Management Information systems – An Overview

Management Information systems – An Overview

After you have studied this chapter you will:
have had an introduction to the book as a whole;
know that the book takes a decision focus to management information systems;
understand that it is the user who determines what is information not the producer;

know the main knowledge requirements for MIS design.

What is a management information system (MIS)?
There is no universally accepted definition of an MIS and those that exist reflect the emphasis – and prejudices! – of the particular writer. The teerm MIS has become almost synonymous with computer based data processing and indeed many books with MIS in the title tum out to exclusively concerned with topics such as systems analysis, file design and the various other technical facets of .computer based systems. This emphasis results in a production – orientated definition of MIS of which the following by Kelly is a typical example:

“Management Information System: The combination of human and computer – based resources that results in the collection storage, retrieval, coommunication and use of data for the purpose of efficient management of operations and for business planning.”

This manual does not take a production – orientated view and emphasises that the means of producing the information – whether by computer or manual methods &#

#8211; is a secondary consideration compared with the importance of ensuring that the correct problems are addressed and that relevant information is available when, where, and in the form required to be usable by management. Then, and only then, should the means of producing the information be considered.
This manual takes a decision focus to the design and operation of MIS which means ,that the information system is viewed as a means of processing data, ie the routine facts and figures of the organisation, into information which is then used for decision making. It is changes in decision behaviour which distinguish data from information. Figure 1/1 summarises this approach.

This means that MIS are qualitatively different from data processing systems and that management involvement annd interaction between information specialists and management is the key feature of successful MIS design.

Having regard to the emphasis of this manual an MIS can be defined as:
A system to convert data from internal and external sources into information and to communicate that information, in an appropriate form, to managers at all levels in all functions to enable them to make timely and effective decisions for planning, directing and controlling the activities for which they are responsible.
Note the emphasis on th

he use of information in the definition, not on how it is produced.
Problems with MIS

There is abundant evidence from numerous surveys both in the UK and the USA that existing MIS, often using advanced computer equipment, have had relatively little success in providing management with the information it needs. The typical reasons discovered for this include the following:

• lack of management involvement with the design of the MIS;
• narrow and/or inappropriate emphasis of the computer system;
• undue concentration on low level data processing applications particularly in the accounting area;
• lack of management knowledge of computers;
• poor appreciation by information specialists of management_s true information requirements and of organisational problems;
• lack of top management support

To be successful an MIS must be designed and operated with due regard to organisation and behavioural principles as well as technical factors. Management must be informed enough to make an effective contribution to systems design and information specialists (systems analysts, accountants, operations researchers and others) must become more aware of managerial functions and needs so that, jointly, more effective MIS are developed.

Management do not always know what information they need and information specialists often do not know enough about management in order to produce relevant information for the managers they serve. An

n example given by Professor Kaplan graphically illustrates this point.
He reported that a group of American industrialists visiting Japan found that their counterparts were regularly supplied with information on the proportion of products which pass through the factory without re-working or rectification. They found that a typical percentage of products that needed no re-working was 92%. The American managers found that this information was not available to them in their factories at home but on investigation it was found that their ratio was 8%. They then worked on this factor for 6 months at which point the ratio had moved up to 66% and, more importantly, productivity was 25% higher.

There is no doubt that better communication between management and information specialists and a wider knowledge by both groups of MIS principles would greatly facilitate the task of developing relevant and appropriate information systems. There is/ unfortunately, no simple checklist of essential features which, if followed, will automatically produce the perfect MIS. What is required is an awareness and understanding of key principles and function so that the design, implementation and operation of the MIS is the result of informed decisions and judgements rather than haphazard development without regard to real organisational requirements.
Knowledge Requirements for MIS
By th
heir nature, MIS draw upon a wide and growing range of concepts and techniques and Figure 1/2 shows the major areas of knowledge which are considered to be the most important in the development and operation of MIS.

Figure 1/2 Knowledge Requirements for the Development & Operation of MIS

Figure 1/2 has been drawn not only to show the various areas of knowledge, which are each developed in subsequent chapters of the manual, but also to show that inter-relationships exist between all the areas. This point is stressed because the knowledge areas are not self-contained, independent entities but interact with, and complement, each other. The understanding of these interactions and cross relationships makes the task of designing MIS much more difficult but conversely, enhances the likelihood of designing relevant information systems which make a positive contribution to the organisation.

It will be seen that encircling the core of the diagram is an area entitled _Behavioural Factors_. This attempts to show in a diagrammatic form the all pervasive influence and importance of behavioural considerations in the design and operation of MIS. Even within areas which are conventionally deemed to be purely quantitative, the reactions, motivations, aspirations and capabilities of the people involved must be considered. An example is the accounting technique of Budgetary Control which is often regarded by accountants as a neutral, technical process but which is viewed by the personnel affected as anything but neutral. Properly designed, such systems may have beneficial motivating effects but all too often are seen by the managers and staff as unwanted impositions which cause resentment and dysfunctional behaviour, i.e. behaviour which does not contribute to organisational objectives. Because of the overall importance of behavioural considerations they are dealt with throughout the manual in context with the topic under consideration.

