Unit-01-Introduction to Management Information Systems Structure: 1.1 Introduction Objectives 1.2 What are Management Information Systems? 1.2.1 Introduction 1.2.

2 Interpretation of MIS Concept 1.2.3 Self Assessment Questions (for section 1.2) 1.3 Organization and Management 1.3.1 What Are Organizations? 1.3.2 Management 1.4 The concept of information 1.4.1 Meaning Information as Processed Data Information as the Opposite of Uncertainty Information as a Meaningful Signal 1.4.2 Uses of information Information as a Resource Information as an Asset Information as a Commodity 1.4.3 The Cost of Information Acquiring Information Processing Information Storing Information Retrieving Information Communicating Information 1.4.4 The Need for Information Systems Individual Needs Managerial Needs Organizational Needs 1.4.5 Self assessment questions (for section 1.4) 1.5 Information Technology 1.5.1 The Role of Information Technology 1.5.2 Components of Information Technology Software Hardware Database Management Systems Data communication technology 1.5.3 Self assessment questions (for section 1.5) 1.6 Managing Information in a Global Environment 1.6.1 Information management model Diagnosis Evaluation Design Implementation 1.7 Management information system as a discipline 1.7.1 Relationship of MIS to Reference Disciplines 1.7.2 Self assessment questions (for section 1.7) 1.8 Summary 1.9 Terminal Questions 1.10 Multiple Choice Questions 1.11 Answers to SAQs, TQs and MCQs 1.1 Introduction With this unit, we shall embark on the journey of “Management Information System”. Begin by discussing a brief outline of MIS, management and organization. We shall conclude by the MIS as a discipline.

Objectives: At the end of this unit, you should be able to · Define Management Information system · Explain the various needs of the information · Understand Management and organization · Explain Information management model · How MIS evolved from the past to the present 1.2 What are Management Information Systems? 1.2.1 Introduction Management information system (MIS) is an organized portfolio of formal systems for obtaining, processing, and delivering information in support of the business operations and management of an organization. The functions of information systems have increased many folds since the first computer was introduced into a business organization in 1954. Of course, we must not forget the weighty ledgers, sedulously kept by the bookkeepers of yore, pigeons carrying news of battles won and heralding profitable speculation op portunities for the recipient, and the clay tablets on which the Babylonians kept records as long ago as 3500 B.C. There were information facilities before computers. Manual calculation and non-electronic communications have not dis appeared, but could they support the complex business of today’s organiza tions. Today’s organizations have been profoundly affected by both the technology push created by continual innovation in information tech nology, and the demand-pull, or the needs in the marketplace, arising from the growing complexity of social organizations and from the recognition of the power of information systems to solve complex problems. These two forces have led to the evolution of the MIS concept itself and have changed the nature of in formation systems. In turn, MIS transform organizations, the nature of work, and the products offered in the marketplace. 1.2.2 Interpretation of MIS Concept In our broad interpretation of the MIS concept, these information systems include all of the following: · Transaction processing systems for operational data processing that are needed, for example, to register customer orders and to produce invoices and payroll checks. · Management reporting systems capable of producing reports for specific periods, designed for managers responsible for specific functions in a firm. · Decision support systems (DSS) expressly designed for the support of individual and collective decision making. · Executive information systems, which support the work of senior executives and of company boards by giving them ready access to a variety of summarized company data against a background of general information on the industry and the economy at large.

commer cial artists. For example. which support and coordinate knowledge work in an office environment by handling documents and messages in a variety of forms-text. image.1 From the organizational point of view. operational support systems assist in the day-to-day activities of the enterprise by keeping track of its resources and commitments. In a broader sense. or scientists who model molecular structures or study the genetic codes of living matter. . Through such systems. a bank can maintain the status of demand deposits for its customers. a manufacturing company can track the inventory of finished goods. and voice. 1.1. diverse profes sional support systems help designers. architects. data. such as engineers. In figure 1. and a dis tributor’s system can answer customer queries regarding orders. The primary function of operational support systems is thus transaction processing. Fig.· Office information systems. knowledge work is also supported by computerized systems assisting professionals in non-managerial functions. it is important to rec ognize that certain systems of different types are interorganizational: they in tegrate the organization with other firms.

Such interorganizational it formation systems speed the flow of information between companies and are frequently a source of competitive edge. materials. are prime exam ples of strategic information systems.1 What Are Organizations? Organizations are formal social units devoted to the attainment of specific goals.Management support systems. A nonprofit hospital applies its resources to provide health care to its target population.3 Organization and Management 1. The range of this type of support is broad and growing. machinery. Another way to look at management is to consider the roles managers play in their workentrepreneur and resource allocator are two examples of these roles.3. it is increasingly common to design certain information systems to give a company a superior competitive position in the marketplace by helping it offer its customers informationrelated products or services that the competition will find difficult to match. Decision support systems allow managers to consider various courses of future action and see projected results in order to plan future activities. and pro jected activity within their areas of responsibility. assist the various levels of management in their tasks and managers are able to obtain summary reports on past. leading. Other systems offer a variety of computerized supports for team work.3. and controlling. 1. current. For example. An ordering system with terminals installed at thousand of client sites. and information) and aims to meet certain financial objectives. the information systems of an organization become connected to those of its suppliers and customers or to providers of information about the external environment in which the firm operates. the quality of .2) 1.3 Self Assessment Questions (for section 1. a motor vehicle bureau licenses drivers and vehicles. Decision-making. There are several fruitful ways to understand management. a business firm that pro duces semiconductor memory chips consumes certain resources (money. However. monitoring. A local government institution employs its resources (financed by the tax payers) to provide a benefit for the area population-thus. or an expert system that helps to diagnose via telecommunication links how equipment installed at customer sites is operating. The classical way is to consider the managerial functions: planning. Executives are able to get an overview of the company’s operations in attractive graphical form and "drill in" on any aspect they want to pursue in more detail. Office information systems support diverse aspects of individual and group knowledge work. Organizations use certain resources to pro duce outputs and thus meet their goals. Detailed analyses have also been made of how managers actually spend their time. An individual may maintain his or her business calendar and communicate with co -workers through the medium of electronic mail in some systems. labor. and coordination are informa tion-intensive aspects of these managerial functions. What do you understand by Management information system? 2. 1.2. various interpersonal tasks have been found to make far greater demands on managers’ time than pure decision-making. staffing. also by sending images. even when the participants are widely dispersed. What does management information system include? 1. In many cases. organizing.2 Management Management is the process of providing an organizational environment in which individuals work and employ available resources to attain aims that contribute to the overall goals of the organization. Indeed.

1 Meaning Information is a complex concept that has a variety of meanings depending on its context and the perspective in which it is studied. thus. firms behave according to how they read the economic climate. that the lead ership function receives scant support from MIS. Moreover. It could be described in three ways 1) as processed data.3 Information as a Meaningful Signal Information theory. Managers also define information in terms of its reducing uncertainty. a branch of statistics concerned with measuring the efficiency of communication between people and/or machines. 1. filtered. the reduction of uncertainty about the outcomes of various alternatives improves the effectiveness of the decision.1 Information as Processed Data Data are generally considered to be raw facts that have undefined uses and application.4. 1. Because managers must project the outcomes of alternatives in making decisions. and knowledge may be derived from scientific terminology. and summarized. obviously.1. When the data are analysed. is designed to support managers in as many of their functions as possible. but the planning function should be extensively supported. Data about when an aircraft departed from its destination is information in the economic sense because it reduces uncertainty about the aircraft’s arrival time. 2) as the opposite of uncertainty. each incoming aircraft has a scheduled arrival time. It is clear. and the three terms maybe used interchangeably. data refer to unprocessed and unanalysed numbers. However. information is considered to be processed data that influences choices. The firm reduces its uncertainty by decoding these signals. that is. The confusion often extends to the information systems context. information. An MIS. and 3) as a meaningful signal-to illus trate the richness of the concept of information.4.1. where all buyers and sellers have complete knowledge about one another and where uncertainty does not exist.manage ment cannot be evaluated by measuring time allocations alone. 1.4. In macroeconomic theory. and conversely. Taking an example of Federal Express in USA. the less uncertainty exists? In microeconomic theory the equilibrium of supply and demand depends on a market known as a perfect mar ket. although to different degrees. data that have somehow been formatted. for example.4. the more information is available. and knowledge is considered to be an understanding derived from information distinctions among data. the more uncertainty exists. its actual arrival depends on unforeseen conditions.2 Information as the Opposite of Uncertainty A different perspective on information derives from economic theory and defines information as the negative mea sure of uncertainty. Economic signals that measure and predict the direction of the economy provide information about the economic climate. the less information is available. the information that a manager brings to bear in a meeting is often a determinant of its success. scientists talk about the information contained in the data and the knowledge acquired from their analyses. defines information as the inputs and outputs of . thereby increasing Federal Express’s ability to handle arriving packages.1.4 The Concept of Information 1. The researcher collects data to test hypotheses. Information makes a market perfect by eliminating uncertainties about supply and demand. 1. that is.making process and the quality of the decision.

communication. Electronic, auditory, visual, or other signals that a sender and receiver interpret similarly convey information. For example, in the recruitment scenario about, the resumes and applications for the open positions are information because they are signals sent by the applicants, and interpreted similarly by both. The Managers in their roles as communicators both generate and receive information. They receive reports that organize signals or data in a way that conveys their meaning. Reports of sales trends become information; so do reports about hazardous waste sites. Managers derive meaning from the information they see and hear as part of communication and use it to make decisions. This definition of information requires a manager to interpret a given signal as it was intended. For example, a manager’s incorrect interpretation of body language in a negotiation would not be considered to be information from this perspective, although we know that managers use both correct and incorrect perceptions as information in decision making and other managerial functions. Again, this view of information suggests the complexity of the concept and the value of a multifaceted definition. 1.4.2 Uses of information Organizations may use information as a resource, as an asset, or as a commodity. Information as a Resource We generally think of organizations using money, people, raw materials, machinery, or even time as resources-inputs to the production of outputs. Information can also be viewed as a resource. Social workers use information about clients in helping them become more functional. Physicians use case histories of patients as inputs to diagnosis and prescription. Resources can also substitute for one another to some degree. Capital in the form of automated equipment can reduce labor required for production. Similarly, information can replace either capital or labor. Organizational members may also use information to decrease the cost or increase the quality of the final product or service. Information as an Asset An asset is the property of a person or an organization that is used to produce a company’s output and does not get used up as a resource does. Some resources are converted to assets that can be used over an extended period, such as the use of capital to purchase equipment that, in turn, becomes an asset. The information resource is similar, but not identical, to other resources in this respect. Information, even if used immediately, is rarely actually consumer. For example, when managers use data about a Department Store sale to determine whether inventory should be replenished, the sales data remain available as a resource for use in other analyses. In some cases, such as the Federal Express aircraft departures, the information quickly loses some value after its use, although it may have subsequent value as a resource for historical analyses. As a corporate asset, then, information is comparable to plant, equipment, and goodwill. It can even be viewed as inventory, with information considered as a raw material, work in process, or finished goods. The asset model of information encourages management to view information as an investment that managers can use strategically. Unlike resources, which managers seek to use efficiently to produce output, managers view assets as giving the organization an advantage over its competitors. For example, the information collected by Department Store about its sales may be extremely valuable to its suppliers and competitors. Information as a Commodity Like corn, automobiles, washing machines, or other commodities, information is a saleable product. Some companies use information primarily to sell it. For example, credit bureaus collect information on your credit history to sell to your potential creditors. In our service-oriented economy, an

increasing number of organizations are adopting a commodity view of information viewing it as a saleable product. 1.4.3 The Cost of Information Although information can be valuable, it is costly to use. Acquiring, processing, storing, retrieving, and communicating information each have costs. Acquiring Information The acquisition of information is a first step in its use. We can obtain information from either formal or informal sources. Formal sources provide information in a relatively organized and predictable fashion, for example, business forms; electronic monitoring equipment such as digital thermometers; and machine-readable purchased data such as an encyclopaedia (Personal records, corporate annual reports, summarized transaction histories) on a compact disc. Informal sources provide information in a less structured way and include conversations with customers, suppliers, and other employees, as well as general observations of personal and organizational activities. Generally, acquiring infor mation through informal sources costs less, but the information acquired may be harder to organize and use effectively. Data acquisition can occur manually or electronically. Managers often hand-write evaluation reports or salespeople maintain written records of customer orders. Increasingly, managers can enter evaluation data directly into the computer, and salespeople can use point-of sale terminals to record detailed sales information electronically. Experts estimate that electronic forms for capturing data cost at least 70 percent less to design, purchase, use, carry, and revise than the equivalent paper forms. Processing Information Processing information describes transforming it into a usable form. Processing typically occurs at two times: first, between the acquisition and storage of information, and second, between its retrieval and communication. The processing that occurs between acquisition and storage generally requires a large amount of personal labor. Manual processing, involves duplicating, sorting, and filing data. Electronic processing, such as with electronic scanners, involves transforming and entering the data into an electronic form. Although both manual and computerized processing may require significant clerical time and incur high costs, electronic pro cessing can reduce these costs. Processing occurs between storing and communicating information for both manual and computerized systems. In manual systems, filing clerks typically perform the processes of retrieval, formatting, and display. When summaries or special analyses are required, analysts with special skills, such as skills in finance or accounting, may process the data. Manual information processing involves high labour and time costs but low equipment costs. Manual pro cessing of large volumes of data tends to be more expensive than computer processing. In computerized systems the processing between retrieval and communication allows more analysis and display possibilities in a shorter time. The costs of computerized processing include rental or depreciation of computer equipment, the labor costs of operating the equipment, and the costs associated with programming software to retrieve, format, and display information. Computerized processing involves lower labour and time costs but higher equipment costs than manual processing. Storing Information The primary cost of storing information is the cost of the storage medium and space on computerized storage uses paper, microform, or both. These media require much more phys ical storage space than electronic media and typically incur a greater cost for leasing or buying space than do electronic media. Computerized storage uses a variety of media, including hard disks, diskettes, pen drives and CD-ROM, depending on the amount of information to be stored and the desired speed of retrieval. The organizational overhead to monitor and control information storage, including staff salaries and physical equipment, adds to the cost of information storage.

Most large companies keep duplicates of their electronically stored information at a secure site remote from their processing facilities to ensure that the data can be retrieved in the event of a disaster such as a fire or flood or terrorist strikes. In addition, most companies keep duplicate paper or microform copies of much of their data. The cost of the media, physical facilities, and staff for these backup systems also contributes to the storage costs. Both document and electronic storage have an ancillary cost for storing the documentation needed to locate information. Storing large amounts of data calls for simultaneously developing and storing an index or map that assists in locating the data. Retrieving Information Retrieving desired data from manual systems can be time consuming and expensive executives spend approximately six weeks a year on average looking for misplaced material. Secretaries may spend as much as 30 percent of their time looking for paper documents and approximately 20 percent of that time searching for misfiled items. Because paper files require large amounts of space, managers may store the data on a different floor or even in a different building. The labour costs of retrieving even small amounts of information exceed those for retrieving information electronically unless the organization can create small and compact storage for its paper records. Electronic systems provide rapid and inexpensive access to information stored electronically in an organized fashion. The costs incurred are only those of using the computer equipment for a fraction of a second, particularly when retrieval is part of ongoing processing. If an individual requests the retrieval, it may require additional processing to translate the retrieval request from a form understood by the person to a form understood by the computer. Then the information is stored in a different place from where it is requested, the request must be transmitted electronically to where the data are stored, and the retrieved data must be transmitted back. Communication costs are relatively low for small amounts of infor mation, but the communication equipment and infrastructure can be expensive unless amortized over a sufficiently large volume of data communication. Companies that have small communication needs can pay to use the infrastructure of third parties, such as telephone companies. Communicating Information Manual transmission of information occurs frequently and easily in most organizations. Most organizational members rely on face-to-face communication in formal or informal setting or on written publications for much of the information they require to do their jobs. Bu t face-to-face communication requires ‘extensive amounts of time, a scarce resource in most organizations. Written media, such as memos, reports, advertisements, or other document can effectively transmit small amounts of information to large numbers of people. Transmitting information long distance or exchanging large volumes of data can occur more effectively by electronic communication. Telephone, television, videoconferencing, fax or other electronic data transmission can instantaneously establish communication in among individuals, groups, organizations, or data repositories or each unit of information transmitted, electronic media are much less expensive than written or oral media. 1.4.4 The Need for Information Systems Individuals, organizations, and society need to use a variety of systems to organize the collection, storage, processing, retrieval, and communication of information. Personal needs tend to be simple as individuals deal with relatively small amounts of data. Organizations collect extensive amounts of information, have a great need to share information among their members, and so generally have more formal and extensive systems for information management than do individuals. Individuals and companies use a variety of systems to satisfy these needs.

Although systems for information management by individuals generally have few components and even fewer procedures. various types of computer equipment.3 Organizational Needs Because of the value of information to organizational performance. individuals employ systems such as posting memo notes on a refrigerator.1 Individual Needs Individuals need information systems both at work and at home.1. 1. Blue Dart may have massive data about package pickups but lack the procedures to trans late these data into efficient systems for package delivery. developing. Case workers at some public housing agencies. Individual jobholders. industry trends.4. Executives at Matsushita Electric of Canada have given portable technology to their staff and managers to allow them to work outside the traditional workplace. most organizations develop procedures to ensure that important information is collected.4. they require increasingly sophisticated systems to help them meet their information needs. for example. such as when visiting prospective and actual clients. Organizations that lack quality information systems may experience problems in accessing the data they need for executive decision making.5 Self Assessment Questions (for section 1. At work. individuals use lap tops or other portable electronic equipment to meet their information needs. and bill paying. Information systems also make global news and information quickly available. increasingly individuals are using sophisticated personal financial managers for personal budgeting. 2. As managers become more sophisticated in performing their tasks. lose important data during a relocation or power failure.4. perform redundant activities in dealing with customers or suppliers. Increasingly managers use computerized systems to assist with obtaining. and using information. captured accurately. 1. investment tracking. 1. and calendars to organize information about future events. setting alarm clocks. customer preferences. or scheduling regular times to share information with family and friends. What are the different uses of information? 3. or fail to respond quickly to changes in the marketplace or industry. which incorporates a small computer and cellular telephone to enable case workers to enter data onsite and then transfer it later at the agency’s headquarters to a larger machine for processing.4. maintaining. and organized effectively. and communicating with other organizational members.4. Many organizations even establish a special group that manages and develops information systems for the entire organization. individuals use file folders or piles on a desk to organize infor mation stored on paper. and making decisions. For example.4. They typically maintain information about employee performance.4) 1. What are the various needs of information? . Define information. Explain the various cost involved with information 4.2 Managerial Needs Most managers require significant amounts of information to perform their jobs. negotiating agreements. use a portable computer office.4. An individual who lacks such aids combined into a personal information system may miss important appointments or fail to accomplish important tasks. At home. and other subjects. directory systems to organize files on a computer disk or diskette. Consider a logistics agents like Blue Dart without a quality information system. and managing resources. Increasingly. motivating. some employees may collect information while others process it or analyse it. and an array of computer software facilitate such infor mation management. They allow businesses to operate internationally by making information about transactions available to managers and other workers in any country.

store. such as data on employees. and retrieve information. print. Software development tools such as computer languages and screen generators facilitate creating or modifying software to respond to an organization’s information needs.5. Applications software assists in the acquisition. and organizations to manage information effectively and efficiently. Significant advances-in information technology have made large quantities of information available to organizational members and other individuals at a relatively low cost.5.5. Today desktop and portable computers costs are continuously reducing and can outperform the room-sized.3 Database Management Systems Database management system offers a vehicle for storing and supporting the processing of large quantities of non. and data communication systems. or human resources professionals. retrieval. Systems software directs the functioning of the computer machinery.scientific information. . sort. in the form of computer code and its accompanying documentation. process.5 Information Technology 1. Sometimes managers and other organizational members require experts to write customized software because they have a unique need that no off-the-shelf software adequately meets.2. and suppliers. Storage hardware includes removable and fixed media that allow rapid access to information.5. Now consider the ability to telephone or send mail electronically almost instantly from the United States to Europe and Asia. store. texts. How does the computer system at Department Store know how to process sales information? What tells the computer system at Federal Express how to record the arrival or departure of aircraft? 1.2 Hardware Computer hardware refers to the equipment used in electronic infor mation processing. Output hardware provides copies of data on paper.2 Components of Information Technology Information technology includes computer software. and communicate information. Processing hardware converts or transforms data.1 The Role of Information Technology Modern technology provides many tools to help managers acquire. This widespread availability of computer technology has dramatically changed the way people process. supermarket prices. and video screens. or other effects. million-dollar computers of ten years ago. Consider the large networks of data available to financial analysts. microform. 1. marketing experts. it offers varying quality for graphics.2. 1. While processing power has increased. and communication of information. and analyse databases of information along a variety of dimensions. products. Think about the availability of encyclopaedias.5. Individuals and organizations can purchase an array of software products. and other information through data services.1. 1. retrieve. storage.2. hardware. processing. database management systems. Many homes have personal computers and household devices with computer microchips. airline schedules. groups. Offthe-shelf software is mass-produced software made for a variety of generic uses such as word processing.1 Software Computer software provides the instructions. Significant strides have occurred in the development of hardware in the last decade. voice. Information technology has allowed individuals. This technology allows managers to easily access. for processing data electronically. In some circumstances these same employees may develop their own software that they modify over time to meet their changing work or personal needs. customers. Input hardware captures raw data and information from interactive uses. the size of the hardware has decreased considerably.

and communicate worldwide.6 Managing Information in a Global Environment Organizations today function in a global environment. might first describe or identify the components of the information systems and technology used to acquire.1. managerial.3 Self Assessment Questions (for section 1. uses information for communication. Organizations use information to increase their competitive advantage.6. The current state of information technology has facilitated the expansion of organizational boundaries.5. This model has some of the same characteristics as the systems development life cycle. and generally improving the quality of life.1. Individuals must assess their information needs at work and home. economic development. for example.5) 1.1 Diagnosis Managers. They also must identify the information they need for developing and implementing their organizational strategy. cost control. open subsidiaries. techniques. What are the various components of information technology 1. or organizational levels. evaluation. One recent study of computer-based information systems in 72 companies in the People’s Republic of China. to facilitate the effective use of information in managerial decision making. A manager. Managers often have needs for transaction processing. Specifying in detail the information needs at each of these levels is the first step in the effective management of information. and other electronic media. They buy and sell products outside their home country. 1. Advances in communication technology occur frequently. such as by improving customer service. or communicate . suggested that most of these firms rely on stand-alone microcomputers and use computer applications for sup port functions rather than such pivotal functions as order entry or billing.2. Managers and other employees can easily send data from one plant location to another or access data located halfway around the world using dial-in options.2 Evaluation Evaluation of the methods.6. Society. and systems for handling information follows the diagnosis of needs. and implementation. Diagnosis of information needs can occur at the individual. plants. and other individuals must begin by assessing their needs for information within a particular situation they face. Diagnosisrequires a description of the existing problem. video conferences. 1. computer networks. The information management model is intended to complement the systems development life cycle. This usage differs significantly from that found in many United States companies. and the possible ways of securing the needed information.4 Data communication technology Data communication technology has dramatically improved the communication of information across short and long distances. project management. process store. the type of information available. or distribution centers around the world. Explain the role of information technology in the modern organisation 2. the context in which it occurs. employees.1. 1. design. reducing the cost and increasing the accuracy and speed of data transmission. This model involves four steps diagnosis. This step begins with an assessment of the current manual or computerized systems for handling information. and communication. too. retrieve. the type of infor mation required to solve it. the four-phase model is directed at users of information systems rather than information systems professionals or other systems designers.6. or quality monitoring. among others. 1. for example.1 Information Management Model An analytical model. financial control.5.

What information needs are not handled and cannot be handled.6. They must also assess whether the information systems professionals function effectively throughout the four phases. Top management must ensure that sufficient resources are available for the implementation as well as for dealing with changes that occur as a result of the implementation. Implementation also includes ensuring that the new systems perform as expected and that they result in the predicted costs and savings. retrieve. or other organizational member combines information about individual. store. if he expects that the information management needs might increase and that individual managers might require access to data they currently lack.3 Design A manager. How well does the current system respond to the information needs? 6. regardless of the information technology a information systems used. he might design a system that incorporates additional computer equipment and communication software. . Specifying the timetable for implementation typically follows. process. What are the components of the information systems and technology used to acquire. 1. How well does the current system respond to the information needs? Are systems available that would significantly improve the handling of information? What consequences will result with a change in the way information is handled? Finally. monitoring such effects and providing solutions for problems that arise should be part of the implementation. What consequences will result from a change in the way information is handled? 9. What are the current systems for handling information? 2. information systems staff. Design involves correcting deficiencies in existing systems and integrating state-ofthe-a practices and technology into them. information systems professional. Recognizing that the new system and technology likely will have unanticipated con sequences should be a key aspect of planning. regardless of the information technology or infor mation systems used? 1. the manager or other user might determine what aspects of his or her information needs are not handled and which cannot be handled. Questions for evaluating information systems and Technology 1.4 Implementation The final step. implementation.1.1. Who will be responsible for overseeing the implementation? How will it occur? What additional resources will be required for implementation? What types of follow-up will occur? How will the change affect other aspects of functioning an individual or organization? Identifying the parties’ responsibility for implementation involves deter mining the roles individual managers. How do these components compare to available state-of-the art systems? 5. Alternatively. or communicate information? 4. managerial. focuses on issues associated with putting the new or altered systems to use. Would state-of-the-art systems significantly improve the handling of information? 8. or specialists from outside the organization will play. staff specialist. or organizational needs with the assessment of current information systems and technology and then designs coherent systems for information management. Would other systems better respond to the information needs? 7. Next he or she might compare these components to available systems.6. Are they manual or computerized? 3.information.

or optimal inventory quantities.1 Relationship of MIS to Reference Disciplines As a discipline of study. Computer science is the study of au tomatic processing of symbolic information. far more important in the company decision-making process. computer commu nications. and. Thus. and by the behavioral fields. information. A general processor of such information is the computer. The fundamental notions of de cision-making. an influential book that appeared in 1947. The intellectual roots of the field of management information systems go back to the study of management as a process in which the crucial aspect is decision making. It provides us with mathematical tools for decision making in such areas as optimal resource allocation. Systems theory contributes ap proaches for dealing with complexity-that of an organization or that of a soft ware system. Managerial accounting. producing novel organizational solutions. The use of computers in business began with accounting. artificial intelligence.1. more recently. MIS draws on several other established fields of scholarship to meld their results and insights into its mission: an inquiry into how organizations can make effective and efficient use of information. are known as its reference disciplines. Management science. entered the mainstream of MIS in the mid-1980s. for the Securities and Exchange Commission). sup plies the information needed for cost planning and control through budgeting. for example. The late 1940s and early 1950s saw the development of Norbert Wiener’s idea of cybernetics and Ludwig von Bertalanffy’s general system theory-both searching for a general theory of control and communication in human and me chanical systems. Drucker had defined modern or ganizations as information-based. database organization. Financial accounting is con cerned with reporting the financial position and operating results of a business entity at the end of a specific time period. because of the vital role information plays in a modern organization. which underlie the discipline of MIS. 1. Auditing techniques have also been adapted from accounting practice. such as a quarter or a year. contributes to our understanding of understanding itself as it studies human information processing.7. the discipline of MIS plays a major role in contributing to the effectiveness of social organizations. which con tribute the knowledge of technology and algorithms for optimal use of a com pany’s resources. Thus. MIS supports both the financial and managerial accounting functions. Financial accounting reports provide information chiefly for entities external to the com pany (for example. A classical 1948 paper by Claude Shannon led to the technical conceptualization of the idea of information. optimal selection of transportation routes. The fields of scholarship.7 Management Information System as a Discipline Management information systems is both an area of practice and a discipline of scholarly inquiry. Sociological approaches help us understand the organizational behavior of people. The most prominent work laying the foundations for this approach was Administrative Behavior by Herbert Simon. which investigate organizations and the people in them. MIS scholars learn much from the practical tasks of con structing new types of systems. The discipline combines theoretical investigation with a pragmatic orientation. a new discipline incorporating the approaches of cognitive psychology and techniques aspiring to understand how mind arises from the brain. Cognitive science. proficiency in MIS is virtually a prerequisite for organizational effectiveness. and their control . created by artificial intelligence scholars in the early 1970s. is a field of applied mathematics. also known as operations research (OR). Software engineering. expert systems. and using new methodologies of systems development. The fundamental reference disciplines for MIS are computer science and the theory of organizations and management. are the fields of computer science particularly important to the field of MIS. This highly dynamic discipline conveys the technological push to the field of information systems. MIS is influenced both by the technical fields. systems.

The first papers analyzing the role of information systems in orga nizations started to appear in the second half of the 1950s. The 1958 paper by Harold Leavitt and Thomas Whisler. The development of MIS as a field of inquiry paralleled the technological de velopments.2 Self Assessment Questions (for section 1.10 Multiple Choice Questions . Their forecast of reduction in the ranks of middle management due to senior managers’ ability to directly control an organization with the support of information technology appears to have indeed come true. MIS is not only a field of practice. Developed in response to problems encoun tered by the military during World War II. Informal information sources must be cultivated and coordinated with the use of formal sources. calculation is just one of the several functions com puters perform.9 Terminal Questions 1. As we have stressed. MIS as an area of practice had a rather slow start. However. the predominant tasks of computers are storing and accessing organized informa tion and processing symbols. 1.7. the focus of the field of MIS.8 Summary MIS are formal systems built around the hardware backbone of computer and telecommunications systems. The authors concluded that what "we shall call … information technology" would have "definite and far reaching impact on managerial organization. computers were thought of at the time as devices for doing precisely what their name impliescomputing. 2. with only some 4. When appropriate software became available. Explain the various disciplines from which MIS has evolved. drawing in part on the findings and methodologies of several reference disciplines. Although the field of MIS originated in the late 1950s. Technological developments re lated to computers and digital communication have continually driven the field in both practice and research.have their own lives in the reference disciplines. UNIVAC I was delivered commercially as the first such machine built on assembly line. Formal computer-based information systems are not the only informational sources in an organization. UNIVAC I was also the first computer model used for business data processing when it was installed by General Electric in 1954. The first general purpose electronic computer. was influential in focusing the discipline.000 computers installed by the end of the 1950s. These notions have also influenced thinking on the role of information in organizations-that is. What do you understand by management. Many areas of research in MIS overlap with the work done by computer scientists. was completed in 1946 at the University of Pennsylvania. Mass production of computers started in 1951 when UNIVAC I was delivered commercially as the first such machine built on an assembly line." They proceeded to set up a frame work for analyzing this impact. 1. Today. MIS as a discipline became established a full decade later. management information systems are unthinkable (well. furnishing an accessible means for users to de velop their own applications and become true partners of MIS professionals in the use of technology for organizational benefit. the personal computer gave strength to end-user computing. perhaps only "thinkable") without computers. but also a discipline of scholarly inquiry. Write a note on information management model 1.7) 1. ENIAC. 1. The organizational computing landscape was revolutionized by the emergence of personal computers in the late 1970s. entitled Management in the 1980.

50 D. The first computer was introduced into a business organization in the year ______ .1.11 Answers Self Assessment Questions: . Transaction processing B. C. 40 C. Prahalad 1. Maslow B. A. Management reporting systems C. K. 1960 2. Management B. Gary Hamel D. Organizations are formal social units devoted to the attainment of specific goals A. ____________ defined modern or ganizations as information-based. 1954 D. A. Peter Drucker C. ____________ which support the work of senior executives and of company boards by giving them ready access to a variety of summarized company A. Decision support systems D. 60 5. All of the above 4. 1952 C. Executive information systems 3. 1950 B. 30 B. Organisation D. Secretaries may spend as much as ____________ percent of their time looking for paper documents A. Information C.

This has been mentioned in section 1.4.2. This has been mentioned in section Section 1.3 4.2.3 1. A 5.2 This has been mentioned in section 1. Multiple Choice Questions: 1.Section 1.1. This has been mentioned in section 1.1. C 2. D 3.3 1.1 2. You will have to refer to section 1.5. C 4. You will have to refer to section 1.5 1.1 Terminal Questions 1. This has been mentioned in section 1.4.2 3. This has been mentioned in section 1.3.4 Section 1.4. B . 2.4.2. 2. This has been mentioned in section 1.1. Section 1.2 This has been mentioned in section 1. This has been mentioned in section 1.

2.Unit-02-Management Information System from Managerial Outlook Structure: 2. operations.2 Finance 2. Then discuss the various levels of management and their information needs. Objectives: At the end of this unit.2.4 Summary 2.1 Introduction With this unit.2 The Manager’s Job in a Global Environment 2. you should be able to . the functions performed by managers. we shall begin with management and managers. finance.5 Terminal Questions 2.1 Introduction Objectives 2.7 Answers to SAQs.2.4 Operations 2.3.6 Self Assessment Questions (for section 2.6 Multiple Choice Questions 2.3.5 Human Resources 2.3 Information Required for the Process of Management 2.2.1 Management and Managers 2.3.2. marketing.3.1 Accounting 2. We shall conclude by functional needs of information in the areas of accounting.1 Functions of Managers 2.3 Functional Information Needs 2.3 Marketing 2.2. TQs and MCQs 2.4 Self Assessment Questions (for section 2.3.1 Information needed by different levels of management 2.3.3) 2.2 Information and Levels of Management 2. and human resource management.

· Mention various levels of management and their needs for information · Explain the functions of manager · Bring out the information needs in the various functional areas 2. political upheavals in distant locations. leading. or change the priorities in unexpected ways. and technological aspects of the envi ronment and plot a strategy to meet such changes. First-line supervisors may experience delays in receiving up-to-date information from their bosses who must directives from a distant corporate headquarters. How do managers perform effectively such conditions? Managers perform a great quantity of work at an unrelenting pace. At all levels managers cope with less-than-perfect information in an uncontrollable environment. they cannot anticipate changes in money rates. At the lowest level. They use information systems to help them bring as much order and completeness to the available informal possible. For example.2. Middle-level managers may have information about production deadline forecasts. This level of activity involves a manager’s continually seeking and then quickly processing large amounts of information. however. which caused significant problems with voice communication and data processing. . decreasing resources.1 Management and Managers Management is the process of achieving organizational goals by planning. They become accustomed to the rapid exchange of information with others and hence must have the needed information readily available. They must understand and respond to dramatic cultural differences.2 Information and Levels of Management 2.2. As one moves up the corporate ladder. a mission. Managers also participate in a variety of brief activities that result in significant fragmentation of their time. or hiring practices that proves to be unreliable or dynamic and that requires to handle emergencies. they seek ways to secure information as efficiently as possible. They typically develop. They may decide that cost cutting requires reducing the number of employees or that introducing a new product line calls for hiring more workers. decisions have a longer term and wider ranging impact on the organization. They must deal with increasing competition. organizing. or the speed of technological advancement. These differences affect the characteristics of managers’ information needs. Because time is precious and managers tend to deal with issues that are current and specific. managers are concerned with supervising the conduct of day-to-day activities.2. Dealing globally increases the likelihood that managers will have unreliable information and intensifies any existing deficiencies in the information h both distance and cultural diversity affects information quality. and rapidly changing technology. managers at companies doing business in the former East Germany after the fall of the Berlin Wall initially experienced repeated difficulties with telephone ser vice.2. 2. managers are concerned with setting long-term goals and directions for the organization. and dynamic cus tomer requirements. generally without time for leisurely reflection.2 The Manager’s Job in a Global Environment 2.1 Information needed by different levels of management Managers at different hierarchical levels in the organization have special concerns. Managers at all levels cope with less-than-perfect information in an uncontrollab1e envi ronment. Often. Top executives attempt to analyze the economic. political. and what information does he or she need to perform that job? Managers face a variety of chal lenges in performing their work in a global environment. What does a typical manager’s job look like. reconsider the best way to perform their jobs. imposing legal constraints. At the highest level. and controlling organizational resources. Executive Management Top-level managers establish the overall direction of an organization by setting its strategy and policies.

