What is Management Information System? - Definition, Scope, Types, Factors

Everything you need to know about management information system.

Management information system (MIS) is a system to provide selected decision-oriented information needed by management to plan, control, and evaluate the activities of the corporation.

It is designed within a framework that emphasizes profit planning, performance planning, and control at all levels.

Management Information System (MIS) is basically concerned with processing data into information. Data collection involves the use of Information Technology (IT) comprising computers and telecommunications networks (e-mail, Voice Mail, Internet, telephone, etc.).

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Walter J. Kennevan defined Management Information System as, “a formal method of collecting timely information in a presentable form in order to facilitate effective decision-making and implementation in order to carryout organisational operations for the purpose of achieving the organisational goals.”

Learn about:-

1. Notes on Management Information System 2. Definitions of Management Information System 3. Scope and Purpose of Management Information System 4. Objectives 5. Goals 6. Elements 7. Areas 8. Importance

9. Factors 10. Decision-Making 11. Pre-Requisites for Designing 12. Designing 13. Stages 14. Advantages 15. Causes 16. Guidelines for Improving Management Information System and Effective Design.

Management Information System: Introduction, Definitions, Scope and Purpose and Objectives

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Contents:-

Notes on Management Information System
Definitions of Management Information System
Scope and Purpose of Management Information System
Objectives of Management Information System
Goals of Management Information System
Elements of Management Information System
Areas of Management Information System
Importance of Management Information System
Factors Affecting the Management Information System
Decision-Making of Management Information System
Pre-Requisites for Designing of Management Information System
Designing of Management Information System
Stages of Management Information System
Advantages of Management Information System
Causes of Management Information System
Guidelines for Improving Management Information System and Effective Design

What is Management Information System – Notes

Management information system (MIS) is a system to provide selected decision-oriented information needed by management to plan, control, and evaluate the activities of the corporation. It is designed within a framework that emphasizes profit planning, performance planning, and control at all levels.

It contemplates the ultimate integration of required but ness information sub-systems, both financial and non-financials within the company.

An effective MIS needs current and future information on:

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i. Administration;

ii. Production;

iii. Marketing;

iv. Operating and

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v. Research functions.

It also requires relevant environmental information (competitive, regulatory) for evaluating corporate objectives, strategic or long-range planning, and tactical or short-range planning.

MIS is an organised method of providing top managers and manager in each functional area of business with all the data, and only those data which the manager needs for decision, when he needs them, and in a form which helps him to understand and stimulate his action on sound lines.

Management information system (MIS) is an interacting continuing, future-oriented structure of persons, machines, and procedures designed to generate an orderly and integrated real time flow of information collected from internal and external sources, for uses as the relevant bases for managerial decision-making in any functional area of business.

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To manage a business well is to manage its future. Management of future implies management of information—external as well as internal information. Today a mass of information is generated by internal as well as external sources.

Since 1960, we are having an information explosion. Hence, management must have well-organised and up-to-date MIS on the basis of which management at all levels can take prompt and sound decisions on all problems in any area of business. MIS is an integral part of decision-making process at all levels of management.

There are two important tools for planning and control:

(1) Budgets and

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(2) Information System.

MIS is a system which provides each manager in the organisation with the information he needs in order to take decisions, plan and control within his area of responsibility.

MIS is an organised way of sending, receiving and recording messages. It includes both formal flow of information as well as informal flow of information, called grapevine. Ideally, information should be accurate, adequate, up-to-date, reliable, timely and understandable. In our system of information there should be no overlaps, no gaps and no contradictions.

There are three areas of management information system:

i. Decision-making,

ii. Planning and

iii. Control.

A manager needs information primarily to make timely and informed decisions.

Information is now regarded as a basic resource of the organisation along with other resources such as personnel, money, materials, machines, and facilities. Information is a critical or crucial resource to the success of the enterprise. It can be used at a cost. It must be at the right place and at the right time.

There are three major areas of information system:

i. Financial information;

ii. Personnel information;

iii. Logistics information—physical flow of goods through an organisation, etc.

Logistics function covers such activities as purchasing, receiving, inventory and distribution. An organisation with a well-designed MIS will generally have a competitive advantage over firms with poorer systems.

