Chapter One
Management Information System in a Digital Firm
MIS concept
Definition
Role of the MIS
Components of MIS
Objectives of MIS
Functions of MIS
Advantages of MIS
Impact of the MIS
MIS and the user
Management as a control system
MIS a support to management
Development process of the MIS.
Management as a control system
System View and Status of MIS in Organizations
Framework for Understanding MIS and its Role at Various Management
MANAGEMENT INFORMATION SYSTEM – AN INTRODUCTION
The subject of Management Information System (MIS) has different meanings for different people. MIS, initially, were built to process transactional data of an organization and to produce regular reports. With little more advancement the system generated a report in a suitable format that created an impact on its user and provoked an action, a decision or an investigation. Today, an information system has evolved to the stage where they handle databases and secondary data available on the web to facilitate decision-making.
G.B. Davis:- “Management Information System (MIS) is an integrated man/machine system for providing information to hold up the operations, management and decision making functions in an organization”
Walter I. Kennevan: A formal method of collecting timely information in a presentable form in order to facilitate effective decision making and implementation, in order to carry out organisational operations for the purpose of achieving the organisational goals.
Components of MIS
People Resources: People are required for the operation of all information systems.
Data Resources: Database holds processed and organized data.
Software Resources: It includes all sets of information processing instruction.
Hardware Resources: Include all physical devices and materials used in information processing.
Process: is a step undertaken to achieve a goal.
Objectives of MIS
What is MIS objective: MIS has five major objectives which include:
Data Capturing
Processing of Data
Storage
Retrieval
Dissemination
Data Capturing
MIS captures data from various internal and external sources of the organization. Data capturing may be manual or through computer terminals.
Processing of Data
The captured data is processed to convert into the required information. Processing of data is done by such activities as calculating, sorting, classifying, and summarizing.
Storage of Information
MIS stores the processed or unprocessed data for future use. If any information is not immediately required, it is saved as an organization record, for later use.
Retrieval of Information
MIS retrieves information from its stores as and when required by various users.
Dissemination of Information
Information, which is a finished product of MIS, is disseminated to the users in the organization. It is periodic or online through a computer terminal.
Objectives of Management Information Systems (MIS)
Support Decision-Making: One of the primary objectives of MIS is to provide reliable and timely information that supports decision-making within academic institutions. This ensures that decisions are based on accurate data, leading to better outcomes for the organization
Enhance Efficiency: MIS aims to improve the efficiency of operations by streamlining processes and reducing the time required to gather and analyze information. This efficiency is vital for academic institutions to function smoothly and effectively
Facilitate Data Management: Another objective is to manage vast amounts of data effectively. MIS helps in organizing, storing, and retrieving data, which is essential for academic institutions that deal with numerous records and information
Promote Integration: MIS seeks to integrate various functions and departments within an academic institution. This integration ensures that all parts of the organization work together cohesively, enhancing collaboration and communication
Improve Strategic Planning: By providing comprehensive data analysis and reporting capabilities, MIS aids in strategic planning. Academic institutions can use insights from MIS to set goals, allocate resources, and plan for the future
Ensure Accountability: MIS helps in establishing accountability within the organization by tracking performance metrics and outcomes. This transparency is essential for maintaining standards and improving overall institutional performance
Support Humanitarian Assistance: The research highlights that MIS can function effectively for humanitarian assistance purposes, indicating its role in supporting various initiatives that benefit the academic community and society at largeCharacteristics of MIS
MIS plays a very important role in every aspect of an organization. These characteristics are generic in nature.
Following are the characteristics of MIS:
System Approach
Management Oriented
Need-Based
Exception Based
Future Oriented
Integrated
Long Term Planning
Sub-System Concept
Central Database
System Approach
The information system follows a Systems approach. The system’s approach implies a holistic approach to the study of the system and its performance in the light of the objective for which it has been constituted.
Management Oriented
The top-down approach must be followed while designing the MIS. The top-down approach suggests that the system development starts from the determination of management needs and overall business objectives.
The MIS development plan should be derived from the overall business plan. Management oriented characteristic of MIS also implies that the management actively directs the system development efforts.
Need-Based
MIS design and development should be as per the information needs of managers at different levels, strategic planning level, management control level and operational control level. In other words, MIS should cater to the specific needs of managers in an organization’s hierarchy.
