Executive Summary
The 21st century business environment is very competitive and hence the need for organizations to make decisions in a timely and accurate manner. The availability of vast amounts of data and information amid time constraints within which a decision is required means that the information technology systems play an important role in the acquisition, processing, and dissemination of information. This paper discusses the role of information technology in organizational decision-making. The paper reveals the various ways that information technology finds its application in organizations’ decision-making process. Lastly, the various factors for the consideration of successful adoption of information technology are discussed.
Introduction
In the 21st century business environment, organizations are operating in a highly competitive environment where factors such as the efficiency and effectiveness of decision-making processes offer an important competitive advantage. The decision-making indicates the process through which individuals make a choice between two or more alternative courses of action to achieve a goal or a specified anticipated outcome. The process of arriving at the best course of action out of several alternatives is referred to as “decision-making course.” According to Griffin and Moorhead (2011), the decision-making process at an organization is synonymous with the entire management process.
The process of decision-making incorporates several steps that include problem definition, search, and discovery of alternative action, evaluation of alternatives, and selecting the best alternative (Malone & Team, 2013). In each step, planning is an integral part since it implies well-calculated courses of actions that are aimed at arriving at the best possible outcome for the organization. However, the process of planning involves several stages, each with its unique decision-making requirements to reach the ultimate goal. The ability of an organization to plan and make the best decision faster, effectively, and efficiently is an important competitive advantage factor.
The decision-making process requires the availability of the right data and information to ensure that the most appropriate alternative is adopted. In the fast changing business environment, organizations are required to identify trends in the business environment, filter a vast amount of the available information concerning each situation, and/or communicate or share information to the relevant management roles. Besides, they are required to identify alternative courses of actions and finally choose the best alternative that will offer the most competitive advantage in the business environment (Malone & Team, 2013). The use of Information Technology (IT) is a 21st century reality.
Currently, nearly all business functions find the relevance of IT in increasing efficiency, effectiveness, and accuracy of process. In the process of organizational decision-making, Information Technology is very relevant since it leads to faster acquisition, processing, sharing, and making of a decision in various business situations. Several studies have been undertaken to show the relevance of information technology in organizational decision-making among other processes. A study by Jones (2010) finds that information technology systems are playing a critical role in organizations of all types, regardless of their size. According to Bonczek, Holsapple, Whinston, and Schmidt (2014), in the decision making process, information technology systems improve the management process by ensuring the usage of the available information for faster and accurate decision-making.
Despite the growing relevance of information technology in organizational management processes and activities, very few studies have been conducted to investigate the role of information technology in organizational decision-making. For instance, Doumpos and Zopounidis (2010) assert that decision-making information technology systems fall into categories, including systems that analyze a situation and/or leave the decision to the management and the systems that make a recommendation and the courses of action that an organization should take in a given situation.
Other studies have shown that information technology systems are not just geared towards the final decision on given issue but are also critical to the various supporting activities that are undertaken towards the achievement of the final goal (Philips et al., 2009). In this case, information technology is very important in ensuring accurate and adequate resource appropriation, allocation, planning, and monitoring, and evaluation. The advent of enterprise resource planning (ERP) systems has further signified the vital role of information technology in organizational management and decision-making. As such, the information technology in organizational decision-making cannot be ignored in the 21st century business environment.
Objectives of the Project
In this paper, the main aim is to provide an in-depth understanding of the role information systems in the decision-making process in an organization at all levels. Further, it will provide insights into how managers can make the best use of information technology systems in the process of decision-making. The study further provides essential guidelines that managers can use information technology systems to reduce uncertainties in the process of decision-making. The paper will also provide a better understanding of the management roles that exist in an organization together with how information technology systems can be used to assist in ensuring effective decision-making processes in each organizational management role.
