Decision Making

MCDA is created by applying the information to a five-step process.

1. Describe the context. 2. Identify various options. 3. Identify and select objectives and criterion. 4. Measure each criterion. 5. Calculate the values.

How Problems Are Discovered 5 steps

1. Identify the current problem. 2. Ask why the problem happened. 3. Continue to ask why. 4. Consult with members of the organization.

The importance of high-velocity decision making is noted by many of the leaders of today's top organizations

According to Jeff Bezos, "You have to somehow make high-quality, high-velocity decisions. It's easy for startups and very challenging for large organizations. The senior team at Amazon is determined to keep our decision-making velocity high. Speed matters in business— plus a high-velocity decision-making environment is more fun too."

Ensuring that the information being used to make informed business decisions is accurate and of high quality is critical in today's business environment. There are six factors that can be used to assess the quality of information.

Accuracy Completeness Relevance Validity Timeliness Consistency

Action formation

Action formation refers to how the psychic states mentioned translate into action by the organization. Once beliefs are analyzed, the organization can measure whether actionable steps have been implemented to match these beliefs. For example, let's say the organization found there is a high interest in increasing recycling at all facilities. An information system can be designed to create recycling programs and track performance, thus improving the organization's sustainability practices.

1. Describe the context.

Before MCDA can occur, the context of the analysis needs to be clearly defined. The context should identify the current organizational landscape, stakeholders, and key personnel involved in the decision-making process. In order to clearly define the context, SWOT analysis (strengths, weaknesses, opportunities, and threats), PESTEL analysis, and resources allocation are used.

Validity

Data collection methodologies and techniques should be valid. Data should be in the correct format and collected using legitimate techniques.

AHP Process

Data included in the hierarchy includes data from enterprise systems as well as insights from human input (qualitative and observational data). Once data is received and entered, it is assigned a numerical value and assigned a weight, essentially creating a mathematical model. Comparisons are then made, weights are evaluated, and the calculation of the probability of each alternative is executed. The higher the probability of each alternative, the higher the likelihood that it will meet the goal or objective.

Timeless

Data should be available when needed. Additionally, data should be up-to-date and reflect current market conditions. Using data from redefined timeframes and timely use of data creates timeliness.

Relevance

Data to be collected should be useful to the organization. Data should be relevant and usable. There is no need to collect data just for the sake of collecting it. It is important to be sure that the collected data is relevant and can be used to make business decisions.

Classical View

Describes what managers do. Classical management theorist Henry Fayol identified the five classical functions of managers, which include planning, organizing, coordinating, deciding, and controlling. Fails to explain what exactly managers do when they plan, make decisions, and manage others.

Reports

Exception reports Production reports Forecasting reports pivot tables

Based on observations, researchers offer a set of five management attribute

Fragmented activities Managers perform work at a fast pace Currency of information Oral communication Diversity of contacts within the organization

High-velocity decision making results from the need to process data and make decisions quickly. ___________ is executed by computers through algorithms and software that can process data. High-velocity decision making software is created by humans and is designed to identify issues, find solutions to these issues, and implement the programs needed to overcome these issues with an emphasis on transactional speed.

High-velocity decision making

Personal Filters

Humans (including managers) process information through their own personal filters that help them make sense of decisions that need to be made. A number of researchers in psychology and economics uncovered the fact that managers, for the most part, are not very good at assessing risk and most are risk averse.

3. Continue to ask why.

If the root cause of the problem is not clearly identified, continue to ask why questions.

1. Identify the current problem.

In order to identify the current problem, it is necessary to provide a complete description of the problem.

2. Ask why the problem happened.

In this step, it is important to ask why the problem occurred.

Incredible amounts of data

It is estimated that 1.7MB of data is created every second by every person. 2.5 quintillion bytes of data are produced by humans every day. In the last 2 years, 90 percent of the world's data has been created. 95 million photos and videos are shared on Instagram every day. 307 billion emails and 5 million tweets are made every day.

Diversity of contacts within the organization

Managers maintain a diverse set of contacts that act as a type of information system to assist in executing short-term and long-term goals.

