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Chapter 12
Enhancing Decision Making
Student Learning Objectives
1. What are the different types of decisions and how does the decision-making process
work? How do information systems support the activities of managers and management
decision making?
2. How do business intelligence and business analytics support decision making?
3. How do different decision-making constituencies in an organization use business
intelligence? What is the role of information systems in helping people working in a
group make decisions more efficiently?
Learning Catalytics is a “bring your own device” student engagement, assessment, and
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The page
number for each key term is provided.
Balanced scorecard method, 489
Informational role, 472
Behavioral models, 471
Intelligence, 470
Business performance management (BPM), 490
Interpersonal role, 471
Choice, 470
Key performance indicators (KPIs), 489
Classical model of management, 471
Location analytics, 482
Data visualization, 477
Managerial roles, 471
Decisional role, 472
Operational intelligence, 481
Design, 470
Pivot table, 487
Drill down, 477
Predictive analytics, 478
Geographic information systems (GIS), 485
Semistructured decisions, 468
Group decision-support systems (GDSS), 490
Sensitivity analysis, 487
Implementation, 470
Structured decisions, 468
Unstructured decisions, 468
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Teaching Suggestions
The opening case, “Germany Wins the World Cup with Big Data at Its Side,” illustrates how the
effective use of data analytics can help employees and managers at all levels and in many
different industries make better decisions. Even though the vignette described the game of
professional soccer, it points out how important turning raw data into useful information can turn
around a team or company. It also shows how executives, managers, and employees have to
continually upgrade and enhance their decision-making skills to keep up with the competition
and the marketplace.
Section 12.1, “What are the different types of decisions and how does the decision-making
process work? How do information systems support the activities of managers and
management decision making?” This section of the text focuses on the management aspects of
information systems, and how the main contribution of information systems has been to improve
decision making, both for individuals and groups. As an exercise, randomly ask your students to
classify different types of decisions and at what management level they would expect those
decisions to be made. For example, the location of a new plant would be an unstructured type of
Section 12.2, “How do business intelligence and business analytics support decision making”
This section explores the emerging business intelligence and business analytics industries that
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are one of the fastest growing and largest segments in the U.S. software market. It builds on
information presented in previous chapters and lets students begin putting the pieces together of
all the material presented so far. You might have students critically analyze how they may take
information about a situation they are in (or have been in) from the environment, understand its
meaning, and then attempt to act on the information. Then have them correlate the process to
how a business would do the same.
Interactive Session: Organizations: Big Data Make Cities Smarter
Case Study Questions
1. What technologies are New York and Barcelona employing to run their cities more
efficiently and improve citizens’ quality of life?
New York City officials are using data more and more to make decisions and deploy resources
rather than relying on “gut instinct” or hearsay complaints and sketchy grievance descriptions.
The city is using wireless sensors to gather data and they are using data from 311, the
nonemergency line for citizen complaints to make decisions. Smartphone apps may be used in a
2. What are the management, organization, and technology issues that should be
addressed by “smart city” initiatives?
Management: Protecting information and identities from misuse and abuse is perhaps the most
important issue that needs to be addressed. Collecting so much data from so many different
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3. What problems are solved by “smart cities?” What are the drawbacks?
Improvements in the efficiency of collecting and wisely using the millions of bytes of data
collected are major problems solved by smart cities. Better decisions about the effective
4. Give examples of four decisions that would be improved in a “smart city.”
Examples of improved decision making in a smart city include 1) which restaurants to inspect
5. Would you be concerned if social media data were used to supplement public data to
help improve the delivery of municipal services? Why or why not?
Answers to this question will vary based on impressions and viewpoints of privacy concerns.
Students should consider the impact of collecting small pieces of data at any one time and the
Interactive Session: Management: America’s Cup: The Tension between Technology and
Human Decision Makers
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Case Study Questions
1. How did information technology change the way America’s Cup boats were managed
and sailed?
Old-fashioned sailboats were usually a single-hulled boat in the seventy-foot range with an
average sailing speed of up to 10 miles per hour. That changed in 2013 when small hydrofoils
2. How did information technology impact decision making at Team USA?
Using powerful data analysis tools, USA managers were able to find relationships they had never
thought about before. For the first time in history, it seemed possible to leave sailing to the
3. How much was technology responsible for Team USA’s America’s Cup victory?
Explain your answer.
