Management, 7e Schermerhorn

Prepared by Michael K. McCuddy Valparaiso University John Wiley & Sons, Inc

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Chapter 3

Information and Decision Making

 Planning aheadstudy questions
How is information technology changing the workplace? What are the current directions in information systems? How is information used for decision making? How do managers make decisions? Why are knowledge management and organizational learning important?
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How is information technology changing the workplace?

 Information and knowledgebasic definitions:  Information Data made meaningful and useful for decision making.  Intellectual capital Shared knowledge of a workforce that can be used to create wealth.  Computer competency (or literacy) Ability to understand and use computers.  Information competency (or literacy) Ability to utilize computers and information technology for decision making.
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How is information technology changing the workplace?

 Information technology
The combination of computer hardware,

software, networks, and databases that allow information to be shared, stored, and manipulated.

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How is information technology changing the workplace?

 Progressive organizations
Are responding to the growing importance of

information technology with specialized organizational units headed by a chief knowledge officer or chief information officer.
Use information technology to compete more

effectively in uncertain environments.

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How is information technology changing the workplace?

 Intraorganizational implications of using

information technology:
Facilitation of communication and information

sharing. Flattening of organizational structures. Faster decision making. Increased coordination and control. Structural flexibility.
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How is information technology changing the workplace?

 Extra-organizational implications of using

information technology:
Helps organizations take care of customers. Helps organizations work well with resource

suppliers.
Helps build and manage relationships with

strategic partners.
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How is information technology changing the workplace?

 Information technology is fostering the

development of electronic commerce (dot.com businesses).  The dot.com lifecycle

Secure an on-line identity Establish a Web presence Enable e-commerce Provide e-commerce and customer relationship management Utilize a service application model

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What are the current directions in information systems?

 Useful information shares the

following characteristics:
Timeliness Quality Completeness Relevance Understandability
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What are the current directions in information systems?

 Information needs of organizations Information exchanges with the external environment
Gather intelligence information Provide public information

Internal information exchanges Top management Middle management First level of management
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What are the current directions in information systems?

 Information systems success factors:
Technical quality of the system Participation and involvement of users in systems design Management support of the system
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What are the current directions in information systems?

 Decision support systems (DSS): Use special software to allow people to interact directly with a computer to organize and analyze data for solving complex and sometimes unstructured problems.  Group decision-support systems (GDSS): Interactive computer-based information systems that facilitate group efforts to solve complex and unstructured problems.
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What are the current directions in information systems?

 Artificial intelligence (AI):
Computer systems with the capacity to reason the way people do.

 Expert systems:
Software systems that use AI to mimic the thinking of human experts, thereby offering consistent and expert advice to decision makers.
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What are the current directions in information systems?

 Intranets Use special software to allow persons working in various locations within the same organization to share databases and communicate electronically.  Enterprise-wide networks Use fully integrated IT to move information quickly and accurately within an organization.  Extranets Use the public Internet to allow communication between the organization and elements in its external environment.
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What are the current directions in information systems?

 Management information systems
Use information technology to meet the information

needs of managers in making decisions.

 Advantages of appropriate MIS utilization:

Planning Organizing Leading Controlling
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How is information used for decision making?

 A problem is The difference between an actual and a desired situation.
Performance deficiency Performance opportunity

 Problem solving is The process of identifying a discrepancy and taking action.  A decision is A choice among alternative course of action.
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How is information used for decision making?

 Programmed decisions
Solutions readily available from past experiences. Best applied to routine problems. Commonly applied to resource use and allocation decisions.
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How is information used for decision making?

 Nonprogrammed decisions Develop novel solutions to meet the demands of a unique situation. Problems that are commonly faced by higherlevel management. Information requirements are high. Decisions involve considerable human judgment.
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How is information used for decision making?

