Chapter 3

Topics: Decision making, Decision theory, Decision engineering Pages: 25 (8348 words) Published: May 6, 2013
Power, D. J. Decision Support Systems Hyperbook. Cedar Falls, IA: DSSResources.COM, HTML version, 2000, accessed on (today's date) at URL

Chapter 3
Analyzing Business Decision Processes


Let’s examine some generalizations about decision-making behavior and business decision processes that impact building and using Decision Support Systems. At a fundamental level, both managers and Decision Support Systems analysts need to acknowledge that decision-making is an important part of a manager's job and some other business professionals. Managers take actions on behalf of an organization and stakeholders. They allocate resources and negotiate agreements. They monitor performance and correct deviations from plans. Managers are evaluated on their ability to make effective decisions. The effectiveness of business decisions is evaluated by many stakeholders, but especially by managers in the managerial hierarchy and by stockholders. Most of us would agree with the above generalizations, but we need to refine our understanding of business decision-making to build successful DSS. Let's begin by asking: What steps do managers follow in making a specific decision? When does a decision process begin and end? How do we identify who is involved in making a specific decision? Managers who want to improve their decisions need to be sensitive to the answers to these questions. DSS designers also need to ask and answer these questions. Decision Support System design should begin with an understanding of an existing decision process. This chapter emphasizes: understanding managerial decisions; evaluating decision-making context; the decision-making processes; what is "good" decision-making; and redesigning decision processes.

Managerial Decisions

Managers do not make all of their decisions as part of a deliberate, coherent and continuous decision-making process (cf., Mintzberg, 1973). Instead, brevity, variety, and fragmented activities characterize the manager’s typical workday. Also, despite its importance managers do much more than make decisions. They also serve roles as a figurehead, leader, entrepreneur, negotiator, and liaison to stakeholders. For managers decision-making is a dynamic process. It is complex and at times ambiguous. Decision-makers encounter information search problems and detours, delayed feedback of results, uncertainty, ambiguity and in some cases conflict during decision-making. In many situations, managers seem to engage in an informal causal analysis in an attempt to favorably influence decision outcomes. [pic]

Figure 3.1 Categories of Organizational Decisions

The scope of organizational and managerial decision-making is very broad. Decisions are made by individuals at all levels in an organization and by a wide variety of groups in an organization. Robert Anthony (1965) classified decisions in four categories associated with organization levels (see Figure 3.1). Analysts need to determine if a proposed DSS is intended for use in: Strategic Planning - decision processes related to allocating resources, controlling organizational performance, establishing broad policies, evaluating investment or merger proposals. Management Control - decision processes associated with acquisition and use of resources by operating units; buyer and supplier behavior; introduction of new products; R&D project expenditures. Operational Control - decisions related to the effectiveness of organizational actions; monitoring product/service quality; assessing product/service needs. Operational Performance - day-to-day decisions made in functional units by managers to implement strategic decisions, functional tactics, and operational activities. Both managers and DSS analysts need to analyze decision support needs and distinguish among them in terms of who participates, the type of decision and other...

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Anthony, R.N. Planning and Control Systems: A Framework for Analysis. Harvard University, Cambridge, MA, 1965.
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Mintzberg, H. The Nature of Managerial Work. New York: Harper and Row, 1973.
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Simon, H.A. "The New Science of Management Decision." The Shape of Automation for Men and Management. New York: Harper Torch Books, 1965.
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