Literature Review
Functions of the Management
Information technology systems provide central support to the management of an organization in various ways. However, the incorporation of the systems is highly dependent on the understanding of the role of the management and managers in an organization. In other words, it is very important to understand the role of managers together with how they perform such roles. However, it is vital to acknowledge the difference between the tasks that managers perform and the functions of the management. In this case, while the role of the managers may change with time depending on the situation and the tasks, the functions of the management are not changing (Bonczek et al., 2014). To expound the difference between the two concepts, it is important to refer to the classical model of what managers do as provided by Henry Fayol in the 1920s. The functions of the management in an organization include planning, organizing, directing, and controlling. In this model, each of the function of management guides the tasks that the managers follow to achieve the requirements of each function. The diagram below represents the process of management function
The diagram above shows that the management process has four functions, which are executed through a variety of decisions that are taken at each function. The decisions taken at each function determine the various tasks and roles that managers embark on to meet the goals of the specific function. The first function of management is planning, which indicates the formulation of what is to be done by an organization and the management (Zsambok & Klein, 2014). The second function of the management is the organizing function, which indicates the resources, money, time, and physical assets that are coordinated by an organization into the well-organized production of goods and services.
The most important function of the management is the directing function (Galliers & Leidner, 2014). In this function, the core aim is to ensure that the management offers important guidelines and leadership, which will ensure that all the other functions of the management are smooth and effective. The controlling function on the other hand refers to the process through which managers ensure that they remain in charge and responsible of all the other functions of the management, thus increasing the ability of the organization to achieve the desired results (Chaffey & White, 2010).
As previously mentioned, each of the management roles in an organization correlates with a set of tasks that the managers are required to perform to guarantee the successful accomplishment of the goals of the function. For example, the task of the managers in the management process of planning involves the establishment of goals and development of strategies and tactics that set the organization on a path of achieving its overall goals (Galliers & Leidner, 2014). In this case, it is important for an organization to understand the main reason of its existence and consequently setting goals for each of its different programs and projects to ensure that it contributes towards the achievement of the overall goals as identified in its mission and vision. Further, during this stage, managers of the organization identify the various activities and strategies that will need to be done towards the achievement of the required result (Chaffey & White, 2010). In the second function of planning, organizing indicates the process through which an organization identifies its resources, both human and capital, and consequently allocates responsibilities to groups and individuals and the respective resources to guarantee the achievement of the organizational goals.
In this case, it is important for an organization to ensure that it has an accurate understanding of its capabilities and resources so that the resources are not only adequate and relevant but also guaranteeing that the skills, knowledge, and the human capital are appropriate for the tasks (Parnell, Driscoll, & Henderson, 2011). Lack of organization is one of the major reasons that explain why many companies fail to achieve their goals because of resource misappropriation, time wastage, and inadequate skills of the various teams that are required to drive the agenda for the achievement of the required goals among other factors. The third function of the management is the directing function, which requires the managers to lead through communication and motivation (Parnell et al., 2011).
In this case, it is important to appreciate that the role of the managers is not only providing important guidelines but also motivating various teams to dedicate their efforts and skills to the achievement of the goals of the organization. The managers ensure that the communication of decisions and processes within and across teams is efficient. Further, they guarantee that the various needs of each team are met adequately to ensure good outcomes for the organization. Lastly, the controlling function of the management ensures that the managers are continually evaluating and adjusting the organizational performance to ensure that the process towards the achievement of the required goals is in the right direction and within the anticipated timeframe and resources (Chaffey & White, 2010).
Information technology can be an important tool, which can help managers in their various tasks towards the achievement of the respective functions in the organization. The activities of the managers involve decision-making, which is a central tenet in managerial functions. To make the appropriate decision, information is very important since it allows managers to act in a responsible and informed manner, which can guide the achievement of the expected goals and outcomes. The availability of information ensures that managers can choose the right actions from a variety of options (Parnell et al., 2011).
As organizations growth, it becomes very important to have specialized teams and managerial functions to address specific needs and problems, yet such decisions and functions must resonate with other functions of the organization to achieve the overall anticipated goals (Doumpos & Zopounidis, 2010). However, the magnitude of each specialized function means that there are smaller activities within each function, with very little time in between each smaller function due to time and competition constraints for an organization (Bonczek et al., 2014; Phillips-Wren, Mora, Forgionne, & Gupta, 2009). It is very critical for the organization to ensure that it has the right information for the managers to perform highly complex and important tasks within a very short time and resource-constrained environment without compromising the overall outcome of the roles and activities.
