Chapter 2: BASICS OF MIS
Introduction Management information Systems (MIS) is the discipline covering the application of people, technologies, and procedures — collectively called information systems — to solving business problems. 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 human deci decisi sion on maki making ng.. There There are are many many elem element entss to Managem Management ent Infor Informatio mation n Systems (MIS) which include: •
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Data - The data input to the system must be as accurate as it can be, subject to its costs and timescales for capture. It should then be stored in the most logical way. This This ofte often n diff differ erss from from how how the the data data is input input.. The The data data then then needs needs to be summarized to create information in a way that best meets the needs of the systems users - this may not necessarily be the most logical way or the easiest or cheapest for the IT team. People - People are involved both in capturing the data and in exploiting the information. It is important to motivate those who capture the data by highlighting the value that the exploited data brings to the organization. Hardware - In a small organization, the MIS may run on just the sales or finance director’s PC. In larger businesses, it usually runs on a server, shared or dedicated, with Internet or intranet access for those who need it. It is unusual to require specialized software. Software - the simplest MIS can be built using standard software. However, most MIS use specialized software, which has the most common features of an MIS already built in. The developer configures this by describing the database and its structure, where the data comes from, how to summarize the data and what standard queries will be required. The cost of this software varies widely. The cheapes cheapestt offers offers limited limited functi functions ons for one PC. The most most expens expensive ive is highly highly functi functional onal,, provid providing ing high high perfor performan mance ce and many featur features es for hundred hundredss or thousands of users and vast amounts of data.
Without these things effective MIS system would be forfeit to many problems, including Information flaws, which if exploited and proved to be wrong could bring about harsh fines from publishing false information (fraud).
DECISION MAKING The word decision is derived from the Latin root decido, meaning to cut off. The conc concept ept of decis decision ion,, theref therefore ore,, is settle settleme ment, nt, a fixed fixed inten intentio tion n bring bringing ing to a
conclusive result, a judgment, and a resolution. A decision is the choice out of several options made by the decision maker to achieve some objective in a given situation. Business decisions are those, which are made in the process of conducting business to achieve its objectives in a given environment. In concept, whether we are talking about business decisions or any other decision, we assume that the decision maker is a rational person who would decide, with due regard to the rationality in decision making. Decision making can be regarded as an outcome of mental processes (cognitive process) leading to the selection of a course of action among several alternatives. Every decision making process produces a final choice. The output can be an action or an opinion of choice.
Human performance in decision making terms has been the subject of active research from several several perspectives perspectives.. From From a psych psycholo ologic gical al per persp spec ectiv tive, e, it is nece necessa ssary ry to examin examinee indiv individu idual al dec decisi isions ons in the the conte context xt of a set of needs needs,, prefe prefere rence ncess an individu individual al has and values the they y seek. seek. From From a cognitiv cognitivee per perspec spective tive,, the decision decision makin making g proc process ess must must be rega regarde rded d as a conti continuo nuous us proc process ess integ integrat rated ed in the the interaction with the environment. From a normative perspective, the analysis of individual decisions is concerned with the logic of decision making and rationality and the invariant choice it leads to . Yet, at anothe anotherr level, level, it might might be regard regarded ed as a problem problem solving solving activi activity ty which which is termin terminated ated when when a satisf satisfact actory ory soluti solution on is found. found. The Theref refore ore,, decision decision making making is a reasoning reasoning or emotional emotional process which can be rational or irrational irrational,, can be based on explicit assumptions or tacit assumptions. assumptions . Logical decision making is an important part of all science-based professions, where specialists apply their knowledge in a given area to making informed decisions. Some research shows, however, that in situations with higher time pressure, higher stakes, or increas increased ed ambigui ambiguitie ties, s, experts experts use intuit intuitive ive decisi decision on making making rather rather than than struc structur tured ed approaches.
The major characteristics of the business decision making are: (a) Sequential in nature. (b) Exceedingly complex due to risks and trade offs. (c) Influenced by personal vales (d) Made in institutional settings and business environment. A. The business decision making is sequential in nature. In business, the decisions are not isolated events. Each of them has a relation to some other decision or situation. The decision may appear as a “snap” decision but it is made only after a long chain of developments and a series of related earlier decision.