Decisional Roles

Managers perform a number of decisional activities for the organization. They help to initiate new strategic objectives, handle conflicts, and distribute budgetary resources to departments and employees under their supervisory control.

Interpersonal Roles

Managers perform as leaders for the organization. They represent their business to stakeholders outside the organization and perform a number of figurative responsibilities such as communicating with the public and recognizing employee performance.

Managers perform work at a fast pace

Managers perform hundreds of different activities each day.

Fragmented activities

Managers perform many short-timed activities throughout the day.

Currency of information

Managers prefer current and specific information that is used in decision making.

Oral communication

Managers prefer oral communication over written communication. Managers find that oral communication allows for faster processing and more flexibility.

Consistency

Multiple versions of a single item of data should be the same. Data should be consistent in content and format. Data stored in multiple locations should be consistent to avoid data and interpretation errors.

4. Consult with members of the organization.

Once the why questions have been asked and information documented, it is important to consult with members of the organization to come up with an agreed-upon root cause of the problem. Once the root cause has been mutually agreed upon, the discussion shifts to establishing solutions for the problem.

Allocation of resources

Resources include money, time, effort, and essentially anything expended when implementing a solution. The consideration of resources to be expended should be included when deciding on the best solution to implement.

Balanced Scorecard

The balanced scorecard framework was developed by Robert Kaplan and David Norton and is used to structure an organization's strategic plans and goals using measurable outcomes of organizational performance. Each area of the framework is measured using a designated key performance indicator (KPI). KPIs are quantifiable values that validate how effectively an organization is accomplishing significant business objectives.

Contemporary View

The behavior of managers in the workplace. Behavioral scientists have created behavioral models that identify actual management behaviors. According to research, when observed, managers tend to be less systematic, more reactive, and generally lack structural and organizational skills. This is quite different from what the classical model suggested.

3. Identify and select objectives and criterion.

The choice of what objectives and criteria to measure is the next step of the process. In MCDA, consequences play an important role in the output that is created. An example of a consequence is the determination of return on investment (ROI) after money has been spent on new equipment. This requires different measured criteria in order to create usable output.

Decision making involves the examination of well-defined solution alternatives designed to overcome a problem. The people in the organization who make the decisions often face difficulties when evaluating alternatives as it can be difficult to measure the strengths and weaknesses of each alternative.

The criteria used might include the cost of the platform, the cost of training on the new platform, and access to trained personnel who have experience with the platform. Using these criteria, the managers and key personnel choose the platform that best matches the criteria identified. Often managers compare alternatives against selection criteria, which may include benefits, costs, advantages, and disadvantages.

Customers

The focus is on who is purchasing products and services. Measurable outcomes include customer satisfaction and retention, product/service delivery, and product/service performance.

2. Identify various options.

The next step in MCDA is the identification of available options. This method compares different options in order to determine which are the best candidates for the measure.

Financial

There are a number of financial outcomes that are measured. These outcomes include revenue, expenses, return on investment (ROI), net income, cash flow, and return on equity.

Internal Business processes

These outcomes measure how efficiently a business is operating. It also measures if customer's needs and wants are being met. Some of the outcomes include quality control, inventory, resource efficiency, equipment efficiency, and execution time.

Learning and growth

This investigates the culture of the organization. Measurable outcomes include employee training, retention, satisfaction, gender and ethnic ratios, and compensation.

Accuracy

This refers to how well-collected data describes and associates with the real-world conditions it is trying to describe. The use of inaccurate data in decision making can lead to incorrect outcomes and conclusions. Collecting data from reliable sources is one way to create data accuracy.

Uncovering problems is critical in addressing issues and establishing a methodology for how to deal with them in the future. One methodology used to address problems is the 5 Whys.

Using the 5 Whys can help to identify the underlying cause of a problem and to better understand the different causes of the problem. Additionally, it can be completed without the use of statistical analysis or MIS software. The use of the 5 Whys is beneficial when human factors or interactions are involved. There are four basic steps to completing a 5 Whys analysis. During each step, it is a good idea to write down or record the responses provided in each step. This allows for visualization of each response and can lead to the more precise identification of solutions.

