Regent School of Business Management Information Systems

Unit 1 - Identify and Source Information Needs
As a manager you are an important creator and manager of information. Your competency in: • • • • Identifying Acquiring Analysing Utilising

appropriate information plays a significant part in the efficiency, effectiveness and competitiveness of your team and your Ministry’s organisational performance. By the end of this module you will be able to: 1. Identify and source information needs a. The information needs of individuals / teams is determined and the sources are identified b. Information held by the organisation is reviewed to determine suitability and accessibility c. Plans are prepared to obtain information which is not available/ accessible within the organisation. 2. Collect, analyse and report information a. Collection of information is timely and relevant to the needs of individuals/teams b. Information is in a format suitable for analysis, interpretation and dissemination c. Information is analysed to identify and report relevant trends and developments in terms of the needs for which it was acquired.

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3. Use management information systems a. Management information systems are used effectively to store and retrieve data for decision making. b. Technology available in the work area/organisation is used to manage information efficiently and effectively. c. Recommendations for improving the information system are submitted to designated persons/groups

4. Prepare business plans/budgets a. Individuals/teams are involved in business plan/budget preparation in a way which uses their contribution effectively and gains their support for the outcomes. b. Business plans/budgets are prepared and presented in accordance with the organisation's guidelines and requirements c. Contingency plans are prepared in the event that alternative action is required.

5. Prepare resource proposals a. Resource planning data is collected in consultation with colleagues, including those who have a specialist role in resource management. b. Estimates of resource needs and utilisation reflects the organisations business plans, and customer and supplier requirements. c. Proposals to secure resources are supported by clearly presented submissions describing realistic options, benefits and costs.

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Unit 1
Section 1 - Identify and source information needs.
This section focuses on the expectations and needs of managers in your Ministries in relation to information. Section 1 will focus on: • • • Identification of needs and sources of information The suitability and accessibility of existing information sources Planning to obtain information currently unavailable

What is an information system?
Information is a critical tool of managers. We are bombarded with large amounts of information every day. A key skill of managers is to filter the useful information from information that does not contribute to you, your team or Ministry achieving its objectives. Information systems organise and distribute information. A good information system should provide accurate, current information that meets the needs of the user. A good information system should provide the right information at the right time to the right people. Information systems can vary in size, type and complexity. They can vary from information gained informally in the canteen to written memos, financial charts and complex computer-based Management Information Systems (MIS). Information systems are a key planning and decision making tool for managers. Without accurate, relevant and current information both effective planning and decision making are difficult to achieve.

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ACTIVITY - Information Systems
What information systems (at least two) do you use to assist you in planning and decision making? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

What information do you obtain from the information systems identified: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

The interlinking of information
The information you and your team use may come from within your department but often the origin of the information is from another department or from an external source. There are also many occasions where you and your department supply information to other departments.

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ACTIVITY - Interlinking of Information
Based on the information systems you identified in the last activity, identify three of the examples of information you use from each of the information systems and where it originates - either within your department, from another department within your Ministry or externally. Type of information Within department From another department Externally

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Information breakdown
As a manager you require a wide range of information to plan, make decisions and meet your department’s performance targets. There are however a number of factors that may result in ‘information breakdown’. The breakdown can include: • • • • • • • • information not being provided when requested unavailability of required information information not arriving on time incorrect information unusable information other causes of information breakdown ……………….. ………………..

ACTIVITY - Information Breakdown
Type of information breakdown Information not provided when requested Example of information breakdown

Unavailability of required information

Incorrect information

Unusable information

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Types of information
The examples of information you have identified are probably presented in a number of common forms including: • • • • • • • • • • • printed reports presentations meetings graphs and charts observation team discussion statistics email messages phone messages photographs, video or DVD other types?

While each of the types of information identified above can be very useful there are many examples of where managers and other users of information would prefer the information to be presented in a different way. Type of Example Usefulness Alternative Type information
None Very useful

1 Printed reports Presentations Meetings Graphs and Charts Observations Team discussions Statistics Email messages Phone messages Photographs, video, DVD

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The reason for Information Systems
Effective Information Systems are often referred to as the key factor in organisations gaining the competitive edge over competitors. In many organisations this important factor is overlooked and the frustrations of being presented with information subject to time delays, incorrect or useless detail or complete lack of relevant information contributes to the stress level of managers and staff and effects the companies 'bottom line".

Good information systems take raw data and organise it in a systematic way which allows it to be formatted into an output that provides a useful summary, comparison or analysis of raw data. A good Information System processes raw data into a useful product. On its own, raw data is not very useful but when processed it can provide feedback and input which can be used by managers and staff to achieve performance targets. Ideally, information systems should be designed to take large amounts of raw data that, in its original form, is useless or time consuming for the user to extract and convert it into a single targeted report.

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ACTIVITY - Useful Information
1. Choose an information system you identified earlier in this section and identify it below: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 2. Identify and provide evidence of the raw data that is input to the information system: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 3. How useful is the raw data in assisting you in decision making? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 4. Identify the source of the raw data and find out much the staff who collect the data know about how the data is used by you or your staff _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 5. What ‘value adding’ does the information system provide in converting the raw data into useable information? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

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6. When was the last time there was a review of the information system and its relevance to your needs? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 7. What suggestions can you make for updating the information system to fit the current purpose of the system? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

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Information overload
Recent advances in technology have resulted in huge amounts of information, from within and external to the organisation, being available to managers. There is a significant danger that managers will be swamped with information overload and lose track of the key outcomes they are expected to achieve. The number of emails received each day continues to grow, new reports constantly appear in the in-tray, the number of meetings is often on the increase and the demands for information from other individuals and departments seems to increase each year. With this flood of information, managers need to develop skills to select, analyse, diagnose the information they require to do their job more effectively. They need to filter out the interesting but unimportant information. Peter Drucker puts information into perspective in the statement:

“Advanced data-processing technology isn't necessary to create an information based organisation…the British built just such an organisation in India when 'information technology' meant the quill pen and barefoot runners were the telecommunications system.”
(Peter Drucker, 'The coming of the new organisation', Harvard Business Review, Jan/Feb. 1988) What Drucker is highlighting is the fact that information has always been available - it just took longer and required more staff to process it in the past. The availability of information in itself is not the objective, it is simply a tool to assist managers with decision making and should always remain a servant rather than the master of an organisation. The trap is that managers can easily become the servants of information. Managers who become dependent on information are described well by Robert Heller:

"Managers are to information as alcoholics are to booze. They consume enormous amounts, constantly crave more, but have difficulty in digesting their existing intake".

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Management Information Needs
There are three types of information that managers need: 1. Strategic Information 2. Tactical Information 3. Operational Information

1. Strategic Information Strategic Information is used to assist managers, usually senior managers, in making major decisions, usually one-off, which influence the future direction and strategy of their organisation or company. These decisions require information that will assist managers to follow trends and developments that may impact on the future opportunities or even the very survival of the organisation or company. Much of the raw data used in Strategic Information Systems is from external sources including local and national government, or non government organisations (NGOs). In recent years many organisations have developed Strategic Management Information Systems (SMIS) which provide useful information in relation to trends and emerging opportunities and threats relevant to the organisation. Examples of areas in which Strategic Information may be useful for example in industry, includes decisions in relation to: • • • • • • Whether to establish a new factory? What new product lines should be introduced? How should the organisation restructure? Whether to take over a competitor? Should a price war be started? Where to outsource the delivery of product?

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The diagram below, based on private sector business is equally valid for public sector organisations.

It identifies the key factors that must be considered in any strategic decision making including: The Company/Organisation itself - information in relation to its capability in relation to critical success factors Competitors - information about their future plans, volume or profit driven, price war potential/capability, investment program, level of risk taking, market share, organisational structure Customers - information in relation to segments, trends, service costs, demographics Economic and Political Environment - information on Gross National Product, Inflation, Trade Deficit, Interest Rates, Tariff Levels, Trade Agreements, Raw Materials availability and prices
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2. Tactical Information Tactical information is normally targeted at providing middle managers with information to assist them in tactical decision making. The information source can be either external or internal and is used to develop new tactics to deal with tactical issues like fluctuating demand patterns, meeting peak capacity periods. Examples of areas in which Tactical Information is useful includes decisions in relation to: Changing the marketing program Increasing the flexibility of working hours Extending plant operating hours 3. Operational Information Operational Information provides detail about the 'nuts and bolts' areas of operations. The source of the information is usually internal and it is used by managers in day to day decisions affecting the operations of their department or section. Operational information is required in relation to resource usage, staffing levels, inventory levels, problems, complaints. Examples of areas in which Operational Information is useful includes decisions in relation to: • • • How many extra staff are required in peak periods of activity? What can be done to improve productivity? How can power use be reduced?

