Management Information System (MIS) is a system by which information is collected, processed and presented to management with a view to improve the quality of decisions. The emphasis of MIS is on information for decision-making. Though MIS was originally developed for large businesses, it has application in all types of organisations.
Management Information System (MIS) is a system of communication designed to keep all levels of management completely informal on all developments in the enterprise which affect them. It is largely concerned with the information for decision making rather than the detailed systems and procedure for authorisation, instructions, record keeping, follow up and control.
Learn about: 1. Meaning of Management information System 2. Definitions of Management Information System 3. Concept 4. The Anatomy 5. Objectives 6. Characteristics 7. Functions 8. Importance 9. Types
10. Systems 11. Approaches 12. Information System and DSS 13. Computer- Based MIS 14. Role of MIS in Decision Support in Management 15. Management Effectiveness 16. Role of MIS 17. Design and Procedure 18. Applications 19. Advantages 20. Problems.
Management Information System: Definitions, Characteristics, Importance, Objectives, Types, Functions, Concept and Advantages
Management Information System – Meaning
Management Information System (MIS) is a system by which information is collected, processed and presented to management with a view to improve the quality of decisions. The emphasis of MIS is on information for decision-making. Though MIS was originally developed for large businesses, it has application in all types of organisations.
MIS in small organisations, of course, is less elaborate than the one we find in large organisations, but it has the same decision-making potential. All businesses require accurate and timely information and MIS provides the much needed information. It generates data, processes and presents the same to management in an appropriate form so that sound business decisions may be taken.
The term ‘MIS’ refers to a computer-based system for providing decision makers with information relevant to their areas of concern. It is a system designed to provide selected decision-oriented information needed by management to plan, control and evaluate the activities of an organisation. It provides information on the past, present and projected future and on relevant events inside and outside the organisation.
Information is the life blood of decision making in management. Information is needed to implement all functions of management.
Management Information System (MIS) is a system of communication designed to keep all levels of management completely informal on all developments in the enterprise which affect them. It is largely concerned with the information for decision making rather than the detailed systems and procedure for authorisation, instructions, record keeping, follow up and control.
Information for decision making is in the form of (i) reports on the results of past action and (ii) on conditions and trends which may have bearing on future actions.
In other words, Management Information System is a formal system to provide information to managers. The basic idea behind MIS is to provide managers with relevant information “in a systematic and integrated manner;” it is regular and continuous rather than sporadic and piecemeal. A good MIS enhances the value of strategic control and strategic planning.
The MIS in modern times makes use of computer network which may synonymously be stated as EDP (Electronic Data Processing). EDP incorporates within its fore hardware, software and the personnel that process the data in the information. Hardware is the computer and other input, output devices that make up the computer system.
Software refers to the programme or set of instructions that put the hardware into operation. It directs the hardware to perform various functions. The personnel in EDP may be classified under three heads – (i) Systems Analysts — who design MIS (ii) Programmers who prepare computer programmes based on the specifications of systems analysts and (iii) operators who operates the computer hardware.
Management Information System – Definitions
The Management Information System (MIS) is a concept of the last decade or two. It has been understood and described in a number of ways. It is also popularly known as information system, the information and decision system, the computer based information system.
The MIS has more than one definition, some of which are given below:
1. The MIS is defined as a system which provides information support for decision-making in the organisation.
2. 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 organisation.
3. The MIS is defined as a system based on the database of the organisation evolved for the purpose of providing information to the people in the organisation.
4. The MIS is defined as a computer-based information system.
Though there are a number of definitions, all of them converge on one single point, i.e., the MIS is a system to support the decision-making function in the organisation. The difference lies in defining the elements of MIS. However, in today’s world, the MIS is a computerised business processing system generating information for the people in the organisation to meet the information needs for decision-making to achieve the corporate objectives of the organisation.
In an organisation, small or big, a major position of the time goes in data collection, processing, documenting and communicating it to the people. Hence a major portion of the overheads goes into this kind of unproductive works in the organisation. Every individual in an organisation is continuously looking for some information which is needed to perform his/her works. Hence, the information is people-oriented and it varies with the nature of the people in the organisation.
The development and management of information technology tools assists executives and the general workforce in performing any tasks related to the processing of information. MIS and business systems are especially useful in the collection of business data and production of reports to be used as tools for decision-making.
MIS is a computer system, usually based as a mainframe or minicomputer and designed to provide management personnel with up-to-date information on an organization performance, e.g., inventory and sales. These systems output information in a form that is usable by managers at all levels of the organization- strategic, tactical and operational. The term system in MIS implies order, arrangement and purpose.
The information can be used for various purposes-
1. Strategic planning.
2. Delivering increased productivity.
3. Reducing service cycles.
4. Reducing product development cycles.
5. Reducing marketing life cycles.
6. Increasing the understanding of customer’s needs.
7. Facilitating business and process re-engineering.
A management information system (MIS) is a system that provides information needed to manage organizations effectively. Management information systems are regarded to be a subset of the overall internal controls procedures in a business, which cover the application of people, documents, technologies, and procedures used by management accountants to solve business problems such as costing a product, service or a business-wide strategy.
Management information systems are distinct from regular information systems in that they are used to analyze other information systems applied in operational activities in the organization. Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g., Decision Support Systems, Expert systems, and Executive information systems.
An ‘MIS’ is a planned system of the collection, processing, storage and dissemination of data in the form of information needed to carry out the management functions. In a way, it is a documented report of the activities that were planned and executed. According to Philip Kotler “A marketing information system consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.”
Management Information System – Concept
IT industry is facing new technologies every day and not many people are able to cope with such rapid changes. Costly mistakes result while making critical decisions in the acquisition of computer systems and the implementation. The problem is even more pressing for small to medium size companies were resources are not quite easily available.
The concept of MIS has emerged substantially over the years. In the 50’s and 60’s the management saw the potential of computers to process large amounts of data speedily and accurately.
The departments that were involved with such activities were known as Electronic Data Processing (EDP) departments. The focus of EDP was record keeping e.g., Accounting data. Then in the 70’s there was a shift from data to information. The focus was not a data but on the analysis of organization data.