Exception Based
MIS should be developed on the exception-based reporting principle, which means an abnormal situation, i.e. the maximum; minimum or expected values vary beyond tolerance limits. In such situations, there should BE exception reporting to the decision-maker at the required level.
Future Oriented
Besides exception-based reporting, MIS should also look at the future. In other words, MIS should not merely provide past or historical information; rather it should provide information, on the basis of projections based on which actions may be initiated.
Integrated
Integration is a necessary characteristic of a management information system. Integration is significant because of its ability to produce more meaningful information.
For example, in order to develop an effective production scheduling system, it is necessary to balance such factors as setup costs, Workforce, Overtime rates, Production capacity, Inventory level, Capital requirements and Customer services.
Long Term Planning
MIS is developed over relatively long periods. Such a system does not develop overnight. A heavy element of planning is involved. The MIS designer must have the future objectives and needs of the company in mind.
Sub-System Concept
The process of MIS development is quite complex and one is likely to lose insight frequently. Thus, the system, though viewed as a single entity, must be broken down into digestible sub-systems which are more meaningful at the planning stage.
Central Database
A central database is a mortar that holds the functional systems together. Each system requires access to the master file of data covering inventory, personnel, vendors, customers, etc. It seems logical to gather data once, validate it properly and place it on a central storage medium, which can be accessed by any other subsystem.
Functions of MIS
The broad functions of MIS are as follows:
To Improve Decision-Making
The Management Information System (MIS) furnishes relevant information on diverse matters, thereby enhancing the decision-making prowess of the management. By utilizing the speedy and precise data provided by the MIS, managers can make prompt and informed decisions, which ultimately enhances the quality of decision-making and contributes to the company’s value.
To Improve Efficiency
The Management Information System (MIS) facilitates managers in executing their duties with enhanced ease and efficiency, resulting in improved productivity.
To Provide Connectivity
The MIS provides managers with better connectivity with the rest of the organization.
The Management Information System (MIS) is commonly utilized in decision-making processes within a system. One such application of MIS is to identify issues that require prompt attention, offer timely feedback, and inform senior management of the current progress and areas for improvement.
Therefore, the main functions of MIS may vary depending on the specific tasks performed by an organization.
Data Processing
Data processing involves collecting, transmitting, storing, and processing data to generate an output. Prediction involves analyzing data using modern mathematics, statistics, or simulation to anticipate future scenarios.
Prediction
By utilizing methods of modern mathematics, statistics, or simulation, data analysis is conducted to predict potential future scenarios.
Planning
The analysis of data of a regular nature may give many indications on likely future events or situations and this can be utilized in planning or reviewing the plan already made earlier.
Control
By examining records of daily, monthly, quarterly, or annual activities, certain factors that require management and control can be identified. If these factors are identified in a timely manner, they can be managed relatively easily. However, some factors may require the attention of senior management to remain under control. It is essential to note that ignoring smaller factors at the beginning may have the potential to disrupt other factors as well.
Assistance
One of the principal functions of MIS is to support senior management by analyzing regular records and drawing inferences about various factors related to the company’s operational performance, such as human resources, financial resources, material resources, and more.
Advantage of MIS
Generate Competitive Advantages
Implementation of Management by Objectives Techniques
Fast Reaction to Market Changes
MIS as Strategic Resource
Change in Industry Structure
Functional Use
External and Internal Change
Availability of Customer Data
Generate Competitive Advantages
Generate Competitive Advantages
Business houses succeed or fail based on how they face competitive challenges. MIS, if implemented properly, provides a wealth of information to allow management to construct and develop effective plans to meet, and beat, their competition.
Implementation of Management by Objectives Techniques
MIS allows all participants, both management and staff, to view, analyse and interpret useful data to set goals and objectives.
Fast Reaction to Market Changes
MIS can deliver facts, data and trends to businesses with lighting speed. Having this information allows business houses to react quickly to market changes, regardless of the type (positive or negative) or volatility.
MIS as Strategic Resource
MIS helps in taking strategic, tactical and operational decisions. It is one of the critical and important resources.
It helps the management to understand cost, quality, price, technology, productivity and product.
It helps to smoothen the business process and thereby facilitate managing of business operations.
It helps to maintain the business standards like ISO, QS, CMMI, six sigma etc.
