Chapter 7: Information and Decision Making

Report
PowerPoint Presentation
to Accompany Chapter 7 of
Management
Canadian Edition
Schermerhorn  Wright
Prepared by: Michael K. McCuddy
Adapted by: Lynda Anstett & Lorie Guest
Published by: John Wiley & Sons Canada, Ltd.
Planning Ahead — Chapter 7 Study Questions
 How is information technology changing the
workplace?
 What in the role of information in the management
process?
 How do managers use information to make
decisions?
 What are the steps in the decision-making
process?
 What are the current issues in managerial decision
making?
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Study Question 1: How is information
technology changing the workplace?
 Information and knowledge — basic linkages:
– Knowledge and knowledge workers provide a
decisive competitive factor in today’s economy.
– Knowledge worker.
• Someone whose value to the organization rests with
intellect, not physical capabilities.
– Intellectual capital.
• Shared knowledge of a workforce that can be used
to create wealth.
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Study Question 1: How is information
technology changing the workplace?
 Information and knowledge — basic linkages
(cont.):
– Knowledge and intellectual capital are
irreplaceable organizational resources.
– The productivity of knowledge and knowledge
workers depends on:
• Computer competency.
• Information competency.
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Study Question 1: How is information
technology changing the workplace?
 Electronic commerce.
– The process of buying and selling goods and services
electronically through use of the Internet.
• B2C e-commerce.
• B2B e-commerce.
– Stages of development in e-commerce:
•
•
•
•
•
Secure an online identity.
Establish a Web presence.
Enable e-commerce.
Provide e-commerce and customer relationship management.
Utilize a service application model.
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Study Question 1: How is information
technology changing the workplace?
 Implications of IT within organizations:
– Facilitation of communication and information
sharing.
– Operating with fewer middle managers.
– Flattening of organizational structures.
– Faster decision making.
– Increased coordination and control.
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Figure 7.1 Information technology is
breaking barriers and changing organizations.
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Study Question 1: How is information
technology changing the workplace?
 Implications of IT for relationships with
external environment:
– Helps with customer relationship management.
– Helps organizations with supply chain
management.
– Helps in monitoring outsourcing and other
business contracts.
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Study Question 1: How is information
technology changing the workplace?
 How IT is changing the office …
– Progressive organizations actively use IT to help
achieve high performance in uncertain environments.
– IT has dramatically changed nature of offices.
– Key developments in networked offices:
• Instant messaging.
• Peer-to-peer file sharing (P2P).
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Study Question 2: What is the role of
information in the management process?
 What is useful information?
– Data.
• Raw facts and observations.
– Information.
• Data made useful for decision making.
– Information drives management functions.
– Characteristics of useful information:
• Timely.
• High quality.
• Complete.
• Relevant.
• Understandable.
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Study Question 2: What is the role of
information in the management process?
 Information needs of organizations.
– Information exchanges with the external
environment:
• Gather intelligence information
• Provide public information
– Information exchanges within the organization:
• Facilitate decision making.
• Facilitate problem solving.
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Figure 7.2 External and internal
information needs of organizations.
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Study Question 2: What is the role of
information in the management process?
 Basic information system concepts:
– Information system.
• Use of the latest IT to collect, organize, and
distribute data for use in decision making.
– Management information system (MIS).
• Specifically designed to meet the information needs
of managers in daily decision making.
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Study Question 2: What is the role of
information in the management process?
 Basic information system concepts (cont.):
– Decision support system (DSS).
• An interactive information system that allows users
to organize and analyze data for solving complex
and sometimes unstructured problems.
• Group decision support system (GDSS) facilitates
group efforts to solve complex and unstructured
problems.
• GDSSs use groupware.
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Study Question 2: What is the role of
information in the management process?
 Basic information system concepts (cont.):
– Artificial intelligence (AI)
• Computer systems with the capacity to reason the
way people do.
– Expert systems (ES).
• Software systems that use AI to mimic the thinking
of human experts.
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Study Question 2: What is the role of
information in the management process?
 Basic information system concepts (cont.):
– Intranets and corporate portals.
• Allow employees, by password access, to share databases and
communicate electronically.
– Extranets and enterprise portals.
