Chapter 12 Management Support Systems Learning Objectives Describe the phases of the decision-making process in a typical organization and the types of decisions that are made. Describe a decision support system. Explain an executive information system’s importance in decision making. Describe group support systems, including groupware and electronic meeting systems. Summarize the uses for a geographic information system. Describe the guidelines for designing a management support system. Chapter Outline I. Types of Decisions in an Organization In a typical organization, decisions fall into one of these categories: Structured decisions—structured decisions, or programmable tasks, can be automated because a well-defined standard operating procedure exists for these types of decisions. Semistructured decisions—semistructured decisions are not quite as well defined by standard operating procedures, but they include a structured aspect that benefits from information retrieval, analytical models, and information systems technology. Unstructured decisions—unstructured decisions are typically one-time decisions, with no standard operating procedure pertaining to them. The decision maker’s intuition plays the most important role, as information technology offers little support for these decisions. Semistructured and unstructured decisions are challenging because they involve multiple criteria, and often users have to choose between conflicting objectives. Different types of information systems have been developed to support certain aspects and types of decisions. Collectively, these systems are called management support systems (MSSs), and each type is designed with its own goals and objectives. A. Phases of the Decision-Making Process Herbert Simon, winner of the 1978 Nobel Prize in economics, defines three phases in the decision-making process: intelligence, design, and choice. A fourth phase, implementation, can be added. Intelligence Phase In the intelligence phase, a decision maker examines the organization’s environment for conditions that need decisions. Data is collected from a variety of sources (internal and external) and processed. From this information, the decision maker can discover ways to approach the problem. This phase has three parts: First, the decision maker determines what the reality is—identify what is really going on in order to help define the problem. Second, the decision maker gets a better understanding of the problem by collecting data and information about it. Third, the decision maker gathers data and information needed to define alternatives for solving the problem. Design Phase In the design phase, the objective is to define criteria for the decision, generate alternatives for meeting the criteria, and define associations between the criteria and the alternatives. Criteria are goals and objectives that decision makers establish in order to achieve certain performance levels. Defining associations between alternatives and criteria involves understanding how each alternative affects the criteria. Generally, information technology does not support this phase of decision making very much, but group support systems and electronic meeting systems can be useful. Choice Phase The choice phase is usually straightforward. From the practical alternatives, the best and most effective course of action is chosen. It starts with analyzing each alternative and its relationship to the criteria to determine whether it is feasible. After a thorough analysis, the choice phase ends with decision makers recommending the best alternative. A decision support system (DSS) can be particularly useful in this phase. DSSs help sort through possible solutions to choose the best one for the organization. Typically, they include tools for calculating cost–benefit ratios, among others. Implementation Phase In the implementation phase, the organization devises a plan for carrying out the alternative selected in the choice phase and obtains the resources to implement the plan. A DSS can do a follow-up assessment on how well a solution is performing. II. Decision Support System A decision support system (DSS) is an interactive information system consisting of hardware, software, data, and models (mathematical and statistical) designed to assist decision makers in an organization. A DSS should meet the following requirements: Be interactive Incorporate the human element as well as hardware and software Use both internal and external data Include mathematical and statistical models Support decision makers at all organizational levels Emphasize semistructured and unstructured tasks A. Components of a Decision Support System A DSS includes three major components: a database, a model base, and a user interface. In addition, a fourth component, the DSS engine, manages and coordinates these major components. The database component includes both internal and external data, and a database management system (DBMS) is used for creating, modifying, and maintaining the database. This component enables a DSS to perform data analysis operations. The model base component includes mathematical and statistical models that, along with the database, enable a DSS to analyze information. A model base management system (MBMS) performs tasks similar to a DBMS in accessing, maintaining, and updating models in the model base. Finally, the user interface component is how users access the DSS, such as when querying the database or model base, for help in making decisions. From the end user’s point of view, the interface is the most important part of a DSS and must be as flexible and user friendly as possible. B. DSS Capabilities DSSs include the following types of features to support decision making: What-if analysis—this shows the effect of a change in one variable, answering questions such as “If labor costs increase by 4 percent, how is the final cost of a product affected?” and “If the advertising budget increases by 2 percent, what is the effect on total sales?” Goal seeking—this is the reverse of what-if analysis. It asks what has to be done to achieve a particular goal. Sensitivity analysis—this enables one to apply different variables, such as determining the maximum price one could pay for raw materials and still make a profit. Exception reporting