Module - 1

Data, Information, Management

and Decision Concepts
BBA V Semester IT for Business Lecture Notes
 Module 1 - Data, Information, Management and Decision Concepts

Table of Contents
1. Introduction ..........................................................................................................................................2
1.1. Difference between Data and Information.................................................................................. 5
2. DATA PROCESSING ACTIVITIES..............................................................................................................5
3. Information act as competitive advantage ...........................................................................................7
4. ATTRIBUTES/CHARACTERISTICS OF QUALITY INFORMATION ..............................................................8
4.1. Organization, Management and Levels of Management .......................................................... 10
5. Types of Information/Classification of Information Based on Management Hierarchy.................... 11
6. MANAGEMENT AND INFORMATION REQUIREMENTS ...................................................................... 13
7. DECISION AND DECISION MAKING .................................................................................................... 15
8. TYPES OF DECISIONS .......................................................................................................................... 17
9. Decision Making Process by Simon’s Model of Decision Making ...................................................... 20
9.1. Simon’s Model of Decision Making............................................................................................ 21
10. Question Bank .................................................................................................................................... 23

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1. Introduction

Everyone in his or her day to day work gathers and processes data. For example, when a
housewife buys milk every morning, she writes in a notebook the number of litres she bought.
At the end of the month she adds the data (litres of milk bought per day) in the notebook and
multiplies it by the price per litre. The result is the information she uses to pay the milkman.
The data on milk purchased each day may be processed in other ways too to obtain different
information. For example, if the total milk bought in a month is divided by the number of
members in the family, it gives information on average milk consumption per head. If the total
monthly expense on milk is divided by the monthly income of the family, it gives information
on proportion of income spent on milk. The main point is that data and information are not the
same.
What is Data?
 Data are raw facts or observation, typical about physical phenomenon or business
transaction which are recorded and stored.
 Data can be defined as a representation of facts, concepts or instructions in a
formalized manner, which should be suitable for communication, interpretation or
processing by human or electronic machine.
 Data is a collection of raw facts & figures. It is without any proper meaning.
 Data is defined as numbers representing measurements from the real world. These
measurements are usually represented by symbols such as numbers, words, and codes,
composed of a mixture of numerical, alphabetical, and other characters. "Datum" is a
term referring to a single measurement.
Example:
1. Temperature Readings:
Data: 25.6°C, 26.8°C, 24.5°C, 27.2°C, 23.9°C
This data represents raw temperature readings at specific times or locations.
2. Stock Prices:
Data: $45.20, $46.50, $44.80, $47.10, $43.90
These values reflect the raw stock prices of a particular company at different points in
time.
3. Survey Responses:
Data: Agree, Disagree, Neutral, Strongly Agree, Strongly Disagree
Raw data from a survey where respondents choose their level of agreement with
statements.
4. Website Clicks:
Data: Homepage (120 clicks), About Us (45 clicks), Products (230 clicks), Contact (15
clicks)
This data represents the raw number of clicks on different sections of a website.
5. Student Exam Scores:
Data: 78, 92, 65, 88, 75
These values represent raw scores of students in a specific exam

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Characteristics of Data:
 Data is the raw material from which useful information is derived.
 Data are not meaningful and does not have value in decision making.
 Data is unorganized or unprocessed
 Data is always interpreted, by a human or machine, to derive meaning.

What is Information?
 The data which has been converted
into a useful and meaningful form is
called “information”.
 When the data is processed or
organized and presented in a given
context it becomes information.
 This is why we can say “Information
is the simplified form of data. “
 The conversion of facts into
meaningful information is known as
“Data Processing”.

