information for decision making, l1, by rahat kazmi

Kingston College of London

Information for Decision Making

Unit 4

Lecture 1

By

Rahat Kazmi

September 2010

Overview• Why Do We need Information within an organization?

• How can We develop, Organize, Analyse and Communicate information (including quantitative and financial information) for management?

• Why all organizations must manage information, just as all commercial businesses must aim to make a profit?

• Does Information increases knowledge, reduces uncertainty and add value?

• Why good decisions are virtually impossible without appropriate information?

• Why does every organization must collect, communicate and process information to survive in a rapidly changing, competitive environment?

• How can managers within the organization make effective decisions in pursuit of the organisation’s objectives without relevant Information?

Prepared by: Rahat Kazmi

Learning Outcomes

On completion of this unit, you will be able to:

• 1. Explain the need for quality information in organizations;

• 2. Identify the relationship between information and decision-making;

• 3. Use statistical tools available for presenting and interpreting business information;

• 4. Demonstrate how financial information enables managers to plan, control and make decision.


Section 1

DataInformation

Decision Making

Data are facts, events and transactions; information is data processed in such a way as to be useful to the

recipient.Prepared by: Rahat Kazmi

Data, Information and Knowledge

• Data is the representation of facts as text, numbers, graphics,

images, sound or video

• Data is the raw material used to create information

• Facts are captured, stored, and expressed as data

• Information is data in context

• Without context, data is meaningless - we create meaningful

information by interpreting the context around data

• Knowledge is information in perspective, integrated into a

viewpoint based on the recognition and interpretation of

patterns, such as trends, formed with other information and

experience

• Knowledge is about understanding the significance of information

• Knowledge enables effective actionPrepared by: Rahat Kazmi

Data Management and Project Success

Data is fundamental to the effective and efficient operation of any

solution:

− Right data

− Right time

− Right tools and facilities

• Without data the solution has no purpose

• Data is too often overlooked in projects

• Project managers frequently do not appreciate the complexity of

data issues


Data and Information Management

• Data and information management is a business process consisting

of the planning and execution of policies, practices, and projects that

acquire, control, protect, deliver, and enhance the value of data and

information assets


Data and Information Management


To manage and utilise information as a strategic asset

To implement processes, policies, infrastructure and solutions to govern, protect, maintain and use information

To make relevant and correct information available in all business processes and IT systems for the right people in the right context at the right time with the appropriate security and with the right quality

To exploit information in business decisions, processes and

relations

Data Management Goals

Primary Goals:

• To understand the information needs of the enterprise and all itsStakeholders

• To capture, store, protect, and ensure the integrity of data assets• To continually improve the quality of data and information,

including accuracy, integrity, integration, relevance andusefulness of data

• To ensure privacy and confidentiality, and to prevent unauthorised inappropriate use of data and information

• To maximise the effective use and value of data and informationassets


Data Management Goals

Secondary Goals:

• To control the cost of data management

• To promote a wider and deeper understanding of the value of data assets

• To manage information consistently across the enterprise

• To align data management efforts and technology with business needs


Data Management Principles

• Data and information are valuable enterprise assets• Manage data and information carefully, like any other

asset, by ensuring adequate quality, security, integrity,protection, availability, understanding and effective use

• Share responsibility for data management betweenbusiness data owners and IT data managementprofessionals

• Data management is a business function and a set ofrelated disciplines


Data Management Issues

• Discovery - cannot find the right information• Integration - cannot manipulate and combine

information• Insight - cannot extract value and knowledge

from information• Dissemination - cannot consume information• Management – cannot manage and control

information volumes and growth


Data Management Problems – User View

• Managing Storage Equipment

• Application Recoveries/Backup Retention

• Vendor Management• Power Management• Regulatory Compliance• Lack of Integrated Tools• Dealing with Performance

Problems• Data Mobility

• Archiving and ArchiveManagement

• Storage Provisioning• Managing Complexity• Managing Costs• Backup Administration and

Management• Proper Capacity Forecasting

and Storage Reporting• Managing Storage Growth


Data Quality

• Poor data quality costs real money

• Process efficiency is negatively impacted by

poor data quality

• Full potential benefits of new systems not be

realised because of poor data quality

• Decision making is negatively affected by poor

data quality


Choices Decision Making• Decisions are required to be taken in day to day life.

• No single task in our life can be done without decision making.

• For every assignment we undertake, there has to be a process

of making choices.

• Whenever we are faced with choices, there is an inevitable

need of selecting one particular course of action.