Often middle managers need detailed but data. Top-level managers may combine these various types of information to formulate a strategy for the organization and a plan for implementing it. coordinating interdependent groups. extensive information about workers’ performance. Middle managers must meet production schedules and budgetary constraints while still acting independently. Middle managers require more detailed information than executives do about the functioning of the groups or workers they supervise. but they also have needs unique to their job. customers. . They must have knowledge of the customs and rituals of different cultures to perform these responsibilities effectively. and others in the industry to gain a competitive advantage over other firms. such as the development of new spreadsheet software or a new computer chip. including the hiring. Often they cannot obtain perfect information must use the best information they can secure. Diagnosing the particular information needs of senior executives requires tracking their organizational and job goals and then assessing the information that help accomplish those goals. requiring executives to have large repositories of infor mation about an array of global issues. They may need to know the cost of labor in Taiwan and zoning laws in Detroit. and data about their group’s products or services to perform their jobs well and to ensure that their work group focuses on organizational goals. and cultural information about other countries in which the organization operates. transfer. Consider the job of a senior marketing manager in the hair-care products division of a large company. directors of staffing and other middle managers usually deal with internal organizational issues. They all participate actively in various personnel decisions. She must determine the best mix of products for the company.reflected in a mission statement that defines the basic character and characteristics of the organization. As organizations increase their international focus. Middle managers serve as the interface between executives at first-line supervisors: They disseminate top management’s directives to lower levels of organization and communicate problems or exceptional circumstances up the hierarchy. promotion or termination of employees. top executives require economic. Of course. why the organization is in business. Top executives typically have both an internal and external orientation: They must that work gets done within their particular subsidiary or division while they interact with executives in other organizations and with the general public. Middle Management Unlike top executives. representing their company to the public. although generally they do not require as detail information as a first-level supervisor requires. and industry. such interactions span regional and national boundaries. and what the organization is in the business to do. profitability. These executives also develop pre and activities in line with stated profit or service objectives. What types of information do top-level managers typically need? Top executives often need performance-related information about results of various divisions or product groups: they may require summary data about sales. Top executives may also spend large amounts of time in cere monial roles. or supervising support personnel. they never have complete information and try to use the available information as effectively as possible. and service. who the organization is. Plant managers. or ongoing projects. legal. suppliers. and skills. Middle managers who act as project managers might be responsible for one or more unique projects. that is. Top executives also use information about new technology. authorize advertising and marketing research expenditures. and supervise a staff of managers responsi ble for accomplishing the department’s goals. organiza tion. middle managers focus primarily on implementing the policies and strategies set by top management. Increasingly. What types of information might she require? Now compare her information needs with those of a senior financial manager or even with those of a senior marketing manager in a computer software firm. regional sales managers. or costs to assess the organi zation’s performance. They may work in the home country or abroad. schedules. production levels. Clearly these three managers have some needs in common. directly managing one or more work teams. such finding ways to increase productivity.

Of course. What information must she have to perform her job? Certainly she requires detailed information about pediatric nursing procedures.3 Information Required for the Process of Management Collecting and disseminating information serve as the cornerstone of management activity. handling customer complaints. 2. attends meet ings that present information about the organization. resolving conflicts. or securing repairs for equipment. Middle managers might also serve as links between their own work groups and others in the organization. organization. and coordinating activities. Organizations consist of multiple. Occasionally these links may extend beyond local or regional boundaries. motivating. they use conferencing by telephone to share ideas. the specific details will differ as a function of the setting. or participates in task forces or com mittees that provide additional information about organizational functioning. They ensure that their subordinates accomplish their daily. The manager must also have information about the individuals. The manager gathers information from the environment inside or outside the organization. Both the nursing supervisor and the plant supervisor may encounter special prob lems that require unique information.2. train a new worker. The supervisor of long-distance telephone operators han dles any problems that arise in servicing customers. group. abilities. such as replacing absent workers. Such supervisors might plan work schedules. who must scan worldwide for large amounts of diverse information. Project managers typically supervise teams of workers who must accomplish a specific goal. or generally handle problems employees encounter. If the staff is union ized. workers. The manager must know each team member’s job responsibilities as well as the member’s skills. too. posing additional challenges for the manager. the manager then . or difficult problems to middle managers for handling. They screen problems and may pass partic ularly significant. What information does she need to solve an understaffing or absenteeism problem? Does she need the same information to answer questions about administration of medications or delivery of meals to patients on the floor? The night shift supervisor in a manufacturing plant might require comparable information about the tasks. He or she reviews written information about the company and its industry. for example. they must recognize these deficiencies and respond accordingly. and its environment to help in leading. The manager must ensure that the project team works together effectively toward its common goal. The head nurse might also require information about daily and vacation schedules as well as the ability to secure tem porary employees. overlapping teams. may experience imperfections in the information they receive. and detailed listings of the nursing services required for each patient. the customer services manager in an insurance company oversees the interactions between customer service representatives and policy holders. knowledge about the skills of the nurses on the shift. she should also know the provisions of the union contract. and equipment. She should have a basic knowledge about the equipment on the floor as well as how to obtain repairs for it. too. only some of which are formally recognized by group or departmental boundaries. might require special knowledge about managing a multicultural workforce or conducting business internationally. First-line Supervision First-level managers have the most direct responsibility for ensuring the effective conduct of their organization’s daily activities. charged five managerial teams around the world with ensuring employee retention in their areas. unusual. and monthly goals and regularly provide workers with feedback about their performance. and knowledge. modify a subordinate’s job duties. Consider the night-shift nursing supervisor in the pediatrics ward of a hospital. What specific information might the new manager of a neighborhood restaurant seek? What information might the manager of customer service monitor in the organization or the environment? Monitoring the environment provides particular challenges for the global man ager. weekly. First-line supervisors also spend large amounts of time in disturbance-handling roles. They. DuPont. Diagnosis of information needs must be ongoing and responsive to the particular situations these managers face.such as the provision of accounting services to a small business. The middle manager. Having collected information about the organization’s functioning.

and controlling. or operational planning. supervisors. often accompanies strategic and tactical planning. Knowledge about technological developments and their applicability to the insurance company. technological developments. the nature of advertising for those products. or individuals outside the organization. organizing. What information does the public works director need. The manager should know the needs of various organizational members so that he or she can choose the most appropriate information to convey and the most appropriate way to disseminate it. What types of information would a manager need to determine the best advertising campaign for his or her products? The manager might need to know what competitive prod ucts exist. or planning for the issues of implementation.medium and long-term periods. 2. for example. or human resource decisions. It can occur at the individual. They also engage in decision making. Planning usually refers to both the specific of goals and the blueprint for achieving them. marketing. The manager should also have a strong knowledge of organization-its structure. in which they allocate resources and act as negotiators. Information about LIC’s capabilities. for example. In each case. as well as about the supply of various types of workers. The public works director of a small town must plan the monthly work schedules for the road crews she supervises. For example. goals.1 Functions of Managers Planning Managers engage in a variety of planning activities that occur over short. resources. The shipping supervisor in a large manufacturing company must determine how often to schedule a third shift of workers. Managers may engage in strategic. The program chairperson must schedule the particular events that compose the national meeting of the Academy of Management. and their jobs to design the operational plan. and culture. and pricing. their clients. . through electronic media. the changing environment. group. At the same time manager must consider his or her own information needs in performing the four basic management functions of planning. and the cost of various media. and the possibility of additional rainfall. The manager must have information about the environment in which the organization functions. peers. and disturbance handlers. In most organizations middle managers more often engage in medium or short-term planning known as tactical planning. organizational. problem solvers. Tactical plans may focus on decisions about staffing. adver tising. and customer demands is essential for determining the organization’s goals and its strategic plan-longterm activities the organization must undertake to accomplish its mission. change agents. the man may give bad news to subordinates and superiors in different ways. or extra-organizational level. constitutes additional information incorporated into the strategic plan. The top managers at LIC of India. tactical. these managers require an array of information about their subordinates. or they may reflect other financial. this information may include data about industry trends. and customer demands.disseminates it to subordinates. Such distribution may occur in face-to-face conversations. its com petitors’ competencies. Operational planning. and market requirements.3. for example. and tactical plans refer to the steps for attaining the tactical objectives. likely decide which insurance products and how to sell them as part of their strategic planning the long-term planning for accomplishing the organization’s mission. Driven in part by the need to respond to competition. managers develop the organization’s mission: goals and the means to accomplish them. or at meetings. to meet the objective of rescuing people as the level of water is raising in the river due to continuous rainfall? She needs to know the availability of crews equipment.2. leading. Tactical objectives describe what units within an organization must do to accomplish strategic objectives.

When the prob lems can be handled in a relatively long time frame. and the scheduling of various organizational members’ time. unpredictable political conditions or an unknown labor pool. the resources available for the change. Consider the decision that a manufacturer of outdoor clothing must make about whether to purchase a small manufacturing plant in China. Consider the information needs of a manager who must close the company’s manufacturing plants in a foreign country. the legal provisions that govern the sale of assets as well as the legal regulations for com pensating terminated workers. prevailing interest rates may affect whether a company should raise cash through the sale of debt or equity. worker expectations. A manager determines the assignment of people to tasks. the manager of a product development team for a new shampoo at Procter and Gamble or she must know how much overtime to budget into labor expenses to ensure a timely product launch. Managers should diagnose each decision situation to iden tify its unique information needs. and product acceptance. Decision making also involves significant information needs. Consider the situation face. managers often need forecasts about likely future conditions. and the consequences of sim ilar changes in other situations. Managers require informa tion about individuals. When problems must be solved in a short time frame. The information needs of global managers in these circum stances are extensive and particular to the special business problems they must solve. Managers frequently negotiate with their subordinates or other managers about the allocation of resources or the best way to accomplish various group or organizational goals. departments. for exam ple. Managers as change agents also need data about workers’ and management’s attitudes toward change. they may need to consider variations in national customs. To plan effectively. analyzes them. the manager acts as a change agent. Managers may need to account for significant currency fluctuations. and organizations involved in or affected by the problem sit uation. The manager must also know the costs of various projects or products. No manager can be correct 100 percent of the time. He or she must know. managers can increase their chances of correctly assessing future conditions by using quality forecasts. For example. They need information about the alternatives available and the costs and benefits asso ciated with each.Managers at various levels determine the best way to reduce costs. the manager as a problem solver defines problems in a situation. In conjunction with resource allocation and negotiation. the manager engages in disturbance handling. Managers may cushion the impact of incorrect foresight with contingency plans. The timing of a company’s plant opening can affect whether the company will purchase a component of its product from a wholesaler or whether it will manufacture the component itself. groups. What information does the manufacturer require in order to make that decision? What information does this manager need in order to make a quality . and vacation schedules. capabilities. Planning in organizations that function globally may pose special challenges. and other work groups. Nevertheless. Part of decision making involves assessing the risks of being wrong versus the rewards of being right. Effective allocation requires the manager to have information about individuals’ existing work assignments. The forecasted market share of a competitor’s produce should influence a company’s production levels and possibly affect hiring and capacity deci sions. the allocation of money materials to individuals. and then proposes solutions.

and first-line supervisor help subordinates develop the skills. Subordinates also acquire information about how the manager perceives their efforts and adjust their perfor mance and priorities accordingly. Managing work groups generally calls for the open exchange of information and ideas. and any job-related goals set. Managers need data about the skills. and providing for coordination all contribute to the organizing process. The manager might also need infor mation about training programs in which the worker has participated. knowledge. knowledge. Organizing generally means establishing a formal reporting structure and a system of accountability among workers. Managers and workers may jointly develop group goals congruent with organizational goals and orchestrate collaborative activities. Leading Leading generally refers to taking actions that direct and motivate employees to accomplish personal and organizational goals. too little. Man agers at all levels attempt to build effective work teams by encouraging cooperation and han dling conflict that arises. They offer guidance to subordinates about the best way to perform various job related activities. it means forming employees into meaning ful work groups with appropriate supervision. middle managers. Managers also evaluate their subordinates. The manager might also need information about unusual factors. Managers must also have a comprehensive . Organizing effectively requires information about the content of jobs. the job’s requirements. First-line supervisors and middle managers generally establish a network of contacts within and even outside the organization to gather information. and experience of subordi nates. Managers need to know the status of group activities so that they can modify schedules and resource allocations. as part of their leadership responsibilities. Top executives. managing these heterogeneous groups requires spe cial information about the impact of cultural differences on job performance and the tech niques for handling them. or irrelevant information. alliances. project structures. The manager acquires information about how individuals view the goals the manager has set and seeks information about what would encourage subordinates to accept these goal and work hard to achieve them. Managers must also understand the assets and liabilities of various structural forms. needs. What types of information do managers require in order to lead effectively? They first need a clear understanding of the organization’s goals and of their responsibilities for accom plishing them. In many organizations. or networks. They also benefit by having information about their boss’s needs and goals.decision? Managers must diagnose their information needs in each particular situation and then seek ways to obtain the required data. materials. such as functional structures. What information does a manager need to handle the prob lem of a poorly performing worker? The manager might need data about the employee’s skill level and attitude. The options for organizing become increasingly complex as managers deal internationally. Organizing Managers must structure their organization and coordinate the organization’s resources to accomplish its goals. abilities. Increasingly managers must supervise multicultural teams of workers. The manager may use interactions with coworkers or colleagues in other organizations to improve their job performance. equipment. Group members must receive and share information about the status of their activities and thought processes. they must also regularly secure information about their subordinates’ performance. and the availability of resources in the organiza tion. formal human resource manage ment systems provide mechanisms for this feedback. and time to perform their jobs. such as family illness or defective equipment that might have affected the worker’s performance. Securing sufficient and appro priate information to coordinate globally challenges managers to diagnose their information needs effectively so that they do not obtain too much. the skills of workers. and sometimes even peers and superiors. Defining the hierarchy of authority deter mining the location of decision making.

the expected standards of perfor mance. Accounts receivable. Financial accounting deals with preparing accounting information for users outside the organization.1 Accounting Accounting is the process of recording. Executives at Russell Reynolds Associates. listings of professional organizations. The director of interna tional finance there led a design project that resulted in standard accounting procedures that conformed to USA.3 Functional Information Needs Managers require a broad range of information to perform their day-to-day functional roles. and expectations of the workers they supervise. and that the organization proceeds toward its established goals. accounts . 2. They also use cost information to maintain profitabil ity. Managers also should diagnose the information required to solve employee-related problems. Effectively motivating and developing subordinates as well as influencing others and building relationships likely require extensive situation specific information that a manager should diagnose. classifying. managers establish standards and methods for measuring performance. Researchers sug gest that they need information about workers’ needs and maturity. assess performance. experiences. and human resource management. Inc. In addition. and then compare performance with the standards. Managerial accounting refers to the provision of financial information that managers within the organization need for their decision-mak ing. marketing. Effectively leading a multicultural workforce creates both specific and generic information needs for managers functioning in the global arena. managers must have information about colleagues from whom they might gather information for the organization. the organization’s structure. They require information about the organization’s functioning to help them anticipate and handle organizational problems and chal lenges. the leader’s relationship with the subordinates. 2. Controlling Managers must also monitor the quality and impact of managerial actions. In this section we discuss examples of information needs in the areas of accounting. shareholders. that workers’ activities occur as planned. Managers commonly use information provided in budgets and financial controls to guide and constrain organizational activities.4 Self Assessment Questions (for section 2. Diagnosing information required to perform specific functional activities is an early step in effective information management. Controlling means ensuring that performance meets established standards. and the potential barriers to their accomplishment. What are the various functions performed by the manager. and summarizing the financial activities of an organization. such as regulatory bod ies. finance. They must also have detailed information about the skills.2) 1. an executive search firm with offices worldwide. 2. and international regulations. What information needs are inherent in the interpersonal roles required for leading? Man agers must know the nature of the tasks being performed. investors. and data about col leagues employed by competitors.understanding of the situation to select the most appropriate leadership style for influencing workers to perform effectively. requires comparative information about the optimal way to implement organizational processes and their actual implementation. operations. Controlling. the task’s structure. In the control process. Originally used to create a historical record of the firm. managers now regularly use accounting information in making decisions. and the organization’s environment. these functional areas are not intended to be exhaustive but to portray com monly occurring functional needs.2. Explain the various information needed by the managers in the organisation 2. and tax assessors..3. determined that top management required consistent and more detailed information from all offices.

payment . and general ledger describe types of accounting information.payable. Types and Examples of Accounting Information Accounts Receivable · Names and addresses of customers · Invoice information · Amounts owed · Due dates · Discounts available Accounts Payable · Names and addresses of suppliers Invoice information · Amounts owed · Due dates · Discounts available Payroll · Labor rates · Hours worked · Employee benefit classifications Withholding rates and amounts Fixed Asset Management · Properties owned · Depreciation schedules · Depreciation taken · Mortgage/rental renewal dates General Ledger · Transaction type and amount · Account codes affected · Account balances Managers working in the functional area of accounting must keep track of money owed to the organization. fixed asset management. as shown below. They require data about unpaid invoices. payroll. payments against these invoices.

managers in Johnson’s Consumer Products Worldwide Innovation and Worldwide Service divisions discovered they needed information for their special financial environments. tax withholdings. Accounting managers and staff must know employees’ pay rates. over time. Managers must also have access to information that helps them time payments. for example. vacations. global accounting systems offer this information as well as information about the amount. nature. deductions. Managers must also know the value of an organization’s assets. accounts receivable. Such tracking requires detailed data about bills received from suppliers and other cred itors as well as information necessary for approval of the payment of such bills. For companies such as utilities that have many customers and operate largely on credit. Managers also need information about checks written so that they can determine the amount still owed and respond to questions from suppliers. They periodically estimate the flow of funds into and out of the business. Managers in global organizations face peculiar information needs in their accounting prac tices because the relative value among the currencies of different countries changes con stantly. General ledger systems use information generated by accounts payable. In addition. Accounts receivable systems generally include such accounting information. IS Diag nosing these needs involves clearly specifying the problems or issues and the information required to deal with them. Managers in the accounting function must also monitor money owed by their organiza tion. allow ing them to benefit in the tradeoff between taking early-payment discounts and retaining sufficient cash in the organization.2 Finance Financial managers focus their activities on the acquisition and use of money. and a receiving document. Accounts payable systems perform many of these functions for determining the money the organization owes to individuals or other organizations. organizations may keep funds that are used to renew or replenish the value of such assets. for example. managers should know the availability of such funds.3. Managers also use the information generated by general ledger systems to plan their expenses and revenues for the future. Because many assets depre ciate. such as bills of exchange. Increasingly. which verifies receipt of the purchased goods. Managers in global companies also use information about exchange rates and currency futures to keep their cash and or assets in countries where they have the greatest return or the least depreciation. a process called budgeting. and origin of financial transactions. continuously monitor the use of funds within the organization. or lose value. Top executives. such changes typically have consequences for the price of stock in the company. and describe and assess alternative uses of excess capital. As a result. 2. managers require unique accounting information for various customer markets. particularly the corporate controller. the value of the organization that owns them will change as well.histories of customers. In addi tion to these generic information needs. They must be able to classify expenses and revenues in ways that allow managers to attribute prof its and losses to departments or individual products. payroll. which authorizes the purchase. a supplier’s bill must match an outstanding purchase order. Managers may need access to data from uniquely international sources of informa tion. and fixed asset systems to provide such profit and loss information. At many companies. . identify and evaluate alternative sources of outside funding. and additional credit information that helps managers decide how much credit to extend to customers.Fixed asset systems organize the information about a firm’s assets and any funds maintained for their renewal. accounts receivable management is crucial not only for generating collections but also for addressing customer questions. Accounting managers must also maintain and have access to employee information and tax information necessary to pay employees. accounting managers may have a set of needs spe cific to their job responsibilities and particular situations. At Johnson Wax. must have up-to-date information about the organization’s profit or loss to help determine the company’s financial worth. and hours worked so that the organization can generate payroll checks and forms for government taxing bodies.

Portfo lio accounting systems provide both inventories and analyses of diverse types of assets. At the department level. wants to shorten the time required for closing its books so that finance department can spend more time in data analysis for managerial improvements. Examples of information used by the marketing function is shown below. distribution. modify their original budgets to reflect the parameters of the corporate budget.Managers use financial information for both planning and control. and product design. Reebok. departmental managers. first-line supervisors or middle managers create budgets in a similar fashion. The concept of marketing derives from the idea of a marketplace where buy ers and sellers meet to trade their goods and services for money or other goods and ser vices. and promotion so as to maximize the appeal to the consumer of an organization’s products and services.3 Marketing Marketing is a social process involving the activities necessary to enable individuals and organizations to obtain the products and services they need and want through exchanges with others. Marketing managers seek to ascertain consumers’ needs and preferences. Marketing managers also use sales information to improve interactions with suppli ers as well as monitor business performance. and projections of cash flow. In the General Foods’ Corporate Financial Planning and Control department for example.3. Analytical computer systems support diverse types of investment management. managers supervised analysts who used microcomputers to consolidate financial data from 17 worldwide divisions and then report the data to upper management for use. Finan cial managers must continuously diagnose the specific information they require for per forming their job responsibilities and dealing with problem situations. Types and Examples of Marketing Information Market Research · Product evaluation surveys · Results of test market promotions · Coupon usage data · Lists of consumers of related products Promotion · Impact of past advertising promotions · Price of advertising by medium · Impact of shelf space and placement · Sales and rebates offered by competitors Pricing · Impact of price and volume changes on profit . pricing. Marketing activities that offer potential for decision support systems include sales forecasting. operation plans and priorities. Inc. If. They create budgets for each function of the company based on such factors as the company’s financial status. They need to know the financial position of their company before they can make decisions about how to allocate financial resources. the history of spending in prior years. budgeting. presentation. 2. in turn. pricing. forecasts of revenue. This knowl edge helps them guide product development. senior management then uses the departmental budgets in its development of a corporate budget.

a division of Dunn & Bradstreet. Other systems integrate engineering data into the management process. and the Arbitron Company sell information about what consumers watch on television. Managers can also purchase market research information from market research firms. systems that take electronic orders and use them to automatically trigger the man ufacturing process will become much more common. and forecasting future trends.4 Operations Operations management refers to the processes of planning. participating in product design. a maker of electronic components in Tampa. or other product or service characteristics. and test consumer responses to price. packaging. Manu facturing managers need information that will allow them to integrate manufacturing with customer service and sales. Group Technologies. This contact will expand their information requirements to include data about customers and their needs. and engineering. Each of these has associ ated information needs.3. back-office operations. requires weekly updating of customer requirements and uses these to effectively schedule production facilities. family size. control systems. we mean the transfor mation of an organization’s resources into the goods and services that are its sources of rev enue. The physical operations of . For example. manufacturing also requires information to incorporate into quality programs. and controlling the physical operations of an organization. Marketing managers and their market research staff monitor what consumers buy.· Price elasticity of product · Price/performance curves for similar products · Market segmentation information Product Design · Engineering drawings and mock-ups · Packaging alternatives Distribution Channel Development · Relationships with distributors · Franchising laws and regulations Market Intelligence · Competitors’ activities and strategies · Information about new and existing products Market research is the process of gathering information about what consumers want and need. The factory of the future may combine services with products. By operations. The physical operations of a manufacturing organization include not only the manufacturing process. 2. organizing. Marketing may include additional activities. relate buying patterns to consumer characteristics such as income. Increasingly. Nielsen. causing manufacturing managers to have more direct contact with customers. and geographic location. Operations can encompass both manufacturing and the provision of services. directing. conduct surveys about hypothetical or real products. but also the processes of transporting and warehousing and the process in which finished goods or services are exchanged for money. such information can help managers decide whether to purchase air time to advertise a particular product. such as planning and budgeting for advertis ing. Managers also use information generated by market research to support product design and manufacturing decisions. Marketing managers must diagnose the information they need to handle particular marketing problems. For example.

assembling it into the proper form. production. the physical processes relate to acquiring information. the major components of operations management and associated information needs are alike. a transaction may affect the company’s income statement or balance sheet. For service organizations that deal primarily in information. hiring of an employee. as listed below.retail service organizations include most of the same processes except that manufacturing is replaced by product acquisition. in one case. insurance · Status of backorders · Implications of stock out Transaction processing describes the recording and filing of data about a company’s transactions and serves as a source of much of a company’s internally generated information. work schedule. financial. such as law and accounting firms. switching to a diagnosis-related reimbursement (DRG) system called for acquiring and processing information about a patient’s illness and treatment. . It can be a major component of the operations function. managers use information about transactions in making marketing. and human resource decisions. Despite these differences. and presenting it to the client. A transaction describes a business event such as the sale of a product receipt of a payment. Managers need information about hiring because it affects the organization’s payroll. in turn. Components of Operations Management and Examples of Their Information Needs and Uses Transaction Processing · Feeds information to all management functions Product and Service Planning and Design · Product costs · Product prototypes · Engineering options Scheduling · Staff expertise · Forecasted production requirements · Equipment maintenance schedules Inventory Control · Current inventory levels by product and location · Holding costs. production capacity estimates. First. which. or taking of a reservation. although it can exist in other functional areas as well. managers seek information about customers’ payments because the payments affect the company’s cash position. Managers require information about transactions for several reasons. For example. Hospitals process transactions as part of their system for charging for medical coverage. Second. influences the schedule of payments to suppliers as well as the company’s credit decisions. space. and subsequent hiring decisions.

Low-level managers often secure information from transaction processing in making rou tine decisions. equipment. equipment needs. What information does the manager require to solve the customer’s problem? The manager needs information about the hotel’s bookings and the customer’s record. they must determine the availability of equipment and materials resources. productivity can be increased if designers and analysts can incrementally modify the designs without re-entering them. At this stage. Consider. encouraging total quality. Managers must translate the capacity decision into spe cific requirements for raw inputs. Ideally. the managers explore the financial. Purchasing managers at retail chains such as Big Bazaar use inventory information from stores to determine the size of additional toy orders. partially completed goods services. its anticipated arrival date. Product and service planning and design generate ideas. Feasibility analysis typically requires the input and review of managers at various levels and specialties throughout the company. and completed but unshipped goods. employee time. and information about constraints such as those relating to work rules. to minimize inventory carrying (managers maintain only an inventory sufficient for completing the final product. for example. development. and preferences. and financial resources to bring the plan to market.5 Human Resources Human resource management refers to the deployment. the manager might decide to offer the customer the suite at the price of the discount room. Capacity planning refers to the process of determining how much to produce in the short and long term. Human Resource Functions and Examples of Their Information Needs and Uses Human Resource Planning · Marker rates and availability of types of labor · Forecasts of staffing needs . and whether it regularly goes out of stock. and prior commitments or schedules. compensation. Inventory control is the management of raw materials. and maintenance. 2. and the rate at which inventory is depleted to control inventory size and costs. test them for feasibility. Inputs to scheduling include process flow. In addition. It requires information about demand and available organizational resources for meeting the demand. including their location applicability for multiple use. the rate at which inventory can be replenished. and distribution implications as well as available capacity. rewarding and management of individual organizational members and worker groups. safety. and administration as shown in the table below. a hotel manager who faces an irate customer claiming to have a reservation that the desk clerk cannot find.3. The func tions of human resource management include planning. Operations managers must know current levels of inventory. the ability to share information is critical. and machine time. and finalize them into the design of a product or service. Learning that the penthouse suite is unused and that the customer is a frequent guest. performance management. marketing. They must be able prioritize objectives such as minimizing costs and time. staffing. For example. personnel available expertise. Scheduling involves the process of matching equipment and employees to the processes. Managers must have information to schedule multiple orders through sequential manufacturing processes. To do this scheduling. labor-management relations. Capacity planning often uses sophisticated models of the relationship between capacity needs and forecasts as well as sensitivity analyses on the assumptions used to make capacity decisions. training and development. assessment. providing inventory as required. How can the purchasing manager assist a store manager whose customers complain that an item is regularly out of stock: purchasing manager can check inventory information to determine the item’s availability in other stores. physical resources.

· Position descriptions Staffing · Resumes of prospective employees · Position descriptions · Evaluation criteria Training and Development · Employee skills and credentials · Position skill and credential requirements · Availability of training staff and facilities · Costs of outside training services Training materials Performance Management · Evaluations of past performance · Objectives for future performance Compensation · Industry and organizational wage levels · Central and state tax regulations · Insurance costs and options Labor-Management Relations · Grievance procedures · Industry and organizational wage levels · Industry and organizational productivity Administrative Affirmative action plans and targets Safety and health procedures Government-requested information Human resource managers engage in the design of organization systems to perform these functions. James Orr wanted a daily count of the number of employees in his organization. they assist line managers with implementing the implementing the resource policies. Human resource planning involves determining the demand and supply for various categories of workers. he could compare this supply with the requirements for workers to do various jobs before making downsizing . programs. and practices.

knowledge. They also provide information requested by various government agencies to check compliance with local . Effective planning also requires information about other potential sources of workers. In global organizations managers must know the differences in currency rates. human resource managers must also know federal tax regulations and other relevant legislation. and then they can enter their names. or experience required for quality job performance or advancement in the organization. This process passes detailed information about the position to the applicant and information about the applicant to the hiring manager. they can screen openings for required qualifications. This information help answer questions such as whether the company should offer a flexible benefits program whether it should introduce on-site day care. They may use observations. behavior checklists. The hiring manager interviews applicants from this list and adds to and updates the ratings. Training and development addresses deficiencies in skills. location.state. Performance management involves providing evaluation data for administrative and training decisions and development activities. and central regulations. and compensation decisions. colleges. Many organizations offers employees extensive information about job openings: Employees can review job openings by job code. or posting date. and expectations about compensation in countries throughout the world. .decisions. Managers must assess individuals’ training needs. or whether it should offer one-time b or salary increases for good performance. A human resource manager rates applicants on each requirement based on history and skil1. When a manager encounters a poorly performing worker. Recruit ing requires communicating information about job openings and the organization to those best qualified for the positions. results. Human resource professionals track affirmative action plans and targets. Staffing describes the recruiting and selecting of individuals for job positions. and training programs already undertaken. benefits other forms of compensation. Administrative responsibilities involve monitoring and keeping records of the functions described so far. and desired positions if they want an internal transfer. The computer then generates a screening list. Compensation design and administration includes determining wages. title. and competitors. Selection involves matching job candidates to job openings. They provide counseling and discuss job opportunities as a part of development. qualifications. and choose the training options that best address the workers’ needs. divi sion. as well as about his or her job’s requirements and goals are essential information for performance management. They must understand the needs of diverse types of workers and translate this understanding into effective policies. often through a human resource professional who screens applicants. training and development. Human resource management in a global environment adds additional information needs. such as high schools. Managers require extensive information about workers’ skills. Human resource managers must have cross-cultural information about the various human resource functions as well as detailed knowledge of practices in various countries or regions. A manager who has difficulty finding employees willing to work abroad for two years may need information to assess whether the compensation package provides enough incentives for the relocation. living conditions. or outputs measures as part of the appraisal. knowledge. job requirements. They monitor the implementation and effectiveness of safety and health procedures. and attitudes. The hiring managers enter the requirements of the job and their relative importance into a computer system. Managers assess past performance and offer ways to improve it in the future. Managers use information collected in the appraisal for making staffing. department. In designing compensation programs. Effective compensation management requires information about industry and organization wage levels as well as job and individual characteristics. determine the training opportunities and programs available to meet these needs. the manager might wish to know whether the worker partici pated in any training programs to help assess the causes of the performance problem. Data about an individual’s actions. abilities. such as bonuses or stock options. Finally.

3. down C. Management refers to the process of achieving organizational goals by planning.4 Summary Managers at all levels in an organization have significant information needs. Top. Increasingly. leading. up B. 2. Accounting b. Executives require information to help them focus on formulating the organization’s overall direction. Middle managers . As one moves ______ the corporate ladder.3) 1. Finance c. middle. These needs apply at all levels of management. Human resource management 2. 2. linearly 1. and controlling organizational resources. decisions have a longer term and wider ranging impact on the organization A. Eventually human resource information systems may become an integral part of the administration of each part of the human resource function. Infor mation needs exist in the areas of accounting. finance. human resource managers have required comprehensive. Operations e. feature-rich information systems that allow information to be used for and support interfaces among multiple functions. marketing.they must effectively diagnose their specific information needs so that they can propose quality programs that respond to the requirements of a multinational and multicultural work force. 2. horizontally 2. Managers in a global setting face a dynamic and unpredictable environment that results in less-than-perfect information. Explain the needs of information in the following areas a.5 Terminal Questions 1. operations. and first line supervisors have special information concerns. 2.6 Multiple Choice Questions 1. Managers also require a broad range of information to perform their daily activities. A. ______ focus primarily on implementing the policies and strategies. organizing. and human resource management. Make an organisation of your knowledge and assess the information needs in the various functional areas. Take an organisation of your knowledge and determine the information needed by different levels of management in that organisation. Marketing d.6 Self Assessment Questions (for section 2.

2.3.3. This has been mentioned in section 2. d.3.2. Market research B. This has been mentioned in section 2. tactical planning C.3. All of the above 4.2 1. Needs research C. Operations encompass ___________ A. Top level management C. A. ____________ is the process of gathering information about what consumers want and need. This has been mentioned in section 2.4 1. all of the above 2.7 Answers Self Assessment Questions Section 2.3.B. Operational planning D.2. c.or short-term planning known as A.1 1.1 Section 2.1 2. In most organizations middle managers more often engage in medium. Services only C. All of the above 3. This has been mentioned in section 2. Non profit organizations D. Manufacturing only B. People research D. This has been mentioned in section 2. First line supervisors D.4 .3 1.3. Strategic planning B.6 1. a. b. Manufacturing as well as services 5. This has been mentioned in section 2.

1. A 3. D 5.3 Multiple Choice Questions 1.2. This has been mentioned in section 2.2 2. e. B 4.5 Terminal Questions 1. A 2.3. This has been mentioned in section 2. A . This has been mentioned in section 2.