There was a shift in the philosophy. Such a concept came to be widely known as ‘Management Information System’. In the 70’s the top management relied on the staff of EDP and MIS to supply the necessary information. The 80’s saw the Personal Computer (PC) revolution. The personal computer to the desk-top metaphor changed the picture completely.
The biggest pay-off for such direct use was the “what-if’ analysis capability. This led to the emergence of Decision Support System (DSS). The information and decision hungry managers of 80’s saw a huge potential in the expert systems as a result of spectacular growth in the Artificial intelligence area.
Combined with DSS philosophy the expert systems could supply a superior class of managerial information support, known as Knowledge Based Systems (KBS). The EDP targeted the operational level of management. The MIS/DSS/KBS target the middle management.
Attempts were made to provide information to top management as well, known as Executive Information System, (EIS).
If we talk about the concept of management information system (MIS) the data is transferred/input in hardware, software, networking, humans and communications through various means and is referred as IT resources. Then this information is combined with corporate mission and is used for business strategies, business process and management objective to develop functional strategies for achieving organization goals.
Management Information System – The Anatomy
The concept of ‘Management Information System’ which is being used here is somewhat different, than the ‘information’ as present’ collected’, ‘assembled’ and ‘processed’ in most of the private and public concerned. The various activities of the firm which involve collecting, processing, storing and reporting of information can usefully be considered as a system.
In actual practice, these activities take place in separate parts of an organizations as subsystem, to the extent that information function has common goals, resources and resource management, it can be viewed as one system. Basically, the information system comprise- (i) data collection and its recording, (ii) Processing, and (iii) Processed date generates meaningful reports.
The reports could be periodical reviews, analytical reports and control or action statements. The characteristics of a good information system are that its records are as detailed and accurate as possible and the flow of information into and out of the system takes place automatically within appropriate time spans.
The system should be able to process the information and provide meaningful reports for decision making at different levels of the division to the degree of detail required by such level. A well designed information system is able to perform these functions automatically, besides it also automatically monitors the transaction and activities by comparing results with established criteria.
An examination of collection assembling and dissemination of data in some of the public and private sector units shows that there is not much ‘systematic approach’. The data does not flow on continuing basis and the reports prepared with the help of inadequate data are difficult to analysis. No care is taken to draw reports to suit the special managerial needs for different levels of management. The later point is specially important to explain.
The reports are required of different levels of management for different purposes. Operational control has almost a day-to-day emphasis while planning needs are best met by choosing a time span long enough to throw up trends.
It is also a characteristic of the control process that the shift from operational control to planning simultaneously involves shift in terms of management reporting from internal (organizational) data to external (environmental) data and from financial to non-financial information.
An examination of the contents of the reports of the public sector units how that no such distinction is made. The same set of information which if furnished to the ministry is also presented to the board and is circulated among all the divisional heads. Repetition of the same information in different forms of reports is generally made.
There are two very important features of these reports. Firstly, they are too many and secondly, they are too bulky. Generally they contain a large number of details in comparison to minor nature and often the most significant and critical figure is lost in those voluminous details.
The long narrative reports as they are at present, prepared result in shifting the focus from significant to minor details. To a certain extent the ministries themselves are responsible; they often call information for ad hoc purposes, which does not fall in the area of the functions defined above.
In this connection it is necessary that the authority seeking information must be clear about its role and prepare a system of information that should be based on a proper and realistic examination of the information requirement of the users and must be related to their management objectives.
Time factor is the most important consideration of these reports. There are instances where the reports are sent after too much lags and by the time the information is received, the report becomes out of date and quite irrelevant to a particular situation.
The study team on public undertakings set up by the administrative Reforms Commission pointed out, among others the following defects in the present reporting system in public enterprises insofar as these relate to the government-
(i) A rational and up-to-date system of reporting is yet to be designed for providing the government with timely information about the true picture of the enterprises;
(ii) In many cases, an unduly large number of reports and returns are being obtained from the public enterprises and at too frequent intervals;
(iii) The form and contents of the reports need to be modified to cut out non-essential information and concentrate on important items of information that the government requires for exercising control at key points; and
(iv) Adequate experts cells do not exist in the controlling ministries or at a central point in the government for processing the reports and returns and for taking follow up action on them.
The Committee on Public Undertakings in their first report on the National Building Construction Corporation had also pointed out that “despite the submission of reports and returns neither the administrative ministry nor the Ministry of Finance were aware of the difficult financial position of the corporation in time.”
In the 5th Report on the Oil and Natural Gas Commission, the Committee remarks that the commission submitted about 55 periodical reports and returns without the ministry getting a clear picture of the problems and progress of the commission.
This violates the fundamental principle of reporting. Communication implies that a person receiving the information understands the nature and significance of material contained in the report he receives.
When communication is generally effective, management’s action and decisions are likely to be based on relevant facts which they receive rather than on untested impressions and guesses.
However, there are reasons to believe that accounting reports to management have not always achieved their intended purpose because the reports were not understood, recipients lacked the time required to grasp the meaning, or the content of reports were not relevant to problems facing the persons who received them.
A great deal of managerial effort and time is required to develop Management Information System for an enterprise. This effort is justified primarily on the grounds that the activities of all sub-units of the enterprise must be focussed on common and agreed upon enterprise objectives- each component of an enterprise must contribute in attaining the enterprise goals.
To ensure conformance, reports become an integral aspect of effective management. It is fundamental that performance reports must encompass all the activities and tailored to the characteristics of each particular environment.
The development of an effective information system depends upon and presupposes a detailed documentation of the functions and activities of the division concerned; a clear formulation of inter-relationships between different activities and the rules and procedures according to which decisions are made and further action is generated.
It means that an information system can be successful only when it is connected with other important finance functions—planning, controlling.
Management Information Systems – 7 Objectives
An information system combines related operations and procedures to perform a major organisation and management activity (such as document production). The efficiency and success of the system depend on careful planning, organisation, and control by the supporting staff of a bank.
The objectives of an information system include:
(i) Decision-making by supplying the best possible current information to management.
(ii) Eliminating duplication of work.
(iii) Saving time by using more efficient methods.
(iv) Establishing uniform procedures.
(v) Identifying responsibility for work and performance.
(vi) Improving service, including providing necessary training for all who operate within the systems.