Consider all outcomes

When designing a solution, you should consider other possible plans or ways to overcome the problem. Creating multiple plans (Plan A, Plan B, Plan C, etc.) helps to visualize all possible solutions.

Identify what you know and don't know

When investigating solutions, acquaint yourself with what you know and don't know. Consider the information you already have, and consider what additional information you need. Then organize all the information in a meaningful way.

Middle managers and operational managers are tasked with observing many of the performance areas of an organization. They observe

a variety of areas including sales, operational activity and performance, employee performance, and adherence to organizational guidelines. Decision making executed by middle managers is often fairly structured to ensure alignment with organizational objectives. A variety of management information systems (MIS) and the reports they provide are used to assist in making structured decisions.

Multiple-criteria decision analysis (MCDA)

also known as multi-criteria analysis (MCA), is an analysis tool used for decision making. MCDA is similar to a cost-benefit analysis, but is not constrained by quantitative or monetary units as a means of comparison. Using this method, multiple sets of varied criteria used in decision making are compared, resulting in more informed decision making. A well-crafted MCDA uses data from a variety of sources and operational areas including mathematics, information technology, economics, and other information systems.

ESS are developed by

creating a procedure for uncovering precisely what performance metrics are important to assist in making management decisions and what resources are needed to develop these systems.

The decisions management makes are

critical to the overall success of an organization. Managers have a variety of roles that allow them to make decisions. Henry Mintzberg, a Canadian researcher on management and business, classifies management roles into three categories: interpersonal, informational, and decisional.

The balanced scorecard framework

developed by Robert Kaplan and David Norton, is used to structure an organization's strategic plan and its goals using measurable outcomes of organizational performance. These measurable outcomes include financial, internal business processes, learning and growth, and customers

Outcome terminology

explains the methods used to measure and monitor the belief and action steps of the BAO framework. Once beliefs have been identified and action steps have been taken, it is necessary to monitor success or failure. Information systems can be created that monitor the performance of implemented action steps and provide data on the success or failure of the endeavors. For example, the organization in the example decided to implement a recycling program at all of its facilities. Once implemented, it is critical that the program be monitored to ensure outcomes are being met.

KPI example

for an e-commerce business might measure how well they are meeting customer expectations. A KPI can be established that tracks the frequency that the customers are receiving the exact products they ordered.

AHP allows for

for many variables or conditions to be considered and prioritized, resulting in the selection of the best alternatives or projects. Using AHP, intricate situations and scenarios are analyzed by deconstructing the problem into a visible hierarchy that can be analyzed through comparison.

The belief action outcome (BAO)

framework is a method for structuring research questions that are interconnected with information systems within an organization. These questions often surround sustainability and online sustainability reports. Sustainability reports are provided by organizations and cover the economic, environmental, and social impact that result from day-to-day operating activities. The BAO framework serves as an approach to ensure the right questions are being asked and that sustainability reporting provides the information managers need.

Types of Decisional Roles

interpersonal roles informational roles decisional roles

A solution

is the response to an identified problem. Essentially, a solution is the method used to overcome a problem. Once a problem has been investigated, analyzed, and determined, it is necessary to determine the best solution to overcome the problem.

Management filters are provided by

many project management software applications. These filters allow managers the ability to search the specific type of data that is needed for a specific decision. Filters are often predefined by the organization and are designed to eliminate the time-consuming task of searching through large volumes of data and helps to avoid management bias and predefined subjective interpretation.

Exception reports

pinpoint outliers that vary from the norm. This could be when a production quota falls below forecasted levels, the performance of sales associates falls below a pre-defined threshold, or can provide alerts when employees have not completed mandatory training.

Additionally, ______________ can be used in organizational decision making. Pivot tables, included in Microsoft Excel and other spreadsheet programs, are used for multi-dimensional data analysis and allow decision makers to view patterns in data sets.

pivot tables

Forecasting reports

provide information about future expectations and whether current conditions will meet, exceed, or fail to meet these expectations.