The deci decisi sion on makin making g proce process ss is a compl complex ex proc proces esss in the the high higher er hier hierar archy chy of B. The management. The complexity is the result of many factors, such as the inter-relationship among the experts or decision makers, a job responsibility, a question of feasibility, the codes of morals and ethics, and a probable impact on business. C The personal values of the decision maker play a major role in decision making. A decision decision otherwise being very sound on the business principle principle and economic economic rationality rationality may be rejected on the basis of the personal values, which are defeated if such a decision is implemented. The culture, the discipline and the individual’s commitment to the goals will decide the process and success of the decision. D. Whatever may be the situation, if one analyses the factors underlying the decision making process, it would be observed that there are common characteristics in each of them. There is a definite method of arriving at a decision: and it can be put in the form of decision process model. The deci The decisi sion on maki making ng proc proces esss requ requir ires es crea creati tivi vity ty,, imag imagin inat atio ion n and and a deep deep understanding of human behavior. The process covers a number of tangible and intangib intangible le factors factors affecti affecting ng the decision decision process. process. It also requires requires a foresig foresight ht to predict the post-decision implications and a willingness to face those implications. All decisions solve a problem but over a period of time they give rise to a number of other problems.
Rational Decision Making A ration rational al decisio decision n is the one which, which, effec effectiv tively ely and effic efficien iently tly,, ensure ensuress the achievement of the goal for which the decision is made. If it is raining, it is rational to look for a cover so that you do not get wet. If you are in business and want to make profit, then you must produce goods and sell them at a price higher than the cost of production. In reality, there is no right or wrong decision but a rational or an irrational decision. The quality of decision making is to be judged on the rationality and not necessarily on the result it produces. The rationality of the decision made is not the same in every situation. It will vary with the organization, the situation and the individual’s view of the business situation. The rationality, therefore, is a multi-dimensional concept. For exampl example, e, the busine business ss decisio decisions ns in a privat privatee organ organiza izatio tion n and a Public Public Sector Sector Underta Undertaking king differ differ under under the head of ration rationali ality ty.. The reason reason for this this differ difference ence in rationality is the different objectives of the decision makers. Any business decision if asked to be reviewed by a share-holder, a consumer, an employee, a supplier and a social scientist, will result in a different criticism with reference to their individual rationality. rationality. This is because each one of them will view the situation in different contexts and the motive with the different objectives. Hence, whether a decision is right or wrong depends on a specific rational view. Simon Herbert differentiates among the types of rationality. rationality. A decision, in a given situation is:
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Objectively rational if it maximizes the value of the objective. Subjectively rational if it maximizes the attainment of value in relation to the knowledge and awareness of the subject. Consciously rational to the extent the process of the decision making is a conscious one. Organizationally rational to the degree of the orientation towards the organization. Personally rational to the extent it achieves an individual’s personal goals.
In other words, so long as the decision maker can explain with logic and reason, the objectivity and the circumstances in which the decision is made, it can be termed as a rational decision .
Whether the rationality applied is appropriate or not cou ld be a point for debate. Gross Bertram M* suggests three dimensions of rationality. rationality. 1. First, First, the the degree degree of satisfacti satisfaction on of human interest. interest. 2. Second, Second, the degree degree of feasibil feasibility ity in achieving achieving the objecti objectives. ves. 3. Third, Third, a consistency consistency in in decision decision making. making. If a decision decision maker maker shows a consis consistent tent behavior in the process of decision making, then one can say that he meets the test of the rationality.
The Problems in Making Rational Decisions (a) Ascertaining the problem As Peter Drucker points out, .the most common co mmon source of mistakes in the management decisions is the emphasis on finding the right answers rather than the right questions.. The main task is to define the right problem in clear terms. The management ma y define the problem as the .Sales are declining. Actually, Actually, the decline dec line of sales is symptomatic; s ymptomatic; the real problem may be somewhere else. For example the problem may be the poor quality of the product and you may be thanking of improving the quality of advertising. (b) Insufficient knowledge For perfect rationality, rationality, total information leading to complete knowledge is necessary. necessary. An important function of a manager is to determine whether the dividing line is reached between insufficient knowledge and the enough information to make a decision. (c) Not enough time to be rational The decision maker is under pressure to make decisions. If time is limited, he may make a hasty decision which may not satisfy the test of rationality of the d ecision. (d) The environment may not cooperate Sometimes, the timing of the decision is such that one is forced to make a decision but the environment is not conducive for it. The decision may fail the test of rationality as the environmental factors considered in the decision-making turn out to be untrue. For example, in a product pricing, the factor of oil and petroleum product price is considered as stable. But the post decision environment proves the consideration to be wrong.
(e) Other limitations Other limitations are the need for a compromise among the different positions, misjudging the motives and values of people, poor communications, misappraisal of uncertainties and risks, an inability of a human mind to handle the available knowledge and human behavior.
