When plans go wrong or out of track, managers have to decide what to do to correct the deviation. Introduction to Decision Making in Management: In todays dynamic world business firms have to take a number of decisions every now and then. Managers should also recognise that even when all alternatives have been evaluated as precisely as possible and consequences of each alternative weighed, it is likely that unanticipated consequences will also arise. In most real-life situations managers adopt a shortcut approach and thus fail to arrive at the best solution. 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. Managerial decision-making is also concerned with regulating and altering the relationship between the organisation and its external (immediate) environment. Decision making stages Developed by B. Aubrey Fisher, there are four stages that should be involved in all group decision making. The second factor is the ability of the decision-maker to differentiate accurately among alternatives determining the amount of time that he should devote in developing alternatives and cannot, in advance, tell the difference between two alternatives and cannot rank them accurately according to this likely effectiveness. 2. The Nature of Decision Making 3. Consider, for example, the following two ways in which a firm might state one of its objectives: To increase our market share by at least 3.5% in the next fiscal year. Finally, a major strength of group decision-making is the relative ease of implementing decisions that have been made. Some decisions can be made in a minutes time. Before attempting to evaluate the quality of any alternative, it is absolutely essential for the decision-maker to first establish the extent to which each of these criteria will be used. Decision-Making at Different Levels in the Organisation 8. 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. This chapter focuses on the specialized systems that firms use to achieve better decision making: management information systems (MIS), decision-support systems (DSS), group decision-support systems (GDSS), and executive support systems (ESS). Once decision is taken, it implies commitment of resources. The decision maker may be unable to weigh and evaluate large numbers of alternatives and criteria. . 8 Management Information System Used by managerial or mid-level managers Subset of the overall internal controls Identification of Resources and Constraints: Just as a business manager does not operate in isolation, problem solving does not occur in vacuum. However, 1978 Nobel Laureate H. A. Simon has made extensive study of managerial behaviour and on the basis of his investigation arrived at the conclusion that modern managers do not always attempt to maximize profits. It is necessary to distinguish, at the outset, between the environment as an objective entity and the managers perception of the environment. Leader decides and communicates decision to the group (Leader does not require group member input) 2. A 0.001% increase in market share satisfies the objective, as does a 1% increase, or 10% increase. 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. 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. Decisions concerning such activities are basically technical in nature. 7. A solution has to be evaluated in terms of the anticipated responses to it. Recognising and Defining the Decision Situation: The first step in making a decision is recognising that a decision is necessary there must be some stimulus to initiate the process. 1. Importance 5. A management information system (MIS) provides information that organizations require to manage themselves efficiently and effectively. For this reason, we will have to be particularly careful making decisions when we have little past experience or information to guide us.. Alternatively there may be prohibitive constraints. The chief approach to formulating the data collection process is the design of management information systems. . These problems compete for the limited amount of organisations resources and managers attention. It is a process of using inputs effectively in the solution of selected problems and the creation of outputs that have utility. A solution has to be acceptable to those affected by it and to those who must implement it. The latter refer to all external influences influences exerted by workers of the organisation and groups outside it. Some groups experience more indecisiveness than individual decision makers since the pressure to reach a decision is diffused among the group members.. However, managers are faced with various constraints in the decision-making process. 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. The firm either increases market share by the prescribed amount in B might be revised. This provided a better and more complete management structure since decision making was . Gather information Next, it's time to gather information so that you can make a decision based on facts and data. 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.. In short, the nature and circumstances of a decision can vary enormously. 8.8 shows an effective process for evaluating alternatives. However, its intricate interplay with other history factors in PDM challenges a principled account of the history effects of feedback. Content Guidelines 2. However, the actual process of decision-making may not be as rational as Fig. 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. Payback Analysis 8. Qualitative decisions about the business activities can be made using MIS. It is very unlikely that all of these conditions will be met, so the decision makers rationality is bounded by situational factors. Finally, the manager might decide that the alternative originally chosen is in fact appropriate, but that it simply has not yet had time to work or should be implemented in a different way. Anything that contributes to problem solving is a resource which includes time, money, personnel, experience, equipment, raw materials and information. An MIS does have limitations, like its . Management Information Systems (MIS) is the key factor to facilitate and attain efficient decision making in an organization. Group decision-making is the accepted norm in Japanese organisations. This explains why the decision maker must become aware of and be sensitive to the decision environment before any decision is possible. The evaluation of alternatives is no doubt a complex exercise. Programmed and Non-Programmed Decisions: Nobel Laureate H. A. Simon has distinguished between two types of decisions, viz., programmed and non-programmed moved decisions. The policies, rules or procedures by which managers make decisions free them of the need to find out new solutions to every problem they face. Meaning of MIS 2. We will be reasonably confident that the supplier chosen will meet our expectations. Secondly, more often than not group decisions are comprehensive decisions resulting from differing points of view of individual members, rather than the selection of the most appropriate (or the best possible) choice for solving the problem. 