7/21/2019 MANAGEMENT INFO SYS - INTRO.pdf http://slidepdf.com/reader/full/management-info-sys-intropdf 1/21 UNIT I INTRODUCTION 1.1 CONCEPTS OF DATA AND INFORMATION 1.2 DEFINITION OF A MANAGEMENT INFORMATION SYSTEM 1.3 CONCEPTS OF DECISION MAKING 1.4 CONCEPTS OF SYSTEM 1.5 INFORMATION SYSTEMS AS A SYSTEM 1.5.1 ORGANIZATIONAL FUNCTION SUBSYSTEMS 1.5.2. ACTIVITIES SUBSYSTEMS1.6 MIS AND OTHER DISCIPLINES 1.7 NEED FOR COMPUTER-BASED INFORMATION SYSTEM 1.8 THE ROLE OF A SYSTEMS ANALYST 1.9 EVOLUTION OF MANAGEMENT INFORMATION SYSTEMS 1.10 BUSINESS CASES SUMMARY REVIEW QUESTIONS After reading this unit you could able to understand, The distinction between data and information Concepts of system and its classification Concepts of information Definitions of management information systems Need for computer based information system Functional and hierarchy levels of management Evolution of Management information system
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Data the raw material for information is defined as groups of non random symbols
such as ₤ and which represent quantities, actions, objects etc. data items in information
systems are formed from characters. These alphabetic, numeric or special symbols areorganized for processing purposes into data structures, file structures and databases. Data
relevant to processing of information and decision making may also be in the form of text
images or voice. However, information generally defined as data that is meaningful or useful
to the recipient Data items are therefore the raw material for producing information.
For instance when I want to take decision of “purchasing of bike” mileages, pickup is
information where as kilometre from destination1 to destination 2 will be useful in
calculating the mileage and helps in taking decision termed data. The terms “information”
and “data” are frequently used interchangeably.
1.2 DEFINITION OF A MANAGEMENT INFORMATION SYSTEM
A definition of management information system, as the term is generally understood,
is an integrated, user – machine system for providing information to support operations,
management, and decision – making functions in an organization. The system utilizes
computer hardware and software; manual procedures; models for analysis, planning, control
and decision making; and a database. The fact that it is an integrated system does not mean
that it is a single, monolithic structure; rather, it means that the parts fit into an overall
design. The elements of the definition are highlighted below:
A management information system is an integrated user machine system for providing
information. To support the operation, management, analysis, and decision making function
in an organization
The system utilizes computer hardware and software manual procedures model for analysis,
planning, control and decision making and a database.
INTEGRATED SYSTEMS
Management information system is an integrated base for organizational individual
subsystems which is developed for and by users of various levels of organization. If the
system is not integrated, the individual applications may be inconsistent and incompatible.Data may not be compatible across applications that same data may be specified differently.
There may be chance for redundant modules when actually a single application serves more
than one need. A user wanting to perform analysis using data from two difficult applications
may find the task very difficult any sometimes impossible.
The first step to integrate diverse information system applications is to prepare an
overall information system plan which determines how they fit in with other functions. In
sort, the information system is designed as a planned federation of small individual sub
systems.
Information system integration is also achieved through standards, guidelines, and procedures set by the MIS functions. The enforcement of such standards and procedures
Managers’ life is filled with making decisions after decisions. Looking at the role of
decision making in management, William Moore has equated it with management when he
says that “management means decision making.” In fact, decision making permeates all
managerial functions and classical management theorists have viewed it as the centre of
managerial activities. Though this classical view on decision making is not exactly true,
decision making is one of managers more challenging roles. This is the reason whyinformation systems designers have focused their maximum attention on designing systems
that help managers communicate and distribute information for decision making.
Decisions may be classified into various categories, which are,
Routine and non – routine.
Programmed and non – programmed
Strategic and tactical or operational decisions.