Lastly, it is significant for an organization to ensure that its various departments and functions are streamlined to ensure that the departments are complementing, as opposed to competing against each other. Thus, it is critical to ensure that the various departments and functions have adequate and effective information-sharing approaches that will guarantee success (Galliers & Leidner, 2014). Information technology is an important platform that allows the storing and sharing of large amounts of data within an organization while ensuring that each department has access to the relevant information to perform its activities. Concisely, each of the functions of the management is guided by various decisions, which are essential in the achievement of an organization’s unique goals (Chaffey & White, 2010). To make the right decision, information plays an important role and hence the importance of the information technology in providing a platform for the acquisition, processing, and utilization of the information for decision-making.
Levels of Management Decision-making and Information Technology
The variety of decisions that organizational management makes are guided by the need of the organization and the impact of such decisions on its operations. It is for this reason that organizations have various decision-making levels, which relate to the authority as bestowed on the managers in the organization. The management of an organization can be divided into three levels, namely, First-Level Managers, Middle Managers, and Top Management. Each of the management levels has its limits within which its decisions can cover and/or influence the activities of the organization (Doumpos & Zopounidis, 2010).
The top management is the overall authority in an organization. It has the power to sanction the decision of the lower management levels in the organization. The main role of the top management is to formulate strategies, policies, long-term plans, and objectives to make strategic decisions (Galliers & Leidner, 2014). The decisions of the top management are informed by the desire to ensure that the organization remains competitive and relevant in its area of business. Therefore, the decisions are very critical since they not only allow the company to remain relevant but also ensure that it continues to retain its unique standing in the market or business sector. On the other hand, the middle managers are required to formulate and make operational plans and decisions geared towards the achievement of the strategic goals set by the top management (Philips et al., 2009).
In this level, the management is focused on what ought to be done by the organization and the respective departments towards the achievement of the organizational goals. Lastly, the first-level managers are mandated with the implementation of the operational plans and objectives. Further, they are required to make short-term decisions, as well as running the day-to-day business operations such as supervision of other employees among other daily and short-term activities (Jones, 2010). The first-level managers are the most visible in an organization since they interact with the employees to run and achieve the goals of the various departments that they are in charge of.
Each of the management levels in an organization has its unique information needs that guide its decisions. For instance, the top-level management is focused on ensuring that the organization is competitive and relevant in its market. In this case, the management must be aware of the current trends in the business sector to ensure that strategies and plans that are formulated are relevant to the business environment while making the organization remain competitive (Bonczek et al., 2014). In this case, the main source of the information for the top management is the external information source. Such information is gathered from external environment sources where it is used to guide the formulation of strategies and strategic plans and decisions that guide the direction that an organization takes in its sector. External information includes but not limited to government policy, taxation policy, brand identity, loyalty of the organization’s products and services, market trends, customer feedback, and economic conditions among other factors.
It is also the role of the top management to disseminate information to the external environment. Such information is essential in the process of marketing, conforming to policies, and as an obligation to the public (Doumpos & Zopounidis, 2010). The middle level management’s decisions are informed by the strategies and plans that have been put in place by the top management. The middle level management is required to put in place operational approaches and plans that will ensure that the organization achieves its strategic goals (Malone & Team, 2013). The first-level decisions are informed by the operational goals and strategies of the middle level management. In other words, all the information that the first level managers use is sourced from the middle-level management in the organization. The diagram below represents the levels of management and the respective sources of information.
The information requirements of each level of management can be facilitated by the use of information technology and the related systems that ensure fast, accurate, and effective acquisition, use, and dissemination of information for decision-making.
The use of information technology systems has evolved over the years to the current high levels of integration in organizational management (Philips et al., 2009). Such changes have accelerated changes in the economy, organizations, and all areas of businesses. In the traditional business environment, information technology and related systems were mainly used to support operational activities and functions. Further, such systems were used to support transaction applications such as their use in supporting accounting transactions (Doumpos & Zopounidis, 2010). Such systems only functioned to support a very small segment of business activities. They were not essential in the decision-making process. However, with the development, which has occurred in the technology field, better systems and technologies, which facilitate the acquisition, storage, and dissemination of information, have emerged. Such systems have ensured their usage and integration into various organizational activities beyond the operational functions (Griffin & Moorhead, 2011). Currently, information technology systems are used in both operations and management roles.