2 Challenges of Information Management 3.7 Information Management Requirements 3.2.6 The Individual at Work Self Assessment Questions (for section Components of an organizational information system 3.3 Development of Organisational Computing 3.6.5 Capabilities of information system in an organizational view 3.6.1 The Components of Perception 3.3 Self Assessment Questions (for Section 3.2.2) 3.2 Time Management Needs 3.4) 3.3 Enhancing Personal Productivity 3.2.1 Dealing with Quantities of Information 3.4.2 Facing Insufficient or Conflicting Information 3.4 Maintaining Technical Skills Humans Versus Computers 3.1 Acquiring Information .6.2 How information are selected and organized 3.1 Task-Related Needs 3.6.4 Demands on Organizations in an Information Society 3.6.Unit-03-Information needs of Organisation and Individuals Structure: Organizational Design for Knowledge Work 3.1 The Information Needs of Individual Job Holders Informational responses to the new environment 3.4.2 Mechanisms for Acquiring and Distributing External Information Introduction 3.4 Career-Related Needs Enhancing Personal Productivity 3.

they organize it in several ways. They may view it against a background. Finally. or experiences. trying to form a complete picture.8 Summary 3. Consider why companies such as IBM or Dig ital Equipment Corporation failed to recognize the changing nature of the computer mar ket in the late 1980s. TQs and MCQs 3.7.10 Multiple Choice Questions 3. They may try to fit it into prototypes or categories that represent typical aspects of similar situations.2. Once individuals attend to information about a situation. novel. or in contrast with their background.7. Clearly.2 Storing Information 3. The different ways computers can help individuals meet their needs for various types of information are narrated.5 Ensuring Privacy and Security 3.7. in motion. the pictures and shapes on the back of a five hundred rupee note. they may group stimuli into patterns.1 Introduction In this unit. . repetitive. we describe how information are selected and organized by individuals. In addition. for example.7. They may match it to concrete examples.4 Communicating Information 3.3 Retrieving Information 3. sometimes even trying to do so using incom plete information. very familiar. The information itself may also influence whether atten tion occurs: Individuals select stimuli that are more intense. · What are the components of organizational information system · What are the requirements for information management 3. the subjectivity of perception limits the processing of infor mation.11 Answers to SAQs. for example. Try to recall.1 The Components of Perception Perception is an active process by which an individual attends to certain stimuli and then organizes them in a meaningful way.9 Terminal Questions 3. Objectives: · How individuals select and organize the information.2 How information are selected and organized 3. and how individuals differ from the computer in various aspects. We shall conclude by understanding the requirements of information management. within an environmental or situational context. · How the organisational computing developed. personality.3. People tend not to see information that they are exposed to repeatedly without consequence. people tend to ignore information that runs counter to deep or long held beliefs. Individuals attend to certain features of a situation or select specific pieces of information to see or hear because of their needs.

An understanding of how people select and organize information is critical to designers of information systems. Managers rely on information systems to collect and summarize data about their organization, so systems designers must present information in ways that have the greatest chance of being seen and remembered to ensure that users select the most impor tant information and organize it in the most effective way. Extensive research in information systems has addressed questions such as how much information to put into a single table, what type of data to present as tables and what type as charts, and how best to use color to convey information and facilitate quality decisions. Managers and other jobholders also have a responsibility to ensure that they receive and select the information they need in order to operate effectively. Some managers may receive insufficient information for decision-making; others obtain so much information that they cannot separate the important from the unimportant. Individuals who hold jobs that require extensive coordination with other jobholders, as well as those who have a high ability and desire to communicate more frequently, experience overload more than those who do not. This overload can be particularly problematic: Decision quality declines as the amount of relevant information increases beyond a manageable limit. 3.2.2 Humans versus Computers Humans and computers are complementary in their ability to filter and save information. Humans can effectively decide what is important; computers cannot. Computers generally can retain much more information and collect it faster than humans collect. For example, computers at stores such as Big Bazaar can maintain a complete, instanta neous, accurate inventory on the thousands of items in a store; manual tabulation by a store clerk would take weeks. In addition, computers often process information more accurately than indi viduals do. Marine biologists obtain the information they require by counting fish, checking maps, and diagnosing equipment flaws under water; underwater personal computers could make the data collection easier. People can think easily in terms of symbols, objects, and concepts that have meaning. They can draw conclusions from data. Increasingly computers are able to think in this way, but they still have only a primitive ability to draw conclusions. Although physicians can use com puter programs to help organize disparate symptoms into a pattern that assists with diagno sis, few patients would want a computer acting alone to treat their life-threatening disease. Computers can perform computations much more quickly and accurately than people can: They can add a column of 50 ten-digit numbers in less than a second, whereas such addi tion would take even the most facile individual several minutes. They can sort a list of one million addresses by ZIP code to prepare envelopes for bulk mailing; to do so manually in a timely fashion would take hundreds of people. Humans Versus Computers Human Assets · Identify important information · Think symbolically · Evaluate information · Recognize patterns · Draw inferences and conclusions Computer Assets

· Retain large quantities of information · Collect information quickly and accurately · Perform extensive computation rapidly and accurately · Sort information rapidly and accurately · Select information meeting preconditions 3.2.3 Self Assessment Questions (for Section 3.2) 1. What do you understand by perception? Explain their components. 2. Write a short note on human and computer ability to filter and save information. 3.3 Development of Organisational computing The role played by information systems in organizations has evolved over time. This evolution has not led to wholesale discarding of the early types of sys tems – this would be quite expensive, and in many cases the older systems are’ still useful after suitable modifications. The progressive retargeting of MIS can be summarized as moving "up and out": progressive support of higher levels of management in increasingly individualized fashion, and aiming MIS at com petitors to achieve strategic advantage. From the mid-1950s to the mid-1970s, companies generally had a single data processing department (later to be renamed MIS department). All application systems were developed within this department and largely at its discretion. Thus, end-user access to computer technology was mediated: professional computer expertise was required to obtain information from the system. The backlog of applications judged worthy of development yet having to wait for the availability of professional time ran two to three years in most organizations. Access to com puting was thus severely restricted. The primary target of data processing departments was operational support, al though management support was emerging toward the end of this period in the form of voluminous reports. Raising the efficiency of company operations was the main objective of most applications. The second era in organizational computing began in the late 1970s and was made possible by a number of technological developments spanning a decade. The development of time-sharing operating systems made it possible for a user on a terminal to access the computer directly. Specialists devised information systems directly supporting the decision-making process and organized com pany data in databases, making the data far more accessible and usable. Mini computers made it not only possible but justifiable to break up the monopoly of a single MIS department. The greatest impact was made by the personal com puter, which emerged on an industrial scale in 1977 as Apple II. Propelled by the broadly used spreadsheet programs (initially, VisiCalc), personal computers and end-user oriented software empowered the users themselves. End-user computing had begun: in many cases, instead of requesting that a system be developed by the MIS department, knowledge workers themselves began using a productivity software package (a database management system or a spread sheet, for example), customizing it for their needs, and even developing systems of their own. Many information systems were brought under control of their users. Organizations now entered a new stage in their reliance on information systems, which included extensive operational and management support systems devel oped during the two earlier stages. During the current, third era of MIS devel opment, firms expect information systems to carry them beyond increased operational efficiencies and managerial effectiveness: systems are now geared to help a company to compete in the marketplace. Business functions are reengi neered and

extensively supported with information technology. This requires close interaction between developers and users; the sharp divide between the two groups often disappears when application systems are concerned. End users initiate and participate in the development of many systems. They also control some of the systems they use. In leading corporations, end-user computing is an important contribution to overall MIS development and maintenance. Sys tems integration is a vital concern. 3.4 Demands on Organizations in an Information Society Transportation and communication networks spanning the globe have removed the protective space and time buffers shielding companies from competition. This calls for constant innovation. Complexity, turbulence, and a high volume of knowledge with potential impact on the company’s operations characterize the operational environment of today’s organization. An infrastructure is the structure of facilities and services necessary for organizations and economies to function and grow. Fast and relatively inexpensive means of transportation, telecommunications networks, and global financial markets are all components of the infrastructure of the information society. These means of rapidly moving goods, information, and money have shrunk the world. They have removed the advantages provided by the remoteness of potential business competitors in the early industrial economy. Largely, firms no longer compete solely against a known handful of other companies: they must develop a general competitive capability. Runners may appreciate the analogy to the difficulty of achieving a record result running alone as compared with running against others in a race. Not only has the space buffer that formerly shielded companies from their remote competitors been removed, but paced by computerized information systems, life cycles for product development have been shortened dramatically. With the use of CAD/CAM (computer-aided design/computer-aided engineering) tech nology, a new car model is developed in nine months instead of three years; financial software and global securities markets make it possible to develop and bring to the market a new financial product, such as a new type of bond, within ten days. Companies used to be able to rely on "cash cows" products, which in mature markets bring significant profits without a need for innovation. Now that time-related protection has also disappeared. A highly dynamic information society requires constant innovation-both in marketed products and services, and in the continual restructuring of organizations to adapt to changing market demands. Moreover, successful organiza tions must not only react, but also proactively anticipate new developments and changes in their markets. Mergers, acquisitions, and organizational restructuring have indeed been the order of the day during the past two decades. The stability and stolidity that were the hallmark of successful industrial corporations have given way to constant corporate renewal. Robert Waterman, a well-known management consultant, quotes the chief executive officer of IBM, John Akers, who "says they never re organize except for a good business reason, but if they haven’t reorganized in a while, ‘that’s a good business reason." However, this dynamism has to be com bined with a stable, "producing" environment. The art of balancing in corporate renewal requires that an organization ensure a sufficient degree of organizational stability to successfully carry out change. Perhaps the best way to state it is to say that an information society requires an organization to maintain a con stant trait of adaptability, rather than adaptation; in other words, a firm must possess the capability to keep changing rather than to make a single change. Management information systems must be vehicles built to facilitate rather than to put the brakes on change, as unfortunately frequently occurs. 3.4.1 Components of an Organizational Information System The environment in which organizations operate from the in formational perspective in terms proposed by George Huber of the University of Texas, who has studied the organizational design

A growing world population and the industrial revolution combined to produce numerosity. Organizations operating in the public sector. 3.4." To succeed in an information society. because of the infrastructure discussed earlier. and increased turbulence-are not simply ancillary to a transition to the new societal form. His conclusions provide a framework for determining what is required of an organizational information system. The second factor is specialization in firms that make narrowly defined products. according to Huber. we should expect that these factors would continue to expand at an accelerating rate (a positive feedback exists). also make the environment in which public organizations operate more complex. The great amount of change and turbulence pressuring organizations today thus calls for rapid innovation in both product and organizational structure. Bar ring some catastrophic event. To succeed. and interdependence. Equally important. Two principal factors have led to increased interdependence. or in terms of the volumes of corporate communications. A company’s product is typically a part of a larger system. organizations must be compatible with this environment. The first as been the revolution in the infrastructure of transportation and communication. Moreover. 3) Increased Turbulence The pace of events in an information society is set by technologies. 2) Growth of Complexity Huber characterizes complexity in terms of numerosity. Huber concludes that these factors – an increase of available knowledge. growth of complexity. To thrive. Even the most isolated of countries participates in some way in the international division of labor. or a growing number of human organizations. Widespread use of telefacsimile. we expect that the rapidly changing environment will be not only "more so" but also "much more so.2 Informational responses to the new environment . interdependence has increased on a global scale. produced with contributions from a number of interdependent firms (consider a car or a computer). diversity. has removed the "float"-the lag between sending and receiving-in written communications. are still governed by the demands of society. as opposed to the self-sufficiency of companies producing a complex product down to its minute elements. along with the pressures conveyed from the private sector. are the hallmarks of an information society: 1) Dramatic Increase of Available Knowledge Whether measured in terms of the number of scholarly journals. an organization must have information systems able to cope with large volumes of information in a selective fashion. both the production and the distribution of knowledge have undergone a manifold increase. These differences lead to diversity. they will be a permanent characteristic of the information society in the future. Rather. The speeds of today’s computer and communication technologies have resulted in a dramatic increase in the number of events occurring within a given time. patents and copyrights. the number of events that actually influence an organization’s activities (effective events) has also grown rapidly. These. Pressures on the public sector in democratic societies. while rarely in a competitive situation.required by an information society. Moreover. people and organizations learned to specialize: they do things differently and organize themselves differently to accomplish specialized tasks. Consider the volumes and speed of trades in the securities and currency markets. as another example.

which has become a classic example. The new. Massive installation of local area networks is proof of this. After all.1 Organizational Design for Knowledge Work Here are the responses required of organizations in an information society: 1) Organizational design for knowledge work in general and decision making in particular. information systems also in novate in the ways products are manufactured and services are provided-this is process innovation. A single workstation has a significant processing capability of its own. support of group work is essential. 4) Explicit mechanisms for acquisition and targeted distribution of external information. orga nizations exist to leverage the work of an individual through group work. Organizations also need to assimilate information technology for both indi vidual and-to an increasing degree-group decision making. 5) Protection from information overload The volume and speed of decision making in an information society continue to increase dramatically. but just as important.The demands of the new environment call forth a set of responses from or ganizations. subject to human approval when appropriate. The metaphor for work in the information age is a personal workstation. hence. we consider the support of decision making as only one of the contributions MIS make to organizational functioning. based on the view that decision-making is a central organizing principle for current and future orga nizations. This small. became a powerful metaphor for the industrial age. and all of these responses have implications for information sys tems. This is called product innovation. information-based organizations are expected to rely to a much greater degree on specialists-knowledge workers broadly distributed throughout an organization. Information systems have been increasingly used over the last decade to gain competitive advantage for products and services. 2) Continuous product and process innovation through information and information systems. Five corporate planners collaborating over several months on drafting a new long-range company plan form another type of group. requesting their comments on a new bud geting policy to be implemented during the next quarter.4. Industrial organizations were built around groups of people doing physical work.However. but also for group knowledge work. In this text. The size of a group depends on the task. To keep up. An isolated (non-networked) personal computer is not an adequate tool for most knowledge-work tasks. Information systems serve to develop new products. tightly collaborating group may use an electronic meeting system with a group decision support facility since the members of the group may be distributed over several company locations. rather than concentrated at its headquarters. though used only in some industrial processes.2. The Federal Express vignette. 3) Constant internal company renewal supported by information systems. The organizations of the information era have to provide both the structure and the technology not only for individual knowledge work. a message broadcast over the company network to all managers above a certain level (perhaps a hundred of them). The workstation is generally built around a personal computer. it connects with the workstations of other workers and provides access to a number of informational services both within the company (corporate databases. for example) and outside of it (such as a commercial demographic database). Some of the requisite responses have been pointed out by George Huber and Reuben McDaniel. and information itself may serve as all or a part of the product. For example. may encompass a large group. routine and noncritical decision-making must be done by the information systems themselves. with a modem connection to the telephone network (though digital networks are being intro duced on ever-larger scales). illustrates . They proposed an organizational design based on the decision-making paradigm-that is. An assembly line. 3.

4) 1. companies have found it advantageous in recent years to produce high-volume standardized products off the shores of the United States.how a company can successfully combine a product with customized service and information. What responses do organisations need to take in an information society? 3.4. 2) Probing. with Large-Capacity Storage and Rapid Communication between Sites . The competitive demands of the global market lead to a certain degree of homogeneity-many can play the competitive game. Thus.3 Self Assessment Questions (for Section 3. commodity production does not bring high profits.2. enough to accommodate the change. where wages are lower and raw materials more accessible. Information systems help companies add more value to their products than is possible in the manufacturing of commodity-type. A browsing mode will also be available for scanning. Organizations must have specialized information mechanisms as a part of boundary spanning. For example. regardless of their geo graphical locations. Information systems will then be customized for the individual. 3. of course. or making an ad hoc search for information regarding a specific problem or opportunity. Many U. The difficulty lies. more complex informational tasks will be delegated to infor mation systems. 3.4. standardized goods. expert systems will be able to define more precisely an individual user’s information-interest profile. MIS users are able to define their pref erence profiles for incoming messages and rank them by order of importance. To flourish. The principal capabilities of information systems include: 1) Fast and Accurate Data Processing. Software screens and filters help in coping with information overload.5 Capabilities of Information System in an Organizational View Computer. If decision makers are not shielded from unneeded information.and communications-based information systems offer a set of ca pabilities to be brought out in the development of individual systems.or acquiring information about their environ ments. What are the hallmarks of an information society according to Huber? 2. leading companies add more value to their products by customizing them for smaller market segments and by flex ible manufacturing. the two objectivesmaintaining informational support and adapting organizational structures to fit the changing environment-will contradict each other. Two modes for collecting information about the business environment require support: 1) Continuous scanning of the economic environment for opportunities and potential problems. some of these capabilities help to provide dynamic action. their effectiveness dwindles. while others help to maintain operational stability even as rapid change takes place. firms need explicit mecha nisms for acquiring external information and distributing it to the appropriate knowledge workers. As we will see. in determining what information is actually needed. A very large number of factors affect a company’s business: no supplier is too remote and no customer too foreign. The same information technology that helps us obtain information and make decisions also contributes to what we may call "positive informational feedback" as large numbers of knowledge workers produce an ever-increasing volume of information.2 Mechanisms for Acquiring and Distributing External Information Unless organizational MIS is flexible. The vast volume of knowledge in the information society calls for coping tech niques.S. with a consequent increase in the number of players. In the not-so-distant future. As the business environment has become global. However.

for example. the organization receives intelligence about the environment. Thus. speed. primarily because of the proliferation of personal computers acting as workstations connected to telecommunications networks. This may be accomplished in a variety of ways. Sophisticated computer models rely on this capability for long-term planning based on a large number of factors and models for optimization of the use of resources (such as raw materials). 2) Instantaneous Access to Information In on-line systems. Information technology is used ever more extensively to coordinate the actions of buyers and their suppliers. A firm’s databases serve as a vital part of its corporate memory-a permanent record that facilitates management. with the exchange of information playing a major role. a query may be directed to some remote site where the data are actually stored without the user’s awareness (that is. MIS-assisted planning and control. electronic data interchange (EDI) systems eliminate the exchange of paper transaction records. 4) Boundary Spanning Aside from the internal role played by MIS within an organization. All managerial functions. may in some cases produce extensive reports. Through boundary-spanning information systems. information systems increasingly serve to link an organization to the outside world. In the immediate sense. the presentation of the data may be individualized for a particular user-with various forms of graphics. This has made MIS a tool for coordinating organizational activities. entering incoming orders or printing payroll checks. MIS have widened their reach to create the "portable manager" complete with laptop and computerized home office. the role MIS play in organizational coordination is a restatement of the fact that MIS have become crucial to management. resulting in economy. Organizations also use boundary-spanning systems to provide computerized information for various external constituencies. decision-making is another basic aspect of management. which process massive volumes of business transactions. which will be further discussed later in the text. Ad-hoc (in other words. the contents of a computer database are generally available for queries in subsecond time. in a transparent fashion). This capability is also used to derive management reports from the voluminous data stored on a semi permanent basis in secondary and archival computer memories. This capability is exploited in the first order by operational-level systems. Through the telecommunications capability. not predesigned) queries. Inter-organizational systems connect suppliers with customers. or to create electronic markets helping to match the needs of multiple buyers and sellers. organization members pursue them with vigor. coordination is accomplished through office information systems. involve both coordination and decision making in varying degrees. Ifcoordinate means to harmonize in a common action or effort. . once goals are established. 3) Means of Coordination Information systems have become widely accessible. then planning with the use of appropriate information subsystems serves to establish common goals at all levels. 5) Support for Decision Making Along with coordination. Coordination brings parts of an organization together in a common effort.This is the fundamental property of computers and telecommunications systems. In a deeper sense. and control aims to ensure that. introduced directly by end users. for example. Moreover. combined with the extensive communication capabilities that information systems give to people within an enterprise. which is necessary to compete successfully. make MIS a coordination tool. and reliability. For example. some of which may be decisive for business success. Coordination activities are not limited to those that take place within an organization.

Unstructured decisions require human judgment as a critical component. Knowledge workers increasingly manipulate models of reality in gaining understanding. Remember that people remain the ultimate decision makers in any organization. The managerial group may then employ an expert system. and studying effects of possible changes. semi structured. the volume and complexity of decision making in an information society requires that decision makers have MIS support. and environments where the products will operate. provide a protocol for the interaction of people within an organization. both components of office information systems. and on applying rules of thumb to the results of the on-site visit. Future a semi-structured decision-can is made for various scenarios with the use of a decision support system. Structured decisions occur when courses of action under all possible circumstances may be programmed and thus fully automated. which would suggest a solution to the credit-granting problem based on a set of established financial criteria. Modeling Computers are broadly used to model future economic conditions. Electronic mail systems and computer conferencing. Suppose that a group of managers is responsible for determining· whether their firm will grant credit to another company. and unstructured decisions. fast. the line between MIS and production control systems becomes blurred and. MIS support both structured and unstructured decisions. 7) Differentiation of Products or Services The strategic use of information systems leads to the use of information as a part of the product or service. on projections for the company’s future. customizes and individualize the product or service with the use of information in a cost-effective fashion may produce a competitive advantage. 6) Formalization of Organizational Practice Operational systems handle transactions in a specific way in every organization. and comprehensive experimentation then becomes possible. Various accounting ratios indicating company performance can be obtained from a management reporting system. designing. Formalizing does not mean casting in concrete: properly designed systems should give an organization the capability to evolve as the environment changes. Granting credit to a large company involves structured. However. no information system can replace visiting the company and "getting the feel" of its management and operations. for example. may rely on established inventory reorder formulas to determine the quantity of supplies needed. However. assuring high consistency of response. the managers are able to make the final decision. which may also determine whether each company falls into the acceptable windows of approval-a highly structured process projections for the company’s. Relatively inexpensive. Management reporting systems. 9) Production Control Computerized systems for production control are not considered a part of MIS in the strict sense. These are just some examples of how organizational practice may be defined through MIS. The capabilities to differentiate. this is an unstructured decision.By informing managers and permitting them to select from among alternative courses of action. as system . Software models are frequently substituted for the use of physical resources (other than the resource of computer time) in making these projections. Authorizer’s Assistant-an expert system for credit card purchases developed by American Express recommends authorization or refusal of credit for most credit card transactions. However. With the expert system’s suggestion and its explanation of how it arrived at its recommendation. prospective products.

1 Task-Related Needs Consider Ramesh. 3. Savings Accounts.1 The Information Needs of Individual Job Holders 3.2 Time Management Needs During a normal workday Ramesh constantly makes decisions about the best way to handle his clients. Computer technology can also meet the needs associated with ensur ing quality in the work place. 3.6 The Individual at Work Individuals assume a variety of roles on the job. because the area covered by him is a large territory. How similar would they be? How would they differ? Now compare the needs of these salespeople to those of hospital employees such as an operating room nurse. Individuals involved in quality efforts require ongoing and updated information about customer needs and product defects.1. leading to higher quality output. Do they have the same or different needs? Now compare the needs of two or more jobholders in an organization you know. the specific information needs vary considerably. might track the time his sales staff spends on various tasks so that he can propose way of reordering those tasks or reallocating staff effort to increase efficiency.1. for example. He might also determine that salespeople need new or better information about products to perform their jobs more effectively.1. or food services man ager.3 Performance-Related Needs Not only do employees at all levels require information about the tasks they perform. whether to spend his time trying to close a new deal with a likely prospect or trying to appease an unhappy distributor. their favorite restaurants.6. However. the accounts receivable clerk needs different information than the accounts payable clerk. To identify potential customers he uses leads provided by his sales man ager. such as en hancing their power.integration progresses. . in his supervisory role. managers who introduce such systems are not always motivated by strictly rational concerns about organizational welfare. uses information to perform a variety of tasks associated with his job.6. Ramesh. thus assuring product diversity to satisfy a variety of customer needs. the names of their family members. or credibility. Ramesh is most productive when he minimizes his travel time. 3. Although these roles all require various types of information. and stories he hears from contacts with prospective cus tomers and from salespeople in other fields. All nine of the capabilities we have discussed are realized through organiza tional information systems. The manager of manufacturing has different information needs from the manager of finance.6. and the types of entertainment they prefer. is even likely to disappear. status.6. who is an Area Sales Manager of Airtel. Flexibility and economies are the potential benefits of using computers in automated production processes. admissions clerk. He also must know a great deal about his company’s and his competitors’ products. 3. Another advantage: computer-controlled production and processing machines can immediately reject defective components and alert operators to faulty processes. acquires information about their birthdays. Ramesh also requires geographical information to be most productive. for example. Compare the needs of the two employees of Bank – Loan. data published in trade journals and newspapers about the sales volume and number of employees in specific companies. Some managers do implement systems to further personal goals. He uses the information about sales history and customers businesses to help make these deci sions. It is cost-effective in computerized manufacturing to produce small lots of products. To build a rapport with various distributors. they also can provide information to management about ways to improve task performance. The key challenge for individuals on the job is to diagnose their particular information needs.

They must know how to access the information they require and recognize when manual data collection and processing is adequate.2 Challenges of Information Management In identifying their information management requirements. Ramesh. Third. they must deal with large quantities of information that may create overload. Employees might also maintain logs of their own performance during a week. In spite of the large amount of information in the library’s electronic cat alog. Because computers process input from diverse sources. 3.2.2 Facing Insufficient or Conflicting Information Although compute rs can make large quantities of information available to individuals.6. they may face insufficient or conflicting information. As individuals move higher in the orga nizational hierarchy and assume more managerial responsibility. and specifications for transfers or advancements. Often employees must lobby their employ ers to add new technology that will help increase personal productivity. not hinder. First.6. she may not be able to secure the precise information she needs. The member of the regional sales office might maintain such records to help with their personal planning and advancement. Personal information needs include lists of personal skills. Often employees face an infoglut. or year to incorporate into discussions about their personal training needs and career development. 3. Fourth. employees must know how to use computers to facilitate.1 Dealing with Quantities of Information The gap between the amount of information that an organization can collect and the ability of its employees to make sense of that information has been widening rather than narrowing.6. such information may not address their needs.6.3 Enhancing Personal Productivity Employees in any organization increasingly use information technology to improve their personal productivity.6. job opportunities inside and outside the organization. may wish to do some library research about com petitors’ products. Second. Employees must also understand and demonstrate when advanced technol ogy is a detriment rather than an asset. The early fear that comput ers would so improve a person’s ability to process and manage information that a job holde r would need only one-third to one-half the time to do his or her job has been dispelled The reverse has occurred.1. users may also obtain conflicting information if one source updates information more frequently than another does. 3. they must find ways to enhance their personal productiv ity. they must acquire and maintain the technical skills needed for effective personal information management. The ability to show the cost-effectiveness of additional expenditures for diagnosing and meeting information needs is critical.2. their per formance. They must also find ways to manage data better. individuals face four major chal lenges in addition to securing the most appropriate information.2. ASM of Airtel. month. To ensure high productivity.6. Career-Related Needs Many individuals view their jobs in the context of a career. 3. an overload of information. To avoid such overload individuals must carefully asses their information needs and then find effective ways of managing the required and available information. information overload become an even more significant challenge.4 Maintaining Technical Skills .

potentially at multiple or offsite locations. magazine. Personal informa tion needs focus on managing time. Many industries publish directories.7. in these systems we typically can store informa tion in only one location (unless we reproduce copies). and advertising industries. and personal documents.Finally. it has become increasingly sophisticated: People can dial foreign countries with out the assistance of a telephone-company operator. is still one of the most widely used information technologies. individ uals or companies that require patent information for scientific inventions can use software to perform sophisticated and rapid patent searches. Other information available electronically includes current and past stock prices. and individuals can leave messages without using a separate answering machine.2 Storing Information Individuals also keep significant amounts of information it files at work. For example.6) 1. or local regulations may call for the main tenance of specific corporate records for varying periods.7 Information Management Requirements Individuals must accurately and quickly determine the information needed to respond to the demands of a changing environment and to ensure personal productivity. repeated searches of data. retrieve. Although many companies provide training to their employees. invented in the nineteenth century. display screen. the best prices and vendors for a vari ety of goods and services. sales con tacts.3 Retrieving Information Manual filing systems satisfy many personal needs for organizing and retrieving information. others do not. In recent years. The telephone. 3.4 Communicating Information Although direct speech and writing are the sim plest means of communication. and computerized bulletin boards of information.6.3 Self assessment Questions (for Section 3. multiple parties can communicate simul taneously through conference calling.7. In particular. or a myriad of other details. store. and communicate information.7. project documents. 3. workers must acquire.1 Acquiring Information A variety of information industries. and evaluations of prod ucts and services in either or both paper and electronic form. employees may find their mobility and productivity limited by the extent to which they can learn new technical skills indepen dently of their employer. they must also ensure the pri vacy and security of the information. information technology has made it possible for individuals to communicate with one another more quickly and effectively. Nevertheless. facsimile (fax) technology allows the transmission of written documents and . 3.7. complete airline schedules are available in printed form as the Official Airline Guide and in electronic form from various for-profit and free sources. They may keep copies of past correspondence. Cur rently. the caller’s telephone number can appear on a. radio. but they may also facilitate its retrieval by supporting quick. 3. Computerizing some of this information can reduce the amount of paperwork and facilitate retrieval. television. What are the information needs of individual jobholders in an organisation? 2. using information technology effectively requires continuous updating of technical skills. records. indices. For example. state. What are the challenges of information management? 3. Ensuring that employees have the appropriate skills has both financial and time cost implications. As a result. such as the newspa per. Not only do computerized system assist in storing information. 3. Central. assist people in acquiringinforma tion for use at work.

This is particularly true if their organization lack norms that encourage security-related behavior. particularly because these security breaches are not easily noticeable. fireproof location. How can he ensure the integrity of the data? Users and devel opers of personal computer information systems are often lax in their attention to issues of security and privacy. Individuals process information by first attending to certain stimuli and then or. A variety of techniques can be used to protect against the theft and destruction of valu able personal information. second set of diskettes at a different site from the first set. and store personal documents. computer files are highly susceptible to theft and sabotage. may be desirable.picture. Workers must also prepare. 3.5 Ensuring Privacy and Security Recall Ramesh. Individuals at work require various types of information for .8 Summary The first step in effective management of information is a careful diagnosis of information needs. Area Sales Manager of Airtel. Employees responsible for publishing catalogs for companies could use electronic publishing to make their catalogs available to potential customers in computerized. Soon. Sophisticated software for word processing desktop publishing and graphics arts has enticed workers to create and mod ify their own documents. Although most personal information sys tems are not meant to be shared. 2) Store a backup. with computers much more able to handle large volumes of data quickly and hum able to deal more effectively with symbols or objects that have meaning. such as a locked file cabinet. Encryption software uses a secret code to scramble (and unscramble) data you have entered so that it cannot be read even by a thief who manages to physically remove the magnetic storage device from your computer. described earlier in this chapter. such as ensuring the legal collection of only correct and up-to-date data that are relevant to the organization’s goals. organizing them in a meaningful way. handle. 3) Develop a key lock and/ or a password security system for your computer so that only a person having a key or the appropriate password can turn on the computer. Privacy advocates call for policies and procedures to protect individuals’ privacy. and graphics capabilities of computers have affected the ease of producing and the appearance of written communication. desktop publishing. Humans and computers can play different roles in this process. Ramesh keeps large amounts of information about his distributors on his personal computer. rather than paper. enabling them to immediately redesign documents to meet chang ing information needs. Word processing. Protecting personal privacy has also become a key issue as computer information systems can maintain large amounts of data about individuals without their knowledge.7. away from heat and magnetism. Note that information thieves can bypass the key lock relatively easily by disassembling and reassembling the computer case. Directions for Encouraging Security 1) Keep all diskettes in a secure. Levels of security can be placed on information systems so that specified information can be shared with others who use the same compute or who are attached to the computer by an electronic network. occasionally sharing some personal information. the telephone system will routinely communicate moving pic tures as well as words. 4) Consider using encryption software when dealing with highly confidential material such as psychological records. 3. However. They may use dic tation or rough notes to record the information. such as calendar or address list. ver sions.over telephone lines.

Apple I B. Electronic data interaction C. What are the principal capabilities of information systems? 2.11 Answers to SAQs.10 Multiple Choice Questions 1. Electronic data interchange B. The information needs include task-related. Take an organisation of your knowledge and determine the information needed by individual jobholders. Apple II C. 3. Explain the requirements of information management.2 Section 3. Windows 3.2. The greatest impact was made by the personal com puter. This has been mentioned in section 3.the roles they perform. Forecasting C. time management.4.1 2.3 1. and can related needs.2. TQs and MCQs Self Assessment Questions Section 3. Apple III D. 3. which emerged on an industrial scale in 1977 as _________ . Objectivity D. Electronic demand interaction D.is an active process by which an individual attends to certain stimuli and then organizes them in a meaningful way A. 3.9 Terminal Questions 1. Perception B. A. EDI stands for ________ A. This has been mentioned in section 3. Subjectivity 2. Electronic demand interchange 3. performance-related. This has been mentioned in section 3.1 . ––––––––.

1 2.1 Section 3.3 1.6.7 3. This has been mentioned in section 3. A . This has been mentioned in section 3.6.2. This has been mentioned in section 3.6. This has been mentioned in section 3. B 3. A 2. This has been mentioned in section 3.5 2.1 Multiple Choice Questions 1.4.6. This has been mentioned in section 3.2 Terminal Question 1.2.

