Phases of decision-making: Intelligence Phase, Design Phase, Choice Phase, Implementation Phase

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Information System (CS507)

LESSON 16

Phases of decision-making

There are five phases of the decision making process, the details of these phases have already been

discussed in detail. These five phases will be elaborated in the form of an example for better

understanding.

16.1 Phases of decision-making process are:

· Intelligence searching for conditions in the environment that call for decisions

· Design inventing, developing, and analyzing possible courses of action

· Choice selecting a course of action from those available

· Implementation implementing the selected course of action

· Monitoring checking the consequences of the decision made after implementation

Phases Example

Assume that a multinational company is considering opening a branch in Pakistan. Identify typical activities

that would be performed in each phase (intelligence, design, choice, and implementation) of the decision

to open or not to open a branch.

16.2 The Intelligence Phase

Scan the environment to identify problem situations or opportunities. Conditions that call for decisions are

identified. Typical Activities include:

· Country Risk based on following

o Country credit rating

o Transparency

o Corruption

· Facilities for one window operation (levels of bureaucracy)

o SRO Culture

o Govt. Policy

o Law & Order

o Exchange rates

For instance, international banks while entering into country make assessment of exposure and thus limit

the maximum number of transactions the bank can undertake.

a) What are the possible advantages, disadvantages, and risks?

b) How much resources will be diverted from other activities?

c) When should we start? And so forth.

16.3 The Design Phase

Possible courses of actions are invented, developed, and analyzed.

Typical Activities include:

Information System (CS507)

Select criteria for assessing the alternatives (e.g., ROI, market share, etc.)

Create alternatives: invest now, invest later, do not invest

Analyze levels and timing of investment

Information flow for decision making

Prepare a feasibility study

How will the choice be made, by whom, and when?

16.4 The Choice Phase

A course of action is selected out of the available alternatives as devised in the

design phase. Typical Activities include:

Get information

Final evaluation

Sensitivity analysis

16.5 The Implementation Phase

Implement the selected course of action. Typical Activities include:

Follow the implementation plan

Deal with resistance to change and necessary approvals and authorizations

Conduct training

Transfer resources

16.6 Rational Individual Models of Decision Making

Since individuals in total make up organization, hence it is reasonable to build information systems which

facilitate the individual decision making. These are:

Rational Man (Comprehensive Model)

Bounded rationality

Muddling (Successive Comparison)

o Psychological (Cognitive Types)

The basic assumption of all these models is the human beings are rational.

· An individual has goals and objectives.

o Alternative course of actions can be followed to achieve these goals.

o Every alternative has a utility and payoffs which helps him to rank the alternatives.

· There is an impact or consequence for every alternative being followed.

Rational Man Model

In a rigorous rational model, it is presumed that the individual is rational enough to

accurately rank all the alternatives.

However, in the real world of humans, specifying all of the alternatives and consequences

is impossible.

Information System (CS507)

Information systems based on this model need to be based on availability of perfect and

complete information on all alternatives so as to ensure certainty.

Real life situations need to be given room for chances which this model does not provide

for.

Rational Man Model Example

1. In a pharmaceutical drug company, the preparation and testing of life saving drug is a critical phase, and

choice of a perfect alternative is inevitable. Hence the information system devised to support it should

be such that it can record and monitor even the slightest variations.

2. In an ammunitions factory, the testing and quality control of various bullet, shells, missiles, bombs, etc is

a sensitive issue. Since chances of error are quite high, the system from selecting and discarding should

be with high sensitivity level.

Bounded Rationality

Keeping in view the high level of perfection and completeness required by the rigorous rational model,

certain adjustments were made in this model. The purpose was to seek a sufficing instead of an

optimizing outcome. Bounded rationality focuses on the fact that Individuals prefer to avoid new

uncertain alternatives and rely on tried and-true rules (SOP's). According to this model, individuals bound

the rational behavior of choosing the best alternative by choosing a sufficing alternative. That is why it is

termed as bounded rationality. Information systems based on this model are close to reality in terms of

considering alternatives which are most commonly available. Quick decision making can be encouraged

through this model.

Bounded Rationality -- Example

Cost benefit analysis is a must in choosing an alternative in a decision making model. Where an alternative

being given is difficult to implement in terms of costs involved, the management might chose a less than

perfect alternative hence SUFFICING INSTEAD OF OPTIMISING.

"Muddling Through"

This model is closer to reality as compared to the above two goals. This model has introduced the concept

of incremental decision making, which decisions are taken by choosing policies most likely the previous

ones. For this purpose the information systems need to be intelligent and include knowledge based

systems to help accumulate and use knowledge.

Psychological (Cognitive Types)

This refers to the underlying personality dispositions toward the treatment of information, the selection of

alternatives and evaluation of consequences. · The model proposes that human beings are value

maximizes and in that sense are rational. But humans differ in how they maximize the value.

Psychological (Cognitive Types)

There are two types of cognitive type of decision making.

Systematic problem is approached in a structured way in terms of some formal method.

Intuitive problem is approached with multiple methods using trial and error to find a

solution.

Information System (CS507)

Of both the above methods, one should be selected based on the problem at hand. Information systems

should follow a systematic and intuitive pattern based on the problems or cases it is supposed to deal

with. MIS and DSS can be seen as having a systematic approach towards problem solution. The concept

of heuristics, fuzzy logic, etc, is devised to follow the intuitive patterns.

16.7 Organizational Models in Decision Making

Organizations are thought to have singular goals controlled by senior level decision makers who are

completely informed. How organization makes decisions as a whole, following are certain models.

Bureaucratic

Political

Garbage Can

Bureaucratic model

Whatever organizations decide is a result of Standard Operating Procedures, evolved over time. In general

organizations do not chose or decide in a rational sense, instead they chose a specific set of SOP's. Radical

policy changing is discouraged at all costs.

Empire Building

Empire building is a business term that refers to a common problem in larger organizations, in which

managers attempt to gather more administrative and financial power. Power can only be shared in an

organization with key employees in terms of their responsibilities & functions. Such employees are the key

players in the decision making process. Hence decisions taken in an organization are a result of collective

efforts of the leaders involved. This model is also termed as Political Model.

Garbage Can Model

This model states that organizations are not rational. Decisions made are largely on accidental basis. Hence

wrong solutions may be applied to wrong problems in an organization and critical mistakes may occur.

Information systems should be designed to support and assist in relevant decision making, instead of

making unrelated and wrong decisions.

System Design & Decision Making

The purpose of elaborating the concept of decision making in the context of IS was to make you realize the

importance of the fact that, Information system must support the managers for timely and effective

decision making. While designing the information system, output, in terms of suitable reports is essential to

analyze, highlight and bring to attention situations that may require decision making. The top manager looks

for value addition to his/her knowledge of business operation.

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