Whether the information is Strategic, Tactical or Operational to be useful it needs to be: • • • • Timely Accurate Useful Accessible

In addition to the above basic requirements of any information system other considerations in relation to developing a good information system include: • • • Understanding the type of decisions the information will provide input to Which is the best source of the information - external and/or internal? How often is the information required?

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ACTIVITY - Decision Making Information
In the table below identify an example of Strategic, Tactical and Operational decisions you make at work and the main information system(s) used to assist in decision making. In addition, indicate whether the source is internal, external or a combination of both.

Type of decision Strategic

Information system(s) Utilised

Source (internal/external/both)

Tactical

Operational

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Determining the information needs of users
Supply Driven In many organisations managers and other staff requiring information are provided with the information in a format determined by the supplier of the information. This 'supply driven' method of developing information systems assumes the needs of the users when in fact the information may only meet some, if any of the user's needs. The 'supply driven' information may also lack the basic requirements of a good information system - timeliness, accuracy, usefulness, easy accessibility. Complex computer based Management Information Systems are often sold (at great expense) to organisations based on the claim that they meet all the information needs of organisations. There are very few organisations that have identical information requirements to others, and even within an organisation the needs of each department and individuals varies. Unless an 'off the shelf' system has the capability of being significantly customised it is likely to prove to be a poor purchase decision. Managers who are subject to 'supply driven' information systems often complain that: • • • • They receive too much information Information is not tailor-made to their individual needs Information is not presented in the most suitable form for them Information is not provided when it is needed.

Demand Driven Successful organisations are very likely to have a secret weapon - Demand Driven Information Systems. Organisations that recognise the need for users to determine their information needs are likely to have more efficient and effective staff who do not suffer from stress and information overload. Demand driven information systems are developed or selected by initially identifying the information needs of individuals, sections and departments and the most effective and efficient information system - manual or computerised - that will satisfy the needs. Often a simple manual system will meet the user's needs much more effectively and efficiently than a sophisticated and expensive computer system. Demand driven information systems are developed on the basis of what is possible rather than what is available. This approach can result in significant productivity improvements by providing information previously unavailable to support a managers 'gut feeling' about a particular process or activity.
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An effective way of developing a good demand driven information system is by using a Decision-Making Analysis Technique (DMAT). This system requires a manager to determine, as much as possible, the future decisions he/she will be required to make. The information required is determined by the decisions to be made. The raw data required is then established based on the information required. A commonly used DMAT system is the Critical Success Factor Method. This method identifies the critical factors required for the organisation, departments, teams and possibly individuals to achieve success. The process usually involves several meetings between the provider of information and the user: Session 1 - Managers goals and underlying critical success factors identified Session 2 - Review goals and critical success factors identified in Session 1 and table possible measures and report formats. Session 3 - Finalise possible measure, report formats, frequency and compare with existing reports received by the manager, make necessary adjustment.

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ACTIVITY - Determining the information needs of users
1. Identify a major workplace decision that you were required to make in the last month: __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ 2. Write down all the information you needed to make the decision: __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ 3. How important was the information you obtained in making your decision? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ 4. What information systems did you use in making your decision? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________
5. Is the current information system you use Demand or Supply Driven?

__________________________________________________________________ __________________________________________________________________

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Misuse of Information
Often information received to assist with decision making can provide a distorted picture of the factors influencing a decision of managers. Over reliance on information can result in managers expecting the information will provide answers for the required decision. For example, a manager looking for ways to improve productivity on a road development infrastructure project may obtain information that provides data on progress per day. The information may indicate that the progress in one part of the road project is 20% below the average for the other areas. Further research may indicate that there are three Ministry staff regularly assigned to this one area. From the information the manager may make a decision that the three staff should be replaced to improve productivity - hopefully by 20%. The manager may have failed to obtain sufficient information that indicated that regular preventative maintenance was conducted Thursday night and often the maintenance staff were failing to complete the maintenance on time, resulting in the Friday shift starting work up to 2 hours late. It is important that information is verified and backed up. In this case the information provided enough detail to identify where and when a productivity problem existed but further information was required to determine the cause of the problem rather that assuming it was the staff. Different information needs to be obtained as managers 'drill down' to the root cause of a problem rather than making decisions based on initial information and assumptions - it is important to separate the person(s) from the problem or risk significant declines in staff morale and subsequently, productivity. On occasions, in many workplaces, information can be misused by unethical managers and staff to influence or persuade a decision to be made in a particular direction. The withholding or distortion of information is one of the key factors in unethical business behaviour. As a manager you need to be aware of the ever present risk of unethical behaviour and ensure that the information you receive is complete and accurate and if in doubt, seek additional information from alternative sources. It is important to assess the credibility of the information. The level of credibility will vary from 'highly credible' for official statistics to possibly questionable or strongly biased for information aimed at promoting a particular cause or project.

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Activity - Unethical use of information
Case Study Sopheap is the manager of the finance section at a garment manufacturing company in Phnom Penh. His company has just merged with a similar company in Sihanoukville and as a result there will only be a need for one finance manager for both factories. Rachana is the finance manager of the factory in Kandal province and has a national reputation as a leader in financial management. She lectures part time at the National University of Management and is a board member of the Kampuchea Institute of Certified Public Accountants & Auditors. Prior to the merger, Rachana’s company had requested that she travel to Hong Kong for 2 weeks to become familiar with a new financial system and its application in similar garment factories there. In the merger negotiations it was agreed that the new financial system should still go ahead and that Rachana should still visit Hong Kong. It was also agreed that Sopheap would act as manager for both factories until a decision could be made in relation to who would be the new finance manager for the merged companies Immediately after Rachana departed to Hong Kong, Sopheap met with the finance section staff at both factories and indicated that due to the merger there was only a need for one finance manager and that it was likely that Rachana would be surplus as a result of the merger. He also indicated that he would protect the employment of finance staff at both factories (this was despite Sopheap being aware of an executive decision to reduce finance staff numbers by 50% following the merger and introduction of the new finance system. In addition Sopheap spent time with the managers of each section at both factories and played golf with the new CEO, in all instances convincing the managers and CEO that, unfortunately, Rachana was surplus to the new organisation’s needs. When Rachana returned from a very successful visit to Hong Kong, she was asked to meet with the CEO, only to be told that, unfortunately, she was surplus to the new organisation’s needs and would be given assistance in finding a job in another company. 1. 2. 3. 4. Can you think of a similar situation that you have experienced? Provide your views on Sopheap's business ethics. How has information been misused by Sopheap in this case study? If you were in the position of the managers Sopheap influenced, what information would you have requested to assist you in making a decision?

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Routine and Non Routine Information
Most decisions made by managers are routine, that is, they are regular daily, weekly, monthly or annual decisions in relation to production, sales, cash flow, marketing. These decisions require similar information sources and successful organisations develop information systems that are readily accessed and provide the exact information requirements for users. There are many 'one-off' decisions that managers need to make. These are called non-routine and involve things like purchase of new equipment, replacement, software updates, launch of new initiatives, expansion of facilities etc. Usually the information required is not immediately available in the organisation's information systems or requires an adjustment of the output from raw data. Managers will need to determine the most reliable and useful source of information to assist in making non-routine decisions, either from existing data bases or new 'one off' sources.

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ACTIVITY - Routine and Non Routine information
Identify the routine decisions you make each week _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ What information do you use to assist you in making routine decisions? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ How easy is it to access the routine information? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Identify the non-routine decisions you have made in the last month _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ How useful was the existing information systems to you in making the nonroutine decisions? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ What additional information sources did you need to identify? _____________________________________________________________________ _____________________________________________________________________

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Unit 2 - Collect, analyse and report information
This section focuses on the ways that managers can collect information, effectively analyse the information and compile useful and user friendly reports Section 2 will focus on: • • • Collecting information, that is relevant to user needs, in a timely manner. Accessing information that is presented in a format suitable for analysis, interpretation and dissemination. Analysing information to identify and report relevant trends and developments in terms of the needs for which it is required.