Unit-04-The Structure of MIS Structure: 4.1 Introduction Objectives 4.2 The components of MIS 4.3 Types of Organizational Information 4.3.1 Transaction Processing Systems 4.3.2 Office Information Systems 4.3.4 Self Assessment Questions (for Section 4.3) 4.1 Information for Management 4.4.1 Internal versus External Information 4.5 Management Reporting Systems 4.5.1 Characteristics of MRS 4.5.2 Reporting by MRS 4.5.3 Self Assessment Questions (for Section 4.5) 4.6 Decision Support Systems 4.6.1 Characteristics of DSS 4.7 Executive Information Systems 4.7.1 Characteristics of Executive Information Systems 4.8 The Role of Expert Systems 4.9 Summary 4.10 Terminal Questions 4.11 Multiple Choice Questions 4.12 Answers to SAQs, TQs and MCQs 4.1 Introduction With this unit, we shall start with the physical components of MIS. We begin by discussing the various types of organisational information and compare internal vs. external information. We shall conclude by the highlighting Management Reporting system and introducing DSS, EIS and expert system. Objectives:

At the end of this unit, you should be able to · Explain the different components of MIS · Explain the five types of systems that make up an organizational MIS · Identify the internal information and external information · Explain Management Reporting System 4.2 The components of MIS The physical components of MIS comprise the computer and communications hardware, software, database, personnel, and procedures. Almost all organizations employ multiple computer systems, ranging from pow erful mainframe machines (sometimes including supercomputers) through minicomputers, to widely spread personal computers (also known as microcom puters). The use of multiple computers, usually interconnected into networks by means of telecommunications, is called distributed processing. The driving forces that have changed the information processing landscape from centralized processing, relying on single powerful mainframes, to distributed processing have been the rapidly increasing power and decreasing costs of smaller computers. Though the packaging of hardware subsystems differs among the three cate gories of computers (mainframes, minicomputers, and microcomputers), all of them are similarly organized. Thus, a computer system comprises a central pro cessor (though multiprocessors with several central processing units are also used), which controls all other units by executing machine instructions; a hi erarchy of memories; and devices for accepting input (for example, a keyboard or a mouse) and producing output (say, a printer or a video display terminal). The memory hierarchyranges from a fast primary memory from which the central processor can fetch instructions for execution; through secondary mem ories (such as disks) where on-line databases are maintained; to the ultra high capacity archival memories that are also employed in some cases. COMPONENT DESCRIPTION Multiple computer computers systems: mainframes, minicomputers, personal

Computer system components are: central processor(s), memory hierarchy, input and output devices Hardware Software Database Communications: local area networks, metropolitan area networks, and wide area networks Systems software and applications software Organized collections of data used by applications software Professional cadre of computer specialists; end users in certain aspects of their work Specifications for the use and operation of computerized information systems collected in user manuals, operator manuals, and similar documents



Multiple computer systems are organized into networks in most cases. Various network configurations are possible, depending upon an organization’s need. Fast local area networks join machines, most frequently clusters of personal computers, at a particular organizational site such as

a building or a campus. The emerging metropolitan area networks serve large urban com munities. Wide area networks connect machines at remote sites, both within the company and in its environment. Through networking, personal-computer users gain access to the broad computational capabilities of large machines and to the resources maintained there, such as large databases. This connectivity converts personal computers into powerful workstations. Computer software falls into two classes: systems software and applications soft ware. Systems software manages the resources of the system and simplifies programming. Operating systems (UNIX, for example) control all the re sources of a computer system and enable multiple users to run their programs on a computer system without being aware of the complexities of resource allocation. Even if you are just using a personal computer, a complex series of actions takes place when, for example, you start the machine, check out its hard ware, and call up a desired program. All of these actions fall under the control of an operating system, such as DOS or IBM OS/2. Telecommunications mon itors manage computer communications; database management systems make it possible to organize vast collections of data so that they are accessible for fast and simple queries and the production of reports. Software transla tors-compilers or interpreters, make it possible to program an application in a higher-level language, such as COBOL or C. The translator converts program statements into machine instructions ready for execution by the computer’s cen tral processor. Many categories of applications software are purchased as ready-to-use pack ages. Applications software directly assists end users in their functions. Exam ples include general-purpose spreadsheet or word processing programs, as well as the so-called vertical applications serving a specific industry segment (for ex ample, manufacturing resource planning systems or accounting packages for small service businesses). The use of purchased application packages is in creasing. However, the bulk of applications software used in large organizations are developed to meet a specific need. Large application systems consist of a, number of programs integrated by the database. To be accessible, data items must be organized so that individual records and their components can be identified and, if needed, related to one another. A simple way to organize data is to create files. A file is a collection of records of the same type. For example, the employee file contains employee records, each containing the same fields (for example, employee name and annual pay), albeit with different values. Multiple files may be organized into a database, or an integrated collection of persistent data that serves a number of applications. The individual files of a database are interrelated. Professional MIS personnel include development and maintenance managers, systems analysts, programmers, and operators, often with highly specialized skills. The hallmark of the present stage in organizational computing is the involve ment of end users to a significant degree in the development of information sys tems. Procedures to be followed in using, operating, and maintaining computerized systems are a part of the system documentation. 4.3 Types of Organizational Information Five types of systems may make up an organizational MIS: Transaction Pro cessing Systems (TPS), Management Reporting Systems (MRS), Decision Sup port Systems (DSS), Executive Information Systems (EIS), and Office Information Systems (OIS). An information system in a large organization would typically include multiple systems of each type, serving, for example, different functional areas within the enterprise, as discussed later in this chapter. System types differ in their processing focuses, and main objectives. The focus defines the mission of a system. 4.3.1 Transaction Processing Systems Transaction processing systems sup port a company’s business operations, and office information systems facilitate communication at all levels of a firm, while the remaining three system types support management functions. A hierarchical classification of MRS, DSS, and EIS users by

and the exchange of messages in various formats. What do we mean when we demand quality information? The attributes we are talking about are summarized in table 4. indeed. while management-support systems aim to "informate" the organization. Generally. If we report that average. when this field was revolutionized by the personal computer. 505. The primary objective of management-oriented MIS com ponents is to improve the effectiveness of managerial decision making by pro viding appropriate informational support. based on accurate figures rounded off to the next million dollars. Information should be com plete.management level is often too reductive. and Rs. Many considerations influence the choice of the appropriate form in which in formation will be presented to a manager. still or moving images. with only relevant items brought to bear in the decision sit uation. and exchanged in any format-as docu ments. computer confer encing. OIS have rapidly developed towards becoming the "office of the future. as traditional office technology. Transaction Processing Systems (TPS) support a firm’s business operations. They also accumulate relevant data in databases for subsequent use by the management-oriented MIS components. our figure is accurate. Relevance provides the main protection against information overload. Since then.000. Office information system 4.4 Information for Management Operational-level information systems support the conduct of business with data processing. but the precision we selected is inappropriate. holograms. relying on the data accumulated through TPS. 750. Transaction processing system b. 456 million. and com munications technologies have converged. it is not. Suppose that.3 Self assessment Questions (for Section 4.3) 1. Rs. To neglect the "informating" aspect of MIS by limiting these systems to data processing means failing to take advantage of their full potential. Note the distinction between accuracy and precision. 408. Thus. computer. Examples of activities supported by OIS include document processing. last year’s quarterly sales were Rs. 4. The table is. to use the term introduced by Shoshana Zuboff. Determining what information is needed is the crucial aspect of the information systems planning and analysis. stored.2 Office Information Systems Office Information Systems (OIS) support general knowledge work in the con text of a business office. 610. a summary: for a detailed listing of thirty-four attributes of quality information Many attributes of information are relative to the decision-making situation (or problem) in which the information will be used. 4. the higher the manage ment level.3. data sets. TPS secure automation. and they will support conferencing at various levels of participants’ presence-from bul letin boards to teleconferencing. Write short note on a. Certain information should not be quantified .495 million better reflects the precision (degree of exactness) of the underlying data. the less detailed-and thus more summarized-the information should be. individual time scheduling and workflow coordination. quarterly sales for the year were Rs. voice messages. project management.1. The development of OIS as we know them today oc curred in the late 1970s. Rs. OIS will ultimately allow messages to be created. while many con sider a DSS to be a support system for higher management.3. The figure of Rs. it may well support operational managers-supervisors-as well. 494. yet concise." The goal of OIS is to support multimedia communication within the firm and to offer gateways to the outside.

but a good part of it must be acquired from external sources. a firm’s employees.2 lists principal external stakeholders of organizations. Group decision support systems. regulatory. for example. if qualitative ("soft") information is presented numerically. . of course.(expressed in num bers).4. Representative examples include: · Sales volume of a firm’s primary competitor in a specific sales district · Potential customer segments for various company product lines · Questionnaire data regarding a projected new product. 4. Table 4. Information for a decision must be obtained in a consistent fashion. organizational advantages come from incorporating external in formation into the information system. obtained via a series of focus groups · Geographical distribution of company stockholders Much external information is not quantitative. and labor union negotiations information is generally difficult to quantify. along with the principal informational demands generated by their presence. The internal stakeholders are. it may create a false impression of reliability. offer a partial solution to the problem.1 Internal versus External Information Increasingly. These groups are called the stakeholders of a firm. A corporation can succeed only by adapting itself to the demands of its envi ronment. who may be classified in terms of their informational needs. Most of the data captured by TPS relates to various aspects of the organization itself. This environment is represented by a number of groups that affect the company’s ability to achieve its objectives or that are affected by it. Such information is partially captured by the organizational TPS. legal. The "battle of the printout" is a well-known deadlock situation in a meeting where several managers offer conflicting information. tax.

The main objective of MRS is to provide lower and middle management with printed reports and inquiry capabilities to help maintain operational and man agement control of the enterprise. such as electronic data interchange (EDI) and other value-added networks.5 Management Reporting Systems Management reporting systems (MRS) are the most elaborate of the management-oriented MIS components.5. particularly with decision support systems.1 Characteristics of MRS . The development of the information society has created an infrastructure for transmission of various types of data. Next. the name we reserve for the entire area of informational support of operations and management. and the relevant aspects of its environment. and projected future of the company. Indeed. With the advent of on-line systems. Organizational MIS have become progressively embedded within these networks and markets so that now. present. the distinction between ex ternal and internal data has become blurred. MIS maintain information about the past. it was possible to maintain up-to-date data about the present. in that they maintained accounting data about company activities. in various areas. Today. some writers call MRS management information systems. For example. 4. and has made information itself an important product.The boundary-spanning role of an information system consists in keeping the organization continually informed about the activities of these external stake holders. consider: · Inventory data maintained by your organization in behalf of a customer firm that relies on your company for all its supply needs within a certain product area (such as a hospital relying on a drug distributor) · An information processing subsidiary of a diversified corporation handling the information of another business unit for the parent company The original data processing systems were oriented toward the past. its operating units. 4. some of them (for example. Continuing comparison of present and projected results is the fundamental tenet of management control. stockholders and government agencies) must also be kept informed by the organization. planning became possible.

report information is obtained and printed (or. MRS provides the following report forms: 1) Scheduled (Periodic) Reports These reports are furnished on a daily. like their development. 2) Exception Reports Another means of preventing information overload is resorting to exception reports. Sep arate spin-off databases may be created for several reasons. A brand manager responsible for a particular product might obtain weekly sales report containing information useful in his or her decision making-showing regional sales and sales to various market segments. For example. is a rather elaborate process. or from databases spun off for the purpose.1) MRS are usually designed by MIS professionals. but rather rely on summarization and extraction from the database according to given criteria. and the supplies ordered from each. Naturally. maintaining the security of central databases. Great care is exercised in developing such systems because MRS is large and complex in terms of the number of system interfaces with various users and databases. 3) MRS does not directly support the decision-making process as a search for alternative solutions to problems. displayed as a screen) in a prespecified format. Exception reporting helps managers avoid perusal of unneeded figures. or produced on a scheduled basis-but only if there are late suppliers. information gained through MRS is used in the manager’s decision-making process. with the use of life-cycle oriented development methodologies (as opposed to first building a simpler prototype system and then refining it in response to user experience). such as avoiding in terference and delays in transaction processing. This limits the informational flexibility of MRS but ensures a stable informational environment. produced only when preestablished "out-of-bounds" conditions occur and containing solely the information regarding these conditions. 3) Demand (Ad Hoc) Reports .2 Reporting by MRS MRS may produce reports. the extent to which each is late. such as economic order quantities for ordering inventory or accounting formulas for computing various forms of return on equity. over an extensive period time. 5) MRS generally has limited analytical capabilities-they are not built around elaborate models. or economizing by using local databases accessible to local managers to counter the heavy telecommunication costs of working with a cen tral database. 4) MRS is oriented towards reporting on the past and the present. either directly from the database collected through transaction processing systems. Modification of such systems. Based on simple processing of the data summaries and extracts. rather than projecting the future.5. rather than end users. 2) MRS is built for situations in which information requirements are reasonably well known and are expected to remain relatively stable. biweekly. 4. if of limited size. The sales manager to assess the performances of sales districts or individual salespeople may use a weekly sales analysis report. or other basis depending on the decision making need. weekly. purchasing managers may need an exception report when suppliers are a week late in deliveries. are built into the MRS itself. Well-structured decision rules. The report might include a list of late suppliers. Such a report may be triggered automatically by the delay of an individual supplier. 6) MRS generally report on internal company operations rather than spanning the company’s boundaries by reporting external information.

6. The possibility of quick interaction with the system offers users a quantitative analysis literally at their fingertips. While the maintenance of MRS is largely the province of MIS professionals.5. 2) DSS are built to be modified. The DSS database is often an extract from the general database of the enterprise.5) 1. perhaps built with a spreadsheet. Some of the more elaborate systems contain limited model-management capabilities. What are the characteristics of Management Reporting System? 2. 4) Projecting possible futures during a planning process is a particular strength of DSS. Some of these systems are rather simple and may be developed with a spreadsheet package (such as Excel or Lotus 1-2-3). and the manager interacting with the system supplies some parts. In the "what-if" mode. Unlike MRS. 3) DSS directly support the decision-making process. Two principal modes of analysis are available. DSS are very flexible and adaptable decision making tools. and the system. By varying the price of the product in the model. the manager can compare predicted results and then select a price. which customize the spreadsheet for a particular set of applications.The ability of a manager to request a report or screen output as needed enhances the flexibility of MRS use and gives the end user (the individual manager) the capability to request the information and format that best suit his or her needs. "What would it take-in terms of input factors-to achieve a particular performance?" 5) The analytical capabilities expressed in DSS models are the reason for the existence of these systems. 4.6 Decision Support Systems All information systems support decision making. and often by. end users frequently perform DSS modifications. which enable the system itself to select a model appropriate to the problem-the user. DSS facilitate a dialogue between the user. the manager using a DSS will consider a number of possible "what if" scenarios. and in a typ ical session. "What if we increase advertising expenditures by 5 percent”’ In the goalseeking mode. relieved of this responsibility. Query languages provided by DBMS make data accessible for demand reporting. with it’s built in models and access to the database.3 Self assessment Questions (Section 4. they also learn to make better decisions. For example. De cision Support Systems (DSS) are a type of MIS expressly developed to sup port the decisionmaking process. the cost of goods. 4. The DSS contains a model relating various factors-such as the price of the product. . in which models express some of the dependencies between factors and their consequences. perhaps using prepackaged templates. The development processes itself and the pattern of use of a DSS entail continuing adaptation of these systems to changing user requirements. a class of these systems supports group decision making. DSS are able to support unstructured or semi-structured decisions.1 Characteristics of DSS 1) DSS are developed with the participation of. DSS offer models for the structured (programmable) parts of the problem and allow the manager to use personal judgment in formulating the final decision. The systems are interactive. the user considers alternative scenarios and their results. Thus. For example. 4. who is considering alternative problem solutions. a manager attempting to establish a price for a new product may use a marketing DSS. What report forms do MRS produce. Moreover. and the promotion expense-to the projected profit (or loss) from the product sales over the first five years it is marketed. In the process. individual managers or a group of managers to support a range of decisions of concern to them. the user asks. thus does not need as thorough an understanding of models. however indirectly.

7) In DSS. In partic ular. to expand the number of people reporting directly to him or to her. many an executive has been able to widen his or her span of management control-in other words. Expert systems may be incorporated into all types of organizational information systems or used as stand-alone advisory tools. Characteristically. through a uniform interface-the fact that the system consults multiple databases should be transparent to the users. Expert systems are used to select the cheapest way to mail a package. they are increasingly com bined with conventional programming technologies in transaction processing and decision support systems. both internal and external. 4. Thanks to these systems.8 The Role of Expert Systems Expert systems are a leading-edge technology that was successfully introduced from the research domain of artificial intelligence into MIS practice in the mid-1980s. In doing so. In particular. and to investigate the general trends of the economies in the many countries where the company may be doing business.1 Characteristics of Executive Information Systems 1) EIS provide immediate and easy access to information reflecting the key success factors of the company and of its units. Complexity of . 5) An EIS should allow easy tailoring to the preferences of the particular user or group of users (such as the chief executive’s cabinet or the corporate board). Users’ time is at a high premium here.6) The combination of internal and external information is important in many DSS. and on the built-in inferencing (reasoning) mechanism. top managers equip a special "war room" with large screens onto which the EIS projects color displays. 4. and develop strategic directions for the company’s future. However. these executives need a great diversity of external information to compare their company’s performance to that of its competition. they need to decide upon. 3) EIS provide access to a variety of databases. to diagnose equip ment malfunction. on the facts of the case. in particular. they rely on a knowledge base about the narrow domain of their application. senior and exec utive vice presidents. the chief executive officer. Expert systems suggest a decision based on a computerized process resembling logical reasoning. senior managers employ a great variety of informal sources of information. to plan an investment portfolio. 4) Both current status and projections should be available from EIS. It is frequently desirable to investigate different projections. allow the EIS user to grasp trends at a glance.7. Frequently. assess the business en vironment. 2) "User-seductive" interfaces. a graphics repertoire is usually available to portray a decision situation more succinctly than it can be done with a tabular display of data. planned projections may be compared with the projections derived from actual results.7 Executive Information Systems Executive information systems (EIS) provide direct support for top managers. and the board of directors also need to be able to track the performance of their company and of its various units. to render a consumer credit decision. so that computerized information systems are able to provide only limited assistance. such as color graphics and video. or to configure a complicated equipment order. 4. 6) EIS should offer the capability to "drill down" into the data: It should be possible to see increasingly detailed data behind the summaries. Executive information systems are a superior tool for exercising the control function of management.

A very common way is to encode it in the form of "if-then" pro duction rules. Reliance on a knowledge base is the essential distinguishing characteristic of these systems. and then further enhanced as the system is used. The system .these tasks-and of the corresponding expert systems-varies widely.1 Simpler systems are usually implemented with expert system shells knowledge-based systems with empty knowledge bases.000 and loan term < 1 year THEN grant credit Another rule in the same knowledge base would define a "good customer" as: IF first contact> 5 years and default number = 0 and business volume> $100. There are several methods of representing knowledge. Expert systems are knowledge-based programs that imitate a reasoning process to suggest a problem solution within their domain of appli cation. The essential component of the knowledge base is heuristics-informal. All the developer (a knowledge engineer or an end user) needs to do is populate the knowledge base with the specifics of the problem domain. The knowledge base is originally populated and subsequently enhanced as the system is tested on trial cases. Most frequently. judg mental elements of knowledge within the expert system’s domain. a heuristic rule in a credit evaluation system may read: IF good customer and credit requested < $5.000 THEN good customer The user to the system presents the set of facts describing a particular situation during a session. Fig 4. The structure of an expert system from the point of view of its user (rather than that of a developer) is shown in figure below. depending on the software used to implement the expert system. The inference engine of the expert system then acts as a reasoning mechanism and attempts to draw a conclusion by comparing the facts of the case to the knowledge base of rules. these systems do not replace an expert. For example. but rather serve as an assistant to a decision maker.

Explain the role of Expert system 4.9 Summary The physical components of MIS comprise the computer and communications hardware. Database D. 4.then gives a rec ommendation. limited natural language processing or limited speaker-independent speech recognition. for example.11 Multiple Choice Questions 1. for example. and all the available promotional prices for the items ordered (because of the multiple promotions offered by companies today – with short duration. In a transaction processing system for order processing. Shared processing D. What do you understand by DSS? What are their characteristics? 2. Decision Sup port Systems (DSS). Procedures.3 . usually interconnected into networks by means of telecommunications. EIS should offer the capability to _____ into the data A. distributed processing B. What is EIS? What are their characteristics? 3. regional applicability. an expert system may determine an order price by considering the cus tomer. 4. Expert systems are sometimes combined with other technologies derived from artificial intelligence research. 3. order volume. Drill diagonal D. A. Expert sys tems are of particular importance in decision support. and procedures. TQs and MCQs Self assessment Questions Section 4. There are Five types of systems may make up an organizational MIS: Transaction Pro cessing Systems (TPS). Operating systems C. and Office Information Systems (OIS). Drill up C. software. Executive Information Systems (EIS).10 Terminal Questions 1. Information processing 2. _______ controls all the re sources of a computer system and enables multiple users to run their programs on a computer system without being aware of the complexities of resource allocation. is called _________ A. Management Reporting Systems (MRS). personnel. Hardware B. The use of multiple computers. where they may be used to suggest possible decisions based on problem constraints and the available outcome range.3. as a sequence of rules applied). Drill down B.12 Answers to SAQs. and other constraints-this is a nontrivial problem that an order clerk would find difficult to handle on-line). all of the above 4. Collaborative Processing C. with an explanation of its reasoning (presented. database.

3. This has been mentioned in section 4.5. B 3.1 1. This has been mentioned in section 4.1. This has been mentioned in section 4.3. This has been mentioned in section 4. This has been mentioned in section 4. b. A .6 2. This has been mentioned in section 4. a.1 2.5.8 Multiple Choice Questions 1. This has been mentioned in section 4.3 1.2 Terminal Questions 1.7 3. A 2.2 Section 4.5.

4.1.1 Reacting to Market Conditions 5.4 Potential External Threats Information and the Situational Analysis 5.4 Linkage Michael Porter’s Value Chains 5.2 Michael Porter’s Competitive Force Model 5.3 Potential Internal Weaknesses 5.2 Strategies for Competitive Advantage Improving Quality Strategy 5.5 Information Leadership Controlling Costs 5.3.Unit-05-Information Needs for Strategic Planning Structure: 5.1.3 Michael Porter’s Generic Strategies for Competitive Advantage 5.2 Value Streams 5.1 Major issues to consider in situational analysis 5.2 Using Information for Strategic Advantage Expanding Globally .3 Information and Organizational Strategy 5.4.1 Differentiation 5.2 Potential External Opportunities Potential Internal Strengths 5.2.3 Focus Cost Leadership Improving Customer Service 5.3.1 Introduction Objectives 5.

Objectives: At the end of this unit.5 Organization Structure and Information 5. we shall start with the concept of value chain and discuss the Porter’s Model of competitive advantage.5.4 Security Cost 5.1 Introduction With this unit.1 International Strategy 5.9 Terminal Questions 5.5.2 Accessibility 5.1.6. We shall conclude by highlighting the organisational need for information and strategic use of information in organisation. We will look into what ways the organisational strategy and information needs to be linked.1 Multinational Corporation 5.3 Self Assessment Questions (for Section 5.5. TQs and MCQs 5.4. How the organisation could use strategy as competitive advantage.4.6 Organizational Requirements of Information 5.3 Reliability 5.5.6 Creating Strategic Alliances 5.7 The Strategic Use of Information Systems 5.4) 5.8 Summary 5.6.3 International Corporation 5.6.4 Transnational Corporation 5.5. you should be able to · Explain the competitive force model by Porter · What are the strategies for competitive advantage · Explain the various international strategy · What are the information needs of the organisation .2 Global Corporation 5.5.11 Answers to SAQs.10 Multiple Choice Questions 5.1.2.

2. Value activities do not operate independently.2 Value Streams Value Stream is an end-to-end set of activities.1 Michael Porter’s Value Chains Value chains help in developing leverage points where the costs needs to be contained and the value can be enhanced. Satisfy customer inquiry Basis for value added or differentiation strategies · Who is our customer? · What is valued by customer? · Who are our competitors? · How difficult is our product to imitate? Problems with value chains · No owner for value stream · Nobody focuses on customer satisfaction · Long time delays · Pass on problems to each other · Seepages through the cracks · Considerable rework 5.2 Michael Porter’s Competitive Force Model . For example: Insurance Industry Value Stream: Customer Engagement Processes: Settle claims. Bill and collect.5. They have linkages amongst themselves. 5.2. IS can add value by supporting the linkages. Value streams are often cross-functional. which collectively create value for a customer.

putting up flexible manufacturing facilities 5.g.g.Fig. having alternative sources of supply · Threat of new entrants e.g.g. 5.2.1 Illustrations for overcoming threats · Reduce bargaining power of customers e. putting terminals into customer’s offices · Reduce bargaining power of suppliers e.3 Michael Porter’s Generic Strategies for Competitive Advantage Strategy 1: Perform value activities at lower costs Example: Automating a manual process to reduce costs Reducing inventory carrying cost Strategy 2: Differentiate own products by value activities Example: Putting terminals in customers’ offices (for locking the customer) Providing name for each adopted doll Strategy 3: Fill niche markets by value activities . putting in a high cost of IS support system · Threat of substitute products e.

technical . Information on industry growth and market share is often public. establishing joint ventures. time. material. Strategic-level decisions include plans for accomplishing long. or other resources are available and required? · Where should the company allocate its resources and energies? Answering these questions calls for obtaining information from both outside and inside the organization. technological. or amalgam of businesses or subunits. Successful pharmaceutical companies. trade magazine journalists. demographic. An organization needs extensive information to determine and then implement its strategy.Example: Special plans for luxury car buyers Home PC sales (additional market) to network customers (existing customers) 5. This ongoing availability of information allows organizations to determine their strategic position as well as the appropriate actions for maintaining or changing this position. patent ownership. Hyatt Hotels needed information to help shorten check-in lines as a way of improving customer service and becoming more competitive. for example. must remain informed about changes within an array of scientific disciplines and integrate. Wal-Mart needed information to assist in improving its pur chasing and distribution systems so that it could compete more effectively against larger rivals. Strategic management at the corporate level focuses on decisions about acquiring new businesses.1 Strategy Corporate level strategy addresses which lines of business a company should pursue. profitability. Information systems can provide the information for making resource allocation and other investment decisions. and performance.3. divesting old businesses. the knowledge throughout the organization to maintain innovation. and creating alliances with other organizations. federation. stock market researchers.3 Information and Organizational Strategy Each organization must develop a strategy-its long-term direction or intended set of activities for attaining its goals. profit margins. They require determining the organization’s distinctive competence by answering questions such as · What kind of business should we be in? · What should be the organization’s markets? · What market niches exist in which the organization can compete? · What products or services should the organization offer? · What technological investment is required? · What human resources are available and required? · What financial. Industry lobbyists. among other information. Information systems can regularly provide organizations with such information by tapping into commercially sold databases that offer extensive economic. Information about market share. return on investment.term goals of market share. agglomeration. and even legal information. Determining its corporate-level strategy requires top management to obtain information about business growth rate-the speed of industry growth-and market share-the portion of the industry market captured by the business unit. It views an organization as a portfolio. due to the disclosures required of companies issuing stocks and bonds. service. and other researchers also act as sources of this information. 5.

3. and potential synergies with competitors. Complete information about costs makes costs easier to control and creates a competitive advantage. Strategic management also involves business-level strategy. electronic conferencing can bring the expertise of a team of physicians in remote locations to a single problem.2.5 Information Leadership An information leadership strategy increases the value of a product or service by infusing it with expertise and information. and how it will deploy resources for advertising.2 Strategies for Competitive Advantage Firms can adopt five strategies to reap a competitive advantage: differentiation. and managers should consider divesting or liquidating them. Bedside terminals can store patient records. and markets helps management determine its investment strategy. quality. equipment. Strategic decisions include what products or services the company should offer. They require information about the nature of available markets and the characteristics of the players in them. competitive strengths and weaknesses. distribution. business units with high ratings on both industry attractiveness and business strength make good financial investments. exclusive relationships with customers. customers’ requirements.capability. customer requirements.3 Focus A focus strategy achieves competitive advantage by concentrating on a single market segment.1 Differentiation A differentiation strategy seeks to distinguish the products and services of a business unit from those of its competitors through unique design. or other characteristics and thereby enable the business to charge a premium for its product or service. research and development. suppliers. quality of the management team. those low on both dimensions have no growth potential. linkage. features. Information systems can provide the information required to support one of these strategies. and staffing. and sales. and specify their cost benefits. including detailed information about competitors’ products. 5.3.3. identify preferred treatments.3.2. what customers it should service. 5.3.2. home health terminals allow patients to consult with doctors online. 5.3. and diagnostic systems can support physicians’ diagnoses. matching the strengths and weaknesses of each business unit or product line to the external environment to determine how each unit can best compete for customers. customer service. cost leadership.2 Cost Leadership A cost leadership strategy seeks to achieve competitive advantage by allowing the business unit to make more profit than its competitors when selling to customers at the same price. Companies following the focus strategy concentrate their resources to become big players in small markets rather than small players in larger markets. For example.2. Managers can also supplement products with summary and activity . Organizations require detailed information about customers’ needs. Even hospitals can use information technology to reduce costs by eliminating paperwork and improving services. The company requires quality internal information to reduce costs by achieving efficiencies in production. 5. and changing environmental conditions.4 Linkage A linkage strategy obtains a competitive advantage by establishing special. Companies pursuing a differentiation strategy need current and accurate information about the market. 5. 5. and even competitors.2. and information leadership. ability to compete on price and quality. focus. special arrangements with suppliers.

Informationalizing refers to this strategy of using information-based enhancements to revitalize mature businesses by enabling them to create or sell information as a core product.1. Finance strategies focus on the acquisition. The acronym SWOT is often used for these four components of situational analysis.4. Strategic management also addresses how functions such as finance. allocation. A reputation for quality exemplifies a strength. Research and development strategies emphasize basic. opportunities. and threats. Human resource strategies revolve around the deployment of employees and the relations between labor and management. or developmental research.4. airlines can electronically track baggage in airports in ways that can correct problems before customers discover they have missing baggage.1 Major issues to consider in situational analysis 5. and wages. For example. research and development. inventory. Opportunities and threats are external or environmental factors that may help or hinder an organization in meeting its strategic goals. product and market information relevant to the customer. and human resource management can best support the orga nization’s strategies. plant location. promotion. Operations strategies include decisions about plant size. Strengths and weaknesses are internal characteristics of the organization that enhance and impede its ability to compete. 5. Weak competitors illustrate an opportunity. and management of capital.reports for an account or customer. operations. or information about related products and services. Functional strategies direct the way individual departments perform their tasks to accomplish organizational objectives.1 Potential Internal Strengths · A distinctive competence · Adequate financial resources · Good competitive skill · Well thought of by buyers · An acknowledged market leader · Well-conceived functional area strategies · Access to economies of scale · Insulated (at least somewhat) from strong competitive pressures · Proprietary technology · Cost advantages · Better advertising campaigns · Product innovation skills . 5. weaknesses. Marketing strategies focus on product development.4 Information and the Situational Analysis Strategic management includes situational analysis-the process of collecting and analyzing information about a company’s strengths. sales. equipment. other examples of informa tionalizing include producing "smarter" cars and allowing customers to design desired features on computers in dealers’ showrooms. while having costs above the industry average typifies a weakness. and pricing. while adverse regulatory rulings represent a threat. marketing. applied.

4 Potential External Threats .· Proven management · Ahead on experience curve · Better manufacturing capability · Superior technological skills Potential External Opportunities · Serve additional customer groups · Enter new markets or segments · Expand product line to meet broader range of customer needs · Diversify into related products · Vertical integration · Falling trade barriers in attractive foreign markets · Complacency among rival firms · Faster market growth 5.4.3 Potential Internal Weaknesses · No clear strategic direction · Obsolete facilities · Lack of managerial depth and talent · Missing key skills or competence · Poor track record in implementing strategy · Plagued with internal operating problems · Falling behind in R&D · Too narrow a product line · Weak market image · Weaker distribution network · Below-average marketing skills · Unable to finance needed changes in strategy · Higher overall unit costs relative to key competitors 5.1.4.

information management is a backroom operation intended to support the other functions of the business. planning. and even buying competitors’ garbage. In a survey of 200 CEOs and CFOs. a company must compare data on its internal condition with industry and competitor averages. reputation for quality or above-average costs. financial data. and customers. Information systems can also be used proactively and strategically as competitive weapons. Quality information systems can assist organizations in securing comprehensive information for the SWOT analysis. To evaluate internal strengths and weaknesses. including hiring employees from competitors.4. and monitoring. Organizations can use them to maintain. schedule.2 Using Information for Strategic Advantage In many. Information systems assist managers in communicating.· Entry of lower-cost foreign competitors · Rising sales of substitute products Slower market growth · Adverse shifts in foreign exchange rates and trade policies of foreign governments · Costly regulatory requirements · Vulnerability to recession and business cycle · Growing bargaining power of customers or suppliers · Changing buyer needs and tastes · Adverse demographic changes Situational analysis requires extensive internal and external data. 75 percent agreed with the statement “I believe that information systems hold the key to competitive advantage for my organization in the 1990s. Some firms go to extensive lengths to obtain information about the market and their competitors. if not most.” Ways Information Systems Help Achieve a Competitive Advantage Company Gains a Competitive Advantage by: · Reacting to market conditions · Improving customer service · Controlling costs · Improving quality · Expanding globally · Creating strategic alliances IS Assists by Helping Organization to: · Reduce excess inventory · Tailor prices to the market . and communicate. potential customer lists. for example. update. Information systems help individuals plan. 5. or access environmental and organizational data. or staffing patterns. such as demographic trends. organizations. suppliers.