Implementation of Information Technology for Decision-Making
The evolution of the Information Technology and related systems has led to the emergence of various technologies that are essential in the decision-making processes of an organization (Chaffey & White, 2010). The information technology systems have become integral in organizational decision-making. It is almost impossible to imagine organizations running without such systems (Jones, 2010). Some of the most important systems in an organization are the Decision Support Systems (DSS) and Management Information Systems (MIS).
The Decision Support Systems (DSS) relate to technologies that are important in decision support in an organization. Decision Support (DS) relate to activities, systems, and concepts that are implemented in an organization to support decision-making by people in an organization. The DSSs have various characteristics, which help their definition in an organization (Galliers & Leidner, 2014). Firstly, the systems are designed specifically to aid decision-making processes (Doumpos & Zopounidis, 2010). Further, the systems are focused on support, rather than automating decision-making process. The other important characteristic of a decision support system is the adaptability to the changing needs of the decision makers.
The use of decision support systems incorporates important concepts that make their functionality effective. For instance, DSSs incorporates both data and models. In this case, for the DSS systems to function well, they must contain the relevant facts and models that allow the processing of such data and the presentation of the final information in the manner required by the decision-maker (Galliers & Leidner, 2014). Concerning the DSS, the main objective of the systems is to improve effectiveness of the decisions, as opposed to the efficiency of making them (decisions) (Bonczek et al., 2014). In other words, the DSSs ensure that the decisions that are arrived at are responsive and relevant to the situation at hand in the organization. The DSSs are also designed in a manner that allows direct interaction with the decision-maker such that the user of the system can have a flexible choice in the kind of knowledge and information that he or she seeks to inform decision-making.
It is worth noting that there are various types of DSS that an organization can use its decision-making processes. In this case, the typologies of DSS are dependent on the mode of assistance offered to a decision-maker by the system. Firstly, the document-driven DSS offers decision support by allowing the searching and retrieval of relevant documents to a given decision-making problem (Griffin & Moorhead, 2011). In this DSS, it is worth noting that an organization uses vast amounts of information found in documents and other storage areas. Searching and accessing such documents and information through manual systems is not only time consuming but also very unreliable. In this case, a document-driven DSS allows a department to store the relevant information in a centralized computerized location that allows easy access through the system, thus saving the decision-makers valuable time, which is essential in ensuring competitiveness (Malone & Team, 2013).
The second DSS typology is the communication-driven DSS, which uses network and communication technologies to guarantee easy collaboration and communication between members of an organization to realize a faster and effective decision-making. In an organization, communication between members of an organization is an essential competitive advantage. There is the need for both vertical and horizontal communication to facilitate teamwork and delegation of duties and roles within and across ranks of the management (Jones, 2010). For example, there is the need for both top-down and down-top communication to facilitate the communication of tasks, strategies, and passing of feedback for the outcomes of the activities undertaken by different people in an organization. Top-down communication allows managers to pass information and decisions for implementation by their subordinates. On the other hand, down-top communication allows subordinates to provide feedback and results of their actions in relation to the instructions and activities expected of them by their managers.
Communication-drive DSSs include intranets, mailing systems, video conferencing, and telephone communication among other systems that allow members to communicate faster, hence ensuring faster and effective decision-making (Bonczek et al., 2014). The third type of DSS is the Data-driven DSS, which allows an organization to process and analyze data for decision-making. In this system, the decision-makers enter data, which is then processed. The results from the analysis are provided to inform the desired decision. The other type of DSS is the Model-driven DSS. In this DSS, the system contains various problem-solving models that use analytical and optimization tools to suggest and make recommendations for the course of action (Zsambok & Klein, 2014). Lastly, the Knowledge-driven DSS is a system that is dedicated or specialized in a given area of knowledge. It is used to support decisions in the particular area.
Decision Support Systems (DSS) are some of the ways through which information technology is used to inform or aid decision-making in an organization. The use of DSS is applicable to all levels of the management of an organization. The popularity of DSS in organizations is a clear indicator that such systems are indeed very critical to both operational and management decision-making (Galliers & Leidner, 2014). However, the systems are more suited for operational decisions in an organization as compared to their usage in management decisions.
