The term environment here covers all factors external to the firm. Recognising and Defining the Decision Situation. Secondly, this is treated as a method of obtaining only compromise solutions. Identification of Resources and Constraints: Just as a business manager does not operate in isolation, problem solving does not occur in vacuum. Secondly, performance data must be readily available so that the comparison to standards may be made. An management information system, or MIS, is a computer-based system that provides managers with the tools to run their department effectively. MIS is less useful for making non-programmed decision making. Decision Support System (DSS) 3. In other words, managers hardly enjoy any discretion in matters involving programmed decisions set managers, decide what to do. 5. Decisions are made to sustain the activities of all business activities and organizational functioning. The Decision-Making Context 5. - Create/Design databases and programs that will provide reports that will support the business objectives and feed the management and stakeholder packs. Introduction to Decision Making in Management 2. The manager will choose to maximize profit or some other value. When plans go wrong or out of track, managers have to decide what to do to correct the deviation. Similarly, when inventory of raw materials occurs. Once perceived Otherwise it may cease to exist. The following are the management levels: 1. The process starts with supervisory managers meeting as a group to analyse a problem or opportunity and develop alternative solutions. MIS is a scientific way of collecting; processing, storing and communicating information relating to the various activities of . Programmed and Non-Programmed Decisions 9. The systems collate raw data into reports in a format that enables decision-makers to quickly identify patterns and trends that would not have been obvious in the raw data. Types of Decisions 7. Finally, it is absolutely essential to develop a data analysis strategy. Group Decision MakingUse of Committees: The steps in the decision-making process descried so far focused primarily on the individual decision maker. Such decisions obviously involve long-term planning and policy formulation. Qualitative decisions about the business activities can be made using MIS. vi) Customer data report helps in planning better and effective marketing strategies and promotional activities. Be it strategic, business activities or HR matters . Good MIS ensures good decision making just in the same way bad MIS drive the making of bad decisions. It is very unlikely that all of these conditions will be met, so the decision makers rationality is bounded by situational factors. Examples of managerial-level decision making at the tactical level include: Allocating budgets and resources. The saying two brains are better than one, like many others, contains an elephant of truth. The fact that someone must make a decision implies that there is a problem to be solved. An important concept developed by Simon is satisfying, which suggests that, rather than conducting an exhaustive search for the best possible alternative, decision makers tend to search only until they identify an alternative that meets some minimum standard of sufficiency. The Nature of Decision Making 3. However, there are certain weaknesses of the group decision-making process. In fact, Simons view of the modern manager is different from the views of other writers on management. Whatever may be type of decision the decision maker has to proceed through a number of well-defined and interrelated steps. For example, the final criterion used to select a plant site might be its proximity to the managers home town. When managers plan, they decide such matters as what goals or opportunities their organisation will pursue, what resources they will use, and who will perform each required task. When making a decision managers have a purpose. A fundamental aspect of all instances of collective motion is that of individual repeated decision-making [1-3].This, in turn, is both driven by and relies on local interactions among the constituent agents, requiring each agent to obtain information about its surrounding social environment [].The consequent formation and maintenance of this distinctive form of synchronized . The MIS is defined as an integrated system of man and machine for providing the information to support the operations, the management and the decision-making function in the organization. vii) Management information system helps an organization to achieve a competitive advantage. It may even mean selecting the best method for going out of business or terminating a contract. Goal oriented process: Decision-making aims at providing a solution to a given problem/ difficulty before a business enterprise. This phenomenon can, of course, be prevented if the leader accepts ultimate responsibility for decision-making. Report a Violation 11. Calculating the consequences of all solutions and comparing the probability of satisfying the criteria. The decisions may be such as where to invest money, where to set up a new plant or warehouse, how to deal with to invest money, where to set up a new plant or warehouse, how to deal with an employee who is invariably late, or what subject should be brought into focus in the next departmental meeting. Management information systems help decision-makers understand the implications of their decisions. Such a response refers to the reaction of the organisation and its individual members to an alternative that has been chosen. Due to the increased advancement in technology, many organizations and businesses are using . There are two reasons for this. viii) It helps in effective decision making, thereby reducing the time for actionable items. Thirdly, the larger the number of people concerned with a problem, the greater the number of likely alternatives to be sought. For this reason, we will have to be particularly careful