Lead Black Slide
Chapter 11
Management Decision Making
© 2001 Business & Information Systems 2/e
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Our Agenda
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Improving Management DecisionMaking Effectiveness
Management Decisions
Management Information Systems
Decision Support Systems
Executive Support Systems
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Our Agenda (cont’d.)
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Expert Systems
Knowledge Management Systems
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Learning Objectives
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Explain how information systems can
improve management decision-making
effectiveness.
Describe the characteristics of
information needed by managers for
decision making at different levels of an
organization.
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Learning Objectives (cont’d.)
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Describe the structure of management
information systems.
Describe the structure of decision
support systems.
Explain the purpose of executive
support systems.
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Learning Objectives (cont’d.)
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Explain how an expert system can
provide expert advice.
Describe what organizational knowledge
is an what knowledge management
systems do.
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Improving Management
Decision-Making
Effectiveness
Management Decision Making
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Improving Management
Decision-making Effectiveness
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A decision is a selection among several
courses of action.
Information helps reduce the
uncertainty. With better information, a
decision maker is more certain about
the outcome of a decision.
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Management Decisions
Management Decision Making
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Levels of Management
Decisions
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Management decisions are made at
several levels in an organization.
Starting at the top:
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Strategic decisions
Tactical decisions
Operational decisions
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Strategic Decisions
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Made by top level managers.
Involve setting organization policies,
goals, and long-term plans.
They affect the organization for many
years.
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Tactical Decisions
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Made by middle-level managers.
Involve implementing policies of the
organization.
They affect the organization for several
months or a few years.
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Operational Decisions
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Made by by lower-level manager.
Involve the day-to-day decisions
needed in the operation of the
organization.
They affect the organization for a short
period of time, such as several days or
weeks.
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Characteristics of
Management Decisions
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The three characteristics of
management decision making
1. Time horizon affected by the decision
2. Frequency of repeating the same decision
3. Degree of structure in the decision
process
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Characteristics of Management
Decisions (cont’d.)
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Strategic decisions tend to be
unstructured.
Tactical decisions tend to be
semi-structured.
Operational decisions tend to be very
structured.
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Information Needs for
Management Decisions
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Two characteristics of information
needed for management decision
making:
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Source of the information
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Internal
External
Degree of detail of information
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Detailed
Summarized
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Information Needs for
Management Decisions (cont’d.)
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Strategic decision information tends to
be external and summarized.
Tactical decision information tends to be
both internal and external and both
detailed and summarized.
Operational decision information tends
to be internal and detailed.
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Information Systems for
Management Support
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Information systems support
management in all the functions of a
business at all levels.
Accounting information systems provide
accounting information at operational,
tactical, and strategic levels.
Financial information systems help in
financial decision making at all levels.
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Information Systems for
Management Support (cont’d.)
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Marketing information systems provide
information to marketing managers at
different levels.
Manufacturing information systems
assist in making manufacturing and
production decisions at all levels.
Human resource information systems
support personnel decisions making at
all levels.
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Management Information
Systems
Management Decision Making
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Management Information
System Structure
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A Management Information System
(MIS) supports management decision
making by providing information in the
form of reports and responses to
queries to managers at different levels
of an organization.
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Management Information
System Functions
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Management information systems
perform the four main functions of an
information system:
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Input function
Storage function
Processing function
Output function
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Decision Support Systems
Management Decision Making
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Decision Support Systems
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A management information system
helps managers make decisions by
providing information from a database
with little or no analysis.
A Decision Support System (DSS) helps
managers make decisions by analyzing
data from a database and providing the
results of the analysis to the manager.
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Management Decision Support
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A decision support system includes
several ways of analyzing data. They
include:
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Statistical calculations – data is manipulated
to determine characteristics of the data or to
draw conclusions from the data.
Mathematical modeling – a representation of
reality.
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Decision Support System
Structure
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The users of a DSS are managers,
usually at the tactical and strategic
levels in the organization.
The DSS model base (analogous to a
database) contains the mathematical
models and statistical calculation
routines that are used to analyze data
from the database.
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Decision Support System
Functions
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The capabilities of a decision support
system are provided by the four
information system functions performed
by the system. They are:
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Input function
Storage function
Processing function
Output function
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Decision Support System
Software
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A decision support system is usually
developed using general software that
is adapted for a specific decision.
An example of DSS software is
spreadsheet software.
