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Book Contents

Ch. 3
Analyzing Business Decision Processes

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A General Decision Process Model

A sequential, decision process model (see Figure 3.3) provides a broad view for understanding decision processes. Decision-making is more than deciding. Each of the steps in the decision process is important; each step can cause errors and each can potentially be supported by some type of computerized decision aid.


Figure 3.3 A General Decision Process Model

The next few paragraphs review the seven steps in a general decision process model: 1. Define the problem, 2. Decide who should decide, 3. Collect information, 4. Identify and evaluate alternatives; 5. Decide, 6. Implement, and 7. Follow-up Assessment.

Define the Problem

Many managers feel that a well-defined problem is much easier to solve and problem identification reduces the chances of having a good answer but to the wrong problem. When the wrong problem is defined it is impossible to making a successful decision. Optimists see problems as opportunities. Pessimists see too many problems. How a problem is "framed" and defined influences how it is solved and the type of decision support, if any, that is used. So what is a problem? A problem exists when at least the following three conditions are met:

  1. Managers have measured how well the company is doing using a standard.
  2. There is a deviation from the standard, i.e. the company is not achieving our desired result. Managers identify problem symptoms.
  3. A manager recognizes the deviation and wants to find a solution.

The above conditions are simple enough but recognizing problems can be difficult. The complexity of today's organizations makes it hard in many cases to identify "real" problems and causes and to get beyond problem symptoms. A number of tools and actions can assist in problem identification including a good information system, well thought out standards, and clear and regular communication with key people in an organization. An annual plan which summarizes progress and establishes specific plans for the next year, awareness of new developments in technology, and regular contact and interaction with managers in other organizations also helps managers in identifying decision problems.

Decide Who Should Decide

In decision situations, an individual makes some decisions with available information. An individual manager makes other decisions after consulting with colleagues to gather information and opinions. Finally, some decisions should be made by groups using a participative decision-making process. Vroom and Yetton (1971) developed a decision tree to help managers decide who should decide in a given decision situation. Their criteria for choosing an autocratic, consultative or group decision process included: need for acceptance of the decision; adequacy of available information; subordinate acceptance of organizational goals; and likelihood of conflict among subordinates about a preferred solution.

Collect Information

Once a problem is defined, one can proceed to determine the factors that affect the problem and the information needed about viable alternatives. Without information, decision-making is by hunch and intuition. On the other hand, too much time can be spent gathering data. Formal search and data gathering has a cost in terms of both money and time. The additional costs need to be weighed against the benefits of additional data. MIS and DSS can provide information for decision-making, but a cost is incurred in development and in use of the system.

Identify and Evaluate Alternatives

The most creative part of decision-making is the identification of alternatives and the determination of which ones should receive serious consideration and analysis. Brainstorming to generate ideas is useful in many situations. A long list of ideas with many poor ideas and one or two good ones is more useful than a short list of old ideas. A large quantity of ideas is more likely to lead to some high quality ideas than focusing on one or a few readily available ideas. Early in the brainstorming process the objective is quantity of ideas. How good, unique or impractical an idea may be is of very little concern in brainstorming. A commonly used group brainstorming and idea evaluation tool is the Nominal Group Technique (NGT). Some GDSS have tools based on NGT, that is, silent idea generation, idea sharing, rating or ranking of alternatives (see Delbecq, Van de Ven and Gustafson, 1975). Using criteria can help evaluate alternatives.

Decide

To make a decision is to commit to a course of action or inaction. In some situations, a decision must be made - it is required or demanded by circumstances, customers or stockholders. Decisions are then sometimes made with less information than one would like and with some feasible alternatives not evaluated or even considered. DSS are not usually as helpful in these "crisis" decision situations. In other situations, there is more time for collecting information and evaluating alternatives.

In decision situations with ample time to collect information and evaluate alternatives, the decision is not forced and the result may be a more thoughtful decision or in a worst case a decision is delayed and postponed. Indecision is a failure to take action when it should be taken. "I need more information" is a common reason cited by people for not deciding. Indecision or decisions made with great anguish often characterize ineffective managers. DSS can potentially reduce procrastination and indecision by helping structure the decision situation and gather information. DSS can also help weight and structure decision criteria on "soft" criteria like company impact or reaction of competitors.

Implement

A decision is the culmination of one process. The specific decision process may be long and convoluted or rapid and simple. But for any problem and set of alternatives, made with or without a decision aid, once a decision is made, something usually happens. Decisions often trigger actions and information technology can focus and direct those actions and complete a broader process of action and change. DSS can help communicate decisions, monitor plans and actions, and track performance.

Follow-up and Assessment

Measuring and evaluating the consequences of a decision that has been implemented calls for the decision-maker to accept responsibility for the decision. During follow up, new problems may or may not be discovered. In some cases, minor adjustments and corrective actions are necessary. Because situations do not remain the same for very long, managers are often dealing with problems that grew out of the solutions chosen to previous problems. So the decision loop or cycle is complete -- definition of a problem leading to assessment of the decision that was implemented leads to consciousness of new problems. DSS can help in monitoring, follow up and assessment.

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