It helps to be ahead in the competition.
It helps companies in analysing their own SWOT.
It also helps in maintaining its own profitability.
It will help in taking new business decisions like new plans, new products, new business lines etc.
It protects companies from business cycles.
It provides future direction to the organisations.
It also provides the competitive edge.
Role of MIS
A management information system (MIS) plays an important role in business organizations.
There are many roles of MIS and some of the important MIS role are discussed below:
Decision making
Coordination among the department
Finding out Problems
Comparison of Business Performance
Strategies for an Organization
Decision making
Management Information System (MIS) plays a significant role in the decision-making process of any organization. In any organization, a decision is made on the basis of relevant information which can be retrieved from the MIS.
Coordination among the department
Management Information System satisfies multiple needs of an organization across the different functional departments.
Finding out Problems
As we know that MIS provides relevant information about every aspect of activities. Hence, if any mistake is made by the management then MIS, information will help in finding out the solution to that problem.
Comparison of Business Performance
MIS stores all past data and information in its Database. That why the management information system is very useful to compare business organization performance.
Strategies for an Organization
Today each business is running in a competitive market. An MIS supports the organization to evolve appropriate strategies for the business to assent in a competitive environment.
The term MIS is synonymously used with terms the Information System (IS), the Information and Decision System and the Computer based Information System. The MIS is defined as an integrated system of man and machine for providing the information to support the operations, the management, and the decision-making function in the organization. The above definition emphasizes an association between MIS and decision making. An application software that processes data, which is not used for decision-making, cannot be called an MIS. For instance, a computer-aided design system is not an MIS.
An MIS deals with information that is systematically and routinely collected in accordance with a well-defined set of rules. In other words, data collection is a planned activity for which resources are allocated and rules are defined. The information provided by an MIS assists managers in planning, organizing, staffing, coordinating, directing and controlling the operations of an organization. The management experts have viewed these steps as Information Systems Management Control systems shows the relationship between operations, planning and control. Planning Control Plan & Targets Operations Corrective Actions
Management Control System in any organization that has planned activities leading to the achievement of the stated goals, there is always a control process in place that measures progress towards these goals and enables the manager to deduct the deviations from the original plan in time. It is the responsibility of the management to take corrective actions before it is too late. The deviations may be due to environmental changes or due to the mistakes made by people. An MIS is concerned with planning and control. An MIS has a large amount of data as its integral part that is stored and managed by a database management system. The exponential growth of information all around makes it necessary that information is probably collected, stored and retrieved in various fields so that it could be usefully exploited whether and when needed. The concern is “What information does the manager need to manage effectively”? We are interested in a system for providing the necessary management information. MIS is a system that aids management in making, and implementing decisions.
An MIS must have the following features:
It must be capable of handling voluminous data.
The data as well as transactions must be validated.
It must be able to perform operations on the data irrespective of the complexity of the operations.
Often multi-dimensional analysis is required.
An MIS should facilitate quick search and retrieval of information.
An MIS must support mass storage of data and information.
The information must be communicated to the recipient in time.
Moreover, the communicated information must be relevant.
The information system must always have an internet link to dig out related information and data from the web for better analysis helping the management in taking decisions.
SYSTEM VIEW AND STATUS OF MIS IN ORGANIZATIONS
Today besides professional managers, all administrators, politicians, academicians have become aware of the need for adopting an integrated holistic perspective by using the systems approach to problem conceptualization and decision-implementation. Today we find everyone talking about systems - the transport system, educational system, healthcare delivery system, defence system, economic system, communication system, management information system, transaction processing system, decision support system, computer systems, etc.
System:
Definitions :
It is an entity; conceptual or physical, which consists of interdependent parts or components.
A system is a complex of elements or components directly or indirectly related in a casual network.
This brings in the notion of some type of feedback and control to see whether or not the system is a position to achieve the goals/purpose/objectives of the system. Any system must have an objective or a set of objectives or a hierarchical set of objectives.
In a large context, a system is an assembly of procedures, processes, methods, routines, techniques etc. united by some form of regulated interaction to form an organized whole. In fact no system, unless it is a totally closed system, can exist in isolation.