Each of the knowledge areas shown on Figure 1/2 is introduced in the following paragraphs.
The Nature of Data, Information and Communications

The processing of data into information and communicating the resulting information to the user is the very essence of MIS. Data is the terms for collections of facts and figures; hours worked, invoice values, part numbers, usage rates, items received etc. etc. etc. These basic facts are stored, analysed, compared, calculated and generally worked on to produce messages in the form required by the user, i.e. the manager, which is then termed information. This outline of the process is simple and readily understandable but further study will show that information is a more complex and ambiguous concept than so far indicated. From the viewpoint of developing relevant MIS, rather than the routine production of standardised reports, consideration must be given to the source of the information, the means by which it is communicated and, most important of all, the meaning attached to the message received and the use made of it. This final link in the communication chain is clearly of critical importance to both the information system designer and user and again emphasises the pervasive nature of human behavioural factors in MIS.

A theme which is developed in this manual is that the value of information can only come from the results of decisions and actions based on the information.
In summary, data incur costs, information – which is properly communicated and acted upon – can create value.

General System Concepts

Many of the concepts of General Systems Theory (GST) have direct applicability to organisations and MIS. GST emphasises that not only is it necessary to examine and analyse the individual parts of the system or organisation – known as the reductionist approach -but also it is vital that the system is viewed as a totality where the whole is greater than the sum of the parts – known as the holistic approach. Systems are composed of sub-systems, or expressed in commercial terms, organizations consist of departments and sections, and these parts interact and are interdependent.

Accordingly it is necessary to consider these inter-relationships otherwise the system or organisation as a whole will not function efficiently and will be slower to adapt to changing conditons, which is a primary requisite to survival. The reductionist approach ignores these vital inter-relationships by treating the individual parts as self contained entities – which they are not. A simple organisational example of this would be if a stock control system in a firm was to be analysed in order to make it more efficient and it was decided that no attempt was to be made to consider the linkages which exist between the production control system, the replenishment system and the stock control system itself. In such circumstances even if the stock control system operated at peak efficiency, the overall effect would be less than optimal and a condition of
sub-optimality would occur.
Organisation Processes and Structures

Organisations are artificially contrived structures with procedures and objectives which should, and usually do, adapt to changes in the environment. MIS exist in organisations in order to help them achieve objectives, to plan and control their processes and operations, to help deal with uncertainty and to help in adapting to change or, indeed, initiating change. Accordingly it is important for information system designers to be aware of the various influences on organisation design. These range from earlier mechanistic concepts, largely stemming from the _scientific management’ movement in the early part of this century, to more modem ideas which recognise the social and behavioural characteristics of the members of the organisation and the need for adaptation and change.

Management Functions and Levels

As already stated, the value of information derives from the actions that management take as a result of using the information. It follows that information specialists need to know what of tasks and functions management have to perform so that they are able to produce relevant – therefore usable – information.
The functions of management can be grouped into five areas: planning, decision making, organising and co-ordinating, leadership, and motivation, and control.

Obviously the emphasis given to each area varies from manager to manager and is especially dependent upon the level of the manager in the organisation.

In broad terms, three levels of management can be seen in all organisations. Top or strategic management, middle or tactical management and junior or operational management.

There are clear differences in information requirements between a manager at the operational or transactional level such as, say, a transport supervisor and a manager at the strategic or top level such as, for example, the marketing director. At the highest level, structured, formal MIS may actually be counter productive, for at these levels informal MIS and external influences become increasingly important.

Another factor which affects the tasks a manager has to perform, and hence his information requirements, is the extent of functional authority within the organisation. Functional authority is that which is exercised by specialist managers and staff throughout the various departments and units of the organisation. Possibly the most common example of this is the Personnel Department which has functional responsibility for many personnel and industrial relation activities throughout the whole organisation.

Whilst each of the five functional areas, which in total constitute the task of management, need relevant information, three particular areas – planning/decision making and control – make heavy demands on the organisation_s MIS and thus are given special attention in this manual.

The Nature of Planning and Decision making and the Techniques Available

Planning and decision making have rightly been called the primary management tasks and these tasks occur at every level of management although, naturally, the type of planning and decision making will vary between the levels.

Planning is the process of deciding in advance which is to be done and how it is to be done. The planning process results in plans which are pre-determined courses of action that reflect organisational objectives and the plans are implemented by decisions and action. Thus, effective planning and decision making are inextricably linked, for without decisions and actions the planning process is a sterile exercise.

