Useful information and recommendations for constructing a managerial decision

Lecture

The procedure for constructing a managerial decision on the basis of its life cycle, taking into account the specifics of the management process. As already noted above, the construction of an MD that realizes the DM's action on the system under study takes place within the 1st and 2nd stages of forming a decision on the basis of the scheme of its life cycle. The result of the 1st stage is the formulation of the goal of the MD, coinciding with the DM's goal with respect to the managed system, its concretization in the form of particular criteria and the sets of characteristics, corresponding to these criteria, that describe the system under study.

The content of the 2nd stage of the MD life-cycle scheme is the formation of alternative MDs corresponding to the particular criteria selected at the 1st stage, on the basis of which the final variant of the MD is selected. The formed alternative MD corresponds to the realization of the DM's goal with respect to the system under study to the extent that the particular criterion corresponding to it matches the overall goal of the MD, i.e., matches the DM's goal with respect to the system under study.

Studying the influence of the management process as the DM's action on the managed system (the control object) through a managerial decision revealed factors whose effect must be taken into account when forming an MD on the basis of the scheme of its life cycle. Fig. 3.10 presents the scheme for using the procedure of forming an individual MD, which is realized at the 1st and 2nd stages of the MD life-cycle scheme and takes into account the features of the management process, including reflecting the influence of the identified factors on the control parameters P2—P8.

In order to actually make use of this scheme, it is necessary, for the managed system under study (the control object) and the DM's goal with respect to this system, to analyze the effect of factors F-1—F-9 and to use the result obtained when forming parameters P2—P8 describing the MD (see Fig. 3.10).

In addition, when determining the necessary initial data (parameter P4), it is necessary to use «Information available on the subject area under study» (factor F-10), and when determining the conditions for applying the decision-making methods corresponding to parameters P2—P4, the influence of factor F-11 — «Decision-making methods and the conditions for their application» — must be taken into account.

Pay attention!

1. Before forming a specific MD, it is necessary to analyze the influence of factors F-1—F-11 on it.
2. The generalized procedure for forming a managerial decision on the basis of the MD life-cycle scheme, taking into account factors reflecting the features of the management process, is presented in the form of a diagram (Fig. 3.10).

Since the decision-making method is connected with the managerial decision, it is quite natural to link the goal and content of the MD with the method of its adoption. The diagram (Fig. 3.10) shows that the goal and content of the MD (parameters P1—P3) are linked with the decision-making method (parameter P6) through the necessary initial information (parameter P4) and the required conditions for applying the DMM (parameter P5):

Useful information and recommendations for constructing a managerial decision

This means that the values of parameters P4 and P5 are the bridge connecting the goal and content of the MD, on the one hand, with the method of its adoption, i.e., with parameter P6, on the other. It is for this very reason that it is also advisable to analyze the influence of factors F-1—F-11 on parameters P4 and P5. The results of the analysis carried out are presented in Table 3.1. They can be included in a decision support system, since they clarify the influence of the factors on the information concerning the necessary initial data (P4) and concerning the required conditions for applying the DMM, which makes the formation of the MD better substantiated.

When analyzing the influence of factors F-1—F-9 on the formation of a managerial decision, it is also advisable to make use of the useful information and the corresponding recommendations for taking the influence of these factors into account (Tables 3.2—3.8). Since the content of these tables concretizes the process of forming the MD, it can be used when forming a decision support system.

The information block of the DSS on the methodology for making a managerial decision. As already noted above, the purpose of creating any decision support system is for that system to provide the decision maker with such information as would help him to make the necessary managerial decisions in a well-founded and sufficiently rapid manner.

Given the idea of constructing an MD based on combining two approaches to its formation — on the basis of the MD life-cycle scheme and on the basis of taking into account the features of the management process itself — the DSS must contain the corresponding information — the block «Information on the methodology for making a managerial decision».