• Allow communication and data sharing between the
organization and the external environment.
– Electronic data interchange (EDI).
• Uses controlled access to enterprise portals and supporting
software to enable electronic transactions between businesses.
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Study Question 2: What is the role of
information in the management process?
 Managerial advantages of IT utilization:
– Planning advantages.
• Better and more timely access to useful information.
• Involving more people in planning.
– Organizing advantages.
• More ongoing and informed communication among
all parts of the organization.
• Improved coordination and integration.
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Study Question 2: What is the role of
information in the management process?
 Managerial advantages of IT utilization
(cont.):
– Leading advantages.
• Improved communication with staff and
stakeholders.
• Keeping objectives clear.
– Controlling advantages.
• More immediate measures of performance results.
• Allows real-time solutions to performance problems.
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Figure 7.3 The manager as an
information-processing nerve center.
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Study Question 3: How do managers use
information to make decisions?
 A performance deficiency is …
– Actual performance being less than desired
performance.
 A performance opportunity is …
– Actual performance being better than desired
performance.
 Problem solving is …
– The process of identifying a discrepancy between actual
and desired performance and taking action to resolve it.
 A decision is …
– A choice among possible alternative course of action.
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Study Question 3: How do managers use
information to make decisions?
 Programmed decisions.
– Apply solutions that are readily available from
past experiences to solve structured problems.
– Structured problems are ones that are familiar,
straightforward, and clear with respect to
information needs.
– Best applied to routine problems that can be
anticipated.
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Study Question 3: How do managers use
information to make decisions?
 Nonprogrammed decisions.
– Develop novel solutions to meet the demands
of unique situation that present unstructured
problems.
– Unstructured problems are ones that are full of
ambiguities and information deficiencies.
– Commonly faced by higher-level management.
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Study Question 3: How do managers use
information to make decisions?
 Crisis decision making.
– A crisis involves an unexpected problem that can lead
to disaster if not resolved quickly and appropriately.
– Rules for crisis management:
•
•
•
•
•
•
Figure out what is going on.
Remember that speed matters.
Remember that slow counts, too.
Respect the danger of the unfamiliar.
Value the skeptic.
Be ready to “fight fire with fire.”
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Study Question 3: How do managers use
information to make decisions?
 Decision environments:
– Certain environments.
• Offer complete information about possible action alternatives
and their outcomes.
– Risk environments.
• Lack complete information about action alternatives and their
consequences, but offer some estimates of probabilities of
outcomes for possible action alternatives.
– Uncertain environments
• Information is so poor that probabilities cannot be assigned to
likely outcomes of known action alternatives.
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Figure 7.4 Three environments for managerial decision
making and problem solving.
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Study Question 3: How do managers use
information to make decisions?
 Problem-solving styles:
– Problem avoiders.
• Inactive in information gathering and solving
problems.
– Problem solvers.
• Reactive in gathering information and solving
problems.
– Problem seekers.
• Proactive in anticipating problems and opportunities
and taking appropriate action to gain an advantage.
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Study Question 3: How do managers use
information to make decisions?
 Systematic versus intuitive thinking.
– Systematic thinking approaches problems in a rational,
step-by-step, and analytical fashion.
– Intuitive thinking approaches problems in a flexible and
spontaneous fashion.
– Multidimensional thinking applies both intuitive and
systematic thinking.
– Effective multidimensional thinking requires skill at
strategic opportunism.
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Study Question 4: What are the steps in the
decision-making process?
Steps in the decision-making process:
– Identify and define the problem.
– Generate and evaluate possible solutions.
– Choose a preferred course of action and
conduct the “ethics double check.”
– Implement the decision.
– Evaluate results.
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Figure 7.5 Steps in managerial decision
making and problem solving.
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Study Question 4: What are the steps in the
decision-making process?
 Step 1 — identify and define the problem.
– Focuses on information gathering, information
processing, and deliberation.
– Decision objectives should be established.
– Common mistakes in defining problems:
• Defining the problem too broadly or too narrowly.
• Focusing on symptoms instead of causes.
• Choosing the wrong problem.
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Study Question 4: What are the steps in the
decision-making process?
 Step 2 — generate and evaluate possible
solutions.