Team USA was losing the upwind legs of all the races where Team New Zealand had the edge.
USA engineers called for boat modifications while the sailors called for more attention to be paid
4. Compare the role of big data in Team USA’s America’s Cup victory with its role in the
German teams 2014 World Cup victory described in the chapter-opening case.
Section 12.3, “How do different decision-making constituencies in an organization use
business intelligence? What is the role of information systems in helping people working in a
group make decisions more efficiently?” When discussing these systems, you should stress that
some are often so well integrated into business processes that students may not have heard much
about them. When presenting this material, you should demonstrate the value of the systems to
each constituency group. For example, the value of TPS and MIS might be easy to understand
and already known by many. That’s usually not the case with decision-support systems for
semistructured decisions. You definitely want to stress how DSS, ESS, and GDSS support
business intelligence.
Students will clearly recognize the importance of decisions on what the selling price of an item
will be or the decision on where a production facility or retail outlet should be located. However,
students are not likely to recognize the importance of the data that go into the decision, the
source of that data, the complexity of each decision, the side-effects of the decision, or how the
decision is really made. Decisions can be very complex, and students need to understand the
ways decision-support systems help managers handle the complexities and better understand all
that goes into the decisions.
Remind students that decision-support systems cover a wide variety of systems, tools, and
technologies such as sensitivity analysis models, pivot tables, balanced scorecards, and key
performance indicators. When covering this material in class, pose and discuss the following
questions with your students. Exactly how do the systems support decisions? Do DSS make
decisions? Do DSS help make decisions? Do DSS just provide the data for decisions?
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Review Questions
12-1. What are the different types of decisions, and how does the decision-making process
work? How do information systems support the activities of managers and management
decision making?
List and describe the different levels of decision making and decision-making
constituencies in organizations. Explain how their decision-making requirements differ.
Figure 12.1 illustrates the answer to this question. Each of these levels has different
information requirements for decision support and responsibility for different types of
decisions.
• Senior management deals mainly with unstructured decisions.
• Middle management deals with semistructured decisions.
• Operational management deals with structured decisions.
(Learning Objective 12.1: What are the different types of decisions, and how does the
Distinguish between an unstructured, semistructured, and structured decision.
Decisions are classified as structured, semistructured, and unstructured.
• Unstructured decisions are those in which the decision maker must provide
judgment, evaluation, and insight to solve the problem. Each of these decisions is
List and describe the stages in decision making.
Stages in the decision-making process include:
• Intelligence consists of discovering, identifying, and understanding the problems
occurring in the organization. Why is there a problem, where, and what effect it is
having on the firm?
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Compare the descriptions of managerial behavior in the classical and behavioral
models.
The classical model suggests that managers perform five classical functions. These functions
are planning, organizing, coordinating, deciding, and controlling. Although the classical
model describes formal managerial functions, it does not provide a description of what
Identify the specific managerial roles that can be supported by information systems.
Table 12.2 compares managerial roles with the support systems. Information systems support
the liaison, nerve center, disseminator, spokesperson, and resource allocator roles. Currently,
information systems do not support the figurehead, leader, entrepreneur, disturbance handler,
12-2. How do business intelligence and business analytics support decision making?
Define and describe business intelligence and business analytics.
Business intelligence: The infrastructure for warehousing, integrating, reporting, and
analyzing data from the business environment. It collects, stores, cleans, and makes relevant
information available to managers. It includes databases, data warehouses, and data marts.
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List and describe the elements of a business intelligence environment.
• Data from the business environment: Structured and unstructured data from many
different sources, including mobile devices and the Internet that are integrated and
organized so that they can be analyzed and used by human decision makers.
• Business intelligence infrastructure: Powerful database systems that capture
relevant data stored in transactional databases or are integrated into an enterprise-data
List and describe the analytic functionalities provided by BI systems.
• Production reports: Predefined reports based on industry-specific requirements.
• Parameterized reports: Users enter several parameters in a pivot table to filter data
and isolate impacts of the parameters.
Compare two different management strategies for developing BI and BA capabilities.
• Single vendor: Provides all the hardware and software necessary to adopt BI and BA
capabilities. The risk comes from the vendor having all the pricing power. The reward
comes from the organization having fewer integration problems.
