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Managerial Expert System as an Information Support to Decision - Making
Copyright © IFAC Automated Systems Based on Human Skill, Kranjska gora, Slovenia, 1997
MANAGERIAL EXPERT SYSTEM AS AN INFORMATION SUPPORT TO DECISION - MAKING
Vojko Potocan
University ofMaribor, School of Business and Economics Maribor, Razlagova 20, SI - 2000 Maribor, SLOVENIA , e-mail: [email protected]
Abstract: In contemporary conditions, it is a suitable management and its basic field of work which is business decision-making (BDM), that can most influence business. Among other influences, quality of decision-making (DM) depends a lot of its information support, which is provided by management expert system (MES). Preconditions for information of such a MES to be optimal ban be better met if one applies systems theory (S1), a systemic standardization ofDM, a general organizational model of business decisions, and a holistic model (HM) ofDM. Copyright© 1998lFAC Key words: management; decision making; management systems; information systems; expert systems;
1. INfRODUCTION
2. DECISION-MAKING AND ITS INFORMATION BASIS
Cooperation of hard and soft systems specialists caIL among other aspects, be viewed from two viewpoints: restricted funds / resources, and DM when they work together in organizations as business system (BS). When funds are restricted and conditions of business operation (BO) are poorly defined, the business results can primarily be improved by an adequate management. The management of the business process (BP) includes the definition of objectives, goals, and the creation of operations which, in connection with the selected model of evaluation, have a direct impact on the target areas.
It is the DM which causes the BS to change its objectives, goals, processes, and structure, as well as to use the monetary, material and human resources. Various BO are inevitably different but also mutually interdependent, within the framework of the management processes (Schroeder, 1996). The DM is based on information, which shows characteristics of the business situation under examination and provides additional necessary knowledge. The entire information support to DM is provided for by a synergic operation of various kinds, types and forms of information systems (IS) (IS concerning the daily operation assure a general information support; prnpose-built IS provide for targeted support to a part of various single levels of management). Information systems (MIS, MSS, DSS, ES, MES) provide their adequately structured and formed general and specific information to managers, according to their information requirements (Dawson, 1996).
Various solutions are available to improve the quality of management. An important improvement is provided by a suitable implementation of its fundamental activity, i.e. the DM process (Certo, 1994). Its quality depends on its information provision.
89
features and characteristics of processes. By formalizing these characteristics, a more explicit process and standard model of the DM process are organized to support the DM.
EveI)' type and level of management needs various infonnation for its high-quality work. Generally created infonnation makes the basis for the managers and employees' DM processes concerning their operation-level lnanagement (fonnation of work instructions. execution, elaboration of reports on work). More demanding DM of experts and managers carrying out the activities at the tactical level is based upon the purpose-fonnatted infonnation (Gelatt. 1993).
In addition, it is possible and necessary to create a system of the standard DM procedures covering efficient BDM. Within individual types of BO and fonns of organization, management can work out a pennanent system of DM processes which is built in the organizational model. The DM processes are standardized to the selected degree together with definition of their constant composition.
Infonnation support to the solution of DM problems which demand more and deeper knowledge is assured by e:\."pert systems (ES). Managers use them to simulate DM to solve special problems on the basis of the entered data and certain DM rules.
Starting points discussed so far can be used by management to fonn a new - HM of DM which presents also the basis for fonnation of an adequate cybernetic model of management. Its fundamental characteristics are: application of a generally valid process model, consideration of a majority of important factors, and aspects of examination.
The ES can be used for the fonnation of infonnation on the fundamental characteristics of the situation or the state of the business system, and its weakness (based on data on deviations) . ES, on the other hand, depends on the prototype systems development, on fonnation of different processes within the implementation of the goal function, on the comparison of targeted and actual features of the BS, and on the management of correction actions (Dawson. 1996).
4. A HOLISTIC MODEL OF MES In order to produce a MES, a unifYing model for a logical analysis for most, if not all, BS was proposed by Potocan (Potocan, 1993; Kajzer and Potocan, 1997). It can be concluded that MES is supposed to support the DM process which is an entity made of partial processes of fonnation, evaluation, selection of a decision, and the implementation of this decision.
3. MANAGERIAL EXPERT SYSTEM AS A SUPPORT TO DECISION-MAKING The quality of MES and its support to DM can be improved by application of the ST and by systemic standardization of both DM and general organization system of BDM (Potocan, 1993; Kajzer and Potocan, 1997).