A system is made up of subsystems, which may be composed of further sub-systems. We could carry on this refinement till we arrive at the so called ‘black box’ level, which is some perceptible manageable level. Just as a system is made up of sub or sub-sub-system, it itself is part of a super or supra system. This could be termed as the environment in which the system operates.
Example: A factory system has various sub-systems like the production sub-system, the shipping sub-system, the financial sub-system, the marketing sub-system and the Information Systems personnel sub-system.
Now a production sub-system could consist of subsub-systems of production control, materials control, quality control etc. the materials sub-sub-system can be further broken down into ‘black boxes’ say purchasing, stores, transportation etc. In turn, the factory system is part of the larger economic system of the country which would be the so-called superior or supra system
FRAMEWORK FOR UNDERSTANDING MIS AND ITS ROLE AT VARIOUS MANAGEMENT LEVELS
There is too much data and information in an organization. In order to design a MIS successfully, we need a framework to structure the information so that the data and information relevant for decision-making can be separated from the rest of the data. Before we talk about the design of MIS, let us understand the strategic management of a business. An organization must respond to market forces, competition, to the environment and to technological changes. The scope of business is wide, touching many fronts. A business, among other activities, must do long-term strategic planning. There are many methodologies for strategic planning.
Strategic Planning is the process of deciding objectives of the organization, determining the possible shift in objectives, deciding on the resources used to attain their objectives and the policies that govern the acquisition, use and disposition of their resources. Management Control is the process by which managers assure that the resources are obtained and used effectively and efficiently to attain the objectives of the organization. Operational Control is the process of assuming that specific tasks are carried out effectively and efficiently.
Planning and Control Activities in Different Functional Areas
It is useful to classify the above definitions with some examples. The table below gives instances of planning and control activities in different functional areas
Differences in Information required for three types of Planning and Control Processes
Let us now look at Simon’s framework that has broken down the process of decision making into three stages:
1. Intelligence: This is the stage in which the decision maker recognizes that there is a problem or opportunity that requires him to make a decision.
2.Design: The decision maker determines the alternatives that are available to him to resolve the problem or exploit the opportunity.
3.Choice: In this stage, an alternative generated in stage-2 is singled out to be pursued. The selection process may involve feasibility analysis or cost-benefit analysis.
With this framework, we can distinguish between three major classes of decisions.
a) Programmed Decisions are there in which all stages are handled by following a preset well-defined procedure. The decisions are repetitive and routine which arise often and are capable of being modeled mathematically in their entirety. The classic example would be inventory-ordering decisions.
b) Non-programmed decisions are difficult to structure in logical mathematical terms. These decisions cannot be handled in well defined and pre-specified procedures. These opportunities are not repetitive in nature and they require fresh intelligence, design and choice phases to be executed. An example would be the decision to set up a new factory or launch a new line of product.
c) Semi-programmed decisions are those in which at least one and no more than two of the above stages can be handled by well-defined preset procedures. An example where the intelligence phase is well structured would be the diverse kinds of variance analysis. A MIS and Control Systems comparison with a budget or standard is undertaken in a well-defined way to signal the need for a decision. Subsequent stages of design and choice, however, are not handled by a set procedure.
Development Process of MIS
The process of Management Information System (MIS) involves several stages to ensure effective planning, implementation, and utilization of information systems within an organization.
1. Identification of Information Needs:
The first step in the MIS process is to identify the information needs of the organization. This involves understanding the business processes, objectives, and decision-making requirements of different levels and functions within the organization.
2. Data Collection:
Once the information needs are identified, the next step is to collect relevant data. Data can be sourced from various internal and external sources, such as transactional systems, databases, surveys, and market research.
3. Data Processing:
After collecting the data, it needs to be processed to extract meaningful information. This involves organizing, cleaning, aggregating, and transforming the raw data into a format that can be used for analysis and decision making. Data processing may include tasks like data validation, integration, and data quality assurance.
4. Data Analysis:
In this stage, the processed data is analyzed to derive insights and support decision making. Various analytical techniques, such as statistical analysis, data mining, and predictive modeling, can be employed to discover patterns, trends, and relationships in the data. The analysis helps in identifying key performance indicators, evaluating performance, and making informed decisions.
5. Information Presentation:
The analyzed information is then presented in a meaningful and easily understandable format. This can involve creating reports, dashboards, visualizations, and other tools to communicate the information effectively to the relevant stakeholders. The presentation should be tailored to the specific needs of different users, such as executives, managers, and operational staff.