3. The central feature of the principle of bounded rationality is Simons contention that the so-called administrative man does not follow an exhaustive process of evaluation of the options open to find a course of action that is satisfactory or good enough. 4. He attempts to present a realistic picture of a decision maker who is faced with two sets of constraints internal and external. It is also necessary to consider the various types of risks associated with each alternative. That is, should the company introduce one new high-priced stereo system or four complementary systems for each market segment? The MIS helps the middle management in short term planning, target setting and controlling the business functions. In defining or formulating a problem the decision maker should be as precise as possible and should state the problem explicitly. In every organization, the senior-level management is actively involved in decision-making. The role of management information systems (MIS) in decision making is to generate data that is useful to management as they consider strategy, staffing, teams, marketing and more. 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. This practice sometimes prove to be disastrous to both the decision maker and the organisation. Programmed and Non-Programmed Decisions 9. Management Information System is flow-processing procedures based on computer data, and integrated with other procedures in order to provide information in a timely and effective manner to. This is certainly not a new system. Thirdly, managers acceptance of solution is increased through their participation. View Feedback 1 / 1 point Typically, data for an organization's information system is captured . Managers use various types of resources and we often speak of five Ms in this context, viz., materials, money, manpower, machinery and management. Decision making is perhaps the most important component of a managers activities. Decision making is an integral part of all marginal activities including organising, leading and controlling. The management decisions are classified into three levels or categories: 1. Lower level managers are used in the preliminary stages of the decision process. There are many types of decision making - routine, strategic, operational, organizational, personal, programmed, non-programmed, and individual and group decisions. Traditionally, MIS was a manual process used to gather information and funnel it to individuals responsible for . It is to be noted that so far no generalised rules have been developed that deal with managing the implementation phase. 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. This crucial stage has the following three distinct but closely interrelated phases: In case where a large number of alternatives have been generated, it is quite likely that many of them will not appear to be feasible. It is possible to assess the acceptability and efficacy (efficiency) of a proposed solution by considering the anticipated responses to it. 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.. Evaluation of Alternatives and Selection of a Course of Action. He specifically notes that decision makers are limited by their values and unconscious reflexes, skills and habits. 8.2 illustrates this point. That is, they should make sure that the alternatives chosen in step 5 and implemented in step 6 have accomplished the desired result. Such decisions are related to the co-ordination and support of the core activities of the organisation. Thus managerial decisions are grouped as: (a) Strategic decision Examples of managerial-level decision making at the tactical level include: Allocating budgets and resources. The inference is that rather than optimizing in the strict sense of proceeding to a maximum they consider all the constraints bearing on the decision situation and choose a course of action that is satisfactory to them (i.e., good enough under the present circumstances). Although managers should encourage creative solutions, they should also recognise that various constraints often limit their alternatives. In order to maximize the efficiency of its core activities it becomes absolutely essential for management to ensure that these actions are not unduly disturbed by short-term changes in the environment. Decision makers are unable or unwilling, or both, to fully anticipate the consequences of each available alternative. The solution is simple to find: even a technically mediocre solution may prove to be effective (in the sense defined above) if it is implemented with enthusiasm and dedication. The term environment here covers all factors external to the firm. These stages, or sometimes called phases, are important for the decision making process to begin Orientation stage - This phase is where members meet for the first time and start to get to know each other. 3. It does require wisdom and experience to evaluate several alternatives and select the best one.. How good their decisions are will largely determine how effective their plan will be.. One popular account, grounded in animal behavior and extended to human behavior, grafted . Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. Hence, it will be judicious on the part of managers to anticipate potential resistance at various stages of the implementation process. 1. In fact, management is basically a study of the decision-making process within an organisation. . Effective decision-making requires a clear understanding of the situation. 