Information Based Decision Making - Assignment Example

?Information Based Decision Making Table of Contents Introduction 3 Nature of data and information 4 Sources of data and information 5 Criteria for selection of data and information 5 Legal requirements relating to collection, use & storage 7 Decision making models 8 People participating in decision making process 10 Methods of presenting decisions made 11 The processes for implementing a communications method 12 Reference 13 Introduction Those days are over when almost all the decisions were taken by head of the business and all other members have to follow that. However, in the prevailing contemporary business environment things have changed a lot. While making any decision, one has to analyse several external as well as internal factors. As for example, factors like economic condition, political state of the local as well as of other nations; legal frame work, social environment, technical changes and environmental condition have major influence on the performance of the organisation. Again, to retain the competitive position in the market, companies have to analyse the strategy used by its competitors and thus respective changes should be made in ones business strategy. With growing inter-relation in all these factors, the decision making process is getting complex day by day. In the contemporary business environment, the management is hardly left with time to conduct an in-depth analysis while making a decision. Therefore, the management prefer to use an information based decision making model. These models make the process of decision making more systematic and transparent. One may argue that such information based methods of decision making requires a lot of managerial time and effort. However, in the era of information technology one can easily extract required data from the central database and using the computer, complex calculations can be done within fraction of minutes. On the contrary, management can also determine beforehand all the possible negative consequences if the decision taken proves at any point of time. In the below give section, information based decision making concept as well as some of the commonly used models will be discussed in-depth. Nature of data and information The success of an information based decision making process highly depends on the quality as well as on the authenticity of the data used. Therefore, while developing the decision based information model, attention should be devoted towards nature of data and information to be used. Generally, while deciding about the nature, one should understand the core reason for which the data will be used. It means the nature of data should be finalised after considering the final use of the result derived from it. For example, if a company is developing an information based decision making process for its new project, then it will prefer to collected financial information to check the cost incurred in the production process. Again, quantitative as well as qualitative data regarding the operational activities will be collected and used to analyse progress of the project. There are certain other factors that need to be ascertained while finalising the nature of data. The team that developers the decision making model should be conscious about authenticity and reliability of the data. A small little alteration in the data can disturb whole of the decision making process. For example, if the data regarding number of units sold in a particular region gets distorted (either willingly or unwillingly), it will effect whole of the marketing decision making model. Considering the wrong data about the sales figure, the marketing manager will provide a misguiding sales forecast for the next month. On the basis of this wrong forecast, the production department will set its schedule and it will pass this information to the purchase department to supply the required material. As a result the schedule of the purchase department will also get disturbed. In general, whole of the monthly schedule of the organisation will get disturbed and will adversely affect the profitability of the company. Therefore, to avoid such situations, the developing team of the decision making model used by the marketing department should rely on such data and information which cannot be distorted easily. Sources of data and information To have reliable and unbiased data, it is quite essential to collect it from authentic sources. Therefore, the quality of the data is influenced from the point (source) where it is collected. It has been commonly found that the possibility of distortion in the data increases if it is collected from secondary source. Therefore, it is advisable to collect data from the point where it is originated. For example, to collect the data regarding number of customers visiting the stores, it is always advisable to collect data in form of foot sets per day. Apart from this, the company can use the information about customers who make purchase from stores at a specific day. However, there is a possibility that some customers visited the stores but made no purchase. Therefore, the data regarding customers making purchase will always be different from the number of customers visiting the store. Before finalising the source for data collection, the management who develops the decision making model should conduct an in-depth analysis. The team associated with decision making model should select a source were possibility of distortion of data is nominal. Criteria for selection of data and information In a decision making process some of the commonly followed steps are- selection, collection, alignment, review and integration of data (Blazey, 2008, p.294). The decision model uses this data, churn it and provide some possible outcomes as well