(vii) Promoting acceptance both of the system and of possible change (resulting from feedback on the system’s effectiveness).
To achieve these objectives, a system must be flexible enough to allow revisions and for interaction with additional sub-systems.
Management Information System – Characteristics
Characteristics of an effective management information system:
(i) Has senior management support and sponsor.
(ii) Has gone through business risk analysis.
(iii) Has good project management controls.
(iv) Has good user interaction/ feedback controls.
(v) Has good security management controls.
(vi) Has good management reporting system,
(vii) Has good return on investment.
(viii) Is delivered on time.
(ix) Delivers all the functional requirements and liked by the users.
Management Information System – Functions
The basic function of MIS is to gather data on various aspects of the operation, accounting, statistical and others; process the data using statistical and operations research techniques; and present the summary and display of this information to the management.
The application of MIS range from payroll and billing (EDP functions which are purely classical in nature) to information processing for business decisions using “big brain” data bases, to store the data and information on all operations of the company. The MIS in this case can be hooked up to various corporate models for planning and decision-making which recommend optimum strategies.
The MIS takes the output of the quantitative models and summarises the information for use by top management. The decisions and outcomes are stored for monitoring, tracking and control and for historical audit trail.
A typical company has several operational information systems that collect and process data for sub-units in the organisation. The overall management information system can retrieve and analyze relevant data required for decision-making.
Following are the seven major functions of MIS:
(i) Facilitate the management of the business.
(ii) Provide management with one adequate decision support system by providing information that is timely, accurate, consistent, complete, and relevant.
(iii) Deliver complex material throughout the institution.
(iv) Support the organization’s strategic goals and direction.
(v) Reduce expenses related to labor-intensive manual activities.
(vi) Enhance communication among employees,
(vii) Makes work effective and efficient.
MIS supplies decision-makers with facts, supports and enhances the overall decision-making process and enhances job performance throughout an institution. At the most senior levels, MIS provides the data and information to help the board and management make strategic decisions.
At other levels, MIS allows management to monitor the institution’s activities and distribute information to other employees, customers, and members of management.
The impact of MIS on the functions is in its management. With a good MIS support, the management of marketing, finance, production and personnel becomes more efficient. The tracking and monitoring of the functional targets becomes easy. The functional managers are informed about the progress, achievements and shortfalls in the activity and the targets. The manager is kept alert by providing certain information indicating and probable trends in the various aspects of business.
This helps in forecasting and long-term perspective planning. The manager’s attention is brought to a situation which is exceptional in nature, inducing him to take an action or a decision in the matter. A disciplined information reporting system creates a structured database and a knowledge base for all the people in the organisation. The information is available in such a form that it can be used straight away or by blending and analysis, saving the manager’s valuable time.
Management Information System – Importance
Management Information System is an integrated set of component or entities that interact to achieve a particulars function, objective or goal. Therefore it is a computer based system that provides information for decisions making on planning, organizing and controlling the operation of the sub-system of the firm and provides a synergistic organization in the process.
The component of an information system includes. A hardware which is used for input/output process and storage of data, software are used to process data and also to instruct the hard-ware components, data bases which is the location in the system where all the organization data will be automated and procedures which is a set of documents that explain the structure of the management information system.
Technological revolutions in all sectors make modern managers to need to have access to large amount of selective information for the complex tasks and decisions. There are huge amount of information available to today’s manager and this had therefore meant that managers are increasingly relying on management information system to access the exploding information.
Management information services helps manager to access relevant, accurate, up-to-date information which is the more sure way of making accurate decisions. It also helps in automation and incorporation of research and management science techniques into the overall management information system for example-probability theory.
The management information services are capable of taking advantage of the computational ability of the company like processing, storage capacity among others.
Based on this relevancy, management information system should be installed and upgraded in various organizations since today’s managers need them to access information for managerial decision-making and also management functions.
MIS is an important resource needed to develop other resources. An MIS is a special purpose system useful for management in an organization. Managers need relevant information, which is information that increases their knowledge and reduces uncertainty. Thus it is usable by the manager for its intended purpose.
1. It is essential tool for managers in planning and decision-making. It is a well-coordinated information system, a database, to provide management with needed information to plan and make decisions.
2. It is useful for planning. As every organization makes long-term and short- term plans with the help of information like sales and production, capital investments, stocks, etc., management can easily plan.
3. MIS is always management oriented and keeps in view every level of management and gets the desired information.
4. MIS provides updated results of various departments to management.
5. MIS is always management oriented and keeps in view every level of management and gets the desired information.
Management Information System – 4 Types: Transaction Processing, Operations Information Systems and a Few Others
A management information system (MIS) is a computer-based system that provides the information necessary to manage an organization effectively. An MIS should be designed to enhance communication among employees, provide an objective system for recording information and support the organization’s strategic goals and direction.
There are four types of MIS that will be introduced in ascending order of sophistication:
1. Transaction Processing Systems:
These systems are designed to handle a large volume of routine, recurring transactions. They were first introduced in the 1960s with the advent of mainframe computers. Transaction processing systems are used widely today. Banks use them to record deposits and payments into accounts. Supermarkets use them to record sales and track inventory. Most managers use these systems to deal with tasks such as payroll, customer billing and payments to suppliers.
2. Operations Information Systems:
These systems were introduced after transaction processing systems. An operations information system gathers comprehensive data, organizes it and summarizes it in a form that is useful for managers. Most of these systems access data from a transaction processing system and organize it into a form usable by managers. Managers use operations information systems to obtain sales, inventory, accounting and other performance-related information.
3. Decision Support Systems (DSS):
A DSS is an interactive computer system that can be used by managers without help from computer specialists. A DSS provides managers with the necessary information to make intelligent decisions.
A DSS has three fundamental components:
(a) Database management system (DBMS) – Stores large amounts of data relevant to problems the DSS has been designed to tackle.
(b) Model-based management system (MBMS) – Transforms data from the DBMS into information that is useful in decision making.
(c) Dialog generation and management system (DGMS) – Provides a user- friendly interface between the system and the managers who do not have extensive computer training.