making decisions when we have little past experience or information to guide us.. The managers primary task is to monitor the environment for potential change. Thirdly, how provisions for evaluation and modification of the chosen solution during the implementation process be made? Levels Decision making Organization levels that comprise of strategic, management, knowledge, and operational levels of the organization classify decision-making. Study with Quizlet and memorize flashcards containing terms like 1) Improving the quality of high-value decision making by an executive will save an organization far more money than improving the quality of lesser-value decisions made at a lower level., 2) Unstructured decisions are novel and nonroutine, and there is no well-understood or agreed-on procedure for making them., 3) A structured . Decision Making Defined 4. Leader decides and communicates decision to the group (Leader does not require group member input) 2. 2. . A second advantage of this method is that the presence of several group members also means that more alternative solutions may be proposed and a great number of proposed solution can be analysed.. Managers rarely consider all possible alternatives to the solution of a problem. Most non-programmed decisions involve innumerable variables and it is neither possible nor feasible, with limited knowledge and resources, to examine them all. In general constraints are factors that impede problem solution or limit managers in their efforts to solve a problem. Thirdly, group decision-making is characterised by indecisiveness and buck passing blaming one another for a poorly made decision or the lack of decision. So they propose and analyse alternative courses of action and finally make a choice that is likely to move the organisation in the direction of its goals. (iii) Choosing the Most Appropriate Alternative: After evaluating the alternatives properly it is necessary to choose the alternative which is acceptable to those who must implement it and those who have to bear the consequences of the decision. A major problem, however, is that managers often feel psychologically uncomfortable to think about problems. After one or more alternatives have been selected, the manager must put the alternative or alternatives into effect. The business managers have to take variety of decision. A programme, for example, might be developed for the sole purpose of implementing a course of action for solving an organisational problem. It is perhaps easiest for managers to make programmed decisions.. H. A. Simon makes the following assumptions about the decision-making process: 1. Decision making is a fundamental function of the management. A solution has to be evaluated in terms of the anticipated responses to it. In order to assess the quality of a solution we have to reintroduce the concepts of efficiency and effectiveness. The ESS is the major recipient of data from the lower-level systems which is mainly used in unstructured decision-making. Specifying technology to improve production efficiency. Feedback is a necessary component of the decision process, providing the decision maker with a means of determining the effectiveness of the chosen alternatives in solving the problem or taking advantage of the opportunity and moving the organisation closer to the attainment of its goals.. In some situations, however, the effective decision may be one that minimises loss, expenses, or employee turnover. Subjective and personal considerations often intervene in decision situations. A rational decision making model takes the following steps: Identifying the problem. Use is made of committees in the decision-making process. Content Filtration 6. With objectives firmly in hand, the next phase in the decision process is to define the particular problem that gives (give) rise to the need to make a decision. This occurs in situations where clear lines of authority and responsibility for making a decision have not been drawn. 950,000. How much time and money should be developing alternatives: Time and money are the important resources at the disposal of the decision-maker. However, the fact remains that todays complex world in which most organisations operate makes it increasingly difficult for a single manager to make complex decisions independently. The truth is that most organisations face a multiplicity of problems at the same time. Group decision-making has its merit and drawbacks. Decision Matrix 6. This means the company makes decisions that will contribute to the longevity, profitability, and continued improvement of all areas of operation. Strategic Planning Level: Plan 2. People tend to satisfice for a variety of reasons. The normative model of decision-making considers constraints that may arise in making decisions, such as time, complexity, uncertainty, and inadequacy of resources. Intuition, judgement and experience always play a very important role in decision-making under uncertain conditions. What can be said in favour of programmed decisions is that such decisions can be made quickly, consistently and inexpensively since the procedures, rules and regulations eliminate the time-consuming process of identifying and evaluating alternatives and making a new choice each time a decision is required. The satisfying concept suggests that she or he will select this site even though further searching might reveal a better one. The MIS is defined as a system based on the database of the organization evolved for the purpose of providing information to the people in the organization. Managerial decision-making is also concerned with regulating and altering the relationship between the organisation and its external (immediate) environment. He attempts to present a realistic picture of a decision maker who is faced with two sets of constraints internal and external. Simon states in Administrative Behaviour that managers satisfies, that is, look for a course of action that is satisfactory or good enough. Managers in the not-for-profit and public enterprises are faced with a similarly wide range of decisions. Their habits, or those of their peers, will help them decide quickly what to do about them. Thus when a situation calls for a programmed decision managers must ultimately make use of their own judgement. 