Understanding the context of managerial decision-making is important in building DSS. The decision-making context defines both the potential for and the limits to decision support. We need to consider the whole decision cycle and process and all of the varied decision activities of managers and their staff.
The importance of managerial decision-making and the types of decisions made vary at different levels in the managerial hierarchy. At the lowest level, supervisors assign tasks, monitor and control operations, and make a variety of short-term decisions. At the managerial control level decisions are more complex and more information is used to make decisions. At the strategic or senior management level, managerial decisions focus on issues of corporate performance, macro allocations of resources, major personnel choices, and strategic directions on products and markets.
All of the managers in an organization are drawing conclusions from information and making choices from identified alternatives. Some managerial decisions need computerized support more than others. Some decision activities are also easier to support than are others.
Alexis and Wilson (1967) discuss 5 elements of a decision situation: goals, relevant alternatives, process of ranking alternatives, decision environment, and decision-makers. DSS analysts should first examine the goals to be achieved in the situation and who sets the goals and when and how are they revised. In some situations analysts can examine relevant alternatives and how they are identified. An alternative is relevant if it is feasible, can be implemented and solves an existing problem. Decision situations usually have a process of ranking alternatives from most to least desirable. This process may be subjective or objective. Analysts should determine how alternatives are currently ordered. DSS analysts should especially examine the decision environment and the decision-makers in evaluating the advisability of computerizing a decision process. Both the decision environment and the decision-makers are important in understanding the decision-making context.
Various aspects of the decision-maker’s environment can affect the final decision. Robert Duncan (1974) characterized the decision environment as consisting of two categories - internal and external. The factors in the internal environment that influence decisions include: 1) people - their goals, experiences, capabilities, and commitment; 2) functional units – the technological characteristics, independence, interdependence, and conflict among units; and 3) organization factors - like goals and objectives, processes and procedures, and the nature of the product or service. The factors in the external environment that impact decisions include: customers, suppliers, competitors, socio-political issues, and technological issues. Some DSS help managers assess the above factors, but what is more important is to consider them when building a DSS.
Sometimes we can identify a single individual who is responsible for making a specific decision, but this is not always the situation. What is often more important is determining the scope of the decision (scope refers to who and what the decision will affect). Scope often determines what level of management should be responsible for making the decision. In general the broader the scope of the decision, the higher the level of management involvement in the decision-making process. Analysts need to identify and evaluate the individual or group who will actually make the choice. Not all decision-makers are alike. Some people are weak decision-makers who want others to make decisions for them. Some people take credit for the good ideas of others; some managers accept little help, they isolate themselves, and are extremely self-reliant. Finally, some managers make a decision based on how it will make them look rather than on facts or values.
Pritsker and Sigal (1983) characterize decision-makers with respect to how they would use a decision support system if one were available. A hands-off DSS user reads reports but doesn’t directly use the DSS. A requester decision-maker has an intermediary, like a DSS analyst, use a DSS. The requester frames the questions, interprets the results, and then makes the decisions. The third type of decision-maker is a hands-on DSS user. The hands-on user has direct on-line access to the DSS. Finally, a renaissance decision-maker is a hands-on user, feels comfortable talking about database systems and modeling, can use intermediaries when appropriate, and can build his or her own models and small DSS. The target audiences for DSS are hands-on and renaissance decision-makers.
People, including hands-on and renaissance decision-makers, have a number of limitations that can be compensated for by using information technology. For example, managers sometimes use simplistic strategies to search for information. Managers request excessive information and/or fail to organize and use the information they request.
People are influenced by how information is presented to them; we are also susceptible to social pressure; and we have a desire to avoid cognitive dissonance. This means that once a person has committed to a decision, then there is less concern about objectivity. People bias new information to support the already made decision. Sadly, some managers routinely make decisions first and then look for information to support or "bolster" their decision. Comparing and evaluating alternatives is sometimes more haphazard than orderly. Risk preferences are usually not discussed explicitly in decision-making. Some managers are generally overconfident or have an illusion of control in situations governed primarily by chance. Also, comparing and evaluating alternatives for many managers is a combination of judgments, political bargaining and limited analysis.
Managers have cognitive limitations, they receive incomplete and imperfect information, and they experience time and cost constraints in decision situations. Decision makers also often find themselves confronted by too much information, time pressure and distractions. According to Janis and Mann (1977), when the degree of complexity of an issue exceeds the limits of a person's cognitive abilities, there is a marked decrease in the adequacy of human information processing as a direct effect of information overload and ensuing fatigue. Decisions may also be affected adversely by personal concerns and agendas. Computerized decision aids can help overcome some of these factors that constrain and limit the overall quality of organizational decision-making. DSS can also be used in negative ways to develop rationalizations and bolster previously made decisions. This type of use of a DSS will negate any benefits of DSS and may actually reduce the effectiveness of decision-making in an organization.