Decision making process We use our decision making skills to solve problems by selecting one course of action from several possible alternatives. Decision making skills are also a key component of time management skills. Deci Decisi sion on maki making ng can can be hard hard.. Almo Almost st any decis decisio ion n invo involv lves es some some conf confli lict ctss or dissatisf dissatisfaction action.. The difficult difficult part is to pick one solution where the positive positive outcome can outweigh possible losses. Avoiding decisions often seems easier. Yet, making your own decisions and accepting the consequence is the only way to stay in control of your time, your success, and your life. Types of Decision
The types of decisions are based on the degree of knowledge about the outcomes or the events yet to take place. If the manager has full and precise knowledge of the event or outcome which is to occur, then his problem of the decision decision making is not a problem. If the manager has full knowledge, then it is a situation of certainty. If he has partial knowledge or a probabilistic knowledge, then it is decision making under risk. If the manager does not have any knowledge whatsoever, then it is decision making under uncertainty. A good MIS tries to convert a decision making situation under uncertainty to the situation under risk and further further to certainty certainty.. Decision Decision making in the operations management, management, is a situation of certainty. This is mainly because the manager in this field has fairly good knowledge about the events which are to take place, has full knowledge of environment, and has predetermined decision alternatives for choice or for selection. Decision making at the middle management level is of the risk type. This is because of the difficulty in forecasting an event with hundred per cent accuracy and the limited scope of generating the decision alternatives. At the the top top manag managem emen entt level level,, it is a situ situat atio ion n of tota totall uncer uncerta tain inty ty of accou account nt of insufficie insufficient nt knowledge knowledge of the external environment and the difficulty difficulty in forecasting forecasting business growth on a long-term basis. A good MIS design gives adequate support to all the three levees of management. A manager can make two kinds of decision:
Structured – which are repetitive and need a definite routine and procedure to deal with them, e.g. stock is below 15 %, so an order need to be place with a supplier.
knowledge, insight, insight, and evaluation. They may well Unstructured – require knowledge, crop up without warning, and the right decision can be critical. Nature of Decision
Decision making is a complex situation. To resolve the complexity, the decisions are classified as programmed and non-programmed decisions. If a decision can be based on a rule, method or even guidelines, it is called the programmed decision . If the stock level of an item is 200 numbers, then the decision to raise a purchase requisition for 400 numbers is a programmed-decision-making situation. The decision maker here is told to make a decision based on the instructions or on the rule of ordering a quantity of 400 items when its stock level reaches 200. If such rules can be developed wherever possible, then the MIS itself can be designed to make a decision and even execute. The system in such cases plays the role of a decision maker based on a given rule or a method. Since the programmed decision is made through MIS, the effectiveness of the rule can be analyzed and the rule can be revived and modified from time to time for an improvement. The programmed decision making can be delegated to a lower level in the management cadre. A decision which cannot be made by using a rule or a model is the non-programmed decision . Such decisions are infrequent but the stakes are usually larger. Therefore, they cannot cannot be delegat delegated ed to the lower lower level. level. The MIS MIS in the non-pr non-progr ogramm ammeded-deci decisi sion on situat situation ion can help help to some some extent extent,, in identi identify fying ing the problem problem,, giving giving the relevan relevantt information to handle the specific decision making situation. The MIS, in other words, can devel develop op decis decisio ion n supp suppor ortt syst systems ems in the the non-p non-pro rogr gram amme medd-dec decis isio ionn-ma makin king g situations.
Four essential decisions: 1. 2. 3. 4.
Cons onsider soluti utions Choose a solution Is ther theree a prob proble lem m or oppo opport rtun unit ity? y? Is th the ch choic oice wo working?
A significant part of decision making skills is in knowing and practicing good decision making making techniq techniques ues.. One of the most most practi practical cal decisi decision on making making techni technique quess can be summarized in those simple decision making steps: 1. Identify the purpose of your decision. What is exactly the problem to be solved? Why it should be solved? 2. Gather information. What factors does the problem involve?
3. Identify the principles to judge the alternatives. What standards and judgment criteria should the solution meet? 4. Brainstorm and list different possible choices. Generate ideas for possible solutions. 5. Evaluate each choice in terms of its consequences. Use your standards and judgment criteria to determine the cons and pros of each alternative. 6. Determine the best alternative. This is much easier after you go through the above preparation steps. 7. Put the decision into action. Transform your your decision into specific plan of o f action steps. Execute your plan. 8. Evaluate the outcome of your decision and action steps. What lessons can be learnt? This is an important step for further development of your decision making skills and judgment. In every everyday day life life we ofte often n have have to make make decis decisio ions ns fast fast,, with withou outt enou enough gh time time to systematically go through the above action and thinking steps. In such situations the most effective decision making strategy is to keep an eye on your goals and then let your intuition suggest you the right choice.