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Sources of information
There are a number of sources of information that can be useful to managers in decision making. A number were identified in Section 1. Many of the sources of information are formal but there are also very useful informal sources of information. The availability and accessibility of information varies between organisations. In some organisations information is very strictly controlled by senior management and is 'trickled down' to staff on a selective and restricted basis. Many successful organisations adopt a much freer approach and have more open access to, and exchange of, information with the exception of information that is confidential (human resource information), or may effect competitiveness. Examples of successful companies with open information systems can often be found in the electronics and information technology industries. In most situations there is open access to information, except in relation to information about key components or production processes that provide the company with a competitive edge. Formal sources of information Formal sources of information are available internally and externally to an organisation and relate to information that has been identified as useful to users within the organisation and incorporated into the official information systems. Internal formal sources of information include: • • • • • • • • • • • • Electronic systems Letters Contracts Meeting minutes Memos Financial records Production reports Annual reports Strategic plans Customer surveys Inventory records Asset register

External formal sources of information include: • Industry magazines (local, national and international) • Non industry magazines with useful information • Internet

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• • • •

Demographic statistics Survey companies Marketing companies Futurologists

Informal sources of information While most information comes from formal sources officially recognised and supported by the company, there are many informal sources of information that can provide useful information. Internal informal sources of information include: • • • • • Staff room conversations 'Management by walking around' Intranet (could be formalised) Information provided by new staff - particularly from competitor organisations Training workshops

External informal sources of information include: • • • • • Family and friends Travel - in country and overseas Social and sports events Mass Media - news, documentaries Shops - particularly those selling beverages

The diagram on the next page summarises the internal and external information environment

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Internal and External Information Environment

ACTIVITY - Formal and Informal sources of information
List the formal internal sources of information you currently use: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ List the informal internal sources of information you currently use: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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What other formal or informal internal sources of information can you identify that may assist you? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ List the formal external sources of information you currently use: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

List the informal external sources of information you currently use: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

What other formal or informal external sources of information can you identify that may assist you and your team with decision making? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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Sources and reliability of information
The previous activity required you to consider the formal and informal, external and internal sources of information that currently assist you and your team in making decisions. In addition you were required to identify other formal and informal sources of information that could assist you in future decision making. One of the weaknesses of establishing formal sources of information is that managers and staff become solely reliant on this information in decision making. Often the formal information sources were established several years ago and the information may now be only partly relevant. A number of new sources of information may have become available and many previously uneconomical sources of information may now be available as a result of technological advances (scanners, remote sensors, internet etc). It is important for managers to continually search for new and better ways of sourcing information relevant to the decision making process. There are also many cases of organisations and managers making decisions based on information that, in hind sight, proved to be unreliable. The increased use of the intra and internet increase the risk of using unreliable information that appears, on the surface to be valid and reliable. It is important that as a manager you thoroughly check the source of the information to verify its validity and currency. A useful strategy to reduce the risk of obtaining out of date and unreliable information is to obtain information from a variety of sources.

Manual or Electronic Information Systems
The advances in information technology in the past decade have meant that many organisations have moved towards becoming 'paperless offices'. Most organisations still have manual as well as electronic information systems. Many staff, particularly those who have grown up before the 'information technology age' still prefer to use manual information systems. In many instances they are identified as 'dinosaurs' by fellow workers who have adapted easily to the electronic information systems. Both manual and electronic systems have advantages and disadvantages. Considerations such as cost, portability, access speed, reliability, accuracy, ease of use must be considered before replacing a manual information system with an electronic system. Some organisations that moved from manual systems to electronic ones early in the technological revolution found that they had purchased extremely expensive systems that required extensive training, were difficult to use, inflexible, expensive to locate and maintain and were only available to a limited number of staff due to lack of portability or

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networking. Because of the high initial investment it is often prohibitive to purchase updated systems that are much more efficient and effective.

ACTIVITY - Manual or Electronic Information Systems
On the table below identify three types of information that you require for decision making (you may refer to ones you identified in Section 1). Indicate the manual and electronic system that can provide you with that information. You also need to indicate the system you prefer to use and why.
Information source Manual System Electronic System Preferred System Why Preferred

ACTIVITY - Checklist for an Electronic Information System
On the following page, develop a checklist that you could use to evaluate the usefulness of an Electronic Information System in providing you with information required for effective and efficient decision making.

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Checklist

________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________

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Locating information
Many managers complain about the lack of information provided to assist them in making decisions. Often the information is available within the organisation or externally but managers are unaware of where the information is located or how they can access it. In most cases the manager is unaware of the where and how because of lack of communication and/or effective training. Often highly sophisticated and effective electronic information systems are purchased without consideration of 'selling' the system, and its capabilities, to staff or providing training. Successful organisations ensure that the budget for the purchase of a new Electronic Information System includes extensive pre purchase consultation with potential users as well as post purchase 'selling', training, and support to ensure that all users are aware of, and skilled, in the use of the new system. Many organisations demand that electronic systems purchased are 'user friendly' to the extent that they require minimum training and are 'idiot proof'. Recent advances in technology, particularly the intranet and internet have potential to provide managers with continuous updates of information rather than waiting for daily or monthly reports before making decisions. Variances can be immediately identified and adjustments made. For non- routine decision making the sources of both internal and external information have expanded significantly as providers of information upgrade the capabilities of their systems and new providers of information emerge. In the previous section you were required to identify locations currently used to obtain information. This may be an example of 'not knowing what you don't know' - that is, there may be many other locations of information that you are currently not aware of . In addition, the locations you currently use may have a number of features that you are not aware of, but could very effectively utilise, to improve your decision making capability.

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ACTIVITY - Identifying New Locations and Better Utilisation of Existing Locations
Find out if there are any new locations that you could utilise to obtain useful information. In addition find out if there are additional features of the locations you are currently using that could provide you with additional useful information. Record your research in the table below.
New Location Useful information available

Existing Location

Additional useful information available

Expert Information Systems
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Many organisations are significantly affected when a staff member resigns or retires. In many cases the staff member, particularly a long serving one, has accumulated a large amount of information relevant to them effectively and efficiently performing their job but the knowledge of the information is held in their head. Once they leave the information leaves with them. Successful organisations recognise the significant 'invisible resource' contained in the expertise of each staff member and have strategies in place to record the expert information of each individual. This is often incorporated into Standard Operating Procedures or in a dedicated Expert Information System that can be added to and updated on a continuous basis. Without such a system a company risks the continual drain of a high value resource - expertise and experience of its people.

ACTIVITY - Expert Information Systems
In the table below identify the information in the area you manage that is important

but is currently not in documented form - i.e. 'only in someone's head'. Also indicate the ideal location for the information and the strategy to record the information in the ideal location.
Information currently not documented Current person (s) who have the information Ideal location for the information Strategy to record the information

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The cost of losing information
When important information is stored in someone's head the retirement, retrenchment or resignation of that person can result in a significant cost to an organisation. The last activity identified several examples of information that is not documented but in someone’s head. In each example identified there is a potential cost associated with the loss of the information to your Ministry.

ACTIVITY - The cost of losing information
Select, from the last activity, one of the examples of information that is not documented. Calculate the potential cost to your Ministry of losing this information if the holder of it resigns, retires or is retrenched. Explain how you arrived at your answer _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________

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Minimising loss of information through Succession Planning
All organisations, including government ministries, have a dynamic human resource base. Staff are promoted, change jobs and locations within the company, move to competitors or other companies, retire or are retrenched when restructuring occurs. Successful organisations minimize the disruption and loss of information when a person shifts from a current job through succession planning, particularly in key areas. Succession planning is a formal strategy to minimise the disruption and potential cost of a key person shifting from an existing position. Effective succession plans are integrated into performance management systems and identify potential replacements for each person in a key position. Strategies are developed to ensure that the information and experience that each key person has is transferred to one or more staff, usually junior, who have shown the potential to effectively perform the job of the key person. Through planned transfer of information and expertise to potential successors the risk of loss of information and the associated costs to the organisation are minimised. Current succession planning practices are based on developing a learning organisation in which there is flexibility and multi-tasking built into Human Resource Management Systems from recruitment through performance management, training and development.

