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Phases of decision-making

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

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:
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 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

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
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.
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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