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Lecture2 Decisions And Decision Makers

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Lecture2 Decisions And Decision Makers

  1. 1. Decisions and Decision Makers Reading: Chapter 2 Why do we need DSS’s? ……. Because of …
  2. 2. The Decision Making Process <ul><li>Decision maker is both a step and a participant </li></ul>Marakas, 2003 Avoid great solution, wrong problem!! This is a dynamic process though it may appear static represented like this
  3. 3. Classes of Decision Makers <ul><li>The many types of D-M’s lead to many types of DSS’s </li></ul>Requires support from the whole organisation Marakas, 2003 Shared authority Single decision maker, other partyicipants
  4. 4. Decision Structures Decision structure Collaborative Non-Collaborative Group Consensus Majority Team Individual Committee Consensus Majority IMPLEMENTATION
  5. 5. Decision Styles Depends on problem context, perceptions of the D-M and their values. Marakas, 2003 Thinkers, not doers Conflict averse Style will be a pattern of these rather than one distinguishable style
  6. 6. Decision Style influencing DSS Design <ul><li>Key issues are the decision maker’s reaction to stress and the method in which problems are usually solved. </li></ul><ul><li>For example, to best serve a directive type who does not handle stress well, the interface needs to allow the decision maker to control the system without tedious input. </li></ul><ul><li>For an analytic type, the DSS needs to allow access to many data sources which the decision maker will analyze. </li></ul>
  7. 7. Forces on Decision Maker Marakas, 2003 <ul><li>A good decision results in attainment of the objective within the constraints imposed – we find out later! </li></ul><ul><li>Forces need to be balanced </li></ul>Encourage innovation or conformity? Time constraints? Stakeholders?
  8. 8. How can a DSS Help? <ul><li>Some common types of support provided by a DSS: </li></ul><ul><li>Explores multiple perspectives of a decision </li></ul><ul><li>Generates multiple and higher quality alternatives </li></ul><ul><li>Explores multiple strategies </li></ul><ul><li>Facilitates brainstorming </li></ul><ul><li>Provides guidance and reduction of bias </li></ul><ul><li>Increases ability to tackle complex problems </li></ul><ul><li>Improves response time </li></ul><ul><li>Discourages premature decision-making </li></ul><ul><li>Provides control over multiple sources of data </li></ul>
  9. 9. Why are Decisions so hard? <ul><li>4 key areas of difficulty: </li></ul><ul><ul><li>Structure </li></ul></ul><ul><ul><ul><li>less information required if more structured </li></ul></ul></ul><ul><ul><li>Cognitive limitations </li></ul></ul><ul><ul><ul><li>Can only handle 5 to 9 pieces of information </li></ul></ul></ul><ul><ul><li>Uncertainty </li></ul></ul><ul><ul><ul><li>Based on incompleteness and inaccuracy of information </li></ul></ul></ul><ul><ul><ul><ul><li>If only we had 20/20 hindsight!! </li></ul></ul></ul></ul><ul><ul><li>Alternatives and multiple objectives </li></ul></ul><ul><ul><ul><li>Selection of one alternative may impede progress on another goal </li></ul></ul></ul><ul><ul><ul><ul><li>Discard marginal ones early as a process </li></ul></ul></ul></ul>
  10. 10. Decision Structure Continuum Marakas, 2003
  11. 11. Typology of Decisions Marakas, 2003 High uncertainty High risk More certainty Are the outcomes clear? Is the preference of outcome clear?? Structured/semi-structured Delbecq, 1967
  12. 12. Decision Theory <ul><li>Keen and Scott Morton categorized decision theory into five perspectives. </li></ul><ul><ul><li>Rational manager perspective </li></ul></ul><ul><ul><ul><li>Complete information </li></ul></ul></ul><ul><ul><li>Process-oriented perspective </li></ul></ul><ul><ul><ul><li>“ Good enough” solutions </li></ul></ul></ul><ul><ul><li>Organizational procedures perspective </li></ul></ul><ul><ul><ul><li>Roles/communications channels </li></ul></ul></ul><ul><ul><li>Political perspective </li></ul></ul><ul><ul><ul><li>Power and influence determine outcome </li></ul></ul></ul><ul><ul><li>Individual difference perspective </li></ul></ul>Marakas, 2003
  13. 13. Simon’s Model of Problem Solving Marakas, 2003 Desired state – current state ownership solutions What constitutes success or failure?
  14. 14. Rational Decision Making <ul><li>Many decision strategies optimise but some solutions are only qualitative </li></ul><ul><li>Others may have multiple objectives at odds with others </li></ul><ul><li>We want a “good” solution </li></ul>Transportation Env. Impact analysis Inventory models Queuing methods Investment models Markov analysis Queuing (simple) “ what if” analysis Goal programs forecasting Linear programming simulation Optimising strategies Satisificing strategies
  15. 15. Bounded Rationality Optimizing strategies search here Satisficing strategies search here Marakas, 2003 Treat the problem NOT the symptom!!!!
