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Decision environments (degree of structure)

8 September, 2015 - 10:52

Obviously, not all situations that require decisions are the same. While some decisions will result in actions that have a substantial impact on the organization and its future, others are much less important and play a relatively minor role.

One criterion that may be used to differentiate among decision situations is the degree of structure that is involved. Many situations are highly structured, with well-defined inputs and outputs. For example, it is relatively easy to determine how much to pay someone if we have the appropriate input data (e.g., how many hours worked and their hourly pay rate), and any relevant decision rules (e.g., if the hours worked for one week are greater than 40, then overtime pay needs to be calculated), and so on. In this type of situation, it is relatively easy to develop information systems which can be used to support (or even automate) the decision.

In contrast, some decision situations are very complex and unstructured, where no specific decision rules can be readily identified. As an example, assume that you have been assigned the following task: “Create the design for a new vehicle that has at least a four-foot long truck bed, is a convertible (with a retractable hard-top roof), gets at least 50 miles per gallon of gasoline, has a high safety rating, and is esthetically pleasing to a relatively wide audience.” There is no “optimal” solution to this task; finalizing a design will involve many compromises and trade- offs, and will require considerable knowledge and expertise.

With this brief introduction, we move to a more detailed discussion of the role of information systems in decision making.