4. Expert Systems and Artificial Intelligence:
These systems use human knowledge captured in a computer to solve problems that ordinarily need human expertise. Mimicking human expertise and intelligence requires that the computer- (i) recognize, formulate and solve a problem; (ii) explain solutions and (iii) learn from experience. These systems explain the logic of their advice to the user; hence, in addition to solving problems they can also serve as a teacher. They use flexible thinking processes and can accommodate new knowledge.
Management Information System – Systems
Computerised MIS has become a normal feature of a computerised business in the developed countries.
A system may be defined as a set of units and elements which are integrated to perform the objective. A corporation consists of divisions, departments, sections, functions, etc., which are joined together in carrying out a common goal. Systems approach centres attention upon objectives for which the organisation has been established.
It stresses the interdependence of elements so that manager is constantly forced to view the elements or parts of a business in relation to each other. It also provides a systematic approach to developing information processing system for management planning and control.
The systems approach forces the manager to consider his business organisation as a network of information, with flow of information, providing decision-makers at all levels with the relevant information in order to make all types of decisions.
These information communication systems interconnect together all components needed to operate business successfully. The systems concept of MIS aims towards optimising the processing of information from various units and provide necessary basis for performing management functions from the systems view-point.
For example, marketing must be integrated with research and development and production, similarly, production with finance, and so on. The MIS provides capability to exchange relevant information about the total organization to an operating optimum decisions rather than suboptimum ones.
Management Information System – 3 Main Approaches
The use of Management Information System in the decision-making is the latest approach in technology.
There are three main approaches of MIS:
Approach # 1. Decision Support System:
Decision support systems are an application of Herbert Simon Model. The model has three phases, viz., Intelligence, Design and Choice. The decision support system basically helps the information system in the intelligence phase where the objective is to identify the problem and then go to the design phase for solution.
The choices of selection criterian vary from problem to problem and then go to the design phase for solution. The choice of selection criterian varies from problem to problem. It is, therefore, required to go through these phases again and again till a satisfactory solution is found. In the use of three phase cycle, you may use either enquiry, analysis, and models or accounting systems to come to a rational solution.
The decision support system helps in making a decision and also in its performance evaluation. These systems can be used to validate the decision by performing sensitivity analysis on various parameters of the problem.
In decision making, we know that there are two types of decisions-Programmable and Non-Programmable. The programmable decision, because of its rule base structure, can be computerised, as inputs, processing methodology; analysis and choice of decision making are predetermined.
Decision support system, can be built around the rule in case of programmable decision situation. While in nonprogrammable decisions, the rules are not fixed or predetermined, and requires every time the user to go through the decision-making cycle as indicated in the Herbert simon model.
The decision support system refers to a class of system which support in the process of decision-making and does not always give a decision itself. The nature of the decision is such that the decision makers need a variety of information, when same or similar types of decisions are to be made. These needs are such that wider additional demands on information would be made, the moment a piece of information is received.
The calls on the information are continuously made till the decision maker is fully satisfied. The reason for changing the demands is also because the methods of decision making undergo a change from time to time. The quantum and the scope of information also changes depending upon the risk in decision-making. The higher the risk, more information may be sought.
i. Status Inquiry Systems:
The number of decisions in the operational management and some at the middle management are such that they are based on one or two aspects of a decision-making situation. It does not call for any elaborate computations, analysis, choice, etc., for decision-making. If the status is known, the decision is automatic, i.e., the status and solution is unique relation.
ii. Data Analysis Systems:
These decision systems are based on comparative analysis, and use of a formula or an algorithm. But, these processes are not structured and therefore, vary. The cash flow analysis, the inventory analysis and the personal inventory systems are examples of the analysis systems. The use of simple data processing tools and business rules are required to develop this system.
iii. Information Analysis Systems:
In this system, the data is analysed and information reports are generated. The reports might be having exceptions as a feature. The decision makers use these reports for assessment of the situation for decision-making. The sales analysis, the accounts receivable systems, the market research analysis the MRP systems are examples of this system.
iv. Accounting Systems:
These systems are not necessarily for decision-making but they are desirable to keep track of the major aspects of the business or a function. The content of these systems is more data processing leading to formal reporting, with exceptions, if necessary. These systems account items such as cash, inventory, personnel and so on and relate it to a norm or norms developed by management, for control and decision.
v. Model Based System:
These systems are simulation models or optimisation models for decision-making. These decisions generally, are one time and infrequent and provide general guidelines for operation or management. The product mix decision, the material mix, the job scheduling rules, and the resource or assets or facilities planning systems are the examples.
In order to illustrate these decisions support system, let us take the example of materials management function and the variety of the decision and the type of decision systems used therein to support and evaluate the decision.
We can further analyse these systems in terms of the input source, the system, the hardware and the type of user as shown in table.
(i) The decision support systems are developed by the users and system analysts jointly.
(ii) The decision support system uses the principles of economics, science and engineering, and also the tools and techniques of management.
(iii) The data used in the decision support system is drawn from the information systems developed in the company.
(iv) The decision support systems are developed in isolation and form an independent system subset of the management information system.
(v) The most common use of the decision support system is to test the decision alternatives and also to test the sensitivity of the result to the change in the system and assumptions.
(vi)The data and information for the decision support system are used from the internal sources such as the database and the conventional files, and from the external sources.
The scope of knowledge management however depends on the perspective the organisation would take. One broader perspective is that KM includes strategic, tactical and operational knowledge management. A limited perspective is ‘Knowledge Management’ for improving operational efficiency of the organisation.
The emergence of KM is out of needs of managing competitive business better. It is out of managing risks in better way as the stakes are very high. The forces which drive KM are internal as well as internal.
These forces create initiatives in the organisation to build Knowledge management System (KMS). KMS is a logical extension to sophisticated MIS, which uses latest information technology to improve process capabilities, customer service and business performance.
Knowledge management has following processes:
1. Define, capture, manipulate, store and develop.
2. Develop information systems for knowledge creation.
3. Design applications for improving organisation’s effectiveness.
4. Create knowledge set, i.e., intellectual capital to increase economic value of the organisation.
5. Keep IC continuously on upgrade to use it as a central resource.
6. Distribute and share to concern.
Effective use of knowledge depends on how a user decides to perform the work and personal ability to pick and choose and further manipulate for effective behaviour. Hence, with formal KM in place in the organisation, use of KM still depends on the person’s initiative, ability to envision and the problem solving skills.