The primary purpose of MIS is to assist managers in making timely, informed decisions in their areas of responsibility. Information is received by the MIS from all sources. MIS identifies relevant information and offers it to managers to be used for decision-making/problems-solving.

Effects of decisions both on the external environment and internally are then compared against given standards. If necessary, corrective action is taken at the decision-making stage or at the information sources stage. MIS is an ongoing process. It has also a systems approach. O.R. analyst relies on MIS.

What is Management Information System – Definitions by Walter J. Kennevan and James A. F. Stoner

A management information system (MIS) enables businesses to provide answers to managers in search of knowledge. MIS does this by combining raw data about the organisation’s operations (contained in its basic information technology systems) with information gathered from employees in expert systems that reflect the organisation’s procedures. MIS may be viewed as a mean for transformation of data, which are used as information in decision making processes.

Management requires complete reliable information to solve any problem and exercise effective control by taking a timely decision. The complete reliable information is received by proper collection, handling and providing the right information to the right person in right time.

The proper management information system it not only reduces the risk of wrong decisions but also work as an effective controlling techniques. Managers at every level require important information with speed, brevity and economy in order to discharge their functions effectively.

Due to the complexity of business and industrial operations, the management information system (MIS) gets more importance. Government regulations are to also create the need of supply of more reliable information accurately within short span of time. This clearly shows that the management executives are entering into an “Information Age”.

Management Information System is a planned, organised and systematic collection of relevant, accurate, precise and timely information which are properly processed and supplied to required persons economically for the purpose of achieving organisational objectives.

James A. F. Stoner defined Management Information System as, “a formal method of making available to management accurate and timely information necessary to facilitate the decision-making process and enable the organisation’s planning, control and operational functions to be carried out effectively.”

Management Information System Committee of the Financial Executive Institute defined, “An Management Information System is a system designed to provide selected decision-oriented information needed by management to plan and evaluate the activities of the corporation. It is designed within a framework that emphasises profit planning, performance planning and control at all levels. It contemplates the ultimate integration of required business information sub-systems both financial and non-financial within the company.”

What is Management Information System – Scope and Purpose: Management, Information and System

The scope and purpose of MIS is better understand if each part of the term is defined thus:

1. Management – Management is the process of directing, organising, planning and controlling resources to achieve organisational goal.

i. Planning – Planning is a process of establishing organisational goal and to develop strategies to achieve goal.

ii. Organising – It is a process to develop the structure of the organisation and determine what tasks are to be done, who reports to whom and where decisions are to be made.

iii. Leading – It is an important process of motivating and managing employees, directing others and forming task group.

iv. Controlling – It is the process of evaluating performance of employee. It is a way of monitoring activities to ensure that they are working as per plan.

2. Information – Information is a collection of data in a meaningful way. It is used for informative or interference purpose, argument or basis for forecasting or decision making.

3. System – A system is set of element journal together for a common objective. All system are part of longer system. Different part of a system (division, department functions unit, etc.).

What is Management Information System – 6 Important Objectives: Facilitates Decision-Making, Avoid Duplication of Work, Savings of Time and a Few Others

An effective Management Information System can achieve the following objectives:

1. Facilitates decision-making – Management executives at all levels are taking large number of decisions by receiving the best possible current information. Accurate, reliable, precise and timely information facilitates the decision-making process very easy.

2. Avoid duplication of work – Major portion of the organisational operations are computerised and procedures are simplified. This type of system reduces unnecessary work and eliminates the performance of duplication of work.

3. Savings of time – Efficient methods are applied in the execution of assigned activities and proper direction is available to the employees of an organisation. Standard time is fixed for each work separately. In this way, there is a possibility of savings of time.

4. Establish uniform procedures – Nature of work is different from one department to another department or one section to another section, but standard and uniform procedure is followed in the performance of a work. Uniform procedures ensure proper flow of data from the concerned department of section.

5. Fixing responsibility – Data have to be supplied immediately after execution of work. Hence, it is the responsibility of concerned executive to provide data. In this way, MIS fixes responsibility each executive.

6. Improving service – Necessary training is to be imparted to the executives before installing Management Information System. Hence, improved service is rendered by the executives in an organisation.

The Management Information System should be flexible in nature to incorporate revisions and include additional sub-systems in order to achieve above mentioned objectives.