It can react more quickly to lagging sales by adjusting advertising and price promotions. customers.g. competitors · Provide information links · Create electronic markets 5.2 Improving Customer Service . Companies can also use competitive pricing to give them a strategic advantage.· React quickly to lagging sales · Leverage cash · Introduce new products · Set prices · Maintain appropriate inventory · Respond to customers’ needs · Monitor customer service · Classify expenditures · Monitor spending · Control budgets · Provide feedback · Give production workers immediate access to analyses · Ease communication · Support coordination · Share information with suppliers. Restaurants can assess the impact of various pricing and promotion strategies on their profit margins. It can tailor its prices more accurately to what the market will bear. 5. It can leverage its cash better. restaurant..2. It can more quickly introduce products that the consumer wants.1 Reacting to Market Conditions A firm that can respond quickly to market conditions has an advantage over its slower competitors in a number of ways. health club) and then adjusting the promotions offered to increase their effectiveness.4. A resort hotel can evaluate the success of special promotional packages by tracking an individual guest’s expenditures by revenue center (e. taking long or short positions and moving money quickly to where the opportunity for profit is the greatest. It can keep its costs lower by reducing excess inventory and eliminating mistakes in purchasing or manufacturing products that will not sell.4.2. golf course. Delta Airlines in USA. being first in market gives a company the opportunity to be a market share leader. Infor mation from computer systems can assist. with resulting scale efficiencies in manufacturing and marketing. maintained a list of competitors’ prices and could respond to changes within two hours.

monitor. user-friendly terminals. Generally. eliminates rework. England. Management information systems were built to provide summary and exception reports to the managers. Systems to classify. after acquisition. To set budgets.3 Controlling Costs Recall that one of the competitive strategies is to become a low-cost producer. the India Railways had developed various options so that a passenger need not have to wait for a long time to get a ticket. and expert systems have together had a significant impact on the American travel industry. each remote company. managers need information about previous spending and about new plans and objectives.2. keeping track of and rationalizing business activities becomes more complex. In the past systems were built so that production workers collected and entered data about production but did not have immediate access to analyses performed on the data that they had collected.4.5 Expanding Globally Prior to the 1980s. Although language differences. regulation of information flows. 5. Budgetary information. would continue to operate in its own realm with minimal management by the holding company. Proposal of having a ticket counter in the ATM machines and other kiosks are under process. information about the goods and services being produced must be processed immediately. satellite printers. Improving quality has also been shown to decrease costs as it reduces waste. managers would know about production problems before the production workers did. and sales. the inability of a company to obtain information about its foreign operations time to compete with foreign companies operating in their own countries pre vented organizations from operating globally. and summarize large amounts of information is. Now companies operating around the globe can exchange information with nearly the same ease as if they were in the same country. To improve quality. analyzed. therefore.4 Improving Quality Having a reputation for quality offers a strategic advantage for any organization. Hong Kong. Nevertheless. Going global remains one . as volume increases.4. and lack of a communication infrastructure remain barriers to the exchange of information. permits managers to optimize their resources within pre scribed limits. a prerequisite to achieving cost reduction through volume growth. Its overseas stores are identical to Amer ican stores and rely on the same information processing systems as they do in the United States.2.4. process. Singapore. and other locations since 1984. companies of all sizes now have the resources and information systems to allow them to operate glob ally. travel management software. The ability to han dle. automatic ticket machines. Even in India.The travel service industry in general has used technology extensively to meet customers’ needs. Companies operating in this fashion necessarily shipped inferior goods and provided inferior services. in general. Information systems meet the need for coordination of diverse enterprises in distant locations. Toys "R" Us has expanded globally into Canada. interfaces between personal computers and mainframes. Most global corporations were holding companies that bought and sold regional companies in different parts of the world. 5. and made available to production workers. 5. Today’s competitive technology has reduced the barrier of distance.2. in turn. Achieving quality requires production workers to have constant feedback about the production process so that they can spot problems immediately and correct them. and limit spending also facilitate cost control. who can intervene in a timely fashion to improve the process. including databases. how does a firm keep costs below its industry’s average? Organizations can do so by achieving economies of scale in production. Information systems can easily serve this function. Consumers will usually be willing to pay more for a product or service that they know will always meet their expectations than for one whose quality will vary. distribution. who would then intervene in the process. programmable work stations. Automatic call distributors. However. and permits more orderly pro cessing.

of the easiest ways for a company to expand its market. and TWA has emphasized these systems. A seller of surgical gauze in New York City found a low-cost supplier in China through an electronic bulletin board and now sells to. among others. and producers of similar products. Allegations of favoritism in the presentation of flight information was a basis for several lawsuits that have been filed against American Airlines by other airlines seeking relief from such anticompetitive practices. wholesalers. for example. In Japan. high-speed networking was rated in one survey of IS managers as the one most likely to have the greatest impact on their company’s strategy over the next five years. rather than physical. allowing greater flexibility in responding to local market needs. By sharing access to its reservation information. stores where products and services can be described.6 Creating Strategic Alliances The competitive advantage achieved by a company using information to react quickly to market conditions. improve quality. American Airlines provided travel agents with direct links to American’s SABRE reservation system. American denies that flights are presented by SABRE in such a way as to favor the choice of American Airlines.S. United. Companies can also secure a competitive advantage by forming alliances with customers. and purchased. or expand glob ally will be short-lived if competitors can copy its strategy. In the 1990’s SABRE has lost its ability to control alliances to some degree because the increasing standardization of microcomputer and network hardware makes it relatively easy for an agency to switch partners. Creating a mature technological environment abroad helps meet customer needs for new products and management’s needs for consistency and control in worldwide locations. the basic marketing strategic of major airlines such as American. better integrating worldwide operations. improve customer service. or other areas in which the two organizations interface. rather than buys from. a company using information for strategic advantage needs time to establish its market share. the strategic advantages achieved will last longer. Information technology helps multinational companies compete internationally by supporting foreign subsidiaries. A company pursuing the strategy of rapid growth and high market share increases its opportunities for success by considering the entire world as its market and using information systems to help it attain the information it requires functioning internationally. Of all information technologies. In 1963 and the years immediately following. Because studies indicate that an airline that supplies a travel agency’s computerized reservation system is as much as 30 percent more likely to have tickets on its flights sold to the agency’s customers. that agency use of computer reservation systems is the primary reason that passengers now book more than 80 percent of their tickets through agencies compared with less than 40 percent in 1976. and serving clients more innovatively. American Airlines provides a well-known case of lasting competitive advantage achieved through sharing information and information services. One developer of SABRE argues. used-car dealers buy and sell cars using their computers to participate in electronic auctions. shown. Information links pathways for communication between two organizations-meet the need for coordination among an organization and its customers and suppliers. sold. Because the development of infor mation systems typically takes several years. an organization must be constantly vigilant for new strategic opportunities. Electronic market systems are electronic. control costs. buyers’ ability to comparison shop reduces a seller’s power in the market and creates lower prices. Information links enable or improve the collection and communication of information regarding inventory. suppliers. Inter-organizational information systems (lOSs) can meet information needs by serving as information links or electronic markets. American encouraged travel agents to book their clients on Amer ican flights. sales. U. They increase competition and efficiency in vertical markets by providing information about industry players and prices. If an alliance can be cemented by the exchange of information and information technology. distributors.2. .4. Delta. Because its competitive advantage may be tenuous. 5. Computer information systems and communications technology form the backbone of such alliances and allow the joint ventures to operate effectively.

organizations more frequently assume a more organic structure. to deal with its foreign subsidiaries. which reduces barriers to lateral communication. These flatter. A recent study suggests that information technology will eventually result in more individuals acting as sources of information. international.5. A company that follows a multinational strategy has little need to share data among its subsidiaries or between the parent and subsidiaries except to consolidate financial positions at year’s end.4) 1.5. and for mal reporting relationships that exist in the organization. in contrast. Effective organizations have a structure that is congruent with their strategy. In more bureaucratic structures. an organization may adopt a variety of strategies. and more rapid decision making. Second. service staffs (e.1 International Strategy In a global market.g.. the matrix structure simultaneously groups workers functionally and by project or product. Electronic media can further increase the information processing capacity of such organizations. 3. .1 Multinational Corporation A multinational corporation has built or acquired a portfolio of national companies that it operates and manages with sensitivity to its subsidiaries’ local environments. In addition to pushing decision making down in the organization. Such a structure can replace managers. "composed of specialists who direct and discipline their own performance through organized feedback from colleagues. such coordination occurs through the hierarchy or by standard rules and procedures rather than through the widespread dissemination of information.5. First. The structure chosen may promote specific information needs for the organization. A bank manager may serve on a task force to develop new products for the bank and several months later participate in a reorganization of the sales functions in the bank. List down the potential internal strengths and weaknesses that organisations face. this structure involves more flexible inter actions among parts of the organization. including multinational. fewer organizational levels involved in processing information. The more organic structures also have a high information-processing capacity.4. coordination of positions. increasing decentralization of decision making replaces centralization of this managerial function. that is. 5. 2. or transnational. List down the external opportunities and threats that an organisation can have. These structures create intense information needs for workers throughout the organization to ensure the coordination of activities.5 Organization Structure and Information An organization’s structure refers to the division of labor. Empowering of workers to make decisions calls for ensuring the ready availability of diverse types of infor mation throughout the organization. A faster response to a dynamic and unpredictable environment requires that lower-level managers assume greater responsibility and accountability in an organization. more decentralized organizations will become more information based. global. customers. Explain how information can be used for strategic advantage 5.3 Self assessment Questions (for Section 5. public relations). often in different business areas. In infor mation-based organizations individuals take responsibility for identifying their information needs and creating links to the sources of the required information.1. and headquarters. fewer individuals formally included in an organizational subunit. legal. The subsidiaries operate autonomously. We can characterize the organizations of the next century in two ways. and central management with systems that make information readily available to workers at all levels in the organization. 5. Project and product management structures group workers according to the project or product on which they work.

6 Organizational Requirements of Information The information that an organization develops and retains should provide value to the company. 5. reliability.1. As a result. Nevertheless. they demand the ability to share both information and information services. Then collecting and maintaining the information in a cost-effective manner make up part of the subsequent steps of evaluation and design. A high level of information flows from subsidiary to parent. while limited data move from parent to subsidiary. Diagnosing the required information is the first step of the four-step approach to infor mation management. We define net value of information as the difference between the value and the cost of information.5. accessibility. a transnational company attempts to retain the flexibility to respond to local needs and opportunities while achieving global integration. Because transnational operate on the premise of teamwork.1. Companies attempt to maximize the net value of information they collect organizationally. and security. 5. a subsidiary without a great deal of human resources expertise may "pay" its parent to operate its human resources function. 5. To do this. in the right place. Userfriendly touch screens offer one way to address this problem.5. Ideally. By linking local operations to one another and to headquarters.5.4 Transnational Corporation A transnational corporation incorporates and integrates multinational. For example.2 Global Corporation A global corporation has rationalized its international operations to achieve greater efficiencies through central control. In practice. 5. and inter national strategies. global. a headquarters organization makes all major decisions. subsidiaries often rely on the parent to exercise its knowledge for the subsidiaries’ benefit rather than simply to export it to the subsidiaries. Although the information theoretically should stay within the subsidiary. Here subsidiaries operate more autonomously than in global corporations. the value of information as an organizational asset can be . A company pursuing a global strategy needs to transfer the operational and financial data of its foreign subsidiaries to headquarters in real time or on a frequent basis.3 International Corporation An international corporation exports the expertise and knowledge of the parent company to subsidiaries. Information systems specialists need to focus on the tasks of collecting and maintaining infor mation as well as on the value of the outputs of an information system when justifying its cost. in this case it may flow back and forth between the parent’s location and the subsidiary’s location.5. manipulating. so small percentage reductions in the cost of information can have a large impact on its net value and on the profit of the firm. Although the bud get for information systems at most organizations falls between 1 and 3 percent of sales. Although its strategy and marketing are based on the concept of a global market. and in the right format. The overall cost of information tends to be high. they consider four characteristics of information: cost. and maintaining information can affect its net value. information flows from the parent to its subsidiaries.6.1. Reducing such costs allows information to add more value to the firm. 5.6. Designers of information systems should minimize the time and effort required to collect or enter data.1 Cost The cost of acquiring.2 Accessibility Designers of information systems seek to make the appropriate information available to users at the right time. designers cannot foresee every possible need for information. the real cost of information is usually much higher.

7 The Strategic Use of Information Systems . Companies that fail to retain backups off site as well as provide for backup processing run the risk of suffering significant damage if they lose information about their customers. the data lost their accuracy and their value. For example. inventory. A New York securities firm missed a big trading opportunity that cost it more than $200 million. or incorrect information. manipulation. A recent study of end-user data at 21 random Fortune 500 companies showed that data pollution – faulty.3 Reliability The improper design and use of information systems can create unreliable data. Both technical and organizational measures can be used to promote data security. production methodologies. Given the availability of these data. and they quickly learned how to hide or delay the reporting of poor results. Burglars thus can continue to raid an organization’s data. competitors can also use stolen information about production schedules. foreign intelligence agencies have used sophisticated technology to intercept data transmissions. which then allowed deadbeat students to continue to get loan renewals while deserving students were refused assistance. A 1992 Computer world survey found that more than 60 percent of companies are aware of occasions when corrupted data negatively affected their operations. and loss of data. Improper use of information systems can also motivate organizational conflict.6. flawed.maximized by making it as widely available as possible to all those who might need it and who have authority to see and use it.4 Security Security means protection against theft. and keeping them at another location. 5. Competitors and foreign governments can pay employees to Surreptitiously steal key information on diskettes or portable computers or disgruntled employees may steal or modify essential information. causing damage over an extended period. most organizations assume that their information is relatively secure and take insufficient measures to protect against theft.S. or financial status. Not surprisingly. costs. Foreign and U. which in turn results in the generation of unreliable data.6. called backups. The widespread use of personal computers has compounded the difficulty of security against corporate espionage.S. 5. For example. Many firms protect against the loss of data to fire or natural disaster by creating copies of the data. Despite the potential damage and difficulty of detection. General Accounting Office determined that data about student loan payments entered incorrectly into the U. Information such as proprietary technology. outstanding invoices. salaries. or unreliable data or data processing-existed in every company. product data. top management periodically confronted lower management with problems they had identified. Department of Education database had cost taxpayers $2 billion. The problems in this study were caused by users who incorrectly entered data from reports generated by an MIS department into personal computers and then used these data as a source for further analysis. Theft of data should concern members of an organization because data theft is not as easily detected as theft of other corporate resources: Stealing data means taking only copies of data and leaving the original copy undisturbed. margins. The impact of "dirty data" on organizational performance can be immense.S. 5. Users regularly generated reports and made decisions based on incomplete. the U. The firm eventually traced the problem to its employees’ failure to enter key data into a new risk management system. One multidivisional company created a state of-the-art information system to provide managers with real-time summaries of sales and distribution data at the touch of a button. The incorrect infor mation was relayed to banks. and research and development breakthroughs may be sent directly to national laboratories or to competing organizations within the foreign country. inconsistent. and performance reports as competitive tools. Divisional managers considered this behaviour to be meddling.

Global corporation. Break even point C. Top management requires infor mation to determine an organization’s strengths.9 Terminal Questions 1. What do you understand by Multinational corporation. Linkage . What are the four characteristics of information. information systems act as a resource similar to capital and labor in determining strategic plans. In the first case. Firms can adopt the following strategies to obtain a competitive advantage: differentiation. A. Strategic management often includes a SWOT analysis. opportunities. cost leadership. Take an organisation of your knowledge and determine how information could be used for strategic advantage in that organisation 5. directly supports strategic decision making. leverage points B. 2. A. weaknesses. 3. A ________ strategy seeks to achieve competitive advantage by allowing the business unit to make more profit than its competitors when selling to customers at the same price. some organizations use strategic decision support systems as tools that collate and analyse information to assist their strategic planning. Information systems can be used strategically to support the strategic planning process and provide competitive advantage. cost leadership C. a strategic decision support system addresses strategic problems. airlines used their information systems as a resource in implementing their strategy of increasing market share by obtaining a greater percentage of ticket sales from ticket agents and quickly revising prices to respond to price changes by competitors. 5. Transnational corporation. 5.Computerized information systems can assist and improve strategic management in organizations. focus. Differentiation B. Mid point D. recognizes the lack of structure in strategic decisions. and economics of production. For example. Information systems can change a business’s or an industry’s products and services. and threats. For example. markets.8 Summary Organizations need information to make strategic decisions and can use it to develop an advantage over their competitors. International corporation. linkage.10 Multiple choice questions 1. In the second case. and information leadership. Value chains help in developing ________ where the costs needs to be contained and the value can be enhanced. Focus D. All of the above 2. and has the characteristics of a decision support system.

6.4. TQs and MCQs Self Assessment Questions Section 5. 5.2 Multiple Choice Questions 1.1.3. 5.4.1. There are –––––––– characteristics of information A.11 Answers to SAQs.4.1.6. This has been mentioned in section 5.5. This has been mentioned in section 5.1. This has been mentioned in section 5.5. B Terminal Questions 1.4.1 and 5. 5.5.4 3. Apply to the organisation mentioned in section 5.4.3 2.2. 5.6.4 3. 4 B.6. 5 C. A 2. This has been mentioned in section 5.4.1. 5. This has been mentioned in section 5.1. A Unit-06-Impact of IT – Managing in 21st Century . 6 D.3 1.1.3. 7 5.4 2.2.1. 5.2 and 5.1.

2 ERP Solution Structure 6.2.3 ERP Solution Evaluation 6.3 Benefits of the ERP 6.4.2 Enterprise Management System (EMS) 6.3 Self Assessment Questions (for Section 6.8 Terminal Questions 6.3) Business System Implementation 6.4 ERP Model and Modules 6.Structure: 6.1 Introduction Objectives 6.2 Technology Evaluation Factor 6.5) 6.7 Summary 6.1 Business needs of today 6.1.1 General Features 6.3.6 EMS and MIS Multiple Choice Questions .1 ERP Architecture 6.5 ERP Selection 6.3.2 Characteristics of ERP Solution 6.1 Vendor Evaluation Factors 6.3 Enterprise Resource Planning (ERP) System 6.1 ERP Basic Features Self Assessment Questions (for section 6.2.4 Self Assessment Questions (for Section 6.2 Technology 6.1 Business Operations

interpret it and trigger the action. It requires. Every business activity has additional dimensions. It also requires the management of interfaced systems such as CAD/CAM. which requires instant processing.1 Introduction With this unit. speed and time. Next step will be of ordering the material on the vendor. etc. we shall start with the concept of Enterprise management system. it must have an ability to sense the situation and act accordingly. you should be able to · What are the various business needs of today · Explain the concept of ERP · What is the architecture of ERP · What are the benefits of using ERP · Explain the different modules of ERP · How to select the ERP for an organisation 6. The architecture of ERP. The word enterprise is chosen to convey that it encompasses the larger business community covering all the players and their participation in the business. It needs the management of EDI systems to get hooked to the customer and vendor for a quick information communication. Take a simple example of customer order received in the Company. In such a scenario.. The dependence on the information. business is information hungry. viz. electronics. the system. MRP. When the business requires online information to make the informed. In the very beginning acceptance possibility needs to be assessed and the customer should be informed immediately. The business needs of today are beyond the transaction processing. is an enterprises wide. the modules of ERP and we conclude by factors for selecting ERP.1 Business needs of today Computer.2 Enterprise Management System (EMS) 6. It must catch an event. which you are designing. The system is extended beyond the Corporate boundaries. and communicate it across to the enterprise. is increasing. and audio video technologies have converged closely to produce a new style of operating business. Internet and the imaging Systems. It also requires event monitoring and updating systems such as the Paging.2. knowledge based decisions and have them executed in the business operations in a coordinated manner.6. booking the order and scheduling the same on shop floor for production. The dynamic business environment of today is full of challenge and opportunities. It requires an instant real time response in every case. . as driving energy source. updating the business status and Worming the marketing representative for monitoring the marketing activities. All this requires operations and management of a couple of systems besides the normal sales application. communication. Objectives: At the end of this unit. Since. wherever it occurs.10 Answers to SAQs and TQs 6. it has to take support of many other systems. We begin by discussing the various business needs of today and Enterprise Resource planning.

i. It also acts as a gateway to interact with the vendor. · CMS – Communication Management Systems. and the other associated institutions of the organizations. the Computer Aided Design/ Computer Aided Manufacture / Com puter Aided Engineering systems are the systems which handle design. what is needed is an integrated solution out of these technologies and the systems offering an enterprise wide management support. copying and text management and dispatching document DBMS. There should also be audio video and imaging systems to bring realism in information and remote sensing systems for security and communication. security. and salary and wages. imaging. etc. With the internal sources of information and the use of information from the external sources.. permissions. cordless mobile telephone systems and the audio video systems. Manufacturing and Engineering Systems for Production Management. Data Transfer. manufacturing and en gineering functions. a wireless communication as. a result of fully transparent and automated operations at all centres in an integrated and coordinated manner taking care of the business. the specific requirements and simultaneously provide inputs to the ERP. · DMS – Document Management Systems. The Electronic Data Inter change (EDI) system assists the ERP in connecting two systems electronically for E-Mail. systems of information processing and communication are needed. it provides a decision support information for strategic planning and control to the top management. i. In the business today. communicator and action. · ERP – Enterprise Resource Planning Systems. at gates. In the EMS.Take another simple example of employee management. movement tracing systems. in stores. independently. The ERP is supported by various other support systems which manage. Docu ments Transfer.e. viz. such as. etc. the demand is a paperless operation. · EDI – Electronic Data Interchange System for commerce. To support such demands of the business. assigning. The CAD / CAM/ CAE. These systems may be automated or mechanized interfaced with the other systems for data communication and pro cessing. · AMS – Attendance Management Systems. It is designed to handle the commercial functions of the business popularly known as the electronic commerce.. It will provide the drawings and design engineering information to the ERP in its execution . Such an integrated solution is called as the Enterprise Management System (EMS). · CAD – Computer Aided Design. the customer. It is a system of managing all functions of the business with information support corning through the ERP. · SMS – Security Management Systems such as the close circuit television alarm or warning systems. The major decision making and its execution takes place through the ERP.. The well-known attendance recording system monitors the employee movement from all angles-availability. the technologies.e. the Enterprise Resource Planning (ERP) system plays the role of front running system. and the well designed solutions and systems are available to support all such needs of the business. actions and decision needs. etc. employee attendance and presence management for the role management or Data Capture Systems on floors. Though the tools. paging. It handles the operational systems to run the business and provides the required inputs to planning and control systems handled by the middle management. where the arrival of the persons or their absence raises a number of triggers in the Organisation.

the EDI. i. store. It uses scanning. All these systems are exten sively used for the main purpose for which they are installed. the SMS. the Document Management System is designed to keep important documents in the database for viewing. and for documenting support in the transactions handled. It may be a person. . The CMS or the Communication Management Systems are used for tracking the important re source for action. the Security Management System handles the security. An employees movement can be restricted or prohibited to select areas before his time is recorded and sent to the ERP for further processing. It provides a support to the ERP by clearing the situation to act further. They are also equipped with the database management facilities and there database act as a back up support to the ERP. can be defined as a Network System comprising the ERP. purchase and inspection functions.1: Components of Enterprise Management System These six systems together act as the support systems to the ERP.e. its movement.of manufacturing. Their attention is drawn to an event and advised to act to handle the situation. The ERP uses the CMS. availability and scheduling. availability and access if tracked. Each of these systems operate on their native systems and are interfaced to the ERP through the gateway by using a specific software. sending messages.e. The OMS. the kind of job handled. i. The AMS. i. These systems are a part and parcel of the ERP System network. These resources are located. imaging. entry access requirement of the business operations. The system provides text edit facility for document manipulation for the purpose of transaction handling. monitored.. the CMS. The SMS.e. A truck will not be allowed to enter unless it is an authorized one. work flow automation and Document Data Base Management System. process and transfer the data to the ERP.. and guarded for security and safety. the CAD / CAM / CAE. It handles the document access. altered and advised to act from the location where they are. and then it will be weighed and its weight will be transferred to the ERP for processing further information. and the OMS.. as a tool. copying and mixing the information and sending the information to the various destinations for execution. or material. Attendance Management System keeps track of the employee related information for personnel planning. for all its communication needs of recording an event. Fig. In the ERP it is used for cross-checking the key information and also to confirm the authenticity of the transaction. The EMS. a vehicle. shift rotation. It provides static information about an em ployee through the human resources management system and the current dynamic information such as his or her presence. therefore. editing. Each one of them have a specific technology to handle the function and are equipped to capture. the cost and so on. 6.

standards for the future. plans. decisions. A typical ERP package solution has following modules: 1) Sales.6. These systems provide the database to the ERP or support the ERP by the basic data input directly or through the data transfer. The resources are finance. while con ducting the business transactions through the system. The ERP is the main system. materials. seamless integration and information communication. the manufacturing system module of the ERP is interfaced with the Drawing. viewing and usage of the drawings and it accepts the data of work order by process operations. for costing and for building the. These packages are RDBMS based with the front-end tools. The solution is structured in the modular fashion to cover the entire business operation. The ERP provides method ology of assessing the resource needs for a given business plan to achieve certain business objectives. The implementation of most of the ERP packages begin with the enterprise modeling which defines the enterprise structure. Marketing. Simultaneously it respects the organisational hierarchy of authority. The production is generic in nature and is supposed to incorporate the best business practices. and actions in a time bound manner The ERP provides a support system in the transaction processing. the authority functions. Inventory . Engineering database for query. The system design of the ERP is integrated with the features and functions providing an enterprise wide solution to handle all the process functionalities. The ERP solutions are available on the Unix platform and also on Windows NT. It addresses the issue of data integrity. information transparency. For example. and also meets the information needs of purchase. manufacturing capacity and human resource. These systems may stand-alone or from a part of the manufacturing or commercial processing systems. stores. updation. The architecture is client/server and uses object oriented technology for design and development of the system. the processes and the business rules. The enterprise model is the platform for the ERP system implementation. The ERP is a package encompassing all major functions of the business. interfaced or assisted by the other systems in the organisation. and reporting across the functions. generally followed in most of the companies. The key benefit of he ERP is that it provides an integrated solution for all the requirements of the business. It also helps to execute the strategies. The product philosophy is to implement the system as it is with some customization which may be typical to the customer requirement. The ERP packages build information base and provide knowledge base for planning and control of the business through the business function management. it provides capability to process the purchase order from ordering to bill processing. manufacturing accounts and finance. Distribution 2) Manufacturing 3) Stores Management 4) Finance 5) Personnel 6) Maintenance 7) Purchase.3 Enterprise Resource Planning (ERP) System The ERP system deals with the planning and use of resources used in the business. For example.

the income tax return. accounting updation and reporting. Authorisation is a feature provided for ensuring that the transaction is completed with regards to the business rules set by the management. the referring feature helps to link the customer order to work order to delivery note to Excise gate pass to bill. The security system of the ERP is built around the as security and the additional features are provided while designing the system. the stores ledger. etc. The ERP features are many. This means that only the authorised user can handle a particular aspect of the transaction and unless the authorised users sign. The order entry is permissible in marketing. The system provides the mapping capability to tie the data. it can transact directly to the vendor or the customer in its own format. in the purchase order transactions the price and discount are confirmed by one user.. The security is built for authorised usage and also for selective access. The . The business organisation runs through the rules and the responsibility allocation. information and analysis level. viz. the employee attendance report. a cash transaction is allowed at the Finished Goods Store and in the Accounts Department by the authorised users only. and the implementation of the business rules. the data. remind ers. a delivery note would give a reference of work order. information or process to the user. The ERP usage can be controlled at all levels. This requires processing in a different manner to assess the impact. progress checking and control. The system provides defined levels to the and there are no limitations on the number of levels. All the ERP solutions provide report writer for the user to create the reports. Through the EDI connectivity. a bill would give a reference to a delivery note and customer order. are provided with the solution at a generic level. It provides access and updation rights to the users as per the control requirement of the management. The ERP provides such facili ties to ensure that the business is operated on the rules and the guidelines set by the management. The ERP satisfies this need of the business. provided for tracking the chain of events for monitoring. The ERP system provides a variety of technology supports to implement the solution very fast in execution mode. For example. The important ones are security authorisation. data transaction validation. A strict adherence to them is essential for creation of the controlled environment. which saves the generation time. The material indents are processable in the stores while the vouchers are process able in the Accounts Department. The solution provides the E-mail facility for communication of memos. For example. It can raise a purchase order on the vendor by picking up and choosing the old purchase orders. It is possible to establish the link through cross reference of the transaction number or code of the previous transactions. it analysis. For example. the terms are decided by the other users and the purchase order is signed by the third user. a work order will give a reference of customer order. At any other place evolving cash transaction is prohibited. ERP provides an aid to create the transaction by a cut and paste mechanism. the information and the data integrity at the highest level. It also sends copies to the concerned persons as stipulated. The ERP is activated by its users. referencing respon sibility. Referencing is a feature. It provides a facility to ensure that the user-location (Department/ Division) transaction integrity is confirmed through check and validation and then ERP allows to proceed. The standard reports like the trial balance. These are provided to safeguard the business of the organisation from illegal practice and also to protect the valuable information from misuse These features help to keep the system. transaction. The ERP solutions are built for a user friendly flexible approach to manage the business with the changing needs. and text to the selected list. The feature does not allow the transaction to proceed unless such references are established. For example. if one wants to check the status of customer order. the transaction is not posted in the system for further processing and usage.Planning and Control These modules are designed for data capture.

The architecture could be a two tier or three tier as shown in Fig 6. Sup pose. The receipt would update the database and the system will have an updated stock status.. in order to better understand the seasonality in the business. These components can be built with the client server role definitions. to form the judgments on the business happenings. The drill down could be multi-dimensional to analyse the critical business information. The ERP sends the electronic mail and executors the SQL statements. All the ERP solutions provide ‘Drill Down’ and ‘Context Sensitive’ helps to use the system. This database update is an event for using the alert. Since. the flexible valuation procedures. the architecture required is to separate the data and its management from its application. The ERP also provides an intelligent support in business management. These events alerts are triggered by the database inserts or updates. Take an example of an item receipt in stores. If the receipt of this item closes the Purchase Order then raise an automatic Purchase Order on the same vendor with the same terms and conditions. The drill down facility helps him to use the information the way he wants. on receipt of an item send E-mail to the Purchase Manager. show the work orders which are scheduled where this items is in use. The drill down helps to run through the system to locate the weak spot for action and control. Hence. Through these facilities the management can conduct an impact analysis to judge the financial results and make the business decisions.solution provides facilities like the trial posting. the Application Logic. alert and schedule them at his choice. and the Presentation.1 ERP Architecture Any information system has three basic components. The help facilities make the ERP user-friendly and easy to learn. viz. guidance and understanding of the term or process or formats. Fig. the application logic has to be separate from the data.2: Client/Server Model – Architecture .2 below. The client is a user and the server provides the services required by the user the to run the system. the end of chosen period processing. the Production Planner and further.3. 6. the Data Management. and the hold transactions. The help could be for information. It is also capable of taking multiple actions through the stored procedures. The user requires the choice of using the data as it suits him the most. Having raised the alert. the posting by choice. It allows the user to define the events. 6. the sales manager is viewing the sales by region by product line. The alert in this case can be defined as. Then he wishes to see the sales revenue over a time. it also allows you to define the action to respond to the alert. the information needs are dynamically changing. etc. The context sensitive help provides an access to help library which can be used by the user by calling help. There is also variability in the manner how the application logic is developed and presented.

spread over to any length. there is a rigid division of roles. This architecture is useful when there is not much change in the application logic and it is complex. The technology solutions are available to implement this philosophy.3 Fig. The GUI screens are so developed that the process running across the organisation is mapped to the business flows instead of the discrete business functions. is the one which is user-friendly. The third possibility is a golden mix of the two architectures.3: Client/Server Model – Architecture It is very difficult to recommend one or the other architecture as the solution to overcome a typical requirement problem. easy to understand and easy to maintain. there could be an application which deals with high volume and complex data structure and this approach is more efficient. The ERP solutions are multi-users which are distributed over the organisation. Further. One is the Graphical User Interface (GUI) and the Network Management. In this architecture all the requirements are sent to the server by all the users in the network. if response issue is taken care of by the high end multiple CPU and the parallel processing hardware platforms. In a two-tier system architecture. what is important is the user environment and the information needs and how the user handles them? The best architec ture. this architecture is useful when the user does not want to change the application logic but may want to change the presentation logic. The GUI is chosen since it allows the customization for a particular business entity. The network is typically the bottleneck in any client/ server system. With the application logic. customization should suit the specifics of the business or customer. Here the application logic is split into two. The logic which deals with the data more is attached to the server platform. the ERP solution uses a scalable architecture and a parallel processing technology by installing the suitable servers at the required locations. The client uses the GUI (Graphical User Interface) tools for simplicity while the application logic is processed on another machine. There could be a case where the user is dumb and is required to use the system in a guided manner with the ‘help’ assistance. The data management is by the server and its processing is through the application logic by client. . is left to the client platform as shown in Fig. In the choice of architecture. the ERP is a generic solution for the business operations. The logic. in a given environment. Two main technology solutions are available to the designer and the implementer of the ERP. which deals with the presentation and the specific needs of the user. In this architecture three distinct roles are defined and three hardware platforms are made responsible to perform. The servers play two distinct roles of handling the data and the applications logic.6. Accompanying the network efficiency and the GUI.Since. Then the three tier architecture is suitable. 6. However. The architecture choice is influenced by this requirement. it creates a reduced traffic intensity due to GUI interface. This ensures good performance with a continuous increa sed load conditions. This affects the load on the server and the response time to the user increases. in each case of implementation. where the data is being managed. appropriately divided between client and server.

4: Solution Structure 6. you can create a purchase order. The presence of existing systems is not challenged or minimised by the ERP solution. The business being complex requires a variety of systems to run efficiently. The analysis also throws light on the exception conditions.2.For most of the customers. the E-mail. transaction processing and data base updates. the image audio and the network video. the servers can be configured to keep the business information online in any format. data capture. the approvals and the execution. It provides the database functionalities for data and information management. the spreadsheet. technology business and implementation as shown in Fig. The solution offers support for the electronic notifications. These customer specific needs are met through a popular and a widely used. However. The ERP solution provides the decision making capabilities either built-in or through the de cision support systems when it comes to implementation. With the multimedia technology. most of the ERP solutions use open application programme interfaces that enable easy coexistence and integration with the legacy and the third party systems. . the ERP offers a basic business functionality. the target versus the actual. Most of these requirements are extensions to the basic business functions. the standard versus the actual and so on.3. it provides solution for the data entry. get it justi fied and approved by the authorized person sitting at the other location. through the EOI. for immediate attention and action. including the text. Then.2 ERP Solution Structure The Enterprise Resource Planning solution structure is built in three layers namely. It then support an analysis of the processed results in single or the multidimensions for one period or successive periods. assemble the documents of the purchase order. 6.3. or the internet to the business partners. It then has the front end tools to develop the application in an exclusive manner. It keeps all the business information online. 6. the users use the Work Flow Technology to move the process in a screen format from person to person for the changes. 6. The ERP solutions are designed to make the office of the business paperless. The solutions also provide the gateways to the popular databases which are used in business. some users have particular needs for which they want an additional support through the tools or other modules. For example. and have it sent through the EOI to a vendor located at a distant location without creating any the paper documents. In fact.4 below: Fig. It offers a support on the comparative analysis the budget versus the actual. attach the engineer ing drawing to the purchase order by accesses to the CAD system.1 Business Operations On the business side. client/server tool set.

The seamless integration of the modules allows the user at any level to take a micro and a macro view of the function and process view of the transaction across the function. the development approach is an object-oriented approach. distribution. based on the design and the implementation strategy.2. interfacing tools. It is built with the function models like the Finance. These modules are then integrated to perform ensuring data and informa tion consistency and concurrency.2. 6. The application develop ment is done through the client/ server technology. Using various information technology tools and application development tools. 6. and maintenance. the object oriented tools. invoicing (Sales) · Production planning and control (Production) · Materials management (Materials) · Finance and accounting (Finance) · Personnel management (Personnel) Table shows the sub-module details of each module .2 Technology The technology side of the ERP solution is managed through the database management technology for data acquisition to data base creation.3.3 Implementation The ERP implementation is multi-user and calls for the network usage for the work flow.3 Self assessment Questions (For Section 6. Materials. The client/ server implementation could be two tier or three tier. The successful implementation of the ERP calls for a strong technology component appropriate to the environment. the application logic is developed to the business functionality. communication and the access to the database(s) which may be at one location or distributed. where the servers handle the specific or the general functions as the case may be and the client play the role of processing interactively and locally for meeting the information needs. etc.The ERP solution then handles the interfacing requirement to the legacy or the third party systems as a support to the main ERP solution. Atypical ERP solution has the following modules: · Business forecasting. updation. 6. To reduce the development effort and for ease of maintenance. The tools arereport writers. planning and control (Business) · Sales. Sales. and Personnel and their sub-modules.4 ERP Model and Modules The generic ERP package represents the commonly operated business model of the organisation. application development tools. Marketing. query processing tools.3.3) What is an ERP architecture? What is a solution architecture? What is the difference between the two? 6.3. where the class and the object libraries are built for reusability of the object and its code.

1.4. · Application logic · Common service functions such as the currency. editing. groups.4. · Diagnostic functions · Transaction flow control · Help functions. text editing.1 General Features · Separation of the programme code and the data areas · Command language · Screen based flow control. online logical · Checks and validations · Word-processing.1 ERP Basic Features 6. . · Central table system for management of parameters. and help. · Action messages · Tuning · Enterprise Modeling: Structure / Policy / Rules / Guidelines 6. texts and master data. markets.2 Business System · Business forecasting for products.1.4. date.6.

the interface tools. The ERP solution has an advantage of fast implementation as the design and development is eliminated being a package. Some of these packages run better. Since. if installed on a particular hardware platform. · Seamless integration of modules. which are less at the server end and more at the client’s end. more locations and more modules as well. In view of this. DSS for resource planning · Information base management for management application 6.2 Characteristics of ERP Solution · Modular structure. · Interface capabilities. Since the whole solution is a package product. the changes are easy to make. they are characterized as described earlier. one can implement the solution in a phased manner module by module. look presentation. and so on the package efficiency changes with the choice to tools. the manner in which they are used decides the efficiency of the solutions. The specific industry features have been taken care of more efficiently as customized solutions. · Independence of hardware platform.4. the manufacturer of the package brings out newer versions of the product offering more facilities to the user to improve the utility of the solution. Due to object oriented technology and the client server architecture. technology and approach may be same or similar. and used by a particular organisation. processing efficiently and user-friendliness. Some of these products are developed as an application in a particular organisation and then turned into a packaged solution. There are more than a dozen ERP solution available in the market each having its own specialty. · RDBMS independent. It can be implemented first on a smaller scale and expanded subsequently with more users. Though tools. some of ERP solution are more useful and efficient in similar organisation. · Scalable architecture.· Target fixing and allocation by the key parameters · Business planning in terms of the resources to execute · Strategy formulation and implementation · MIS for strategy monitoring and control · Business modeling for the strategy development and testing. Most of the ERP solutions need some changes to suit the environment. it has modular structure. front end tools. . Though. The Commerce and Corporate Laws differ from country to country and the ERP in such cases need customization to satisfy the local requirements of the business. Since the design/ developer has a choice of RDBMS. they differ in feel. · PC download/upload facility.