According to Davis and Olson: “Information is a data that has been processed into a form that
is meaningful to recipient and is of real or perceived value in the current or the prospective
action or decision of recipient.”
Examples:
1. Temperature Trends:
Information: An analysis of temperature trends indicating that temperatures have been
fluctuating between 23.9°C and 27.2°C, with an average temperature of approximately
25.6°C.
2. Stock Price Performance:
Information: A comparison of stock prices over time showing fluctuations in the
company's valuation, with a noticeable increase from $43.90 to $47.10 in the latest
data.
3. Survey Agreement Levels:
Information: An overview of the survey responses categorizing the levels of agreement,
showing that a majority of respondents either agreed or strongly agreed with the
statements presented.
4. Website Engagement Summary:
Information: A summary of website engagement, indicating that the "Products" section
received the highest number of clicks (230), followed by the "Homepage" (120), "About
Us" (45), and "Contact" (15).

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5. Student Exam Performance Analysis:
Information: A performance analysis revealing that the student exam scores range from
65 to 92, with an average score of approximately 79.6, providing insights into the
overall performance of the students in the specific exam.
Characteristics of Data
 Information is the resultant version of some data.
 Information always be processed or organized
 Information is the context in which data is taken.
 Information is meaningful and has value in decision making

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1.1. Difference between Data and Information

Data Information
Data are collection of raw facts or When data is processed, organized and presented
observation as the outcome of the in meaningful manner in the desired context to the
experiment, experience, or business end user so as to make it useful is called
transactions. information.
Data is an individual unit that contains Information is a group of data that collectively
raw materials which do not carry any carries a logical meaning.
specific meaning.
Raw data alone is insufficient for Information is sufficient for decision making
decision making
Data is unorganized and unrefined facts It is in organized and refined form

Data doesn’t depend on information. Information depends on data.

Example: Example
An example of data is a student’s The highest (82), average (67.3) and lowest (45)
individual test score score of a class is the information derived from the
45,63,75,82,70,65,51,77,66,79 given data.

2. DATA PROCESSING ACTIVITIES

The process of manipulation data to achieve the required objectives and results is called data
processing. The MIS is used to process data. The MIS converts data into meaningful
information. A series of actions or operations are performed on data to get the required output
or result.
Activities in Data Processing

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Different activities involved in data processing are as follows:

1. Data Capturing
 The process of recording the data in some form is called data capturing. Data is
captured before it can be processed. Data may be recorded on source documents. Data
can also be given directly to the computer through input devices.

2. Processing of Data
The process of applying different operations on data is called data manipulation. The following
operations can be performed on data:
 Classifying: A process of organizing data into classes or group data is called classifying.
For example, the data in a college can be classified in two groups. The data of students
may be in one group and of teachers may be in second group.
 Calculation: A process of applying arithmetic operations on data is called calculation.
The common calculations are addition, subtraction, multiplication and division etc.
 Sorting: The process of arranging data in a logical sequence is called sorting. The data
can be sorted numerically or alphabetically.
 Summarizing: The process of reducing a large amount of data in a more concise and
usable form is called summarizing. For example, people deposit money in banks daily.
The data of bank can be summarizing to show the total money deposited in a particular
month instead of showing all deposits.

3. Managing Output Result

The following activities can be performed on data after the data has been captured and
manipulated:
 Storage: The process of retaining data for future use is called data storage. Different
storage medium are used to store the data such as hard disks and tapes etc.
 Retrieval: The process of accessing or fetching the stored data is called data retrieval.
The data can be retrieved as and when required. The retrieved data can be displayed in
different forms such as reports, graphs and charts etc.
 Communication: The process of transferring data from one location to another is called
data communication. The data may be transferred to different locations for further
processing. For example, the result can be sent to the students via email.
 Reproduction: The process of copying or duplicating data is called reproduction of data.
Data can be reproduced if different users need data at different locations.

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3. Information act as competitive advantage

In the dynamic landscape of business, gaining a competitive advantage is crucial for sustained
success. A competitive advantage is a unique attribute or set of advantages that allows a
business to outperform its rivals. It enables the business to achieve superior performance in
comparison to other companies in the same industry or market. Competitive advantages can
take various forms and are the key factors that contribute to a company's success and
sustainability.
Competitive advantage could also be seen "as an internal system that delivers benefits to a
firm, not enjoyed by its competition".