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12-3. How do different decision-making constituencies in an organization use business
intelligence? What is the role of information systems in helping people working in a group
make decisions more efficiently?
List each of the major decision-making constituencies in an organization and describe
the types of decisions each makes.
• Operational management: Generally, makes structured decisions based on day-to–
day operations in the organization; receives most information from transaction
reporting systems and some information from MIS systems.
• Middle management: Generally, makes structured decisions and semistructured
decisions based on routine products reports from TPS and MIS; use exception reports
Describe how MIS, DSS, or ESS provides decision support for each of these groups.
Management information systems (MIS) provide routine reports and summaries of
transaction-level data to middle and operational level managers to provide answers to
structured and semistructured decision problems. MIS provide information on the firm’s
performance to help managers monitor and control the business. They typically produce
fixed, regularly scheduled reports based on data extracted and summarized from the firm’s
underlying transaction processing systems. The formats for these reports are often specified
in advance.
Decision-support systems (DSS) provide analytical models or tools for analyzing large
quantities of data and supportive interactive queries for middle managers who face
semistructured situations. DSSs emphasize change, flexibility, and rapid responses. With a
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DSS there is less of an effort to link users to structured information flows and a
correspondingly greater emphasis on models, assumptions, ad-hoc queries, and display
graphics.
Executive support systems (ESS) help senior managers with unstructured problems that
occur at the strategic level of the firm. ESS provide data from both internal and external
sources, including data from the Web and provide a generalized computing and
Define and describe the balanced scorecard method and business performance
management.
A balanced scorecard focuses on measurable outcomes on four dimensions of a business’s
performance: financial, business process, customer, and learning and growth. Each
dimension uses key performance indicators (KPIs) to understand how well an organization is
performing on any of the dimensions at any time. The framework of a balanced scorecard
Define a group decision-support system (GDSS) and explain how it differs from a DSS.
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A GDSS is an interactive computer-based system that facilitates the solution of unstructured
problems by a set of decision makers working together as a group. GDSS have been
developed in response to the growing concern over the quality and effectiveness of meetings.
Explain how a GDSS works and how it provides value for a business.
Hardware, software tools, and people are the three GDSS elements. Hardware includes the
conference facility itself (room, tables, chairs) that is laid out to support group collaboration.
It also includes electronic hardware such as electronic display boards as well as audiovisual,
computer, and networking equipment. Software tools include electronic questionnaires,
electronic brainstorming tools, idea organizers, questionnaire tools, tools for voting or setting
Discussion Questions
12-4. As a manager or user of information systems, what would you need to know to
participate in the design and use of a DSS or an ESS? Why?
Student answers to this question will vary.
12-5. If businesses used DSS, GDSS, and ESS more widely, would managers and employees
make better decisions? Why or why not?
Student answers to this question will vary.
12-6. How much can business intelligence and business analytics help companies refine
their business strategy? Explain your answer.
Student answers to this question will vary.
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Hands-On MIS Projects
Management Decision Problems
12-7. Subaru: Dealerships keep records of the mileage of cars they sell and service. Mileage
data are used to remind customers of when they need to schedule service appointments and other
purposes. What kinds of decisions does this piece of data support at the local level and at the
corporate level? What would happen if this piece of data were erroneous, for example, showing
mileage of 130,000 instead of 30,000? How would it affect decision making? Assess its business
impact.
At certain miles or years, sending sales pitches increases the potential for maintenance sales on
which dealerships realize significant profits. Dealerships can also send customers sales pitches
12-8. Applebee’s: The largest casual dining chain in the world wants to develop menus that are
tastier and contain more items that customers want and are willing to pay for. How might
information systems help management implement this strategy? What pieces of data would
Applebee’s need to collect? What kinds of reports would be useful to help management make
decisions on how to improve menus and profitability?
Applebee’s can use data from transaction processing systems and point-of-sale systems to track
which menu items sell the best. The company can use external demographic data to understand
potential customers by accessing data about ages, income levels, and the number of children per
family. The company can also use external weather data to track which menu items should be
Improving Decision Making: Using Pivot Tables to Analyze Sales Data
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Software skills: Pivot tables
Business skills: Analyzing sales data
12-9. This project gives you an opportunity to learn how to use Excel’s PivotTable
functionality to analyze a database or data list.
