Information Processing and Organizational Choices

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Chapter 11

• Information Processing and Organizational Choices

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The Value of Information

• There are seven characteristics that make
  information valuable
• Relevance
• Quality
• Richness
• Quantity
• Timeliness
• Accessibility
• Symbolic value

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Value of Information-Relevance

• Two challenges in deciding relevance what
  information is relevant and to whom it is
  relevant?
• Done by using the concepts of domain and task
  environments
• Linking sensors need to be connected to the
  proper decision-authority centers
• The most relevant information is for strategic
  decisions

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Value of Information-Quality

• Quality refers to accuracy
• Two types of errors can be committed in regard to
  information quality
• Type I errors occur when information is accepted
  as true when it is actually false
• A Type II error occurs when the organization
  accepts as false something that is actually true

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Value of Information-Richness

• Information richness and quantity are related
• Richness carrying capacity of a particular
  method of conveying information
• Written information tends to be lean. It can
  convey vast amounts of specific, precise
  numerical data, but cannot provide direct
  immediate feedback and it lacks an extensive
  visual component

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Value of Information-Richness

• Spoken communication, such as a phone call, adds
  new dimensions of richness
• The richest form of communication is face-to-face
  communication
• There is a relationship between information
  richness and the types of tasks being carried out
  
• We need increasingly rich information as tasks
  become lower in analyzability

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Value of Information-Richness

• As we move up the hierarchy, individuals need
  increasingly rich information. Top-level
  managers need the richest sources of information.
  
• Market control systems need modestly rich
  information sources, bureaucratic systems
  somewhat more, and clan control systems must make
  the most extensive use of rich information
  sources

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Value of Information-Quantity

• Enough information is needed, but too much
  information causes information overload
• Too much information can cause decision-authority
  centers to ignore all the information provided

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Value of Information-Quantity

• Organizations never have perfect and complete
  information
• They must operate under what Simon has labeled
  bounded rationality
• Organizations must realize
• Their known-unknowns
• Cost of information increases geometrically as
  they try to gather more information about a
  particular issue

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Value of Information-Timeliness

• There is a time value of information
• The usefulness of data increases the more recent
  they are
• Speed is a major factor and the use of the
  computer has made information timelier
• The key factor is the ability to obtain
  information soon enough to take or not take
  action
• Opportunity cost of doing the wrong thing at the
  wrong time

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Value of Information-Accessibility

• Accessibility to information may be more
  important than the quality of information
• In practice, managers often use lesser-qualified,
  easily available information

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Value of Information-Accessibility

• Managers chose information based on
  availability for several reasons
• 1) Social and economic costs of searching for
  valuable information
• 2) The structure of the organization may
  restrict access to high quality information  

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Value of Information-Accessibility

• Reasons continued
• 3) Incentives can reward managers for seeking
  information from certain sources and penalize
  them for searching from others
• 4) Information is often incomplete and vague
  and managers may seek information from places
  that are considered trustworthy and readily
  available
•  

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Value of Information-Accessibility

• Fast, powerful, low cost computers and Internet
  connections have dramatically increased
  accessibility of information
• The increased accessibility has re-emphasized the
  importance of judging quality and accuracy of
  information

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Value of Information-Symbolic Value

• The fact a manager has access to or receives
  information may confer prestige or status
• Strategic plans that are not
  actually used may, nonetheless, be
  used to confer a sense of control
• Being or not being in the information loop can
  be used to convey status and power

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Systems for Managing Information

• Information consists of a
  series of stocks and flows
• The system of gathering, reporting, analyzing,
  accepting, storing, retrieving, and using
  information is the information system
• The information system is composed of a
  seven-step process

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The Seven-Step Process

• Gathering information
• Reporting information
• Analyzing information
• Accepting information
• Storing information
• Retrieving information
• Using information

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Gathering Information

• Involves gathering information from both inside
  and outside the organization
• Comes from both primary and secondary sources and
  information is frequently gathered using surveys,
  questionnaires, tests, and interviews
• Validity and reliability are important issues of
  concern
• Information that is gathered
  also needs to be relevant