– Potential solutions are formulated and more
information is gathered, data are analyzed , the
advantages and disadvantages of alternative
solutions are identified
– Approaches for evaluating alternatives:
• Stakeholder analysis.
• Cost-benefit analysis.
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Study Question 4: What are the steps in the
decision-making process?
 Step 2 — generate and evaluate possible solutions
(cont.).
– Criteria for evaluating alternatives:
•
•
•
•
•
Benefits.
Costs.
Timeliness.
Acceptability.
Ethical soundness.
– Common mistakes:
• Selecting a particular solution too quickly.
• Choosing a convenient alternative that may have damaging
side effects or may not be as good as other alternatives.
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Study Question 4: What are the steps in the
decision-making process?
 Step 3 — decide on a preferred course of
action.
– Classical decision model.
• Managers act rationally in a certain world.
• Managers face clearly defined problems and have
complete knowledge of all possible alternatives and
their consequences.
• Results in an optimizing decision.
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Study Question 4: What are the steps in the
decision-making process?
 Step 3 — decide on a preferred course of
action (cont.).
– Behavioral decision model
• Managers act in terms of what they perceive about a
given situation.
• Recognizes limits to human information-processing
capabilities.
– Cognitive limitations.
– Bounded rationality.
– Results in a satisficing decision.
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Study Question 4: What are the steps in the
decision-making process?
 Step 4 — implement the decision solution.
– Involves taking action to make sure the solution
decided upon becomes a reality.
– Managers need to have willingness and ability to
implement action plans.
– Lack-of-participation error should be avoided.
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Figure 7.6 Differences in the classical and behavioral
models of managerial decision making.
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Study Question 4: What are the steps in the
decision-making process?
 Step 5 — evaluate results.
– Involves comparing actual and desired results.
– Positive and negative consequences of chosen
course of action should be examined.
– If actual results fall short of desired results, the
manager returns to earlier steps in the decisionmaking process.
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Study Question 5: What are the current issues
in managerial decision making?
 Types of heuristics for simplifying decision
making:
– Availability heuristic.
• People use information “readily available” from memory as a
basis for assessing a current event or situation.
– Representativeness heuristic.
• People assess the likelihood of something happening based
upon its similarity to a stereotyped set of occurrences.
– Anchoring and adjustment heuristic.
• People make decisions based on adjustments to a previously
existing value or starting point.
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Study Question 5: What are the current issues
in managerial decision making?
 Escalating commitment.
– The tendency to increase effort and apply more
resources to a course of action that is not working.
 Ways to avoid the escalation trap:
– Set advance limits and stick to them.
– Make your own decisions.
– Carefully determine why you are continuing a course of
action.
– Remind yourself of the costs.
– Watch for escalation tendencies.
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Study Question 5: What are the current issues
in managerial decision making?
 Potential advantages of group decision
making:
– Greater amounts of information, knowledge,
and expertise are available.
– More action alternatives are considered.
– Increased understanding and acceptance of
outcomes.
– Increased commitment to implement final
plans.
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Study Question 5: What are the current issues
in managerial decision making?
 Potential disadvantages of group decision
making:
– Pressure to conform.
– Minority domination may occur.
– Decision making takes longer.
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Study Question 5: What are the current issues
in managerial decision making?
 Ethical decision making.
– Any decision should meet “ethics double
check.” mentioned in step 3 of the decisionmaking process.
• How would I feel if my family found out about this
decision?
• How would I feel if this decision were published in
the local newspaper?
• Any discomfort in answering these questions
indicates the decision has ethical shortcomings.
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Study Question 5: What are the current issues
in managerial decision making?
 Ethical decision making (cont.).
– Considering the ethics of a proposed decision
may result in better decisions and prevention of
costly litigation.
– Ethical decisions satisfy the following criteria:
•
•
•
•
Utility.
Rights.
Justice.
Caring.
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Study Question 5: What are the current issues
in managerial decision making?
 Knowledge management.
– Processes through which organizations develop,
organize, and share knowledge to achieve competitive
advantage.
 Chief Knowledge Officer (CKO)
– Energizes learning processes.
– Manages and enhances organization’s intellectual
assets.
 Knowledge management requires a culture that
values learning fosters a learning organization.
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