Use the data file for Online Management Training Inc. described earlier in the chapter.
This is a list of the sales transactions at OMT for one day. You can find this spreadsheet file
at MyMISLab. Use Excel’s Pivot Table to help you answer the following questions:
• Where are the average purchases higher? The answer might tell managers where to
focus marketing and sales resources, or pitch different messages to different regions.
• What form of payment is the most common? The answer could be used to
emphasize in advertising the most preferred means of payment.
• Are there any times of day when purchases are most common? Do people buy the
products while at work (likely during the day) or at home (likely in the evening)?
• What’s the relationship between regions, type of product purchased, and average
sales price?
We provide instructions on how to use Excel PivotTables in our Learning Tracks.
Improving Decision Making: Using a Web-Based DSS for Retirement Planning
Software skills: Internet-based software
Business skills: Financial planning
12-10. This project will help develop your skills in using Web-based DSS for financial
planning.
The Web sites for CNN Money and Kiplinger feature Web-based DSS for financial planning
and decision making. Select either site to plan for retirement. Use your chosen site to
determine how much you need to save to have enough income for your retirement. Assume
that you are 50 years old, single, and plan to retire in 16 years. You have $100,000 in
savings. Your current annual income is $85,000. Your goal is to be able to generate an
annual retirement income of $60,000, including Social Security benefit payments.
Use the Web site you have selected to determine how much money you need to save to help
you achieve your retirement goal. If you need to calculate your estimated Social Security
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benefit, use the Quick Calculator at the Social Security Administration Web site
(www.ssa.gov/planners/calculators.htm).
Critique the site—its ease of use, its clarity, the value of any conclusions reached, and the
extent to which the site helps investors understand their financial needs and the financial
markets.
An additional savings of $214,000 is required to generate an annual retirement income of
$60,000 from the ages of 66–90 with a projected interest rate of 6 percent.
Opinions will vary about each site’s ease of use, clarity, and the value of any conclusions
Collaboration and Teamwork Project
12-12. In MyMISLab, you will find a Collaboration and Teamwork Project dealing with
the concepts in this chapter. You will be able to use Google Drive, Google Docs, Google
Sites, Google +, or other open source collaboration tools to complete the assignment.
Case Study: How Much Does Data-Driven Planting Help Farmers?
12-12. List and describe the technologies used in this case study.
Farmers are using global positioning system navigation systems running on tablet computers to
manage equipment and issue instructions during planting and harvesting seasons. Farmers and
12-13. How do the systems described in this case provide operational intelligence?
Prescriptive planting uses data provided by farmers on field boundaries, historic crop yields, and
soil conditions to agricultural data analysis companies which analyze that data along with data
about seed performance and soil types in different areas. The company sends a computer file
with recommendations back to the farmer, who uploads the data into computerized planting
equipment. The data analysis company monitors weather and other factors to advise farmers how
to manage crops as they grow.
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12-14. How does predictive planting support decision making? Identify three different
decisions that can be supported.
Prescriptive planting takes much of the guess work out of planting and harvesting crops. Just the
right amount of seed and fertilizer are laid down to improve the average corn harvest thereby
increasing profits. Three decisions prescriptive planting supports include the amount of seed and
12-15. How helpful is predictive planting to individual farmers and the agricultural
industry? Explain your answer.
Monsanto estimates that data-driven planting advice could increase worldwide crop production
by about $20 billion a year. However, output from predictive planting system has not achieved
those levels yet. Small farmers will be hard-pressed to afford the technology required by the new
programs because of the cost of the service itself along with the cost of retrofitting existing
planting equipment or buying more modern equipment that includes the electronic gear. Large
farmers will have an easier time of purchasing the software and retrofitting their equipment.
Regardless of whether the farm is big or small, the impact of the new data-driven software
programs will be minimal in good years because yields would be high regardless of the decisions
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information systems in helping people working in a group make decisions more efficiently?
AACSB: Analytical thinking, Reflective thinking.)
12-16. Identify and describe three factors that prevent managers from making good
decisions.
Visit MyMISLab for suggested answers.
12-17. Give three examples of data used in location analytics and explain how each can help
businesses.
Visit MyMISLab for suggested answers.