Table 3.1

Influence of factors F-1—F-11 on parameters P4 and P5 of the formation of a managerial decision

Factor	Content of the factor	Values of the factor	Influence on parameter P4 (necessary initial information)	Influence on parameter P5 (required conditions for applying the DMM)
F-1	Type of the managed system under study	Socio-economic system	Non-socio-economic system	The initial data must include information on the presence or absence, in the system under study, of a person (people) whose behavior may affect the functioning of the system	The question has not been studied	If a person (people) is present in the system under study whose behavior may affect the functioning of the system, this fact must be taken into account when choosing the decision-making method	The question has not been studied
F-2	The subject area (SA) to which the managed system under study belongs	SA-1, SA-2, ..., SA-1	The initial data must be related to the corresponding SA	Factor F-2 has an insignificant influence on the choice of the decision-making method
F-3	Complexity of the managed system under study (the control object)	The system under study (the control object) is complex, i.e., the DM's goal with respect to it and the overall goal of the MD are complex. A complex MD presupposes, for its realization, the formation and adoption of other MDs preceding it	The system under study (the control object) is not complex, i.e., the overall MD corresponding to the DM's goal does not require detailing	Initial data must take into account the complexity of the decision, either through aggregating information across all the constituent managerial decisions, or through specifically accounting for information on each of the decisions involved in forming the complex decision	Initial data is related to a simple, uncomplicated managerial decision being formed	The complexity of the system under study (the management object) must be taken into account either in the conditions for applying the decision-making method, or in its content	If the decision is not complex, it (the complexity of the system under study) is not taken into account in the decision-making method

Factor	Content of the factor	Values of the factor	Effect on parameter P4 (required initial information)	Effect on parameter P5 (required conditions for applying the decision-making method)
F-4	Variant of the time-based change of the characteristics describing the system	Discrete	Continuous	Initial information is discrete	Initial information is continuous	The decision-making methods are discrete	The decision-making methods are continuous
F-5	Time horizon of formulating the DM's goal	Can be any	Initial information must cover the entire time horizon of formulating the DM's goal (the time horizon for planning the decision)	The decision-making method must cover the entire time horizon of formulating the DM's goal (the time horizon for planning the decision)
f-6	Relationship between the DM's interests regarding the system under study (the management object) and the goals of creating and/or operating the system under study	Interests coincide	Interests do not coincide	Initial information may be related to the implementation of the DM's goal and the goal of creating and/or operating the system under study	Initial information corresponds only to the implementation of the DM's goal	Factor F-6 does not affect the choice of decision-making method
F-7	Presence of subjects having their own interests with respect to the managed system under study (the management object)	There are subjects having their own interests with respect to the system under study	There are no subjects having their own interests with respect to the system under study	Initial information on the interests of other subjects with respect to the system under study must be obtained and analyzed for the relationship between the direction of other subjects' interests and the interests of the DM	The absence of subjects having their own interests with respect to the system under study has no effect on the initial data	Factor F-7 does not affect the choice of decision-making method

Continuation of Table 3.1

Factor	Content of the factor	Values of the factor	Effect on parameter P4 (required initial information)	Effect on parameter P5 (required conditions for applying the decision-making method)
F-8	Variant of taking into account the interests of other subjects with respect to the managed system under study (the management object)	Full reconciliation of interests	Incomplete reconciliation of interests	Initial information must include data on all the interests of other subjects with respect to the system under study (the management object)	Initial information must cover those interests of other subjects with respect to the system under study (the management object) that the DM will take into account when reconciling interests	Decision-making methods must ensure that all the interests of other subjects with respect to the system under study (the management object) are taken into account	Decision-making methods must ensure that only those interests of other subjects with respect to the system under study (the management object) that the DM will take into account when reconciling them are considered
F-9	Variant of the influence on the system under study (the management object), i.e., a variant of representing the management object as a set of characteristics describing the managed system	Change of the state of the system	Transformation of the system	Initial information covers the set of characteristics that require only a change of their values to implement the DM's goal	Initial information covers not only the already known characteristics describing the system, but also possible new ones	Decision-making methods presuppose only changing the values of the known characteristics to implement the DM's goal	Decision-making methods presuppose refining the set of characteristics describing the system, and, if necessary, changing their values
F-10	Information available on the subject area under study	It can be classified by the values of various features (completeness, accuracy, reliability, etc.)	Initial information on the managerial decision being formed can be refined taking into account its classification, determined by the influence of factor F-10	The conditions and content of the decision-making method are determined by the content of the refined initial information

Factor

Content

of the factor

Values of the factor

Effect on parameter P4 (required initial information)

Effect on parameter P5 (required conditions for applying the decision-making method)

f-11

Decision-making methods and the conditions for their application

They can be classified according to a wide variety of features — the initial information used, the content of the decision-making method, the results of applying the decision-making method, etc.