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Group Decision Support
Systems
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A Group Decision Support Systems
(GDSS) is a system designed to support
group decision making.
A GDSS is typically used in a network.
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Geographic Information
System
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A Geographic Information System (GIS)
is an information system that provides
information for decision making based
on geographic location.
A GIS includes a database in which all
data is organized by geographic
location.
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Executive Support Systems
Management Decision Making
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Executive Support Systems
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An Executive Support System (ESS) is
designed specifically for the information
needs of strategic managers.
Also called an Executive Information
System (EIS).
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Executive Information Needs
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While strategic level managers generally
need summarized information,
occasionally they need detailed
information.
The detailed information is available
through a process called drilling down.
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Executive Support System
Structure
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An ESS may include any of the following:
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On-line access to reports.
The ability to query the MIS database for
information not usually received in reports.
The ability to access external databases.
The ability to analyze and summarize data
from reports and queries, and to view the
results of the analysis graphically.
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Executive Support System
Structure (cont’d.)
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The ability to drill down to detailed
information.
Electronic mail (e-mail) to communicate with
employees.
An electronic appointment calendar.
Basic word processing capabilities for writing
notes, memos, and other simple
communications.
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Executive Support System
Functions
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An executive support system provides its
capabilities through the four information
system functions:
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Input function
Storage function
Processing function
Output function
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Expert Systems
Management Decision Making
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Expert Systems
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An Expert System (ES) is a type of
information system that gives expert
advice to the decision maker.
The system accomplishes this task by
incorporating human expert knowledge
and using this knowledge to analyze
specific problems.
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Expert Advice
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Expert advice is used at all levels of a
business, but is most commonly
required for structured problems at the
operational and tactical levels.
Problems in research and development,
engineering, production, finance,
computer systems, accounting, and
other areas use expert advice.
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Expert System Structure
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The knowledge base is a database of
expert knowledge.
Different types of expert systems use
different techniques for storing
knowledge.
One technique is to use rules.
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A rule is an if-then structure.
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Expert System Structure
(cont’d.)
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The expert system software consists of
a user interface and an inference
engine.
The inference engine analyzes rules in
the knowledge base to draw
conclusions.
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Expert System Functions
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Expert system capabilities are provided
by the four information system
functions:
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Input function
Storage function
Processing Function
Output Function
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Expert System Software
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Expert system software is very complex.
Knowledge engineers usually do the
development of the rules and the
knowledge base.
Programming languages include:
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LISP
PROLOG
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Other Artificial Intelligence
Applications
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Neural networks consist of artificial
neurons, which are software elements
that act like human neurons.
An intelligent agent is a program that
acts on behalf of an individual, based
on preferences that are given to the
agent.
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Knowledge Management
Systems
Management Decision Making
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Organization Knowledge
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Explicit knowledge can be stated or
written in a form someone else can
understand.
Implicit knowledge cannot be expressed
easily but is understood by the
individual.
Making decisions involves the use of
both explicit and implicit knowledge.
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Knowledge Management
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Knowledge management is the process
of managing organizational knowledge.
An organization must determine what
knowledge it has and acquire the
knowledge that it is lacking.
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Knowledge Management
(cont’d.)
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Explicit knowledge needs to be
organized and recorded in a way that
makes it usable by others in the
organization who do not have that
knowledge.
Knowledge needs to be communicated
to those who need it and share among
the employees in an organization.
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Management Decision
Making
Key Terms
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Key Terms
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Ad Hoc Report
Artificial Intelligence
(AI)
Decision Support
System (DSS)
Demand Report
Drilling Down
Executive Information
System (EIS)
© 2001 Business & Information Systems 2/e
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Executive Support
System (ESS)
Expert System (ES)
Geographic Information
System (GIS)
Group Decision Support
System (GDSS)
Inference Engine
Intelligent Agent
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Key Terms (cont’d.)
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Knowledge
Knowledge Base
Knowledge
Management
Knowledge
Management System
Management
Information System
(MIS)
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Model Base
Neural Network
Organizational
Knowledge
Query
Rule
Scheduled Report
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Summary
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Improving Management DecisionMaking Effectiveness
Management Decisions
Management Information Systems
Decision Support Systems
Executive Support Systems
© 2001 Business & Information Systems 2/e
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Summary (cont’d.)
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Expert Systems
Knowledge Management Systems
© 2001 Business & Information Systems 2/e
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Final Black Slide