Information, Information Technology resultant Information revolutionizing the rules of the

game and creating new paradigm shift, giving companies new ways to out-perform their rivals.
This, in turn, facilitates the organizations gaining competitive advantage.

Information can serve as a competitive advantage in following ways:

• Informed Decision-Making: Access to relevant and timely information enables businesses

to make well-informed decisions. This, in turn, allows for strategic planning and execution,
giving an organization a competitive edge over those that rely on less accurate or outdated
information.

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• Market Understanding: Comprehensive information about market trends, customer
behavior, and competitor strategies provides businesses with a deeper understanding of
their industry. This understanding allows companies to anticipate changes, identify
opportunities, and stay ahead of market shifts.
• Innovation and Adaptation: Information is crucial for innovation. Companies that stay
informed about emerging technologies, industry best practices, and changing consumer
preferences can adapt quickly, fostering a culture of innovation that sets them apart from
competitors.
• Operational Efficiency: Efficient use of information can streamline internal processes and
operations. Access to data on supply chain management, production processes, and
employee performance enables organizations to optimize their operations, reducing costs
and improving overall efficiency.
• Customer Insights: Understanding customer preferences, needs, and feedback is essential
for building strong customer relationships. Companies that leverage information to gain
insights into customer behavior can tailor their products, services, and marketing strategies
to better meet customer expectations.
• Risk Management: Information helps businesses identify and mitigate risks. Whether it's
financial, regulatory, or operational risks, having accurate and up-to-date information
allows companies to develop effective risk management strategies, enhancing their
resilience in the face of challenges.
• Strategic Planning: Information is a cornerstone of effective strategic planning. Businesses
equipped with comprehensive data can formulate and execute strategies that align with
market demands and trends, giving them a competitive advantage in the long term.
• Customization and Personalization: In today's highly competitive markets, the ability to
customize products and services based on individual customer preferences is a significant
advantage. Information about customer demographics, buying patterns, and preferences
allows companies to offer personalized experiences, creating a competitive edge

4. ATTRIBUTES/CHARACTERISTICS OF QUALITY INFORMATION

 Success of any organization depends on the quality of information which is very crucial
resource. Further future of an organization depends on using and disseminating the
information wisely according to their objectives.
 To run any organisation successfully, when your information is of good quality and when
this information is placed in right context in right time according to their needs then it gives
the way to find out the about opportunities and problems well in advance.
Good quality information: Quality of information refers to its fitness for use, or its reliability.
Following are the essential characteristic features:

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1. Timeliness
o Timeliness means that information must reach the recipients within the
prescribed timeframes. For effective decision-making, information must
reach the decision-maker at the right time, i.e. recipients must get information
when they need it. Delays destroy the value of information.
2. Accuracy
o Information should be accurate. It means that information should be free from
mistakes, errors &, clear. Accuracy also means that the information is free from bias.
Wrong information given to management would result in wrong decisions. As
managers decisions are based on the information supplied in MIS reports, all
managers need accurate information.
3. Relevance
o Information is said to be relevant if it answers especially for the recipient what, why,
where, when, who and why? In other words, the MIS should serve reports to a
manager which is useful and the information helps them to make decisions. The
characteristic of relevance, to be effective, should also include up-to-date, i.e. latest
information.
4. Adequacy
o Adequacy means information must be sufficient in quantity, i.e. MIS must provide
reports containing information which is required in the deciding processes of
decision-making. The report should not give inadequate or for that matter, more
than adequate information, which may create a difficult situation for the decision-
maker. Whereas inadequacy of information leads to crises, information overload
results in chaos.
5. Completeness
o The information which is given to a manager must be complete and should meet all
his needs. Incomplete information may result in wrong decisions and thus may
prove costly to the organization.
6. Explicitness
o A report is said to be of good quality if it does not require further analysis by the
recipients for decision making.
7. Impartiality
o Impartial information contains no bias and has been collected without any distorted
view of the situation.
8. Economical
o The cost of producing information should be less than the benefits produced from
such information. In other words, the benefits (direct & indirect) that are desired
from the information should exceed the cost of producing the information.
o For example; if the cost of developing and implementing a sales analysis system
comes to Rs 20,000 per month (on an average) and the organization increases its
sales just by Rs 10,000 per month due to the system; then there is no point in
producing such information.

