Unit 2: Information, Management and Decision Making

Information, Management and Decision Making

What is Information?

Information is processed data that is meaningful and useful for decision-making. Data is raw facts (e.g., 1000, Monday, 25°C), but information gives context (e.g., “1000 units were sold on Monday at 25°C temperature”).

Data ➝ Processing ➝ Information ➝ Decision

Example: A manager sees that “sales increased by 10% in the northern region during summer.” This is information derived from data and helps in making business decisions.

In any organization, information is crucial for effective management and decision-making. Managers depend on accurate and timely information to make informed decisions that help in planning, organizing, leading, and controlling the organization’s activities.

• Information: Processed data that is meaningful and useful for decision-making.
• Management: Coordinating resources to achieve goals.
• Decision Making: Choosing the best course of action among alternatives.

Role of Information in Management

Managers need accurate, timely, and relevant information to:

• Plan strategies
• Make decisions
• Monitor performance
• Solve problems

Example: A production manager uses information on inventory levels to decide whether to reorder raw materials.

Attributes of Information

Good information must have specific qualities (attributes) to be useful:

Relevance of Information to Decision Making

Why Information is Important in Decision Making:

Information helps managers:

• Identify problems or opportunities
• Analyze alternatives
• Choose the best course of action
• Implement and evaluate decisions

Example: A marketing manager uses customer feedback (information) to decide whether to launch a new product variant.

🔸 Poor Information = Poor Decisions

• Incomplete or outdated information can mislead decisions.
• Accurate and relevant information increases the chances of success.

Example: If a company launches a product based on old market trends, it may fail.

Types of Information

Information can be classified based on source, nature, and use:

• Information is processed data used in management decision-making.
• Good information must be accurate, timely, relevant, complete, and understandable.
• It supports strategic, tactical, and operational decisions.
• It can be internal/external and quantitative/qualitative.

Classical Model of Decision Making (Rational Model)

The Classical model assumes that decision-makers are fully rational and logical. They have complete information, can evaluate all alternatives, and choose the best one to maximize results.

Key Features

• Based on logic and order
• Decision-maker is fully informed
• All alternatives are known
• Goals are clear and measurable
• Focus is on optimal decision

Steps in the Classical Model:

• Identify the problem
• Set goals or objectives
• Identify all alternatives
• Evaluate alternatives
• Choose the best one
• Implement the decision
• Evaluate the outcome

Example: A company wants to launch a new mobile phone.

Management conducts market research, analyzes costs, evaluates 4 different models, and selects the one with the highest expected profit. This is a rational decision based on full data and analysis.

🔸 Limitations:

• Assumes perfect information (rare in real life)
• Time-consuming
• Not suitable for uncertain or complex environments

Administrative Model of Decision Making (Bounded Rationality Model)

🔸 Developed by: Herbert A. Simon

This model assumes decision-makers face limited information, time, and ability. They make decisions that are "good enough", not necessarily perfect.

🔸 Key Features

• Decision-makers have bounded rationality (limited ability to process info)
• They satisfice – choose an option that is acceptable rather than optimal
• Realistic approach, considers constraints
• Used in real-world situations

Example: A marketing manager needs to launch a campaign quickly but lacks full customer data.

They choose a strategy that worked previously instead of analyzing all options — a satisficing decision.

🔸 When to Use

• When time is limited
• When information is incomplete
• When decisions are made under uncertainty

Herbert Simon’s Decision Making Model

Herbert Simon proposed a step-by-step model of decision-making with three major phases:

Example: Let's say an HR manager wants to improve employee retention.

• Intelligence: Finds high turnover in the sales department.
• Design: Considers increasing salary, offering flexible hours, or creating training programs.
• Choice: Chooses to implement flexible working hours as a solution.

🔸 Additional Step (by some authors):

Review/Feedback Phase – Assess the effectiveness of the decision after implementation.

🔹 Summary Table

Classical = Ideal and theoretical

Administrative = Realistic and practical

Herbert Simon’s Model = Structured and widely accepted in management studies

What are Management Support Systems (MSS)?

Management Support Systems (MSS) are computer-based tools designed to help managers in decision-making, problem-solving, and strategic planning. They provide useful information, data analysis, and models to support better decisions.

Example: A marketing manager using a software to predict sales trends for the next quarter.

Types of Management Support Systems

A. Decision Support System (DSS): A DSS is a computer-based system that helps managers analyze data, explore options, and make non-routine, semi-structured decisions.

Features:

• Supports "What-if" analysis
• Uses data models and statistical tools
• Provides interactive interface
• Helps in analyzing complex problems

Example: A production manager uses DSS to determine the best combination of raw materials to minimize cost and maximize output.

✅ Use Cases:

• Financial planning
• Forecasting sales
• Budgeting
• Resource allocation

B. Group Decision Support System (GDSS): GDSS is a type of DSS that helps a group of people work together to make decisions. It provides a platform for collaboration, discussion, and voting.

✅ Features:

• Supports brainstorming, surveys, and group discussions
• Includes voting systems or ranking methods
• Reduces conflict and helps in reaching consensus

Example: A company team from marketing, finance, and operations uses GDSS in a meeting to decide the best strategy for a product launch. Everyone inputs their ideas, ranks them, and the system helps summarize the group's decision.

✅ Use Cases:

• Strategic planning sessions
• Project reviews
• Policy making
• Problem-solving meetings

C. Executive Information System (EIS): An EIS is a high-level system designed for top executives. It provides summary information, dashboards, and performance indicators for strategic decisions.

✅ Features:

• Presents data in graphs, charts, and dashboards
• Real-time, user-friendly interface
• Focuses on key performance indicators (KPIs)
• Helps in monitoring business performance

Example: A CEO uses an EIS dashboard to check monthly sales, profits, and customer satisfaction scores at a glance.

✅ Use Cases:

• Monitoring organization-wide performance
• Strategic goal setting
• Analyzing trends and risks

🔹 Summary Table

• DSS helps in solving complex problems using data and models.
• GDSS supports group-based decisions and enhances collaboration.
• EIS provides summarized, visualized data for strategic-level decision-making.