KM system is a superset of systems build over present information system architecture. It is not a transaction processing system and it does not have standard system components, which when implemented would create IC.
It would be appropriate to clear some doubts on knowledge and KM for its acceptance in the organisation as an asset.
Time has come to handle the knowledge-IC systematically, for use in strategic management of business. The knowledge over a period gets developed in the organisation and it resides in people, information, files, and database. It is not always, explicit but tacit in character and content, to know and acquire.
To bring knowledge as critical input in the management process, it is necessary to have knowledge management systems. The knowledge management system therefore deals with definition, acquisition, construction, storage, delivery and application of knowledge. KMS handles two types of knowledge. One is tacit and either is explicit.
All human beings have intelligence, which they use for problem solving, intelligence when supported by knowledge and reasoning abilities becomes an artificial intelligence. When such an artificial intelligence is packed into a database as a system, then what we have is AI system.
AI systems fall into three basic categories, viz., the expert systems (knowledge based), the natural language (native languages) systems, and the perception system vision, speech, touch. AI is a software technique applied to the non-numeric data expressed in terms of symbols, statements and patterns.
It uses the methods of symbolic processing, social and scientific reasoning and conceptual modelling for solving the problems. The AI systems are finding applications in configurations, design, diagnosis, interpretation, analysis, planning, scheduling, training, testing and forecasting.
The AI systems do not replace people. They liberate experts from solving common/simple problems leaving the experts to solve complex problems. Artificial Intelligence systems help to avoid making same mistakes, and to respond quickly and effectively to a new problem situation. The knowledge-based expert system is a special AI system.
It has wide applications in business and industry. AI systems thrive on artificial intelligence. AI is a field of science and technology where knowledge from other disciplines such as computer science, biology, psychology, mathematics, statistics and engineering is blended together.
The goal of AI is to develop computer functions of features as close to human intelligence, described as reasoning, learning, problem solving, exhibiting creativity, respond quickly, sort quickly Antiguans and incomplete and or erroneous information or situation. AI domain is very large and its application spreads in wide areas of business and Industry.
Cognitive science application uses knowledge and human information processing capabilities to produce major application as expert systems. The saver provides intelligent information sets, knowledge database, rule base and goal driven reaching capability to solve the problem. Expert systems are designed to make humanlike inferences leading to an advice to decision maker.
Robotics, application uses AI, engineering science, and physiology to produce computer intelligence to guide a ‘computer driven machine’ to perform like human being, having capabilities of perception, touch, manipulation, locomotion, navigation and so on. Robotics applications are found useful in manufacturing, material handling and transportation.
Natural interface application uses AI to build natural, realistic, multi-sensory human-computer interface. This interface enables you to build a ‘Virtual Reality’. Virtual reality becomes very handy support to test, feel or experience the ‘reality’ before it is actually created.
Management Information System – Information Technology and DSS
Managers, now a days, are drenched with information from multifarious sources. Thanks to the abundance of newspapers, journals, magazines, TV and radio programmes, and the explosive growth of Internet. In this Information Age, managers should know-how to handle information in an appropriate manner and put the same to effective use.
It is simply not possible to process all available information. They do not have the time to do so. Consequently, all managers need to collect, process and warehouse the most relevant information to make effective decisions in the present and future.
This is where Information Technology could be pressed into service by using tools such as data warehousing and data mining. Data warehousing is the process of collecting pieces of knowledge, often in the form of stories that might be helpful to someone in similar situations in future.
These data are stored in a data base with easy access to those who might require the data at any point of time. Data mining is the use of software to dig through the warehouse of stored information to search for the relevant bits.
Tools such as search engines and software agents help managers find bits of information that might help in resolving issues that they confront from time to time. Tools such as decision support systems help managers to gain instant access to information in a less structured format than a traditional management information system or data base.
DSS software combines corporate information on past performance with what’s currently taking place; it helps managers to work with large quantities of data not otherwise available to them. Through a DSS managers can get information about the firm, the competitors, the business environment etc. almost instantaneously.
(DSS software is user friendly and contains lot of graphical user interfaces) A modern DSS may consist of links to the World Wide Web and have built in artificial intelligence that adjusts to group behaviour and needs as well.
Currently computer scientists are trying to empower computers to behave as though they could think by perceiving and absorbing data, reasoning and communicating in ways similar to human behaviour.
Some Expert systems that are currently in use (for example to plan shipping schedules, offer financial advice to investors, advice to managers regarding how to react and respond to competitive moves etc.) can make decisions without human interaction. Such systems imitate human thinking and offer advice or solutions to complex problems in much the same way as a human expert would.
Management Information System – Computer-Based MIS
The use of management information system has grown tremendously following the accelerated growth in computers and their capabilities to process, store and retrieve useful information required for management decisions. The widespread adoption of MIS began in early 1960’s and it has now developed into a major discipline and science.
Most large corporations have special MIS groups whose function is to design, implement and maintain relevant management information. Prior to the birth of MIS, electronic data processing (EDP) was the most frequently used term for computer applications to business procedures and functions.
The development in computer technology enabled storage of large amount of information which could be readily accessible from central and remote locations through the use of existing telephone network. The rapid progress in computer technology permitted the use of computers for comprehensive planning, decision-making, implementation and control functions of management in medium and large companies in addition to EDP or ADP functions such as pay-roll processing.
A computer-based MIS is a collection of data processing equipment (hardware such as memory unit, central processing unit, printers, data entry terminals, etc.), procedures related to computer programming to process and retrieve data (software), and people that integrate various aspects of converting raw data into information that is usable for management planning, decision-making, implementing, and controlling of operations.
Most managements devote 90 per cent of their efforts to obtaining information which will enable them to operate and control and only 5 per cent of their efforts to obtaining necessary information to meet competition and another 5 per cent to obtaining the information needed to meet future needs.
Market-oriented company adopting comprehensive customer- oriented business planning to meet competition and changes in the environmental variables must have about 40 per cent effort in obtaining information to meet competition and adjust with environment changes and say, 60 per cent effort in obtaining information to operate and control.
