How Decision Support Systems Help Senior Managers Make Decisions More Efficiently - Essay Example

How decision support systems (DSSs) help senior managers make decisions more efficiently and effectively Introduction Decision support systems (DSSs) are a computer-based systems used to help users in their decision-making practices. A decision support system (DSS) combines the intellectual abilities of human beings with the capabilities of computer systems to ameliorate the value of decisions that are made (Lin & Watada, 2010, p. 334). The aim of this paper is to describe the capabilities of DSSs and discuss how the systems enhance managerial decision-making processes at senior management level and provide value to for a business. To achieve this, realistic examples of DSS application are highlighted in the paper. Before the main discussion however, the paper presents some theory on the concept of the decision-making process. Theory on the concept of the decision-making process Modern decision theory has progressed since mid 20th century through contributions from a variety of academic disciplines (Hansson, 1994, p. 6). There a number of models that describe the decision process. The first one is that which was suggested by philosopher Condorcet (1743-1794). Condorcet was of the opinion that the decision process involves three stages. The first stage refers to the rules that will act as the foundation for a decision in a given subject. Here, one evaluates the various features of the subject and the ramifications of various approaches to make a conclusion. In the second stage, the issue is clarified and opinions approach and coalesce to form a few generalised opinions. Thus, the judgment is condensed to a choice between convenient options. The third stage involves the actual choice between the alternatives (Hansson, 1994, p. 9). Decision processes that are regarded modern sequential models according to Hansson (1994) include John Dewey’s (1910) model, Herbert Simon’s (1960) model and Brim et al.’s (1962) model. Dewey’s decision-making model comprises five stages: a sensed problem; an explanation of the nature of that problem; proposition of probable answers; assessment of the answer; and further scrutiny and experimentation leading to the rejection or acceptance of the answer (Hansson, 1994, p. 9). Simon (1960) changed Dewey’s model of five stages to make it appropriate in regard to decision-making in organisations (Hansson, 1994, p. 10). According to Simon, decision-making encompasses three key stages: finding instances for making a decision, finding potential alternatives, and choosing among these alternatives. He referred to these three phases as intelligence, design and choice respectively (Hansson, 1994, p. 10; Forman & Selly, 2001, p. 18). Brim et al (1962) further subdivided the process of making a decision into five stages: recognition of the problem; gathering essential information; formulation of potential solutions; assessment of the proposed solutions; and deciding on a plan for performance. They also suggested a sixth stage called implementation of the decision (Hansson, 1994, p. 10). The decision models highlighted above are referred to as sequential models because they divide the decision process into stages that should always come in the same sequence. However, such models have been criticised by authors such as Witte (1968) and Witte (1972) [cited in Steinkühler (2010, p. 59)] on the basis that in practice, decision makers do not inevitably pass through the individual stages in the stipulated way but may also perform different operations in parallel, rather than in a particular order. Thus, as Hansson (1994, p. 10) opines, a practical model should permit the respective stages of the decision process to appear in different sequence in different decision-making situations. There are also non-sequential models such as that proposed by Mintzberg, Raisinghani and Théorêt (1976) [cited in Hansson (1994, p. 10)]. Although this model uses the stages proposed by Simon (1960), the proponents suggested that the stages do not occur in a linear sequence but circular. Mintzberg et al. argued that a linear model is not adequate for most organisational decisions, and highlighted cycling back and lags as well as bureaucracy as important elements in the process (Aaltonen, 2007, p. 3; Heller, 1992, p. 62). From the discussion above, it is evident that decision-making is a complex activity especially when the decisions are to be made for organisations. Critical decisions need to be made with regard to problem solving, strategic planning, resource allocation and so on. There is need for systems that encompass the model suggested by Simon (1960), which according to Forman and Selly (2001, p. 18) is perhaps the most widely accepted categorisation of the decision-making process. Notably, as mentioned above, Mintzberg et al. (1976) [cited in Aaltonen (2007, p. 3) and Heller (1992, p. 62)] supported the three phases of decision-making: intelligence, design and choice – although they noted that the phases do not necessarily have to be in a sequence. Therefore, decision-making systems should feature these stages, and this is where decision support systems come in to offer assistance. Capabilities of DSSs DSSs help users in taking unstructured or semi-structured decisions. They combine models and information in an effort to solve the unstructured or semi-structured problems with extensive involvement of the user. DSSs are designed to enable analysts and managers to access information in a reciprocally active manner, to manipulate the information, and to perform suitable analyses (Rainer & Cegielski, 2010, p. 365). To achieve this, they should have the following core capabilities as noted by Oke (2009, p. 6.5): Representations: A DSS is able to conceptualise information used in making decisions through representations such as charts, graphs, lists, symbols and reports. Operations: A DSS is capable of making logical and mathematical manipulations of data such as assigning risks and simulating alternatives through its interaction with the user. Memory aids: A DSS uses features such as databases, work spaces, views of data, libraries and other capabilities to refresh or update memory. Control aids: This refers to a capability which enables a user to manage the DSS activities such software allowing a user to control memory representations, operations, menus, tutorials, training, help commands, functions keys and so on. Using a DSS that has the core capabilities highlighted above, a user should be able to accomplish a number of tasks. These include getting aid on the decision-making process; addressing semi-structured or unstructured decision-making situations; creating general purpose models, simulation capabilities, and other analytical tools available to the user. The DSS should be adaptable so that it can be used for different decision-making scenarios and should be able to accommodate a wide array of management styles (Oke, 2009, p. 6.4). How DSSs enhance managerial decision-making at senior management level and provide value for a business Organisations have to make decisions at various levels. There are operational decisions, tactical decisions and strategic decisions and all have to be coordinated. For instance, transport