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4.1. Organization, Management and Levels of Management

Organization
 An organization is a collection of people who work together and coordinate their
actions to achieve organizational goals.
Management
 Management is the art of getting things done through an individual or group of
individuals to achieve the goal and objective of the organization efficiently.
 Management is a distinct process consisting of planning, organizing, activating and
controlling, performed to determine and accomplish the objectives by the use of people
and resources- George R Terry
Manager
 A Manager is the person responsible for planning and directing the work of a group of
individuals, monitoring their work, and taking corrective action when necessary.
 A manager is a person responsible for supervising and motivating employees and for
directing the progress of an organization.
Levels of Management
 A series of managerial positions in an organization is called levels of management.
 A level of management determines the amount of authority and status enjoyed by any
managerial positions.

Top Management
Strategic Level

Middle Management
Management Level

Operating Management
Operational Level

Levels of Management Hierarchy

1. Strategic Level
o Managerial positions at the strategic level are at top level management.
o These managerial positions include the board of directors including Vice president
and CIO (Chief Information Officer), Chief Executive including GM (General
Manager) and the departmental heads.
o They are mainly responsible for strategic functions of the organization.
o The main functions of the managers ate the strategic level are to:
 Establish the overall long term goals of an organization
 Establish ways of attaining the long term goals
 Lay down the overall policies.
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 Provide direction and leadership to the organisation.

2. Management Level
o After the strategic level, the next level of management is the management level.
o The various managerial positions at this include the departmental and branch
managers such as sales and marketing managers, purchase managers, finance
managers, HR Managers, etc.
o These managers are mostly involved in tactical planning and control.
o The main functions of the managers ate management level are to:
 Link the top and lower levels of management.
 Transmit orders, suggestions, policy decision and detailed instructions
downwards.
 Carry the problems and suggestions upwards.
 Inspire the operating managers towards better performance.

3. Operational Level
o The operational level is the lowest level of management hierarchy.
o It includes all the managers and supervisors who work under the management level.
o The main functions of the operational level are to:
 Assign jobs and tasks to the subordinates.
 Assist and advise the subordinates by explaining the work and procedures.
 Supervise the work of subordinates to ensure the quality and quantity of
work.
 Report the problem faced and suggestions made by workers to the higher
level.
5. Types of Information/Classification of Information Based on
Management Hierarchy

Information, as required at different levels of manage-ment can be classified as operational,

tactical and strategic.
Below figure shows the types of information required at different levels of managerial
hierarchy.

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1. Operational information:
Operational information relates to the day-to-day operations of the organisation and thus, is
useful in exercising control over the operations that are repetitive in nature. Since such
activities are controlled at lower levels of management, operational information is needed by
the lower management.
For example, the information regarding the cash position on day-to-day basis is monitored and
controlled at the lower levels of management. Similarly, in marketing function, daily and
weekly sales information is used by lower level manager to monitor the performance of the
sales force.
It may be noted that operational information pertains to activities that are easily measurable
by specific standards. The operational information mainly relates to current and historical
performance, and is based primarily on internal sources of data. The predictive element in
operational information is quite low and if at all it is there, it has a short term horizon.
2. Tactical information:
Tactical information helps middle level man-agers allocating resources and establishing
controls to implement the top level plans of the organisation. For example, information
regarding the alternative sources of funds and their uses in the short run, opportunities for
deployment of surplus funds in short- term securities, etc. may be required at the middle levels
of man-agement.