6. management can see the information in their perspective and take different view of the business. 14) The ERP implementation automatically leads to the usage of the best business procedures bringing the consistency of operation in the world of business. 17) The quality of decision making improve as the user decision maker is made alert and he is made knowledgeable and better informed dynamically. management becomes knowledge driven and the organisation becomes a learned one. the application of object technology and use of the front end tools. 18) The tools available to the decision maker are friendly whereby he is equipped to make decision and execute it simultaneously. 9) Since. Due to strong interface capabilities. paperless office is a newer possibility as communication is faster and systems are connected directly.4. the human resource can be utilised better due to access to information across the databases distributed over the organisation. Closer contact with the customer. 16) The ERP scope can be enlarged through the Internet/lntranet access. 10) The processes become faster due to work group technology and application of work flow automation. as it is a scalable architecture. 3) Customer satisfaction increase due to shorter delivery cycle. 6.4) . market and technology.4 Self assessment Questions (For Section 6. it make the management alert at a number of points demanding the decision or action. releasing the burden on the middle management. the ERP design is proactive. the user service can be maintained at higher level. office automation. 12) The ERP remain a valid solution with the expansion of business. 4) Simultaneous activisation of the decision centers because of instant inducement through triggers or updates. making the ERP sensitive to the latest events in the business. Simultaneous increase in the productivity of the business possible.3 Benefits of the ERP 1) Better management of resources reducing the cost of operations. E-mail. 13) Due to the client/ server architecture. 11) Due to the support technologies like EDI. 2) Planning at function and process level. 15) With the use of the data warehousing and data reverse engineering. 7) Due to faster processing technology and SQL. the process changes can be easily carried out in a short duration of time. 6) Intelligent ERP download the decision making at lower level.4. Hence. 5) Business operations transparency between business partners cutting down the execution time of critical business operation.

5) Future plans of the vendor. 3. OLE/ODBC compliance.1.5. Explain the characteristics of ERP Solution.5 ERP Selection Since. 10) Image in the business and in the information technology world. Strength in the other technology knowledge and the ability to use them. etc. 2. . 2) Object orientation in development and methodology. the solution scope. 7) Ability to execute the ERP solution. and architecture. 5) Front end tools and back end data based management system tools for the data. 4) Business philosophy of the vendor. viz. the buyer has a choice to make. Each product has its own USP and differs in a number of ways in content. real time access. an ease of implementation. Write a short note on the basic features of ERP. process presentation management. 3) Handling of server and client based data and application logic. 6. the vendor.5. 12) Organisation for product development and support. 6. 3) R & D investment in the product. scope. 13) The global experience of the vendor and commitment to the product for long term. 9) Perspective plan of the ERP improvement with technology development. the market offer a number of ERP packages. The selection can be made on three dimensions.2 Technology Evaluation Factor 1) Client server architecture and its implementation-two tier or three tier. 2) Product share in total business of the vendor. the technology. 4) Application and use of standards in all the phases of development and in the product. 6) Market reach and resource strength of the vendor.1 Vendor Evaluation Factors 1) Business strength of the vendor. 6) Interface mechanism: Data transfer. 11) Financial strength of the vendor to sustain and handle the business and technology risk. What benefits does an organisation have after implementing ERP? 6.

12) Documentation for system handling and administration. sensitive business process. 6. response and integration. the ERP solution is a tool to change the style of business management. implement and train. etc. and the socio-cultural factors. The ability for a quick start on implementation. 2) business scope versus application scope and so on. lotus notes. Such a study will help find out if the ERP is fit for the organisation. Support system technologies like bar coding. 14) Solution architecture and technology. it requires thorough understanding of the business. 3) The degree of deviation from the standard ERP product. screen painter and batch processor. critical application. 6) Flexible design. and precision in results. Since. 11) Product quality in terms of security. Since the ERP implementation is a two three year’s project. MS-Office.3 ERP Solution Evaluation Factor 1) ERP fit for the business of the organisation in terms of the functions. 11) Hardware-software configuration management. 4) Ease of use: Easy to learn. as it is the most important and critical success factor. The methodology of selection will begin first with the study of organisation in terms of the business focus. 10) Operating system and its level of usage in the system. communication. error messages. the ERP solution will sustain and be adequate for the current and the future business needs for a period of five to seven years. reliability. 9) Versatility of the solution for implementation on a platform with the project of saving the investment. imaging. dictionaries. . It is a very important to find out that the ERP is fit or not. 7) The level of intelligent usage of ‘help’ . The price of the ERP package is difficult to judge and often it is a negotiable point in favour of the buyer in competitive scenario. 9) Down loading to PC based packages. After that. report writers.5. network. 5) The ability to migrate to the ERP environment from present status. the management criticalities. 13) Product rating in its class of products. EDI. the business issues. it would become a platform for the future expansions and growth. 10) Rating on performance.7) Use of case tool. screen generators. etc. features and processes.

It should have important functional head. processes. as many factors are intangible in nature. process handling facilities. business focus and customer deliverables. Though such an approach is appropriate. This committee should prepare a requirement document spelling out the business goals. the committee should examine the trade off involvement in the selection. restructure the organisation. are avail able or not. It should not happen that organisational issue dominate the choice of the ERP and in the process the best product is rejected. the organisation should be carrying out business process engineering and reengineering study. the futuristic scenario of business. If some of them are not available then there is a possibility of work around to achieve the same result. When the product presentation is over. This information should be on how successful the vendor is.It is advisable for the organisation to form a committee for selection of the ERP solution. In this process. and they should be allowed to study the organisation and its business. A note on the management philosophy. Ideally. in the implementation of the ERP? The strengths and the weaknesses of the vendor. for a de tailed security and evaluation. the vendor should be asked to resubmit the technical and commercial proposal with price and the terms of offer. The short-listed vendors then should be asked to give the product presentation to the selected group of decision makers to seek their opinion on the product. the committee should confirm whether the critical requirement of business. practices and style will be a valuable input. the committee should gather information on the experience of the other organisation where the ERP is implemented. A second evaluation note should be made for a comparative analysis of the ERP solutions and then a critical evaluation of this analysis should lead to the choice list. The submission of the vendors should be scrutinized by the committee for short-listing. procedures. The choice list should be weighed by these points. features. the selected ERP vendors should be called for seeking the ERP offer. In such an event. it is not always possible to bring out a clear win in the evaluation. When such a document is ready. The proposal should have the following details: 1) Scope of supply 2) Objectives 3) Modules and deliverables 4) Implementation methodology 5) Plan and schedules of hardware and software implementation 6) Resource allocation 7) Responsibility division between the organisation and the vendor Process of implementation . modify the processes functionalities before the ERP decision is made. the critical functions. All the vendors should be asked to submit a technical proposal explaining the fit of the ERP to the organisation. The committee should be headed by a CEO or his designated authority. a strong Information Technology person and a person from cor porate planning function. The document should be given to the vendors. Once the committee makes the decision. in terms of information. the product and the post sales pro cesses should be ascertained. etc. product demonstration should be arranged. and ob jectives. Simultaneously.

The emphasis on the automation of processes with a strong Information Tech nology implementation. the management must exploit it to its advantage by adopting the best practices or changing the practices through the business process reengineering. .6 EMS and MIS There is a qualitative change in the MIS design due to the complexity of the business operations and the risk involved in handling the business. potentially the ERP is designed for productivity rise. the vendor and organisation enter into a legal contract. Besides the normal MIS reports required for the top management. Payment terms 15) Process of acceptance of the ERP by stages and linking with the payments Once the ERP decision is made. It connects the organisation to other agencies. duties. i.. 6. It is a supporting system and does not solve all the problems of business management. The success of the ERP lies in its implementation with commitment. deliverables and the value com ponents. It should also include the clauses on issues arising out of unforeseen circumstances and how to resolve them with the legal remedy available to both the parties. there should be clauses relating to safeguarding the interests of each other to cover the risk arising out of the technology failure. It is to be appreciated as a managerial tool and not as a labour saving device. What factors are considered to evaluate an ERP Solution? Why is implementation effort necessary even though ERP package is chosen? 6.5) 1. The process definition now goes beyond the organizations boundary. Since. Since. Such legal contract should list the obligations. It requires full participation of the organisation. the Top Management also needs a set of the additional reports. The MIS is now required to maximize the process productivity and performance. Explain the various vendor evaluation factors considered for ERP selection 2. responsibilities. The decision models are built across the business management functions. the ERP is a product of several technologies. What are the technology evaluation factors that need to be considered during ERP selection? 3. The management focus is shifting from the function to the process.4 Self Assessment Questions (For Section 6. The ERP is a tool to manage the enterprise resources to achieve the business objective.9) Organisation of implementation 10) Progress monitoring and control of the important events 11) Process of resolving the issue all levels 12) The official product literature 13) Association with the other vendor its purpose 14) Commercial submission: i.e. Price by module and number of users ii. The decision making support is required for the process optimization. the management requires the information support in the process management and not in the function management.5. where the critical business pro cesses and the critical success factors are a focus area.

The ERP solution takes care of data integrity and consistency across the organisation. Once the ERP is built in the organisation. The effective uses of the variety of tools. which may have multiple locations. the EDI/E-mail. In today’s competitive world. the bar coding. functional.The ERP solution caters to this requirement very easily. etc. The decision maker can operate as an individual in isolation from the others. therefore. and the application level processing logic is taken care in the server level giving freedom to the user. the work flow automation. define and resolve the problems. over and above this. to define the problem and evolve the solution using the front-end tools. if need be. The ERP solution is an integrated solution. Role. the shift of decision-making is towards strategic management of the business. It further helps to formulate the strategies to achieve these goals taking its implementation further. The ERP solution. The ERP enables the work group management efficiently and effectively. disregarding the hardware or the software platform. cuts down the operation cycle time and raises the ability of the management to take decisions. as a client. provides the capability to modify the Management Information System from time to time as per the changing information needs.5: EMS Model: Structure. due to its scope and coverage. provides executive information for the strategic management of business. and the paging systems are built in ERP. Objectives . 6. All the ERP solutions use the client-server architecture in the solution. The management attention on the focused area is easily possible. enables Strategic Management based on the strategic information for decision-making. The frontend hardware and the tools are so powerful that an individual can develop his own MIS based on his decision making information needs beside the usual MIS like corporate. The effective use of these variety of tools also speeds up processing. where the data process ing. the EIS. The ERP design provides transparency to the users of information giving them an access to the sensitive information to locate. the information and its storage and. The ERP. They provide all the routine reports at any time for the middle management of the organisation. it takes care of the data. and supported by a variety of tools. The solution operation is seamless. the data warehousing. like the data rep lication. Fig. The conventional MIS design is more or less embedded in the ERP solution.

7 Summary The dependence on the information. Adding management systems 2. 6. Always management system C. the MIS design is more flexible highly decision intensive and efficient. 6. It requires. MIS is in place? Discuss. as driving energy source. It provides autonomy in global system operations. Study the literature of any ERP package and match the offerings with your concept of ERP. _________is a feature provided for ensuring that the transaction is completed with regards to the business rules set by the management. 6. A. transaction processing and data base creation.8 Terminal Questions 1. Authorisation C. signature D. Attendance Management Systems B. 3. is increasing. With the ERP. Advanced management system D. 4 C. The business needs of today are beyond the transaction processing. Can you be sure that if ERP Solution is implemented. Make a small note on ERP package selection for management. advocacy B. viz. wherever it occurs. 3 B. 5 D. It requires an instant real time response in every case. MIS in ERP environment is a sophisticated design serving the needs of the organisation. 6 . Any information system has ______ basic components. 2. A. Every business activity has additional dimensions.The ERP through such an MIS design.9 Multiple Choice Questions 1. policy formulation 3. A.. AMS stands for ___________ . speed and time. MIS design uses ERP which in turn uses other systems for inputs in terms of data capture.ERP along with other systems becomes an EMS. improves the decision making skills of the individuals very effectively. The ERP packages build information base and provide knowledge base for planning and control of the business through the business function management.

Select the relevant points Section 6. A .2 and 6. B 3.1 2.3. This has been mentioned in section 6. This has been mentioned in section 6.5. This has been mentioned in section 6.2.4 1.3 Terminal Questions 1.4 1.5. This has been mentioned in section Section 6.3. This has been mentioned in section 6. A 2.5 2.4.3 This has been mentioned in section 6. 3.10 Answers to SAQs. This has been mentioned in section 6. This has been mentioned in section 6.6 3. TQs and MCQs Self Assessment Questions Section 6. Read the material from their website and relate with the concepts discussed Multiple Choice Questions 1.3. This has been mentioned in section 2.2.2 3.5. Strategy for the plan achievement 7.4.5 Hardware and software plan 7.3 Risks of Internet to Organizations Ascertaining the class of information The system development schedule 7.2 Ethical and Social issues with E-Commerce 7.3.3) 7.4.1 Home Office 7.5 Privacy and Databases Major threats to IT installations 7.Unit-07-Quality and Privacy Issues Structure: 7.2.2) 7.3.2 Other Remote Options 7.3.1 MIS goals and objectives 7.4.1 Contents of MIS Plan 7.6 Self Assessment Questions (For Section Self Assessment Questions (For Section 7.2 Common Business Exposures 7.2.1 Organisational Information .2 Business Decisions and Information Assurance 7.1 Introduction Data Security and Data Privacy 7.4 Development of long range plans of the MIS 7.4.1 Introduction Objectives MIS plan is linked to the business plan 7.1 The Value of Telecommuting 7.3 Ethical and social issues with network The architecture of the MIS 7.

3.10 Answers to SAQs. management needs assurance that: Organizational goals are being achieved.4 Self Assessment Questions (For Section 7. All concerned need an assurance that the right information is being made available: · Growing public awareness and concern · Growing shareholder awareness and concern .4. we shall start with the importance of information on business decisions.3. Problems with cash flow.3 Knowledge Information 7. Increased costs. TAQs and MCQs 7. Impact of discontinuity in service are: Competitive disadvantage.4 Decision Support Information 7.4.5 Operational Information 7. you should be able to · Explain the ethical and social issues with network · What are the common business exposures and Risk of using internet by the organization · How to implement MIS in the organisation · What are the guidelines for the successful implementation of MIS · How to manage quality in MIS 7. Fines and/or sanctions.1 Introduction With this unit.7 Summary 7.4) 7. Objectives: At the end of this unit. and certain legal obligations have been met.4.9 Multiple Choice Questions 7.2. Loss of revenue.7.6 Management of Quality in the MIS 7.5 Implementation of the Management Information System 7.4.2 Functional Information 7. We shall conclude by guidelines for successful implementation of MIS.3. We begin by discussing the common business exposures and threats of using internet by the organization.8 Terminal Questions 7. 2 Business Decisions and Information Assurance 7. Mitigation action has been taken to minimize risks to the system.1 Introduction Business decisions are becoming increasingly dependent on high quality information. In any organisation.3.4.

· Legal responsibilities of management 7.2.2 Common Business Exposures Business Exposure Erroneous record keeping Some of the Possible Causes Incomplete or inaccurate processing of transactions Improper interpretation or Willful disregard for accounting practices Many factors including irreparable damage to organizational databases

Unacceptable accounting

Business interruption

Misleading information or failing to acquire necessary Erroneous management decisions information Fraud or embezzlement Statutory sanctions Excessive costs Loss or destruction of resources Deliberate communication of wrong information Violation of laws or reporting regulations Failure to acquire approvals for high-value expenditures Lack of adequate safeguards over organizational resources Many factors including use of poor IS/IT to satisfy customer requirements

Loss of competitive advantage

7.2.3 Major threats to IT installations 1. Unreliable systems - Power failure e.g. power outage . - HW failure e.g. disk failure - Systems SW failure e.g. as failure - Application SW failure e.g. incorrect update - Personnel failure e.g. poor training, intoxication 2. Disasters - Natural disasters e.g. fire, water, earthquakes - Financial disasters e.g. law suits, strikes 3. Holistic action - External e.g. sabotage, espionage - Internal e.g. fraud, theft, malice 7.2.4 Self assessment Questions (For Section 7.2)

1. What are the common business exposures and what could be their probable causes? 2. What are the major threats to IT installations? 7.3 Ethical and social issues with network 7.3.1 Home office Information technology has made it possible for many people to perform their job functions using their home as an office. Many of the salespeople, may spend most of their time working from home because they require minimal interaction with the corporate office. Computer programmers increasingly work at home because they essentially require only a computer, modem, and telephone line to perform their job. These and other forms of telecommuting, where an individual works from home and typically communicates extensively with the corporate office using electronic media, have increased in popularity. In 1991, for example, the National Association for the Cottage Industry estimated that 38 million Americans spend a significant amount of time working out of a home office. Experts estimate that about 75 percent of all information workers, encompassing more than 55 percent of the U.S. workforce, are potential telecommuters. Even in India, the telecommuting is welcomed and more and more of the organisation are adopting, as they find it has various advantages. The Value of Telecommuting A home office offers a worker increased flex ibility in work hours, increased ability to deal with family issues, less time spent in com muting, and the ability to purchase less costly homes distant from city centers; it also increases personal autonomy and control. An organization that allows employees to spend most of their time working from a home office may hire or retain talented and unique employees who avoid a more traditional work location. Apple Computer, AT&T, exemplify the growing number of companies whose policies include telecommuting as an accepted corporate practice. Many professionals who deal in foreign markets or with foreign companies maintain an office in their home in addition to or instead of an office at their company. This remote location permits them to work more easily throughout the night to stay in touch with key clients and branch offices and to monitor key market information as it evolves. In India it has helped organizations to retain female computer professionals, as they get wedlock and leave the organisation due to their commitment towards the bringing up of the child. Telecommuting has helped to reduce such numbers to a large extent. The major disadvantage of telecommuting is a decrease in face-to-face communication with others in the organization. In the near future, however, the increasing availability and lower cost of tele conferencing equipment that permits transmission of video images across the phone lines may reduce this problem. Some small cities are trying to attract telecommuters as residents by significantly upgrading their communication capabilities. Managers may oppose telecommuting because they fear a loss to control over workers, are concerned about an employee’s legal obligations to the company when off-site, or fail to understand the benefits of this arrangement to the organization. Improvements in telecommunication, greater acceptance of employee autonomy, and a greater number of successful home offices may address this problem. Other Remote Options Some individuals perform only part of their work at home, rather than doing the majority of it at home on a computer during regular work hours. For example, may spend several hours a day working at home so that they can travel in off-peak hours. Workers may participate in after hours telecommuting, where they perform their work on the computer at home outside regular office hours. This type of alternative work arrangement potentially increases workers’ flexibility by helping them handle multiple responsibilities, spend more time with children, and con trol the pacing of work. Although this flexibility should reduce the conflict between work and family, research suggests that the reverse has occurred. In particular, after-hour telecommuting has two

consequences. First, it increases role overload because of the increase in the number of hours spent per week working. Second, it interferes with workers’ performing multiple roles because work spills into family time and intrudes on nonwork respon sibilities. Satellite offices, established away from the city center and near employee residences offer an alternative to the home office. Employees can share time between a home office one or more satellites, and the main office. This option retains the flexibility of the home office, reduces commuting and traffic problems, and increases the opportunities for face-to -face contact. Few companies in USA are experimenting. The typical home office is equipped with a telephone, a tele phone answering machine, a copier, and a variety of computer equipment. A personal com puter, often portable, aids in composing documents and receiving data in electronic form. A modem receives and transmits data between computers over the telephone line. Facsimile (fax) machines transmit and receive images over telephone lines. Telecommuting is on the rise, thereby facilitating more and more persons to work from home. Advantages 1. Saves travel time, travel cost, travel infrastructure, decreases pollution. 2. Allows flexi-time 3. Allows "home-bound" people to enter workforce 4. Less office space and infrastructure 5. Reduced operational costs 6. Improves productivity Problem areas 1. No contact with others 2. Tendency to work longer hours 3. Lack of control over workforce 4. Difficulty in assessing quality of work 5. Who did the work? Appraisal etc 6. Drop in certain businesses (e.g. travel, eating) 7.3.2 Ethical and Social issues with E-Commerce 1. Internet can be used in illegal ways, as there are no laws related to its use. Many servers contain illegal, immoral, defamatory information (which cannot be legally communicated using facilities like TV, radio, etc.). 2. There is minimal or no control over the Internet (unlike telephone, radio, TV, etc.). Limited banning of material in Internet is not possible i.e. all-or-none rule. 3. Free speech advocates say that screening of incoming material is the responsibility of the receiving end

sending unsolicited mail 5. and maliciousness · Systems errors · Accidents and disasters Where as Data privacy is concerned with ethical/moral protection of data: · Right of organization to accumulate data · Integration of data from multiple sources e. · Big brother is watching syndrome.g.3.4.3 Risks of Internet to Organizations · Contracting viruses · Interception of passwords by hackers · Interception of sensitive/commercial data · Illegal/objectionable use of site by users · Inability to effectively disconnected Internet to own employees · Misrepresentation of identity by site visitors · Legal loopholes in electronic contracts · No security against eavesdropping · No security against interception · Misuse of supplied/captured information · Misrepresentation of identity of site 7.3.e.4 Data Security and Data Privacy Data security is concerned with physical security of data from inside and outside causes: · Frauds. thefts. There is no law against Spamming i. Massive flaming of large quantity of e-mail to one address. The question arises – Is sending/receiving large quantity of mail ethical? 7. credit cards and income tax . · Purpose for use of data · Possible misuse of accumulated data · Right of individual to inspect gathered data .

employee performance records. Most of the organisations do not recognise ‘Information’ as a resource. . due regard is often not given for its planned development and use. understanding of language and speed are broken. and not as information processing for management actions and decisions.3. in the function of Storage.It often arises as to what are the primary reasons for renewed importance for data security and data privacy? · Growing sizes of databases · Distributed systems · Data being viewed as resources 7. Many organisations have spent financial resources on computers purely to expedite the activity of data collection and processing.4 Development of long range plans of the MIS Any kind of business activity calls for long-range plans for success. It can be used for storing base or knowledge base. Computers can now ‘be tool for information processing and communication. The organisations have invested in computers and expanded its use by adding more or bigger computers to take care of the numerous transactions in the business. distance. Many organisations have purchased computers for data processing and for meeting the statutory requirements of filing the returns and reports to the Government. Databases can accumulate and use vast amount of data in an inexpensive manner. Communications. this function is misinterpreted as data processing for expeditious generation of reports and returns. the information processing function of the computers in the organisation never got its due regard as an important asset to the organisation. The plan for development and its implementation is a necessity for MIS. In this approach. They can communicate to any distance and share data. For example: credit card transactions dealt with personal information in corporate databases. In MIS. It can be used for knowing the current status of any aspect of the business due to its on-line real time processing capability. In fact. it calls upon the management to plan for it and control it for the appropriate use in the organisation.3. the scene has been changing since late eighties when the computers became more versatile. Intelligence and Language. time and capacity. Legal databases. The computers have become user-friendly. Hence. Proliferation of better and inexpensive use of IT leads to collection of personal data from large number of sources.3) 1. They have looked at information as one of the many necessities for conducting the business activity. However.6 Self assessment Questions (For Section 7. the information is recognised as a major resource like capital. What are the ethical and social issues of E-Commerce? 7. data in patient’s medical records. . The computer technology is so advanced that the barriers of storage. What do you understand by telecommuting? Evaluate the advantages and disadvantages of the same 2.5 Privacy and Databases Privacy: one’s right to control information about oneself. And if this resource is to be managed well. Computers are used mainly for computing and accounting the business transactions and have not been considered as a tool for information processing. loan databases 7. the same being true for MIS. information and physical resources of other computers.

if necessary. Information strategy for the business implementation playing a supportive role. Table shows equivalence of Business Plan and MIS Plan. objectives. business risks. 7. Hardware and software plan for the procurement and the implementation. Operation plan for the execution 7. To ensure such an alignment possibility. matching the plan Management plan for execution and control execution. internal and external environment of the organisation and the business. The plan would have the following contents.1 MIS goals and objectives It is necessary to develop the goals and objectives for the MIS which will support the business goals. . The goals and the objectives of the MIS would be so stated that they can be measured The typical statements of the goals are as under: · Provide an online information on the stocks. System development schedule. Once the management translated into information needs. markets and the accounts balances. The plan of development of the MIS is linked with the steps of the implementation in a business development plan. The details of information are provided to the operations management to assess the status of an activity and to find ways to make up. The MIS goals and objectives will consider management philosophy policy constraints. The information needs are then traced to the source data and the system in the organisation which generate such a data. The system of information generation is so planned that strategic information is provided for the strategic planning. The design l an open system is a complex task.Any organization requires Management Information System flexible enough to deal with the information needs of the organisation.4. It can be achieved only if the MIS is planned.4. it is necessary that the business plan-strategic or otherwise.2 MIS plan is linked to the business plan 7.1 Contents of MIS Plan A long-range MIS plan provides direction for the development of the systems. The information he implementation of the business plan should find place in the MIS. keeping in view the plan of the business management of the organisation. It should be conceived as an open system sly interacting with the business environment with a built-in mechanism to desired information as per the new requirements of the management. which will be dealt by the designer under a support from the top management. consistent to the business goals and objectives. control information is provided for a short term planning and execution. Business plan MIS Plan Management information system. states information needs. plan Business goals and objectives Business plan and strategy Strategy planning and decisions Architecture of the Management Information System to support decisions.2. The plan of MIS is concurrent to the business plan of the organisation.4. and provides a basis for achieving the specific targets or tasks against a time frame. it is left for the designer to evolve a plan of development and implementation.

2 Strategy for the plan achievement The designer has to take a number of strategic decisions for the achievement of the MIS goals and objectives. 7. it is necessary to develop the accounting system first and then the analysis. whenever necessary.4 The system development schedule A schedule is made for the development of the system.2. It spells out in detail the subsystems lentry to processing. It also provides a way to handle the systems or subsystems by way of simplification.4. The organisations which do not care to take proper decisions in these areas suffer from over-investment. coupling and decoupling of subsystems.4.· The query processing should not exceed more than three seconds. · The focus of the system will be on the end user computing and access facilities.5 Hardware and software plan With regard to the technical and operational feasibility. and storage to printing. It is important to note the following points: . also given to logical system development. one Database versus Multiple database. unless the systems are fully developed their integration is not possible. · Information support will be the first in the strategic areas of management such as marketing or service or technology. linkages.2. programmer skills and know how. For example. Accounting versus Analysis. (d) Manpower composition: analyst. The system development schedule is he information requirements which in turn. are linked with the goals and objectives of the business. 7.4.4. Then the plan of procurement is made after selecting the hardware and software. it is necessary to revise schedule and the development schedule. This development schedule is to be weighed against the time scale for achieving a certain information requirement linked to a business plan. the economics of investment is worked out. Further. 7. the approach to the information system development and the choice of hardware and software are the strategic decisions in the design and development of the MIS in the organisation.2. (c) Resource for system development: In-house versus external. analysis to modelling. customised development versus the use of packages.3 The architecture of the MIS The architecture of the MIS plan provides a system and subsystem structure and their input. (b) System development strategy: Any approach to the system development-Operational versus Functional. If these are not fully met. a batch. under-utilisation and are not he critical information requirements. Database versus Conventional approach. The selection of the architecture. The process is to match decisions with the financial decisions. a real time.2. They are: (a) Development strategy : online. 7. While preparing the schedule due consideration is given to the importance of the system in the overall information requirement. distributed versus Decentralised processing. One can take the phased approach of investment starting from the lower configuration of hardware are going over to higher as development takes place.

3. products. The organisation’s strategic plan should be the basis for the MIS strategic plan. which becomes the basis for the ascertainment. The classification could be as shown in table below. Who will achieve it? Details on the investment schedule and benefits. Architecture of the plan Information Technology details. The complexity can be handled if the information is classified on the basis of its application and the user. The information system development schedule should match with the implementation schedule of the business plan. culture. The choice of information technology is a strategic business decision and not a financial decision. Model of MIS Plan Contents Particulars Business environment operat ions. the type of business. locations.3 Ascertaining the class of information Ascertaining the information needs of the management for the business execution is a complex task. When and the tools for achievement? Schedule of development Details of the systems and subsystems and their linkages charted against theWhen and how will it be time scale. goals and objectives? What is information? the key Information needs Strategic/ planning. services. Class Organisational Example of information User The number of employee’s. and current Where are we? What is the foundation of business? goals/ Where do we want to reach? Focus Corporate information Corporate philosophy Policy.4. new mission/ Corporate mission/ goals/Current and objectives objectives. turnover and variety of the details of each . of the plan Internal and external resources. achieved? Organisation and executionManpower and delegation details. guidelines.1. How much will it cost? Budget 7. operational. Clear quantitative statements on these factors showing a trade off between theWhat is the risk? Is it worth Business risk and rewards risk and rewards. the risk? Business strategy policy andDetails of the strategic and policyHow do we achieve the decisions affecting the business.Many users at all the levels. 2.

payables. Non-moving inventory. outstanding. production technology. rescheduling and loading of the jobs on the shop floor depending upon the persons present. statutory information. Functional Top Knowledge Decision support Status information on a particular aspect. It is necessary therefore to map the information in terms of data . Section officer Operational The design of the MIS should consider the class of information as a whole and provide suitable information system architecture to generate the information for various users in the organisation. etc. The trends in sales. Information for problem solving and modelling. budgets. sales. schedules. production. such as utilisation. overdueMiddle Management and payments and receivables. in the form of planned versus actual. Operations Management.4. departments and divisions or the functions in the organisation. Purchases. norms etc. Quantitative information on the business status. Information on the production. receivables. sales. despatches consumptions. but its usages are different.3. Let us now proceed to ascertain the information needs of each class 7. profitability standard. TheOperational and information for monitoring of executionManagement Supervisor. Functional heads. Manager Information entity Employees attendance Salary wages & overtime (personnel) x x Manager (production) x x x Manager (Administration) x x x x Manager (Accounts) Human resource information x It can be observed from the table that the information entity is one. The deviations from the budgets.one of these entities. The production manager would use it for scheduling. and its analysis. Management.1 Organisational Information One can define the organisational information as the information required by a number of personnel. industry and business information planMiddle and-the performance and target. Purchase. targets. Competitor s information. Such information can be determined by constructing a matrix of information versus user as shown in the table below. the employee attendance information would be used by the personnel department for legal compliance of maintaining the muster recommended by the Factory Inspector. The corporate planning and administration will use it for manpower assessment and control and manpower forecasting. stocks. requirement versus availability. For example. The organisational information requirement needs to be studied thoroughly and critically as it is used across the organisation.

Most of these targets are business targets such as the turnover. the geographic zones. the price. he is responsible for achieving the targets. Functional information is also used for assessing particular aspects of the business. Work Design For example. etc. Such an information is used for planning. The determination of the information can be done by taking each business function. the marketing manager has a monthly target of Rs 1 million order booking. The manager would be assessed on the basis of responsibility he discharges in conducting the business. The functional information is normally generated at equal time intervals. 7. Functional information is largely factual. it is advisable to store the data in the form of the database which will be used by the users for generating their respective information needs. and the sales organisation structure. half a million invoicing.3. Production. Commercial. quarterly. for the customer order scrutiny the available stock. and develop the information versus the user matrix. say monthly. does not have a use elsewhere. Marketing. This information is purely local to that function and by definition. the product groups.2 Functional Information The functional information is defined as a set of information required by the functional head in conducting the administration and management of the function. Since. and orders on hand throw a light on marketing function of the organisation.source. it can be processed in seven ways. Responsibility The managers in the functional areas of management are responsible for achieving the targets and accomplishing the goals and objectives. For example. locations. receivables. and not more than two months receivables. stocks and so on. the responsibility and the functional objectives. It is. orders pending payable throw light on the purchase function. This information is used for the responsibility accounting and decision making for achieving the targets. budgeting and controlling the operations of the function. These information sets have a functional utility and are required in detail revolving around several dimensions. The procedure of the order processing requires this information. This information is used by a manager to plan and control his function. Since the usage of the organisational information is at different levels for different purposes. The functional information can be assessed on the following three parameters-the work design. the product. the stocks of finished goods. utilization. it would be necessary to inform him on these aspects at regular intervals. the market segment. necessary to inform and update the information on targets at regular intervals to enable him to make or change decisions in domain of operations. production. Sales. Functional objectives . The raw material stocks. the terms of payment and the probable delivery is an information set evolved out of the work design of customer order processing. if you take the sales information. For example. so that the designer can provide the path from the acquisition to the generation and the storage. For example. statistical and detailed in multi-dimensions of the function. viz. the customer. generation and usage.4. for understanding the trend and making comparisons against the time scale. etc. WIP. such as Personnel. therefore.

not to exceed Rs. 10 million. The source of such information are the managers and their functional heads who together execute the business activity. The support may act in two ways. Hence. Considering an example. for consistency and at fixed intervals for updating the knowledge base.3. Most of such goals and objectives are potentially achievable within the managerial and physical resources that the manager has at his disposal. It highlights the deviations from the norm or standard and also any abnormal developments which are not in congruence with forecasts or expectations. the functional information would emanate from the work design and procedures. · Employee attendance per month should be 99 per cent. 0. the overall business plan objectives gives rise to the objectives for each business function. Functional goals and objectives are necessary to achieve overall corporate achievements. and with reference to the functional goals and objectives.2 million · Capacity utilisation should be minimum 85 per cent. whether the sales are declining and the trend is likely to continue in the quarter. necessary the manager on the achievements of these targets on a continuous basis. For example.3 Knowledge Information Knowledge information creates an awareness of those aspects of business where manager is forced to think. and the other as an aid to decision making. · Finished goods inventory. The decision may fall in the domain of top management or the middle management. The nature of this information is analytical and relates to the past. the knowledge information supports the functions of the middle and the top management. the managerial responsibility accounting. planned and implemented the business plan. It contains business results and comparative analysis of the performance. The knowledge infor mation is required by the middle and the top management as they are the ones who have conceived. Such an information shows the trend of the activity or a result against the time scale. · Total sales per month is Rs. Information is used in a decision support system for model building and problem solving. The product is failing continuously on one aspect and the reason of failure is the process of manufacturing. Knowledge information is tracked continu ously and reported in a fixed format.4 Decision Support Information Most of the information required by the middle and the top management is for decision making. The knowledge information is reported in graphic formats for a quick grasp and managerial response. It is. It would be determined by studying the work design and procedures and the responsibility which the manager holds for the business performance. .4. · Outstanding more than six months not to exceed Rs. Some of the business plan objectives are given below based on which each function in the organisation derives its objectives. 7. the current and the future. Such information pin-points the area or entity and forces the managers to act. 7. therefore. To summarize. That information which measures the business activity and evaluates the performance on the key target areas. one for justifying the need of a decision.4.3. is the functional information. decide and act. The information does not act as a direct input to the decision making procedure or formula but supports the manager in the efforts of decision making. The knowledge information may cut across the functional boundaries of the organisation. 1 million. The action or decision may fall in other functional areas of business operations.Each function has its own objective which is derived out of the corporate goals.

