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Chapter 9

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York University
Administrative Studies
ADMS 2511
Cristobal Sanchez- Rodriguez

Chapter 9 Notes Managers and Decision Making - Management is a process by which organizational goals are achieved through the use of resources (people, money, energy, materials, information, space and time), resources are inputs - attainment of organizations goal is output of the process The Managers Job and Decision Making - all managers have three basic roles: 1. Interpersonal roles: figurehead, leader, liaison 2. Informational Roles: monitor, disseminator, spokesperson, analyzer 3. Decisional Roles: entrepreneur, disturbance handler, resource allocator, negotiator - Decision making is a systematic process - simon described the process as composed of three major phases, intelligence, design and choice, a 4 phase implementation was added as well - there is a continuous flow of information from intelligence to design to choice but at nay phase there may be a return to a previous phase - the decision making process starts with the intelligence phase, in which managers examine a situation an identify and define the problem - in the design phase, decision makers construct a model that simplifies the problem - decision makers set criteria for evaluating all potential solutions that are proposed - the choice phase, involves selecting a solution which is tested ‘on paper’ - implementation is successful if the proposed solution actually resolves the problem - failure leads to a return to the previous phase Why Managers Need IT Support? - the number of alternatives is increasing due to innovations, improved communications, the development of global markets etc. A key to good decision making is to explore and compare many relevant alternatives. - decision must be made under time pressure, therefore not possible to process information manually fast enough to be effective - due to increased uncertainty in decision environment, can conduct a sophisticated analysis - often necessary to rapidly access remote information, consult with experts or conduct a group decision making session all without incurring large expenses What Information Technologies Are Available To Support Managers? - Business Intelligence Systems (BI) and intelligent systems A Framework for Computerized Decision Analysis Problem Structure - the first dimension is problem structure, where decision making processes fall along a continuum ranging from highly structured to highly unstructured decisions - structured decisions refer to routine and repetitive problems for which standard solutions exist such as inventory control - in a structured problem, the first three of the decision process pahaes – intelligence, design and choice – are laid out in a particular sequence and the procedures for obtaining the best solution are known - two basic criteria that are used to evaluate proposed solutions are minimizing costs and maximizing profits - at the other extreme are unstructured decisions, there are no cut and dried solutions - unstructured problem is one where intelligence, design and choice are not organized in particular sequence - typical unstructured problems include planning new service offerings, hiring an executive, and a set of research and development projects for coming year - semi structured problems: only some of the decision process phases are structured - they require a combination of standard solution procedures and individual judgment - example of these are evaluating employees, setting marketing budgets for consumer products, etc. The Nature of Decisions: 1. Operational control: executing specific tasks efficiently and effectively 2. Management control: acquitting and using resources efficiently in accomplishing organizational goals 3. Strategic Planning: the long range goals and policies for growth and resource allocation The Decision Matrix: - three primary classes of problem structure and the three broad categories of the nation decisions can be combined in a decision support matrix that’s consists of nine cells - lower level managers usually perform the structured and operational control oriented tasks - PAGE 273 and 272 to look at diagram Business Intelligence, Multidimensional Data Analysis, Data Mining and Decision Support Systems - once an organization has captured data and organized it into databases, data warehouses and data marts, it can use it for further analysis - Business Intelligence (BI) refers to applications and technologies for consolidating, analyzing, and providing access to vast amounts of data to help users make better business and strategic decisions - business intelligence systems encompass two types of information systems (1) those that provide data analysis tools (that is multidimensional data analysis or online analytical processing, data mining and decision support systems) and (2) those that provide easily accessible information in a structured format (that is digital dashboards) Multidimensional Data Analysis - provides users with an excellent view of what is happening or what has happpened - to accomplish this, multidimensional analysis tools allow users to ‘slice and dice’ the data in any desired way - in the data warehouse, relational tables can be linked, forming multidimensional data structures, or cubes - this process looks like rotating the cubes as users view it from different perspectives - the power of multidimensional analysis lies in its ability to analyze the data in such a way as to allow users to quickly answer business questions Data Mining - searching for valuable business information in a large database, data warehouse or data mart - data mining can perform two basic operations (1) predicting trends and behaviors and (2) identifying previously unknown patterns - multidimensional analysis provides users with a view of what is happening - data mining addresses why it is happening and provides predictions of what will happen in the future - data mining can also identify previously hidden patterns in a single step - for example, it