Decision-making

Decision-makingcan be regarded as thecognitive process

resulting in the selection of a belief or a course of action among
several alternative possibilities. Every decision-making process
produces a final choice that may or may not prompt action.
Decision-making is the study of identifying and choosing
alternatives based on the values and preferences of the decision
maker. Decision-making is one of the central activities of
management and is a huge part of any process of
implementation.
Overview
Human performance with regard to decisions has been the
subject of active research from several perspectives:
Psychological: examining individual decisions in the context of a
set of needs, preferences and values the individual has or seeks.
Cognitive: the decision-making process regarded as a continuous
process integrated in the interaction with the environment.
Normative: the analysis of individual decisions concerned with
thelogic of decision-makingand rationality and the invariant
choice it leads to.

Contd..
Decision-making

can also be regarded as a problemsolving activity terminated by a solution deemed to be

satisfactory. It is, therefore, a reasoning or emotional
process which can berationalorirrationaland can be
based on explicit assumptions ortacit assumptions.
Rational choice theoryencompasses the notion that
people try to maximize benefits while minimizing costs.
Some have argued that most decisions are made
unconsciously. Jim Nightingale states that "we simply
decide without thinking much about the decision
process. In a controlled environment, such as a
classroom, instructors might try to encourage students
to weigh pros and cons before making a decision. This
strategy is known asFranklin's rule. However, because
such a rule requires time, cognitive resources and full
access to relevant information about the decision, this
rule may not best describe how people make decisions.

Problem analysis & decision-making

It

is important to differentiate betweenproblem analysisand

decision-making. The concepts are completely separate from
one another. Traditionally, it is argued that problem analysis
must be done first, so that the information gathered in that
process may be used towards decision-making.
Problem analysis
Analyze performance, what should the results be against
what they actually are
Problems are merely deviation from performance standards
Problem must be precisely identified and described
Problems are caused by a change from a distinctive feature
Something can always be used to distinguish between what
has and hasn't been affected by a cause
Most likely cause to a problem is the one that exactly explains
all the facts

Decision-making

Objectives

must first be established

Objectives must be classified and placed in order of
importance
Alternative actions must be developed
The alternative must be evaluated against all the objectives
The alternative that is able to achieve all the objectives is
the tentative decision
The tentative decision is evaluated for more possible
consequences
The decisive actions are taken, and additional actions are
taken to prevent any unfavorable consequences from
becoming problems and starting both systems (problem
analysis and decision-making) all over again
There are steps that are generally followed that result in a
decision model that can be used to determine an optimal
production plan.

Decision planning
Making

a decision without planning is fairly common, but

does not often end well. Planning allows for decisions to be
made comfortably and in a smart way. Planning makes
decision-making a lot more simple than it is.
Decision will get four benefits out of planning: 1. Planning
give chance to the establishment of independent goals. It is a
conscious and directed series of choices. 2. Planning provides
a standard of measurement. It is a measurement of whether
you are going towards or further away from your goal. 3.
Planning converts values to action. You think twice about the
plan and decide what will help advance your plan best. 4.
Planning allows for limited resources to be committed in an
orderly way. Always govern the use of what is limited to you.
(e.g. money, time, etc.)
Analysis paralysis
Analysis paralysisis the state of over-analyzing (or overthinking) a situation, or citing sources, so that a decision or
action is never taken, in effect paralyzing the outcome.

STRUCTURED VS UNSTRUCTURED

Decision making stages

Contd..

Contd..

Decision Support System(DSS)

ADecision

Support System(DSS) is a computerbasedinformation systemthat supports business or

organizationaldecision-makingactivities. DSSs serve
the management, operations, and planning levels of an
organization (usually mid and higher management) and
help to make decisions, which may be rapidly changing
and not easily specified in advance (Unstructured and
Semi-Structured decision problems). Decision support
systems can be either fully computerized, human or a
combination of both.
While academics have perceived DSS as a tool to
supportdecision making process, DSS users see DSS as
a tool to facilitate organizational processes. Some
authors have extended the definition of DSS to include
anysystemthat might supportdecision making.

Attributes
i)

DSS should be adaptable and flexible.

ii) DSS should be interactive and provide ease
of use.
iii) Effectiveness balanced with efficiency
(benefit must exceed cost).
iv) Complete control by decision-makers.
v) Ease of development by (modification to suit
needs and changing environment) end users.
vi) Support modeling and analysis.
vii) Data access.
viii) Standalone, integration and Web-based

DSS Characteristics and capabilities

1.

