Information and decision making
Information is the resource organization that creates and changes the description of reality, reduces the uncertainty of the situation and enables effective decision making.
Decision making process
In general, the decision may be treated as non-random selection or how to act on the basis of certain criteria. The second approach concerns the decision making process, as a sequence of actions to achieve a certain choice. According to H. Simon decision-making process includes the following steps:
- Researching the environment looking for the condition requiring a decision, the diagnosis,
- Design, development and analysis of possible policy options,
- Selecting specific actions that are available, using appropriate selection criteria
There are following stages of the decision making process:
- Identify the problem (collecting information)
- The creation of alternative solutions,
- Prediction and assessment of possible outcomes of each option,
- Selection of the final option,
- Implementation and monitoring of the implementation of the decision.
Decision as transforming of information
The decision making process can be described as the process of transforming information:
- Information is a kind of material for decision
- Any decision is also information for subsequent decisions
- The decision is information that causes action taken by subordinates or decisions of other managers.
Information requirements of decision making process
By focusing attention on the role of information in decision-making managers should pay attention to the requirements of decision-makers. Information that allows to make appropriate decisions at the right time should meet the following requirements:
- Reliability, meaning the objective accuracy of the information with an object that is described in a specific time and place.
- Timeliness - information should be provided to the recipient for the duration of the situation, which affected and describe the past.
- Detail - defined as the consistency of the scope of information with the class of decision and problems solved.
- Addressability,- which focus on a specificity of information for particular recipient
- Accuracy - defined as the precision and proper structuring of information within the customer's needs and limit the cost of processing.
- Consistency - that is, in terms of compliance with semantic, substantive and formal requirements.
- Availability or the possibility of obtaining information at the required time and place, using the simplest possible means accepted by the user.
- Completeness - information should include within its scope the whole issue concerned.
- Clarity - which consists in the fact that the information describes a specific problem in a way that does not present problems of interpretation.
- Economy - possibility of obtaining the information at lowest possible cost
The decision-making processes should look for an adequate amount of needed information at the right time. The information needed to make a decision should provide new knowledge in relation to knowledge already possessed by the decision maker. Too much information is known as redundancy. It is necessary to enhance the reliability of communication, but it is expensive because it involves additional resources and maintenance of information transmission channels.
- McLeod, R., & Schell, G. (2001). Management Information Systems 8/e. Chapter-17" Marketing Information System" published in.
- Newell, A., & Simon, H. A. (1972). Human problem solving (Vol. 104, No. 9). Englewood Cliffs, NJ: Prentice-Hall.
- O'Brien, J., Marakas, G. M., Hills, T. M. G., & Lalit, M. R. (2006). Management information systems.
- Simon, H. A. (1971). Designing organizations for an information-rich world. Computers, communication, and the public interest, 37, 40-41.
- Simon, H. A. (1978). Information-processing theory of human problem solving. Handbook of learning and cognitive processes, 5, 271-295.