The role of the management is focused on the making of critical management decisions that inform the operational plans of an organization. In this case, it is very important to ensure that the management is in a position to access relevant and timely information, which informs the courses of action and strategies undertaken to meet the overall organizational goals (Chaffey & White, 2010). The emergence of Management Information Systems (MIS) is an important area of information technology that allows organizations and the management to use informational technology for opportune, accurate, and decision-making. The management information systems (MIS) provide information to users with similar needs in an organization. In the organizational setting, their main aim is to provide managers with the information they require to take decisions and/or solve problems that arise in their roles. MISs are very critical to an organization.
They are supported by corporate databases, which include all information generated from operational activities and transactions in the organization (Galliers & Leidner, 2014). For example, the recording of various activities in the organization allows the generation of reports that help managers to make decisions to inform future activities and strategies. The reports generated in an organization can be used to support management decision-making through various approaches. For instance, such reports can be used to highlight exceptions or deviations from the norm of an organization (Bonczek et al., 2014). For example, if an organization’s performance is improving, managers can use such reports to highlight changes in trends of revenues or transactions, hence informing decisions on where to concentrate their efforts.
The conception of the MIS requires the input of the right information, which is then disseminated to the right people at the right time. The organization’s objectives, targets, plans, and standards inform the type of data entered into the MIS before establishing the parameters and guidelines for the functioning of the system. The MIS output should provide the relevant information, which can support the management in arriving at the right decisions (Galliers & Leidner, 2014). MIS systems provide information and support at three different decision-making levels. The first level is the strategic level decision-making information, which allows an organization to plan activities, which pave a way for the organization to plan long-term objectives and goals, as well as in the establishment of the organizational policies (Jones, 2010). Such information includes external data such as industry dynamics, and government policy among others. The data is considered in the determination of the long-term goals while considering the organizational mission and vision.
The second level of decision-making information that is provided by the MIS is the tactical decision-making information. In this case, the focus is on the use of information to inform short-term goals in response to the emerging issues in the organization and the industry (Parnell et al., 2011). Such decisions allow an organization to review its strategies and make various changes to remain focused on the outcomes that are anticipated in the long-term goals (Chaffey & White, 2010). Lastly, the operational decision-making information is very important since it allows the management to actualize the strategies and plans through actions that are required for the subordinate staff (Philips et al., 2009). The operational information allows the managers to be aware of the current performance of the organization, which in turn guides future courses of actions at the tactical and strategic decision-making levels.
Concisely, failure by an organization to implement and incorporate information technology in its decision-making process is a major mistake that should be avoided. Information Technology provides important avenues that allow faster response to both internal and external factors, thus allowing accurate, timely, and effective decision-making to guarantee competitiveness of an organization.
Discussion
The role of information technology in organizational decision-making cannot be ignored in the 21st century. It is evident that organizations must adopt information technology to guarantee timely, effective, and accurate decision-making to ensure that they remain relevant in their activities. The analysis of the literature review has revealed that the decision-making process is not a lone affair. In this case, Information Technology systems provide a platform where various members of the organization and different levels of management and roles can make informed decisions that are aligned with the overall goals of the organization (Bonczek et al., 2014). Therefore, it is important for an organization to consider various factors in its implementation and adoption of information system for the best outcomes.
Firstly, it is important to understand that each organization has its unique demands, which must guide the kind of information technology to be adopted (Zsambok & Klein, 2014). It is highly advisable to do a thorough audit of the information and technology needs to ensure that the relevant information technology systems are adopted. The adoption of the systems should also consider the current trends in the information technology field to ensure the adoption of up to date information (Philips et al., 2009). The adoption of irrelevant and obsolete technology can put an organization at a disadvantage, which can drive it out of market.
Secondly, it is important to understand that the information technology systems are not intelligent systems. Hence, they require the input of the right data and information for the information that such systems provide to remain relevant to the organizational decision-making needs. In other words, the concept of garbage-in-garbage-out (GIGA) should be the driving force for the adoption of information technology systems that allow the input of relevant data that can pave a way for the process and output of relevant data for an organization (Jones, 2010).
