Mangement Decision Levels

How do you break businesses into smaller pieces to analyze them? To understand management, reengineering, and information systems, it helps to divide the organization into three decision levels: strategy, tactics, and operations. Each level has unique characteristics, which use different types of support from information technology. These levels were explained by Robert Anthony in 1965. In 1971, Gorry and Scott-Morton added a detailed explanation of how information systems at that time could support the various levels of management. However, the terms and characteristics are largely taken from military terms. Throughout history, in most nations the military has been the largest organization in terms of the number of “employees.”

The figure in the slide is an updated picture of the typical pyramid shape of most organizations involving operations and tactical and strategic decisions. As is typical with most management models there are many

gray areas and the lines are not absolute.

The power of the model is that it makes it easier to solve business problems. With any problem, your goal is to identify the primary management level. Once you know the level, it is easier to focus on the types of solutions that will be relevant. For example, if a company is having basic problems with its day-to-day accounting, you would focus on improving the data collection—and worry later about strategic tools and problems with competition.

Operations

The operations level consists of day-to-day operations and decisions. In your first job, you will typically concentrate on the problems that arise at this level. For example, in a manufacturing firm, machine settings, worker schedules, and maintenance requirements would represent management tasks and decisions at the operational level. Information technology at this level is used to collect data and perform

well-defined computations. Most of the tasks and decisions are well structured, in the sense that they can be defined by a set of rules or procedures. For example, a clerk at Wal-Mart follows the procedures in the guidebook to deal with typical operations. Common problems are anticipated, with actions spelled out in the guidebook. Computer security is an increasingly important problem—for both individuals and companies.

Managers in other disciplines—such as accounting, marketing, or finance—also face operational decisions. Personal productivity tools, like spreadsheets, word processors, and database management systems help managers collect and evaluate data they receive on a daily basis.

An important task at the operations level is to collect data on transactions and operations; hence transaction processing systems are a crucial component of the organization’s information system. The data collected form the foundation for all characteristic of transaction processing systems is the ability to provide data for multiple users at the same time. A special class of transaction processing software

designed for factory operations is called process control software.

Database management systems are increasingly used to control data and build systems to share data.

Increasingly managers work in teams—either with workers in the same department or across departments and sometimes companies. Sophisticated software tools are being developed to help integrate data in these collaborative arrangements. They deal with structured problems over relatively short periods of time.