Table of Contents
DECISION MAKING
Before knowing about information systems, we will try to understand what is decision making. Decision making is a frequent activity in business organizations. Unless decision making is carried out, the goals of an organization can not be met. Decision making is defined as an activity of planning, organizing, coordinating, directing and controlling the business in an effective manner. The decision making, however, depends upon the nature of the work in an organization. In general, the decision making is carried out in three levels namely- strategic level, tactical level and operational level.
Strategic level
Strategic level decisions are concerned with situations where the top level personnel direct and control the move of the organization where to head. These decisions are normally carried out where external forces influence the situation. Some of the strategic decisions are taken when the authorities of the organization are required to decide upon the new policies, new markets, competitions, change of ownership, financial or administrative crisis, technology adoption etc.
Tactical level
Tactical level decisions are taken by the senior yet middle level personnel for long term gains. Examples of such decisions include the situations like budget usage, staff appraisal, capacity planning, yearly schedules and performance issues. Tactical decisions target at effectiveness of an organization and thus, are very much dependent upon the reliable information systems.
Operations level
Operations level decisions are taken by the personnel who execute the task on day to day and frequently require mundane tasks. These decisions are independent of external forces and these are taken locally within the section, department or division of an organization. The operational level decisions include the tasks like daily transaction, cash flow, weekly production control, sales. The individual’s efficiency contributes toward the decision making at operational level.
INFORMATION SYSTEMS
In this section, we define and explain a few important aspects of decision making within an organization. Three major aspects are information, system and information system.
Information:
Information is the most powerful and the most important aspect of an organization. Information is defined as data endowed with relevance and purpose. In other terms, information is meaningful and useful data for arriving at certain decision. Information has characteristics to make organization and business lifeful. Information has to flow within and outside organization for its own survival as well as organization’s survival. Every person of an organization is concerned with some sort of information.
System:
System is the next important aspect of an organization with which the organization functions. As system can be defined as a set of organizational elements working together for achieving some desired and purposeful objective. In other terms, a system is a functional whole within an organization comprising of norms, rules and regulations A system makes an organization systematic i.e. functioning with predefined set of rules in efficient and effective manner. A set of rules comprise a certain form of information.
Information System:
An information system is a set of elements, each of which is capable of carrying out certain information processing. All elements performing the task of information processing together for achieving a desired objective constitute an information system. An example of an information system is a personal computer. A personal computer consists of a CPU, I/O devices and memory. All these elements are capable of information processing to a little or a large extent. Information processing means manipulation, storage, retrieval, dissemination, organization and communication of data or information.
An information system, in general, functionally consists of the following units:
- Logical Units
- Computer Hardware and Software
- Information Related Personnel
In a modern organization, these three can further be grouped by the elements as under
Logical Units
- Work Style and Culture
- Roles, Duties, Responsibilities
- Schedules and Calendars
- Planning and Control
- Monitoring and Maintenance.
Under Computer Hardware and Software
- Personal Computers & Computer Networks
- Printers and Scanners
- Communication Devices such as Fax, Modem or broadband
- Office & Database Software
- Internet.
Under Information Related Personnel
- Chief Information Officer (CIO)
- System Analysts & Designers
- Information System Manager
- Programmers
- End user.
DECISION MAKING AND INFORMATION SYSTEMS
In this section, we attempt to show that how the management of an organization can make use of information system for obtaining the benefits and arrive at better productivity and economy. A manager in an organization has to play many roles which can be categorized into three major categories-interpersonal roles, informational roles and decision making roles.
Interpersonal roles
Interpersonal roles are concerned with the leadership, teamwork, and liaisoning. In the modern context, the liaisoning can be supported by the electronic communication system whereas other roles like leadership and teamwork are the best done through intellectual approaches.
Information roles
Information roles deal with core thinking, dissemination and spokesmanship. Core thinking is all about the manager’s ability to utilize the information mentally, whereas the dissemination and spokesmanship are the processing tasks to be done manually or automatically.