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Activity - Succession planning and Information transfer
In the Expert Information Systems activity you identified the current holders on nondocumented information. For each of the people identified indicate the succession plan that is currently in place. If there is none, suggest a possible plan that should be implemented.
Current holder of undocumented information Succession plan currently in place Suggested succession plan where none exists currently

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Barriers to accessing information
In most organisations there is a large amount of information available but there are often accessibility barriers. This can be caused by a number of factors including: • • • • • • • • • • • • lack of sufficient training of all potential users of the information system location of the information level of security unavailability of the 'gate keepers' of the information lack of sufficient computer terminals incompatibility of software systems between departments or plants lack of available catalogue of information systems available within the organisation and the detail held in each system. lack of awareness of usefulness in job lack of user manual or help menu lack of Standard Operating Procedures (SOP) lack of secure original of manual information lack of borrowing recording system

Possible strategies to eliminate barriers include: • • • • • • • • establishing a larger network of computer terminals training programs for potential users help desk user manual/help menu reducing unnecessary security barriers formalising the 'gatekeeper' system and including back up gatekeepers library style borrowing system one to one advice on job application of information

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Activity - Information Barriers
Based on the barriers identified above or others you are aware of, identify two examples where you experience barriers to easily obtaining information. Describe the barrier and the strategy to eliminate the barrier. Once you have completed this activity you may wish to continue a similar activity in your department as a workplace improvement strategy.
Existing information barrier Description of barrier Strategy to eliminate barrier

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Information research
The gathering of information requires good research skills to source the most useful information in the easiest, quickest and most cost effective way. Research skills that can assist in obtaining the best information include: • • • • • • Identifying clearly the objective of obtaining the information Identifying the best sources for obtaining accurate, complete and up to date information Checking possible other users who may already have similar information Developing an action plan outlining how to obtain the information most efficiently Once the information is obtained and applied, reviewing its usefulness Identifying continuous improvement strategies to further refine the information gathering process

The sources of information are classified as either primary or secondary sources. Primary information is new information that does not currently exist. Primary information can be gathered in a number of ways including direct measurement (units manufactured per minute, cost per module, sales per area, growth per month), questionnaires, face to face interviews, direct observation, sampling. Secondary information is information that already exists either within the organisation or externally. Secondary information may not be specific enough to provide sufficient information for decision making. It often needs to be supported by primary information. An advantage is that it is usually readily available and cheap to obtain and may be in a format similar to that required by the user. Researching for information will include obtaining qualitative and quantitative information, both primary and secondary. Qualitative data is based on observation or obtaining opinions. It is commonly used in marketing and its usefulness is largely determined by the skills of the researcher in designing the information gathering plan to ensure that the information collected is as objective as possible. Quantitative data is based on developing techniques to accurately measure the information required and to produce information that is presentable numerically with a high degree of certainty. Quantitative information is relatively easy to obtain in relation to technical, financial, scientific, biological and production information. It is less common in the areas where people, and their complexity and diversity, in relation to things like opinions, tastes, feelings, experiences, wealth, location, age and cultures, are involved. A number of statistical tools have been developed in an attempt to convert qualitative information into quantitative information with a reasonable degree of accuracy. Statistics are referred to in more detail in Unit 4 of this module.

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Unit 3 - Use management information systems.
This section focuses on the how managers can select and use a management system in planning, decision making and performance monitoring and improvement Section 3 will focus on: • • • The efficient use of management information systems to store and retrieve decision making information The use of available technology to efficiently and effectively manage information Developing and submitting recommendations for improvements of the information system.

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Information system features
Information systems that managers use with ease and confidence are likely to have a number of key features that result in them being taken for granted by the user(s). Several of the key features have been identified in the previous sections. The key features of a good information system can be summarised as: • • • • • • • • • accuracy useful information reliable sources up to date ease of access user friendly secure regularly updated good housekeeping

ACTIVITY - Information system features
a) The key features identified can be used as a checklist to rank the value of an information system. This activity requires you to identify the main information system you use and to score it in relation to each of the key features. You are also required to explain why you applied the chosen score to each feature. Complete the table on the following page.

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Information System: __________________________________________________
Key Feature 1 Accuracy Useful information Reliable sources Up to date Ease of access User friendly Secure Regularly updated Good housekeeping 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen

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ACTIVITY - Information system features
Unless the system is perfect it is likely that you have scored some key features at less than a perfect score of 10. You will also have indicated why you have allocated that score. This section of the activity requires you to identify possible strategies to improve the effectiveness of the system in the key features you identified as being less than perfect.

Key Feature
Accuracy

Implement Strategy

Useful information

Reliable sources

Up to date

Ease of access

User friendly

Secure

Regularly updated

Good housekeeping

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Changing from a manual to an electronic information system
In the previous sections it was indicated that many people, for various reasons, prefer to use a manual system rather than an electronic system. In many instances there is no objective analysis of the features and benefits of each type of system, the decision to remain with a manual system being based on familiarity, fear of technology, insufficient time to retrain, cost etc.

ACTIVITY - Changing from a manual to an electronic information system
Choose an information system you use that is currently in manual form (whiteboard, filing cabinet, hand recorded) and rank its key features (you may have already done this in a previous the previous activity - Information System Features). Identify an electronic system that could possibly replace the manual system and rank its key features. Indicate your decision in relation to which system you would prefer to use in the future. If it is the electronic system suggest strategies to replace the manual system. One of the important stages in decision making is consultation. In relation to this activity it is important to consult with key stakeholders. You are required to describe the consultation process used to assist you in making a decision. Note: The information system you are assessing does not need to be large - it could be meeting minutes, daily diary etc.

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Manual system audit
Key Feature 1 Accuracy Useful information Reliable sources Up to date Ease of access User friendly Secure Regularly updated Good housekeeping 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen

Alternative Electronic System audit
Key Feature 1 Accuracy Useful information Reliable sources Up to date Ease of access User friendly Secure Regularly updated Good housekeeping 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen

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ACTIVITY - Changing from a manual to an electronic information system (continued)
Strategy to implement electronic information system (if selected) _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Consultation process used _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

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Selecting an Electronic Information System
In the previous activity a manual and alternative electronic system were compared using the key features required for a good information system. This section focuses on electronic information systems. There are a number of addition features that need to be considered in relation to comparison of the suitability of electronic information systems including: Ease of use • How easy is the electronic information system to use, particularly for users with little or no previous computer awareness.

Capability • • • • • • • • Can the system hold all of the information currently required? What additional information is the system capable of holding? What is the capacity to expand the system as needs and amount of information expand? What is the user capacity of the system? How many terminals will the system support? How many users can access the system at the same time? Is the configuration compatible with existing systems? What type and how many computers can the system support? Intra and internet capacity and speed Reliability

Configuration • • • How many workstations are required and where? How many printers are required? What type? Where? What size and type of screens are required?

Output • • What type of output is required - graphics, text, data? How often is output required and in what quantity and quality?

Support • • • • What training is provided with the system? What help desk support is there? How detailed and useful is the help menu? What is the reputation and history of the supplier?
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Upgrading • • • Are regular upgrades available? Does the system have the capacity to accept upgrades How easy is it to add additional enhancements (scanners etc)

Cost • • • • • • What is the purchase cost? What is included in the purchase cost (training, set up etc)? What are the running costs (Power, repairs, upgrades)? What are the costs to expand the system later? What are the costs of ancillary equipment (printers, desks, scanners etc) What are the set up costs (installation, cabling, internet connection etc)

Compare these features with the checklist you developed in Section 2.

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Activity - Selecting an electronic system
Based in the selection criteria identified above EITHER conduct an audit of an existing electronic information system you currently use OR use the selection criteria to compare alternative electronic systems that may be available to replace a manual system or existing electronic system you are currently using but would like to replace in the next 12 months. Check with your IT Support staff to see what criteria they use.