What is Management Information System – Goals

The goals of an ideal MIS are to relieve management from converting data into information, provide relevant information to each management level for effective decision-making and the effective conduct of the job function, and present information that is current and in a readily usable and easily understood format.

To meet these goals, the MIS would possess the following attributes:

i. It would address the primary needs of the management function and not the needs of a person.

ii. It would address the underlying problem, not just the symptoms.

iii. It would present a maximum of information and a minimum of data.

iv. It would be reliable.

v. The outputs would be timely.

vi. The output would contain sufficient and relevant information to minimize uncertainly in a format that can be easily understood and be usable without further modification.

What is Management Information System – Top 3 Elements: Management, Information and System

The term Management Information System consists of three words. They are Management, Information and System. If one understands the meaning and nature of these three words, properly, he can have thorough understanding the concept of Management Information System.

Element # 1. Management:

Management is the process of planning, organising and controlling of the physical and human resources in order to achieve the objectives of an organisation. Managers can prepare the plan in order to achieve the objectives by selecting best course of action. He can identify the task which are emerged under the operation of an organisation and organised into homogeneous groups.

The completion of the task is to be controlled by setting performance standards and avoid deviations from such standards. In this place, management facilitates the executives for taking number of valued decisions with regard to planning, organising and controlling the performance of task and functions of the business.

Element # 2. Information:

Information can be defined as tangible or intangible facts which are used to reduce or avoid uncertainty of future events. Information is necessary to every management to plan and control the business operations effectively.

Information is derived from the data out of the available data; information is developed and used for decision making purpose. There must be a proper transformation of data into information. The presentation of information in such a way that is current and in a readily usable and easily understood format.

Element # 3. System:

A system can be defined as a set of interrelated elements working towards for achieving general objectives of an organisation.

There may be many sub-system in an organisation and all such systems are parts of large systems. There is a need of application of principles of system in a business organisation. If so, there is a possibility of integration of the sub-systems through information inter proper change. The system concept of MIS is therefore one of optimising the output of the organisation by connecting the operating sub-systems through the medium of information exchange.

What is Management Information System – 3 Main Areas: Decision-Making, Planning and Control

There are three areas of management information system. They are decision-making, planning and control.

These areas are briefly explained below.

1. Decision-Making:

MIS is designed to generate and free flow of information collected from internal and external sources for sound decision making in all functional area of business. Management should have well organised system to collect information and maintain up to date information to take prompt and timely decision. MIS is an integral part of decision-making process at all levels of management.

The main aim of MIS is to help the managers to take timely decisions in their areas of responsibility irrelevant information should be avoided while taking a decision.

2. Planning:

Top management wants information for planning purpose. Planning is the primary function of management. The primary function is effectively carried on by the managers under well-designed management information system. Sometimes, the MIS can be hooked up to various corporate models for planning. The uncertainty can be converted into a certainty through proper planning. This is possible only with the help of management information system.

3. Control:

The MIS informs the decision-maker about the performance of work with standards set for them. If the information is better, more complete, more reliable and timely, it is easier for manager to exercise effective control. Additionally, a system of controls must be developed so as to ensure proper control.

What is Management Information System – Importance: Complexity of Business Operations, Size of Business Unit, Changes in Economic Structure and a Few Others

An effective management information system is very important on account of the following reasons:

1. Complexity of Business Operations:

The business operations will be changed into complexity due to dynamics of the environment. The MIS helps the managers in this situation, to look upon the business operations without much difficulty.

2. Size of Business Unit:

Most of the business units have grown in size. This results in management being removed from the scene of the operations. Now, MIS plays in vital role to solve operational problems.

3. Changes in Economic Structure:

Rate of inflation and unemployment, changes in interest rate GNP and the like are affecting the smooth functioning of a business unit. Hence, this type of information should be collected and helps the managers to take a valid decision.

4. Technological Changes:

These include changes in the operations of a business unit. Whenever there is a change in technology, there is a problem to the management. This type of problem can be easily solved with the help of effective MIS.

5. Social Changes:

These include higher level of education, changes in consumer tastes, usage of computer at home, preferences of job etc. this type of information is maintained up to date. If so, running of a business unit is very easy.

6. Determination of Training Needs:

In large scale enterprise, the operations are decentralised so that more information is needed about the operations of units. The performance of all units should be closely watched and steps must be taken if there is a poor performance of units. It means that training needs can be found out in order to improve the performance of units. Here, MIS can be effectively used for measuring performance and decide the training needs for better performance and achieve organisational goals and plans.

