaluate results. </li></ul></ul>
  29. 29. Figure 7.5 Steps in managerial decision making and problem solving.
  30. 30. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 1 — identify and define the problem. </li></ul><ul><ul><li>Focuses on information gathering, information processing, and deliberation. </li></ul></ul><ul><ul><li>Decision objectives should be established. </li></ul></ul><ul><ul><li>Common mistakes in defining problems: </li></ul></ul><ul><ul><ul><li>Defining the problem too broadly or too narrowly. </li></ul></ul></ul><ul><ul><ul><li>Focusing on symptoms instead of causes. </li></ul></ul></ul><ul><ul><ul><li>Choosing the wrong problem. </li></ul></ul></ul>
  31. 31. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 2 — g enerate and evaluate possible solutions. </li></ul><ul><ul><li>Potential solutions are formulated and more information is gathered, data are analyzed , the advantages and disadvantages of alternative solutions are identified </li></ul></ul><ul><ul><li>Approaches for evaluating alternatives: </li></ul></ul><ul><ul><ul><li>Stakeholder analysis. </li></ul></ul></ul><ul><ul><ul><li>Cost-benefit analysis. </li></ul></ul></ul>
  32. 32. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 2 — g enerate and evaluate possible solutions (cont.). </li></ul><ul><ul><li>Criteria for evaluating alternatives: </li></ul></ul><ul><ul><ul><li>Benefits. </li></ul></ul></ul><ul><ul><ul><li>Costs. </li></ul></ul></ul><ul><ul><ul><li>Timeliness. </li></ul></ul></ul><ul><ul><ul><li>Acceptability. </li></ul></ul></ul><ul><ul><ul><li>Ethical soundness. </li></ul></ul></ul><ul><ul><li>Common mistakes: </li></ul></ul><ul><ul><ul><li>Selecting a particular solution too quickly. </li></ul></ul></ul><ul><ul><ul><li>Choosing a convenient alternative that may have damaging side effects or may not be as good as other alternatives. </li></ul></ul></ul>
  33. 33. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 3 — decide on a preferred course of action. </li></ul><ul><ul><li>Classical decision model. </li></ul></ul><ul><ul><ul><li>Managers act rationally in a certain world. </li></ul></ul></ul><ul><ul><ul><li>Managers face clearly defined problems and have complete knowledge of all possible alternatives and their consequences. </li></ul></ul></ul><ul><ul><ul><li>Results in an optimizing decision. </li></ul></ul></ul>
  34. 34. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 3 — decide on a preferred course of action (cont.). </li></ul><ul><ul><li>Behavioral decision model </li></ul></ul><ul><ul><ul><li>Managers act in terms of what they perceive about a given situation. </li></ul></ul></ul><ul><ul><ul><li>Recognizes limits to human information-processing capabilities. </li></ul></ul></ul><ul><ul><ul><ul><li>Cognitive limitations. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Bounded rationality. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Results in a satisficing decision. </li></ul></ul></ul></ul>
  35. 35. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 4 — i mplement the decision solution. </li></ul><ul><ul><li>Involves taking action to make sure the solution decided upon becomes a reality. </li></ul></ul><ul><ul><li>Managers need to have willingness and ability to implement action plans. </li></ul></ul><ul><ul><li>Lack-of-participation error should be avoided. </li></ul></ul>
  36. 36. Figure 7.6 Differences in the classical and behavioral models of managerial decision making.
  37. 37. Study Question 4: What are the steps in the decision-making process? <ul><li>Step 5 — e valuate results. </li></ul><ul><ul><li>Involves comparing actual and desired results. </li></ul></ul><ul><ul><li>Positive and negative consequences of chosen course of action should be examined. </li></ul></ul><ul><ul><li>If actual results fall short of desired results, the manager returns to earlier steps in the decision-making process. </li></ul></ul>
  38. 38. Study Question 5: What are the current issues in managerial decision making? <ul><li>Types of heuristics for simplifying decision making: </li></ul><ul><ul><li>Availability heuristic. </li></ul></ul><ul><ul><ul><li>People use information “readily available” from memory as a basis for assessing a current event or situation. </li></ul></ul></ul><ul><ul><li>Representativeness heuristic. </li></ul></ul><ul><ul><ul><li>People assess the likelihood of something happening based upon its similarity to a stereotyped set of occurrences. </li></ul></ul></ul><ul><ul><li>Anchoring and adjustment heuristic. </li></ul></ul><ul><ul><ul><li>People make decisions based on adjustments to a previously existing value or starting point. </li></ul></ul></ul>
  39. 39. Study Question 5: What are the current issues in managerial decision making? <ul><li>Escalating commitment. </li></ul><ul><ul><li>The tendency to increase effort and apply more resources to a course of action that is not working. </li></ul></ul><ul><li>Ways to avoid the escalation trap: </li></ul><ul><ul><li>Set advance limits and stick to them. </li></ul></ul><ul><ul><li>Make your own decisions. </li></ul></ul><ul><ul><li>Carefully determine why you are continuing a course of action. </li></ul></ul><ul><ul><li>Remind yourself of the costs. </li></ul></ul><ul><ul><li>Watch for escalation tendencies. </li></ul></ul>
  40. 40. Study Question 5: What are the current issues in managerial decision making? <ul><li>Potential advantages of group decision making: </li></ul><ul><ul><li>Greater amounts of information, knowledge, and expertise are available. </li></ul></ul><ul><ul><li>More action alternatives are considered. </li></ul></ul><ul><ul><li>Increased understanding and acceptance of outcomes. </li></ul></ul><ul><ul><li>Increased commitment to implement final plans. </li></ul></ul>
  41. 41. Study Question 5: What are the current issues in managerial decision making? <ul><li>Potential disadvantages of group decision making: </li></ul><ul><ul><li>Pressure to conform. </li></ul></ul><ul><ul><li>Minority domination may occur. </li></ul></ul><ul><ul><li>Decision making takes longer. </li></ul></ul>
  42. 42. Study Question 5: What are the current issues in managerial decision making? <ul><li>Ethical decision making. </li></ul><ul><ul><li>Any decision should meet “ethics double check.” mentioned in step 3 of the decision-making process. </li></ul></ul><ul><ul><ul><li>How would I feel if my family found out about this decision? </li></ul></ul></ul><ul><ul><ul><li>How would I feel if this decision were published in the local newspaper? </li></ul></ul></ul><ul><ul><ul><li>Any discomfort in answering these questions indicates the decision has ethical shortcomings. </li></ul></ul></ul>
  43. 43. Study Question 5: What are the current issues in managerial decision making? <ul><li>Ethical decision making (cont.). </li></ul><ul><ul><li>Considering the ethics of a proposed decision may result in better decisions and prevention of costly litigation. </li></ul></ul><ul><ul><li>Ethical decisions satisfy the following criteria: </li></ul></ul><ul><ul><ul><li>Utility. </li></ul></ul></ul><ul><ul><ul><li>Rights. </li></ul></ul></ul><ul><ul><ul><li>Justice. </li></ul></ul></ul><ul><ul><ul><li>Caring. </li></ul></ul></ul>
  44. 44. Study Question 5: What are the current issues in managerial decision making? <ul><li>Knowledge management. </li></ul><ul><ul><li>Processes through which organizations develop, organize, and share knowledge to achieve competitive advantage. </li></ul></ul><ul><li>Chief Knowledge Officer (CKO) </li></ul><ul><ul><li>Energizes learning processes. </li></ul></ul><ul><ul><li>Manages and enhances organization’s intellectual assets. </li></ul></ul><ul><li>Knowledge management requires a culture that values learning fosters a learning organization. </li></ul>

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