Initial information is linked to the decision-making methods used and the conditions for their application

If the conditions and content of the DMM, determined by the influence of factors F-1—F-10, coincide with the conditions and content of the methods of some group of DMMs, the DM selects a DMM from this group. Otherwise, the DM modifies a known DMM, or creates a new one, or moves to steps 2—4 of the first stage of the MD life-cycle model (see Fig. 3.10) in order to re-form the MD for which one of the already known DMMs belonging to one of the DMM groups can be used

Factors (F) that determine the specifics of the ICS and affect other management parameters

Table 3.2

Factor	Content of the factor
F-1	Type of the controlled system under study
F-2	The subject area to which the controlled system under study belongs
F-3	Complexity of the controlled system under study
F-4	The way the characteristics describing the system change over time

Useful information (UI) related to the specifics of the controlled system under study

Table 3.3

Useful information	Content of the useful information
UI-1	If the system under study is socio-economic, it must be kept in mind that its element can be an individual (a group of people) whose behavior can affect the functioning of the controlled system
UI-2	The specifics of the subject area to which the controlled system under study belongs helps to specify the list of characteristics describing the ICS. It may have its own particularities that influence the formation of the DM's goal, as well as the formation of the goal of the MD and its content
UI-3	If the ICS is complex, the control object specifying it may also be complex, which affects the formulation of the DM's goal, as well as the formation of the goal of the MD and its content
UI-4	The way the characteristics describing the system change over time affects the set of characteristics describing the ICS and corresponding to the various partial criteria that specify the goal of the MD when constructing alternative MDs. It also determines the demand for applying the MD construction procedure when managing the system under study, and also distinguishes groups (conditions) of methods for making managerial decisions — discrete or continuous ones. If the ICS is created on the basis of a one-off project, or as a functioning system it assumes constancy of the values of the characteristics describing it, the need to apply the MD construction procedure is a one-off occurrence and arises only when the values of the characteristics become unsatisfactory. If, however, the system under study implements a certain process unfolding over time, i.e., the values of the characteristics describing it change over time, the need to monitor the state of the controlled system exists constantly, and the demand for constructing an MD, i.e., the very use of the MD construction procedure aimed at achieving the DM's goal, is determined by the course of the process implemented by the ICS. The demand for the MD decision-making procedure is also determined by the number of alternative MDs that are constructed for choosing the final variant of the MD

Recommendations (R) for taking into account factors related to the specifics of the controlled system under study

Table 3.4

Recommendations	Content of the recommendations
R-1	It is necessary to analyze the situation related to the system under study. If the system is socio-economic, it is necessary to determine whether it contains people whose behavior may affect the functioning of the controlled system. If there are such people, this must be taken into account when forming the DM's goal and, as a consequence, when forming the MD
R-2	It is necessary to find out whether there are any particularities of the subject area to which the controlled system under study belongs that could affect the formation of the DM's goal, as well as the goals and content of the corresponding MD. If there are, they must be taken into account when forming the DM's goal and, as a consequence, when forming the goal and content of the MD
R-3	It is necessary to analyze the complexity of the controlled system under study. If the controlled system under study is complex, this may affect the complexity of the control object specifying the system, as well as the formulation of the goal and content of the managerial decision itself. To clarify the control object, the formulation of the DM's goals, and the formulation of the MD's goal and the determination of its complex content, relevant specialists and experts may be brought in
R-4	It must be taken into account that the time factor affects the set of characteristics describing the ICS and corresponding to the various partial criteria that specify the goal of the MD when constructing alternative MDs. It is also necessary to analyze the influence of the time factor on the functioning of the system under study. If the MD is related to the implementation of a certain project for creating a new controlled system, or if the functioning of the controlled system under study assumes constancy of the values of the characteristics describing it, the MD can be made on the basis of using discrete decision-making methods. In this case, the need to construct a new MD arises only when the values of certain characteristics describing the system become unsatisfactory, i.e., cease to meet the DM's goal with respect to this system. If the functioning of the controlled system under study assumes that the values of the characteristics describing it change over time, i.e., the system implements a certain process unfolding over time, the MD can be made on the basis of using continuous decision-making methods. In this case, the need to use the procedure for constructing an MD aimed at achieving the DM's goal is determined by the course of the process itself. The procedure will be applied whenever the values of the characteristics describing the system become unsatisfactory, i.e., cease to meet the DM's goal with respect to that system. Such a studied management system requires constant monitoring of the process that this system implements. The demand for applying the procedure for constructing an individual MD is also determined by the number of alternative MDs formed that are used to select the final variant of the MD

Factors (F) determining the specifics of the DM's goal and affecting other management parameters