The tactical information is generally predictive, focusing on short-term trends. It may be partly
current and partly histori-cal, and may come from internal as well as external sources.

3. Strategic information:
While the operational information is needed to find out how the given activity can be
performed better, strategic information is needed for making choices among the busi-ness
options.

The strategic information helps in identifying and evaluating these options so that a manager
makes informed choices which are different from the competitors and the limita-tions of what
the rivals are doing or planning to do. Such choices are made by leaders only.

Strategic information is used by managers to define goals and priorities, initiate new
programmes and develop policies for acquisition and use of corporate resources. For example,
information regarding the long-term needs of funds for on-going and future projects of the
company may be used by top level managers in taking decision regarding going public or
approaching financial institutions for term loan.
Strategic information is predictive in nature, relies heavily on external sources of data, has a
long-term perspective, and is mostly in summary form. It may sometimes include ‘what if’
scenarios. However, the strategic information is not only external information.

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For long, it was believed that strategic information is basically information regarding the
external environment. However, it is now well recognized that the internal factors are equally
responsible for suc-cess or failures of strategies and thus, internal information is also required
for strategic decision making.

6. MANAGEMENT AND INFORMATION REQUIREMENTS

The management of an organization would involve many different functions. The functions
would depend on the types of organization. Many functions are, however, common most
organizations. For effective management of each function, specific strategic, tactical and
operational information are needed.

Human Resource Management

The major goal of human resource management is to make best use of the available human
resources in the organization. To attain this goal, the information necessary at various levels of
management is as follows
(i) Strategic Information:
• Long range human resource requirements at different levels
• Policies on wages and incentive such as stock options and bonus
• Policies on human resource development and training
• Policies on personnel welfare and facilities
• Policies on outsourcing non-core functions.
(ii) Tactical Information:
• Performance appraisal
• Demographic make-up of personnel and its impact on retirement
• Production incentives and relation to productivity
• Morale of personnel
• Absentee reduction
• Leave and overtime policies
• Personnel deployment policies
(iii) Operational Information:
• Routine assessment
• Skills inventory
• Loans/advances and recoveries
• Attendance record
• Overtime assignment
Production Management
The goals of production (manufacturing) management are to optimally deploy human
resources, machines and materials to maximize production of goods by the organization. To
attain this goal the following types of information would be needed.
(i) Strategic Information:
• Yearly and monthly production quotas and alternate schedules

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• Policies on machine replacement, augmentation and modernization
• Information on the introduction of new production technologies, acquisition and mergers
• Identifying best product mix
• Policy on quality assurance
(ii) Tactical Information:
• Identifying and controlling areas of high cost such as work in progress inventories
• Identifying critical bottlenecks in production
• Identifying alternate production schedules based on tools, machines, material and
personnel availability
• Performance measures of machines (breakdown histories, cost of repair and failure) to
decide on replacement
• Quality control measures
(iii) Operational
• Monitoring up to date production information by examining assemblies, detecting likely
shortages and giving early warning
• Scheduling better production dynamically
• Preventive maintenance schedules of machines
• Monitoring tools, machines, and human resource availability
• Ensuring quality at each step in production

Finance Management
The main goal of finance management is to ensure financial viability of the organization,
enforce financial discipline and plan and monitor the budget. The various levels of information
required to meet these goals are as follows:
(i) Strategic Information:
• Methods of financing
• Pricing policies
• Tax planning
(ii) Tactical Information:
• Variance between budget and expenses
• Large outstanding payments / receipts
• Credit and payment status
• Cost increases and pricing
• Impact of taxation on pricing
(iii) Operational Information:
• Periodic financial reports
• Budget status to all functional managers
• Tax returns
• Share registration and transfers
• Profit and loss account
• Accounts payable
• Accounts receivable

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• Payroll, provident fund accounts
• Calculation of direct costs-overheads-standard cost
• Cash management
• General ledger