Information as an Aid to Decision Making How do we then ensure e nsure rationality? It is ensured, if the process of decision making is carried out systematically, systematically, whereby all the aspects of the decision making discussed above are taken care of. Herbert Simon said that a decision dec ision maker follows the process of decision making disregarding the decision or the type of decision and the motive behind the decision. This process is followed consciously or without knowing it. We We can put this process in the Decision Making Model Simon (1977) describes the process of decision making as comprising four steps: 1. 2. 3. 4.
Intel tellige ligenc ncee Design Choice Later stage has been added with a view of improving the decision i.e. Review.
The intelligence stage encompa encompasse ssess collec collectio tion, n, class classifi ificat cation ion,, proces processin sing, g, and presentation of data relating to the organization and its environment. This is necessary to identify situations calling for decision. During the decision stage , the decision maker outlines alternative solutions, each of which involves a set of actions to be taken. The data gathered during the intelligence stage are now used by statistical and other models to forecast possible outcomes for each alternative. Each alternative can also be examined for technological, behavioral, and economic feasibility. feasibility. In the choice stage , the decision maker must select one of the alternatives that will best contribute to the goals of the organization. review stage, past choices can be subjected In the review subjected to review during implementati implementation on and monitoring to enable the manager to learn from mistakes. Information plays an important role role in all four four stages stages of the decision decision proces process. s. Figure Figure 1 indicat indicates es the inform informati ation on requirement at each stage, along with the functions performed at each stage and the feedback loops between stages.
An example of the Simon Model would illustrate further its use in the MIS. For example, a manager finds on collection and through the analysis of the data that the manufacturing plant is under-utilized and the products which are being sold are not contributing to the profits as desired. The problem identified, therefore, is to find a product mix for the plant, whereby the plant is fully utilized within the raw material and the market constraints, and the the prof profit it is maxi maximi mize zed. d. The The manag manager er havi having ng iden identi tifi fied ed this this as the the probl problem em of optimization, now examines the use of Linear Programming (LP) Model. The model used to evolves various decision alternatives. However, selection is made first on the basis of feasib feasibili ility ty,, and then then on the basis of maximum maximum profit.T profit.The he produc productt mix so given given is examined by the management committee. It is observed that the market constraints were not realistic in some cases, and the present plant capacity can be enhanced to improve the profit. Desirable features of an MIS •
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Be flexib flexible le - allowi allowing ng for differe different nt ways ways of analy analyzin zing g data data and evalua evaluatin ting g information. Be able to support a range of skills and knowledge. Provide interpersonal communication with other people in the organization. Not Not requir requiree extens extensive ive period periodss of concent concentrat ration ion as manager’ manager’ss switch switch betwee between n different tasks. Make it easy to interrupt the work and return to it at a later time. Protect a manager, from information overload.
Classification of Decision Making Systems The decision making systems can be classified in a number of ways. There are two types of systems based on the manager ’s knowledge about the environment. A. Closed decision making system:
If the manager operates in a known environment then it is a closed decision making system. The conditions of the closed decision making s ystem are: (a) The manager has a known set of decision alternatives and knows their outco mes fully in terms of value, if implemented. (b) The manager has a model, a method or a rule whereby the decision alternatives can be generated, tested, and ranked. (c) The manager can choose one of them, based on some goal or objective. A few examples are a product mix problem, an examination system to declare pass or fail, or an acceptance of the fixed deposits. B. Open decision making system
If the manager operates in an environment not known to him, then the decision making system is termed as an open decision making system. The conditions of this system are: (a) The manager does not know all the decision alternatives. (b) The outcome of the decision is also not known fully. fully. The knowledge of the outcome may be a probabilistic one. (c) No method, rule or model is available to study and finalize one decision among the set of decision alternatives. (d) It is difficult to decide an objective or a goal and, therefore, the manager manag er resorts to that decision, where his aspirations or desires are met b est. Deciding on the possible product diversification lines, the pricing of a new product, a nd the plant location, are some decision making situations which fall in the category of the open decision making systems. The MIS tries to convert every open system to a closed decision making system by providing information support for the best decision. The MIS gives the information support, whereby the manager knows more and more about the environment and the outcomes, he is able to generate the decision alternatives, test them and select one of them. A good MIS achieves this.