The result of the first phase of making MES (cognition and description of the decision situation or problem) is the definition of the space of possible solutions. The analysis of their adequacy in tenns of actual conditions and restrictions enables fonnation or development of workable decisions, which are further on investigated and evaluated. This enables the selection of decisions meeting minimal criteria. at least. The process is finished by selection of the most favorable decision which is therefore prepared for implementation, and actually carried out.
AppliCt'1tion of the ST provides for the necessary complexity and holism of the BDM. This means that the BS is controlled from a system of all and only essential aspects including the process concept of business systems. Thus, management examines composition, operation, conceptualization and design of BS as an entity of the basic, managerial and infonnational (soft and fuzzy!) partial systems.
The processes of making MES may take place subsequently, intermingle, overlap, and be open to their environment. Partial processes present interdependent aspects of the same MES.
Standardization is founded on the cognition that an entity of methods of the standard management DM can be elaborated for BDM. The method ofDM in the individual BS should, however, meet specific requirements. From the standpoint of BDM it is possible to roughly detennine the entity - the system of necessary metllods and techniques used in making these decisions and systems ofDM processes.
In MES. it is crucial that a number of different factors have their impact on the business decision making. A rational DM is holistic. i.e. based on consideration of the majority of those factors which significantly influence its implementation and results. The required analysis of the fundamental characteristics of DM. and the definition of its factors are made possible by the application of the soft systems approach (SSA) to makingMES .
In order to solve problems of different DM. management can apply a unified model of the DM process. Different kinds, types, and modes of DM have similar starting points: a process, a composition, 90
The SSA to the DM problem assures a holistic research of all the factors which detennine the basic characteristics, the process and the manner of DM. To meet the needs of examination of the BDM, some authors define all DM factors as formal and informal.
Lindsay, 1996; Dyck Mulej, 1997). and their relations (Kajzer and Potocan, 1997). In the BS, suitability of DM depends prilnarily on economic perfonnance presented by criteria of efficiency and effectiveness. They cover both internal and market measures of BS quality. The financial effectiveness is an aggregate criterion for the economic evaluation of tile majority of decisions made in business. But it is too narrow to provide really holistic infonnation.
Basically the fonnal factors have a direct connection with econOlnics ofBS and support the achievement of the economic goals (such as like business policy, strategy. technology, monetary flow, business results). Infonnal factors are not directly connected witll econOlnics of BS but tlley, however, have impact on its operation (directly, indirectly). They are psychological. sociological, socio-psychological and political factors (e)". pectations, wishes, goals, values, cultural factors, personal factors . ... ). The infonnal factors. above all. influence relations and links of the decision making system (internal, external). These factors can be indicated as soft elements of both DM andMES.
Another important aspect of decision making is ethics. Market relations stress interdependence of business partners. A long-tenn reliability makes business cheaper. An ethical finn is a good business partner. The finn's image can be based on botll criteria discussed above. and be god or bad, but it can be bluffing. That's why it is worth a specific consideration in tenns of credibility, creditwortlmess and trustworthiness.
5. SSA AS A PRECONDITION FOR HOLISM OF MES
MES need to be a dialectical system of econOlnic hard and soft data including indirect indicators, to cover these finding on contents ofMES.
The SSA is based on Soft Systems Methodology (Harrison, 1995) and makes the basis for SSA model of DM. The focus of the SSA model is a 'holistic analysis of the activity' under investigation included the real word and abstract thinking, which enables fonnation of a set of possible solutions. SSA analysis involves tile comparison between the desired and possible results of decisions. The desired results are fonned on the ground of defined expectations and wishes, and present the maximal goals of activities tackled by DM. On tile other hand we herein create less demanding goals depending on the really available potentials and the real current situations.
7. SOME CONCLUSIONS The quality of business operation directly depends upon tile adequacy of the management core process, i.e. BDM. Its quality level can be considerably improved by: application of tile ST. tile systelnic standardization of DM, general organization system of BDM, and use of HM model of decision - making. All of them need to be covered by MES. Systemic standardization of DM in MES provides for the necessary complexity and holism of support to BS. Their structure, operation and planning are dealt with as an entity of a basic, management. and the infonnation (soft and fuzzy!) partial systems.
Results of the DM process taking place in the SSA model presents a set of decisions which are optimal from the viewpoint of the DM conditions. The final choice of the decision can, of course, also depend on any other DM factor. The final decision can be, on the basis of their impact, either accepted, rejected, or found inadequate.
The standardization of management improves the BDM systems. Its perfonnance provides for creation of a unified mode of DM, and increases comparability of management in various situations and BS. The standardization process involves activities for fonnation of a unified methodology, of a consistent process model, and of a BS of the standardized DM processes.