analysis—this monitors the performance of variables that are outside a defined range, such as pinpointing the region that generated the highest total sales or the production center that went over budget. A typical DSS has many more capabilities, such as graphical analysis, forecasting, simulation, statistical analysis, and modeling analysis. C. Roles in the DSS Environment To design, implement, and use a DSS, several roles are involved. These include the user, managerial designer, technical designer, and model builder. Users comprise the most important category because they are the ones using the DSS; therefore, the system’s success depends on how well it meets their needs. A managerial designer defines the management issues in designing and using a DSS. These issues do not involve the technological aspects of the system; they are related to management’s goals and needs. This person specifies data requirements, what models are needed, how these models might be used, and how users want to view the results (graphics, text, and so forth). The technical designer focuses on how the DSS is implemented and usually addresses the following questions: How should the data be stored (centralized, decentralized, or distributed)? What type of file structure should be used (sequential, random, or indexed sequential)? What type of user access should be used? Menu driven, such as QBE? Or command line, such as SQL? What type of response time is required? What types of security measures should be installed? The technical designer might be a computer specialist or a consultant from outside the company and may use a commercial DSS package or write the system’s code from scratch. A model builder is the liaison between users and designers. The model builder is responsible for supplying information on what the model does, what data inputs it accepts, how the model’s output should be interpreted, and what assumptions go into creating and using the model. Typically, requirements for what the model should do come from the managerial designer, implementation of the model is carried out by the technical designer, and specifications for the model come from the model builder. The model builder can also suggest new or different applications of a DSS. D. Costs and Benefits of Decision Support Systems Some DSSs can be developed from resources already available in the organization, which can reduce costs, but many require new hardware and software. Before making this investment, organizations should weigh the costs and benefits of using a DSS. Costs and benefits can be difficult to assess, however, because these systems are focused on effectiveness rather than efficiency. In addition, a DSS facilitates improvements but does not necessarily cause them. Peter G. Keen, a former MIT professor, conducted an interesting study on how organizations use DSSs and concluded that the decision to build a DSS seems to be based on value rather than cost. He outlined the benefits of a DSS, some of which are as follows: Increase in the number of alternatives examined Ability to make one-of-a-kind decisions New insights and learning Improved control over operations, such as controlling the cost of production Time savings As this study indicates, most of the benefits are intangible and difficult to assess. However, they can be quantified to a degree, although the quantification might vary, depending on the person doing the calculations. The benefit of improving communication and interactions between management and employees is perhaps the most difficult to quantify, but it is one of the most important. A DSS is said to have achieved its goals if employees find it useful in doing their jobs. In addition, some DSSs result in saving on clerical costs, and others improve the decision-making process. III. Executive Information Systems Executive information systems (EISs), a branch of DSSs, are interactive information systems that give executives easy access to internal and external data and typically include “drill-down” features and a digital dashboard for examining and analyzing information. Ease of use plays an important role in the success of an EIS. Because most EIS users are not computer experts, simplicity of the system is crucial, and EIS designers should focus on simplicity when developing a user interface. Another important factor in an effective EIS is access to both internal and external data so executives can spot trends, make forecasts, and conduct different types of analyses. For an EIS to be useful, it should also collect data related to an organization’s “critical success factors”—issues that make or break a business. An EIS should be designed to provide information related to an organization’s critical success factors. Most EISs include a digital dashboard, which integrates information from multiple sources and presents it in a unified, understandable format, often as charts and graphs. Digital dashboards and scorecards offer up-to-the minute snapshots of information and assist decision makers in identifying trends and potential problems. The following are some important characteristics of an EIS: Tailored to meet management’s information needs Can extract, compress, filter, and track critical data Offers information in graphical, tabular, and text formats Includes statistical analysis techniques for summarizing and structuring data Contains customized application-development tools A. Reasons for Using EISs An EIS can put a wealth of analytical and decision-making tools at managers’ fingertips and includes graphical representations of data that helps executives make critical decisions. Managers can use these tools to improve the efficiency and effectiveness of decision making in the following ways: Increase managers’ productivity by providing fast and easy access to relevant information. Convert information into other formats, such as bar charts or graphs, to help managers analyze different business scenarios and see the effect of certain decisions on the organization. Spot trends and report exceptions, such as gathering data on profitability and production costs at a manufacturing plant to determine whether closing the plant is more beneficial than keeping it open. B. Avoiding Failure in Design and Use of EIS Some of the factors that can lead to a