Programmed / structured and non - programmed / unstructured are mutually
exclusive. Strategic decisions are non - programmed and non - routine while tactical or
operational decisions are mostly routine and programmed. Therefore, understanding of programmed and non - programmed decisions is important.
PROGRAMMED DECISION OR STRUCTURED DECISION
Is routine decision which is made within the organizational system governing
policies and rules. These policies and rules are established well in advance to solve recurring
problems in the organisation. The factors affecting decision making are static and well –
structured. For example, the problem relating to recruitment of employees is solved by
recruiting those employees who meet selection criteria. These criteria are established by
recruitment policy and the managers have just to decide which employees meet selection
criteria and the decision is made accordingly. Programmed decisions are comparatively
easier to make as these relate to the problems which are solved by considering internal
organizational factors. Decisions are made by lower levels managers in the organization.
NON - PROGRAMMED DECISION OR UNSTRUCTURED DECISION
Is relevant for solving unique / unusual problem in which various alternatives cannot
be decided in advance. For such a decision, the situation is not well - structured and the
outcomes of various alternatives cannot be arranged in advance. For instance if an
organisation wants to take actions for expansion, it may have several alternative routes likegoing for a taking over or acquisition of an existing company. In each situation, the managers
evaluate the likely outcomes of each alternative to arrive at a decision consider ing various
factors, many of which lie outside the organisation. Non - programmed decisions are novel
and non-recurring. Therefore, readymade solutions are not available. Since these decisions
are of high importance because of their long - term consequences, these are made by
managers at higher levels in the organisation.
DECISION - MAKING CONDITIONS
The decision maker makes today’s decision for future conditions whose Impact is
known in future period. The future conditions for a decision vary along a continuum rangingfrom criteria of perfect certainty to condition of complete uncertainty.
In each of these conditions, knowledge of outcome of the decision differs. An
outcome defines what will happen if a particular alternative or course of action is chosen and
implemented. Knowledge of outcome of each decision alternative is important when there
are multiple alternatives and only one alternative is to be chosen. In the analysis for decision
making, three types of knowledge with respect to outcomes are usually distinguished asshown in Table.
TABLE 1.1
Conditions Outcome Knowledge of outcome
Certainty Only one outcome of each
alternative.
Complete and accurate
knowledge of the outcome of
each alternative
Risk Multiple outcomes for eachalternative
Probability of occurrence can be attached to each outcome.
Uncertainty Multiple outcomes for each
alternative
No knowledge of the
probability to be attached to
each outcome.
Table :-OUTCOMES IN DIFFERENT DECISION - MAKING CONDITIONS
Decision making strategy differs, based on the variation in the knowledge ofoutcomes of different alternatives in different decision – making conditions. The degree of
structuring in a decision can be seen in terms of continuum in which degree of structuring
TABLE: - MANAGERIAL DECISIONS, LEVEL OF STRUCTURING AND
SUPPORT SYSTEMS
As we move upward in managerial hierarchy, we find that the degree of structuring in
decision making gets gradually reduced and support systems required for decision makinggradually tend to be unstructured. After clarifying the concept of decision and decision
making as well as type of decisions, let us understand the decision making process by which
a decision is arrived.
DECISION - MAKING PROCESS FIGURE 1.1
Decision is the outcome of a dynamic process which is
consist of various steps and involves various factors. Process of
decision making process has been shown in Figure.
Choosing an
alternative
Implementation
Problem
identification
Alternative
generation
Process presented is more relevant for non - programmed
decisions. Problems that occur infrequently are unstructured
and are characterized by a great deal of uncertainty regarding
the outcomes of various alternatives; require the managers to
utilize the entire process. For frequently occurring structured
problems, it is not necessary to consider the entire process
because decision rules are developed to handle such problems
and it is not necessary to develop and evaluate various
alternatives each time such a problem arises.
