Chapter

08
Management Information and
Decision Support Systems
Principles
• Good decision-making and problem-solving skills are the key to
developing effective information and decision support systems.
• A management information system (MIS) must provide the right
information to the right person in the right format at the right time.
• Decision support systems (DSS) support decision-making
effectiveness when faced with unstructured or semi structured
business problems.
Principles (Cont. )
• Specialized support systems, such as group support systems
(GSS) and executive support systems (ESS), use the overall
approach of a DSS in situations such as group and executive
decision making.
Introduction
Decision Making and Problem
Solving
• Every organization needs effective decision making.
• In most cases, strategic planning and overall goals of the
organization set the course for decision making.
 Hence, help employees and business units achieve their
objectives and goals.
• Information systems can assist with strategic planning and
problem solving.
Decision Making and Problem
Solving
• A well-known model, developed by Herbert Simon, divides the
decision-making phase of the problem solving process into
three stages:

• Intelligence,
This model design
was later
and incorporated
choice. by
George Huber into an expanded model
of the entire problem-solving process.
Decision Making and Problem
Solving
1. Decision-making phase: First stage in problem-solving
process.
• Intelligence stage: Potential problems or opportunities are
identified and defined.
• Design stage: Alternative solutions to the problem are
developed.
 Feasibility of these alternatives should be evaluated.

• Choice stage: Requires selecting a course of action.

Decision Making and Problem
Solving
2. Problem solving: Goes beyond decision making to include
implementation and monitoring stages.
• Implementation stage: A solution is put into effect.
• Monitoring stage: Decision makers evaluate the
implementation to determine whether the anticipated results
were achieved and to modify the process in light of new
information.
 Monitoring stage could involve feedback and adjustment.
Decision Making and Problem
Solving
• In the choice stage (3), various factors influence the decision
maker’s selection of a solution.
One such factor is whether the decision can be programmed.
• Types of decisions:
1. Programmed decisions.
2. Non-programmed decisions.
Decision Making and Problem
Solving
1. Programmed decision
• Decision made using a rule, procedure, or quantitative
method.
• For example, to say that inventory should be ordered when
inventory levels drop to 100 units is a programmed decision
because it adheres to a rule.
• Easy to computerize using traditional information systems.
Decision Making and Problem
Solving
2. Non-programmed decision
• Decision that deals with unusual or exceptional situations.
• Not easily quantifiable.
• For example:
 Determining the appropriate training program for a new
employee.
 Deciding whether to start a new type of product line.
Decision Making and Problem
Solving
In general, computerized decision support systems can either
optimize or satisfice.
• Optimization model: Find the best solution, usually the one
that will best help the organization meet its goals.
• Satisficing model: Find a good – but not necessarily the best –
problem solution.
 Satisficing is usually used because modelling the problem
properly to get an optimal decision would be too difficult,
complex or costly.
Decision Making and Problem
Solving
• Heuristics - ‘rules of thumb’ - : Commonly accepted
guidelines or procedures that usually find a good solution.
• For example: Ordering four months’ supply of inventory for a
particular item when the inventory level drops to 20 units or
less.
 Although this heuristic might not minimize total inventory
costs, it can serve as a good rule of thumb to avoid
running out of stock without maintaining excess inventory.
Management Information
Systems
• A Management information system (MIS): An
integrated collection of people, procedures, databases, and
devices that provide managers and decision makers with
information to help achieve organizational goals.
• The primary purpose of an MIS
1. Help an organization achieve its goals by providing managers
with insight into the regular operations of the organization that
they can control, organize, and plan more effectively and
efficiently.
Management Information
Systems
• The primary purpose of an MIS (Cont. )
2. Can give the organization a competitive advantage.
3. Providing the right information to the right people in the right
format and at the right time.
4. Provides managers with information that supports effective
decision making and provides feedback on daily operations.
Management Information
Systems
Inputs to a Management Information System
• Data that enters the MIS originates from both:
1. Internal data sources
• Transaction processing systems TPSs and enterprise resource
planning ERP systems and related databases.
• Data warehouses.