INFORMATION CONCEPTS Information is a critical resource in the operation and management of organizations. Timely imely avai availa labi bili lity ty of rele relevan vantt info inform rmat atio ion n is vita vitall for for effe effect ctiv ivee perf perfor orma manc ncee of managerial functions such as planning, organizing, leading, and control. An information system in an organization is like the nervous system in the human body: it is the link that connects all the organization's components together and provides for better operation and survival in a competitive environment. Indeed, today's organizations run on information. The term information system usually refers to a computer-based system, one that is desig designe ned d to supp suppor ortt the the opera operati tions ons,, manag managem ement ent,, and and decis decisio ion n funct functio ions ns of an organization. Information systems in organizations thus provide information support for decisio decision n makers makers.. Inform Informati ation on system systemss encompa encompass ss transa transacti ction on proces processin sing g systems systems,, management information systems, decision support systems, and strategic information systems. Information consists of data that have been processed and are meaningful to a user. Data versus Information
Data refers to raw, unevaluated facts, figures, symbols, objects, events, etc. Data may be a collection of facts lying in storage, like a telephone directory or census records. Info Inform rmat atio ion n is data data that that have have been been put put into into a meani meaning ngful ful and and usef useful ul cont contex extt and and communicated to a recipient who uses it to make decisions. Information involves the communication and reception of intelligence or knowledge. It appraises and notifies, surprises surprises and stimulates stimulates,, reduces uncertainty uncertainty,, reveals reveals additional additional alternatives alternatives or helps eliminate irrelevant or poor ones, and influences individuals and stimulates them to action. An element of data may constitute information in a specific context; for example, when you want to contact your friend, his or her telephone number is a piece of information; otherwise, it is just one element of data in the telephone directory. Computers have made the processing function much easier. Large quantities of data can be processed quickly through computers aiding in the conversion of data to information. Raw data data ente enterr the the syste system m and and are are tran transf sfor orme med d into into the the syst system em's 's outp output ut,, that that is, is, information to support managers in their decision making. Characteristics of Information relevance, timeliness, timeliness, accuracy, accuracy, costThe charact characteri eristi stics cs of good good inform informati ation on are relevance, effectiveness, reliability, usability, exhaustiveness, and aggregation level . Information is relevant if it leads to improved decision making . It might also be relevant if it reaffirms a previous decision. If it does not have anything to do with your problem, it is irrelevant. irrelevant. For example, information information about the weather conditions in Paris in January is relevant relevant if you are considering considering a visit to Paris Paris in January. January. Otherwise, Otherwise, the information information is not relevant.
Timeliness refers to the currency of the information presented to the users. Currency of data or information is the time gap between the occurrences of an event in the field until its presentation to the user (decision maker). When this amount of time is very short, we describe the information system as a real-time system. Accurac Accuracy y is measur measured ed by compari comparing ng the data to actual actual events events . The importance of accurate data varies with the type of decisions that need to be made. Payroll information must be exact. Approximations simply will not suffice. However, a general estimate of how much staff time was devoted to a particular activity may be all that is needed. Value of Information Information has a great impact on decision making, and hence its value is closely tied to the decisions that result from its use . Information does not have an absolute universal value. Its value is related to those who use it, when it is used, and in what situation it is used . In this sense, information is similar to other commodities. For example, the value of a glass of water is different for someone who has lost his way in Arctic glaciers than it is to a wanderer in the Sahara Desert.
The concept of normat of normative ive value of information has been developed by economists and statisticians and is derived from decision theory. The basic premise of the theory is that we always have some preliminary knowledge about the occurrence of events that are rele relevan vantt to our our deci decisi sion ons. s. Addi Additi tion onal al info inform rmat atio ion n might might modi modify fy our view view of the the occurrence probabilities and consequently change our decision and the expected payoff from from the decisio decision. n. The value value of additio additional nal inform informati ation on is, hence, the differ differenc encee in expected payoff obtained by reduced uncertainty about the future event. Informat Information ion supports supports dec decisio isions, ns, dec decisio isions ns trigger trigger actions, actions, and actions actions affect affect the achievements or performance of the organization . If we can measure the differences in performance, we can trace the impact of information, provided that the measurements are carefully performed, the relationships among variables are well defined, and possible effects of irrelevant factors are isolated. The measured difference in performance due to informational factors is called the realistic value or revealed value of information.
For most information systems, particularly those supporting middle and top management, the resulting decisions often relate to events that are not strictly defined and involve probabilities that cannot be quantified. The decision-making process often is obscure and the outcomes are scaled by multiple and incomparable dimensions. In such cases, we may either attempt to perform a multi-attribute analysis or derive an overall subjective overall subjective value. The The subjective value reflects people's comprehensive impression of information and the amount they are willing to pay for specific information. As mentioned before the five classical functions of a manager are: 1. 2.