PHASES IN DECISION - MAKING PROCESS
PROBLEM IDENTIFICATION
In this phase of decision-making process involves searching the environment for
conditions calling for decisions. the problem is identified and formulated. A problem is the
difference between current state of affairs and expected state of affairs on the subject matter
of decision.
For instance, in organizational scenario, a problem will be found when there is
diversion outcome from the desired results. Manager develop the suitable model and tries to
identify the problem existence.
Without formulating the problem the identified problem seems to vague. At this
stage, the problem identified earlier, is more precisely defined and complexity get clarified.
MacGrimmon and Taylor have suggested four strategies for reducing complexity and
formulating a problem:
1. Determining the boundaries (clearly identifying what is included in the problem).
2. Examining changes that may have precipitated the problem.
3. Factoring the problem into smaller sub-problems.
4. Focusing on controllable elements.
ALTERNATIVE GENERATION
In this phase, decision maker generates possible alternatives through which the
problem can be solved. If there is only one way of solving a problem, no question of decision
arises. So, the decision maker must try to find out the various alternatives available in order
to get the most satisfactory result of a decision. Identification of various alternatives not only
serves the purpose of selecting the most satisfactory one, but It also avoids bottlenecks in
operation as alternatives are available if a particular decision goes wrong. However, it should
be borne in mind that it may not be possible to consider all alternatives either because some
of the alternatives cannot be considered for selection because of obvious limitations of the
decision maker or information about all alternatives may not be available. Therefore, while
generating alternatives, the concept of limiting, factor should be applied.
A decision maker can use several sources for identifying alternatives - his own past
experience; practices followed by others, using creative forecasting and statistical techniques,
research.
CHOOSING AN ALTERNATIVE
In this phase, the best alternative is chosen to solve the problem. Evaluation of
various alternatives presents a clear picture as to how each of these contributes to solution of
the problem. A comparison is made among likely outcomes of the various alternatives and
the most appropriate one is chosen. Choice aspect of decision making is, thus, related to
deciding the most acceptable alternative which fits with the organisational objectives. It may
be seen that the chosen alternative should be acceptable in the light of organisational
objectives, and it is not necessary that the chosen alternative is the best one. However, all
alternatives available for decision making will not be taken for detailed evaluation because of
the obvious limitations of managers in evaluating all alternatives.
IMPLEMENTATION
Even though the actual process of decision making ends with the choice of an
alternative through which the objectives can be achieved, this phase will help manager to rknow what way their choice has contributed. The implementation of decision may be seen as
an integral aspect of decision.
Implementation of a decision requires the communication to subordinates, getting
acceptance of subordinates over the matters involved in the decision, and getting their
support for putting the decision into action. The decision should be effected at appropriate
time and in proper way to make the implementation more effective. The effectiveness of
implementation is important because it is only effective action through which organisational
objectives can be achieved. When a decision is put into action, it brings certain results. These
results provide indication whether decision making and its implementation is proper.
Therefore, managers should take follow-up action in the light of feedback received from theresults. If there is any deviation between objectives and results, this should be analyzed and
factors responsible for this deviation should be located. The feedback may also help in
reviewing the decision when conditions change which may require change in the decision.
METHODS OF DECIDING AMONG ALTERNATIVES
There are different methods to evaluate various alternatives through which a problemcan be solved. In evaluating alternatives, an attempt is made to find out the likely outcome of
each alternative so that the alternative which is likely to provide maximum outcome is
chosen. In evaluating the likely outcomes of various alternatives, generally, following
methods are used:
1.
Optimization techniques.
2. Pay-off matrices.
3. Decision tree.
4. Decision table.
5. Game theory.
6.
Elimination by aspects.7. Decisional balance sheet
1.4 CONCEPTS OF SYSTEM
DEFINITION
Systems can be abstract or physical. An abstract system is an orderly arrangement of
interdependent ideas or constructs. For example, a Weapons system is an orderly
arrangement of the equipment, procedures, and personnel which make it possible to use a
Weapon. Accounting system consists of the records, rules, procedures, equipment, and
personnel which operate to record data, measure income, and prepare reports. Circulatory
system involves the heart and blood vessels which move blood through the body.