failed EIS are: Management loses interest or is not committed to the project. The system’s objectives are not linked to factors critical to the organization’s success. The project’s costs cannot be justified. Developing applications takes too much time, or the system is too complicated. Vendor support has been discontinued. C. EIS Packages and Tools EISs are generally designed with two or three components: an administrative module for managing data access, a builder module for developers to configure data mapping and screen sequencing, and a runtime module for using the system. Some EIS packages provide a data storage system, and some simply package data and route it to a database, usually on a LAN. Most EIS packages come with a standard graphical user interface (GUI). Generally, managers perform six tasks for which an EIS is useful: tracking performance, flagging exceptions, ranking, comparing, spotting trends, and investigating/exploring. Exception or variance reporting is another useful technique that managers use to flag data that is unusual or out of normal boundaries. IV. Group Support Systems Group support systems (GSSs) are intended to assist decision makers working in groups. DSSs are usually designed to be used by a particular decision maker; a GSS is designed to be used by more than one decision maker. These systems use computer and communication technologies to formulate, process, and implement a decision-making task and can be considered a kind of intervention technology that helps overcome the limitations of group interactions. A GSS, with the help of a human facilitator, enhances decision making by providing a clear focus for group discussion, minimizing politicking, and focusing attention on critical issues. The success of a GSS depends on the following: Matching the GSS’s level and sophistication to the group’s size and the scope of the task Providing supportive management (especially at the CEO level) that is willing to “champion” using a GSS in the organization Related technologies for group support, such as electronic meeting systems (EMSs), groupware, computer-mediated communication (CMC), computer-supported cooperative work (CSCW), and e-collaboration, are not considered full-function GSSs because they do not have decision-making tools, but they are less expensive and include communication and problem-solving mechanisms for effective team management. GSSs are useful for committees, review panels, board meetings, task forces, and decision-making sessions that require input from several decision makers. In addition to all the capabilities of a DSS, a GSS should include communication features so decision makers in many different locations can still work together to participate in the decision-making process. A. Groupware The goal of groupware is to assist groups in communicating, collaborating, and coordinating their activities. It is intended more for teamwork than for decision support. Groupware is a collection of applications that supports decision makers by providing access to a shared environment and information. Groupware is software that helps a group of decision makers work with the same application, regardless of their locations. Groupware tools include e-mail, chat applications, video conferencing, and database sharing. Some of the capabilities of groupware include the following: Audio and video conferencing Brainstorming E-mail Scheduling Workflow automation The Internet has become an important part of groupware. The most important advantage of a Web-based GSS is being able to use open network standards, meaning the GSS can be used on any operating system or type of workstation. The most notable disadvantages are speed limitations (because the Internet is often slower than a company’s proprietary network) and security issues. B. Electronic Meeting Systems Electronic meeting systems enable decision makers in different locations to participate in a group decision-making process. There are various types, but they all have the following features: Real-time computer conferencing—this allows a group of people to interact via their workstations and share files, such as documents and images. The conference often includes an audio link, but there is no video capability. Video teleconferencing—the closest thing to a face-to-face meeting, this requires special equipment and sometimes trained operators. Video cameras are used to transmit live pictures and sounds, which makes video teleconferencing more effective than phone conferencing but also more expensive. Desktop conferencing—this combines the advantages of video teleconferencing and real-time computer conferencing. With desktop conferencing, participants can have multiple video windows open at one time. C. Advantages and Disadvantages of GSSs Advantages of GSSs include the following: Because decision makers do not have to travel as much (which includes paying for planes, hotels, and meals), costs as well as stress levels are reduced. Because decision makers are not traveling long distances, they have more time to talk with one another and solve problems. Shyness is not as much of an issue in GSS sessions as it is in face-to-face meetings. Increasing collaboration improves the effectiveness of decision makers. Disadvantages of GSSs include the following: Lack of the human touch—gestures, handshakes, eye contact, and other nonverbal cues can be lost, which can hinder the effectiveness of meetings. Unnecessary meetings—because arranging a GSS session is easy, there is a tendency to schedule more meetings than are necessary, which wastes time and energy. Security problems—GSS sessions have the same security problems as other data communication systems, so there is the possibility of private organizational information falling into the hands of unauthorized people. V. Geographic Information Systems A geographic information system (GIS) captures, stores, processes, and displays geographic information or information in a geographic context, such as showing the location of all city streetlights on a map. A GIS uses spatial and non-spatial data and specialized techniques for storing coordinates of complex geographic objects, including networks of lines (roads, rivers, streets) and reporting zones (zip codes, cities, counties, states). Typically, a GIS