Marketing Management
The goal of this function is to maximize sales and ensures customer satisfaction. To attain this
goal the various types of information needed are :
(i) Strategic Information:
• Search for new markets and marketing strategies
• Analysis of competitor’s strategy
• Technology and demographic forecasts and product changes
(ii) Tactical Information:
• Advertising techniques and analysis of their impact
• Customer preference and satisfaction surveys
• Sales force deployment and targets
• Exploring alternate marketing channels. Timing of special sales campaigns
• Customer relationship management
(iii) Operational Information:
• Sales analysis by regions, customer class, sales persons
• Sales target versus achievement
• Market share and trends
• Seasonal variations
• Effect of model changes
• Performance of sales outlets
• Costs of sales campaigns and benefit
• Call centre support
• Maintenance of home page on the world wide web
• Order entry

7. DECISION AND DECISION MAKING

Every action of a manager is generally an outcome of a decision.

Owing to this fact, P.P. Drucker in his book “Practice of Management,” observes “Whatever a
manager does, he does through making decision.” True, the job of management involves the
making of innumerable decisions. That is why many persons think that management is
decision-making.
The word ‘decides’ means to come to a conclusion or resolution as to what one is expected to
do at some later time. According to Manely H. Jones, “It is a solution selected after examining
several alternatives chosen because the decider foresees that the course of action, he selects
will do more than the others to further his goals and will be accompanied by the fewest
possible objectionable consequences”.

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Decision is a choice whereby a person comes to a conclusion about given circumstances/
situation. It represents a course of behaviour or action about what one is expected to do or not
to do. Decision- making may, therefore, be defined as a selection of one course of action from
two or more alternative courses of action. Thus, it involves a choice-making activity and the
choice determines our action or inaction.
Decision-making is an indispensable part of life. Innumerable decisions are taken by human
beings in day-to-day life. In business undertakings, decisions are taken at every step. All
managerial functions viz., planning, organizing, staffing, directing, coordinating and controlling
are carried through decisions. Decision-making is thus the core of managerial activities in an
organisation

Definition
 The word decision has been derived from the latin word ‘decidere’ which means “to cut
off” or “to come to a conclusion”.
 Decision may be regarded as a ‘choice’ whereby a decision maker comes to a conclusion
about given situation.
 A decision is a choice out of several alternatives available to the decision maker to
achieve some objective at given point of time.
 A decision can be regarded as a judgment when a conclusion is reached after
considering all the available options and choosing single one among them.
 Decision making is a process of selecting an optimum or the most suitable alternatives
from number of alternatives.
 The study of the selecting and identifying the alternatives depending upon the values
and preferences of the decision maker is termed as the decision making.
 Thus, a decision is an outcome or the end result, while decision making is a process.
Example:
 Decision to raise a Purchase Order
 Decision to give Increment
 Decision to promote an employee
 Where to advertise a new product
 What stock to buy
 Which movie to see
 Where to go for dinner

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8. TYPES OF DECISIONS

1) Types of Decisions – Purpose of Decision Making

1. Strategic planning decisions are those decisions in which the decision maker develops long-
term policies, objectives and allocates recourses to achieve these objectives.
 Decisions in this category are of long-time period and usually involve a large investment
and effort.
 Such decisions are taken by strategic planning level (top level) managers.
 Ex: opening a new branch, acquiring a new business, launching a new product,
diversification of business etc
2. Management control decisions: These decisions are concerned with the issues of smooth
and effective implementation of policies.
 These decisions are taken by managers at the middle-level management.
 Such decisions ensure that the organizational resources are utilized in an optimum manner.
 For instance, the information on fast and slow moving items may be used to take the
tactical decision to stock more of the former and give discount on the latter.
3. Operational control decisions: These decisions are made to ensure that the day-to-day
work is carried out in an efficient manner.