In order to provide appropriate information, MIS designers must be aware of the types of decisions made at the various levels of organisation. A useful, broad classification is that given by H.A. Simon who classified decision making into programmed and non-programmed areas.

Programmed decisions are those that arc routine and repetitive and where the decision rules are known. Conversely, non-programmed decisions are novel and unstructured and the nature of the problem and decision rules are complex and little understood. It follows from these brief descriptions that radically different information and procedures are required for the different decision types, which has obvious implications for MIS design. To create value from information, changes in decision behaviour must result and consequently there must be a decision focus to the MIS. This means that the MIS must be designed with due regard to the types of decision, how decisions are taken, how the decision maker relates to the organisation, the nature of the organisation, its environments and so on. Acceptance and understanding of this emphasis by both managers and information specialists is the primary requisite to effective MIS design. Managers, and the MIS which supports them, must distinguish between effectiveness and efficiency.

Effectiveness means doing the right thing i.e. producing the desired results.

Efficiency is a measurement of the use of resources to achieve results.
Thus an organisation may be producing the wrong output efficiently and is thus an ineffective organisation. Good management concentrates on what must be done beforeconsidering how it should be done and the MIS should help them do this.

Control Principles – Feedback and Feedforward

Control has already been mentioned as one of the main management tasks. Much of the lower and middle management effort, and consequently much of the routine output of MIS, is concerned with control activities. Control is the process of ensuring that operations proceed according to plan and at the most basic level this is done by comparing the actual results or output of the system against a target and using any differences found to adjust the input side of the system so as to bring activities in line with the target. In practice the target may be termed a norm, a budget, a standard, a performance or stock level and so on.
The procedure outlined above, i.e. input – process – output – monitor and compare – adjustment, requires what is known as a feedback control loop and such a loop is a common feature of many aspects of MIS, for example, stock control budgetary control, production control and so on. It will be realised that the basic system described is relatively mechanistic and is therefore not necessarily suitable for all facets of the organisation_s activities. For example, there is the implicit assumption that the target or plan does not change and that conditions in the next control cycle will be similar to those in the past. Clearly, in volatile and uncertain conditions these assumptions are hardly likely to be correct.

Where the self regulating feedback system is not able to control a process adequately it may be feasible to use feedforward. This is where monitoring at some early stage of a system or process may indicate that an adjustment should be made at a later stage of the process, prior to the final output. Feedforward is not an automatic process and requires management intervention for it to operate successfully and consequently, it does not have the degree of ‘automatic_ control inherent in a feedback system.

The Influence of Information Technology (IT)

IT is a general expression covering computers, telecommunications and electronics and there is little doubt that IT is having a profound influence on all aspects of life, including organisations and MIS. Much of the expenditure on computers and IT incurred by organisations to date has been on relatively routine data processing applications, particularly in the accounting area, and in operational control systems such as stock control. Of course these are vital tasks but of themselves they do not constitute management information systems. These traditional data processing systems, which are often highly sophisticated and complex, perform the essential role of processing the day-to-day transactions and provide much of the data from which management information can be prepared. The rapid growth of technology and the dramatically falling cost of computing capability means that more and more aspects of managerial planning and decision making can be assisted by information technology provided, of course, that the information system is developed in accordance with properly defined objectives and principles.

Although there are many overlaps and inter-relationships, it is possible to distinguish three types of systems using information technology:

a) Data Processing (or transaction processing). These are computer and electronics based systems for recording, processing and reporting on the day-to-day activities of the organisation. Examples include; ledger keeping, payroll and so on.
b) Office Support Systems. These systems provide day-to-day assistance with the functions of the office. Examples include; word processing, electronic mail and so on.
c) End-User Systems. These systems seek to provide management with direct assistance with their work. Examples include; Decision Support Systems, Expert Systems, Executive Information Systems and so on.
> Key Point Summary
>• The manual adopts a decision focus to MIS with an emphasis on the user_s requirements for relevant information not on the means of production.
>• There are wide ranging knowledge requirements for MIS including; the nature of data and information, general systems concepts, organisation principles, planning and decision making, control principles, management functions, and the use of information technology.
>• There is an all pervasive influence of behavioural factors on the design and operation of MIS
>• Management and MIS must concentrate on what before how.
• Self Review Questions
1. Define a MIS.
2. What problems have been found from surveys of MIS?
3. What are the main areas of knowledge required for MIS design ?
4. Distinguish between data and information.
5. What is the reductionist approach?
6. What is the holistic approach?
7. What is the role of MIS in organisations?
8. Into what groups can management functions be grouped?
9. What is planning?
10. Distinguish between programmed and non-programmed decisions.
11. What is feedback?, feedforward?
12. What are the three major areas in which IT is influencing information systems?

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