Information Systems Strategic Planning – Week #2 Lecture 1

Making "Good" Decisions

Businesses must make decisions, good decisions every day in order to sell their products and make a profit. Sifting through large amounts of data is a common issue in this Information Age. Companies must gather the data, convert it in to information, perform in depth analysis and come to a decision on basic business questions every day. One model is the six step decision making process. This model assists companies as they follow company procedures to come to viable solutions.

The six-step decision-making process:

These six steps are critical in the process of making decisions. It allows for all parts of the issue to be addressed. Several possible solutions can be pursued, the results tested and the best possible solution can be selected.

Businesses face many types of issues so decisions of various areas of the company are very different in nature. The operational side of the business makes very structured decisions, how many widgets to manufacture and how much raw materials to purchase are a couple of examples. Managers make decisions that are sometime structured and sometimes unstructured, this is labeled semi-structured decision making. When the leaders of a company go off site once a year to make long term planning decisions the decisions made are mostly unstructured decisions.

How do business make decisions? What types of issues require decisions to be made? One way companies make decisions is based on KPI (Key Performance Indicators). KPIs are like goals, they are preselected milestones that are monitored. If the desired level is not met then actions are taken to see what happened. Some business will actually create a dashboard with these indicators so that the important milestones can be monitored in a way that is much like driving a car! Indicators can be of any concern that is important to the business – it could be returned items, the average amount that a customer purchases, the cost of raw materials or even turnover (employees leaving). KPIsusually include the number of new customers, this is an external issue being monitored. An internal financial KPI example is ROI – return on investment which means for every dollar that is invested how much does the company get back?

How does the company gather data that it turns into valuable information? Some data may be gathered by asking customers questions using tools such as polls or surveys. Marketing firms hold focus groups so that customers (or potential customers can voice their opinions directly. Much larger quantities of information can be accumulated by a transaction processing system (TPS). These systems can be very complex but for the most part they track sales, what item was purchased, what was the price, what was the day and time and maybe even what else was purchased at the same time.

Enough about data let’s get back to the decision making process! There are four quantitative models that are identified as support systems for managers

Companies use these tools to make decisions on a moment by moment basis or once a year, depending on the issue and the company’s level of preparedness. Making good decisions on a regular basis will help a company survive rough economic times as well as the introduction of competition and the natural life cycle of products. The most important thing to making decisions is following a consistent process so that all options are reviewed and the best possible outcome can be achieved.

 

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