Support for decision makers (mainly in semi- and un-structured

situation) by bringing together human judgment and computerized
information.
2. Support for all managerial levels, ranging from top executives to
line managers.
3. Support for individuals (from different departments,
organizational levels or different organizations) as well as groups of
decision makers working somewhat independently virtual teams
through collaborative Web tools.
4. Support for independent or sequential decisions that may be
made once, several times or repeatedly.
5. Support in all phases of decision-making process (intelligence,
design, choice, implementation).
6. Support for a variety of decision-making process and style.
7. The decision maker should be reactive, able to confront changing
conditions quickly and able to adapt the DSS to meet these
changes.
DSS are flexible, so users can add, delete, combine, change or
rearrange basic elements.

Contd..
8.

User-friendliness, strong graphical capabilities and natural

language interactive human-machine interface can greatly
increase the effectiveness of DSS, Most new DSS application
use Web-based interfaces.
9. Improvement the effectiveness of decision making rather
than its efficiency. When DSS are deployed, decision making
often takes longer but the decisions are better.
10. The decision maker has complete control over all steps of
the decision-making process in solving a problem a DSS
aims to support not to replace the decision maker.
11. End users are able to develop and modify simple systems
by themselves. Larger systems can be built with assistance
from information system specialist. Online analytical process
(OLAP) and data mining software, with data warehouses,
allow users to build very large and complex DSS.
12. Models are generally utilized to analyze decision-making
situations. The modelling capability enable experimentation
with different strategies under different configurations.

DSS Components

A typicalDecision support systemshas four components: data

management, model management, knowledge management and user
interface management.
1 Data Management Component
The data management component performs the function of storing and
maintaining the information that you want yourDecision Support
Systemto use. The data management component, therefore, consists of
both the Decision Support System information and the Decision Support
System database management system. The information you use in
yourDecision Support Systemcomes from one or more of three sources:

-Organizational information;you may want to use any information

available in the organization for your Decision Support System. What you
use, of course, depends on what you need and whether it is available. You
can design your Decision Support System to access this information directly
from your companys database and data warehouse. However, specific
information is often copied to the Decision Support System database to save
time in searching through the organizations database and data warehouses.
-External information:some decisions require input from external sources
of information. Various branches of federal government, Dow Jones,
Compustat data, and the internet, to mention just a few, can provide
additional information for the use with a Decision Support System.
-Personal information:you can incorporate your own insights and
experience your personal information into your Decision Support System. You

Contd..
2

Model Management Component

The model management component consists of both the Decision Support

System models and the Decision Support System model management system.A
model is a representation of some event, fact, or situation. As it is not always practical, or
wise, to experiment with reality, people build models and use them for experimentation.
Models can take various forms.
Businesses use models to represent variables and their relationships.For
example, you would use a statistical model called analysis of variance to determine
whether newspaper, TV, and billboard advertizing are equally effective in increasing sales.
Decision Support Systems help in various decision-making situationsby utilizing
models that allow you to analyze information in many different ways. The models you use
in a Decision Support System depend on the decision you are making and, consequently,
the kind of analysis you require. For example, you would use what-if analysis to see what
effect the change of one or more variables will have on other variables, or optimization to
find the most profitable solution given operating restrictions and limited resources.
Spreadsheet software such as excel can be used as a Decision Support System for what-if
analysis.
The model management system stores and maintains the Decision Support
Systems models.Its function of managing models is similar to that of a database
management system. The model management component can not select the best model
for you to use for a particular problem that requires your expertise but it can help you
create and manipulate models quickly and easily.

Contd..
3 User Interface Management Component

The user interface management component allows you to communicate with

the Decision Support System. It consists of the user interface management
system. This is the component that allows you to combine your know-how with
the storage and processing capabilities of the computer.
The user interface is the part of the system you see through it when enter
information, commands, and models. This is the only component of the system
with which you have direct contact. If you have a Decision Support System
with a poorly designed user interface, if it is too rigid or too cumbersome to
use, you simply wont use it no matter what its capabilities. The best user
interface uses your terminology and methods and is flexible, consistent,
simple, and adaptable.
For an example of the components of a Decision Support System, lets
consider the Decision Support System that Lands End has tens of millions of
names in its customer database. It sells a wide range of womens, mens, and
childrens clothing, as well various household wares. To match the right
customer with the catalog, lands end has identified 20 different target
markets. Customers in these target markets receive catalogs of merchandise
that they are likely to buy, saving Lands End the expense of sending catalogs
of all products to all 20 million customers. To predict customer demand, lands
end needs to continuously monitor buying trends. And to meet that demand,
lands end must accurately forecast sales levels. To accomplish theses goals, it
uses a Decision Support System which performs three tasks:

Contd..
-Data

management:The Decision Support System stores

customer and product information. In addition to this
organizational information, Lands End also needs external
information, such as demographic information and industry and
style trend information.
-Model management:The Decision Support System has to
have models to analyze the information. The models create new
information that decision makers need to plan product lines and
inventory levels. For example, Lands End uses a statistical
model called regression analysis to determine trends in customer
buying patterns and forecasting models to predict sales levels.
-User interface management:A user interface enables Lands
End decision makers to access information and to specify the
models they want to use to create the information they need.