2. External data sources

• Customers, suppliers, competitors, and stockholders whose
data is not already captured by the TPS.
• Internet and extranets.
Management Information
Systems
Output of Management Information Systems
• A collection of reports that are distributed to managers.
 These can include summaries, charts and graphs.

The Types of Reports Generated by an MIS

1. Scheduled report: Produced periodically, or on schedule,
such as daily, weekly, or monthly.
2. Key-indicator report: Summary of previous day’s critical
activities and it is typically available at the beginning of each
workday.
Management Information
Systems
The Types of Reports Generated by an MIS (Cont. )
3. Demand report: Developed to give certain information at
someone’s request.
4. Exception report: Automatically produced when a situation
is unusual or requires management action.
5. Drill-down reports: Provide increasingly detailed data
about a situation.
Decision Support Systems
• A Decision support system (DSS) is an organized collection
of people, procedures, software, databases, and devices used to
help make decisions that solve problems.
• Used by managers at all levels.
• Focus of DSS: Decision-making effectiveness regarding
unstructured or semi-structured business problems.
• MIS helps an organization ‘do things right’, a DSS helps a manager
‘do the right thing’.
Decision Support Systems
To some extent, today’s managers at all levels are faced with less
structured, non-routine problems.
 The quantity of these decisions increase as a manager rises
higher in an organization.
Decision Support Systems
• Highly structured problems: Problems that are
straightforward and require known facts and relationships.
• Semi-structured or unstructured problems: More complex
problems in which the relationships between the pieces of data are
not always clear.
 The data might be in a variety of formats, and the data is often
difficult to manipulate or obtain.
MIS vs DSS (Table
8.2)
Decision Support
Systemsof DSS
Components
1. The database.
2. The model base.
3. Access to the Internet, networks, and other computer based
systems.
4. The user interface.
Decision Support
Systems
Components of DSS (Cont. )
1. Database management system
• Allows managers and decision makers to perform qualitative
analysis on data stored in company’s databases, data
warehouses, and data marts.
• Can also be used to connect to external databases.
Decision Support
Systems
Components of DSS (Cont. )
2. Model base: Part of a DSS that provides decision makers with
access to a variety of models and assists them in decision
making.
 Decision makers perform qualitative analysis on data stored in
company’s databases and data warehouses.
 Can also be used to connect to external databases.
Decision Support
Systems
Components of DSS (Cont. )
3. The User Interface or Dialogue Manager
• Allows users to interact with the DSS to obtain information.
• Assists with all aspects of communications between user and
hardware and software that constitute the DSS.
Group Support Systems
Group support system (GSS) consists of most elements in a
DSS, plus software to provide effective support in group decision
making.
Group Support Systems
Characteristics of GSS
• GSS must be easy to learn and use
 Many groups have less tolerance than do individual decision
makers for poorly developed systems.
• GSSs allow anonymous input, where group members do not know
which of them is giving the input.
 Example: Using GSS to help rank the performance of
managers. Anonymous input allows the group decision
makers to concentrate on the merits of the input without
Group Support Systems
Characteristics of GSS (Cont. )
• Parallel communication: With a GSS, every group member can
address issues or make comments at the same time by entering
them into a PC or workstation.
 Parallel communication can speed meeting times and result in
better decisions.
Executive Support Systems
• Executive support system (ESS) is a specialized DSS.
 Includes hardware, software, data, procedures, and people
used to assist senior-level executives.
 Also called an executive information system (EIS).

• ESSs are typically tailored to individual executives

 DSSs are not tailored to particular users.
• ESS must be easy to learn and use and not overly complex.
Executive Support Systems
• ESSs support strategic planning.
• Strategic planning: Determining long-term objectives by
analyzing the strengths and weaknesses of the organization,
predicting future trends, and projecting the development of new
product lines.