Human Problems in MIS:
It is said that informal channels of information, are considerably used by managers in their managerial functions but these informal channels of information are not found into computerised MIS. Managers want hot only right information. They want it rapidly. Hence, they rely heavily on informal communications.
In reality, all informal communications should enter in a systematic manner so that the informal information can become part of the MIS. In short, MIS should honour human as well as the technical needs of managers. It is a fact that informal information is a large part of the manager’s information diet. MIS must duly recognise this sooner the better.
Role of Computer in Information System:
The electronic digital computer has been commercially available for about 25 years. There have been three generally recognised generations of computers. The fourth generation of computers has also been firmly established by 1980. Now software (programming) gets much greater emphasis than hardware.
Computer now can take over activities formerly reserved only for the human mind. It can now even think. It can provide brain power. It can hear, see, speak and even sing. The future capacity of computers seems almost unlimited. What the computer cannot do today is make a human value judgement. Hence, computerised MIS can only support decision-making when we deal with semi-structured and unstructured decision situations.
MIS is best suited for operational planning and control areas particularly in structured or programmed decisions. At the middle and top management level it has only supporting role and can assist in decision making process. In these areas manager is still the decision-maker. Computer cannot replace manager in semi-structured and unstructured decision areas.
The various sub-systems of MIS collect, process and store necessary pieces of information. This data is stored and maintained in a file (specific space for storage in the computer memory). When the data is needed, the computer software can retrieve it from the file. The collection of such sub-unit files for total organization is called the “central data base” for the MIS.
The heart of the MIS is the group of procedures and techniques that retrieve needed information from the central data base, perform necessary analysis and present summary results for review of management. The modern information processing technology offers high-speed, rapid access and mass storage devices to store large amount of data and information concerning various aspects of the firm and its environment.
The information needs of management served by MIS include, for example, forecasting of sales by month or year, master production schedules to meet the forecasted sales, inventory management, plant monitoring and control, purchasing and receiving of raw materials, and exception reports for operations. MIS also provides an effective feedback control mechanism for timely flow of information and imaginative analysis of well chosen information elements which ultimately determine the future of the organization.
These three aspects:
(1) Timely information flow,
(2) Imaginative analysis and
(3) Well-chosen information elements, make MIS field exciting, challenging and necessary for organization’s survival in the competitive world.
Management Information System – Role of MIS in Decision Support in Management
The management process is executed through a variety of decisions taken at each step of planning, organising, staffing, directing, coordinating and control, MIS aids decision-making. If the management is able to spell out the decisions required to be taken, the MIS can be designed suitably.
Decisions in Management:
i. Planning – A selection from various alternatives—strategies, resources, methods, etc.
ii. Organising – A selection of a combination out of several combinations of the goals, people, resources, method and authority.
iii. Staffing – Providing a proper manpower complement.
iv. Directing – Choosing a method from the various methods of directing the efforts in the organisation.
v. Coordinating – Choice of the tools and the techniques for coordinating the efforts for optimum results.
vi. Controlling – A selection of the exceptional conditions and providing the decision guidance to deal with them.
The objective of the MIS is to provide information for a decision support in the process of management. It should help in such a way that the business goals are achieved in the most efficient manner. Since the decision making is not restricted to a particular level, the MIS is expected to support all the levels of the management in conducting the business operations. Unless the MIS becomes a management aid, it is not useful to the organisation.
Management Information System – Management Effectiveness
‘Negandhi Estafen’ provides a good model for the analysis of management effectiveness, which generates an enterprise effectiveness in achieving the goals and objectives. The models put a lot of emphasis on the management philosophy and the environment factors on which the effectiveness is dependent. The environment factors provide the opportunities to survive and grow with certain constraints, while the management philosophy sets the guidelines for deciding the management practices of run the enterprise.
While the environment factors are difficult to control, it is left for the management to change its philosophy towards the various players in the business, viz., the employees, the consumers, the suppliers, the government, the community and the shareholders. Basically, it is a change in attitude towards these players.
For example, how to look at the employees? If the attitude is to treat them as business partners, you will empower them and create a sense of belonging to the organisation. Such an attitude will have an impact on the management practices, where the employees will play a decisive critical role. It will affect the organisation structure by reducing its size and the reporting levels.
If the attitude towards the consumer is changed to fulfill the expectations giving rise to a higher satisfaction, then the management practices in the product design, manufacturing and marketing will undergo a sufficient change. The product life cycle will undergo a significant change. The product life cycle will then be short, and more features and functions will be added to the product fulfilling not only the functional needs but also the service needs of the consumer.
The management practices, therefore, emerge out of the management’s philosophy and the environment, in which it operates. The management effectiveness would largely depend on both these factors. The MIS design would, therefore, be different depending upon the management practice followed by several organisations in the same industry. Such design improves the management effectiveness leading to an improvement in the enterprise effectiveness.
Management Information System – Role of MIS
MIS design should be designed, viewing the organization and should give due weightage to the human side of the organisation and its culture. The task and technology are the physical aspects of the organisation which can be ascertained very easily. But culture and people are very difficult to assess from the design point of view.
The structure of the five sub-systems should be considered while designing the MIS. MIS design should give reports in line with the organization structure. This means that the main decision makers and the power centers must be recognized in the MIS. Let us discuss these aspects of the organisation, structure and their implications.
In a tall hierarchy with a high degree of centralization, the MIS should give control information to the higher management where decision-making in concentrated. If the system is structured on the functional basis where the functional head is a key decision maker and all the functions have equally important role to play, then the MIS will have a functional design with the information support to the functional head. Further, in such a set-up, an integrated MIS would be necessary, reporting the corporate status of the business to the top management.
If the organisation works on a standarized system where rules, policies, systems and procedures have been laid down, then these become part of the MIS. The processing routines in the MIS incorporate these features as an integral part. This is safe as it has already been approved by the management of the organisation.
Along with the information, if the decision-making responsibilities are also clearly defined and allocated, then the MIS can produce information reports by processing the data and summarizing the results in line with the decision maker’s position in the structure.
In the basic model of the organization is modified as a product or a project organization system, then the MIS should focus on the management of planning and control of the multiple functions. Besides these functions, he has to know the trouble spots and shows the interconnection with the other functions.
It must summaries all information relating to the span of control of product or project manager. The MIS should be able to cater to the view of the product or the project manager and also to the top management.