1. Conduct an audit of an existing electronic system you currently use
Selection criteria 1 Ease of use Capability Configuration Output Support Upgrades Cost 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen

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2. Compare alternative electronic information systems to replace existing manual or electronic information system (you may wish to copy the tables if there are more than two systems being compared). System 1
Selection criteria 1 Ease of use Capability Configuration Output Support Upgrades Cost 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen

System 2
Selection criteria 1 Ease of use Capability Configuration Output Support Upgrades Cost 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen

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ACTIVITY - Selecting an electronic system (continued)
1. Replacement system recommended Why?________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 2. Provide the trainer with evidence of the selection criteria used by IT support staff _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

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Presenting Information
There are several key considerations in relation to designing the way in which information is presented to ensure that it provides the user with the most 'user friendly' format. Information may be presented in a number of ways but should always include the following key characteristics: Layout • Positioning on page/screen • Major and minor headings • Emphasis on key points • Easy find index Order/Categories • By postcode, alphabetic, receipt number, plant, department • Straight line or by category - eg A, B, C Customers, Product Range Output • Computer Screen/Touch Screen • Hard Copy (paper) • CD rom • Computer disk Frequency of updates/Volume • Continuous, hourly, daily, weekly, monthly, annual updates • Number of printed copies related to number of users - some frequent, others occasionally. Utilising new technology • higher speed • extended terminals • portability (mobile phones with internet capability) • wireless networking • lower cost/greater capability

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ACTIVITY - Presenting Information
Select an information system you frequently use. Audit the quality of presentation in relation to the above categories by scoring on a scale of 1 (poor) to 10 (excellent) and comment on the reason for your score and suggested changes

Information System: ____________________________________
Presentation Characteristic 1 Layout Order/Categories Output Medium 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score/suggested changes

Frequency of updates/volume Introduction of New Technology

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Maintaining an Information System
Some organisations still purchase 'off the shelf' information systems on the basis of purchase price. As indicated earlier, there are many factors, in addition to price, that need to be considered in relation to the overall cost of an information system. The benefits the organisation will gain from introducing a new system or updating or maintaining an existing one need to be considered. The following ongoing considerations need to be addressed in relation to all information systems: Training As indicated previously, a sophisticated, expensive and potentially very valuable information system may fail to meet part or any of its potential unless a training plan is included in the initial setup and ongoing upgrading of an information system. The cost of training can be significant if indirect costs (downtime of staff and replacement) are included. Systems designed to require minimum training , although expensive compared to other 'discount' systems may be cheaper in the long run if they incorporate features that minimise the training required. Support Some 'discount' systems are sold by 'fly by night' sales staff and when even a basic question requiring clarification is raised the sales staff or other company representatives are difficult or impossible to contact. Reputable information systems providers have dedicated help lines or provide good training to internal IT service staff. Support considerations include the speed at which it is possible to access help, either internally or externally. If there are 1000 staff requiring internal IT help and there is only 1 phone line/support person the information system can grind to a halt. Similarly, if there are millions of users of a major information system worldwide and only one contact point with only two or three lines, immediate assistance is unlikely - but you may be able to listen to many tunes! Maintenance How often is maintenance required? How long does it take? When is it done? For any information system to run efficiently and at full capacity it is necessary to maintain both the hardware and software. Identifying peak and trough use times is important as well as having IT support that is efficient and follows a programmed preventative maintenance plan. Upgrades Technology changes very rapidly and information systems that do not have the capacity to be upgraded will rapidly become obsolete. Again, discount 'off the shelf' systems may not have capacity or capability for upgrades, or there may be a
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high cost attached to them - a cheap purchase price compared to other systems may quickly be eliminated when the first upgrade is required. Where there is a cost of upgrading it is important to include the costs in the original budget for the information system otherwise upgrades will be missed and the system will rapidly fall behind that of competitors who have budgeted and implemented regular upgrades. Supplies In addition to the hardware and software there are a number of consumables that need to be included in the budget for an information system, in many instances, with the potential to add significant costs to the budget. Consumables include printer paper, printer ink, disks. Many organisations expect that when they introduce electronic information systems the usage and costs of consumables will reduce significantly, only to find that the costs remain the same, or often rise due to staff demanding paper copies of the greater volume of information available. Training and policy guidelines are needed over a period of time to reduce the 'natural' requirement of many staff to have everything copied onto paper. Another consideration is the availability of supplies. Some cheaper systems require supplies only available from the original manufacturer, usually at a significantly higher cost and more restricted availability than international standard supplies that are cheaper and usually available immediately from a local distributor.

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ACTIVITY - Maintenance
a. Identify the information system you are undertaking the maintenance audit on. _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

b. Maintenance audit (see below)

Maintenance Factors
Training

Performance of existing information system

Support

Maintenance

Upgrades

Supplies

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Needs based storage of information
Some information only has a short 'shelf life' and little requirement to store it. Most information however, needs to be stored to provide input to weekly, monthly or annual reports, or for legal reasons. Whether an information system is manual or electronic it still requires an efficiently planned, organised and maintained storage system. The advantage of electronic systems is that the large amount of space required for manual systems has been eliminated. There is however, still a case for manual storage of some information, particularly when it is received in manual form. There are several key factors that should be included in any information storage system including: Accessibility Most information required by managers needs to be easily accessed. This requires the information to be stored in a way that minimises the time or distance required to access it. A manager who relies on information available only on their manager's computer will possibly waste time walking to the managers computer, and even more time if the manager is unavailable. Manual storage systems are often inaccessible outside set opening times, particularly if they are archived files that have a 'gatekeeper' who is not always readily available. Logic Manual systems are the most likely to be difficult to access if the filing system has not been set up in a logical way. Simple alphabetic systems often result in the option to file information under several different letters. For example sales to a customer in Siem Reap may be filed under C for Customers, S for Siem Reap, S for Sales. Electronic systems can overcome this by providing cross reference capability. Agreed logical systems need to be established on a company wide (or at least department wide) basis to ensure ease of access. Accurate It is possible for decision making information to be stored in several separate locations. If this is the case not all the required information may be accessed due to the user not being aware of all the locations of the information. Simple errors, particularly in a manual system, may compound if they are not identified and corrected. An example could be where a key error resulted in the sales figures for a particular area appearing with an extra digit - 100000 units instead of 10000. When accessed for future planning this figure may result is significant problems, particularly if it is an electronic system that automatically programs production and the error is only a small part of normal production. ( A good system would detect the error).

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Time Each time information is retrieved there is a cost based on the number of minutes and possibly hours required by one or more staff to allocate time to information retrieval rather than some other productive task. Significant opportunities to reduce costs can often be identified in inefficient information retrieval systems where it is difficult and time consuming to find and retrieve information. Each of the above requirements of a good information storage system can be met through addressing the following questions: 1. 2. 3. 4. 5. 6. 7. 8. What information needs to be stored ? What is the most logical way to store the required information? Who will need to access the information? How often will the stored information need to be accessed? How easy will it be to retrieve the information? What is the cheapest efficient way to store the information? What is the future storage capacity requirement? Who needs to know about where and how the information can be accessed?

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ACTIVITY - Information storage systems
Identify the manual and electronic storage systems you currently use (refer to Section 1) Manual storage systems:________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Electronic storage systems:______________________________________________ _____________________________________________________________________ _____________________________________________________________________ Select the main manual and electronic storage system and identify how well it addresses the key requirements of a good storage system. For both the manual and electronic system chosen, identify changes that can be made to improve the current system. Manual storage system:
Manual storage requirement 1 Accessibility Logic Accuracy Retrieval time 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen/suggested changes

Electronic Storage System
Manual storage requirement 1 Accessibility Logic Accuracy Retrieval time 2 3 Performance Score 4 5 6 7 8 9 10 Reason for score chosen/suggested changes

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Security of Information
The value of information as a critical resource is often overlooked by organisations. Information systems and the storage associated with them represent significant investment which, if lost or stolen, could result in the failure of the organisation. In earlier sections information was identified as the competitive edge of many successful companies. The loss of information could result in the immediate loss of that competitive edge. As with other resources, risk analysis, of the potential loss of information, should be undertaken by all companies. Good managers ensure that the analysis is undertaken and a risk minimisation plan implemented to ensure that the risk off loss is minimised or possibly eliminated. The high levels of competitiveness in many industries has resulted in increasing industrial espionage and sabotage. Recent world events have increased the likelihood of electronic or direct terrorist attacks on key information storage systems as a way of crippling companies or governments. There are a number of threats to the security of information systems including: • • • • • • • Theft Sabotage Computer Virus Natural Disasters - Fire, flood, dust storm, cyclone Power surge or failure Programming errors System breakdown

There are several strategies that can be implemented to reduce the risk of information loss due to one or more of the above factors including: • • • • • Physically securing manual or electronic information systems - monitoring systems, locks of the system or room access, limited user access Password access in electronic information systems and in storage locations for manual systems Virus checking - at least daily with latest virus software Back up - preferably in different location to the original stored information Security Policy and Procedures

As the methods used to penetrate security systems become more sophisticated organisations need to constantly update security. There is however the risk that increased security measures may result in reduced accessibility and availability of information to genuine users. In designing effective security systems the objective is to achieve maximum security with minimum disruption to the users.

