3: SYSTEMS APPROACH TO MANAGEMENT PROBLEM SOLVING

Before solving the problem, a manager is expected to weigh, how the overall
system will respond to changes in its components part. The system approach to
management is more of a thought process that helps manager solve a problem.
To solve a problem, managers must view the organization as a dynamic
integrated unit and should anticipate the intended as well as unintended impacts
of their decisions.

A System Approach to Problem Solving can be defined in six finite steps-

Defining of problem or opportunity

Gathering and analyzing data

relating to problem or
opportunity

Identifying the alternative

solutions
Evaluation of the solution

Evaluating various alternatives

Selecting the best alternative

Implementing the best solution

Illustration:
Problem: Long delays between receipts of orders and delivery.

Solution: Applying six steps of systems approach-

Step 1: Defining the problem

The problem here is inordinate delay between the receipt of orders and
their delivery. The possible repercussions of this on the vendor could be-
a) A bad reputation
b) Loss of customers
c) Reduction in profitability
d) Stoppage of payments due.

Step 2: Gathering and analyzing data concerning the problem

The following were the causes that perhaps affected the problem of delay
in meeting orders-

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 a) Excessive orders in the hand of vendors
b) Shortage of power (resulting in reduction of production)

Step 3: Identification of alternative solutions

The possible course of action identified in this case are-
a) Refusal of orders, in case total size of the orders exceeds the plant-
capacity in one shift.
b) To run the plant in double shift, to meets the requirement in time. The
shortfall in the power-supply may be met with installation of generators.

Step 4: Evaluation of alternative solutions

Out of the possible course of actions, as suggested in step 3, the second
solution seems to be more viable, as it accounts for the overall increase in
the profitability after considering the additional cost for installation of
generator. It would result in retaining customers and growth of the
organization.

Step 5: Selection of the best alternative

Management closely scrutinizes the alternatives and gives approval for
the best possible alternative. In this case, the management puts the
stamp of approval on the second alternative.

Step 6: Implementation of solution

The implementation of the solution requires the necessary changes in
policies and plans. Besides this, the necessary resources need to be
arranged for running the plan in double shift and installation of the
generator. Finally, appropriate procedures are developed to exercise
smooth production and timely supply to customers, the concerned officers
are accordingly instructed.

DECISION MAKING IN MIS

Every organization needs effective decision making to reach its objective and
goals. Problem solving is the critical activity for any business organization. A
well-known model developed by Herbert Simon divides decision making phase of
the problem solving into three stages: intelligence, design and choice. George
Huber later incorporated this model into the entire problem solving process.

• Intelligence Stage: is the first stage of decision-making, during which potential

problems and opportunities are identified and defined.

• Design Stage: is the second stage of decision-making, during which

alternative solutions to the problems are developed.

• Choice Stage: is the third stage of decision-making, which requires selecting

a course of action.

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• Problem Solving: is a process that goes beyond decision making to include
the implementation stage.

• Implementation Stage: is a stage of problem solving during which a solution is

put into effect.

• Monitoring Stage: is the final stage of problem solving process, during which
decision maker evaluate the implementation.

Intelligence

Decision Making Design

Choice
Problem Solving

Implementation

Monitoring

CLASSIFICATION OF DECISIONS

Organizational decisions can be categorized into-

• Programmed Decisions: Programmed decisions are the decisions that are

well structured and based predetermined set of precedents, procedures,
techniques and rules. They are time-tested for validity i.e., they tend to be
consistent over situations and time. For example, ordering more inventories
when inventory levels drops to specified levels is an example of a
programmed decisions (source: Stone/Mitch Kezar). Similarly, most of the
organization there is a set of procedure for receipt of materials, payment of
bills, employment of clerical personnel, release of budgeted funds…

• Non-Programmed Decisions: Non-Programmed decisions are the decisions

that deal unusual or exceptional situation (situation about which not much
information or knowledge is available). In most of the cases, it is difficult to
quantify. Determining the appropriate training program for the new recruit,
deciding whether to start new type of product line, and weighing the benefits
and disadvantages of installing a new pollution control are examples. Each of

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 this decisions contain many unique characteristics for which the application of
rules or procedures in not so obvious. A decision-maker is expected to be
more experience, having enough exposure to the environment and adequate
judgment of the situation.