A physical system is a set of elements which operate together to accomplish an
objective. Computer system consists of several subsystems which functions together to
accomplish computer processing. Computer system is demonstrated as a simple system
Open systems exchange information, material, energy with the environment. For
instance, humans and organizational systems are examples of open systems. Open system
will react to the changes in the external environment and surveys in the environment.
SUBSYSTEMS
The system is integration of various subsystems and interfaces between them. This is
a basic concept in analysis and development of systems. A development of complex system
is tedious, so the system is decomposed into subsystems. This process of decomposition of
system is continued until subsystems could be of independent in behaviour and manageable
in size. For instance the funds management system is described in the figure as a combination
of subsystems.
FIGURE 1.4
Funds
Management
s stem
Working
capital
processing
Check
Printing Cash flow
system
processing
Internal fund
flow
processing
1.5 INFORMATION SYSTEM AS A SYSTEM
The information system processes the received inputs of data and produces the
outputs. The basic system model consists of input, process, and output as well as the data
storage. Instead of collecting data and transforming data to information, keeping the storage
will help in subsequent use. This basic information processing model is useful in
understanding not only the overall information processing system but also the individual
information processes applications. Each application may be analyzed in terms of input,storage. Processing and output. The information processing system has functional subsystems
Functional subsystem Functionality of the subsystem
Marketing
Market research
Market testingDemand forecasting
Sales planning
Manufacturing
Material resource planning
Scheduling
Resource allocation
Cost control
Logistics
Stock analysis
Inventory control
Distribution
Personnel
Human resource Planning
Performance appraisal
Administrative controlPayroll
Finance and accounting
Financial control
Cost analysis
Capital budgeting
Income measurement
1.5.2. ACTIVITIES SUBSYSTEMS
Another approach to understanding the structure of an information system is in terms
of the subsystems which perform various activities. Some of the activities subsystems will beuseful for more than one organizational function subsystem; others will be useful for only
one function. Examples of major activities subsystems are:
TABLE 1.4
Activity subsystem Some typical applications
Transaction processing
Processing of orders shipments and
Receipts
Operational control Scheduling, analysis of performance reports
Management control Budget preparation and resource allocation
Strategic planning Formulation of objectives and strategic plans
Allocation of tasks to eachorganizational unit in order to
achieve objectives of tactical plan
between one to twelve months.
Yearly budget.
Effective and efficient use ofexisting facilities and
resources to carry out
activities within budget
constraints.
TRANSACTION PROCESSING SYSTEM AND OFFICE AUTOMATION SYSTEM
TPS serve the need of operational level of the organization. It is defined as recording
the daily day to day transactions basis for the conduct of business. It is highly structured.
Transaction processing is performed manually or with mechanical machines; computer-baseddata processing has altered the speed and complexity of transaction processing, but not the
basic function.
TPS are major producers of information for other types of systems available in
various other level of management. Without transaction processing, normal organizational
functioning would be impossible, and the data for management activities would not be
available. For instance, in banking the transaction processing systems supply data to the
organization’s ledger which are responsible for maintaining records of the organization for
analyzing the performance of the organization through balance sheet and so on. TPS can
connect the organization with its stake holders (customers and suppliers).
The transaction processing cycle begins with a transaction which is recorded in some
way. Although hand-written forms are still very common, transactions are often recorded
directly to a computer by the use of an online terminal. Recording of the transaction is
generally the trigger to produce a transaction document. Data from the transaction is
frequently required for the updating of master files; this updating may be performed
concurrently with the processing of transaction document or by a subsequent computer run.
Office automation has a number of applications ranging from internal communication to
long-distance external communication. The major applications of office automation are in
following areas:
Word processing.
Desktop publishing.
Videotex.Document imaging.