Table 3.5

Additional factors, besides F-1, F-2, F-3	Content of the factor
F-5	Time horizon for formulating the DM's goal
F-6	The relationship between the DM's interests regarding the studied management system (the object of management) and the goals of creating and (or) operating the studied management system
F-7	The presence of subjects who have their own interests with respect to the managed system under study (the object of management)
F-8	The way in which the interests of other subjects with respect to the managed system under study (the object of management) are taken into account
F-9	The way in which action is taken on the managed system under study (on the object of management), i.e., the way in which the object of management is represented as a set of characteristics describing the managed system

Additional useful information (UI) on the factors determining the specifics of the DM's goal and affecting other management parameters

Table 3.6

Useful information	Content of the useful information
UI-5	The chosen time horizon for formulating the DM's goal determines the planning horizon of the managerial decision corresponding to that goal — the period of operation of the system under study taken into account when the MD is developed, as well as the planning horizon used when forming alternative managerial decisions, from among which the DM selects the final, resulting variant of the MD
UI-6	The relationship between the DM's interests regarding the studied management system (the object of management) and the goals of creating and (or) operating the studied management system can vary. Since the goal of the MD always coincides with the DM's goal with respect to the managed system under study, the content of the MD and the set of characteristics covered by the managerial decision are determined by the DM's goal. The relationship between the DM's goal and the goal of the studied management system significantly affects the evaluation of the MD's effectiveness. If the goals of the DM and of the studied management system coincide, the effectiveness of the MD reflects the effectiveness of achieving both goals
UI-7	Outside or inside the system there may be subjects who have their own interests with respect to the managed system under study. This fact must be taken into account when formulating the DM's goal with respect to the studied management system, as well as when forming the goal and content of the corresponding MD
UI-8	The interests of other subjects with respect to the managed system under study may be taken into account in different ways: not taken into account at all, taken into account partially, or taken into account fully. The interests of other subjects that are taken into account must be reflected in the formulation of the DM's goal with respect to the managed system under study, as well as — in the goal and content of the corresponding MD. In this case, the formulation of the DM's goal and the degree to which the interests of other subjects with respect to the managed system under study are taken into account must ensure the realization of the DM's original goal with respect to the system, formulated without taking into account the interests of other subjects. The manner in which the decision-

Useful

information

Content of the useful information

making person takes into account the interests of other subjects with respect to the studied management system reflects the degree of coordination of the DM's interests with the interests of other subjects and with his own interests. The DM ensures full coordination of the interests of other subjects with respect to the system under study if all these interests are taken into account by him when forming the DM's goal, as well as when forming the goal and content of the corresponding MD. The DM ensures incomplete coordination of the interests of other subjects with respect to the managed system under study if, in the new formulation of his goal and the goal of the MD, as well as in the content of the MD, the interests of other subjects are taken into account only partially

UI-9

Depending on the DM's goal with respect to the studied management system, different ways of acting on the studied management system are possible and, as a consequence, — different ways of representing the object of management: as a known set of characteristics requiring change to realize the DM's goal, and as a refined set of characteristics describing the system, which in certain cases require a change in their values to achieve the DM's goal. The influence of the way of acting on the studied management system must be taken into account when forming the set of characteristics describing the object of management for each of the alternative managerial decisions

Table 3.7

Additional recommendations (R) on the factors determining the specifics of the DM's goal and affecting other management parameters

Recommendations	Content of the recommendations
R-5	When formulating the DM's goal with respect to the managed system under study, the time horizon must be taken into account — the period of operation of the studied management system within which this goal is formulated. This same period must be used as the planning horizon for the alternative and final resulting MD, i.e., as the period of operation of the system under study taken into account when determining the content of the corresponding MD
R-6	It is necessary to clarify the relationship between the DM's goal with respect to the system under study and the goal of creating and (or) operating the system under study. If they coincide, the assessment of the MD's efficiency, calculated to reflect the effectiveness of the decision with respect to achieving the DM's goal, can be regarded as an assessment of the MD's efficiency with respect to achieving the goals of the system under study itself. Otherwise, the MD's efficiency must be calculated separately — with respect to achieving the DM's goal regarding the system under study and with respect to achieving the goal of creating and operating the system itself
R-7	It is necessary to clarify whether there are subjects (inside the system under study or outside it) that have their own interests with respect to the system under study. If there are such subjects, the DM must study the interests of these subjects and determine to what extent the interests of these subjects coincide with the DM's interests with respect to the managed system under study, are unidirectional with them, or conflict with them
R-8	The DM must decide on the degree of reconciliation of all identified interests of other subjects connected with the managed system under study. The DM must decide on the degree of consideration, in the new formu-