• Semi-structured Decisions: Semi-structured decisions are more complex.

The relationships among data are not always clear, the data may be in the
variety of formats, and the data is often difficult to manipulate and obtain. In
addition, the decision-maker may not know the information requirements of
the decision in advance.

• Individual and Group Decisions: individual decisions are the decisions taken
by the managers, who assume full responsibility for the consequences of
such decisions. They may get information, factual analytical report, pros and
cons of alternatives and suggested course of actions from sub-ordinates or at
times from exclusive committees. However, the responsibility and the
authority or the onus of making final decision rests with the concerned
individual. S/he cannot delegate or abdicate this authority.

On the other hand, in the case of group decisions, several of the managers
jointly deliberate on the problem, information & alternatives and hammer out a
decision for which they assume collective responsibility. The decision-making
function and process get rich enrichment by pooling of the diverse expertise,
knowledge authority and perspectives represented by the group. Elaborate
group deliberation and consideration of alternative course of action with
varied point of views tend to ensure that decisions are of high quality and also
their implementation becomes easier. The disadvantages of group decision-
making are – delays in decision-making, lack of rationality and responsibility
among group members, dilution of the quality of decisions due to compromise
and conformity among members of the group.

STRUCTURE OF MIS

The conceptual structure of MIS is a collection of functional subsystems

consisting of four major information processing components like transaction
processing, operation control, management control and strategic planning
support.

• Strategic Planning: involves setting of goals, laying down policies and

providing general guidance to the organization.
• Management Control: or the tactical planning is concerned with acquisition of
resources, evolving tactics to meet the objectives, optimal planning for
business unit in terms of its location and development of its product,
establishing the budget and monitoring them.

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• Operational Planning and Control: deal with efficient and effective use of
resources and facility at hand to carry out activities within the prescribed
policies and framework.
• Transaction Processing: involves recording each and every transaction and
maintenance of file in order to provide database for generating and providing
information to users at various management levels.

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 APPROACHES OF MIS DEVELOPMENT

For developing MIS following three approaches are used:

• Top down approach: The top down approach assumes a high degree of top
management involvement in the planning process and focuses on
organizational goals, objectives and strategies. The top management
develops a corporate plan as a guide for designing information system. The
various stages in top down approach are –
a) Analyze the objectives and goals of the organization to formulate policies
and plan and communicate them down the line to middle and supervisory
management for translating them into reality. The analyses may be in the
area of profits and growth, expansion of product lines and services,
diversification, increased market share etc. It also determines the
availability of resources in terms of capital, equipment and raw material.
b) Identify the functions of the departments (Marketing, production, human
resource, finance, research and development) and explain how they
support the organization.
c) Ascertain the major activities, decisions and functions of the managers at
various levels of hierarchy. Determine what, who and when the decisions
should be made.
d) Identify and supply models that guide managerial decision processes.
Provide with the information required for various activities and decisions.
e) Prepare specific information processing modules and identify files and
database for application.

• Bottoms up approach: The development of information system starts from

identification of life stream systems. Life stream systems are those systems
that are essential for the day-to-day business activities. The examples include
payroll, sales order, inventory control, purchasing etc. The various stages in
bottoms up approach are-
a) Individual functional applications are planned separately consisting of
transaction processing, updating and sample reports.
b) Files of various functional applications are integrated and chained into
database.
c) Various functions are added to operate on the database at management
control level.
d) Integration of various models into model base having capability of
providing wide range analyses, decisions and planning options.
e) Strategic planning data and planning models are added to the information
system.