• Any task can be done in various ways, but doing it

simultaneously through all possible alternatives is virtually

impossible.

• This necessitates making a reasonable choice from all the

options available.


Choices Decision MakingAn example can be taken for a person who wants to go to Glasgow. He/she

Can look at following options:

• Use any of the local bus service available

• Go by train

• Travel by air

As you can see, the decision to be made in this situation is faced

with the availability of a set of combination of alternatives.


Choices Decision MakingEvery decision we take in daily life requires some sort of information about

the alternatives available. For instance, in the above example certain factors

need to be considered before taking a decision:

• How urgent it is to reach to Glasgow

• How much time is available to accommodate travelling, since

each mode of travelling will take different time to reach at the

same destination?

• Whether bookings are available for the desired day and time.

• Is there any possibility of cancellation of booking or flight or

bus service.


Choices Decision Making• Which bus service or airline or train service to chose from,

since various options available for travelling to Glasgow.

• Without relevant information, we can’t take the right decision.

• Similar is the case with business. Businesses are run by

organizations which are in-fact a group of people.

• Like individuals organizations have various alternatives on a

day to day basis in operations, Decisions are made by

individuals from the management.


What is Information?

• Information is an essential business commodity. Without information, staff at all levels in an organization would be unable to perform their duties. The organization would not achieve its objectives and, hence, would not survive.

• Information has no value in itself. It becomes valuable when its existence enhances the decision-making process.


Information• Information in all its forms – input,

processed, outputs – is a core

component of any IT system

• Applications exist to process data

supplied by users and other

applications

• Data breathes life into applications

• Data is stored and managed by

infrastructure – hardware and

software

• Data is a key organisation asset with

a substantial value

• Significant responsibilities are

imposed on organisations in

managing data

Applications

Information

Infrastructure

People

ProcessIT

Systems


Information


DataInformation

Knowledge Action

Data, Information, Knowledge and Action

When is Information Valuable?

• Relevant;• Complete;• Clear;• Accurate;• Timely;• Up to date;• Well presented;• Measures favourably against the costs of

providing it


Information is an Organisation Asset

• Tangible organisation assets are seen as having a value

and are managed and controlled using inventory and

asset management systems and procedures

• Data, because it is less tangible, is less widely perceived

as a real asset, assigned a real value and managed as if

it had a value

• High quality, accurate and available information is a

prerequisite to effective operation of any organisation


Sources of Information

• Historical records;

• Internal databases;

• Resources capabilities;

• Trends;

• Targets;

• Stock availability;

• Customer credit rating.

Internal Sources


Sources of Information

• External databases;• Internet;• Published statistics;• Government reports

economic and trade reports;

• Published reports andannual accounts of competitors, suppliers and business customers;

• Suppliers’ price lists and brochures;

• Seminars and conferences;• Newspapers and magazine

reports;• Market research;• Economic climate;• Social trends;• Competitor activity;• Global market information.• Marketing Brochure• Friends or Family

External Sources


levels of Information

Strategic

Tactical

Operational

Information Flow Down Information Filters Up

Figure 1: Levels of Information


The Strategic Level of Information

• The strategic level of information oversees the activities of the entire organization

• It is concerned with long-term planning and policy decisions.

• For this level information is highly summarized, regarding company activities to date, trends, forecasts, and awareness of competitor activity, economic climate, social trends, and technological and legislative developments.

• The source of information is mainly external, with more emphasis on scope than detail.


Example of Strategic Level Information

At strategic level, the marketing director would typically

require information on:

• Potential overseas markets

• Extent of competitor activity

• Suitability of products


The Tactical Level of Information

• The tactical level of information coordinates and controls the activities of a department or section

• It is concerned with the short-term planning of that department or section.

• Information at this level concern factors such as budgets, development of operational plans and staff appointments.

• The source of information at this level is both internal and external

• And it has a medium level of accuracy depending on the circumstances.


Example of Tactical Level Information

At tactical level, the sales manager would typically require

information on:

• Breakdown of sales by salesperson

• Breakdown of sales by region

• Breakdown of sales by product


The Operational Level of Information

• The operational level of information is responsible for the day-to-day running of a department or section

• Information at this level is mostly internal, historical and, often, quantitative and detailed

• For Example: stock availability, staffing, prices, customer credit ratings etc.