6. HOLISM OF CONTENTS OF MES SUPPORTING DM A HM ofDM is based on a holistic systems approach, on the target~riented DM, as well as on the discussion of most important DM aspects and factors.
Which are the necessary methods and techniques to be used in these DM processes, can be roughly detennined from the BDM aspect. A unified HM of the DM process can be applied in solving of different DM issues, and built into MES.
A full holism is impossible. Therefore, both MES and the DM should be studied from the dialectical system made of aspects of economics (Gelatt, 1993), ethics (Ceno. 1994) and the company's image (Evans and 91
Application of the SSA enables a holistic consideration of all the significant decision making factors. Thus we can see that it is synergically influenced by the fonnaI (hard) factors (they are connected with economics of BS) and by the infonnaI (soft) ones. In MES, a HM includes the examination of the DM from the viewpoints of economics, ethics and BS image.
8. REFERENCES
Certo. S. (1994). Modem Management: Quality, Ethics. and The Global Environment, Chaptel 5. Allyn and Bacon, Boston. Dawson. P. (1996). Organizational Change: A Processual Approach, pp. 304 - 314. Paul Chaplnan Publishing, London. Evans, 1.. Lindsay, W. (1996). The Management and Control of Quality, Chapter 1. West Publishing Company, Minneapolis. Gelatt H. (1993). Creative Decision-Making, pp. 124 - 152. Kogan Page, London. Gyck. R.. Mulej, M. (1997). _)'elf-transformation of the Forgotten Four-fifths. Kendall Hunt Publ. Dubuque, Iowa. Hanison. F. (1995). The Managerial Decision Making Process, pp. 24 - 67. Haughton Miffiin. Boston. Kajzer, S.. Potocan, V. (1996). Synergy: A Wcry to Successful Linkage ofBusiness Systems, pp. 212 - 220. L. Montanheiro (ED.), Public and Private Sector Partnership: Working for Change, Pavic Publications, Sheffield. Potocan V. (1993). Formation of the Organizational Model ofthe System ofStandard DecisionJvJaking Processes ofProduction Management, pp. 40 - 72 (MA Thesis). EPF, Maribor. Schroeder. G. (1996). Operations Management: Decision Making in the Operations Function. Chaptel 3. McGraw-Hill Book, New York.
92
MANAGERIAL EXPERT SYSTEM AS AN INFORMATION SUPPORT TO DECISION - MAKING
Vojko Potocan
University ofMaribor, School of Business and Economics Maribor, Razlagova 20, SI - 2000 Maribor, SLOVENIA , e-mail: [email protected]
Abstract: In contemporary conditions, it is a suitable management and its basic field of work which is business decision-making (BDM), that can most influence business. Among other influences, quality of decision-making (DM) depends a lot of its information support, which is provided by management expert system (MES). Preconditions for information of such a MES to be optimal ban be better met if one applies systems theory (S1), a systemic standardization ofDM, a general organizational model of business decisions, and a holistic model (HM) ofDM. Copyright© 1998lFAC Key words: management; decision making; management systems; information systems; expert systems;
1. INfRODUCTION
2. DECISION-MAKING AND ITS INFORMATION BASIS
Cooperation of hard and soft systems specialists caIL among other aspects, be viewed from two viewpoints: restricted funds / resources, and DM when they work together in organizations as business system (BS). When funds are restricted and conditions of business operation (BO) are poorly defined, the business results can primarily be improved by an adequate management. The management of the business process (BP) includes the definition of objectives, goals, and the creation of operations which, in connection with the selected model of evaluation, have a direct impact on the target areas.
It is the DM which causes the BS to change its objectives, goals, processes, and structure, as well as to use the monetary, material and human resources. Various BO are inevitably different but also mutually interdependent, within the framework of the management processes (Schroeder, 1996). The DM is based on information, which shows characteristics of the business situation under examination and provides additional necessary knowledge. The entire information support to DM is provided for by a synergic operation of various kinds, types and forms of information systems (IS) (IS concerning the daily operation assure a general information support; prnpose-built IS provide for targeted support to a part of various single levels of management). Information systems (MIS, MSS, DSS, ES, MES) provide their adequately structured and formed general and specific information to managers, according to their information requirements (Dawson, 1996).
Various solutions are available to improve the quality of management. An important improvement is provided by a suitable implementation of its fundamental activity, i.e. the DM process (Certo, 1994). Its quality depends on its information provision.