7. Wide use of Computer:

The computers are widely used since the operation requires less expenses and have more capacity to store and supply more information. This has made information handling easier.

What is Management Information System – 4 Factors Affecting the Management Information System: Availability, Quality, Quantity and Timeliness

There must be a free flow of information from one place to another place within organisation. If so, every employee knows what is happening in an organisation and tries to change his activities. Even though, some factors affecting the free flow of information.

The factors affecting the management information system are as follows:

Factor # 1. Availability:

Availability of information refers more accurate and relevant information. All decisions are made out of available information. If decisions are made out of inadequate, inaccurate and irrelevant information, the results are highly uncertain. But, there is no parameter available to access the information as accurate or inaccurate, relevant or irrelevant and adequate or inadequate. Hence, the managers are forced to take decisions out of available information

Factor # 2. Quality:

Quality of information describes its compactness and accuracy. Sound decisions are taken only out of quality information. Accordingly the information should be precise and highly reliable.

Factor # 3. Quantity:

Too much information cannot be processed very easily by the management within stipulated time and difficult to get accurate information. On the other hand, too little information may leave relevant, reliable and accurate information which are necessary to take useful decisions.

Factor # 4. Timeliness:

Information must be available when needed. Sometimes, some important decisions can be delayed due to non-availability of necessary information properly in time and the results missed opportunities. At the same time, the time gab between the collection of data and the presentation of the proposed information should be reduced as much as possible. Besides, the information should be presented before the decision-maker when needed and not on a periodic and cyclic basis.

What is Management Information System – Decision-Making

We have defined decision-making as the process of selecting an alternative from among several to achieve a set of goals and objectives. To generate and to evaluate, alternative data must be collected, processed and analysed. The link between MIS and decision-making is strong and as such they are inseparable in practice. Therefore, the use of quantitative techniques for management decision-making process always involves MIS.

The MIS can improve organizational decisions by:

(a) Upgrading the existing clerical systems,

(b) Programming routine decisions and

Of course, all non-programmed decisions need judgement, experience and intuition in addition to facts and figures. MIS must recognise its limitations in the branch of strategic or unstructured decisions which involve uncertainty and turbulent environment.

The upgrading of existing clerical systems offers labour saving, accurate and rapid mechanism to efficiently perform existing operations and provide timely flow of information for decision-making. The organizational resources are then made available to other challenging endeavours.

The MIS takes the drudgery out of performing same operations day in and day out. The first applications of computers were in these areas. The examples of clerical applications that can be upgraded in decision-making and operational control are: inventory accounting and status, ledger accounting, production reporting, accounts payables and receivables and so on.

Programming of routine decisions through MIS offers potential for upgrading of the management decision-making process by making available managerial talents to resolve unforeseen and non-recurrent problems. Majority of management decisions occur on a routine basis and are of repetitive nature.

There is no reason why a large number of such decisions cannot be coupled with MIS and automated, requiring skills of lower level. Of course, the decision-maker must constantly watch for changes in the environment that will cause changes in the value of parameters.

The MIS can process current information and constantly monitor the values of parameters. If the values fall outside the range determined from sensitivity analysis (in which case decision is no longer optimum), a flag is raised to attract the decision-maker’s attention.

In order to develop effective programmed decisions, the decision-maker must develop a set of decision rules. For example, if MIS is used for inventory control, the re-ordering of item can be programmed. Since the MIS keeps complete accounting of Inventory level of any given item, a decision rule could be devised such that computer will recommend re-ordering as soon as the inventory level falls below X units (re-order point).

The Economic Order Quantity (EOQ) and re-order point can be determined by analyzing the inventory environment and constructing an inventory model to replicate the decision situation. Another example of programmed decision is one of blending various food or chemical ingredients to produce amounts of outputs to meet demands subject to input resource availabilities.

A linear programming model can be used to implement these decisions. The non-recurrent decisions occur because of the uncertainties involved in forecasting the environment in medium to long-term time-frame (beyond one to two years). Most of the programmed decisions involve short-term time frame (in months) and thus forecasting rules can be developed and adopted for MIS implemented decisions. For example, to determine the re-order quantity, the EOQ formula requires estimation of quantity demand in the time period under consideration.