Thirdly, an organization should understand that the implementation of information technology is a resource-intensive process (Malone & Team, 2013). The initial investment in the adoption of effective information technology can cost an organization a considerable amount of resources. It is very important to ensure that the organization plans well and/or provides the adequate resources that will allow the implementation and management of information technology systems at all times (Bonczek et al., 2014). Without proper resource planning and appropriation, the process can be very costly while the lack of proper management of the systems can easily reduce their effectiveness in the aiding of decision-making process. Other important considerations for resources include the training of staff members, as well as the adoption of other supportive resources that are essential for the overall success of the project.
Lastly, it is very important for the organization to understand the role of teamwork and the top management in ensuring the smooth running of the information management systems (Griffin & Moorhead, 2011). The adoption of the information system requires the sanctioning of the top management, which has the mandate of dedicating resources and ensuring the adoption of the technology throughout the organization. The top management uses external information to make important decisions on the direction, which an organization should take. Hence, the management is in the best position to determine the information technology needs of the organization as informed by the external trends in the industry and as guided by the internal mission and vision of the organization (Philips et al., 2009).
The importance of the teamwork is guided by the fact that information technology systems for decision-making require the input of data and information from different levels of the organization. As such, it is very important for the organization to ensure that all members of the organization understand the usage of the system besides being in a position to input the right information for the final decisions made by the respective managers to reflect the correct status of the organization at the given time.
When an organization considers the above factors, it ensures that its information technology systems are effective and efficient while working as expected in supporting decision-making at all levels of the organization (Doumpos & Zopounidis, 2010). It is only through the adoption of the relevant technologies that are specific to organizational needs that the benefits of information technology can be felt. As such, organizations should consider the various concepts and approaches that have been discussed to guarantee the best outcomes for the use of information technology.
Conclusion
The ability of an organization to make timely, effective, and efficient decisions is a major competitive factor. Such decision-making not only allows the organization to achieve its goals but also to remain competitive by ensuring opportune and fast response to market dynamics. The use of information technology is very essential in aiding the decision-making process in an organization as discussed. The use of information technology provides a platform that allows the input, processing, and dissemination of information at various management levels that are essential to the organization. However, the benefits of the information technology require several factors of consideration such as the relevance of the technology to the organization, the skills, and knowledge on the usage of the technology throughout the organization and resource usage. Concisely, information technology plays a central role in the effectiveness and efficiency of organizational decision-making process to ensure that an organization achieves its goals while remaining relevant and competitive in its sector.
Reference List
Bonczek, Robert, Holsapple, Clyde, Whinston, Andrew, and Schmidt, William., “Foundations of decision support systems,” 1st Edition, 2014, San Diego, CA: Academic Press.
Chaffey, Dave, and White, Gareth., “Business information management: improving performance using information systems”, 2nd Edition, 2010, New York, NY: Pearson Education.
Doumpos, M., and Zopounidis, C., “A multicriteria decision support system for bank rating”, Decision Support Systems, 2010, Vol. 50, Iss. 1, 55-63.
Galliers, Robert, and Leidner, Dorothy., “Strategic information management: challenges and strategies in managing information systems.” 11 Edition, 2014, London, UK: Routledge.
Griffin, Ricky, and Moorhead, Gregory. “Organizational behavior.” 10th Edition, 2011, Boston, MA: Cengage Learning.
Jones, Gareth., “Organizational theory, design, and change”, 7th Edition, 2010, Upper Saddle River, NJ: Pearson.
Malone, T., and Team, L., “Is empowerment just a fad? Control, decision-making, and IT”, Sloan management review, 2013, Vol. 38, Iss. 2, 123-136.
Parnell, Gregory, Driscoll, Patrick, and Henderson, Dale., “Decision making in systems engineering and management”, 2nd Edition, 2011, Hoboken, NJ: John Wiley & Sons.
Phillips-Wren, G., Mora, M., Forgionne, A., & Gupta, J., “An integrative evaluation framework for intelligent decision support systems”, European Journal of Operational Research, 2009, Vol. 195, Iss. 3, 642-652.
Zsambok, Charles, and Klein, Gary. “Naturalistic decision-making.” 1 Edition, 2014, London, UK: Psychology Press.