Planning – the direction a company compan y takes e.g. diversifying, where to operate. e quipment and services. Organising - resources such as people, space, equipment
3. 4. 5.
Coordinating - the activities of various departments. Decision-making - about the organisation, products or services made or sold, the employees, use of o f I.T. Controlling - monitoring and supervising the activities of others.
The role of a management information system (MIS) is to provide a manager with sufficient information to make informed decisions to help him to carry out the above functions. The best definition definition of an MIS MIS is: The role of a management information system is to convert data from internal and external sources into information that can be used to aid in making effective decisions for planning, directing and controlling. We need to make the distinction between a data-processing system, an operational and management information system: 1. 2. 3.
Data processing systems record day too day transactions, e.g. sale of a CD to a customer. Operational Operational Information Information systems systems read read the the coll collec ecte ted d data data and and do things things like like producing lists of items that need to be re-ordered. The MIS will analyse the sales data to highlight sales trends of different product lines, to enable decisions to be made as to whether the product needs special promotion, or whether it should be discontinued.
A. The MIS deals with internal and external information .
The internal information can be got quite easily from the various systems on the company network, e.g. sales figures for each product p roduct line. The external information is gathered from: 1. 2.
3. 4.
Intelligence Intelligence about competitors’ competitors’ activities . This This can come through through reading reading articles in the press, leaks, or even industrial espionage. Information about population shifts . As the population population gets older, older, the less likely they are to be interested in pop-music or customising cars, but are more likely to be interested in weight-loss products or holidays for the over 50s. Economic and social factors. Sales of cars would go down in an area where a major employer had just closed down a plant. Financial forecasts forecasts would would change if the minimum Government Government Legislation Legislation . Financial wage rose.
B. The MIS can be used to gather information from both formal and informal flows of information.
A formal flow of information is one in which a procedure is adopted, e.g. the downloading of sales figures from several branches first thing on a Monday
mornin morning. g. Extern External al data data can be collec collected ted using using specia specialis lised ed data collect collection ion Bradstreet who agencies such as Dun and Bradstreet who produce economic data for academic and commercial organisations. organisations. Formal flows can also come from people working on the same document at several locations, or by use of e-mail, or by use of company intranets . Informal informatio information n flows come from chance meetings, meetings, reading magazines or newspapers, or watching the news on TV. TV.
C. The MIS must produce information for managers on three levels: Operational – day-to-day decisions such as ordering in more stock Tactical – decisions that have a short to medium term effect, e.g. introducing a new product to a particular retail outlet; Strategic – long term decisions that will affect the future of the organisation, e.g. whether to open a new store, or take over a rival concern.
SYSTEM CONCEPTS A system is a set of components that operate together to achieve a common purpose. Thus a management information system collects, transmits, processes, and stores data on an organization's resources, programs, and accomplishments. The system makes possible the conversion of these data into management information for use by decision makers within the organization. A management information system, therefore, produces information that supports the management functions of an organization. MIS per personn sonnel el must must be tech technica nically lly qualifi qualified ed to work with comput computer er hardwar hardware, e, software, and computer information systems . MIS managers, once they have risen
through their technical ranks of their organization to become managers, must remember that they are no longer doing the technical work. They must cross over from being technicians technicians to become managers. Their job changes from being technicians to being system systemss manag manager erss who mana manage ge othe otherr peopl people's e's techn technica icall work work.. Th They ey must must see themselves themselves as needing to solve the business problems problems of the user, user, and not just of the data-processing department. MIS manage managers rs are in charge charge of the system systemss develop developmen mentt operati operations ons for their their firm. firm. Systems development requires four stages when developing a system for any phase of the organization: Phase I is systems planning . The systems team must investigate the initial problem by determining what the problem is and developing a feasibility study for management to review. Phase II identifies the requirements for the systems . It includes the systems analysis, the user requirements, necessary hardware and software, and a conceptional design for the system. Top management then reviews the systems analysis and design. Phase III involves the development development of the systems systems . This involves developing technical support and technical specifications, reviewing users' procedures control, designing the system, testing the system, and providing user training for the system. At this time, management again reviews and decides on whether to implement the system. Phase IV is the implementation of the system. The new system is converted from the old system, and the new system is implemented and then refined. There must then be ongoing maintenance and reevaluation of the system to see if it continues to meet the needs of the business. Systems Life Cycle
The construction of a specialist computer system often involves large teams of people, and it is absolutely absolutely critical critical that they are managed correctly. correctly. If they are not, the project project will be at best inefficient inefficiently ly run or at worst go belly-up. belly-up. There are a good number of sophisticated computer projects that have attracted publicity for all the wrong reasons, usually with the waste of many millions of euros eu ros of public money mone y. There are a number of ways that computer projects can be managed. We will look at 1. 2. 3.