The uncertainties in the values of uncontrollable variables and parameters make it impossible to programme decision that occur in longer time frame. Other decisions occur infrequently and, hence, do not justify expenditure on development of decision rules. Such more complex non-recurring decisions are handled by the decision-maker as they arise. Most of the top management decisions fall in the category of non-programmed decisions.

These typically involve decisions on research and development, new product introduction, maintaining market share in various product groups and developing strategies to achieve organization objectives. The role of MIS and OR in these decisions is to assist the decision-makers in processing and analyzing vast amount of information and summarizing it for consideration by top management. This may be called a decision-assisting MIS/OR. (Decision Supporting System.)

The MIS, in general, keeps the decision-maker aware of important information, aggregated and disaggregated; informs him of programmed decisions made; provides analysis of alternatives to assist in decision-making.

For structured or programmed decisions, e.g., accounts receivable, inventory control, short-term budgeting warehouse location, etc., we have structured decision systems—almost the whole MIS.

For semi-structured decisions, e.g., production scheduling,” cash management, overall budget, new product planning, and mergers. etc., and for unstructured decisions, e.g., PERT cost system, sales and production. R. & D. planning, etc., we have decision support systems (DSS)—only a small part of MIS, which is based on computer.

What is Management Information System – 8 Pre-Requisites for Designing Effective Management Information System

Management Information System should be effective. So, proper care has been taken by the management executives to design management information system.

The following prerequisites are necessary for designing effective management information system:

1. Top management should define, decide and describe the types of information needed to the decision-maker.

2. Information format is also decided well in advance for quick supply of information.

3. Management can identify the problems connected with free flow of information within organisation. These problems should be solved to remove the constraints involved with supply of inadequate information.

4. The sources of information should be clearly defined and explained to the concerned persons who are responsible to collect the information.

5. Management information system has the alternatives to the long range plans by considering environment conditions.

6. The management can select the best MIS pattern. The management should consider cost, feasibility, flexibility and implementability while selecting the best MIS pattern.

7. High degree imagination and foresight are the important factors responsible to design effective management information system. Hence, the management should employ such type of personnel while designing MIS.

8. The designed MIS should cope with the needs, goals and environment of the organisation.

What is Management Information System – Design of a Well-Developed System

Under management information system, a set of procedures is systematically followed to collect relevant data, processing the data and presented in a required format as information. When the management can take sound decisions and necessary actions for running the business.

A well-developed system should be designed in the following manner:

1. Supplies complete, accurate and timely data – Effective planning and decision-making is possible by availing complete, accurate and timely data. The MIS would solve the problems connected with inconsistent, incomplete and inaccurate data.

2. Identify and quantify inter-related operations – Production and sales are independent variables, but, these variables have close relationship within each other. Production is depending upon the demand for the product i.e., sales volume. So, the information of production develops a relationship with sales. This can be projected to forecast future trends.

3. Measure and control the performance – Production data can be presented in monetary terms. If so, production costs can be measured and control the performance which can be closely monitored.

4. Identify needs of decentralised organisation – In large scale enterprise, there is a decentralisation of authority and departmentation. The needs of such decentralised units and departments can be properly noted to avoid duplication and waste of efforts. It means that a pool is created to collect the data from such units and departments.

5. Information in summarised form – Information is presented in such a manner that action can be initiated and/or decision can be taken without further interpretation and analysis. It reduces the time, efforts and volume of information. Management by exception principle is followed here by the top management.

6. Flexibility – The management information system should be flexible as much as possible so that the system can be changed or revised whenever necessary.

What is Management Information System – 6 Major Stages: Assembling, Processing, Analysing, Storage and Retrieval, Evaluation and Dissemination

The transformation from data to information involves six stages.

These six stages have been briefly explained below:

1 Assembling – It means finding and collection of data and recorded in a set of files. The well-defined sources of information facilitate the collection of data.

2. Processing – It means that the collected data has been summarised, edited and processed. During editing, the irrelevant and inaccurate data have been eliminated from the records.

3. Analysing – It means that the data has been analysed to develop or calculate percentages, ratios etc., percentages and ratios are providing useful information to the decision-maker.

4. Storage and retrieval – Indexing, coding, filing and location of information are coming under the process of storage. Provisions have been made to quick relocation of such information and retrieval when it is necessary.