Example of Operational Level Information

At operational level, the sales clerk would typically require

information on:

- Prices

- Stock availability

- Customer credit rating


The Requirements of an Information System

• Relevant, and sufficiently accurate for its

purpose

• Complete, and from a reliable source

• Communicated, in time, to the right person

• Understandable, with the right level of detail

What is Good Information?


Attributes of Quality Information

• It must enable managers to make effective decisions

• It must be suitable and timely, for taking effective control action

• It must be compatible with the responsibilities of specific managers

• It must contain an appropriate levelof detail for the recipient

• It must relate to the current situation

• It must have an acceptable level of integrity

• It must be compatible with the response time needs of systems

• It must be based on exceptions or variances to accord to the principle of ‘management by exception’, where appropriate

• It must be produced at an optimumcost

• It must be easily understandable by the recipient

• It must not contain unnecessary jargon or abbreviations

• It must be provided at a suitable frequency.


Information System (IS) Should Ensure that the:

• Right information is in the

• Right place with the

• Right person at the

• Right time and in the

• Right format.


Management Information System (MIS)?

• A management information system provides managers, at all levels, with appropriate information for planning, control and decision-making.

• Information technology can enhance the organisation’s management information system by providing better, faster information

• This will result in improvements or changes in management action.


Role of MIS in Management Action

• Better and more accurate planning;

• Enhanced decision-making;

• Closer control of activities;

• Better coordination of activities;

• Improvements in quality.


An Overview of Management Information Systems: Perspective

• A management information system (MIS) provides managers with information that supports effective decision making and provides feedback on daily operations

• The use of MIS spans all levels of management


Sources of Managerial Information


Inputs to a Management Information System

• Internal data sources (TPSs and ERP systems and related databases; data warehouses and data marts; specific functional areas throughout the firm)

• External data sources (Customers, suppliers, competitors, and stockholders whose data is not already captured by the TPS; the Internet; extranets)


Ways IT provides Information

• Internal databases

• Internet for internal communications

• Decision-support packages and spreadsheets

• Routine transaction processing

• External databases for research

• The Internet


Outputs of a Management Information System

• Scheduled report: produced periodically, or on a schedule

• Key-indicator report: summary of the previous day’s critical activities

• Demand report: developed to give certain information at someone’s request

• Exception report: automatically produced when a situation is unusual or requires management action

• Drill-down reports: provide increasingly detailed data about a situation


Characteristics of a Management Information System

• Fixed format, standard reports

• Hard-copy and soft-copy reports

• Uses internal data

• User-developed reports

• Users must request formal reports from IS department


When decisions affect others – impossible to please all

• Whatever decision you make – some people will be happy and some will not

• Build and maintain a trusting decision making environment – will keep the zone of acceptance broad

• Different approaches for different situations

• Better to make a decision that is informed and satisfies your conscience


Decision Making in our Daily LivesThe work of managers, of scientists, of engineers, of lawyers--the work that steers the course of society and its economic and governmental organizations--is largely work of making decisions and solving problems. It is work of choosing issues that require attention, setting goals, finding or designing suitable courses of action, and evaluating and choosing among alternative actions.

The first three of these activities--fixing agendas, setting goals, and designing actions--are usually called problem solving; the last, evaluating and choosing, is usually called decision making.

Herbert Simon, Nobel Laureate 1988

We all face decision making situations Life of leaders – decisions, decisions, decisions, …


What is Decision Making?

• Decision making is the developing conceptsleading to the selection of a course ofaction among variations. Every decisionmaking process produces a final choice

• It can be an action or an opinion. It begins when we need to do something but we do not know what

• e.g. Decision to raise a Purchase Order


Decision making in business and management

Several decision making models or practices for business include:

– SWOT Analysis - Evaluation by the decision making individual ororganization of Strengths, Weaknesses, Opportunities and Threatswith respect to desired end state or objective.

– Buyer decision processes - transaction before, during, and after apurchase

• Corporate finance:

• The investment decision

• The financing decision

• The dividend decision

• working capital management decisions

– Cost-benefit analysis - process of weighing the totalexpected costs vs. the total expected benefits

In general, business and management systems should be set up to allow decision making at the lowest possible level.


Types of Decisions

• Unstructured/ Nonprogrammed

• Structured/ Programmed

• Semi-structured


Information Requirements of Key Decision-Making Groups in a Firm


Which Mobile Phone should I buy?

What are the things you consider before making a decision?


What should I wear for class (or work) today?

What are the things you consider before making a decision?


Any Questions?


information for decision making, l1, by rahat kazmi

Documents