  16. 16. The Process of Choice <ul><li>This is the climax of the decision process where alternatives are concerned </li></ul><ul><li>The focus is on the semi or unstructured types of decision where uncertainty is high </li></ul><ul><li>Obstacles to choosing: </li></ul><ul><ul><li>Cognitive limitations </li></ul></ul><ul><ul><li>Incomplete/inaccurate information </li></ul></ul><ul><ul><li>Time limitations </li></ul></ul><ul><ul><li>Cost restrictions </li></ul></ul>
  17. 17. Cognitive Processes <ul><ul><li>Humans can only retain a few bits of information in short-term memory. </li></ul></ul><ul><ul><li>Decision makers display differing intelligence. </li></ul></ul><ul><ul><li>Some decision makers tend to restrict their search. </li></ul></ul><ul><ul><li>Decision makers that employ concrete thinking tend to be limited information processors. </li></ul></ul><ul><ul><li>Propensity for risk varies among decision makers. </li></ul></ul><ul><ul><li>Decision maker’s level of aspiration is positively correlated with desire for information. </li></ul></ul><ul><ul><li>In general, older decision makers appear to be more limited than younger ones. </li></ul></ul>Harrison, 1995
  18. 18. Perception & Judgment <ul><li>Perception Blocks </li></ul><ul><ul><li>Difficulty in isolating the problem. </li></ul></ul><ul><ul><li>Delimiting the problem space too closely. </li></ul></ul><ul><ul><li>Inability to see the problem from different perspectives. </li></ul></ul><ul><ul><li>Stereotyping. </li></ul></ul><ul><ul><li>Cognitive saturation or overload. </li></ul></ul><ul><li>Judgment </li></ul><ul><ul><li>judgment is most favoured for alternatives </li></ul></ul><ul><ul><li>judgment is faster, more convenient, and less stressful. </li></ul></ul><ul><ul><li>in isolation judgment may be nothing but a guess. </li></ul></ul><ul><ul><li>Exclusive use relies on decision maker’s recollection, which may fail – hence support! </li></ul></ul>
  19. 19. Biases and Heuristics <ul><li>We all have “rules of thumb” that we rely on in making decisions. Another term for such rules is heuristics . </li></ul><ul><li>Heuristic search techniques follow a series of steps based on “rules” developed by experience. </li></ul><ul><li>These searches can often provide solutions very close to those found by exhaustive search. </li></ul>Marakas, 2003
  20. 20. More on Heuristics Optimisation not feasible Reliable method not available Can produce multiple solutions Symbolic processing involved Requires less cognitive effort Problems solved frequently Requires less conception time High computation time Easy to implement Input data are inexact or limited Easy to understand Appropriate Use Advantages
  21. 21. Heuristic Example Starting from New York take the shortest route between cities 7580 miles Take an exterior route without crossing paths and backtracking 7005 miles Computation increases exponentially as number of cites increases – could take millions of years to process!!
  22. 22. Heuristic Bias (Kahnemann, Tversky) <ul><li>Heuristic bias can hamper finding a solution. </li></ul><ul><ul><li>Availability – people tend to estimate probability based on past experience, which may not be representative. </li></ul></ul><ul><ul><li>Adjustment and anchoring – people often pick a starting value and then adjust up and down from it. They tend to underestimate the need for adjustments. </li></ul></ul><ul><ul><li>Representativeness – people tend to misestimate probabilities of belonging to a group. – e.g. the computer geek! </li></ul></ul><ul><ul><li>Motivational – incentives often lead decision makers to estimate probabilities that do not reflect their true beliefs. </li></ul></ul><ul><ul><ul><li>E.g. quote a low sales figure so that look good when you exceed it! </li></ul></ul></ul>
  23. 23. Effectiveness and Efficiency in D-M <ul><li>Effectiveness of DSS: (what should be done?) </li></ul><ul><ul><li>Easier access to information </li></ul></ul><ul><ul><li>Faster problem recognition and identification </li></ul></ul><ul><ul><li>Easier access to computing tools </li></ul></ul><ul><ul><li>Greater ability to evaluate large choice sets </li></ul></ul><ul><li>Efficiency from DSS: (how should it be done?) </li></ul><ul><ul><li>Reduction in decision costs </li></ul></ul><ul><ul><li>Reduction in decision time </li></ul></ul><ul><ul><li>Better quality in feedback supplied </li></ul></ul>
  24. 24. Summary (big chapter – get ideas) <ul><li>Decision Making Process </li></ul><ul><li>Classes of Decision Maker </li></ul><ul><li>Decision Styles </li></ul><ul><ul><li>Directive, analytical, conceptual, behavioural </li></ul></ul><ul><li>The DSS can help </li></ul><ul><ul><li>Brainstorming, quality alternatives etc </li></ul></ul><ul><li>Structure of Decision </li></ul><ul><li>Rational decision making perspectives </li></ul><ul><li>Simon’s Model of Problem Solving </li></ul><ul><li>Cognitive processes </li></ul><ul><ul><li>Perception, limitations, judgment </li></ul></ul><ul><li>Heuristics and bias </li></ul><ul><li>Additional DSS Resources at: </li></ul><ul><li>http:// dssresources.com / </li></ul>Worth reading Case Studies in each chapter