as the alternative solution to be used. As whole of the process of analysis is directly dependent on the quality of the data, therefore while setting the decision making process, the criteria associated with the data should be predetermined. Some of the commonly verified characteristics of data are its quality and availability. As for example, the data to be collected from an electronic source must be competent with the software as well as the hardware to be used. It should be secure, reliable and user-friendly (Blazey, 2008, p.294). As discussed earlier in the project, the data and the information used for decision making process should be reliable and unbiased. It must be collected from an authenticated source that minimises the possibility of manipulation and distortion in the data. However, the most important factor is which type of data to be collected. Data can be either quantitative or qualitative. Quantitative data is the numeric data (numbers); hence this is used for applying mathematical tools and statistical analysis. Data regarding number of units produced/consumer per day and unit sold per month are common example of quantitative data. Qualitative data can be considered as textual records that are drawn from context, local perception and the holistic understanding of the phenomenon that is being studied (Bamberger, 2000, p.38). It is difficult to conduct any mathematical calculation with such data but for gathering information regarding qualitative factors (such as customer satisfaction or grievance among the employees); qualitative data has to be used. Both of the data has some advantages as well as disadvantage. As compared to quantitative data the possibility of biasness is high with the qualitative data. Again, information based decision making model need numeric data to churn and derive information for formulating alternative solutions. Therefore, the quantitative data has to be converted in numeric form. This is possible with help of a suitable scale but while developing the scale, the model developer team has to be careful. Exponential scale is one of the commonly used scale that is used to convert qualitative data to quantitative data on the basis of intensity if importance (Triantaphyllou, 2000, p.28). If required, the team member can use a trial and error method while setting the scale. This will assist in minimising the error in the finally developed decision making tool. Legal requirements relating to collection, use & storage The decision making model of a company that is based on the internal data need not to worry much about the legal matters. However, if the information is associated with the customers or the competitors, then the company should be conscious enough. Many companies use a decision making model that collected information regarding purchasing habits of the customers. They collected this information from the company’s website and the retail outlets. This data can be used to understand the purchasing behaviour of the customer base. It also identifies different patterns indicating changes in the test and preference of the customers. This information is often used by research and development department to develop new products and services. However, the customers may feel insecure that someone is monitoring his/her purchasing behaviour. Therefore, the government in some nations may restrict companies to publishing this information. Therefore, the companies should be careful regarding the legal frame prevailing in the nation about collection, use and storage of data. Apart from the legal guideline, the organisation should be conscious regarding ethical norms associated with use of data. There is a possibility that a conduct that is legal may be unethical or illegal conduct appears ethical. Therefore, the model developing team should consider both legal as well as ethical factors that vary from one nation to another (Resnik, 2010). Decision making models The concept of use of decision making model is nothing new for the history of management. Decision making tool known as PERT (Program Evaluation and Review Technique) was developed in 1957 to support the U.S. Navy's Polaris nuclear submarine project. Frederick Taylor also considered it as a tool for scientific management (Shelly & Rosenblatt, 2009, p.105). In the same era, CPM was developed by DuPont De Nemours for managing its production units (Shelly & Rosenblatt, 2009, p.105). With time several other decision making models were developed by the organisations that best suit their requirement. Some of the tools are discussed below: Figure 1: Decision Making Model-1 (Source: Kamalanabhan, p.3) This model has three broad systems- target problem system, decision making system and information systems. As per this model, the information system collected data from the external environment. This information system also collects data regarding the target problem. Churning out all the available valid information, it generates alternative solutions. The Output from the information system in passes to the decision makers. These are the ultimate decision makers; therefore after analysing all possible alternatives, they take the final decision about the problem. Again, the information system collects data about the problem to verify how far the decision was successful in sorting out the problem. After filtering the information from the collected data, it is again passed to the decision makers so that they can maker required changes in the decision to make it more effective. Therefore, the process of decision making results in a cyclical process. This is a more generalised form of information based decision making model that can be further modified to suit specific requirement of different department, division or process. The second information based decision making model is