Lead Black Slide. © 2001 Business & Information Systems 2/e2 Chapter 11 Management Decision Making.

Lead Black Slide

© 2001 Business & Information Systems 2/e

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Chapter 11

Management Decision Making


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Our Agenda Improving Management Decision-

Making Effectiveness Management Decisions Management Information Systems Decision Support Systems Executive Support Systems


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Our Agenda (cont’d.) Expert Systems Knowledge Management Systems

5© 2001 Business & Information Systems 2/e

Learning Objectives 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.


Learning Objectives (cont’d.) Describe the structure of

management information systems. Describe the structure of decision

support systems. Explain the purpose of executive

support systems.


Learning Objectives (cont’d.) 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



Improving Management Decision-making Effectiveness 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



Levels of Management Decisions Management decisions are made

at several levels in an organization. Starting at the top: Strategic decisions Tactical decisions Operational decisions


Strategic Decisions Made by top level managers. Involve setting organization

policies, goals, and long-term plans.

They affect the organization for many years.


Tactical Decisions Made by middle-level managers. Involve implementing policies of

the organization. They affect the organization for

several months or a few years.


Operational Decisions 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.


Characteristics of Management Decisions The three characteristics of

management decision making1. Time horizon affected by the

decision2. Frequency of repeating the same

decision3. Degree of structure in the decision

process


Characteristics of Management Decisions (cont’d.) Strategic decisions tend to be

unstructured. Tactical decisions tend to be

semi-structured. Operational decisions tend to be

very structured.


Information Needs for Management Decisions Two characteristics of information

needed for management decision making: Source of the information

Internal External

Degree of detail of information Detailed Summarized


Information Needs for Management Decisions (cont’d.) 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.


Information Systems for Management Support 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.


Information Systems for Management Support (cont’d.) 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 Information System Structure 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.


Management Information System Functions Management information systems

perform the four main functions of an information system: Input function Storage function Processing function Output function


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Decision Support Systems



Decision Support Systems 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.


Management Decision Support

A decision support system includes several ways of analyzing data. They include: Statistical calculations – data is

manipulated to determine characteristics of the data or to draw conclusions from the data.

Mathematical modeling – a representation of reality.


Decision Support System Structure 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.


Decision Support System Functions The capabilities of a decision

support system are provided by the four information system functions performed by the system. They are: Input function Storage function Processing function Output function


Decision Support System Software 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.


Group Decision Support Systems A Group Decision Support Systems

(GDSS) is a system designed to support group decision making.

A GDSS is typically used in a network.


Geographic Information System 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



Executive Support Systems An Executive Support System

(ESS) is designed specifically for the information needs of strategic managers.

Also called an Executive Information System (EIS).


Executive Information Needs

While strategic level managers generally need summarized information, occasionally they need detailed information.

The detailed information is available through a process called drilling down.


Executive Support System Structure

An ESS may include any of the following: 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.


Executive Support System Structure (cont’d.) 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.


Executive Support System Functions

An executive support system provides its capabilities through the four information system functions: Input function Storage function Processing function Output function


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Expert Systems



Expert Systems 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.


Expert Advice 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.


Expert System Structure 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. A rule is an if-then structure.


Expert System Structure (cont’d.) 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.


Expert System Functions Expert system capabilities are

provided by the four information system functions: Input function Storage function Processing Function Output Function


Expert System Software Expert system software is very

complex. Knowledge engineers usually do

the development of the rules and the knowledge base.

Programming languages include: LISP PROLOG


Other Artificial Intelligence Applications 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



Organization Knowledge 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.


Knowledge Management 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.


Knowledge Management (cont’d.) 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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Key Terms


Key Terms Ad Hoc Report Artificial Intelligence

(AI) Decision Support

System (DSS) Demand Report Drilling Down Executive

Information System (EIS)

Executive Support System (ESS)

Expert System (ES) Geographic

Information System (GIS)

Group Decision Support System (GDSS)

Inference Engine Intelligent Agent


Key Terms (cont’d.) Knowledge Knowledge Base Knowledge

Management Knowledge

Management System Management

Information System (MIS)

Model Base Neural Network Organizational

Knowledge Query Rule Scheduled Report


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Summary Improving Management Decision-

Making Effectiveness Management Decisions Management Information Systems Decision Support Systems Executive Support Systems


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Summary (cont’d.) Expert Systems Knowledge Management Systems

Final Black Slide

Lead Black Slide. © 2001 Business & Information Systems 2/e2 Chapter 11 Management Decision Making.

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