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 These decisions are taken by the operation-level managers (bottom level) and deal with the
routine operations of the organizations.
 Ex: Production scheduling decisions, inventory control decisions, purchasing decisions are
part of operation control decisions.
2) Types of Decisions - Level of Programmability

What is Programmability....?
 A program is defined as a plan for the automatic solutions of a problem.
 Programs are simply a string of instructions to accomplish an assignment.
 So programmability refers to decisions which have capability of being programmable/
automatable.
1. STRUCTURED/ PROGRAMMED DECISION
 Structured or Programmed decisions are well defined, rule-based, and have some
specified procedure, which may be used to arrive at a decision.
 These decisions are repetitive, routine, and involve a definite and well-defined
decisions making process.
 These are also called programmed decisions because rules, methods, and guidelines
can be applied to reach a decision.
 Simply put, if you can apply a rule when deciding what to do, it is a structured
decision.
Example:
 Determine special offers to customers.
 Sending reminder notice to a customer for an overdue balance based on overdue
date
 Approving or rejecting employee leave request based leave policy
 Inventory recorder decisions
 Paying salaries at the end of the month

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2. UNSTRUCTURED/ NON-PROGRAMMED DECISION
 Decisions which are not well defined and have no pre-specified procedure or
decision rule are known as unstructured or non- programmed decisions.
 Unstructured decisions can’t be programmed and are thus called non-programmed
decisions.
 Unstructured decisions are non-routine, infrequent and complex, due to which
such decisions are taken by strategic level managers.
 The decision maker must provide judgment, evaluation, and insights.
Example:
 Expanding the business
 Planning of new services to be offered
 moving operations to foreign countries
 Planning for R & D
 Relocating the manufacturing unit to a new state.

3. SEMI-STRUCTURED DECISIONS
 Semi-structured decisions fall between structured and unstructured decisions
 It requires a combination of standard procedures and individual judgment.
 Annual evaluation of employees,
o Part structured - e.g. access to employee's performance appraisal report
o Part unstructured - e.g. Personally knowing employee how he has handled
customer
 Why have sales in a particular branch declined over the last year?
o Part structured - e.g. access to internal company data
o Part unstructured - e.g. knowledge of local economic conditions
 Develop marketing plan.

3) Types of Decisions – Knowledge of Outcome

 Classified on the basis of the degree of knowledge about the outcomes or the
events yet to take place:
 If the manager has full knowledge, then it is situation of certainty.
 If the manager has partial knowledge or a probabilistic knowledge, then it is DM
under risk.
 If he does not have any knowledge whatsoever, then it is DM under uncertainty.

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Programmed vs. Non-programmed Decisions
Characteristics Programmed Non-programmed
Also called Structured decision Unstructured

Type of problem Structured, routine, Unstructured, novel,

well defined ill defined

Managerial level Lower level Upper level

Frequency of Repetitive New, unusual

problem

Information Readily available Ambiguous or incomplete

Time frame for solution Short Relatively long

Judgment Objective Subjective

Solution relies on Procedures, rules, and policies Managerial Judgment and creativity

9. Decision Making Process by Simon’s Model of Decision Making

Making decisions has been identified as one of the primary responsibilities of any manager.
Decisions may involve allocating resources, appointing people, investing capital or introducing
new products. If resources like men, money, machines, materials, time and space were
abundant, clearly any planning would be unnecessary. But, typically, resources are scarce and
so there is a need for planning. Decision making is at the core of all planned activities. We can
ill afford to waste scarce resources by making too many wrong decisions or by remaining
indecisive for too long a time.
In 1960 Noble Laureate Herbert Simon proposed the most famous model of the decision
making process.

Herbert Simon’s Model

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9.1. Simon’s Model of Decision Making

Herbert Simon (1916 – 2001)
 Herbert Simon was a Jewish-American economist and cognitive psychologist, whose
primary research interest was decision-making within the organizations
 He is best known for the theories of "bounded rationality" and "satisfying".
 He received the Nobel Prize in Economics in 1978.

