Role of Information in Decision-making

Information plays a vital role in decision-making. Even to take very simple decisions, we need information. To understand the role played by information in decision-making, we have to understand how decisions are taken. Decision-making is basically a process that includes the following stages:

Information is thus, very important to take decisions.

Imagine a simple decision like the one a driver (say) makes when he puts on the brakes to stop a speeding vehicle when he sees a child crossing the road (in middle of the road). The driver decides on braking based on a lot of information processing that happens in his brain. At every stage of the decision-making he uses information that he captures visually. All decisions are like this.

First we get information about a problem, format it into a structure and then factor in the information about the context in which the problem has occurred. Like in the above case instead of the child being at the middle of the road and crossing it, the driver would have seen the child about to cross over with a few steps only he would probably not have braked to stop but would have slowed down, as he would have calculated that by the time the vehicle reaches the crossing stage, the child would already have passed. So if the problem was structured as ‘how to not hit the child crossing the road?’, and if the child was at the middle of the road, the driver would have braked but had the child been at (say) at ninety per cent completion level of crossing the road, the driver would have only slowed down and not braked to stop. Therefore, we see that the context has a major role in the decision-making and information is required both about the problem and about the context in which the problem occurred. The next stage for the decision maker would be to generate alternatives. In the driver’s case such possible alternatives would be

1. to stop by braking
2. to slow down
3. to take a sharp turn towards left or right to avoid the child
4. press the horn so that the child crosses the road fast
5. To drive the vehicle on to the footpath and out of the road to avoid collision, etc.

So the decision-maker generates these possible solutions to the problem at hand based on information about such possible solutions. Each of the alternatives represents a possible solution, which one can generate if one has information about them. In the case of the driver, obviously, he needs knowledge and information to generate these alternatives, i.e., to stop by breaking the driver would need to know that braking stops the vehicle. If he is unaware of this crucial information he would not have been able to generate this alternative. So information is vital for generation of alternatives. Now for the choice part also, the decision maker needs to have information about the suitability of each alternative to decide, which the ‘best’ is. In our example, the driver calculates the ‘payoff’ for each alternative based on his calculation of the outcome that again is based on information. He selects the ‘best’ option that solves the problem. Thus, we can see that information is the key to the decision making process, without information and the right kind of information decision-making is not possible. Information plays a crucial role in every stage of the decision-making process.

Decision-making is the most important task of managers in an organization. Therefore, to enable managers to take good quality decisions, it is very important to provide them with the right kind of information. Information management in organizations therefore assumes a special significance. In most organizations, business or otherwise, a systematic systems based method is used for information management. Systems based information management works best under a computerized environment and such computer based information management system is normally called ‘Management Information Systems (MIS)’, which provides the service of information supply to the managers enabling them to take informed decisions. It may be worthwhile to mention here that MIS does not necessitates the use of computer based technology, but the use of computers and information technology makes MIS suitable for business organizations in a competitive environment as it helps to provide timely and accurate information. MIS done manually, without the help of computers is neither timely nor accurate.