Why Is Making Rational Decision Difficult for Higher Executives? How Do Information Systems Assist Decision Makers of Unstructured Problems?
Mohamed Hafiz Bin Othman
8 December 2009
“Why is making rational decision difficult for higher executives? How do information systems assist decision makers of unstructured problems?
Decision making occurs as a reaction to a problem or an opportunity, requiring consideration of alternative courses of action. Rational decision making describes choices that are consistent and value-maximizing within specific constraints. It assumes the problem is clear and unambiguous, there is a single and well-defined goal is to be achieved, all alternatives and consequences are known, preferences are clear, constant and stable, the final choice will maximize economic payoff and no time or cost constraints exist.
Decisions can be classified into 3 categories, namely structured, semi-structured and unstructured. Structured decisions are repetitive and routine, having short term impact, low risk and usually involve clear standard operating procedures or SOPs (PK/SK: problems and solutions are known). These type of problems occurs more regularly at the operational level. Some examples are the decision made by a production floor supervisor on the amount of labour needed to achieve a particular production volume, or when a purchasing staff has to decide which vendor to choose from to order office furniture. Information required to make such decisions is readily available and thus easily automated or programmed, thus have a higher chance of deriving rational decisions.
Semi-structured decisions involve tactical issues that have medium term impact such as when middle managers determine production schedules, select new employees, and decide how pay raises are to be allocated.
At the other end of the spectrum are unstructured decisions, which involve judgement, evaluation, intuition and urgency (PU/SU): problems unknown, solutions unknown). A study of experienced professionals holding high-level positions found more than 90 percent of managers said they were likely to use
8 December 2009
“Why is making rational decision difficult for higher executives? How do information systems assist decision makers of unstructured problems?
Decision making occurs as a reaction to a problem or an opportunity, requiring consideration of alternative courses of action. Rational decision making describes choices that are consistent and value-maximizing within specific constraints. It assumes the problem is clear and unambiguous, there is a single and well-defined goal is to be achieved, all alternatives and consequences are known, preferences are clear, constant and stable, the final choice will maximize economic payoff and no time or cost constraints exist.
Decisions can be classified into 3 categories, namely structured, semi-structured and unstructured. Structured decisions are repetitive and routine, having short term impact, low risk and usually involve clear standard operating procedures or SOPs (PK/SK: problems and solutions are known). These type of problems occurs more regularly at the operational level. Some examples are the decision made by a production floor supervisor on the amount of labour needed to achieve a particular production volume, or when a purchasing staff has to decide which vendor to choose from to order office furniture. Information required to make such decisions is readily available and thus easily automated or programmed, thus have a higher chance of deriving rational decisions.
Semi-structured decisions involve tactical issues that have medium term impact such as when middle managers determine production schedules, select new employees, and decide how pay raises are to be allocated.
At the other end of the spectrum are unstructured decisions, which involve judgement, evaluation, intuition and urgency (PU/SU): problems unknown, solutions unknown). A study of experienced professionals holding high-level positions found more than 90 percent of managers said they were likely to use