Management Information Systems In order to make decisions, managers need the right information to serve a wider range of needs
. A systems approach to managing this demand can be met through management information systems (MIS). It has been said that MIS are what the nervous system is to the human body.
Definitions of MIS We live in an information age The original definitions of information were associated with knowledge. Now, instead of thinking about the information itself, knowing that we have got so much of it, we have to become much more aware of what we are going to do with it. As the organisation grows, the management function is performed by people who are more specialised and may be removed from day-to-day activities. It is usually at this time that management information systems (MIS) are required.
Definitions of MIS - history The emergence of MIS goes back to the 1950s. The first electronic computer developed for business purposes in 1951 must have posed many interesting questions as to what to do with it. In fact, early business applications centred on routine clerical and accounting operations such as payroll and billing. These were mainly transaction applications, named simply because they involved processing accounting transactions. The machines were prone to failure, difficult to operate and painstakingly slow
Definitions of MIS - history Advances in disk technology made it possible to access data more quickly and in different ways. New programming systems helped to develop and refine operating systems. Each development contributed to the rise of MIS. As systems developed, though the transaction processing part of the system provided the operational data necessary to run an organisation more efficiently on a day-to-day basis, the management component became more important. Systems started to provide reports and information that enabled managers to make more effective decisions.
Definitions of MIS - history The increasing appearance of computer and communication technologies in offices during the 1970s and 1980s gave rise to links with MIS and created the potential for convergence, based upon the needs of users around each organisation. Some organisations used accounting information systems (AIS) and office information systems (OIS) for local information and decision-making needs of various departments and subsets of an organisation. In many instances such user-led developments led to disparate islands of technology within the organisation. In contrast, the aim today is for integration of such technologies across the organisation.
Definitions of MIS The more recent role for information technologies is to think about them as a strategic weapon. For example, information technology (IT) has the power to: •change industry structures and alter the rules of competition •create opportunities for competitive advantage with the provision of new ways to outperform rivals •spawn new businesses and opportunities, often from within an organisation's existing operations.
Definitions of MIS Deconstructing the term MIS enables us to define each word in a business context: Management - being managed or people managing a business. Over recent years management has become more scientific and system-oriented. Information - knowledge made available to people within an organisation. Systems sets of connected things or parts within an organisation which tie the planning and control by managers to the various operations.
Definitions of MIS There are a number of definitions of MIS, each with a slightly different emphasis or focus. Lucey (1995) emphasises the decision focus of his definition: '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.'
Definitions of MIS MIS are different from data-processing systems because the key element is management involvement, so the emphasis is upon the use of information through user processes and not how it is provided through MIS processes
Definitions of MIS Parker and Case (1993) consider: 'a management information system (MIS) to be any system that provides people with either data or information relating to an organisation's operations.' They then describe who the system is focused upon. 'Management information systems support the activities of employees, owners, customers, and other key people in the organisation's environment - either by efficiently processing data to assist with the transaction work load or by effectively supplying information to authorised people in a timely manner.'
Definitions of MIS MIS include a number of subsystems, such as the following. •Transaction processing systems (TPS) comprise routine day-to-day accounting operations. •Management reporting systems (MRS) generate reports for decision-making processes. •Decision support systems (DSS) provide a set of easy-touse modelling, retrieving and reporting requirements and are used by people making decisions. •Office information systems (OIS) involve the use of computer-based office technologies such as desktop software applications, including e-mail, teleconferencing and desktop publishing.
Definitions of MIS It could be argued that managers have always sought and utilised information, but in the past many were forced to rely upon haphazard sources. A modern management information system raises the process of managing from the level of guesswork and piecemeal information to the development of a system of information with sophisticated data process which enables managers to solve complex problems and make informed decisions.
Definitions of MIS As can be seen in Figure, MIS tie together the three components of management, information and systems.
Definitions of MIS According to Murdick and Munson (1986), the management information system: 'not only provides information to assist managers in making decisions, but it may also be designed to provide decisions for repetitive classes of problems. The MIS, by providing a common set of data and information available to all managers, integrates the management of the company. Thus the company as a whole may be truly operated as a system, with all elements working towards common objectives.'
Definitions of MIS Information extracted from a management information system might therefore be at a variety of levels for a range of users. For example: • Strategic planning. The strategic planning process uses both internal and external sources of information. In a dynamic and changing business environment information is geared towards helping an organisation to use strategic planning to adapt.