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GROUP ACTIVITY - Security Audit
In one or more groups undertake an information systems security audit for your department. The makeup of the groups will be determined in the workshop. You are required to present a report that includes the following: A. The current security system in your department? B. The information that is least secure in your department C. Recommended strategies to improve security whilst minimising the inconvenience to users D. Information that is low risk in relation to loss but is currently 'over secured' E. Recommended strategies to reduce the security level for low risk information without compromising the overall information system security.

Note: Due to the level of confidentiality this activity involves the final report to the trainer requiring internal clearance from our Ministry and editing prior to presentation (a good example of a security consideration that could easily breach Ministry policy in relation to security of information).

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Unit 4 - Prepare plans/budgets
This section focuses on the value gained from managers having the skills to effectively plan, implement and monitor budgets. Section 4 will focus on: • • • The involvement of managers and teams in planning and budget preparation and the resultant benefits The preparation and presentation of budgets in accordance with the requirements of your Ministry The development of contingency plans when there are variances between planned and actual budgets.

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The manager's role in budget planning
The lack of planning is one of the key factors contributing to organisational failure. Budgets provide managers with a systematic framework in which to operate the business or organisation. A budget can be defined in monetary or non monetary terms as the means by which an organisation plans to achieve its goals and objectives. These goals may be long term or short term. To meet the long term goals it is necessary to develop short-term strategies that are incorporated into annual budgets. A budget is not simply a means of limiting expenditure or checking staff performance. It is a tool for planning and controlling the effective and efficient use of resources to ensure the daily activities of each department are contributing to the organisation's long term goals. The development of an annual budget should be based on the organisation's Mission Plan, Strategic Plan and Integrated Work Plan (IWP). Whilst the Mission Plan sets out the long term (Up to 15 years) reason for the organisation’s existence, the Strategic plan sets the long-term policies and objectives (up to 5 years) and outlines broad strategies for achieving the objectives. Objectives can include risk reduction, growth, community and environmental initiatives. The Integrated Work Plan has a focus of 1 year and focuses on short term objectives, financial needs, operational policies and medium term investment programs. Budgets are the annual operational plans that are designed to achieve the strategic objectives and include details of marketing, production, labour requirements, costs, profit. The development of good budget plans provides a key performance reporting system. Responsibility reporting is often used in relation to budgets to provide performance reports in relation to the manager and teams of specific areas. Budgets provide a number of benefits including: • • • • Planning — identifying goals and strategies to achieve them. The development of budgets provides an opportunity to consider and evaluate alternative approaches, make decisions and action them Coordination — Budgets allow the plans of the different sections of a business to be developed in a coherent way with consideration for the other sections and overall business. Communicating — A budget provides a clear source of information that can be used to inform staff of goals and activities and the role of each person and department in achieving the organisational goals. Motivation — a budget provides staff with clear targets and the pathway to achieve

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them, particularly where they have been involved in pre-budget consultation. Staff can think about their future and that of their department and the organisation. Control — Feedback through budget reports provides a way of continuously evaluating the actual outcomes in relation to the goals and objectives. The monitoring of budgets provides the opportunity to identify problems and take corrective action immediately.

Many successful organisations involve staff in the development of budgets, whilst others determine budgets at senior management level. There are two main approaches to setting budgets: Top Down — senior management decides what the budgeted expenditure will be for the next budget period and lower management are expected to set their budgets to achieve the targets set by senior management. This often allows for little staff participation and the possibility of unrealistic budget targets, resulting in deteriorations of staff morale. Bottom Up — individual budgets are set by the people responsible for achieving results in their departments or areas. The budgets are consolidated into an overall budget which is then reviewed by senior management.

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This approach can provide a greater opportunity for involvement by staff at all levels provided that managers are willing to invest the time in gaining input from staff. There is a risk that staff involvement may result in budget padding. Staff may overestimate budget requirements, believing that costs will be cut. Managers who involve staff in the planning of budgets will gain several benefits for their team and the organisation including: • • • • Improved planning — not necessarily more efficient time wise but more effective Better understanding by staff of organisational goals Greater acceptance by staff of organsiational goals Stronger commitment by staff to achieving these goals.

There are several ways in which budgets are set including: 1. Incremental — adding or subtracting a percentage from last year's budget 2. Estimates — this requires a `guess' at what expenses and revenue are expected and required for the next year — it does not rely on any disciplined approach based on the strategies identified in this unit and applied by successful organisations. 3. Zero based budgeting — each budget is prepared from a zero base. It requires departments to develop the most efficient budget to achieve identified targets and justify it. 4. Comprehensive budget — this budget development strategy depends on each department developing a budget that is then incorporated into the overall budget for the organisation. The individual budgets are established along broadly set guidelines (similar to the bottom up approach) and the combining of similarly established budgets from different departments is called goal congruence.

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ACTIVITY - Budget Planning
Which of the top down and bottom up methods of setting budgets is used in your Ministry? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ How much opportunity do (a) you and (b) your staff have in contributing to the budget process ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Which of the following methods of setting budgets is used in your Minstry and/or department — Incremental, Estimating, Zero Based, Comprehensive? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Identify the advantages of the budget planning strategy used ______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Indicate any shortcomings of the budget planning strategy used. _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Identify ways in which you can help improve the budget planning process _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________

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Preparing a budget
There are several features of good budget preparation including: • • • • • • Identifying a clear purpose for the budget Participation and ownership Controllability Timing Flexibility Validity of assumptions

In preparing a budget for an organisation there are a number of factors to consider including:
1. Accrual Accounting or Cash Accounting -

Accrual Accounting Method: Revenue is treated as revenue when a sale is made or when goods are dispatched. Revenue is immediately included in the profit and loss statement. Expenses are recognised when they are incurred. The actual time of payment is not considered Cash Accounting Method: Revenue is reported only when cash is received and expenditure when actual payment is made. Medium to large companies usually use the Accrual Accounting Method.

2. The coordination of all the activities and budgets of the organisation. Good coordination is a critical success factor for a nationwide, project based insitution such as a government Ministry.

ACTIVITY - Cash or Accrual Accounting Method
Investigate which method of accounting is used in your Ministry — Accrual or Cash _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________

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Comparing actual performance with budgets
Budgets allow managers to evaluate actual against planned performance. The continuous feedback provided by comparing actual performance against planned performance is a strong motivating force that allows managers and teams to undertake corrective action to ensure that budgets and other performance indicators are on track. Flexing the budget. Budgets need to be flexible to allow for the constantly changing environment and one of the ways to ensure that like figures are compared is to use a technique called Flexing the Budget. Because the actual level of budget performance is often different from the planned level it is often necessary to `flex' the original budget to allow like with like comparisons. For example, if the maintenance department has a planned budget for the month that involves painting 4000m2 and the actual area painted is 5000m2, it is best to compare performance on the basis of a `flexed' version of the original budget as follows The following important points relate to the above variance example: 1. When actual expenses are greater than the budgeted expense the variance is Unfavourable (shown with brackets or a — sign). When actual expenses are less than the budgeted expense the variance is favourable (shown without brackets or with a + sign) 2. If actual revenue is greater than budgeted, the variance is favourable. If actual revenue is less than budgeted, the variance is unfavourable. The Variance Rule: A variance is favourable if it leads to a budget surplus and unfavourable if it leads to a budget shortfall. 3. When `flexing' a budget only variable costs are adjusted. Fixed costs remain the same despite variations in activity levels. 4. The comparison of actual with planned budget is a Performance Report. If the original budget had been compared with the actual budget all expenses (except salaries) would have been higher in the actual budget, causing some readers of the expense budget to believe the maintenance department was performing poorly. In reality, when comparing like with like — ie the actual expense budget with a `flexed' budget the department is performing very well, with the exception of labour — which may be due to the painting of some ceilings that required extra time and wasn't included in the original budget.