Contd..
4

Knowledge Management Component

The knowledge management component, like that in an

expert system, provides information about the relationship
among data that is too complex for a database to represent.
It consists of rules that can constrain possible solution as well
as alternative solutions and methods for evaluating them.
For example,when analyzing the impact of a price
reduction, a Decision Support System should signal if the
forecasted volume of activity exceeds the volume that the
projected staff can service. Such signaling requires the
Decision Support System to incorporate some rules-of-thumb
about an appropriate ratio of staff to sales volume. Such
rules-of-thumb, also known as heuristics, make up the
knowledge base.

Fig.

Applications
There are several possibilities of building Decision Support Systems in
any knowledge domain.
One is theclinical decision support system formedical diagnosis. There
are four stages in the evolution of clinical decision support system
(CDSS). The primitive version is standalone which does not support
integration. The second generation of CDSS supports integration with
other medical systems. The third generation is standard-based while the
fourth is service model-based.
Other examples include a bank loan officer verifying the credit of a loan
applicant or an engineering firm that has bids on several projects and
wants to know if they can be competitive with their costs.
DSS is extensively used in business and management.
Executive dashboard and other business performance software allow
faster decision making, identification of negative trends, and better
allocation of business resources. Due to DSS all the information from any
organization is represented in the form of charts, graphs i.e. in a
summarized way, which helps the management to take strategic
decision.
A growing area of DSS application, concepts, principles, and techniques is
inagricultural production, marketing forsustainable development . For
example, theDSSAT4package,developed through financial support of
USAIDduring the 80s and 90s, has allowed rapid assessment of several
agricultural production systems around the world to facilitate decisionmaking at the farm and policy levels.

Contd..
DSS

are also widespread inforest managementwhere the

long planning horizon and the spatial dimension of planning
problems demands specific requirements. All aspects of
Forest management, from log transportation, harvest
scheduling to sustainability and ecosystem protection have
been addressed by modern DSSs. The Community of
Practice of Forest Management Decision Support Systems
provides a large repository on knowledge about the
construction and use of forest Decision Support Systems.
A specific example concerns theCanadian National Railway
system, which tests its equipment on a regular basis using
a decision support system. A problem faced by anyrailroad
is worn-out or defective rails, which can result in hundreds
ofderailmentsper year. Under a DSS, CN managed to
decrease the incidence of derailments at the same time
other companies were experiencing an increase.

Executive Dash Board

An Executive Dashboard is a visual representation, such as the

image below, that gives executives a quick and easy way to view
their companys performance in real-time.

How Executive Dashboards Work

Executive

Dashboards work by connecting,

via APIs or application programming
interfaces, with the business systems you
currently use. These systems including,
among others, your accounting software,
your customer relationship management
(CRM) system, your email system, your
website analytics program, etc.
The Executive Dashboard pulls all this
information into one place so you dont
have to log into multiple systems. It can
also manipulate this data so the
information is in a more accessible format.

Benefits

Improves

personal efficiency
Speed up the process of decision making
Increases organizational control
Encourages exploration and discovery on the part of
the decision maker
Speeds up problem solving in an organization
Facilitates interpersonal communication
Promotes learning or training
Generates new evidence in support of a decision
Creates a competitive advantage over competition
Reveals new approaches to thinking about the
problem space
Helps automate managerial processes
Create Innovative ideas to speed up the performance

Types of Decision Support Systems

1Data driven DSS
These DSS has file drawer systems, data analysis systems, analysis information
systems, data warehousing and emphasizes access to and manipulation of large
databases of structured data.
2Model driven
The underlying model that drives the DSS can come from various disciplines or areas
of specialty and might include accounting models, financial models, representation
models, optimization models, etc. With model drive DSS the emphasize is on access to
and manipulation of a model, rather than data, i.e. it uses data and parameters to aid
decision makers in analyzing a situation. These systems usually are not data intensive
and consequently are not linked to very large databases.
3Knowledge driven
These systems provide recommendation and/or suggestion schemes which aids the
user in selecting an appropriate alternative to a problem at hand. Knowledge driven
DSS are often referred to as management expert systems or intelligent decision
support systems. They focuses on knowledge and recommends actions to managers
based on an analysis of a certain knowledge base. Moreover, it has special problem
solving expertise and are closely related to data mining i.e. sifting through large
amounts of data to produce contend relationships.
4Document driven
These systems help managers retrieve and manage unstructured documents and web
pages by integrating a variety of storage and processing technologies to provide
complete document retrieval and analysis. It also access documents such as company
policies and procedures, product specification, catalogs, corporate historical
documents, minutes of meetings, important correspondence, corporate records, etc.
and are usually driven by a task-specific search engine.