89
features and characteristics of processes. By formalizing these characteristics, a more explicit process and standard model of the DM process are organized to support the DM.
EveI)' type and level of management needs various infonnation for its high-quality work. Generally created infonnation makes the basis for the managers and employees' DM processes concerning their operation-level lnanagement (fonnation of work instructions. execution, elaboration of reports on work). More demanding DM of experts and managers carrying out the activities at the tactical level is based upon the purpose-fonnatted infonnation (Gelatt. 1993).
In addition, it is possible and necessary to create a system of the standard DM procedures covering efficient BDM. Within individual types of BO and fonns of organization, management can work out a pennanent system of DM processes which is built in the organizational model. The DM processes are standardized to the selected degree together with definition of their constant composition.
Infonnation support to the solution of DM problems which demand more and deeper knowledge is assured by e:\."pert systems (ES). Managers use them to simulate DM to solve special problems on the basis of the entered data and certain DM rules.
Starting points discussed so far can be used by management to fonn a new - HM of DM which presents also the basis for fonnation of an adequate cybernetic model of management. Its fundamental characteristics are: application of a generally valid process model, consideration of a majority of important factors, and aspects of examination.
The ES can be used for the fonnation of infonnation on the fundamental characteristics of the situation or the state of the business system, and its weakness (based on data on deviations) . ES, on the other hand, depends on the prototype systems development, on fonnation of different processes within the implementation of the goal function, on the comparison of targeted and actual features of the BS, and on the management of correction actions (Dawson. 1996).
4. A HOLISTIC MODEL OF MES In order to produce a MES, a unifYing model for a logical analysis for most, if not all, BS was proposed by Potocan (Potocan, 1993; Kajzer and Potocan, 1997). It can be concluded that MES is supposed to support the DM process which is an entity made of partial processes of fonnation, evaluation, selection of a decision, and the implementation of this decision.
3. MANAGERIAL EXPERT SYSTEM AS A SUPPORT TO DECISION-MAKING The quality of MES and its support to DM can be improved by application of the ST and by systemic standardization of both DM and general organization system of BDM (Potocan, 1993; Kajzer and Potocan, 1997).
The result of the first phase of making MES (cognition and description of the decision situation or problem) is the definition of the space of possible solutions. The analysis of their adequacy in tenns of actual conditions and restrictions enables fonnation or development of workable decisions, which are further on investigated and evaluated. This enables the selection of decisions meeting minimal criteria. at least. The process is finished by selection of the most favorable decision which is therefore prepared for implementation, and actually carried out.
AppliCt'1tion of the ST provides for the necessary complexity and holism of the BDM. This means that the BS is controlled from a system of all and only essential aspects including the process concept of business systems. Thus, management examines composition, operation, conceptualization and design of BS as an entity of the basic, managerial and infonnational (soft and fuzzy!) partial systems.
The processes of making MES may take place subsequently, intermingle, overlap, and be open to their environment. Partial processes present interdependent aspects of the same MES.
Standardization is founded on the cognition that an entity of methods of the standard management DM can be elaborated for BDM. The method ofDM in the individual BS should, however, meet specific requirements. From the standpoint of BDM it is possible to roughly detennine the entity - the system of necessary metllods and techniques used in making these decisions and systems ofDM processes.
In MES. it is crucial that a number of different factors have their impact on the business decision making. A rational DM is holistic. i.e. based on consideration of the majority of those factors which significantly influence its implementation and results. The required analysis of the fundamental characteristics of DM. and the definition of its factors are made possible by the application of the soft systems approach (SSA) to makingMES .
In order to solve problems of different DM. management can apply a unified model of the DM process. Different kinds, types, and modes of DM have similar starting points: a process, a composition, 90
The SSA to the DM problem assures a holistic research of all the factors which detennine the basic characteristics, the process and the manner of DM. To meet the needs of examination of the BDM, some authors define all DM factors as formal and informal.
Lindsay, 1996; Dyck Mulej, 1997). and their relations (Kajzer and Potocan, 1997). In the BS, suitability of DM depends prilnarily on economic perfonnance presented by criteria of efficiency and effectiveness. They cover both internal and market measures of BS quality. The financial effectiveness is an aggregate criterion for the economic evaluation of tile majority of decisions made in business. But it is too narrow to provide really holistic infonnation.
Basically the fonnal factors have a direct connection with econOlnics ofBS and support the achievement of the economic goals (such as like business policy, strategy. technology, monetary flow, business results). Infonnal factors are not directly connected witll econOlnics of BS but tlley, however, have impact on its operation (directly, indirectly). They are psychological. sociological, socio-psychological and political factors (e)". pectations, wishes, goals, values, cultural factors, personal factors . ... ). The infonnal factors. above all. influence relations and links of the decision making system (internal, external). These factors can be indicated as soft elements of both DM andMES.