The systems life cycle The waterfall model Prototyping .
A. The systems life cycle was the traditional way in which projects were carried out. Each stage was completed before b efore the next was started. The various stages are:
1. 2. 3. 4. 5. 6.
Feasibility study Maintenance Design Analysis Implementation Testing
It is difficult to backtrack in SDLC B. In the waterfall model , it is possible to rework earlier stages in the light of experience gained at a later stage. Each stage is signed signed off and the next stage is proceeded proceeded with. However the end user is rarely involved in the development stage, even though they may well well be invol involved ved in sign signin ing g off. off. It is ther theref efor oree crit critic ical al that that the the analy analyst stss and the the programmers understand the end-users’ requirements. This can be quite difficult with the waterfall model. The various stages here are: 1. 2. 3. 4. 5. 6.
Feasibility Study Requ Requiirem rements ents anal analy ysis Design Codi oding an and Testing Conversion Post Post-i -imp mple leme ment ntat atio ion n revi review ew
The waterfall model has disadvantages, which can be overcome using prototyping, in which a model of the system is developed in partnership with the end-user. C. The features are worked out with the end user using a prototype, and the end user can have a considerable considerable input into the development development of a project. project. The approach is shown below: 1. 2. 3. 4. 5.
Esta Establi blish sh an outli outline ne spec specif ific icat atio ion n Devel velop a proto ototyp type Evaluate Specify Design and Im Implemen ementt
Benefits are: • •
• •
Misunderstandings are detected at early stages The user user will will notice notice any missin missing g functi functions ons,, incompl incomplete ete or incons inconsist istent ent requirements. can be built quickly to demonstrate d emonstrate systems it can be used for training before the system is finished
Drawbacks are: • • •
Project management can be discoordinated or even sloppy. Meetings with end users can become time consuming. The final result could be completely different to what was requested in the first place.
There are several different ways of prototyping:
1. 2. 3. 4.
Test the feasibility of the design proposal Piloting – Test building ng to develo develop p an underst understandi anding ng of the user’s user’s Modelling – buildi requirements Throw-away Throw-away prototyping prototyping – Pilot and modelling are throw away types – once they achieve their purpose the real system is built. Evolutionary prototyping – each prototype built is a step closer to solution.
I: What Prompts a New System?
1.
The current system may not do what it should.
2.
Technological developments may have made the current system outdated.
3.
The current system may be too inflexible or expensive to maintain.
A. Feasibility Study The scope and objectiv objectives es of the system system are specifie specified. d. The aim is to understa understand nd the probl problem em and and see see if it is worth worth contin continui uing ng.. A feasibility feasibility report report is produced by the systems analyst who considers the five main factors which are (TELOS): •
•
•
•
•
Technical feasibility – investigating if the technology exists to implement the system Economic Feasibility – establishing the cost-effectiveness of the system – do the benefits outweigh the costs? Legal Feasibility – Is there any conflict with system and legal requirements e.g. Data Protection Act Operational Feasibility – are work practices and procedures able to support new system. Also Also considers social factors e.g. e.g . how it will affect working lives. Schedule Schedule feasibility feasibility – How long it will take to develop and if it can be done in specified time frame.
Telos is a Greek word meaning a target.
B. Once the feasibility study concludes that the project is viable, it proceeds to the requirements analysis . This involves: •
•
•
•
Interviewing staff at all levels of the organisation to get their views on exactly what they want. Sending Sending out questionnaires which need to be carefully constructed to avoid ambiguous responses. Examining all the documentation , from the most day-to-day to those used by the most senior of the managers. Observation of current procedures and practices.
C. All of this is carried out by systems analysts who produce data flow diagrams to picture the company’s operations .
D. The analysts also consider the costs and benefits implications . They also consider the way the project will be implemented: • • •
Will it be done in-house or using consultants; What hardware would be used; What software could be used?
E. Finally a report is written with a recommendation to proceed or abandon the project. II: The next stage is the system design: •
•
• • • •
• • •
Hardware profile , including the technical data of the machines on which the programs will be run. Software profile , including the programming language, packages, and database management systems; Inputs, including entry screens; Outputs, such as reports; The user interface . The modular design structure for the progra program. m. The program program is built built up in discrete sub-units and put together; Test plan and data; Conversion plan ; Documentation , including a user manual.