1. Intelligence Stage:
In this stage, the decision-maker identifies or recognizes the existence of a problem or
an opportunity. It involves gathering information, defining the problem, and
understanding the factors involved. The goal is to comprehend the current situation and
recognize the need for a decision.
2. Design Stage:
Once the decision-maker has a clear understanding of the problem or opportunity, the
next stage involves designing potential solutions. This stage includes generating and
analyzing various alternatives, considering the possible outcomes, and assessing the
feasibility of each option. The focus is on developing a range of possible solutions and
understanding the implications of each.
3. Choice Stage:
During the choice stage, the decision-maker evaluates the different alternatives
generated in the design stage and selects the best course of action. This involves
comparing the pros and cons of each option and making a decision based on
preferences, priorities, and objectives. The chosen alternative becomes the decision
that will be implemented.

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4. Implementation Stage:
The final stage is the implementation of the chosen decision. This involves putting the
selected solution into action. It includes planning and executing the necessary steps to
ensure that the decision is carried out effectively. Implementation may require
coordination, communication, and resource allocation to achieve the desired outcomes.

Each stage has specific information requirements to facilitate effective decision-making. Here's
a breakdown of the information requirements at each stage of the Herbert Simon Model:

Intelligence Stage:
Information Requirements:
• Problem Identification: Information is needed to identify issues, challenges, or
opportunities that require a decision. This involves collecting data on current conditions,
trends, and anomalies.
• Environmental Scanning: Gathering information about the external environment, including
market trends, competitor actions, technological advancements, and other relevant factors
influencing the decision.
• Internal Data: Accessing internal data related to the organization's resources, capabilities,
and performance metrics.
• Feedback: Information from previous decisions and their outcomes to learn from past
experiences.
Design Stage:
Information Requirements:
• Alternative Analysis: Gathering information on various alternatives, their feasibility,
potential outcomes, and associated risks.
• Resource Availability: Information about the availability and allocation of resources,
including financial, human, and technological resources.
• Constraints: Identifying and understanding any limitations, constraints, or restrictions that
might impact the implementation of different alternatives.
• Cost-Benefit Analysis: Information to evaluate the costs and benefits of each alternative,
including both quantitative and qualitative factors.

Choice Stage:
Information Requirements:
• Evaluation Criteria: Information on the criteria used to evaluate and compare alternatives,
including performance metrics, key success factors, and strategic goals.
• Risk Assessment: Understanding the potential risks and uncertainties associated with each
alternative to make an informed decision.
• Decision-Making Criteria: Clear information about the decision-making criteria, including
priorities, preferences, and any specific requirements.
• Implementation Plan: Information about the plan for implementing the chosen alternative,
including timelines, responsibilities, and required actions.

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Implementation Stage:
Information Requirements:
• Action Plan: Developing a detailed plan outlining the steps for implementation.
• Resource Allocation: Allocating resources such as time, budget, and personnel.
• Communication Strategy: Planning how to communicate the decision to relevant
stakeholders.
• Monitoring and Control: Establishing mechanisms to monitor progress and make
adjustments if needed.
• Contingency Planning: Anticipating potential challenges and developing contingency plans

10. Question Bank

1. What is unstructured decision? Give an example
2. What is attributes of information?
3. Draw neatly Herbert Simon’s Model.
4. What are the attributes of Information?
5. Explain attributes of information.
6. What is decision and decision making?
7. Explain Herbert Simon’s stages of Decision making model.
8. Classify Managers as per the level of the hierarchy and explain what kind of decision
they take according to their level in the Management
9. Describe the Quality of information.
10. Discuss various types of decisions.
11. Mention the types and sources of information.
12. Differentiate between a “decision” and “Decision making process”, Illustrate Simon’s
model of decision making.
13. Explain the difference among structured, unstructured and semi-structured decisions
with examples.
14. Mention the different stages involved in decision making and explain them.
15. Enumerate the various basis of classifying decisions.
16. Explain structured and unstructured decisions with the help of examples.
17. Discuss, how does an organization use information systems for gaining competitive
advantage?

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