Recommendations	Content of the recommendations
	lation of the DM's goal regarding the system under study, of the interests of other subjects, in such a way that the new goal of the DM, as well as the goal and content of the corresponding MD, ensure for the DM the achievement of his goal with respect to the managed system under study, formulated originally without taking into account the reconciliation of interests
R-9	When constructing alternative managerial decisions, it is necessary to determine which variant of impact on the system under study — on the object of management (changing the state of the system or transforming it) — the DM will undertake with respect to the corresponding partial criterion implementing the overall goal of the MD. The DM must decide how the desired value of the partial criterion will be achieved — on the basis of changing the values of already known characteristics describing the object of management, or on the basis of refining the set of characteristics and, if necessary, changing their values

Table 3.8

Factors (F) determined by the specific nature of the procedure for forming the managerial decision itself

Factors	Content of the factor	Note
F-10	Information available on the subject area under study	In view of the particular independent significance of factors F-10 and F-11, questions of the content of useful information and recommendations for its use are considered separately
F-11	Decision-making methods and the conditions for their application

The structure of this block may be as follows.

1. Presentation of the approach to forming a separate MD based on the scheme of its life cycle. This should include a description of each of the stages of the scheme, including a list of actions for each of them; a list and content of the normative and internal documents defining the regulations for these actions; a presentation and description of the procedure for forming a separate MD based on the scheme of its life cycle. Note that this description of the procedure for forming a separate MD based on the scheme of its life cycle is necessary. This is explained by the fact that the DM may use only this approach to forming the MD. Such a decision by the DM is justified in the case where the managed system under study, with respect to which the DM must form the MD, is fairly simple and does not require in-depth analysis and the application of complex decision-making methods. The decision on choosing the method of forming the MD — based only on the scheme of its life cycle, or based on combining this approach with the managerial (systemic) one, in which factors due to the specific nature of the management process itself are additionally studied and taken into account when constructing the MD — remains with the DM. However, it can be said right away that the more complex the managed system under study, the more justified is the choice of the second variant of forming the MD — based on combining the two named approaches.

2. Presentation of the combined approach to forming a separate MD — based on the scheme of its life cycle, taking into account the features of the management process. As an independent approach to forming the MD, taking into account only the features of the management process makes sense only when it concerns just the first two stages of implementing the MD life-cycle scheme — Stage 1. Defining the goal of the MD and specifying the criteria implementing it; Stage 2. Developing the MD. Presenting the combined approach to forming the MD involves including the following data in this information block:
- • presentation and description of the combined procedure for forming a separate MD (see Fig. 3.10);
- • presentation of the list of factors due to the features of the management process, including:
  - — the list of factors determining the specific nature of the system under study and affecting other management parameters (see Table 3.2),
  - — the list of factors determining the specific nature of the DM's goal and affecting other management parameters (see Table 3.5),
  - — the list of factors determined by the specific nature of the managerial decision and affecting the management parameters (see Table 3.8);
- • presentation of useful information on these factors (see Tables 3.3, 3.6, 3.8);
- • presentation of useful information on the influence of factors F-1—F-11 on the content of information on the necessary source data and on information on the required conditions for applying decision-making methods (see Table 3.1);
- • presentation of recommendations on taking into account the influence of the factors when forming a specific managerial decision (see Tables 3.4, 3.7, 3.8).

As already noted above, questions related to factors F-10 and F-11, including questions of the classification of information and decision-making methods, are, in view of their complexity and great significance, considered separately.
See the corresponding sections of this textbook.

Considering the managerial decision as an impact of the controlling system on the system under study makes it possible to identify the factors due to the specific nature of the management process and affecting the formation of the managerial decision.

The analysis carried out of the features of the management process revealed those of them that are related to the system under study, to the DM's goal, and to the process of forming the decision itself.

Combining, within the general procedure for forming an individual managerial decision, two approaches to forming it — based on the scheme of its life cycle and taking management into account — makes it possible to combine the advantages of both approaches. Thus, using the decision life-cycle scheme makes it possible to distinguish relatively independent but interconnected stages of constructing the decision, beginning with the formulation of its goal (stage 1) and ending with monitoring the implementation of the decision (stage 5). Taking into account the factors that influence the management parameters describing the process of forming the decision, in turn, makes it possible to specify and more precisely describe the process of forming the decision, implemented within the first and second stages of the decision life-cycle scheme.

The identified factors influencing the formation of the decision, useful information on them, and recommendations for their use can be included in the content of a decision support system, which will enable its user to make any managerial decisions in a more well-founded way.