6. Information Dissemination:
Once the information is presented, it needs to be disseminated to the appropriate individuals or groups within the organization. This can be done through various channels, such as email, collaboration tools, intranets, or mobile applications. Timely and accurate information dissemination ensures that the right people have access to the right information at the right time.
7. Information Utilization:
The final stage of the MIS process is the utilization of information for decision making and performance improvement. The information provided by the MIS supports strategic planning, operational management, problem-solving, and performance evaluation. It enables managers and executives to make informed decisions based on accurate and up-to-date information.
Question Bank
I. Multiple Choice Questions (MCQs)
Which of the following best defines Management Information System (MIS)?
a) A system for managing physical resources.
b) A system to process financial transactions.
c) A system to provide information to support decision-making.
d) A system for automating manufacturing processes.
Answer: c) A system to provide information to support decision-making.
The primary role of MIS is to:
a) Replace human managers.
b) Automate all organizational tasks.
c) Support managers in planning, controlling, and decision-making.
d) Eliminate the need for data storage.
Answer: c) Support managers in planning, controlling, and decision-making.
Which of the following is a key component of an MIS?
a) Only hardware.
b) Only software.
c) Hardware, software, data, procedures, and people.
d) Only communication networks.
Answer: c) Hardware, software, data, procedures, and people.
One of the primary objectives of MIS is to:
a) Increase the cost of operations.
b) Provide timely and accurate information.
c) Reduce the need for strategic planning.
d) Complicate decision-making processes.
Answer: b) Provide timely and accurate information.
Which function of MIS involves data storage and retrieval?
a) Planning.
b) Organizing.
c) Data processing.
d) Controlling.
Answer: c) Data processing.
An advantage of MIS is:
a) Increased complexity of operations.
b) Improved decision-making.
c) Reduced data security.
d) Decreased efficiency.
Answer: b) Improved decision-making.
MIS impacts organizations by:
a) Decreasing transparency.
b) Enhancing operational efficiency.
c) Reducing communication.
d) Eliminating data analysis.
Answer: b) Enhancing operational efficiency.
In the context of MIS, management as a control system implies:
a) Managers have no role.
b) MIS helps managers monitor and regulate organizational activities.
c) Control is solely based on physical resources.
d) Control is only based on financial information.
Answer: b) MIS helps managers monitor and regulate organizational activities.
MIS acts as a support to management by:
a) Replacing managerial judgment.
b) Providing information for informed decisions.
c) Limiting access to data.
d) Increasing operational costs.
Answer: b) Providing information for informed decisions.
The system view of MIS in organizations emphasizes:
a) Individual components in isolation.
b) The interconnectedness of components.
c) The lack of interaction between departments.
d) The independence of data systems.
Answer: b) The interconnectedness of components.
II. Short Answer Questions
Define MIS in your own words.
What are the key roles of an MIS in an organization?
List the essential components of an MIS.
What are the primary objectives of implementing an MIS?
Briefly describe how MIS functions within an organization.
What are the benefits of using an MIS?
Explain the impact of MIS on organizational operations.
How does MIS support management as a control system?
Why is a "system view" important when considering MIS in organizations?
What is the importance of a framework for understanding MIS and its role at various management levels?
III. Long Answer Questions
Describe the development process of an MIS. What are the key stages and considerations?
Explain the relationship between MIS and the user. How does MIS cater to the needs of different users within an organization?
Discuss the role of MIS in strategic, tactical, and operational levels of management. Provide examples of how MIS supports decision-making at each level.
Analyze the advantages and disadvantages of implementing an MIS. How can organizations mitigate the potential challenges?
Explain the concept of "management as a control system" in the context of MIS. How does MIS contribute to effective control within an organization?
How does a "system view" and the current status of MIS in organizations contribute to the success of an organization?
Discuss the Framework for Understanding MIS and its role at various management levels in depth.
Explain the impact of MIS on organizations in the following areas: operational efficiency, decision-making, and competitive advantage.
Describe the functions of MIS in detail, and explain how each function contributes to the overall effectiveness of the system.
Discuss the objectives of MIS in relation to the needs of the organization. How do these objectives contribute to the overall goals of the organization?
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