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. Problem formulation seems to be the most neglected aspect of the decision-making process. As Boone and Kurtz have argued: if judgement was suspended during the creative generation of alternatives in the previous step, most of the alternatives generated would fall into the infusible category. 1. The manager does not operate in a certain environment. The ability to make good decisions is the key to successful managerial performance. It is a goal-oriented process and provides solutions . How Good should the Decisions Be? Consider the case of a manager attempting to decide where to locate a new manufacturing facility. These three types of decisions may now be briefly illustrated: In every organisation there is need to make decisions about core activities. MIS comprises of three elements: Management, Information and System. Report a Violation 11. Managers in every organisation are faced with these three types of decisions, viz., technical, managerial and institutional. As Stoner puts it: It does not take a wise manager to reach a decision when there are no other possible choices. The table below summarizes the advantages and disadvantages of group decision-making. MIS is also the study of how such systems work. However, a particular product, say Cinthol, may demand an expensive advertising campaign to counter a competitors aggressive marketing strategy. See Fig.8.1. Use is made of committees in the decision-making process. level. vi) Customer data report helps in planning better and effective marketing strategies and promotional activities. See Page 1. They are entrusted with responsibilities in decision-making. Decision Making Defined 4. Recognising and Defining the Decision Situation. Choosing what data MIS tracks as well as how management uses this data in decision making can make or break the direction of a company in the competitive marketplace. Further, he argues that the individual can be rational in terms of the organisations goals only to the extent that he is able to pursue a particular course of action, he has a correct conception of the goal of the action, and he is correctly informed about the conditions surrounding his choice. Many real-time advantages for every company are offered by transaction processing systems. True, participation in problem solving by organisational members should increase their receptiveness to the chosen alternative.. Decisions are made at every level of management to ensure organizational or business goals are achieved. Another problem to consider when implementing decisions is peoples resistance to change. Selecting the best option. The quality of managerial decision-making depends upon the qualitative information and the But these are exceptions rather than the rule). Group decision-making has its merit and drawbacks. Simon states in Administrative Behaviour that managers satisfies, that is, look for a course of action that is satisfactory or good enough. Simulation 9. When the cost of failure is high, the leader must . Firstly, group decisions are slower than individual decisions and are more costly in terms of time and money due to the number of personnel involved. The ESS is the major recipient of data from the lower-level systems which is mainly used in unstructured decision-making. All the previous steps have been of a preparatory nature and it is in this step that the manager finally decides what to do. In decision-making, MIS cannot take the place of managerial decisions. MIS producing routine production reports are typically used to support this type of decision making. Once perceived The Delphi Technique 5. Thus, MIS must perform the following functions in order to meet its objectives. One of the alternatives that was identified previously (the second or third choice) could be adopted. Levels Decision making Organization levels that comprise of strategic, management, knowledge, and operational levels of the organization classify decision-making. Most non-programmed decisions involve innumerable variables and it is neither possible nor feasible, with limited knowledge and resources, to examine them all. Some automobile companies faced with falling demand for petrol-operated cars have produced battery-operated motor cars. Identification of Resources and Constraints. Fig. A programme, for example, might be developed for the sole purpose of implementing a course of action for solving an organisational problem. Alvar Elbing has proposed the following five rules for evaluating alternatives: 1. In a like manner managers will not generally have to think about the routine problems they face every day. MIS provides regular information to managers to allow them to make decisions based on data rather than guesses. Knowledge Management Systems A knowledge management system stores and extracts information to help users enhance their knowledge and optimize collaboration efforts to complete tasks. 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. 7. On the contrary, the technically correct alternative may fail to evolve sufficient response or succeed if it is implemented in half-hearted and haphazard fashion. 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. If the firm consistently achieves a given objective, then the objective might be reviewed or changed to prevent under-achievement. The satisfying concept suggests that she or he will select this site even though further searching might reveal a better one. Since managers are often forced to make decisions in the absence of complete information there is departure from the goal of profit maximization. Empirical evidence available so far suggests that decision made by groups are more accurate than those made by individuals. When a manager makes a decision, he (she) chooses from some set of alternatives as the one he (she) believes will best contribute to some particular end result. For example, the final criterion used to select a plant site might be its proximity to the managers home town. It therefore lies at the heart of business cost-benefit analysis. 8.2 shows such important influences as supervisors, peers and colleagues, subordinates, other organisational components (such as other departments and their managers), and the environment (including elements of the task environment, such as competitors and suppliers, as well as general environmental factors such as technology and the economy). 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