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Reporting Information

• Should be communicated to the proper people
• Information needs to be coordinated
• Must reach the proper units in a timely fashion
• Modern computer systems have greatly aided in
  solving coordination problem

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Analyzing Information

• Analysis of the information
  answers the question at hand
• Information can get distorted because each time
  it is analyzed, it gets interpreted
• Personal biases may enter in either intentionally
  or inadvertently, so organizations need to set
  guidelines for interpreting information
• Managers from the top to the bottom can utilize
  appropriate software and analysis systems

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Accepting Information

• Just because information is sent does not mean it
  is received and accepted
• Follow-up is necessary to make sure the
  information was received
• Acceptance, however, does not
  mean agreement

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Storing Information

• Information storage can be as simple as placing a
  pile of paper on an executives desk or as
  sophisticated as entering it into a high-speed
  computer
• The key factors in storage
  are cost, timeliness, and
  access

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Retrieving Information

• Computers have made information ever more
  accessible
• The retrieval decision should be made at the time
  of storage so the information is readily
  available and inexpensive to retrieve

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Managing the Information Process

• MIS or Management Information System refers
  specifically to the reporting and control system
  the managers use to carry out their jobs
• Terminology is constantly evolving, and many
  experts in the field now prefer the IT or
  Information Technology
• A MIS is a formalized system, which makes
  information available to managers in a timely,
  accurate, and relevant fashion

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Effective MIS Characteristics

• User-based
• Timely, accurate, and relevant
• Tied to a computer
• Cost effective
• Needs to be a system
  of systems
• System should be managed

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Importance of the Information Systems in
Organizations

• Creation of a top management position
  designated as Chief Information Officer- CIO
  
• CIO is charged with developing and implementing
  information strategy and linking it to the
  overall corporate strategy
• Some firms have also created Information Policy
  Boards (IPB)

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Information and the Decision-Making Process

• Theorists have developed three models of
  decision-making and information plays a different
  role in each
• Rational Decision-Making
• Bounded Rational Decision-Making
• Garbage Can Decision-Making

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Rational Decision-Making

• Assumes that decision-makers gather information
  at no costs
• They use perfect rationality
• They arrive at utility-maximizing decision
  outcomes

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Rational Decision-Making

• The process is linear in nature, with the
  following steps
• Problem identification or recognition
• Determining the desired outcome
• Developing alternative solutions
• Assessing and choosing a utility-maximizing
  solution or solutions
• Implementing the decision

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Bounded Rational Decision-Making

• Best intention to make rational decisions, but
  real life conditions place boundaries or
  constraints on their ability to do so
• Outcome is one that is of lesser quality than a
  utility-maximizing outcome
• A satisficing outcome is the first outcome that
  meets some minimum level of acceptability

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Garbage Can Decision-Making

• Step-wise decision-making process is no longer
  present
• Solutions may precede the identification of
  problems, or no problems may even exist
• Decisions are made that do not solve the
  problems, and those problems may continue
• Some problems eventually get solved, but utility
  maximization is abandoned

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Garbage Can Decision-Making

• Garbage can decision-making is more likely under
  certain organizational conditions
• The goals and objectives are ambiguous,
  conflicting, and poorly articulated
• Many problems exist simultaneously, and many
  decisions may be under consideration at the same
  time
• The means for accomplishing the goals are
  ambiguous and poorly understood

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Garbage Can Decision-Making

• The decision process is nonlinear and it can
  start or stop at any point
• Problems may be invented to fit solutions
• Because of the fluidity, the decision process may
  become inconsistent
• Garbage can model is not a desired state of
  affairs rather, it is a descriptive model
• Sports and convocation center example is an
  illustration of the garbage can decision approach
  

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Information Technology and the Modern
Organization

• Given the rapidly changing information
  technology, it is difficult and foolish to make
  specific suggestions about changes in
  organizations
• The proliferation of fast, inexpensive, and
  comprehensive information technology is
  revolutionizing organizations and work life

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Information Technology and the Modern
Organization

• The old hierarchical structures are breaking
  down. Being a part of a network can become more
  important than having a certain position in the
  hierarchy
• Information technology can allow for greater
  control and coordination down and across
  organizational units
• Conversely, the technology can also lead to
  greater decentralization and flexibility