In the organisation culture provides sufficient incentive for efficiency and results, the MIS should support this culture by providing such information which will aid the promotion of efficiency. If the culture encourages delegation of power and authority, then the MIS should incorporate the decision making rules in the system.
The organization system is an open system and MIS should be so designed that it highlights the critical business, operational, technological, and environmental changes to the concerned level in the organization, so that the action can be taken to correct the situation. The principle of the feed forward control should be extensively used as a design feature to provide a prior warning to the decision maker.
Since the organisation system has a dynamic role to play to meet the changing needs of a business, the MIS becomes a common support system for playing the dynamic role. When an organization is moving through the business phases of introduction, growth, maturity and decline. MIS should provide an information support, relevant to that phase of the business cycle. This means the designer of the MIS should foresee such requirements and make the design flexible enough to support such requirements.
The organizational learning helps to tone up the behaviour of the organization. The MIS should support the learning mechanism by identifying the cause and effect in a given situation. It should keep the records of action and provide help to analyze the best action in a given situation. It should be help to build various decision models for use by the managers. The information support should be such that the group of enterprising manager should be able to improve their capabilities to perform batter.
The design of the MIS, in isolation from organizational factors, is destined to fall as it just not fit into the structure. Since organization systems in the same business differ for various reasons such as the leadership style, the management style, culture and group of people as a body and so on, it is difficult to evolve a standard model of the MIS for a business and/or an industry.
Business environment is prone to changes and this factor makes business planning very complex. Some factors such as the market forces, technological changes, complex diversity of business and competition have a significant impact on any business prospects. MIS is designed to assess and monitor these factors.
The MIS design is supposed to provide some insight into these factors enabling the management to evolve some strategy to deal with them. Since these factors are a part of the environment, MIS design is required to keep a watch on environment factors and provide information to the management for a strategy formulation.
Strategy formulation is a complex task based on the strength and weakness of the organization and the mission and goals it wishes to achieve. Strategy formulation is the responsibility of the top management relies on the MIS for information.
There are various business strategies such as overall company growth, product, market, financing and so on. MIS should provide the relevant information that would help the management in deciding the type of strategies the business needs. Every business may not require all the strategies all the time. The type of strategy is directly related to the current status of business and the goals it wishes to achieve.
The MIS is supposed to provide current information on the status of the business vis-a-vis the goals. MIS is supposed to give a status with regard to whether the business is on a growth path or is stagnant or is likely to decline, and the reasons thereof. If the status of the business shows a declining trend, the strategy should be of growth. If business is losing in a particular market segment, then the strategy should be a market or a product strategy.
The continuous assessment of business progress in terms of sales, market, quality, profit and its direction becomes the major role of MIS. It should further aid the top management in strategy formulation at each stage of business. The business does not survive on a single strategy but it requires a mix of strategy operating at different levels of the management.
For example, when a business is on the growth path, it would require a mix of price, product and market strategies. If a business is showing a decline, it would need a mix of price-discount, sales promotion and advertising strategies.
The MIS is supposed to evaluate the strategies in terms of the impact they have on business and provide an optimum mix. The MIS is supposed to provide a strategy- payoff matrix for such an evaluation.
In business planning, MIS should provide support to top management for focusing its attention on decision-making and action. In business management the focus shifts from one aspect to another. In the introductory phase, the focus would be on a product design and manufacturing.
When the business matures and requires and requires to sustain or to consolidate, the focus would be on the past sales services and support. The MIS should provide early warning to change the focus of the management from one aspect to the other.
Evolving the strategies is not the only task the top management has to perform. It also has to provide the necessary resources to implement the strategies. The assessment of resource need, and its selection becomes a major decision for the top management. The MIS should provide information on resources, costs, quality and availability, for deciding the cost effective resource mix.
When the strategies are being implemented, it is necessary that the management gets a continuous feedback on its effectiveness in relation to the objective which they are supposed to achieve. MIS is supposed to give a critical feedback on the strategy performance. According to the nature of the feedback, the management may or may not make a change in the strategy mix, the focus and the resource allocation.
MIS has certain other characteristics for the top management. It contains forecasting models to probe into the future—the business model for evaluation of the strategy performance by simulation business conditions. It contains functional models such as the model for a new product launching budgeting, scheduling and the models using PERT/CPM technique for planning.
MIS for the top management relies heavily on databases which are external to the organization. The management also relies heavily on the internal data which is evolved out of transaction processing, Management uses the standards, the norms, the ratios and the yardsticks while planning and controlling the business activities.
They are also used for designing strategies and their mix. The MIS is supposed to provide correct, precise and unbiased standards to the top management for planning.
We can summaries the role of the MIS in the top management function as follows:
(i) Decide the goals and objectives,
(ii) Determine the correct status of the future business and projects,
(iii) Provide the correct focus for the attention and action of the management,
(iv) Evolve, decide and determine the mix of the strategies,
(v) Evaluate the performance and give a critical feedback on the strategic failures,
(vi) Provide cost-benefit evaluation to decide on the choice of resources, the mobilization of resources, and the mix of resources, and
(vii) Generate the standards, the norms, the ratios and the yardsticks for measurement and control.
Management Information System – Design and Procedure
Designing an MIS:
Many MIS have been failures. Hence careful design and implementation of MIS is essential.
Following factors determine the success of an MIS:
1. The information system must be designed and implemented to meet the needs of those managers who will use it in carrying the day-to-day responsibility.
2. Designing and implementing a MIS is best accomplished through close cooperation between systems analysts and managers.
3. A good starting point in MIS design is the analysis of the information systems that exists currently in the organisation.
4. Flexibility of design is the most desirable characteristic of an MIS system.
5. Output from the MIS must be presented in such a manner that it could be used bv managers without experiencing any problem. Information over load must be avoided.
1. Forward looking control data system is updated.
2. Output directed to lower and middle management.
3. Greater use of management by exception principle.
4. Input/ output oriented terminals for disseminating information needed in the form of tele-typewriters and visual display devices which are capable of sending and receiving information.
5. Existence of integrated sub-systems where information could be processed according to functional records.
6. Common data base like Inventory Data Base.
7. Existence of modular approach which means the system for receiving information and disseminating information. It must be flexible to accommodate changing external and internal environmental factors.