Definitions of MIS • Management control. This is the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation's objectives. Control involves planning. For example, are sales ahead of budget, does cost data support costing estimates, are policies in line with predictions? Most of the information for management control is generated internally. Operational control. This ensures that tasks are carried out efficiently. At this level, tasks have been specified and methods determined. Information for operations involves providing those involved with the responsibility of executing tasks with the minimum of expenditure on resources. •
Definitions of MIS As so many parts of an organisation's operations and information processes depend upon information, it is considered to be a key resource within every organisation. Skilfully handling information has become an important business objective. Though the terms data and information are used by some to mean the same thing, there are a number of differences. For example:
Definitions of MIS • data refer to stored facts - as data become filtered and disseminated, they take on meaning, and so become information • data are inactive and just exist, whereas information is active and relevant and provides a basis for things to be done • data are technology-based, whereas information is business-based and facilitates business decision-making
Definitions of MIS • though data may be gathered from various sources, it is the process of customising them for the needs of various users that transforms them into information
Definitions of MIS As managers are frequently presented with statements containing information and data, they need to ascertain their quality. Information must be pertinent. This means that it must relate to the organisation and to matters of importance for the people dealing with that information to enable them to deal with an issue. Information must also be timely and available when required. Clearly, users do not want to be confused by misleading information, so it must also be accurate. Good information should therefore make a difference and reduce uncertainty. CASE STUDY: Comparing different systems
Definitions of MIS There are many different sources of information for effective decision-making. Information sources exist from many different potential sources. A clear division can be made between internal and external data. Internal data are generated and made available within an organisation. Such data may come from a variety of sources such as cost accounting information. Other data may be more informal, for example word-of-mouth, facts, gossip and from personal observations.
Definitions of MIS External data are those extracted from the organisation's external environment. For example, it could include news of the launch of a new product by a competitor, changes in exchanges rates or new technological developments by other organisations in an industry. Informal external data would include personal contacts within the external environment. Given the broader nature of external data, they are particularly useful for making decisions about the direction of the organisation in the future such as those for strategic planning.
Definitions of MIS Examples of formal data might include: Internal External Management reports Information services Management audits Trade publications Meetings Industry consultants Forecasts Forums Examples of informal data might include: Internal External Conversations Networking Grapevine Trade shows Observation Personal contacts
Definitions of MIS Internal and external data may also vary according to the nature and type of business
USE way in which an organisation is structured is called The OF INFORMATION its organisational structure, and often this will determine how information is used. For example, an organisation may be structured in the following ways: By function - departmentalising by work function such as marketing, operations or personnel might mean that organisations using this approach have a separate MIS department. One of the advantages of this is that all of the specialists are grouped together where they will have specific information needs and requirements. By product - where organisations such as Unilever or Procter & Gamble have diverse product ranges, they may structure along product lines. Organisations structuring in this way may have a separate MIS unit within each of
USE OF INFORMATION By customer - publishers of books typically structure their divisions by customer type. For example, this book has been developed by an educational publisher based upon the needs of people in the institution you attend. As a result, this influences the company's information requirements, both for the division and the organisation as a whole. By geography - where organisations are physically dispersed, the local operation will require an information system which not only integrates it into head office but also provides it with the flexibility it requires to be competitive.
USE OF INFORMATION Within large organisations, a combination of structural approaches is usually found. For example, at corporate level strategic activities usually have a functional orientation such as marketing or group personnel. The next level of structuring may be by product group, area or customer group. The way an organisation is structured will have a significant effect upon how an organisation's information system evolves.
USE OF INFORMATION Traditional systems were centred upon different departmental functions and processes. As a result, data were treated as a separate component of functional analysis and process design. Traditional systems therefore replicated existing processes and applications to produce uncoordinated and incompatible files in each department or associated with each process. The notion of integration mechanisms and systems had simply not been addressed.
USE OF INFORMATION Integration of data processing involves rearranging systems development through organisation-wide planning of information requirements. The focus then shifts from a process or departmental application through to a data orientation. This new data-centred approach is often termed information engineering as it views data as the foundation for the design of an information system.
USE OF INFORMATION Where integration takes place MIS can be accessed and shared by multiple processes and users. The focus point of the stable data model is integrated information available across the organisation, with individual applications seen as peripheral. An example of an integrated data-centred approach is shown in the figure
USE OF INFORMATION The formal organisation has a pattern of relationships defined by official rules, policies and systems. It is usually the one depicted on organisation charts with diagrams showing official relationships, departments and levels of management. Within the formal organisation there is: • a unity of objectives and effort • well-defined relationships, duties and responsibilities • stability and predictability • clear hierarchy of control and command.
