Business owners and operators routinely make decisions that determine the success or failure of a business enterprise. Effective decision making requires accurate, timely and useful information.
The purpose of management information systems, including decision support systems, is to guide the decision-making process. Specifically, MIS combines people, computer hardware, software and communication devices to collect, store and convert raw data into useful information, which subsequently is communicated to the right people precisely when needed.
Types of Decisions
Managers at various levels of business use different types of systems to obtain information they need to make decisions for their areas of responsibility. System managers charged with addressing the information needs for different levels within an organization commonly refer to three types of business decisions according to their hierarchical position within a company:
- Strategic: Unstructured decisions based almost entirely on judgment without the benefit of known or definitive outcomes.
- Tactical: Semistructured decisions that require some judgment but also have some agreement on solution methods and outcomes.
- Operational: Repeated, structured decisions for routine tasks involving daily company operations.
MIS is commonly used as the umbrella term to include systems that support all three types of business decisions. However, decision support systems is the term most appropriate for systems that support unstructured and semistructured decisions, while MIS mainly applies to systems that support structured decisions.
Strategic decision makers chart a company's overall strategic direction -- financial, competitive and political goals, objectives, strategies and policies -- and track the company's performance.
Because the future is based on unknowns and uncertainties, strategic decisions are inherently unstructured. As such, strategic decision makers often use a specialized type of DSS called executive information systems. An EIS presents tailor-made information to executives according to their preferences. Unlike other types of DSS, an EIS can access critical enterprise information from all areas of a company so the strategic decision maker gets a companywide overview. Moreover, an EIS gives executives the ability to drill into the data and quickly retrieve more detailed, related information.
Tactical decision makers generally make semistructured decisions based on specified instructions. They develop and execute short- and medium-range plans and strategies to achieve the specified overall company goals and objectives established by strategic decision makers. They allocate resources, set budgets, establish objectives and track the performance for departments and other organizational groups under their management.
Operational decision makers are mainly at lower levels of management. They make structured, repetitive decisions based on event facts that require minimal judgment and generally have immediate consequences. A MIS that supports operational decisions commonly focuses on the managerial decision-making process itself, including policies and clear criteria that help managers make rational, informed and consistent decisions.
Types of Decision Support Systems
While strategic decision makers commonly use EIS to access custom-made, enterprise information for decisions that affect the entire company, tactical decision makers use other types of DSS that support semistructured decisions. These can be sorted into five categories:
- Communication-driven: Using the Internet or client server, this type of DSS allows for online communication, such as video conferencing and instant messaging.
- Data-driven: This type lets decision makers query databases with specific questions requiring specific answers.
- Document-driven: Ubiquitous in daily life, this type of DSS lets decision makers use key words or search terms to search the Internet documents on a given subject.
- Knowledge-driven: Often called management expert systems, this catch-all category allows people within a company and others interacting with the company to select the best solution to any given problem on a range of topics, such as product or service knowledge and usage.
- Model-driven: Depending upon how the model is configured, these systems simulate real-world scenarios, such as accounting models, financial models and optimization models. Decision makers can select from multiple choices and analyze the effect of their decisions.
- Global Development Research Center: Types of Decision Support Systems (DSS)
- University of Missouri-St. Louis: Information Systems Analysis 488
- Inc.: Decision Support Systems
- IBM Press: Principles of Decision Management Systems
- MBA Official: Differentiate Between Management Information System and the Decision Support System
- Compass: Structured Decision Making