III: Then there’s the implementation , where the system is coded and tested . Also Hardware is installed, ready to convert from the old system to the new. •
• •
Hard Hardwa ware re is inst instal alle led, d, whic which h may need need exte extens nsiv ivee work work on cabl cablin ing g and/ and/or or redesigning offices; Users are trained; Conversion of master files, or creation of new master files.
There are several ways of conversion : •
•
• •
Direct Direct changeover changeover, in which the old is topped and the new is introduced. Usually Usually this is over a weekend or some other slack time. The advantage advantage is that there there is a mini minimu mum m of dupl duplic icat atio ion. n. The The draw drawba back ck is ther theree can can be seri serious ous disruption if the new system has errors in it. wheree the the two two syst systems ems are are run run alon alongs gsid idee each each othe otherr, Parallel conversion conversion wher minimising disruption due to errors. However this does involve involve duplication of the work. Phased conversion where bits of the new system are introduced, one at a time. Pilot conversion where the system is implemented initially in a few branches.
IV: IV: Once the system is up and running, there is a post-implementation review . It is usually in the first few weeks and months that errors become apparent.
So system maintenance may be needed: •
•
•
Perfective maintenance – although the system is running well, there may be room for improvement; Adaptive maintenance – where new functions are added to take into account the changing needs of the company; Corrective maintenance to get rid of errors.
The following diagram shows a sample system maintenance module :
Why an MIS Might Fail MIS systems are complex complex and expensive expensive pieces of software, and many people people are involved involved with the design both within the organisation and from outside. outside. Often they are built by software software houses to the precise requirements of the the organisation. So the client organisation needs to be very clear as to what it wants, and the software house analysts need also to be very clear about the requirements.
MIS failures can be expensive and bring bring bad publicity to all parties. parties. They can arise due to: •
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•
•
•
•
•
Inadequate Inadequate analysis - problems, needs and constraints constraints aren’t aren’t understood understood in the early stages. Lack of management involved in the design – wrong expectations of a new system / no-one understands the system. Emphasis on the computer system – Need procedures for handling input and output / select the right hardware and software Informati ation on must must be easily easily Concent Concentrati ration on on low-leve low-levell data process processing ing – Inform accessible and understood Lack of management knowledge of ICT systems and capabilities – managers managers know what they want from the system s ystem but don’t understand the technology Lack of teamwork – An ICT manager must co-ordinate the accounts, marketing, sales etc. departments and help everyone understand the benefits of the system Lack of professional professional standards – All systems need clear documentation that all users can understand (not just the ICT literate)
Organisations can judge how successful the implementation of an MIS system has been by applying the following evaluations: •
• •
•
High level of use - Is it actually actually used? Some systems don’t become operational operational for reasons such as it taking too long to enter data. High level of user satisfaction - Do users like the systems? Accomplishment of original objectives - Have the objectives specified in the analysis stage been achieved? Appropriate nature of use - Is the software being correctly used?
Has proper training been given? •
Institutionalization of the system - Has it been taken on board enthusiastically?
Types of Systems Management information systems can be used as a support to managers to provide a competitive advantage. The system must support the goals of the organization. Most organizations are structured along functional lines, and the typical systems are identified as follows: Accounting management information systems: All accounting reports are shared by all levels of accounting managers. Financial management information systems : The financial management information system provides financial information to all financial managers within an organization including the chief financial officer. The chief financial officer analyzes historical and
current financial financial activity activity,, projects projects future future financial financial needs, and monitors monitors and controls controls the use of funds over time using the information developed by the MIS department. Manufacturing Manufacturing management management information information systems systems : More than any functional area, oper operat atio ions ns have have been been impa impact cted ed by grea greatt adva advanc nces es in tech techno nolo logy gy.. As a resu result lt,, manufacturing operations have changed. For instance, inventories are provided just in time so that great amounts of money are not spent for warehousing huge inventories. In some instances, raw materials are even processed on railroad cars waiting to be sent directly to the factory. factory. Thus there is no need for warehousing. Marketing management information systems: A marketing management information system supports managerial activity in the area of product development, distribution, pricing decisions, promotional effectiveness, and sales forecasting. forecasting. More than any other functional areas, marketing systems rely on external sources of data. These sources include competition and customers, for example. Human resources management information systems: Human resources resources management management information systems are concerned with activities related to workers, managers, and other individuals employed by the organization. Because the personnel function relates to all other areas in business, the human resources management information system plays a valuable role in ensuring organizational success. Activities performed by the human resources management information systems include, work-force analysis and planning, hiring, training, and job assignments.
The above are examples of the major management information systems. There may be other other managem management ent inform informati ation on system systemss if the company company is identi identifie fied d by differ different ent functional areas.
