Information Technology and Decision
Making
• Intellectual Capital
The collective brainpower or shared
knowledge of a workforce that can be
used to create wealth.
It is a major source of competitive advantage.
Information Technology and the New
Workplace
• Electronic Office
Refers to the use of computers and related
technologies to electronically facilitate operations
in an office environment.
Information Technology and the New
Workplace
• Electronic Commerce
Called e-business and it information technology
to support on-line commercial transactions.
Amazon.com is a striking example of
e-commerce and its dynamics.
External and Internal Information
Needs of Organizations
Public Information
Intelligence Information
Gathered from the
external environment
Top
Management
Disseminated to the
external environment
Formulates strategy, policies,
long-term plans, and objectives,
make strategic decisions.
Middle Managers
Formulate operational plans and objectives
to implement strategy; make operational decisions
First-Level Managers
Implement operational plans and objectives; make
short-run decisions; transact day-to-day business operations
Developments in Information
Systems
• Information Systems
Use IT to collect, organize, and distribute data
for use in decision making.
• Chief Information Officer
Senior executive responsible for IT and it
utilization throughout an organization.
Developments in Information
Systems
• Management Information Systems
Use IT to meet the information needs of
managers as they make decisions.
• Decision Support Systems
Use special soft ware to allow users to interact
directly with a computer to help make decision
for solving complex problems.
Developments in Information
Systems
• Group DecisionSupport Systems
• Groupware
• Artificial Intelligence
• Expert Systems
• Intranets
• Extranets
• Interorganizational
Information Systems
Information and Problem
Solving
• A Problem
Is the difference between an actual situation and
a desired situation.
When the actual situation is less than desired it is
a performance deficiency
When the situation turns out better than
anticipated we have a performance
opportunity
Information and Problem
Solving
• Problem Solving
The process of identifying a discrepancy
between an actual and desired state of affairs,
and then taking action to resolve the discrepancy.
This process is dependent upon the right
information being available to the right people
at the right time.
Types of Managerial Problems
• Structured
Ones that are familiar, straightforward, and clear
in respect to the information needed to resolve
them.
• Unstructured
Tend to occur as new or unexpected situations
that involve ambiguities and information
deficiencies.
Types of Managerial Problems
• Programmed Decisions
Apply solutions from past experiences to the
problem at hand.
• Nonprogrammed Decisions
Develop unique solutions that are specifically
tailored to the situation at hand.
Types of Managerial Problems
• Nonprogrammed decisions are required when
new and unfamiliar problems arise, and/or when
standard responses have not been prepared.
• Most problems faced by higher-level managers
are of this type.
Conceptual Skills are Important
Types of Managerial Problems
• Crisis Problem
An unexpected problem that can lead to disaster
if not resolved quickly and appropriately.
Exxon Valdez - Chernobyl
Hugo
Problem Environments
• Certain Environments
They offer complete information on possible
action alternatives and their consequences.
• Risk Environments
They lack complete information, but offer
“probabilities” of the likely outcomes for
possible action alternatives.
Problem Environments
• Uncertain Environments
They are so poor in information that it is difficult
even to assign probabilities to the likely
outcomes of alternatives.
Groups and creative problem solving techniques
are frequently used in these situations.
How Managers Deal With
Problems
• Problem Avoiders - Inactive
Those who ignore information that would
otherwise signal the presence of a problem.
• Problem Solvers - Reactive
Those who try to solve problems when they arise.
• Problem Seekers - Proactive
Those who actively look for problems to solve, or
opportunities to explore as a matter of routine.
How Managers Deal With
Problems
• Systematic Thinkers
Approaches problems in a rational step-bystep, and analytical fashion.
* Planning before action
*
*
*
Ordered search for information
Conscious of their approach
Break down complex problems into
smaller components and then address
them in a logical and integrated fashion.
How Managers Deal With
Problems
• Intuitive Thinkers
Approach problems in a flexible,
spontaneous, and quite often, a creative
way.
*
They provide imaginative responses to problems
based on a quick and broad evaluation
*
They rely on unverbalized cues and
hunches, ... defend solutions in terms of “fit”.
*
Most effective in high uncertain environments.
How Managers Deal With
Problems
• Multidimensional Thinkers
Those with the capacity to view many problems at
once, in relationship to one another, and across
long and short time horizons.
• Strategic Opportunism
The ability to remain focused on long-term
objectives by being flexible in dealing with shortterm problems and opportunities as they occur.
The Problem Solving Process
• Find and define the problem
• Generate and evaluate alternative
solutions
• Select preferred solution and
conduct ethics double-check
• Implement the solution
• Evaluate the results
Finding and Defining the Problem
• Find the Problem
Identify the gaps between actual and desired
states of affaire, and determine their causes.
Gather information.
* Don’t define the problem too broadly or
too narrowly.
* Don’t focus on symptoms instead of
causes.
* Don’t choose the wrong problem to deal
with.
Generate and Evaluate Possible
Solutions
• Criteria for Evaluating Alternatives
–
–
–
–
Benefits - What is gained or resolved?
Costs - How much and how risky?
Timeliness - How fast will things occur?
Acceptability -Acceptance and support by
those who must live with the decision.
– Ethical Soundness - Does it meet with the
acceptable ethical criteria of the various
stakeholders?
Choose a Solution and Conduct
the Ethical Double-Check
• Management Theory Recognizes
Differences Between Two Major Models
of Decision Making:
– Classical Decision Model - describes how
managers should ideally make decisions using complete
information. (Optimizing)
– Administrative Decision Model - describes how
managers act in situations of limited information and
bounded rationality. (Satisficing)
Choose a Solution and Conduct
the Ethical Double-Check
• Judgmental Heuristics
Heuristics are strategies for simplifying decision
making. There are three specific and common
approaches, identified as judgmental, that have
potential biases:
– Availability Heuristic
– Representative Heuristic
– Anchoring and Adjustment Heuristic
Choose a Solution and Conduct
the Ethical Double-Check
• Escalating Commitments
Another potential decision-making error…..it is
the tendency to continue to pursue a course of
action, even though it is not working.
Don’t forget the Ethics Double-Check
Implement the Solution
• Take Action to Ensure That the
Solution Decided Upon Becomes a
Reality.
Avoid the lack-of-participation
error - the failure to adequately
involve those persons whose
support is necessary to ensure a
decision’s complete implementation.
Evaluate Results
• Compare the actual and desired
results to insure that the problem
has really been solved.