coordinators may need a way slash cut costs, increase profits, and uncover new methods of managing their fleets; and a loan committee at a financial institution may need a system to help them to determine the clients who qualify to receive loans. Additionally, store managers need decision-making systems that can help them to decide what and how much inventory to order so as to meet customer needs, utilise the available storage space, and increase profits. As well, an entrepreneur who has some space to lease out can use vacancy records to determine the price to be charged for the space. There is need for decision-making in every organisation. Senior management (strategic decision makers) can use semi-structured environments to make decisions with the aid of decision support systems. DSSs are aimed at helping managers in their process of making decisions, but they do not replace them. This means that a DSS is applicable only as a system to complement the decisions to be made by managers. Generally, a DSS consists of different models of operations research that offer guidelines to the managers for taking effective decisions. The DSS also uses data from an organisation’s internal database but searches for specific data that pertain to the problems at hand. It acts as a tool to help managers answer the “what if” questions about what would happen if the manager made some changes (Gitman & McDaniel, 2008, p. 360). For example, a manager can create a spreadsheet that shows the amount of overtime required when the number of workers in the organisation increases or decreases. The system is then programmed such that the manager only enters some figures and the programme computes the results (Gitman & McDaniel, 2008, p. 360). In such a case, the managers will not have to worry about losses that could arise when some employees are absent. With a good system, it is also possible to determine the number of workers that an organisation needs in order to produce a given number of goods and therefore minimise on excesses in wages. Marketing executives can also use DSS models that utilise sales data and demographic assumptions to develop a forecast of the types of machinery, furniture or electronics that would appeal to the market at a given point in time. There are many examples of cases in which decision support systems are used as aids in making critical decisions. One of the leading global pharmaceutical companies, GlaxoSmithKline, uses a DSS to manage inventory effectively. The DSS effectively verifies the stock level as well as the number of weeks forward coverage (WFC) for each stock keeping unit (SKU) (Shang et al. 2008). With such a system, the company is able to maintain a given amount of inventory and therefore maintain its production capacity. In another example presented by Stair, Reynolds and Reynolds (2009, p. 394), the United States Coast Guard uses a formal decision process referred to as the Ports and Waterways Safety Assessment (PAWSA) model to establish the type of resources required to safeguard the nation’s waterways and coastlines. In one result of its decision-making process using PAWSA, the Coast Guard established that it required four extra vessel-traffic centres. Another good example is that of current United States president Barack Obama’s presidential campaign in 2008. The presidential campaign utilised a DSS that was referred to as Neighbour to Neighbour. The campaign compared election board data with information collected on rallies, websites, or through telephone calls. The system included names and addresses of voters who were believed to be undecided during the campaign. It also included matters of interest to the particular voter, information regarding issues of interest in specific regions, as well as previous voting records. Using this tool, members of the team could more effectively identify pitches and scripts to use with voters in a given region to persuade them to vote for Obama. Additionally, they could customise fliers and other campaign objects to get their message to the voters more successfully (Sauter, 2011, p. 18). The examples above show that decisions support systems can be used by organisations to achieve different goals based on the organisations’ needs. Conclusion As shown in this paper, decision-making is a complex process especially with regard to making decisions in an organisation setting. There are many models to explain the process of decision-making such as John Dewey’s (1910) model, Herbert Simon’s (1960) model and Brim et al.’s (1962) model. These models are sequential in the sense that they have stages that decision makers are thought to follow. Nonetheless, authors such as Mintzberg et al. (1976), though supporting Simon’s (1960) model that involves intelligence, design and choice, conjecture that decision-making in organisations follows a circular rather than linear format due to aspects such as bureaucracies. It is due to such arguments that DSS is an important tool to help in decision-making. Decision support systems help managers to make decisions but do not replace them. They have capabilities such representations, operations, memory aids, and control aids which users interact with to make informed organisational decisions. A manager can use a DSS to answer questions regarding changes that are to be made in an organisation. As shown in the paper, decision support systems are used in a wide array of settings such as inventory management, predicting market trends, determining which resources need to be deployed in different areas and so on. Because of the complexity involved in making such decisions, DSSs help managers to make more informed decisions and thus add value to their organisations. References Aaltonen, M (ed) 2007, The third lens: Multi-ontology sense-making and strategic decision-making, Ashgate Publishing, Ltd., London. Forman, E H & Selly, M A 2001, Decision by objectives: How to convince others that you are right, World Scientific, Singapore. Gitman, L J & McDaniel, C 2008, The future of business: The essentials, eth edn, Cengage Learning, New York. Hansson, S V 1994, Decision theory: A brief introduction, Royal Institute of Technology (KTH), Stockholm, viewed 8 August 2012 Heller, F A 1992, Decision making and leadership, CUP Archive, Cambridge. Lin, L & Watada, J 2010, ‘Building a decision support system for urban design based on the creative city concept’ in Jain, C J & Lim, C P (eds) Handbook on decision making, Springer, New York., pp. 317-346. Oke, J K 2009, Management information systems, Nirali Prakashan, Pune. Rainer, R K & Cegielski, C G 2010, Introduction to information systems: Enabling and transforming business, 3rd edn, John Wiley & Sons, New York. Sauter, V L 2011, Decision support systems for business intelligence, 2nd edn, John Wiley & Sons, New York. Shang, J, Tadikamalla, P R, Kirsch. L J & Brown, L 2008, ‘A decision support system for managing inventory at GlaxoSmithKline’ (abstract), Decision Support Systems, Vol. 46, Issue 1, pp. 1–13, viewed 8 August 2012 Stair, R M, Reynolds, G & Reynolds, G W 2009, Principles of information systems, 9th edn, Cengage Learning, New York. Steinkühler, D 2010, Delayed project terminations in the venture capital context: An escalation of commitment perspective, BoD – Books on Demand, Norderstedt. Read More