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 Top down approach Bottoms up approach
Top management takes the main Supervisory management identifies
initiative in formulating major the life stream system for which MIS
objective strategies and policies, for may be developed.
developing MIS.
Middle and supervisory management Top management refrains from
have little role in the development of
guiding the development of the
system. system developed by supervisory
level.
More consistent with the systems Developed through orderly process of
approach and is also viewed as total transition, building upon transaction
system which is fully integrated. processing system. This system may
not be integrated.

• Integrative approach: This approach overcomes the limitation of the above

two approaches. The managers at all levels influence the design of the
system. Here, the top management after identifying the structure and design
of MIS suitable to the organization passes it on to lower managers for their
views and modifications. The managers at the lower level are permitted to
suggest the changes, addition and/or deletion and return it to the top
management for further approval/action. This evaluation, modification and
approval process continues till a final designed is achieved to the satisfaction
of all concerned.

Conclusions :- Types of Information Systems:

A system, as we all know, is simply a set of components that interact to accomplish the
desired purpose. A business is also a system. It comprises of marketing, manufacturing,
sales, research, shipping, accounting, and personnel – all working together towards
achieving the business targets. Each of these can itself be classified as subsystem.

The purposes of the business information system are to process, input, maintain files and
produce information, reports and other outputs. Depending upon the mangers need the
business information system can be classified into –
• Transaction Processing System (TPS)
• Management Information System (MIS)
• Decision Support System (DSS)
• Office Automation System (OAS)
• Executive Information System (EIS)
TRANSACTION PROCESSING SYSTEMS
• Addresses routine questions
- How many inventory items are there in the inventory?
- What is the total payroll?
• Keeps track of flow of transaction – operations oriented
• Spans the boundary between the organization and its environment

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• Maintains upto date information about the organization
• Serves the operational control level
• Performs and records daily routine
• Major producer of information
MANAGEMENT INFORMATION SYSTEMS
• Focuses on daily, weekly and monthly summaries of transactions that are useful for
monitoring and controlling operational level activities
- Are things working well?
- How is one (monthly/weekly) report as compared with the other?
• Relies on existing corporate data and data flows
• Serves the management control level – assists managers in decision-making and
problem solving
• Produces condensed information obtained from TPS
• Provide managers with reports/ on line access to organization performance
• Addresses structured questions that are known well in advance
• Not very flexible
• Applies simple models on data

DECISION SUPPORT SYSTEMS

• Supports non-routine decision-making
• Devoted to support management decisions that are semi structured, unique (non-
recurring) or rapidly changing
Have advanced analytical capabilities which permit users to use different models to
analyze information – usually incorporate more sophisticated modeling using
statistical techniques such as linear programming, regression analysis, time-series
analysis etc..
Draw information from TPS & MIS, and also use information from external sources

OFFICE AUTOMATION SYSTEMS

Supports clerical activities with facilities for –
• Office Publishing
- Word processing and DTP
• Electronic Communication
- Electronic mail and fax
• Image processing
- Scanning, document management
EXECUTIVE SUPPORT SYSTEMS
Helps match changes in the external environment with organizational activities
• Helps in addressing questions like
- Employment requirements in five years down the line
- Products changes to be made in future
• Serves the strategic level of management
• Involves generalized computing and communication
• Dependent on external and internal information

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• Makes less use of analytical models
EXPERT SYSTEMS
• Designed to replace human experts – particularly important where expertise is scarce
and very expensive
• Arisen from academic research into Artificial Intelligence
• Software that expresses knowledge in terms of facts and rules
• Ability to change, ‘learn’ or add new rules
• Greater use in strategic and tactical level decision-making
• Banking Expert System are developed to scrutinize the application for loans and its
decision are accepted by the lower level staff

Review questions:

How system approach can be used for problem solving?

1. What is decision making? What are the various classifications of decisions?
2. Describe the conceptual structure of MIS.
3. What are the various approaches to development of MIS?

Readings:
Management Information Systems – James O’Brien
Management Information Systems – Jerome Kanter
Introduction to Business Information System – Rolf T Wigand and others – chapter7
Analysis and Design of Information System – V. Raja Raman
Information Systems – Hussain and Hussain

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