Decisional roles
Decisional roles include entrepreneurship, resource allocation, negotiation and disturbance (interrupt) handling. All these roles are used to handle initiatives, conflict resolution, and strategic decision making.
Let us now see how information systems can influence the manager’s role for decision making. It should be first noted that the manager’s main job is to execute the process of decision making. The earlier methods involved in process are bureaucratic and tedious but the modern information systems are capable of enhancing the automation and reducing the tediouness, the use of electronic systems such as personal computers, laptop computers and other information technology (IT) appliances reduce the manual overheads. The use of IT appliances is making the life of manager sophisticated and more comfortable so as to enable him for performing the intellectual task more efficiently.
It is important to note here that the information system differ from file systems significantly, in the following terms:
- Information systems are application (or business) oriented where as file systems are system oriented.
- Information systems are more general than file systems.
- Information systems are normally considered as logically organized where as the file systems are generally physically organized.
- Information systems are used mainly for decision making in many applications while the file systems are meant for storing information.
- Information systems are more interactive than file systems.
- An Information system may comprise of several files.
- Information systems have characteristics of data redundancy, interrelationships, and normalization while the file systems are sequences of basic data items.
- Information systems may occupy larger storage space than file systems.
INFORMATION SYSTEM ARCHITECTURE
An information system can be considered as the combination of two domains-technical domain and application domain. The technical domain comprises of the computer science (CS), communication system (Comm.) and Information Technology (IT). The application domain consists of economics, productivity, sociology and business in context. Accordingly. the architecture of an information system looks like one that is shown in Figure below.
In Fig. the important element of information system is not shown i.e. decision making which is due to the manager. Therefore, we have another schematic of IS architecture that includes manager for decision making (See Fig. below).
In Fig. above it is indicated that the manager is depending upon information system technically for achieving the objectives of organization in terms of business, social needs productivity and economy.
COMPUTER BASED DECISION MAKING
Decision making is a knowledge intensive activity. It requires a great deal of mind processing, yet it requires a huge amount of data and information items. The decision making as such can not be done by the computers as they are purely mechanical and algorithms devices, which work on given set of instructions. They can not generate instructions of their own. The juglary of executing instructions done by computers helps in the decision making activity. A decision making activity involves so much of calculations and computation and if it is done by the computer systems, it relieves the mind of the user for making fruitful decisions. For instance, a manager in a flourished company wants to project the monthly profit expected in the next financial year, this requires a complete set of data of the past year and the current year. This data set can be displayed graphically in the form of the histogram on the computer screen after the intensive manipulation of data items. The computation of data items and display of profit is a mechanical and algorithmic task and it is done efficiently by the computer machine. The decision making part lies with the human mind, that has very much been received due to tasks performed by the computer. That the way, the computer helps in decision making to the people.
We define a computer based decision making system is a computer system that involves a huge amount of computation necessary for decision making such as planning, control, monitoring, analysis, evaluation, prediction etc. The modern computers that involve advanced level techniques for carrying out computation have some automation at decision making level. Some of such computer based decision making systems are:
- Expert system
- Knowledge based system
- Decision support system
- Executive information system
An expert system
An expert system is a software that functions with the help of user interface program, knowledge base and rule engine. This system is capable of providing expert decisions, advice and solving complex problems in specific domains like medical treatment, oil exploration, chemical analysis etc.
A knowledge based system
A knowledge based system is a general software system that is built on a strong knowledge component. Such a system is capable of providing training and learning to the user with ability of correcting decisions by the user.
A decision support system
A decision support system is a software that uses a huge amount of data with flexible access and it supports the manager in making useful decisions. The eBusiness kind of application falls under this category of the software capable of handling decision.
An executive information system
An executive information system is a laptop software that helps the company and business executives in taking quick routine decisions while meetings, travel and conferences.
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