LogicGate

provides Cloud-based risk management software to aid in managerial decision making. According to LogicGate, their software allows organizations the ability to streamline routine tasks and focus on what's important. Users can automate document collection with a workflow management system that facilitates deadline-triggered requests. They offer transparent tracking and notification and activate dynamic questionnaire templates to accept interview and survey input. Users can dig into reporting and analysis with custom analytics and heat maps that deliver in-depth, real-time data on critical risks across an enterprise.

Corporate-level managers/executives are

responsible for making decisions that impact profitability and the short-term and long-term success of an organization. In order to get the information they need, managers rely on output provided by executive support systems (ESS).

An example of an unstructured decision is

the determination of whether or not to expand to a new global market. In this process, data about the market is attained to help guide decision making. After data analysis, the management team will have to use their own judgments and insight in order to make the final determination. These types of decisions do not have a predefined set of guidelines or procedures for how best to handle them. High-level managers often have to make unstructured decisions.

Production reports

track current and predicted future levels of production and whether production goals will be met.

Managers are a vital component of a successful organization. Their responsibilities often include

using data to make decisions, prepare reports, and manage employees. There are two views of managerial behavior that are often applied to better understand management behavior: the classical view and the contemporary view.

Analytical Hierarchy Process (AHP)

was first developed by Thomas Saaty and is a multi-criteria programming model that uses an analytical hierarchy process for decision making in multifaceted operational environments.

Belief Structure

Belief formation Action formation Outcome terminology

Structured Decisions

involve tasks and choices that are routine and encompass prescribed and definite procedures for how they should be handled. Structured decisions are regularly made by individual employees and teams and often include operational decisions. Creating defined procedures gives managers and employees the ability to avoid time-consuming processes that treat each decision as a new task. Middle managers often encounter structured decision making, although some of the decisions they face will likely include unstructured elements.

Completeness

is well-structured and includes all elements that were intended to be collected. Data should be analyzed to ensure all necessary data is present and accounted for. Creating a structured plan for what data is needed can help to create data completeness.

4. Measure each criterion.

Measurement of all criteria is the next step of the process. When constructing this type of analysis, it is important to determine the weight or level of importance of each criterion. Some criteria, such as the impact on operational efficiency, cost, and training may carry different weights on the viability of a decision. Once the criteria have been determined, each should be analyzed to determine its level of importance.

Structured decision example

Middle managers might have to uncover the reasons why a sales report is showing a three-month decline at the distribution center in a certain sales territory. %0D%0AThe middle manager will have to obtain a report from the organization's enterprise system that provides information on sales and order activity as well as distribution information. In order to uncover the reasons behind the issue, the manager will likely have to acquire unstructured information from employees and market research. Combining these different sources of structured and unstructured data will allow the manager to make an informed decision that can be communicated to upper management. Some decisions are semi-structured where one part of the problem has a straightforward answer that is provided by a predetermined process or procedure, and the other part of the problem is solved using an unstructured solution method.

Risk Management

The issue with some risk management systems is that they are designed by humans and are subject to the programming created by humans. If they are not designed correctly, they can provide information that can lead to poor decision making.

Belief formation

According to researchers Lopez and Scott, belief formation includes information on the way various psychic states including beliefs, desires, and opportunities about the operating environment are formed. Analysis of these beliefs are measured against those held by stakeholders to measure alignment. For example, in one case, using an information system and BAO approach, management uncovered that many stakeholders both inside and outside the organization identified a high belief structure around organizational recycling and sustainability. Based on this information management might decide to take actionable steps to address this.

5. Calculate the values.

The last step of the MCDA process is the calculation of scores. To calculate, the scores for each criterion are multiplied (with their weight) and the scores for each criterion are then added together.

Unstructured decisions

are often executed by higher-level management and include strategic decisions such as market entry or exit, capital budgeting, and strategic goal development. When making a structured decision, the manager uses his or her own insight and judgment in addition to data produced from decision-making systems to address an issue and provide a possible solution. Unstructured decisions are significant, nonroutine, and have far-reaching implications for the success of the organization.

Informational Roles

In their informational capacity, managers are the central location for information provided by the organization. They disseminate information and strategic objectives from within the organization to their subordinates.