Electronic mail.
Electronic calendaring.
Video & Audio conferencing.
Facsimile transmission.
Decision support system and executive information system and expert system are
used in middle and top level of management which will be discussed in unit 3.
1.6 MIS AND OTHER DISCIPLINES
Concepts of MIS are found in management accounting, management and organization
theory, operations research, and computer science.
MANAGEMENT ACCOUNTING
Financial accounting and management accounting are the broader categories of
management accounting. Financial accounting deals with the measurement of profit for
accounting period and analysing the financial status at the end of the period. This will be
helpful for the stakeholders. It will have limited decision content towards management. In
contrast management accounting consists methods and concepts which is necessary for
planning, choosing among alternative business actions and control through the evaluation and
interpretation of performances. Here, the management accounting provides inputs for
decision making in the areas of planning and control.
BEHAVIOURAL THEORY
MIS helps in effective functioning of the organization. The fields of management and
behavioural theory helps in understanding the functions of a MIS and behaviour of the
managers in each level of the organization such individual decision making and group
decision making, individual and team motivation, leadership styles and traits of leader,
organizational change management and group dynamics, and organisation structure andculture and so on. The knowledge of these concepts helps the designer of MIS to understand
the behaviour pattern and the types of decisions made by manager at each level of the
organization.
OPERATIONS RESEARCH
Operations research is a quantitative technique in managerial decision theory where
the managers search for the optimum result. In operations research, various mathematical and
decisive models are used for solving the problems. Operations research concepts are helpful
in development of models for “what if” analysis mainly used in DSS, MIS and helps in
computer - based solutions of many types of decision problems. In other word the systematic
approach to problem solving, use of models, and computer-based solutions are generally
incorporated in the decision support system.
COMPUTER SCIENCE
Computer science deals with the hardware and software of computer systems. Theknowledge of computer science enables information storage, processing, and retrieval faster.
Computer science covers the concepts of algorithms, computation and data structures which
are important in development of MIS. However, modern MIS is not merely an extension of
computer science but the emphasis in MIS is on the application of the technical capabilities
that computer science has made available. The fundamental processes of management
information systems are more related to organizational processes and organizational
effectiveness then computer algorithms.
Various academic disciplines are contributing to the development of MIS and it is
considered a separate field of study. Other academic disciplines help in designing and
developing MIS.
1.7 NEED FOR COMPUTER-BASED INFORMATION SYSTEM
As long as organizations are small and have limited operational goals manual
information systems are satisfactory. Many trends in the development of industry and
commerce have made computer -based information systems essential to efficiently run
organizations. These are: -
The size of organizations is becoming larger. This is particularly true in India due to
increase in population and rapid rate of industrial development.
Computer - based processing enables the same data to be processed in many ways,
based on needs, thereby allowing managers to look at the performance of an organization
from different angles.
As the volume of data has increased and the variety of information and their
timeliness is now of great importance, computer – based information processing has now
become essential for efficiently managing organizations.
Organizations are now distributed with many branches.Markets are becoming
competitive. To maintain favorable balance of payments in a country, organizations have to be internationally competitive.
The general socio - economic environment demands more up-to-date and accurate
information. Human systems are changing faster than ever before. Governmental regulations
have become complex. Organizations have to interact with many other interested parties such
as consumer groups, environmental protection groups, financial institutions, etc., which did
not exist before.
All the above developments demand decision making based on up-to-date, well
analyzed and presented information rather than thumb rules and hunches of an earlier era.
MIS is possible without computer too. When the organization goes for the computer
based information system the role of the system analyst plays a vital role. A systems
analyst’s primary responsibility is to identify information needs of an organization and obtain
a logical design of an information system which will meet these needs. Such an informationsystem will be a combination of manual and computer - based procedures to process a
collection of data, useful to the managers in taking decisions. He must have the knowledge of
the data flow and process of the organization.