USE OF INFORMATION Informal organisation focuses more upon people. Information arises from social relationships between teams of individuals who develop informal ways of getting things done. Informal organisation exists within every organisation to some extent. Social groups develop their own beliefs and ways of getting things done which are sometimes not the same as that of the formal organisation. For example, informal organisation may: • use unofficial methods which are more efficient • provide more satisfaction for employees • coordinate activities more efficiently • be more flexible and improve communication.
USE OF INFORMATION According to Lucey (1995), 'Organisations choose structures which are thought to be most efficient for their particular circumstances and operating conditions'. This means that in order to be flexible they tend to combine the best features of functional, product and geographical organisational structures. Such organisations are often viewed as organic because they adapt to changing conditions and develop features such as network control structures, motivating management styles, flexible working practices and flatter organisational structures, all of which help to empower employees through the use of information and technologies.
USE OF INFORMATION One particular concept that has developed from high technology industries is that of the matrix structure. Within a matrix structure, project teams are combined with a conventional functional structure. The matrix is thus a combination of structures which enables employees to contribute to a number of activities or teams. In information terms it enables team members to use information to focus upon a number of aims at the same time, while also providing the flexibility to respond to new markets and opportunities as and when they arise.
USE OF INFORMATION The terms centralised and decentralised are important management concepts that are inextricably linked to the use and distribution of information. They are often used to describe the distribution of authority and decisionmaking within an organisation.
USE OF INFORMATION Centralised organisations are organisations with a clear-cut hierarchical structure in which decisions are made at the top of the hierarchy. Within such organisations there are likely to be different information requirements at the top of the hierarchy which are distinct from those further down. By contrast, within decentralised organisations decision-making is distributed as far down the management hierarchy as possible. This provides lowerlevel managers with considerable practice in making decisions and prepares them for moving up the hierarchy.
USE OF INFORMATION Issues of confidentiality Though it is often said that no system can be 100% secure, confidentiality, security and privacy are key issues when dealing with information. One of the main elements in developing an information system is to ensure that databases and systems are secure. There are a number of reasons that these issues are of fundamental importance. For example, accidental, negligent or intentional disclosure of information to unauthorised people may enable them to use that information in a way that is neither intended nor legal. Similarly, information may be destroyed, modified or used incorrectly if it gets into the wrong hands.
USE OF INFORMATION Confidentiality refers to the limits on the use of information collected from individuals. This means that personal information should only be distributed to those who have a need to know and use that information, and should not be disseminated outside the organisation. In order for information to be confidential it must be secure. Security is a technical condition for achieving privacy and confidentiality. It refers to the policies, procedures and technical measures used to prevent unauthorised theft, access or alteration to record systems. It can be promoted with a range of tools designed to protect access to software, hardware and communications networks.
USE OF INFORMATION Privacy is a broader term often used to encompass security and confidentiality. Three elements to privacy are: • limits on the collection of information • specific rights of individuals to access, review and challenge information kept about them • management responsibility for record systems.
USE OF INFORMATION Data Protection Act The Data Protection Act 1984 was passed to regulate the use of information for processing systems which relate to 'individuals and the provision of services in respect of such information'. The Act covers only the holding of computer records and not manual records. The Act requires those using personal data to register with the Data Protection Register. Registered data users must then follow the eight principles of the Act.
USE OF INFORMATION • • • • Data must be obtained and processed fairly and lawfully. Data must be held only for specific lawful purposes which are described in the entry into the register. Data should not be used in any other way than those related to such purposes. Data should be adequate, relevant and not excessive for those purposes. Personal data should be accurate and kept up to date. Data should be held no longer than is required. Individuals should be entitled to access their data and, if necessary, have it corrected or erased. Data must be protected with appropriate security • • • •
USE OF INFORMATION There are a number of exemptions to the Act, including information kept by government departments for reasons of national security, information the law requires to be made public, mailing lists (as long as the subjects are asked if they object to data being held for this purpose), payrolls and pensions information, clubs and personal data held by individuals in connection with recreational or family purposes. To ensure that data is held only for legitimate purposes, many organisations appoint a data protection officer. CASE STUDY: Code of Fair Information Practice