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Budget 4000m2

Flexed Budget 5000m2

Actual 5000m2

Variance

Riel
Paint Labour Supplies Electricity Gas Water Salaries Total 40000 15000 6200 1900 700 500 1600 65900

Riel
50000 18750 7750 2375 875 625 1600 81975

Riel
47040 20160 7720 2280 820 580 1600 80200

Riel
2960 (1410) 30 95 55 45 1775

Determining and implementing appropriate action The first consideration in relation to variance is to determine whether the variance is worth investigation on a `cost benefit' basis. This may be determined in several ways: 1. The size of the variance — for example a minimum of 20,000R may be set — this may vary between companies depending on size (although lots of small variances may add up to a significant figure) 2. Percentage variation. An organisation may set a variance of 5% or over as requiring explanation and adjustment 3. Frequency of variation. A one off may not warrant investigation but should be monitored for frequency and if it occurs again, the variance should be investigated. 4. The cost of investigating and remedying. Some variances may cost more in investigation and remedying than the benefits to be gained Strategies to improve the corrective action stage There are several strategies that can be used to improve the corrective action stage once variances have been identified including: 1. Ensure that the assumptions, figures and calculations are accurate and correctly recorded 2. The use of performance reports contributes to developing a culture of continuous improvement in the organisation, particularly where the variance data is presented in a user friendly manner 3. Regular evaluation and improvement meetings can be held to analyse: · The causes of the variances · Implementing corrective action · Progress of previous corrective action
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ACTIVITY - Performance report for your Department expenses
Using the Performance report table below, complete the sections that relate to your department . Provide the trainer with evidence of where you sourced the information

Expenses Materials Labour Supplies Fuels Depreciation Insurance Rent Phone Postage Other

Budget

Actual

Variance

Reasons

Corrective Action

NB: Some expenses may not be relevant to your department. Feel free to change or add expenses in the empty rows to reflect Ministry operations.

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Unfavourable variance and possible remedies
Revenue Variance Although Sales may not apply to your Ministry, there can be a variance in actual revenue which, if unfavourable, can have an impact on operations. Consider possible causes of an unfavourable variance in revenue including: • • • • • • Delay in funding transfer Error in original projections Poor quality of equipment Overpricing Errors in the original budget Others

Possible actions to take could include: 1. 2. 3. 4. 5. 6. Transferring funds from some other area of operations Negotiating with suppliers Negotiating with donors Extending credit terms Improving operational logistics Others

ACTIVITY - Revenue Variance
Identify an unfavourable variance in revenue for your department or Ministry as a whole, and the cause of the variance. Explain the action taken to reduce or eliminate the variance. _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________

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Materials Variance This could easily apply to government projects. There are a number of possible causes of unfavourable materials variance including: • • • • • Materials buying price higher than budgeted — possibly due to unexpected price increases, poor purchasing techniques (late orders, small orders), expensive delivery methods (air freight) Poor usage of materials — caused by poor work skills, machine breakdown, higher than expected rework/rejects, absenteeism Different materials ordered than budgeted for Different mix of materials Errors in the original budget

Possible actions include: 1. Finding alternative suppliers 2. Improving sales forecasting and production scheduling 3. Purchasing higher volumes to gain discounts 4. Checking invoices 5. Gaining proper authorisation 6. Purchasing correct materials 7. Preventative maintenance schedules 8. Improved skills training 9. Reviewing security 10. Correct and accurate recording 11. Measuring scrap/wastage/reworks 12. Reducing scrap/wastage/reworks 13. Implementing regular stock audits.

ACTIVITY - Materials Variance
Identify an unfavourable variance in materials, and the cause of the variance. Explain the action taken to reduce or eliminate the variance. _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

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Labour Variance This could also be relevant concerning technical advisers, the mix of labour required for a project, any sub-contracted labour employed. Or the need to transfer labour from one area to another. There are a number of possible causes of unfavourable labour variance including: • • • • • • • • • Higher wage rates Higher wage on-costs Different mix of labour used Different amounts of overtime worked Lower grade of materials used Poorly trained employees Injuries Low morale Other

Possible actions include: 1. Reviewing wage rates and on-costs 2. Reviewing mix of labour 3. Undertaking proper human resource planning including succession planning 4. Reviewing labour usage 5. Internal control of time recording 6. Reviewing recruitment policies 7. Providing competency based training 8. Purchasing better quality materials 9. Reviewing production/processing methods 10. Other

ACTIVITY - Labour Variance
Identify an unfavourable variance in labour, and the cause of the variance. Explain the action taken to reduce or eliminate the variance. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

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Other expenses variance • • Supplies/fuels — similar to causes and actions for materials Payroll Services — double dipping — some payroll agencies increase there charges with inflation but also charge a percentage of the payroll processed — which is also likely to be increasing due to inflation causing the wage bill to rise. There may be many other areas that managers can identify `hidden' drains on the company.

Interest Unfavourable variance in relation to this expense can occur by: • Paying bills too quickly • Paying bills late and incurring fines/losing discount • Poor credit management in relation to debtors • Incorrect bank calculations • Lack of awareness of alternative finance sources with more favourable interest and charges

ACTIVITY - Other Variances
Identify a department expense where, in the past there were often variances. Indicate the reason for the variance and the remedies you and your team took. Explain the process you used to minimise the variance. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

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As has been suggested in the Payroll example, there are often hidden drains on the organization or your department that may not show up in the budget reviews, particularly if the hidden cost has been built into the original budget for this year, or possible in the past (another justification for zero based budgeting). It is possible for an organization to continue paying unnecessary amounts for materials, labour etc. By having a review policy that regularly looks at the value-added by an input,and possible alternatives, it is possible to identify previously unknown drains.

ACTIVITY - Hidden Drains
With your team, review the inputs to your department and, if required, identify a possible `hidden drain' on the department. Provide recommendations of a possible remedy to the drain. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

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Unit 5 - Prepare Resource Proposals.
This section focuses on the how managers can identify future resource needs, collect resource needs data and present realistic resource needs proposals. Section 5 will focus on: • • • The collection of resource data through consultation with colleagues and resource management specialists Estimating the resource needs and utilisation that reflects the organisations business plans, and customer and supplier requirements Supporting proposals to secure resources with presentations that include realistic options, benefits and costs.

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Identifying expenditure needs and preparing resource proposals
This section focuses on the operating and capital expenditure and the resources needed by the organisation to achieve the operating and capital expenditure targets. There are a number of demands on managers to meet the requirements of shareholders, customers, the community and the environment. Managers are required to select and utilise resources in an efficient and effective way. Careful analysis and planning must occur and information sourced to ensure that any decision made to acquire resources, particularly those involving significant investment, are based on proper analysis and consultation. To undertake proper analysis both financial and non financial data needs to be considered. Financial data includes income and expenditure, cost of raw materials, labour cost per unit. Non-financial data includes progress against workplan, quality audit, donor feedback etc. Some data is readily available within the organisation but other data may need to be sourced externally. It is important in all decision making in relation to expenditure decisions that there is broad consultation with stakeholders and experts - both internally and externally. The resources managers are responsible for include: • • • Human Resources - staff - Full time, part time, contract Operational Resources - Resources that are considered to be totally used in the production of an output or service in 1 year Capital Resources - Resources that are used to produce other goods or services. They are used up over a period of years but depreciated annually. They include buildings, major equipment, land, intangibles (eg brand name)

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Human Resources - Staff
The proportion of expenditure allocated to staff depends on the nature of the products or services created by an organisation. In organisations that produce goods or services that are labour intensive the proportion of expenditure related to people is usually a high proportion. In organisations that are highly mechanised and produce goods or services using the latest technology the human resource expenditure is only a small component of overall expenditure.

ACTIVITY - Expenditure on Human Resources
Find out what proportion of total expenditure is allocated to human resources in a. your department or unit ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

b. Your Ministry ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

If there is a difference between the proportions in your department and organisation as a whole, explain why ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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Good selection, recruitment and orientation systems are essential. In arriving at the optimum level of human resources, information needs to be obtained in relation to a number factors including: • • • • • • • • • Technical skills required Forecast output Fixed labour requirements Variable labour requirements Labour regulations Output per labour unit Cost of labour On costs per worker (holidays, sick leave) Other

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ACTIVITY - Human resource Information
Identify and provide evidence of the specific measurable outcomes required by your department or unit for this financial year (you probably already have this information) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 1. Briefly describe the information you use in relation to determining the human resourcing factors listed.
Resource Factor Technical skills required Forecast production Fixed labour requirements Variable labour requirements Labour regulations Output per labour unit Cost of labour On costs per worker (holidays sick leave) Other Information Source

Describe how you arrive at your Human Resource requirements ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Indicate strategies you could introduce to improve your determination of human resource needs. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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Capital Resources and Expenditure
Capital Resources are fixed assets that are usually major in relation to cost and are used for more than one financial year. The actual cost determines whether an asset is a Capital Resource or Operational Resource .