The personnel involved in the management information systems are: end users (clerical,
operational and top level managers); professionals (database administrator, programmers).
The systems analyst coordinates the efforts of all these personnel to effectively develop and
operate computer - based information systems.
The requirement must be collected from the users of the system. Users may not bevery familiar with coding terminology. The system analyst must collect the requirement from
the users of the information systems. This is best achieved by having a common meeting with
all the users and arriving at a consensus.
The systems analyst requires good interpersonal relations and diplomacy. He must be able to
convince all the users about the soundness of the group decision and obtain their cooperation.
An analyst studies the problem in depth and helps in choosing the best solutions and the
relative difficulties in implementing each of other alternatives.
An analyst is responsible in obtaining the functional specification; it must be precise and
detailed. it must be non - technical so as users ,clerks, middle level managers and top
managers of organization able to understand.
He is also responsible to design the system which must be understandable, accommodate
changes easily. The analyst must know the latest design tools to assist him in his task. As part
of the design he must also create a system test plan.
A systems analyst must be familiar with all the functions of the organizations. He
must aware of new technological changes since he is responsible for the feasibility analyses.
He must be a good listener,a good communicator, a good diplomat, conflict revolver
,motivator, influencer.
1.9 EVOLUTION OF MANAGEMENT INFORMATION SYSTEMS
Based on the needs and requirements of the organization MIS has been evolving
though the period of time. MIS was manually operational before the invention of computer
application in this area. The following table illustrates the evolution of information system.
TABLE 1.6
Decade Information systems Characteristics of information systems
1951-60 Electronic data processing Collecting, manipulating, storing of data.
No scope for decision making1961-70 Management information Pervasive in all level of the management
1981 andabove Artificial intelligence,Executive information
system
Solution for unstructured decision makingthrough advanced graphics
1985 and
above
Knowledge management
system,end user computing
Intelligence workstation for knowledge
work which involves thinking, processing
information and formulating analyses ,
recommendations and procedures
1.10 BUSINESS CASES
All organizations are divided into many departments or sections with each department
having an assigned functional responsibility. Consider for example, an educational institute
such as Anna University. It will typically have besides academic departments a central
administrative office. The administrative office will be divided in to many sections each with
an assigned function. Typically the functions will be student section which will normally deal
with student records, students admission etc. an accounts section, purchase section stores
section, personnel section, medical section and student hostel office. A hierarchical chart of
the sections is shown in figure and their functions in table. A manufacturing organization for
instance will have the functions shown in table division of an organization in to departments
with specified functions is mainly intended to let each department focus on an area of
responsibility. All departments will have to coordinate their activities to meet the overall
objectives of the organization. This coordination normally provided by higher levelmanagement in the organization.Functions of various departments of a University.
We see that there are some common functions such as personnel, purchase, stores and
accounts and there are organization specific functions such as students section in a universityand production section in a manufacturing organization. This is a general observation.
Information processing methods, however, have general features regardless of the
organization for which they are designed.
SUMMARY
The vital role of information in an organization has been discussed. how the
manager should react to the information of external environment and internal environment.
The information systems have become essential for helping organizations deal with changes
in global economies and the business. The kinds of systems built today are very important for
the organization’s overall performance, especially in today’s highly globalize andinformation- based economy. Information systems are driving both daily operations and
organizational strategy. Powerful computers, software and networks, including the internet ,
have helped organizations become more flexile , eliminate layers of management , separate
work from location , coordinate with suppliers and customers, and restructure work flows ,
giving new powers to both line workers and management. Information technology provides
managers with tools for more precise planning forecasting and monitoring of the business. To
maximize the advantages of information technology, there is a much greater need to plan the
organization’s information architecture and information technology infrastructure.
REVIEW QUESTIONS
1. Define Management Information systems.
2. What is system? Discuss some systems you know.
3. Discuss the types of subsystem in each level of the management.
4. Explain the subsystem based on the functionality of the organization.