4. 7. the system designer acts as a change agent or a catalyst. the information on the non-moving inventory justifies the decision of its disposal at a throwaway prices. unless technically infeasible. 7. The demand forecasts information aids in the decision on determining the economic order quantity for production or a sale. The decision support information can be determined for the company at the entity level leaving its use to the decision makers in a suitable manner. the designer should respect the demands of the user. models and procedures. It brings about organisational change.4) 1. What are the contents of a MIS Plan? 2. In the process of implementation. It can be determined by identifying the tools techniques. The first and the foremost fear is about the security to the person if the change-over from the new is not a smooth one. the work design may make the new job impersonal. Not mix up technical needs with the information needs. These decisions are such that they make the routine administration of the business smooth and efficient. Not question beyond a limit the information need of the user. The source of this information could be internal or external to the organisation. . it affects people and changes their work style. therefore. 1. There are certain guidelines for the systems designer for successful implementation of the system and the system designer should. On many occasions. The main purpose of this information is fact finding and taking such actions or decisions which will affect the operations at a micro level. change the job from one machine .5 Implementation of the Management Information System The implementation of the system is a management process.5 Operational Information This information is required by the operational and the lower levels of the management. These decisions do not fall in the category of the managerial decisions. Second fear is about the role played by the person in the organisation and how the change affects him.For example. draw additional material.to the other. The decisions may be to stay on overtime.3.4. rests with the designer. The user of the system has a certain fear complex when a certain cultural work change is occurring. Not forget that his role is to offer a service and not to demand terms. He should try to develop suitable design with appropriate technology to meet the information needs. and for any successful implementation he has to handle the human factors carefully. 2. used by the managers in the decision making. which could be either favourable or unfavourable depending upon the strategy of the implementation. 4. The process evokes a behaviour response. and a fear complex may get reinforced that the career aspects may be affected. Remember that the system design is for the use of the user and it is not the designer’s prerogative to dictate the design features. send a reminder to the supplier for the supply of material. In short.4 Self assessment Questions (Section 7. the role may reduce his importance in the organisation. Explain with relevant examples the ascertaining the class of information need for the business execution. Care has to be taken to assure the user that such fears are baseless and the responsibility. The designer should not recommend modifications of the needs. 3. 7.

This change can occur in a number of ways. 6. The significant problem in this task is the resistance to change. .5. Realise that through serving the user. 16. Ensure that he appreciates that his commitments contribute largely to the quality of the information and successful implementation of the system. 12.. Impress upon the user that he is one of the users in the organisation and that the information is a corporate resource and he is expected to contribute to the development of the MIS. The first step is Unfreezing the organisation to make the people more receptive and interested in the change. and participation. viz. 17. the factors inherent in the design of the system and the factors arising out of the interaction between the system and its users. 15. Impress upon the user that the quality of information depends on the quality of input which he provides. Hence the designer should be prepared to change the system specifications or even the design during the course of development. so that he is emotionally involved in the process of development. his role therefore still has an importance in the organisation. and eliminating the organisational problems before implementing the system. 8. 13. Not challenge the application of the information in decision making. The Lewin’s model suggests three steps in this process. playing the role of a catalyst. Impress upon the user that the change. The resistance to change occur due to three reasons. Impress upon the user that perfect information is non-existent. 7. Ensure that the user makes commitment to all the requirements of the system design specifications. It is the sole right of the user to use the information the way he thinks proper. the factors internal to the users of information. The second step is Choosing a course of action where the process begins and reaches the desired level and the third step is Refreezing. Enlist the user’s participation from time to time. persuasion. Not expect perfect understanding and knowledger form the user as he may be the user of non computerised system. 10. Ensure that the problems in the organisation are resolved first before the system is taken for development. 14. this process is implemented through an external change agent such as a consultant. This itself can be achieved by improving the human factors. Conduct a periodical user meetings on systems where you get the opportunity to know the ongoing difficulties of the users. which is easily possible in manual system. Many a times. 18. Implementation of the MIS in an organisation is a process where organisational transformation takes place. 9. 11. is not that easy in the computer system as it calls for changes in the programs. Ensure that the overall system effort has the management’s acceptance. The problem of resistance can be handled through education. and providing incentives to the users. where the change is consolidated and equilibrium is reinforced. Train the user in computer appreciation and systems analysis as his perception of the computerised information system will fall short of the designer’s expectation. he is his best guide on the complex path of development. Impress upon the user the global nature of the system design which is required to meet the current and prospective information need.

It should be relevant to the user forIf the relevance is appropriate. Accuracy and precision Relevance to the user Timely information Production information should be reported in terms of quantity. The parameters which are generally considered are as shown below: Parameter of quality Complete data transactions of Example Comments allAll invoices of the month. A low quality information would adversely effect the organisational performance as it affects decision making. system and procedures which generate such a data and the management of the data processing function. is required to be very high.6 Management of Quality in the MIS Information is a corporate resource. If the information is received late it Information on the sales despatch. and the user. Only that Valid transaction and inputdata which meet the designEnsures the validity of the data and data specifications can be used. quality required is high. All the input is processed and controlled. . However. Only correct transaction types are permitted in the system. in turn. 2. the a decision making. and is being used for decision making. labour. Some parameters may have lesser importance in the total value on account of their relevance in the information and its use. 1. it is possible to measure the quality of information on certain parameters. witherroneously leading to a wrong information references. etc. assures a valid information. as important as the capital. The quality of these important parameters is ensured by conducting a proper systems analysis. therefore. is not an absolute concept. documents. quality and groups. The quality of the parameters is assured if the following steps are taken. AllThis achieves integrity of data with vouchers of the month. view of decision making. fields and records) are subjected to validity checks. Inputs (transactions. know-how. act or law using procedure and relevant data. All updating and corrections are completed before the data processing begins. 3. and also subjecting it to audit checks to ensure the system integrity. designing a suitable computer system and ensuring its maintenance from time to time. Its level is determined with reference to the context and its use. decision. respect to the time period. Its quality.becomes useless from a point of pending position. The quality of information is the result of the quality of the input data. or family. Quality. processing design. complete data. Assures that the results are accurate and precisely correct Correct use of the formula orbased on rule. Perfect quality just as perfect information is non-achievable and has cost benefit implications. andIncomplete information forces the rejection and reasons. unlike any other product. system design.7. All these parameters need not have a very high value in terms of the unit of measure. It should beuser to infer or interpret Meaningful and completegiven in a proper format.

In the process of implementation.9 Multiple Choice Questions 1. A. 7. Fines and/or sanctions.4.7 Summary Business decisions are becoming increasingly dependent on high quality information. 9. Impact of discontinuity in service are: Competitive disadvantage. It brings about organisational change. 5. Back-up of the data and files are taken to safeguard corruption or loss of data. Due attention is given to the proper file selection in terms of data. it affects people and changes their work style. Loss of revenue C. To reap the benefits of MIS. 2. periods and so on. run to run controls. All of the above .. 6. Competitive disadvantage B. process control and access control. The user of the information is the best judge of the quality. Loss of revenue. the system designer acts as a change agent or a catalyst. The access to the data files is protected and secured through an authorisation scheme. the same being true for MIS. Intermediate processing checks are introduced to ensure that the complete data is processed right through. Any kind of business activity calls for long-range plans for success. 7. Impact of discontinuity in service are _________ . The system modifications are approved by following a set procedure which begin with authorisation of a change to its implementation followed by an audit. i. Problems with cash flow D. Utility of information and its relevance are the two other measures of quality. Information technology has made it possible for many people to perform their job functions using their home as an office. 8.e.8 Terminal Question 1. Increased costs. What guidelines should you consider to have an successful implementation of system. The implementation of the system is a management process. systems are developed with standard specification of design and development 11. the implementation is very important. and for any successful implementation he has to handle the human factors carefully. computer system processing is controlled through programme control. The assurance of quality is a continuing function and needs to be evolved over a period and requires to be monitored properly. How do you manage the quality in MIS 7. It cannot be assessed in physical units of measure. Problems with cash flow. The system audit is conducted from time to time to ensure that the computer system specifications are not violated. 7. 10.

Violation of laws B. Zonal offices 7. The possible cause of fraud could be ______ A. TQs and MCQs Self Assessment Questions Section 7.2. Head offices B.4. This has been mentioned in section 7. reporting regulations C.3 Section 7. This has been mentioned in section 7. This has been mentioned in section 7. This has been mentioned in section 7. _________ established away from the city center and near employee residences offer an alternative to the home office.10 Answers to SAQs.3.1 2. This has been mentioned in section 7.2.1 2.2.4 A. D 2.6 1. Regional offices C. Satellite offices D.6 Multiple Choice Questions 1. C 3. Lack of adequate safeguards over organizational resources 3.2. This has been mentioned in section 7.5 2. C . This has been mentioned in section 7.4. This has been mentioned in section 7.2 Section 7. Deliberate communication of wrong information D.2 2.4 1.3 Terminal Questions 1.

We conclude the unit with the relevance of IT and the link with BPR and MIS.1 What delays the business process? 8.3 MIS and BPR 8.3) 8.2.1 Definition and Approach 8.2.4 Self Assessment Questions (For Section 8.7 Answers to SAQ’s.4 Summary 8. we would start with the definition and meaning of Business process reengineering. Objectives: At the end of this unit. Value stream model of organisation 8.2 Organisation and Business Process Reengineering 8.6 Multiple Choice Questions 8.2 Relevance of Information Technology (IT) 8.3.5 Terminal Questions 8.3.3 Redesigning of Processes 8.Unit-08-Business Process Re-engineering Structure: 8.2 Business process 8.5 Self Assessment Questions (For Section 8.1 Introduction Objectives 8.3 Process model of the Organisation 8.1 Introduction In this unit. you should be able to · Define Business Process management · Understand business process and its elements · Explain value stream model of organization · Relevance of IT in BPR .2.2) 8. TQ’s and MCQ 8. Then we analyze the business process and value stream model of organisation.2.

Any re-engineering exercise. Radical redesign is the second important concept used in the definition of re-engineering. quality. practiced and found acceptable for centuries.· How MIS and BPR are linked 8. service is improved and the customer gets higher value at a higher speed. Is there any other way whereby the sales transaction can be registered and money recovered without raising the invoice document. are to be rejected. The radical redesign calls for trimming and chopping of these designs so that the cost is reduced.. The business and its management in terms of marketing. one can question the necessity of an invoice for billing and recovery of money.2. It calls for pushing down decision making to the lowest level by enlightening and empower ing the people. etc. sales and accounting functions will be replaced by the ‘management of processes’ which starts in the organisation and end at the . less space a product or service of excellence and highest customer satisfaction. It requires a vision. value engineering and so on do not fall into this basic approach to re engineering. which terminates at the customer door contributing to the value desired by the customer. the business is conducted in a certain manner. production. The approach to re-engineering aims at customer focus. service and the speed at which it delivers. The conventional approach of organisation development. process it. The old principles like when it is a money matter it is for finance and accounts to handle.1 Definition and Approach Michael Hammer defines re-engineering as ‘the fundamental rethinking and radical redesign of Business process to achieve dramatic improvements in the critical contemporary measures of performance such as cost. The new benchmark may replace the cost. The definition of re-engineering is loaded with a number of important concepts and its understanding is necessary for successful re-engineering of business. The fundamental rethinking calls for questioning everything that is being followed. It requires questioning on the basic principles of management and administration which are used for decades. For example. It will further generate and. you buy raw material. The new rules will consider the customer for whom the organisation and the business is established. It requires organisation restructuring and redesigning based on the process. It requires one to take a different view of the business-the view based on the process and not on the tasks or functions. sell and distribute the goods to the customer. The fundamental rethinking calls for starting all over again rejecting the past. The radical redesign calls for off-loading the activity outside the business organisation if it contributes to the cost and not to the customer desired value. when it is a matter of quality it is the responsibility of the quality assurance department. quality. i. pack the finished goods. and rest to be done through outsource. When the reengineering exercise is complete. It suggests only to do what can be done best. It begins with the objective of activity elimination. The new rules will force one to think in terms of ‘process and not tasks or functions. work study. computerization. There are standard procedures and designs for these activities. tools and techniques. the organisation will have fewer people. then improvisation and finally outsourcing. service and speed’. mechanization. frame new rules of the business game.2 Organisation and Business Process Reengineering 8. automation. The redesign calls for a change in the technology. an innovation and an imagination. The fundamental rethinking and radical redesign’ mentioned in the definition is that exercise which produces dramatic improvements.e. It rejects old legacies and ‘proven’ practices. The first and the foremost is fundamental rethinking. For example. The improvement that re-engineering expects to generate is to set a new benchmark. if it produces only marginal improvements is then not a result of fundamental rethinking and a radical redesign.

The organisation chart of the business will not be shown with the hierarchical structure of people bound by functions but it will be described in the hierarchical structure of processes. What is required by re-engineering is a change of focus. payables and receivables. but how quickly the customer problem is solved and his service expectations fulfilled. etc. overheads. The mindset should change from direct cost to this cost of busin ess performance. the main process and the sub processes which contribute to the result of the main process. When cost is to be controlled so that it is affordable to the customer. resulting into the value in which the customer is interested. In the present world. The flow of information will be free from barriers. Customer satisfaction would be measured now not by the number of complaints. Fast response whether it is order delivery or complaint handling is what the customer is looking for and is what the organisation should provide. The fundamental redesign of the business processes requires a significant change in the mindset of the people across the organisation. The reason for the emphasis on this point is that all the organizations take efforts to control the direct cost through change in the product design and the technology.. the order book may be full if it takes a long time to process the order but the business is exposed to the risk of not getting the repeat business orders. inventory. Procuring the right material of the right quality is important but how soon can the material be procured is vital. customer complaints. though this cost does not add any additional value to the customer. lesser the stocks and lesser the cost of procurement. These measures and methods. Another change would be in measuring the performance of business in terms of customer satisfaction. communication. Hence. The direct cost is material and labour. pend ing orders and queries. procurement. i.e. The re-engineering of business calls for a change in the management philosophy. the planning should be in terms of direct cost of execution of business. which in any case should be few. But adequate attention is not paid to the cost of business execution. The re-engineering exercise will measure the process efficiency and effectiveness of the existing processes and bring in a dramatic improvement in all the performance criteria of business such as the cost. Another radical change in the mind set is from the cost and overhead to the performance cost.customer door. the cost of the order processing. are not meaningful in the present competitive business world. the quality. etc. The process thinking and multiple process integration will make the organisation seamless. It calls for new rules of business to manage the multiple processes. While the cost of execution is the aggregate of all the costs incurred in the business pro cesses directly associated with or supportive to the main activity of converting the raw material into the finished goods. Business re-engineering requires a major change in the mindset. order processing cycle time is important. is the costs of the business execution. though not wrong. The business strategy should be competitive rather than protective to . it has to be done in the shortest possible time. It will retain mainly those processes which affect the contemporary measures of performance and cond uct them in such a manner to produce an additional value to the customer. Customer satisfaction would be highest if the price paid by the customer is convincingly appropriate for the value the product or service offers and there is no better option elsewhere. hour to minute and minute to nano second. distribution. Instead of orders. Whatever is done. day to hour. business performance is measured in terms of order book. The units of measuring time will gradually shift from week to day. tools and techniques. storage. delivery. The shorter the cycle time. It is analyzed based on cost. The business should be thought in terms of time and process cycle time. For example. the service and the speed of delivery. The procurement cycle from the requisition of material to physical arrival of the material is import ant. from physical aspect to time aspect of the business. The organisation will now be described using processes running across the departments and functions. turnover. general administration. use of better materials.

The significant addition to the traditional performance measures is the knowledge resource. their number needs to be controlled. But now this is not sufficient. Hence for the productivity gain. Market share is also an important yardstick. the productivity of the order processing task in the marketing department is not important. The concentration on the productivity is necessary but the emphasis should be on the process productivity and not on the task or the function productivity. In short. or the business will be threatened by an altogether new development and so on. productivity and efficiency which are all taskbased should be measured for the process. efficiency to effectiveness and productivity to performance. The management of the organisation would boldly and openly express these relations as an asset of the organisation. Michael Hammer’s definition is comprehensive to cover all these aspects of change. What is important is how much knowledge they have about the various aspects of business.maintain leadership and growth. quality to satisfaction. there is no doubt that the cost of production should be less and less than that of the competitors. Dramatic improvements are possible only if there is change in the mindset and the management philosophy in tune with the requirements of business. much more than just contractual and legal. traditional measures like the cost. efficiency. a franchise strengthening the endeavor of the organisation to service the customer. It should be such that it keeps the organisation under a constant state of alert. The control of overheads should be exercised on the process and not on the functions. the’ quality’ also needs different interpretation. Instead of delivery promise. overheads and many others are useful but would not be relevant in the coming decades. It is not very important as to how many people are engaged in the business though undoubtedly. Once the business has been re-engineered the management thinking would be oriented towards customer satisfaction. These relations would be of business partner. The focus would shift from the management of the company to the management of corporate relations between the management. Re-engineering calls for a change in the performance measures. The correct measure would be the value it generates for the customers. are you competitive on the ‘value’? Yet another important measure. Productivity can be improved by various methods but still the customer receives the delivery of the product very late. the entire process of the order receipt to the delivery and recovery of money should be considered. productivity. quality. Further. quality. the appropriate measure would be service fulfillment. But the real measure is whether the quality fulfils the expected satisfaction of the customer. a new technology would bring down the cost. The service is all comprehensive measure than just the delivery promise. viz. Measuring the sales in a niche in itself has a very sharp focus. These relations would take shape in the arrangement such as an alliance. The focus should be on process productivity where the process terminates at the customer end. . The same is true of overheads. The traditional performance measures. Another change in the management philosophy should be from delegation to empowerment down the line. the change is from cost to value. the suppliers and the customers. The relationship should be based on trust and not on command control principle. The market should be measured in terms of the share in niche and not as a percentage in the large segment.. For example. the product will be replaced suddenly. the cost. or overnight. The relations should be such that they support the mission and the goals of the organisation. It is not the number but the quality and the level of knowledge they have. For example. It is imperative that the management should ensure the quality the product is claimed to have. These are the times when like an earthquake. The question is.

the scope expands to manufacturing. 8. In the process execution. The business process is defined as ‘a set of activities performed across the organisation creating an output of value to the customer’.The business in the coming decades will largely depend on the knowledge the people have. then the management is running a high risk business. validated and used for decision making. the data is gathered. processing. If knowledge is inadequate. Table 8. Likewise. the scope of the bill payment is not limited to the accounts and finance departments but it covers ordering the vendors. delivering and recovering the money. producing the results and communicating them. In a classical organisational set-up.mental changes in one’s conventional thinking. Every process has a customer who may be internal or external to the organisation.2. The learning ability of people will build the knowledge resource. storing. the new measures suggested here are critical and important. performing. one is required to make some very basic and fund a.engineering. outdated and irrelevant. The process is executed through the basic steps such as receiving the input. The decision is then communicated.1 gives the business performance measures-traditional to modern form. . processed and stored. is that the purchase order information decides the number of aspects of bill payment. When the bill payment process is to be re-engineered. You concentrate on the ‘process’ and not on the task when it comes to re. measuring the input. For example.2 Business process For initiating business re-engineering. the different processes are handled in parts within the four walls of the department and the functions are limited to the responsibility assigned to them. But when it comes to re-engineering. recording. it will be re-engineered right from the purchase ordering to cheque payment to the vendor. But when it comes to comparison with others. Traditional performance measures will continue to play important role as before. receipt and acceptance or goods and paying the bill amount. The basic element of the processes is motivation to perform certain activities. accessing data. The business is re-engineered through process re engineering and the business has a number of processes which together produce the business results. the order processing scope in the traditional sense is within the marketing department. The data is used in the process to generate the information which would be checked. The scope of the process runs across the departments and functions and ends up in substantial value addition which can be measured against the value expectation of a customer. analysing the document. The reason for covering the purchase ordering as a part of the bill payment process.

it consumes resources and time. The other processes in the organisation contribute to the overheads of performing the business function. the customer is looking for. it will be seen that the people are moving papers and products to achieve some result. The critical business processes are those. The re-engineering approach attempts to eliminate or shorten the steps so that resource consumption is reduced and time of process execution is shortened. The value stream processes are critical and become the immediate candidates for re engineering. the processes involving attendance. When the process is performed. Every process is made of a series of activities. to the value customer is looking for. If the external customer focus is taken as a criterion for process selection. In each activity some ‘work’ is done which produces some result for processing into the next activity. there are long processes and short processes. such as. document. produce and communicate. These steps are performed a number of times across the execution process. Such processes are a second priority as far as re-engineering is concerned. payment of wages. measure. processing and storing · Information processing · Checking. For example. If the work done under any activity is analyzed. access. resulting into a business result. A business process defined for re-engineering has a clear cut ’start and end’. . leave. In the process they collect the information for decision making and then carry out a physical activity of pushing the product or the output using the paper for record. receive input. security. But the process of new product development from the concept to the prototype is critical as it is expected to contribute high value to the customer.Basic elements of business process are: · Motivation to perform · Data gathering. process. In organisation. which contribute to the value significantly. It eliminates redundancy by eliminating the steps. travelling and accounting are not value stream processes as the resources employed in them do not create a value or improve a value to the customer. There are critical processes and not so critical processes. then all the processes which generate and add value to the customer are called the value stream processes. validating and control · Decision making · Communication All these relate to human initiative. A business process in any area of the business organisation performs through basic steps. record / store. perform. analyze. which do not contribute. For example. While the non-critical processes do not contribute much to the value. the process of receiving a visitor in the organisation could be considered as non critical. document and communication.

It will not permit thinking on the task basis within the confines of the function or department. Such processes contribute to substantial overheads and could be considered for cost control leading to the price reduction under the reengineering methodology. rules. The classical organisation model is recast on the basis of processes ignoring the people hierarchy. A process may begin in one department and run across other departments producing a business result of some value. processed. audit. The stimulus to activate the process could be external or internal and it flows across the departments where the data is gathered. analyzed. decision and product stand to scrutiny through a fundamental rethinking for radical redesign to produce dramatic results. where the resources are used intelligently and the productivity is the highest. the processes which are essential for the smooth working of the business such as the employee related processes. expectation and perception are affected. 8. Once the process view of the organisation is taken. In re-engineering exercise all the six entities. and removes the barriers on . process runs across the department of the functions where the department or the function heads hold same or similar positions at par in the organisation structure. the old conventions and practices of business processing undergo a radical change. viz. The process is handled by a number of people having different status in the organisation. and powers within the scope of function of the department they are handling. The change breaks the hierarchy.1: Work model Figure 8. The need for constructing a process model of the organisation is to force some fundamental thinking. 8. etc. process and effectiveness and productivity. For constructing the process model. general administration. and redesigning that will bring a dramatic change in the working and the end result of the organisation. canteen. are not considered. people.1 shows this work model comprising six elements. budgeting and accounting.Fig. The process model of the organisation considers only those processes where the’ end’ of each process produces a result whereby the customer concern. They are backed by authority. and promote process optimization. The people who manage the business are engaged in the series of such work modules distributed across the organisation. participating people are considered as a team working with the sole objective of achieving the customer expectation on value.3 Process model of the Organisation The re-engineering initiative begins with viewing the organisation through the processes and not by the tasks or functions. the decisions are taken and the intermediate results are passed on to the next stage for further processing. information. It will help to redesign the process in terms of input. it is a business process. When such work modules are viewed together as a single entity. As discussed earlier. In such process. interest. paper. Every activity in the process will be evaluated from the stand point of an ultimate result. It considers only those processes which produce value for the customer.. The process view of the organisation will prevent functional and local suboptimisation. activity.2.. security.

therefore. Depending upon the value choice of the customer. which will fulfill the basic needs of the customer by producing a product. Every organisation. the team members stay where they are but work or. Further. The team is not a committee where the subject is discussed. The managerial or supervisory role is abandoned and replaced by a role of facilitator. To improve the performance of the team a number of measures are used. perceived belief. if the value expectations are fulfilled. procurement processing. recovery. relevant to the organisation. must identify value streams in the process model consistent with the business. However. Due to information technology usage. which will satisfy the value perceptions of the customer. delivery. and ease of access. packaging. The organisation is required to design such processes. which is designed. It is put into database. value mix and buying decision criteria. It facilitates freeing data from ownership. The value is an intangible concept and the customer has his own perceptions on the value. He may consider all the parameters or only a few of them for his buying decision. give sustainable business advantage to the organisation. the decision making intelligent and purposeful and information .the access and use of information. which affect the cost. They are empowered fully to perform at the stage where they are mobilized and do not have to seek approval or sanction elsewhere. the processes of the organisation become critical and relevant. however. growth. For example. For example. order processing. the goods manufactured and the nature of business and its objectives. The access is free to all concerned but at the same time it is secured properly to prevent unauthorized access to the information. The business organisation. the team uses information technology extensively. The customer is satisfied when he believes that the price paid by him fulfils the value expectations. the analysis quicker.4 Value stream model of organisation The organisation is established to fulfill customer needs. can be seen as a value stream model. the process organisation can be implemented. having associated customer values. As a team member their role is self contained and complete in every respect. All these processes deal with some aspect of business. bill payment. the customer satisfaction is automatic. if redesigned properly. Once the process model and the value stream model is built. the data search is faster. The work group culture is a radical cultural change in the working of the organisation where the information technology plays a significant role. In the information technology application.2. therefore. It deviates from the command control system to a system of work group called as team. people come together to form a work group. The process model. The work group. 8. the quality. All organizations have some processes that are critical from value viewpoint. an intangible measure. These processes. are the secondary processes that support value delivery to the customer. leadership and competitive advantage. The customer puts value based on which he evaluates the product or the service on about twenty-one parameters. The value is a measure. the information database to achieve the desired result. On the technology front. price. customer relations and product development and design are value streams in any process model. analyzed and the decision alternatives recommended for approval and sanction. an organisation in food business will consider those processes critical and relevant which produce food products fulfilling basic needs of appetite and taste and meets the value expectations on availability. these processes create a competitive and strategic environment and clear customer focus. manufacturing. has to decide which customer segment it will like to serve and then evolve various business strategies. Only these critical processes really matter for business success in terms of survival. independent of its application or use. supplier relations. as a team. In the process execution. which is difficult to count in clear terms or specifications as different customers have different value priorities. communication processes etc. Processes like invoicing. executes a complete process cycle. They lose their function or departmental identity as a team member. the service and the speed. They give clear guidelines where the organisation should invest for high returns in business through re-engineering. The team members are at par and perform as equals.

training and support. rest all should be commissioned outside. it is necessary to normalize the processes by segregating them based on internal and external customers. smarter products and an intelligent software. The changes in process design must cut down the cost. All value streams are linked through the information paths installed on Local Area Networks and the Wide Area Networks. keeping the existing processes as it is. the organisation will have less or no bureaucracy and hierarchy. When the information technology is embedded into the process. . improve the quality. The use of information technology. While building the process organisation. The reengineered process organisation will have process managers. The extensive use of Expert and AI systems is made to improve the decision making process and the decision quality. Policy. suppliers and customers should be made business partners so that they work for achieving common business goals. the organisation becomes seamless with free information flow. the people in the team are empowered to make decision through education. The relationship between the suppliers and customers should be such that they cooperate and participate in the processes as equal partners and team members. The existing processes shall be redesigned if they suffer from defective philosophy. For the effective process organisation build. In other words. and efficient.update instantaneous. policy and rules. delayering will make the organisation slim. from external · Take the process beyond the organisation · Think in terms of business partners / associates and not as buyers and sellers · Retain only those processes which contribute to the value to the customer and sub contract others Since the people in the process are empowered themselves. They are supported by a knowledge database and decision support systems. Hence. All these arrangements and changes should be tested based on value improvement. Some processes should be considered for sub-contracting or outsourcing if they fall in the area outside core competency. knowledgeable workers using smarter machines. The whole process is faster making human resource more efficient and productive. and make the delivery faster and response to the changing needs of the customer quicker. and Practices followed by management over a period. The broad steps of building the process organisation are as follows: · Motivation to perform · Free Data/Information from ownership · Build seamless information flow · Provide access unlimited · Empower person(s) through support · Recast business operations into process (Client and Server) · Designate process managers · Segregate processes where customer is internal. Pride. would make them faster no doubt but they would continue to be inefficient. The processes should then be scrutinized by questioning the Philosophy. The processes in which the staff is best in all respects should be retained in the organisation. Procedure.

The information technology capabilities can be put to use while redesigning the process so that such repetition is eliminated and all the decisions covering all aspects of the busin ess are settled in one stroke. refers. The willingness to do some fundamental thinking and redesigning radically is a key to success. The re-engineered process organisation will have less people using very little space. 8. validating.5 Self Assessment Questions (Section 8. The knowledge will become impersonal and available to all. human resource management and defining the business and its scope for the organization. 2. fulfilling various other needs outside that process in the organisation. the receipt of goods.2) 1. Explain with relevant example the concept of business process. The power structure would break the spirit of authority and the dominance will be replaced by cooperation and a participative affinity. The process will be transparent and results will be visible. Table 8. The process operators repeatedly search. The exercise of the process organisation building begins from the top management group whose initiative and commitment to re-engineering matters and is inevitable. Explain the value stream model of the organisation. d) the value declarations are correct and complete. Also mention their elements 3. The aspects are whether: a) the receipt is against the valid purchase order.3. confirming and conforming are carried out only once in the redesigned process with the help of information technology. The change will affect the work culture and management philosophy. a transaction when processed with the information technology application. a typical business transaction is settled for acceptance. collating. c) the terms and conditions of supplies are fully met. which requires careful handling of a number of issues simultaneously. and analyze the same data or a set of the data in different contexts across the process for achieving the local objectives of the department or function. a number of processing steps are repeated across the process.Building process organisation is a complex job of implementing a change. its matching. b) goods received are as per specifications both in terms of quality and quantity. and e) amount payable is computed and kept ready for confirmation through the bill of the supplier. The number of steps in any business process related to the data search. All will have a common goal of realizing customer satisfaction.2 shows the approach to select re-engineering opportunities. and if conventionally designed and implemented on functional lines.3 Redesigning of Processes 8. . compute. The organisation will be flexible and responsive to the customer needs. What do you understand by the term Business process Reengineering? How does it differ from the traditional concepts. For example. The issues are related to the choice of technology.2. saving the process time considerably. It will be managed by people of vision capable of producing innovative ideas and possessing a high tendency to change.1 What delays the business process? A business process is complex and lengthy. Through this process. This increases the process cycle time. access. 8. settles a number of aspects of this one transaction.

it updates the purchase order status. The . Electronic Data Interchange and E-mail has made it possible to process any input at any location and transfer the output in any medium to the other location. the Information Technology helps to generate the goods rejection note for the information of the suppliers. It can handle first the receipt of goods. If all methods of scrutiny. The swift and versatile communication capabilities cut down not only the mailing time but also provides facilities for follow-up. the information technology uses its own data and knowledge bases for decision-making. why and from which location. such data is kept under the custody of the senior people in the organisation and its availability is person-dependent. message processing and action. analysis. and decision-making are put in the redesigned process using information technology capabilities the time taken in the transaction and processing is saved. it is handled by breaking the process in a series of smaller tasks and con necting them by information linkage or decoupling them by providing the data and information in the stored form. no separate document is generated. It will give an effect in the accounts payable as per due date and generate payment voucher for accounting and cheque for payment to the supplier. if necessary. image and video. Video conferencing. a transaction awaits for scrutiny. and the acceptance followed by inspection. usage. The process team members perform a wider comprehensive role in the information technology dominated redesigned business process. The information technology provides the capability of updating a receipt transaction in stages with the appropriate comments or remarks. In the conventional approach of processing. the stock status and generates an indent for material issue. If the goods are accepted. analysis and approval by the decision maker. The entire business process is normalized by removing the decision makers and giving their role to the information technology. The information technology is capable of handling progressive updation and documentation of a transaction. The action may call for generation of documents or communication to the concerned agencies for the knowledge and action. voice. Communication is possible in all media-text. when the business process is complex due to the business rules and methodology. This causes a delay in processing and tackling a transaction efficiently and effectively. formula and procedure are satisfied. and communication to all the concerned agencies are saved reducing the process cycle time. filling and updating the records.Since all such aspects with the variations are settled at one place in one stroke. The hardware and the software heterogeneity does not pose any problems. IT is capable of analyzing the situation created by a business transaction and further interpreting the transaction results in terms of the policy and rules and then triggering action at various points. The information technology provides the capability of handling this aspect of the information whereby the access. Though using these capabilities. then in warding. multimedia processing. when. The delays arising out of queuing and hold up due to the absence of the decision maker. Taking the example of receipt of goods once again. and update rights can be given to selected trained people and the system keeps an account of its use in all aspects-who. normalized and expedited. The modem information technology provides very powerful communication facilities with no limitation of distance. rule. the time taken for signatures and counter signatures. approval. This saves paper flow and delay due to non-attendance of documents. the dependent steps in the rest of the business functions are expedited reducing the total process cycle time. etc. IT is capable of triggering the action if certain conditions framed by the management in terms of the policy. In the functional approach. The modem information technology provides intelligent capabilities to incorporate business rules in the application system. The use of this capability reduces bureaucratic dependence on the senior person in the hierarchy or the authority reducing the processing time. whereby the decision making at all levels can be rationalized. The inputs in these media are possible to handle without regard to the distance. The issues revolving around secrecy. In the conventional functional processing. confidentiality and safety of the data and information can also be handled effectively using IT. At each stage.

if the process is showing signs of inefficiency and ineffectiveness. time.3. With these facilities. Any business process in the course of execution gathers and processes the data and stores it for further use. At each stage in the redesigned process the functional tools. It increases the people productivity and process effectiveness. the team members are motivated to work for the elimination of delay and to achieve superior business process results. With this possibility data. The delay arising out of mailing. reducing the process cycle time. when and why’ of the delay in the process. The range of technologies in all fields. etc. The working of the organisation is made seamless and transparent to all by the information technology and its working can be changed keeping in view the supplier and the customer needs. The capability of the information technology is phenomenally higher and assures dramatic results in the cost. if the process is redesigned to meet the enterprise requirement. the people intervention for consultation. The storage capacity has no limitation and the hardware-software capability is no problem in IT. processes need not wait for the data or information. The information technology needs intelligent handling and application for redesigning the process. message and document transfer to the supplier or the customer is easily possible without any time delay. is a very strong potential enabler in the business process reengineering. a transaction. person. . Since. is considerably cut down. and no delays are experienced in handling a complex business transaction. knowledge. the process operators acted as individuals in isolation creating the barriers in movement of papers and information. The processing can be redesigned in such a way that the systems in the organisation and that of the supplier or the customer can communicate directly to each other. discussion. Since.information technology can handle such complexity in the business world through the business performance rules embedded into the process and in its informa tion system.2 Relevance of Information Technology (IT) It is experienced that the role of the information technology as an enabler is very important and significant in re-engineering. the redesigned process would extensively use the information technology. The client performs this task and transfers the advertisement to the firm for further processing. the information technology can analyse and identify the ‘where. Since. they can be redesigned to access and take any information from any other distributed database. gets processed very fast independent of the location. the rules and the business intelligence is an integral part of the redesigned process. For example. service and delivery. Its contribution. study and suggestions. or position. decision making and opinion seeking is eliminated. sanction. the database can be distributed at the different locations and still can be viewed and used as one database. compared to other technologies to the radical redesigning of the process is maximum. therefore. The integration of all types of data for business processing is possible. The advertising firm can design and develop the advertisement on their system and send the same to the system of the client for viewing. the redesigned process with Informa tion Technology support will be response driven. The capabilities of the Infor mation Technology enable the organisation to redesign the processes for a team of persons working for a common goal and customer satisfaction. Since. The hierarchy in the organisation is reduced eliminating the bureaucratic interference. it is possible to cut down drastically the new product advertisement processing time. based on the microprocessor applications affect a number of factors of the business processes. With this technology. It is possible to distribute appropriate information technology facilities at different locations and connect them in a network. it is possible for the team leader or manager acting as a facilitator to take quick action. and skills are provided. Each process stage is complete and self reliant. The facilities are capable of handling private and public databases to provide information to the decision makers. The information technology. simple or complex. 8. approval. advice. In the conventional process design. know-how.