8. Use of Operations Research Models.
Following questions may be kept in mind to judge the effectiveness of the MIS system:
1. Do you feel that the information systems exist to provide service to you in your day- to-day work? How has it helped you in this respect?
2. Has the information system provided the service that you feel was promised at the start of its design and implementation?
3. Do you consider that the system has been implemented with due regard to costs and benefits? Are there any areas in which you consider costs excessive?
4. Do you feel comfortable using the system? Could more attention have been paid to matching the output of the system to your needs and if so, in what areas?
5. Is the system flexible enough in your opinion? If not, where should changes be made?
6. Do you still keep a personal store of information in a notebook or elsewhere? If so, will you share that information with the system? Do you seek any benefits in so doing?
7. Do you think that the information is still evolving? Can you influence the evolution and if not, why not?
8. Does the system provide you timely, relevant and accurate information?
9. Does the system make too much use of complex procedures and models?
10. Do you feel there has been sufficient attention paid to the confidentiality and security of the information in the system? Can you suggest areas of improvement?
Management Information System – Top 3 Applications: Strategy Support, Data Processing and Management by Objectives
With computers being as present everywhere as they are today, there’s hardly any large business that does not rely extensively on their IT systems. However, there are several specific fields in which MIS has become invaluable.
1. Strategy Support:
While computers cannot create business strategies by themselves they can assist management in understanding the effects of their strategies, and help enable effective decision-making. MIS systems can be used to transform data into information useful for decision making.
Computers can provide financial statements and performance reports to assist in the planning, monitoring and implementation of strategy. MIS systems provide a valuable function in that they can collate into coherent reports unmanageable volumes of data that would otherwise be broadly useless to decision makers.
By studying these reports decision-makers can identify patterns and trends that would have remained unseen if the raw data were consulted manually. MIS systems can also use these raw data to run simulations – hypothetical scenarios that answer a range of “what if” questions regarding alterations in strategy.
For example, MIS systems can provide predictions about the effect on sales that an alteration in price would have on a product. These Decision Support Systems (DSS) enable more informed decision making within an enterprise than would be possible without MIS systems.
2. Data Processing:
Not only do MIS systems allow for the collation of vast amounts of business data, but they also provide a valuable time saving benefit to the workforce. Where in the past business information had to be manually processed for filing and analysis it can now be entered quickly and easily onto a computer by a data processor, allowing for faster decision making and quicker reflexes for the enterprise as a whole.
3. Management by Objectives:
While MIS systems are extremely useful in generating Statistical reports and data analysis they can also be of use as a Management by Objectives (MBO) tool. MBO is a management process by which managers and subordinates agree upon a series of objectives for the subordinate to attempt to achieve within a set time frame.
Objectives are set using the SMART ratio- that is, objectives should be:
M – Measurable
A – Agreed
R – Realistic
T – Time-Specific
The aim of these objectives is to provide a set of key performance indicators by which an enterprise can judge the performance of an employee or project. The success of any MBO objective depends upon the continuous tracking of progress. In tracking this performance it can be extremely useful to make use of an MIS system. Since all SMART objectives are by definition measurable they can be tracked through the generation of management reports to be analyzed by decision-makers.
Management Information System – Advantages
The field of MIS can deliver a great many advantages to enterprises in every industry. Expert organizations such as the Institute of MIS along with peer reviewed journals such as MIS Quarterly continue to find and report new ways to use MIS to achieve business objectives.
1. Core Competencies – Every market leading enterprise will have at least one core competency—that is, a function they perform better than their competition. By building an exceptional management information system into the enterprise it is possible to push out ahead of the competition. MIS systems provide the tools necessary to gain a better understanding of the market as well as a better understanding of the enterprise itself.
2. Enhance Supply Chain Management – Improved reporting of business processes leads inevitably to a more streamlined production process. With better information on the production process comes the ability to improve the management of the supply chain, including everything from the sourcing of materials to the manufacturing and distribution of the finished product.
3. Quick Reflexes – As a corollary to improved supply chain management comes an improved ability to react to changes in the market. Better MIS systems enable an enterprise to react more quickly to their environment, enabling them to push out ahead of the competition and produce a better service and a larger piece of the pie.
4. Significant cost benefits, time savings, productivity gains and process re-engineering opportunities are associated with the use of data warehouse for information processing.
5. Data can easily be accessed and analysed without time consuming manipulation and processing.
6. Decisions can be made more quickly and with confidence that the data are both time-relevant and accurate.
7. Integrated information can be also kept in categories that are meaningful to profitable operation.
Management Information System – Problems
Problems of the control system may be discussed under the following heads:
1. No consensus on the criteria for measuring performance;
2. Reporting data may be invalid;
3. Performance norms may be based on outputs on which business may not have control;
4. Performance standards may be set by inherent contradictions;
5. Employees may consider the system to be unfair;
6. Over-emphasis on short term performance;
The entire control process may prove to be ineffective if the criteria for meeting the performance is the subject of controversy. Some may consider regularity and punctuality as the basis of employee performance whereas others feel the cost of production or the quantity of production as the bases of measuring performance.
Reporting data may be invalid, the data is not related to the performance of the individual.
Performance norms may be based on such outputs on which the business has no control. For instance, the material supply is provided by the government which is imported from outside. On these issues the organisation has no control.
There may be inherent contradictions in performance standards. Whereas the performance standard laid down for an individual work in eight units for the scheduled period of eight hours. Of the eight hours, he is expected to give one hour compulsorily for attending a training programme. Under the circumstances, there is contradiction in the performance standard. If one hour goes he may at best produce seven units by working for seven hours only.
Standard of performance laid down may be considered as unfair by the employees. They consider it unfair in the wake of prevalent environmental conditions, the competence of workers, their compensation package and the comparative standard fixed by the competitors. Standards which are unachievable should not be fixed. They will brand many efficient workers as inefficient which will lower the morale of the workers apart from creating conflict between labour and management.
Many time conclusions are drawn on the basis of performance in the short run. That short run may be the gestation period; hence the result may be erroneous. Since strategic management pertains to the long term, conclusions drawn on operating results may be far from reality.