5. Evaluation – It means the determinations of usefulness of information in terms of accuracy, precise, and relevance. The degree of accuracy, precise and relevance is based upon the needs of the decision-maker.

6. Dissemination – It means supplying the required information in the specified format at the right time to the decision maker.

What is Management Information System – Top 5 Advantages: Facilitates Planning, Reduce Information Overload, Simplifies Control, Assists Co-Ordination and a Few Others

The effective management Information System contributes in the following ways to the management:

1. Facilitates planning – Planning requires reliable, relevant and accurate information. These are possible under the effective management information system. The MIS keeps the executives aware of changes in the environment of business. In this way, MIS facilitates the planning function carried on by the executives.

2. Reduce information overload – All the data collected by an organisation is not required to managers. Under effective MIS, the data has been divided into relevant and irrelevant. The irrelevant data may create confusion in the minds of managers. Hence, the irrelevant data has been avoided with the help of effective MIS and reduced information overload.

3. Simplifies control – MIS is acting as a bridge between planning and control. It helps the managers to take a sound decision which simplifies control function.

4. Assists co-ordination – MIS is an integrated approach to planning and control. MIS facilitates co-ordination by keeping each department/section aware of the problem, status, importance and needs of other departments/sections. It links all decision centres in an organisation.

5. Improves decentralisation – Monitoring work is also done under the effective MIS. This type of arrangement helps the management to delegate authority without losing control.

What is Management Information System – 5 Major Causes of Poor Management Information System

Management Information System is to make an effective with the help of computer capabilities. Even though, there may be some causes for poor management information system.

They are given below:

Cause # 1. More Information is Better:

Effective or sound decision can be taken only out of more information. This is a fallacy. But, the real fact is that only relevant, accurate and precise is enough for taking effective decision and not more. Generally, more information will over burden the decision- maker and even creates a confusion. This process may lead the decision-maker into an unwanted place. Besides, he cannot be able to absorb all information. Hence, mere accurate and relevant information is enough.

Cause # 2. Lack of Managerial Involvement:

Effective MIS requires top management support. Moreover, the decision maker has to be encouraged so that MIS has been properly utilised. If not so, no use following MIS.

Cause # 3. Poor Communication:

The managers must be provided with relevant current information. Then, the managers should be trained to recognise the basic nature and utility of computer. The computer specialist must design a system in which every decision maker is going to use the computer to avail better communication. But, in practice, the computer is used for generate data and results poor communication.

Cause # 4. Computers cannot do Everything:

Computer can process the data and provide at the information in a specified format. But, it does not compensate managerial judgement. Besides, computer can be used as a tool and not a substitute of decision maker.

Cause # 5. Human Acceptance:

The success of the MIS depends upon the acceptance and involvement of employees of the concerned organisation. Generally, the employees can oppose the MIS because the system may increase the workload or decrease the importance of human being.

What is Management Information System – Guidelines for Improving Management Information System and Effective Design

The management information system can be improved by adopting the following guidelines:

1. There must be an involvement of top management in the design of MIS. This involvement leads to greater acceptance on the part of employees of an organisation.

2. There must be a close relationship between the designer and user of MIS. This is created by motivating employees to design the MIS themselves. Employees know the ground reality of an organisation. Hence, employees can design the MIS very effectively.

3. Master plan can be developed. The master plan is not only covers current needs but also covers future needs of an organisation. The master plan avoids the uncertainties connected with MIS development.

4. Both designees and users are held responsible and accountable for the success of MIS on cost benefit analysis basis. The accountability cannot be changed so that benefits exceed costs.

5. Management should take all efforts to create confidence in the minds of employees to accept it as an aid rather than a replacement.

Guidelines for Effective Design of Management Information Systems (MIS):

(i) The user of the information should be included on the design team.

(ii) Cost of money and time of the system should be taken into account, and match them with the benefits derived from the system.

(iii) Weightage should be given to relevance and selectivity over sheer quantity.

(iv) The system should be tested before it is installed.

(v) Adequate training and documentation should be provided for the operations and users of the system.

(vi) Information should be disaggregated and similar decisions should be aggregated.

(vii) The actual mechanical methods for information processing are designed and controls for the systems developed.

(viii) The decisions system must be thoroughly analysed.