specifically for the marketing department. The diagrammatic representation of the model is given below: Figure 2: Decision making Model-2 Source: Agriculture and Consumer Protection, n.d.) This marketing information model is a continuous and interacting structure where data regarding people, equipments and procedures is collected, sorted, analysed and evaluated. The information derived is distributed to the users on timely basis for assisting in making final decision related to planning, implementation and controlling marketing related activities. As per this model, the data about marketing environment like the market, distribution channels, competitors, political, legal, economy and technology is collected and transferred to internal report system. These systems generate several reports and pass them to marketing research system. They later on generates more specified output that can be used to make decision regarding demand for a specific product/service in the target market, the possible customer purchase behaviour and so on. The data in form of reports generated by the internal report system also goes to the marketing model. These are the computerised models (such as time series model, linear programming, elasticity models, Analysis of Variance (ANOVA) model, sensitivity analysis model and what if model) that churn data and provide filtered information to the decision makers. The marketing intelligence system is responsible for analysing data from news, magazine, business journals and different reports. The final output from all these four systems/models is passed to the marketing department where final decisions are being taken. People participating in decision making process The information based decision making model is based on the data and information collected from different areas. In an organisation, there are mainly three types of decisions taken by different level of managers. The operational level decisions are taken by the floor or low level managers. They take decisions about day to day activities. The control decisions are taken by the middle level managers and these decisions are associated mainly to the functional area of a specific department or a division. The top management is responsible making strategic decisions. As all the managers will derive required information from a common decision making model, therefore they all should actively participate in the model development process. The ground level employees are the one that actually perform the task and possess maximum information about the process. Therefore, they should also be motivated to participate in developing the decision model. If the organisation’s workforce is incapable of developing the decision making model, then it is advisable to consult with the experts who possesses required experience in developing the decision making model. However, the managers and the employees should provide required information to the external experts in developing the model. Methods of presenting decisions made Once the decision making model is prepared, it should be discussed with all those who will be part of this model. The model should be explained by the team who actually formulated it. They should use different charts, models and other interactive techniques to explain the model. Later on, there must be an open discussion round where people can raise question to clear their doubts. If required, some training sessions should be offered so that people feel comfortable while using the model. The processes for implementing a communications method Success of a model highly depends on the process of its implementation. Sometime a plan that appears foolproof in the planning session may reflect severe loopholes in the process of implementation. Therefore, it is advisable to implement any model in part by part manner. The same logic should be applied for implementing communication methods. At first different communication channels in each of the department should be implemented in one by one manner. This will provide an opportunity to analyse the effectiveness of the model at an early stage. If required, changes should be introduced and the efficiency of the model should be re-examined. Once the communication model is implemented individually in each of the department, it needs to be integrated. Different communication channels, such as vertical communication channel, horizontal communication channel and diagonal communication channels in all the different departments should be integrated. This will improve flow of information throughout the organisation and as a result the degree of transparency and reliability will improve. However, one the communication model is implemented throughout the organisation, it should be monitors closely. If the model functions as per the plan smoothly for certain period, it can be considered that process of implementation is successful. Reference Agriculture and Consumer Protection. No date. Chapter 9: Marketing Information Systems. Marketing research and information systems [Online]. Available at: http://www.fao.org/docrep/w3241e/w3241e0a.htm [Accessed on February 14, 2011]. Bamberger, M. 2000. Integrating quantitative and qualitative research in development projects. World Bank Publications. Blazey, . L. 2008. Insights to Performance Excellence 2008: An Inside Look at the 2008 Baldrige Award Criteria. ASQ Quality Press. Shelly,G. B. & Rosenblatt, H. J. 2009. Systems Analysis and Design. Cengage Learning. Resnik, D. B. March 19, 2010. What is Ethics in Research & Why is It Important?. National Institute of Environmental Health Sciences. [Online]. Available at: http://www.niehs.nih.gov/research/resources/bioethics/whatis.cfm [Accessed on February 14, 2011]. Triantaphyllou, E. 2000. Multi-criteria decision making methods: a comparative study. Springer. Read More