Contd..
5Communication driven
This breed of DSS is often called group decision support systems (GDSS). They
are a special type of hybrid DSS that emphasizes the use of communications
and decision models intended to facilitate the solution of problems by decision
makers working together as a group. GDSS supports electronic communication,
scheduling, document sharing and other group productivity and decision
enhancing activities and involves technologies such as two-way interactive
video, bulletin boards, e-mail, etc.
6 Inter- and Intra-organization DSS
These systems are driven by the rapid growth of Internet and other networking
technologies such as broadband WANs, LANs, WIP, etc. Inter-organization DSS
are used to serve companies stakeholders (customers, suppliers, etc.), whereas
intra-organization DSS are more directed towards individuals inside the
company and specific user groups. The latter, because of their stricter control,
are often stand-alone units inside the firm.

7New breeds of DSS

Hybrid Systems, which are combinations units using aspects of more than one
different type of DSS. A very popular example is Web based DSS, which can be
driven by a combination of different models such as document-driven,
communication driven and knowledge drive. Web-based DSS are computerized
systems that delivers decision support information or decision support tools to a
manager or business analyst using Web browser like Firefox or Internet Explorer.

On-line Analytical Processing (OLAP)-a category of software technology that

enables analysts, managers and executives to gain insight into data through
fast, consistent, interactive access to a wide variety of possible views of
information that has been transformed from raw data to reflect the real
dimensionality of the enterprise as understood by the user.

Function of DSS in Business

DSS

is computer based information system for management

decision maker who deal with the semi-structured problems. DSS
play an important role in business. It performs various activities. The
role of DSS is explained as follows:1. What if analysis
2. Goal oriented
3. Risk analysis
4. Model building
5. Graphical analysis

1. What - if analysis: - This is the process of assessing the part of

variables. This helps managers to be proactive rather than reactive
in their decision making. This analysis is critical for semi-structured
and unstructured problems because the data necessary to make
such decisions are not available.
2. Goal oriented: - It is process of determining the input values
required to achieve acertain goal. For example house buyers
determine the monthly payment they can afford (say for example
Rs. 15000/-) and calculate the number of such payments required to
pay the desired house.

Contd..

3.
Risk analysis: - Risk is the important factor which affects the
business enterprise. DSS allows managers to assess the risks
associated with various alternatives. Decisions can be classified as
low risk, medium risk and high risk. A DSS is particularly useful in
medium risk and high risk environments.
4. Model building: - DSS allows decisions makers to identify the
most appropriate model for solving the problems. It takes into
account input variables; inter relationship among the variables
problem assumptions and constraints. For example a marketing
manager of a television manufacturing company is charged with
the responsibility of developing a sales forecasting model for
colour TV sets.
5. Graphical analysis: - This helps managers to quickly digest large
volumes of data and visualize the impacts of various courses of
action. They recommend the use of
graph when:a) Seeking a quick summary of data.
b) Forecasting activities.
c) Detecting trends over time.
d) Composing points and patterns at different variables.

Group Decision Support System (GDSS)

It

is an interactive computer based system to

facilitated the solution of unstructured problem
by a set of decision makers working together
as a group. The group decision support system
was developed in response to a growing
concerned over the quality and effectiveness of
meetings.
One result shows that the amount of a
managers time spend in meeting range from
35 to 70%.
The group perform two generic activities
communication, interaction and decision
making or problem solving. The communication
is the transmission of information from one
person to another while interaction is repetitive

Types of Groups

Authority

Groups : This include formal

authority relationship such as boss and
sub-ordinate.
Intra-departmental Groups: This is the
working group under the same base i.e.,
the group is homogeneous.
Inter-Departmental Groups: It passes
work from department to department in
chain forming a super group i.e., the
groups is heterogeneous groups.
Project Groups: They are form to full
time to accomplish goal by a specific time.

Contd..
Committee

and Task Forces Groups:

They are form to deal with a subject area
or issue within a specified time.
Business Relationship Groups: They
are formed under relationship with
customers and suppliers, trade
associations and professional associations.
Committees of Practices: Group of
people who play or work or stay together
so long that they have developed similar
way of doing things. For eg: volunteer
organization, support club, local
committee and campus students.

Components of Group Decision

Support System
Scholars

and researchers have identified at least three

basic elements of a GDSS Hardware, software tools
and people. Hardware refers to the conferences
facilitating including rooms, tables, chairs, computers,
electronic codes, audio visuals system etc. Such
facility must be physically laid out in a manner that
supports group collaboration.
A wide range of software tools including tools for
organizing ideas, gathering information ranking and
setting priorities and other aspect of collaboration
work are how being used to support decision making
meetings. People refer not only to the participants of
the meeting but also trained facilitator and other
support staffs who operate and manage meeting room
facilities.