ACTIVITY - Capital Resources
Find out what your Ministry defines as a Capital Resource ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

ACTIVITY - Identifying Capital Resources
In your department or unit, identify and report on the assets that are classified as Capital Resources. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Identify the contribution that each of these Capital Resources make to the overall performance of your department or unit. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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In addition to identifying Capital Resources already in existence an important skill of a manager is to contribute to the selection, purchase, installation and use of Capital Resources. Identifying the most appropriate resources, particularly major ones, to achieve the objectives of your department or unit and your Ministry as a whole will require special skills, particularly due to the fact that predictions of future returns on each investment option need to be made. There is no method of identifying exactly what the future benefits and costs of a new investment are. Any analysis will involve an estimate of future cash flows to arrive at a figure that will allow comparison of various investment options. There are many different ways of arriving at a comparison of different investment options. All of them rely on information. There are four main forms of evaluation methods commonly used for assessing expenditure on capital resources. 1. 2. 3. 4. Payback Period Accounting rate of return Net Present Value Internal Rate of Return.

For this unit it is not a requirement that managers have a detailed understanding of each of these methods. As a manager you do need to be aware of the different methods and why they are used.

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ACTIVITY - Investment Evaluation Methods
Identify and describe a major capital investment that was recently made by your department (if your department has not made a major investment recently select one from your Ministry as a whole) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Find out how the investment decision was made, and ideally the Investment Evaluation Method(s) used. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What consultation processes were used to ensure that there was sufficient input from the stakeholders in the investment decision? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What are some of the indirect benefits arising from the investment for your staff, stakeholders and Ministry? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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Operating Resources and Expenditure
The earlier definition of Operating Resources identified them as resources that are used in a financial year. Another definition describes them as relatively minor items in relation to cost but which are important contributors to the day to day efficiency and effectiveness of daily operations.

ACTIVITY - Operating Resources
Identify and describe an operating resource investment that was recently made by your department or unit (if your department has not made an operational investment recently select one from your Ministry) ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ Find out how the investment decision was made, and ideally the Investment Evaluation Method(s) used. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What consultation processes were used to ensure that there was sufficient input from the stakeholders in the investment decision? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What are some of the indirect benefits arising from the operational resource investment for your staff, customers and owners ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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Some of the operational resource investments you may have chosen include: • • • • • Communication Systems Computing and Information Systems Tools of Trade or minor equipment Materials Movement or Handling equipment Maintenance Equipment

Identifying needs and opportunities
In identifying needs and opportunities it important to research information in relation to current operating resource availability and use. These factors may be observed in the workplace in a range of situations that effect the efficiency and effectiveness of your department and your Ministry as a whole. Indicators of problems with availability and use of current operating resources may include: • • • • • • Bottlenecks Time-wasters Idle or down-time Inability to meet Service Level Agreements Information restrictions Poor response times

An audit of operational or capital resources will identify areas where availability and use rates are identified as being below required standards. The research should include seeking information on the options that stakeholders identify in relation to alternatives to better utilise existing resources or the requirements for replacement of old resources with new ones.

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ACTIVITY - Identifying needs and opportunities
Based on the possible indicators of problems in resources availability and use listed above, identify a resource where there is a problem related to availability and/or use and the indicator that there is a problem. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What alternative methods could you use to conduct the research to identify the causes of the problems in availability and use of the resource and possible ways of improving the situation ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What benefits are there to be gained from including customers (internal and external) in your research? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ What methods would you use to validate, evaluate and apply costs to the quantitative and qualitative information gathered? ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________

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Preparing and presenting proposals
Following research - both quantitative and qualitative - the next step is to develop a proposal that is to be presented to the key decision makers in relation to the planned operational or capital investment. There are a number of elements that should be included in a good proposal. It is likely that your department has a suggested format for presenting proposals.

ACTIVITY - Preparing and presenting proposals
Investigate and provide evidence of the format of proposals used in your Ministry. Are there standard guidelines?
_______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________ _______________________________________________________________________________________

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The elements that should be included in a proposal include: Executive Summary including • • • • • • • • Title Identification of problem(s) or opportunities Reason for proposal Aims and objectives Summary of costs Proposed method of financing Financial and non financial benefits Recommendation summary

The layout of the body of the proposal should include: • • • • • • • • • • • • • • • • • Title Author, contact details, date Purpose and problems to be solved or opportunities to be gained Key aims, objectives and benefits Capital and other requirements Timelines proposed Research undertaken and sources Alternatives considered Data Collected Verification of data Financial calculations Assumptions underlying calculations Evaluation in quantitative and qualitative terms Bona fides of authors of the proposal Capital sources and costs Recommendations Summary and conclusion

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ACTIVITY — Major Project — Group
The objective of this project is for you to prepare a proposal for either an operating or capital investment you have identified in consultation with your team. Ideally the proposal should be one that you need to complete and submit as part of your forward planning. You will need to identify the investment proposal prior to the end of this training and briefly discuss it with the trainer. In completing the project you will benefit from following an action learning cycle: 1. 2. 3. 4. 5. 6. Gather information and data Receive feedback in relation to information and data Develop action plan Implement required actions Evaluate action and outcomes Develop new action plans

The proposal will be presented at a time agreed between your trainer and your group and ideally will involve a formal presentation to the whole group. Each project will be completed by teams of 3-4 from the same unit or department - the make up of the groups will be determined prior to the completion of the workshop. The following checklist provides you with guidelines for completing the project and should be used in combination with the key elements of a proposal listed earlier in this section: 1. Setting up the project: • identify an opportunity for productivity or performance improvement through operational or capital investment • obtain the required consent and/or agreement from other staff if required • estimate the time line for the project and milestones • identify information required • identify required resources • identify additional assistance required 2. Identifying the project goals: • identify the cause of any problems in relation to existing operational or capital investment in the area you have selected • identify productivity improvement opportunities • identify the outcomes required from the any new operational or capital expenditure - be specific in relation to the required outcomes eg. 5% improvement in productivity, 25% reduction in complaints, 95% of documents delivered on time, staff turnover reduced by 20% etc.

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3. Identify possible alternative options by: • conducting research internally and externally • identifying constraints including financial, time, capacity to consider alternatives 4. Gather data by: • identifying internal and external data sources • collecting quantitative data in relation to projected effect on revenue, costs, staff, stakeholders and validating wherever possible 5. Provide quantitative and qualitative support for the proposal by: • identifying and explaining the assumptions on which calculations are based • checking with others for verification of assumptions • calculate benefits including savings, increased productivity etc. and check for accuracy 6. Address financial issues as identified by financial guidelines and discussions with internal financial advisors including: • estimate returns on investment through alternative financing methods • compare leasing with purchasing • consider depreciation • include taxation implications 7. Develop professional presentation of proposal • identify the presentation strategy - written, verbal, power point • design a logical sequence and incorporate visuals - graphs, tables, photo's • incorporate key quantitative and qualitative data. • Incorporate a request for a decision / endorsement of the proposal.

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Useful Terms:
Back up A way of protecting data by copying it and storing it in more than one place A financial plan Resources that are used to produce other goods or services. They are used up (depreciated) over several years. A particular combination of equipment and software that makes up a working system. to configure a device or system is to set it up or modify it to meet some individual set of needs. Formal preparation of alternative strategies to be put in place should initial courses of action need to be varied A formal prediction of future events for use in a plan or budget Equipment such as a keyboard, monitor, printer, computer, and other devices that may be attached to the computer A collection of hardware, software, people, procedures, and data The products or materials held to allow the production or delivery of a product or service A set of formal business systems designed to provide information for an organisation

Budget Capital Resources

Configuration

Contingency Planning

Forecast

Hardware

Information Systems

Inventory

Management Information Systems (MIS) Operational decisions Operational resources

Regarding the 'day to day' operation of the organisation Resources that are totally used in the production of output or service - eg. materials, fuel, paint, electricity. An assessment of what an amount to be received in the future may be worth in today's Dong Information that is collected for a specific activity

Present value of money

Primary Data

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Questionnaire

A list of questions designed to acquire accurate information to assist with decision making Information that has already been collected by another party A collection of computer programs, normally provided with the computer enabling it to be used efficiently Made by senior management in a long term planning sense, 'big picture' decisions A group of facts, principles, doctrines or the like which together form one entity Usually made by middle management as they develop appropriate business tactics The difference between budgeted money or volume expected and the actual result

Secondary data

Software

Strategic Decisions

System

Tactical Decisions

Variance

SECTION FIVE:
Prepare resource proposals

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