can analyze retail sales data to discover seemingly unrelated products that are often purchased together - one interesting pattern discovery problem is detecting fraudulent credit card transactions - in most cases the intent of data mining is to identify a business opportunity in order to create a sustainable competitive advantage - Retailing and Sales: predicting sales, preventing theft and fraud, and determining correct inventory levels and distribution schedules among outlets - Banking: Forecasting levels of bad loans and fraudulent credit card use, predicting credit card spending by new customers, and determining which kinds of customers will best respond to new loan offers - Manufacutring and production: Predicting machinery failures and finding key factors the help optimize manufacturing capacity - Insurance: forecasting claim amounts and medical coverage costs, classifying the most important elements that affect medical coverage, and predicting which customers will buy new insurance policies - Police Work: Tracking crime patterns, locations, and criminal behavior; identifying attributes to assist in solving criminal cases - Health Care: correlating patients demographics with critical illnesses and developing better insights on how to identify and treat symptoms and their causes - Marketing: classifying customer demographics that can be used to predict which customers will respond to a mailing or buy a particular product Decision Support Systems - Decision support system (DSS) combine models and data in an attempt to solve semi structured and some unstructured problems with extensive user involvement - DSSs designed to enable interactive access to data, to enable manipulation of this data, and to provide business managers and analysts the ability to conduct appropriate analyses - DSS can manipulate data, enhance learning and contribute to all levels of decision making -they have the related capabilities of sensitivity analysis, what if analysis and goal seeking analysis Sensitivity Analysis - is the study of the impact that changes in one (or more) parts of a decision making model have on other parts - most of these analysis examine the impact that changes in input variables have on output variables - it enables the system to adapt to changing conditions and to the varying requirements of different decision making situations - provides a better understanding of the model, and the problem it purports it describe - A sensitive model means that small changes in conditions dictate a different solution - in a non sensitive, changes in conditions do not significantly change the recommended solutions - for this reason the chances for a solution to succeed are much higher in a non sensitive model than in a sensitive one What if Analysis - attempts to predict the impact of a change in the assumptions (input data) on the proposed solution - for example, what will happen to the total inventory cost if the originally assumed cost of carrying inventories is not 10 percent but 12 percent? - in a well designed, BI system managers themselves can interactively ask the computer these types of questions as many times as they need to Goal Seeking Analysis - represents a ‘backward’ solution approach - attempts to find the value of the inputs necessary to achieve a desired level of output Group Decision Support Systems - these systems are designed specifically to support decision making by groups - group decision support system (GDSS) is an interactive, computer based system that facilitates a groups efforts to find solutions to semi structured and unstructured problems - the objection of these systems is to support the process of arriving at a decision - the first generation of GDSSs was designed to support face to face meetings in what is called a decision room – a face to face setting for a group DSS in which terminals are made available to the participants Organizational Decision Support System - ODSS focuses on an organizational task or activity that involves a sequence of operations and decision makers - examples of organizational tasks are capital budgeting and developing a divisional marketing plan - to complete an organizational task successfully, each individual’s activities must mesh closely with other people’s work - in these tasks, computer support serves primarily as a vehicle for improving communication, coordination and problem solving Digital Dashboards - digital dashboards evolved from executive information systems, which were information systems designed specifically for the information needs of top executives - today, all employees, business partners and customers can use digital dashboards - a digital dashboard (also called an executive dashboard or a management cockpit) provides rapid access to timely information and direct access to management reports - user friendly and is supported by graphics - enables managers to examine exception reports and drill down reports - they can have shortcomings: for example the dashboard alerted managers when the targets for the fill rates were not being met but it did not tell them why these targets were not being met. Thus managers, did not know whether a target was missed due to bad forecasting issues with Del Monte’s distribution channels, or some other reason The capabilities of digital dashboards Capability Description Drill Down The ability to go to details, at several levels, can be done by a series of menus or by direct queries Critical success factor Calculates the factors most critical for the success of business. (CSF) These can be organizational, industry, departmental etc Key Performance Calculates the specific measures of CSFs indicator Status Access The latest data available on KPI or some other metric, ideally in real time Trend Analysis Short, medium, and long term trend of KPI’s or metrics which are projected using forecasting methods Ad hoc analysis Analyses made any time, upon demands and with any desired factors and relationships Exception Reporting Reports that highlight deviations larger than certain thresholds.
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