Another important aspect of decision making is ethics. Market relations stress interdependence of business partners. A long-tenn reliability makes business cheaper. An ethical finn is a good business partner. The finn's image can be based on botll criteria discussed above. and be god or bad, but it can be bluffing. That's why it is worth a specific consideration in tenns of credibility, creditwortlmess and trustworthiness.
5. SSA AS A PRECONDITION FOR HOLISM OF MES
MES need to be a dialectical system of econOlnic hard and soft data including indirect indicators, to cover these finding on contents ofMES.
The SSA is based on Soft Systems Methodology (Harrison, 1995) and makes the basis for SSA model of DM. The focus of the SSA model is a 'holistic analysis of the activity' under investigation included the real word and abstract thinking, which enables fonnation of a set of possible solutions. SSA analysis involves tile comparison between the desired and possible results of decisions. The desired results are fonned on the ground of defined expectations and wishes, and present the maximal goals of activities tackled by DM. On tile other hand we herein create less demanding goals depending on the really available potentials and the real current situations.
7. SOME CONCLUSIONS The quality of business operation directly depends upon tile adequacy of the management core process, i.e. BDM. Its quality level can be considerably improved by: application of tile ST. tile systelnic standardization of DM, general organization system of BDM, and use of HM model of decision - making. All of them need to be covered by MES. Systemic standardization of DM in MES provides for the necessary complexity and holism of support to BS. Their structure, operation and planning are dealt with as an entity of a basic, management. and the infonnation (soft and fuzzy!) partial systems.
Results of the DM process taking place in the SSA model presents a set of decisions which are optimal from the viewpoint of the DM conditions. The final choice of the decision can, of course, also depend on any other DM factor. The final decision can be, on the basis of their impact, either accepted, rejected, or found inadequate.
The standardization of management improves the BDM systems. Its perfonnance provides for creation of a unified mode of DM, and increases comparability of management in various situations and BS. The standardization process involves activities for fonnation of a unified methodology, of a consistent process model, and of a BS of the standardized DM processes.
6. HOLISM OF CONTENTS OF MES SUPPORTING DM A HM ofDM is based on a holistic systems approach, on the target~riented DM, as well as on the discussion of most important DM aspects and factors.
Which are the necessary methods and techniques to be used in these DM processes, can be roughly detennined from the BDM aspect. A unified HM of the DM process can be applied in solving of different DM issues, and built into MES.
A full holism is impossible. Therefore, both MES and the DM should be studied from the dialectical system made of aspects of economics (Gelatt, 1993), ethics (Ceno. 1994) and the company's image (Evans and 91
Application of the SSA enables a holistic consideration of all the significant decision making factors. Thus we can see that it is synergically influenced by the fonnaI (hard) factors (they are connected with economics of BS) and by the infonnaI (soft) ones. In MES, a HM includes the examination of the DM from the viewpoints of economics, ethics and BS image.
8. REFERENCES
Certo. S. (1994). Modem Management: Quality, Ethics. and The Global Environment, Chaptel 5. Allyn and Bacon, Boston. Dawson. P. (1996). Organizational Change: A Processual Approach, pp. 304 - 314. Paul Chaplnan Publishing, London. Evans, 1.. Lindsay, W. (1996). The Management and Control of Quality, Chapter 1. West Publishing Company, Minneapolis. Gelatt H. (1993). Creative Decision-Making, pp. 124 - 152. Kogan Page, London. Gyck. R.. Mulej, M. (1997). _)'elf-transformation of the Forgotten Four-fifths. Kendall Hunt Publ. Dubuque, Iowa. Hanison. F. (1995). The Managerial Decision Making Process, pp. 24 - 67. Haughton Miffiin. Boston. Kajzer, S.. Potocan, V. (1996). Synergy: A Wcry to Successful Linkage ofBusiness Systems, pp. 212 - 220. L. Montanheiro (ED.), Public and Private Sector Partnership: Working for Change, Pavic Publications, Sheffield. Potocan V. (1993). Formation of the Organizational Model ofthe System ofStandard DecisionJvJaking Processes ofProduction Management, pp. 40 - 72 (MA Thesis). EPF, Maribor. Schroeder. G. (1996). Operations Management: Decision Making in the Operations Function. Chaptel 3. McGraw-Hill Book, New York.
92