uses three geographic objects: Points—the intersections of lines on a map, such as the location of an airport or a restaurant Lines—usually a series of points on a map (a street or a river, for example) Areas—usually a section of a map, such as a particular zip code or a large tourist attraction Digitized maps and spatially oriented databases are two major components of a GIS. A GIS can perform the following tasks: Associate spatial attributes, such as a manufacturing plant’s square footage, with points, lines, and polygons on maps. Integrate maps and database data with queries, such as finding zip codes with a high population of senior citizens with relatively high income. A GIS with analytical capabilities evaluates the impact of decisions by interpreting spatial data. Many GISs offer multiple windows so one can view a mapped area and related nonspatial data simultaneously, and points, lines, and polygons can be color coded to represent nonspatial attributes. A zoom feature is common for viewing geographic areas in varying levels of detail, and map overlays can be useful for viewing such things as gas lines, public schools, or fast-food restaurants in a specified region. A. GIS Applications GISs integrate and analyze spatial data from a variety of sources. No matter into what category a GIS falls, most applications require a GIS to handle converting data to information, integrating data with maps, and conducting different types of analysis. GIS applications can be classified in the following categories, among several others: Education planning Urban planning Government Insurance Marketing Real estate Transportation and logistics VI. Guidelines for Designing a Management Support System Because MSSs have a somewhat different purpose than other information systems, the important factors in designing one are summarized in the following list: Support from the top management Objectives and benefits clearly defined Identifying executives’ information needs Keeping lines of communication open System’s complexity hidden, interface kept simple Keeping the “look and feel” consistent Designing a flexible system Making sure response time is fast Key Terms Structured decisions, or programmable tasks, can be automated because a well-defined standard operating procedure exists for these types of decisions. (P. 253) Semistructured decisions include a structured aspect that benefits from information retrieval, analytical models, and information systems technology. (P. 253) Unstructured decisions are typically one-time decisions, with no standard operating procedure pertaining to them. (P. 254) Management support systems (MSSs) are the different types of information systems that have been developed to support certain aspects and types of decisions. Each type of MSS is designed with unique goals and objectives. (P. 254) In the intelligence phase, a decision maker examines the organization’s environment for conditions that need decisions. Data is collected from a variety of sources (internal and external) and processed. From this information, the decision maker can discover ways to approach the problem. (P. 254) In the design phase, the objective is to define criteria for the decision, generate alternatives for meeting the criteria, and define associations between the criteria and the alternatives. (P. 255) During the choice phase, the best and most effective course of action is chosen. (P. 255) In the implementation phase, the organization devises a plan for carrying out the alternative selected in the choice phase and obtains the resources to implement the plan. (P. 255) A decision support system (DSS) is an interactive information system consisting of hardware, software, data, and models (mathematical and statistical) designed to assist decision makers in an organization. Its three major components are a database, a model base, and a user interface. (P. 256) The model base component includes mathematical and statistical models that, along with the database, enable a DSS to analyze information. (P. 256) A managerial designer defines the management issues in designing and using a DSS. These issues do not involve the technological aspects of the system; they are related to management’s goals and needs. (P. 258) The technical designer focuses on how the DSS is implemented and usually addresses questions about data storage, file structure, user access, response time, and security measures. (P. 258) A model builder is the liaison between users and designers. He or she is responsible for supplying information on what the model does, what data inputs it accepts, how the model’s output should be interpreted, and what assumptions go into creating and using the model. (P. 258) Executive information systems (EISs), branches of DSSs, are interactive information systems that give executives easy access to internal and external data and typically include “drill-down” features and a digital dashboard for examining and analyzing information. (P. 259) A digital dashboard integrates information from multiple sources and presents it in a unified, understandable format, often as charts and graphs. It offers up-to-the minute snapshots of information and assists decision makers in identifying trends and potential problems. (P. 260) Group support systems (GSSs) assist decision makers working in groups. These systems use computer and communication technologies to formulate, process, and implement a decision-making task and can be considered a kind of intervention technology that helps overcome the limitations of group interactions. (P. 262) Groupware assists groups in communicating, collaborating, and coordinating their activities. It is a collection of applications that supports decision makers by providing access to a shared environment and information. (P. 264) Electronic meeting systems enable decision makers in different locations to participate in a group decision-making process. (P. 264) A geographic information system (GIS) captures, stores, processes, and displays geographic information or information in a geographic context, such as showing the location of all city streetlights on a map. (P. 266) Instructor Manual for MIS Hossein Bidgoli 9781305632004, 9781337625999, 9781337625982, 9781337406925
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