3. However, most important and strategic decisions in modern organisations are taken under conditions of uncertainty. Finally, Normal R. F. Maier has pointed out that, in most instance, one person or a few individuals will dominate the group because of differences in status or rank from the other members or through force of personality. It is merely a valuable method for top-level executives in making decisions and solving problems. Again, marketing managers have to determine the appropriate production mix with regard to price and promotion: if multiple products are produced, what should be the price range among different products? fMIS IS AN EFFECTIVE TOOL IN DECISION MAKING The Indian business scenario is also changing at a very fast rate in all the aspects and in all the areas, using advanced software tools like MIS, DSS and Expert System. Prior to the actual decision, existing conditions relevant to the decision itself are observed, assessed and measured. Operational Control Level: Direct Operational control level includes: Marketing: It is the area in which considerable effort as spent in describing how the computer could be applied to the entire range of marketing operations. One popular account, grounded in animal behavior and extended to human behavior, grafted . Such decisions are needed to solve problems like how to allocate an organisations resources, what to do about a failing product line, how community relations should be improved, and almost all significant problems a manager faces. 1. Relative to other types of. There is no denying the fact that programmed decisions limit the freedom of managers to a considerable extent. Decisions are made at every level of management to ensure organizational or business goals are achieved. Managers should consider three proximate factors in determining the appropriate amount to spend in generating alternatives. Rather they examine a few alternatives that appear to be likely solutions. A 0.001% increase in market share satisfies the objective, as does a 1% increase, or 10% increase. The MIS helps the middle management in short term planning, target setting and controlling the business functions. Regardless of their level of responsibility, managers must make decisions for their companies. Every organisation has written or unwritten policies that simplify decision-making in a particular situation by limiting or excluding alternatives.. For example, when an important equipment breaks down, the manager has to decide whether to repair or replace it. "Make or buy" decisions. This is more so in those situations involving complex problems where no one member is a specialist in the problem area. This can lead to considerable dissatisfaction or frustration. After reading this article you will learn about:- 1. While programmed decisions limit the flexibility of managers, they take little time and free the decision maker to devote his or her efforts to unique, non-programmed decisions. It is to be noted that so far no generalised rules have been developed that deal with managing the implementation phase. The senior leaders are always engrossed in making decisions where the fate of the employees and the organization is involved. 1. Therefore in this article the stress will be on the formal decision-making process, i.e., how managers proceed systematically to reach logical decisions that can help them in the best possible way to reach their goals. In other words, what should be done? A more realistic decision-making situation is a state of risk. Essays, Research Papers and Articles on Business Management, Decision-Making under Certainty, Risk and Uncertainty, Decision Making in an Enterprise: Meaning and Process, Top 5 Models of Managerial Decision Making, Mathematical Models: Types, Structure and Advantages | Decision Making, Classification of Plans: 3 Categories | Management, Introduction to Decision Making in Management, Decision-Making at Different Levels in the Organisation, Group Decision Making Use of Committees. Copyright 10. But all decisions have to proceed through these steps. This should be of critical concern to the manager or decision maker. This is, of course, a realistic assumption provided the decision maker is able to obtain complete information concerning all possible alternatives and thus choose the best solution designed to achieve a particular goal. One important concept that Simon derived from these ideas is the notion of bounded rationality. Thus, MIS must perform the following functions in order to meet its objectives. . Some groups experience more indecisiveness than individual decision makers since the pressure to reach a decision is diffused among the group members.. None of the decisions is simple and it is virtually impossible for decision makers to account fully for all of the factors that will influence the outcome of the decision. But these are exceptions rather than the rule). In order to make such an evaluation of the effectiveness of a possible decision, the following three conditions must be fulfilled: Firstly, there must exist a set of standards which act as yardstick against which to compare performance. Determination of organizational objectives and developing plans to achieve them. Such decisions can be placed into three broad categories: technical decisions, managerial decisions and institutional decisions. But compromises by their very nature require participants to sacrifice some of their interests. In a like manner managers will not generally have to think about the routine problems they face every day. When making a decision managers are faced with alternatives. Finally, a major strength of group decision-making is the relative ease of implementing decisions that have been made. In general, the information required to solve problems related to these activities is generally concerned with the operational aspects of the technology involved. Decision Making - Meaning and Important Concepts. In fact, in every management information system there is an in-built early warning signal system of reporting various environmental developments such as new or adapted products by competing producers; changes in attitudes and sentiments of buyers; development of new processes or methods of production. Similarly, the financial manager has to decide whether to invest in a new plant or to lease. 