 Crisis decision making
A crisis involves an unexpected problem that can lead to disaster if not resolved quickly and appropriately. An extreme type of nonprogrammed decision must be made. Crisis management may be the ultimate test of problemsolving capabilities. Proactive managers develop basic contingency plans for dealing with likely crisis situations.
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How is information used for decision making?

 Decision conditions:
Certain environments
Offer sufficient information about action alternatives and their outcomes.

Risk environments
Lack complete information about action alternatives and their outcomes.

Uncertain environments
Information is so poor that probabilities cannot be assigned to likely outcomes of known action alternatives.
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How is information used for decision making?

 How managers approach decisions: Problem avoiders
Inactive in decision making

Problem solvers
Reactive in gathering information and solving problems

Problem seekers
Proactive in anticipating problems before they occur
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How is information used for decision making?

 How managers approach decisions:
Systematic thinking
Approaching problems in a rational, step-by-step, and analytical fashion.

Intuitive thinking
Approaching problems in a flexible and spontaneous fashion.

Multidimensional thinking
Applying both intuitive and systematic thinking
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How is information used for decision making?

 How managers approach decisions:
Strategic opportunism
The ability to remain focused on long-term objectives while being flexible enough to resolve short-term challenges in a timely manner.
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How do managers make decisions?

 Five-step decision-making process:
Identify and define the problem. Generate and evaluate possible solutions. Choose a preferred solution and conduct ethics double check. Implement the solution. Evaluate results.
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How do managers make decisions?

 Step 1identify and define the problem Problem symptoms signal a performance deficiency or opportunity. Problem finding focuses on identifying performance gaps and their causes. Avoid the following:
Defining the problem too broadly or too narrowly. Focusing on symptoms instead of causes. Choosing the wrong problem.
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How do managers make decisions?

 Step 2generate and evaluate possible solutions Avoid the following:
Selecting a particular solution too quickly. Choosing a convenient alternative that may have damaging side effects.

Criteria for evaluating alternatives:

Benefits Costs Timeliness Acceptability Ethical soundness
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How do managers make decisions?

 Step 3choose a solution and conduct the

ethics double check

Classical decision model
Views manager as acting in a certain world. Results in an optimizing decision.

Behavioral decision model

Views manager as acting in situations of limited information and bounded rationality. Results in a satisficing decision.
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How do managers make decisions?

 Step 4implement the solution
Establish appropriate action plans. Managers need to have willingness and ability to implement action plans. Avoid lack-of-participation error.
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How do managers make decisions?

 Step 5evaluate 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, return to earlier steps in the decision-making process.
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How do managers make decisions?

 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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How do managers make decisions?

 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. Make your own decisions. Carefully determine why you are continuing a course of action. Reminds yourself of the costs. Watch for escalation tendencies.
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How do managers make decisions?

 Advantages of group decision making:
Greater amounts of information, knowledge, and expertise More action alternatives are considered Greater understanding and acceptance of outcomes Increased commitment to final plans
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How do managers make decisions?

 Disadvantages of group decision making:
Pressure to conform Minority domination Decision making takes longer

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How do managers make decisions?

 Ethical decision making
Any decision should meet ethics double check.
How would I feel if my family finds out about this decision? How would I feel if this decision were published in the local newspaper?

Should be done during step 3 of decision-making process. May result in better decisions and prevention of costly litigation.
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Why are knowledge management and organizational learning important?

 Knowledge management Processes through which organizations develop, organize, and share knowledge to achieve competitive advantage.
 Chief Knowledge Officer (CKO) Energizes learning processes Manages organizations intellectual assets  Knowledge management requires understanding

of and commitment to IT.

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Why are knowledge management and organizational learning important?

 Core ingredients of learning organizations
Mental models Personal mastery Systems thinking Shared vision Team learning
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Why are knowledge management and organizational learning important?

 Creativity is
The display or use of ingenuity and imagination to create a novel approach to things or a unique solution to problems. Essential for a learning organization. Essential for mastering the demands of complex and changing environments.
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