8.7: Basic resources of the organisation the five. The more important the decision the greater the value of marginal improvements in the solution. These human costs are often considerable even though these cannot be measured in terms of money. In fact, managers who know exactly how the data are to be analysed will be able to specify the types of the data they need, the most preferred format, and the time sequence in which they are needed. Such advance specifications are likely to act as aids in reducing the mass of useless data that are often collected. In fact, managers often identify one or two alternatives very fairly and choose from among them. Finally, a post decision observation should be made to determine how successful the decision was in solving the original problem. Prohibited Content 3. MIS comprises of three elements: Management, Information and System. Account Disable 12. Leaders make the big bucks to make decisions, especially the hard ones. For example, the Dean of the Faculty of Indian Institute of Management, Calcutta, must decide how to allocate funds among such competing needs as travel, phone services, secretarial support, and so on. 5. As Stoner puts it: It does not take a wise manager to reach a decision when there are no other possible choices. Level Two: The Leader Makes the Decision with Input from Key Individuals/Stakeholders. A few examples of such decisions may now be given. Effective managers usually rely on policy as a time saver. Managers use various types of resources and we often speak of five Ms in this context, viz., materials, money, manpower, machinery and management. It is, therefore, quite obvious that the key element in decision-making under a state of risk is accurately determining the probabilities associated with each alternative. Organisational decisions are made under three conditions, viz., certainly, risk and uncertainty. The decision making role of the management is the 'heart' of the executive activities in the organization. Non-programmed decisions, as Stoner has put it, are those that are out of the ordinary or unique. The risks of each alternative must be considered. If the organisation is to survive and grow in the long nm it must be ready to adapt and evolve in response to diverse environmental changes. Managers of most profit-seeking firms are always faced with a wide range of important decisions in the areas of pricing, product choice, cost control, advertising, capital investments, dividend policy and so on. Decision-making and levels of management: Conceptual and technical skills: Decision-making differs from each level of management. Institutional decisions concern such diverse issues as diversification of activities, large-scale capital expansion, acquisition and mergers, shifts in R & D activities and various other organisational choices. In other words, it is a measure of organisational productivity. A management information system (MIS) is a computer system consisting of hardware and software that serves as the backbone of an organization's operations. Since the solution of most managerial problems requires the combined effort of various members of the organisation, each must understand what role he (she) has to play during each phase of the implementation process. Business managers have to make various types of decisions. 1 MIS takes into account mainly quantitative factors, thus it ignores the non-quantitative factors like morale, attitudes of members of the organisation, which have an important bearing on the decision making process of executives. How can information technology contribute to unstructured decisions? This is partly a matter of determining how the problem that is being addressed came about. 11. Managers in every organisation are faced with these three types of decisions, viz., technical, managerial and institutional. The MIS helps the top-level management in goal setting, strategic planning and evolving the business plans and their implementation. Moreover, the manager must also be able to define the situation. 2. In the words of Boone and Koontz: Institutional decisions involve long-term planning and policy formulation with the aim of assuring the organisations survival as a productive part of the economy and society. The implication is clear: if an organisation is to thrive in the long run as a viable organisation, it must occupy a useful, productive place in the economy and society as a whole. Unexpected cost increases a less-than-perfect fit with existing organisational subsystems, unpredicted effects on cash-flow or operating expenses, or any number of other situations could develop after the implementation process has begun. In defining or formulating a problem the decision maker should be as precise as possible and should state the problem explicitly. A useful tool for making business decisions is a management information system. It is a process of using inputs effectively in the solution of selected problems and the creation of outputs that have utility. The difference between management information system and decision support system is that management information system supports structured decision making while decision support system provides support for unstructured or semi-structured decisions.
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