Once the action is complete in the process. the necessary document would be generated and records at various locations be updated for further reference. printing. The knowledge database can be used for decision making by all. the information systems are tools. the Information Technology capabilities provide very mature and intelligent support in manufacturing. In the course of execution. speedy processing and storage and communication to any location helps to build the knowledge database. are improved by IT. its key areas of attack are time and resource used by the processes. and decision making. validates and controls a number of aspects of the business process before taking a decision for implementation. It is a process improvement enabler in Re-engineering the business process. being efficient and effective in meeting the goals of re-engineering. It is possible to process the data at one location and effect the update at other different locations. Our goal in re-engineering is to save the process time considerably and use minimum direct and indirect resources. computing. The processes on the shop floor and warehouses can use the IT effectively to expedite all the steps of movement. The data can be an on-line data or an off-line data as the need be. . its relevance to business process reengineering is very apt. information and decision-making. is found riddled with a number of steps where the Information Technology can playa role of an enabler to improve the process parameters. The use of Information Technology enables the re-engineering of the value stream process to be an expeditious process. transferring and communicating. Beyond this. The storage of the data can be structured around the hardware and software. the speed is very high. Day by day the storage medium is becoming smaller in size but at the same time its data holding capacity is increasing. analysing. checking. The IT provides work flow automation software. material handling. access. The Information Technology. The first part of the process identifies searches. The information technology is an enabler. If any business process is analyzed it has two parts-one physical processes such as movement and handling of paper and goods. plotting. The physical processes and the data handling processes go hand in hand. picks up and then moves the paper or goods to the next stage for further processing. processing. each business process is to be redesigned for a dramatic improvement. They are complementary and supportive to each other. The capability of the IT for data capture. There are different media to store the data and information. The search capabilities of the IT are so versatile that an unknown entity can be searched with a limited or a hazy clue. computing. etc. IT is an intelligent partner in the re-engineering project with its range of technologies. assembling and packing. picking. Since. such search is handled with the quick access capabilities. takes over all human functions related to data. The speed and response of the basic steps such as searching. and other related to the proce ssing of the data. it checks. locating. relocating and distribution of the goods. Intelligent material handling systems are available which use data for locating picking. shifting. locates. in fact. It is possible to store data in a distributed order in different locations and still be one database in the whole organisation sharable by all. warehousing and reducing the process cycle-time. A business process. It performs the validating. IT provides storage capabilities in a number of ways. The second major component in the business process is data analysis and decision making to trigger a suitable action. Since. The capacity of the storage medium is very high. Bar Coding Technology. communicating and processing at a mind-boggling speed and precision. The Information Technology provides different capabilities to deal with these requirements of the business process. Similarly. The Information Technology. The relevance of the Information Technology is appropriate due to its merit as the catalyst and the process partner for improvement.The business process requires the formation and its analysis for decision-making. and intelligent material handling systems using microprocessor based technology to handle the physical side of the business process. handling.

The Manage ment Information System in a re-engineered organisation would be process centred. production. evaluating customer satisfaction.3. etc. The management information system will capture the data on the various milestones in the process and create the MIS report for management at all levels.4 Summary The approach to re-engineering aims at customer focus. It is. enabling the process to become automotive in its execution. expectations and perceptions. where triggers are used to move the process. Explain the link between MIS and BPR.4 Self Assessment Questions (Section 8. the .and the decision support systems are drivers for the process performance. 8. The role of Management Information System will be raised to a level where the following activities would be viewed for the management action: · Control of process cycle time · Work group efficiency · Customer satisfaction index · Process efficiency and effectiveness · Effectiveness of the Management in enterprise management and not in enterprise resource · The strength of the organisation in terms of knowledge. learning and strategic effectiveness The traditional role of the MIS as a decision supporter will continue. work culture and style and the value system.3 MIS and BPR Any exercise towards building design of the management information system will be preceded by an exercise of business process re-engineering. It requires one to take a different view of the business-the view based on the process and not on the tasks or functions. The decision support systems will be integrated in the business process itself. material. processing. What are the possible reasons for the delay in the business process? 2. however. The traditional MIS is function-centered like finance. The triggers could be business rules and stored procedures. 8.3. Are-engineered value stream process will generate the transactions to effect the business result.3) 1. analysis and report ing would be process central and performance efficiency would be evaluated in relation to the value generated by the processes. the quality. The re-engineering exercise will measure the process efficiency and effectiveness of the existing processes and bring in a dramatic improvement in all the performance criteria of business such as the cost. therefore. essential to have a relook at the organisation where the mission and goals of the organisation are likely to be replaced. The MIS will concentrate more on the performance parameter evaluation which is different in the re-engineered organisation. This would change the platform of business calling for a different MIS. The MIS in the re-engineered organisation would be more of a performance monitoring tool to start with and then a control for the performance. Building the MIS is a long-term project. 8. The data capture. The business itself would undergo a qualitative change in terms of the business focus.

This has been mentioned in section 8. A. Michael Schumacher C.2.6 Multiple Choice Questions 1. Business re-engineering requires a major change in the _______ . Micheal Jackson D. The hardware and the software heterogeneity do not pose any problems.2. 2. This has been mentioned in section 8.service and the speed of delivery. Michael Clarke 2. A. 8.1. Find out a relevant case in which BPR has been adapted and relate the concepts that you find in this chapter with that case. _______ is traditional measure. cost B. The modem information technology provides very powerful communication facilities with no limitation of distance. A. Machine B. 2. TQ’s and MCQ Self Assessment Questions Section 8. quality. ______ defines re-engineering as ‘the fundamental rethinking and radical redesign of Business process to achieve dramatic improvements in the critical contemporary measures of performance such as cost.2 . productivity D.5 1. material D.5 Terminal Questions 1. mindset C. infrastructure 3.2. 8. service and speed’. All of the above 8. quality C. Explain the relevance of IT in BPR. Michael Hammer B.7 Answers to SAQ’s.

B 3. This has been mentioned in section 8.3. D . This has been mentioned in section 8.2 2. A 2. This has been mentioned in section 8.1 2. Multiple Choice Questions 1.3.3 Terminal Questions 1.3. Read the entire chapter and relate to the situation.4 Section 8.4 1.3. This has been mentioned in section 8.2.3.

7 Multiple Choice Questions 9.4.3) 9.1 Creativity in decision making by individuals and groups 9.1 Introduction With this unit we shall begin with roles and activities performed by managers and the role played by MIS to fulfill them.1 Software that assists your creativity 9.2 Self Assessment Questions (For Section 9.2 Individual Limits to Rational Decision Making 9.8 Answers to SAQs and TQs 9.1 Organizational Limits to Rational Decision Making 9.1. Objectives: At the end of this unit.1.2 Self Assessment Questions (For Section 9.1 Introduction Objectives 9.1 Managerial Roles and Their MIS Support 9.6 Terminal Questions Summary 9.3 Decision Making 9.3. .2.2) 9. Then discuss the decision making in the organization.4 Individual differences and cognitive styles 9.2 What do Mangers Accomplish? 9.4) 9.1.2.Unit-09-Manager and Decision Making Structure: 9.4. We shall conclude by discussing how the success of a management information system in supporting a decision maker depends heavily on certain characteristics of the individual.3.1 Rational decision making and its limits 9.2 Self Assessment Questions (For Section 9. the rational decision making and their limitation during decision making. you should be able to · What are the various roles of managers and how MIS support managers.3.

Managers have a "bias for action" (rather than reflection).2 What do Mangers Accomplish? Management information systems have evolved from offering generalized support to the controlling and. Blake Ives and Margrethe Olson have determined that the average activity of an information systems manager lasts 10. later. Though personal agendas are related to organizational plans. It has been observed that proactive managers make special efforts to develop a long-term view and a long- . They strongly prefer verbal media. Even the most computer-resistant managers are included in electronic mail networks and use reports produced by MIS. and they spend most of their time in face-to-face meetings. where body language and nuance of expres sion enhance communication. Effective managers carve out. · How creativity is important in decision making 9. very often initiated by emerging problems. Kotter described their activities as establishing personal goals and agendas. to supporting the daily work of virtually every manager. building a personal network of people at all levels of the organization. their own informal structure within the corporate structure. Activities Telephone calls Desk work Tours and travels Unscheduled meetings Scheduled meetings % of time 6 22 3 10 59 A manager maintains a complex web of contacts. we will also answer another: what information-system support does a manager need? Whereas the classical model of managerial functions derived from Fayol’s work provided us with a summarized view of management activities. to the planning functions of management. Half of the activities of chief executives last less than 9 minutes. both outside and inside of the organization. This conclusion is confirmed by John Kotter’s analysis of the work of effective managers. and they use this network to keep themselves informed and to influence others. Confirming these findings.3 minutes. they are separate from them-but it is through these individual agendas that organizational plans are implemented. with only 10 percent of them taking more than an hour. requiring rapid shifts of attention from one issue to another.· Explain Herbert Simon’s model of decision making · Rationality in decision-making and the limitations during decision-making. and implementing their personal agendas with the help of this network. This leads us to a question: what are the activities of a manager? In answering this question. A successful manager is not swamped by the onslaught of these activities: he or she maintains a personal agenda. The distribution of time spent by executives is shown below. Ives and Olson have determined that MIS managers dis tribute their time in a very similar fashion. He described the daily work of a manager as hundreds of brief activities of great variety. A realistic behavioral picture of a modern manager has emerged from the work of Henry Mintzberg (1973). which offer flexibility and responsiveness. behavioral studies of managers give us a detailed view of how these activities are actually carried out. as it were.

As a figurehead. By developing liaisons vertically and laterally.2. 9. These efforts range from quiet thinking time without telephone calls or visitors to executive retreats away from everyday concerns. Role Interpersonal Roles Figurehead leader liaison Informational Roles Monitor Disseminator Spokesperson Decisional Roles Entrepreneur Disturbance Handler Resource Allocator Negotiator Information transfer Extensive: Management Reporting Systems Executive Information Systems Office Information Systems Assistance in Decision Communication: Making and Personal Interaction Dominant MIS Support Assistance in Communication: Teleconferencing Office Information Systems Decision Support and Executive Information Systems Crisis Management Systems Decision Support Systems Group DSS and Negotiation Support Decision making Systems Mintzberg’s work was done during the first era of organizational computing. . Certain kinds of office infor mation systems. the function of MIS in interpersonal roles is limited. through such activities. Thus.. these managers attempt to develop a vision for their subunit and for the organization as a whole. Even in roles requiring more personal contact. However. a busy executive can participate in a teleconference when she or he cannot be there in person. managers build and exercise their personal networks of people. By their very nature. managers influence their subordinates to carry out their tasks so as to satisfy their own goals as well as the organizational goals. as shown in table below. There is just no substitute for personal contact in very many cases. when the work of an individual manager was still very poorly supported by MIS. Office information systems enhance communication be tween individuals and between various work groups.term agenda. In table above listing of the extent of MIS support available today. a manager (particularly a high-level executive) represents the organization to his or her subordinates and to the outside world. particu larly in the case of figurehead and leader roles.1 Managerial Roles and Their MIS Support Henry Mintzberg classified managerial activities into ten roles falling into three categories. such as Coordinator (from Action Technologies). As leaders. actions do not preclude reflective thinking. support a con versation (rather than a one-sided message) as a unit of social interaction in an organizational setting. office information systems have provided significant support for the liaison role.

Reductions in the ranks of middle management. · They should make it easy to interrupt the work and to return to it at a later time · They should offer the manager the capability to do various things at the same time-as is possible with a windowing environment. is due in part to this fact. mediation between parties is a frequent role for a manager.2. and other stakeholders. may help to develop common assumptions and resolve conflicts. and decision support systems have become indispensable in many organizations for this purpose. make much of the information accessible to those who need to know. The activity of any organization can be viewed as a multiplicity of negotiated conflicts. a manager brings together re sources in a novel way. selecting one. people whose work to a large degree consists in playing these roles. A class of systems specifically designed for the collective work of negotiating parties is presently evolving. personal documents (letter or memos). Another form of negotiation is dealing with customers. and fragmentation-information systems used directly by managers need to have these characteristics: · They should not require extensive periods of concentration. managers prefer to deal with so-called "information-rich" sources. impersonal documents. On-line management information systems have taken over many of these managerial roles. Being informed of the facts-garnered to a large degree through information sys tems-is a basis for any negotiation. however. suppliers.In their informational roles.2 Self Assessment Questions (For Section 9. with subordinates for committed work. managers receive (monitor) and disseminate information. Resource allocation is the essence of planning. variety. Decision support systems assist an entrepreneur in considering options. and numeric reports. It would be misleading to assert that at the present time MIS satisfies most man agers’ needs in their informational roles. as opposed to a telephone. up to managers to use information technology in a creative fashion. Indeed. Using a group decision support system. telephone con versations. in order of decreasing richness: face-to-face conversations. We stress the personal and responsive nature of the "rich" media. Handling disturbances is a part of managerial control. in the Mintzberg model. both inside (as disseminators) and outside of the organization (as spokespersons). also introduces innovations in organizational activities. As you can see. Particularly when facing uncertainty or equivocality. the decisional roles are the ones where this is the crucial aspect. and planning for its implementation. the tasks of decision making and communication that underlie management activity find relatively extensive support in information systems. which requires the presence of both parties at the same time. . Because of the nature of a manager’s work-which is characterized by brevity. including voice and imaging. a manager in today’s organization will have to negotiate: with superiors for resources. to implement a personal agenda. All managerial roles have an element of decision making. complemented by office information systems. can enhance communication by offering a nonverbal communication content. An entrepreneur initiates new market-oriented activities and. In this role. Management reporting and executive support systems. It is. This support will undoubtedly increase. Richard Daft and Robert Lengel found that these preferred sources are. or even an executive information system. · They should make it possible to control communication time an electronic communication medium makes possible an asynchronous conversation.2) What are the various managerial roles classified by Mintzberg and relate the MIS support for the same. · Multimedia systems. 9. the emerging crisis manage ment systems will help here.

Some of the solutions may require more intelligence-more informa tion gathering about the problem. but most of the tools we shall discuss below rely’ on human ingenuity-informed by MIS. chief executives turn to their executive information systems each morning to look for first signs of developing problems or opportunities. Executive in formation systems and carefully designed management reporting systems contain built-in triggers and exceptions that help alert a manager to a problem. highly creative processes. Problems that require decisions are sometimes difficult to perceive." Effective managers thus do not avoid problems-they seek them out. often they require multiple decisions to solve. 9. Some decision support systems offer a certain assistance here. This is a creative. which in turn call for more information. Problem framing and development of alternatives.9. and the phases of intelligence and design may be rather tightly interlocked itera tions: garnering more information leads to new alternatives. This first stage of the decision-making process is called intelligence. and opportunities do so even more rarely. Proactive managers of information systems work closely with end users to see what problems they can solve for them. The activity that Simon called design involves the development of alternative solutions to a problem. Solutions to the problems we are discussing are actually courses of action-there are many aspects to such a solution. Decision making is the process of identifying a problem. Systems developed to address the critical success factors (CSF) of an individual manager are likely to spotlight a problem.1: Simons three step model More and more. Once a manager finds a problem. Innovative companies seek out customer opinions about their products. because problem finding requires a search of the environment: problems frequently do not present them selves for some time. The intuitive grasp of a problem most often relics on such an ability to establish an analogy. find rather scant support from automated systems.1. and the fundamental activity in problem solving is decision making. A well-established model of the decision-making process has been proposed by Herbert Simon (1960). An experienced manager often recognizes a problem as similar to one he or she has already encountered.3 Decision Making A manager is a problem solver. based on the formulation of methodical thinking by the philosopher John Dewey (though it can be traced back to Aristotle). developing alternative solutions. . Fig. and even more difficult to define (or "frame"). he or she needs to formulate or "frame" it. divergent (leading in many directions) process. Simon’s three-step model is shown in figure 9. The process begins with a search for a problem or an opportunity-bold people do call problems "opportunities in disguise. and choosing and implementing one of them.

That is. less structured decisions. it describes how a person should make a decision. Some of the limits arise from the way organizations function. Many implementation dif ficulties have been tracked to the separation of these functions. 9. decision makers choose the first alternative that moves them toward their goal. Structured decisions are repetitive and can be represented as algorithmsprogrammable procedures. This model is normative (prescriptive).The choice of an alternative often has to be made in an environment of consid erable risk or uncertainty. Rather. even with the use of any computing power avail able in the foreseeable future. both the quality of the decision and of its implementation are higher if the people who make the decision are also responsible for its implementation. The effects of such decisions may be tracked with management reporting and executive support systems. with its goal of optimizing.1 Rational decision making and its limits The classical concept of a perfectly rational decision maker does not apply to the plethora of situations in organizational decision making. Since full rationality. is just one proof that the decision-making model based on full rationality is. Organizational change processes. In this theory. Since a decision maker’s ability to perceive all the alter natives and their outcomes is limited by cognitive abilities. Simon has also classified all decisions into two classes. may need to be activated to implement more far reaching decisions. financial resources. The impossibility of centralized planning of a nation’s economy. Thus. Expert systems begin to support it as well. However. owing both to their ex cessive number and to lack of information. now called structured and unstructured. that is. while the decision-making process can usually profit from computerized sup port. . Implementation of a decision is a broad issue. As in any control process. and we shall discuss techniques for applying it. they satisfice (word coined by Simon). corrective actions may have to be initiated when necessary-indeed. in more general terms. and time pressures. The classical model of a decision maker was formulated in economic theory and is usually attributed to Adam Smith. The model approximates certain real situations. an alternative theory of decision-making behavior has evolved. profit or market share attained by a firm). in general. In general. is an impossibility in most re alistic situations. the goal itself may be adjusted as incremental decisions suc ceed or fail. they can be relegated with ease to computer processing. some from our cognitive limitations as human individuals. No satisfactory solution may be found among the avail able alternatives. in which case the decision makers may have to go back to the design stage to develop other alternatives. Most decision making is subject to bounded. the decision maker seeks to optimize.3. · The decision maker knows all possible courses of action (alternatives). The process the model describes is known as rational decisionmaking. limited rationality. it is impos sible to specify all the alternatives and their outcomes. with more complex. managers may have to rethink the de cision.The model makes the fol lowing very strong assumptions: · The rational decision maker seeks to maximize the payoff from a decision (for example. · The decision maker knows the outcome of each course of action. not realistic. The what-if mode of decision support systems directly supports this phase. the decision maker exhibits bounded rationality. Unstructured decisionsrequire human judgment. this model suggests that decision makers do not actually optimize when making decisions. or even to the intelligence stage to reformulate the problem. proposed by Herbert Simon (1960). Project management software is used to schedule human resources and to track project timelines.

Making a decision is not concluded by the "choice" of an alternative.2 Individual Limits to Rational Decision Making Individual capability to make rational decisions is also limited. Rational decision making in organizations is also limited by programmed be havior. government.1. As you shall see. they follow stan dard operating procedures. we cannot retain in . chance-driven choice making. and cultural back grounds. When decision makers engage in this type of behavior. A decision process generally includes several participants. He contended that decision making in large organizations under ordinary circumstances is a process of "muddling through"-making small. Individuals have frames of reference based on their experience. and much of their decision making consists of attaching solutions to problems in a rather random manner. during which any chosen course of action may be modified as it is implemented. Other aspects of organizational decision making are reflected by what George Huber called the political/competitive model. Therefore. 9. Charles Lindblom analyzed how the decision-making process. 9. plus or minus two". These frames of reference act as filters.incremental changes from existing actions and policies. blocking out certain types of information or certain alternative courses of action-to the possible detriment of quality decision making. and pro grammed choice making. The important criteria in this decisionmaking mode are avoiding the uncertainty of major changes and maintaining the consensus of all involved. assisted by information systems. In other words. several studies of budget development clearly point to it being a po litical process. The more recent. various types of group decision support systems (GDSSs) can help these groups to negotiate." An analysis of the results of previous choices. If we consider the concept of bounded rationality more broadly.1. each of whom may seek to influence the decision in a direction favorable to themselves or to the unit they represent. The need to reconcile the diverging interests of various stake holders (for example. This prevents them from settling on mini malistic departures from standard operating procedures. These firms are unable to adapt to the changing environment. and most pessimistic. For example. political/competitive behavior. we should be able to identify both the organizational and individual factors that limit it. Other aspects include incremen talism. knowledge.The alternative chosen by a satisficing decision maker satisfies his or her aspi ration level and risktaking propensity. which constrains their choices and prevents creative problem solving as they opt for the "safe and tried. "garbage-can" decision making is present to some extent in all companies: because of the dif ficulty in forecasting outcomes. labor. so-called garbage can theory of orga nizational decision making is based on the premise that not all organizations are destined to succeed-many companies (even those consid ered excellent at some point) will fail. and others) often leads participants to avoid making major departures from current policies-and is thus one of the reasons for incremental decision making. foresee. In one sense. Therefore.3.3.1 Organizational Limits to Rational Decision Making The rational model of organizational decision making reflects only some aspects of the decisionmaking environment: those that lend themselves most readily to receiving support from information systems. and manage a crisis. it is rather a continuous process. senior management. particularly in large organizations (including governments). most of these decision-making behaviors are rooted in the divergent interests of the people involved in making a decision. differs from the rational model. Human ability to process information is limited by what Princeton University psychologist George Miller called "the magical number seven. raising the aspiration levels of managers and heightening their expectations is one technique for teaching them innovative decision making. chance does playa role in providing a solution to many an organizational problem. or to look at a broad array of alternatives before arriving at a decision. may help decision makers relax the constraints of programmed choice making.

others concern individual cognitive behavior. People display distinct cognitive styles in the ways they gather and evaluate information. Our understanding of probabilistic information is generally poor. People more readily accept infor mation that confirms. their current convictions.short-term memory and consider simultaneously during decision making more than five to nine "chunks" of information. To cope.2 Self Assessment Questions (For Section 9. unwarranted inferences are frequently drawn from small samples. All this means that people’s perception of information and their decision making based on that information may be manipulated. This underscores the need for MIS specialists to bring these requirements to light and the importance of using techniques such as prototyping of information sys tems. It has been recognized that people do not necessarily understand their own in formation requirements. It is partly because of this limitation that we analyze or design information systems through a process of stepwise refinement. rather than challenges. Explain the decision making process proposed by Herbet Simon 2. Explain the concept to rational decision-making and their limitations 3.3) 1.3. In their analysis of how . The form in which information is displayed influences people’s understanding of it. Decision makers are more likely to use only readily available information rather than transform that information into a potentially more useful form. For ex ample. we are thus able to handle the system by dealing with only a few components at a time. with neglect of available statistical techniques for ensuring the reliability of such con clusions. an internal locus of control. People frequently perceive a causal relationship between two factors when there are no grounds for doing so. Much of the research regarding individual differences has been summarized by Robert Zmud. In general. Amos Tversky and Daniel Kahneman have established that people are highly averse to possible loss and will undergo significant risk to prevent it. Human decision making is distorted by a variety of biases. human cognition is human information processing. as are other phenomena such as learning or understanding language. items listed first or last have a greater impact than those in the middle. On the other hand. which we usually need to dial right after being told what it is. Explain the individual capability of decision-making and their limitations 9. 9. a higher risk-taking propensity. Decision making is a cognitive activity. even though they would not incur such a risk when seeking gain. It also points up the need to consider carefully the way information is presented in order to avoid biasing decision making. Some of these are differences in the attitudes of system users. Individuals who tend to access information to a greater degree exhibit a low degree of dogmatism. This is why "lying with statistics" often encounters low resistance. A simple example is the number of digits in an international long-distance telephone number. For ex ample. and low tolerance for ambiguity.4 Individual differences and cognitive styles The success of a management information system in supporting a decision maker depends heavily on certain characteristics of the individual. the skill of decision making can and must be acquired through training and reflective practice. Vivid events that are easily recalled or events in the recent past are unjustifiably assigned higher probability and weigh more heavily in the decision. we organize the individual digits into larger chunks (a familiar area code or country code is such a chunk-we remember it as a single unit).

While the importance of individual cognitive style in the design of MIS has been contested. feeling bound by tradition.1 Creativity in decision making by individuals and groups Individual creativity is the cornerstone of good decision making? Cornerstones. It is desirable that the system allow an easy shift back and forth between sum marized and detailed data (needed by receptive individuals). lack of a sense of challenge · Cultural blocks: avoidance of fantasizing and ret1ection. Ray and Myers postulate that creativity consists in learning to release the human poten tial present in all of us. and much of it can be learned. as we discussed. Receptive decision makers focus on details rather than on a pattern and attempt to form a general picture of the situation from these details (a characteristic of inductive thinking). Such systems should not impose a preset processing order. Preceptive indi viduals bring to bear concepts ("precepts") to filter incoming stimuli. End-user system development and a number of available packages have ad dressed the necds of intuitive (or heuristic) decision making. The information-gathering dimension focuses on perception.4. desire for orderliness. are a frequent reason for the demise of creative problem solving. A well-regarded approach to "creativity in business" is described in a book with that title by Michael Ray and Rochelle Myers. Information evaluation relates to the way an individual brings information to bear in the process of decision making. McKinney and Keen stress that all of these modes of thought are appropriate in certain situations. fear of rightbrained thinking (because we have been trained to believe that analytical thinking is superior to intuitive or qualitative judgments) · Environmental blocks: lack of support within the organization · Intellectual blocks: lack of information. and some combinations of them are particularly fit in certain occu pations. do not houses make. developers of information systems tend to be systematic individuals and thus tend to assume that the users are (or should be) the same. mathematically. the user is able to identify and test new alternatives. James Adams sees the road to individual creativity as a process of overcoming the following obstacles: · Perceptual blocks: stereotyping. these people are more willing to go with their "gut feeling" about the problem. but rather allow the user the freedom to set this order as he or she is working. Much of this wish list is now fulfilled in well-designed DSS and EIS. inadequate skills in expressing ideas (for example. or visually) .managers’ minds work. An intuitive individual applies heuristics (rules of thumb) and shortcuts and uses trial and error to find a solution. the fact that significant differences exist among individual decision-making processes should inform the way systems are designed. In particular. A variety of tabular and graphical output formats should also be available. and organizational departures from rational de cision making. These systems allow the user to play out a variety of scenarios. James McKinney and Peter Keen have classified the information related modes of thought along two dimensions: information gathering and information evaluation. they look for specific conformities with or devia tions from the concepts they have already formed. int1exible use of problem-solving strategies. preconceived notions. on the way a person organizes the verbal and visual stimuli he or she encounters. 9. however. verbally. Creative thinking offers new approaches to often ill-defined problems that are worth solving. inability to see a problem from various viewpoints · Emotional blocks: fear of taking risks. A systematic (or analytic) decision maker approaches a problem by structuring it and applying a well-defined method ex pected to lead to a solution. The creative process requires cultivation. from the framework of these concepts.

Synectics encourages thinking by analogy (for example. we may note that the committee seems to have come up with an animal that has contributed immensely to human civilization. Little Red Riding Hood. the category "red" will bring out. hot. · "Anything goes"-wild ideas are encouraged. with one of the members acting as a recorder. Idea Fisher will first guide you through a series of questions to help you clarify your goal (far example. The goal of a brainstorming session is to generate ideas. we can identity our prin cipal inadequacies and deal with them. The program can give you tens or hundreds of associations with the topic you select. Another technique for creative problem solving. and red sky at night. Red Square. A group of five to ten people participates. You can then cull from the list the notions you may want to use in your campaign. The nominal group tech nique addresses the needs of groups in which broad differences of goals and opinions are certain to lead to antagonism and argumentation: large parts of the sessions are spent by participants working alone. This is of use at several stages of the decision-making process when the group is framing the problem or identifying the pertinent information. Probably the best known among group problem-solving techniques is brain storming. what can your experience playing baseball teach you about the way your project team should be organized?). the program helps you think through a concept." People in a group are able to bring diverse backgrounds. 9. red alert. a founder of one of the most suc cessful U. among others: crimson. · The more. IdeaFisher does the brainstorming for you. Let us say you are preparing a marketing campaign. and their ideas are then cir culated and evaluated. and particularly when they are generating alternative solutions. Groups can also constrain individual creativity. The opposite of cre ative work in a group is groupthink. Brainstorming aims at fluency in the idea-generating process. some of the analytical work ex ploring the reasons for this is cited by Nunamaker.S. the greater the likelihood of coming up with several good alternatives . and again. expertise. and cogni tive styles to bear on a problem. a rather elaborate program developed by Fisher Idea Systems. is more selective-only the best ideas are further considered as the process progresses. advertising agencies. For example. It is sometimes said in jest that the camel is a horse designed by a committee.1 Software that assists your creativity Idea Fisher. With a knowledge base of 675. fluency that should result in significant output. The ground rules of brainstorming are: · No criticism-group members make no evaluation of ideas as they are freely generated. originated by Alex Osborn (1953). To use a term we discuss in the chapter. "What symbolic meanings does the object have?" or "What is its purpose or function?"). certain individuals do not perform well in group settings. · Build on the ideas of others-participants should feel free to combine or modify ideas generated by others and thus come up with superior ideas. communism.As soon as we have classified obstacles in this fashion.1.000 words and phrases and a natural-language user interface.4. listing ideas as they are presented. internal judgment by participants should be suspended . Not that you did not know most of these concepts-they simply may not have sprung to your mind when you needed them. Recent analyses indicate that much creative decision making in organizations is performed or stimulated by groups-from a work team to the chief executive’s "cabinet. Janis of Yale University meaning . a term coined by Irving L. Finding new associations between ideas underlies creative thinking. lobster. has the capacity to come up with new associations between ideas for you. the better-the more ideas the group generates. the synectics process. Group work has to be carefully organized.

3 minutes. Interpersonal roles are mainly based on face-to-face interactions. Pressure on or the removal of dissenters from the group is a part of this behavior. 1950 B. choice. cannot be determined 2. Informational and decisional roles are supported by a variety of information systems. people display distinct cognitive styles as well as individual differences.2 Self Assessment Questions (Section 9. 10 Minutes B. though in some cases computerized communications media may be employed. 11 minutes D. The rational decision making model applies to a rather limited class of structured decisions. Evaluate in terms of decision making process. 9. A. which make information available. Individual creativity is the cornerstone of good decision making? Elucidate. 1960 D. 9. 10. 2. 1970 . the illusion of invulnerability. In their information-processing activities. This drive for preservation of the group unit at the expense of grappling with the issues fosters over optimism. 9. What is brainstorming.7 Multiple choice questions 1. Blake Ives and Margrethe Olson have determined that the average activity of an information systems manager lasts ________ .6 Terminal Questions 1. C. Decision making is a fundamental managerial activity. assist in decision making. and implementation. Explain the various cognitive style as identified by James McKinney and Peter Keen. and collective ra tionalization of decisions and opinions that are not valid on rational grounds. 9. well-established model of the decision-making process has been proposed by Herbert Simon in the year ______ .4) 1. design.4.dysfunctional decision-making behavior in a group. Explain. and serve as a means of communication.5 Summary Managers play three types of roles in carrying out their functions. 2. Consider the structured decision that you make in your daily life. 1955 C. A. Rationality is limited ("bounded") by both organizational and human limitations. It may be conceptualized as consisting of four stages: intelligence.

D .1 3. This has been mentioned in section 9.3 2.1. Consider example in the frame work explained 2. Structured decisions 9.2 Section 9.8 Answers to SAQs. B 2.2 2. Semi structured decision B. This has been mentioned in section 9.1.3. TQs and MCQs Self Assessment Questions Section 9. are repetitive and can be represented as algorithms-programmable procedures. Unstructured decisions D. This has been mentioned in section 9.1.2 This has been mentioned in section 9.3.1 Terminal Questions 1. This has been mentioned in section 9. This has been mentioned in section 9.1 Multiple Choice questions 1. Ill structured decisions C.1 Section 9. A. C 3.2 This has been mentioned in section This has been mentioned in section 9.

1 DSS Technology 10.3 Capabilities of DSS 10.4.4 Systems Based on Accounting Models 10.5.2 How DSS are Deployed 10.4.2 Who builds a DSS 10.2 When should you use the decision support approach ? Data Management Subsystem 10.2.3 The Dialog Management Subsystem 10.2 The model Management Subsystem Data Access Systems 10.4 Self Assessment Questions (For Section 10.3.4 Self Assessment Questions (For Section 10.5.3 How DSS are developed .4 Classification of DSS 10.2 Data Analysis Systems 10.Unit-10-DSS and EIS Structure: 10.3.3 Forecast-Oriented Data Analysis Systems 10.1 Ill structured problems 10.5 Building a decision support system 10.2.6 Systems Based on Optimization Models 10.4.2) 10.3 Components of DSS 10.1 Introduction Objectives 10.5.5 Systems Based on Representational Models 10.3) 10.

Decision support systems are interactive information systems that assist a de cision maker in approaching ill-structured problems by offering analytical models and access to databases. Peter Keen.6 Executive Information Systems 10.10. Decision support systems are a type of MIS that represent a distinct approach to computerized support of managerial decision making. you should be able to · When DSS could be used in the organization · What are the capabilities of DSS · What are the various components of DSS · How DSS are deployed · How EIS differs from DSS 10. thus. since entirely new capabilities are now available.7 Organisational aspects of DSS and EIS 10. The development of these systems arose from dissat isfaction with the rigidity of reporting systems that defined the early MIS envi ronment. The approach was artic ulated in the early 1970s by Michael Scott Morton and has since become a broad area of information system practice and research. The hallmark of DSS is flexibility.11 Answers to SAQs.8 Summary 10.5. their hallmark is (or should be) flexibility.4 Developmental trends in DSS 10.10 Multiple Choice Questions 10. As stressed by another pioneer in the area.1 Introduction With this unit. We begin by discussing how it supports the management and organization. .5) 10. TQs and MCQs 10. We shall conclude by the organizational aspects of DSS and EIS.9 Terminal Questions 10.2 When should you use the decision support approach ? Decision support systems offer managers a package of capabilities for prompt and flexible access to data and to models that work with the data to produce needed information.5 Self Assessment Questions (For Section 10. Objectives: At the end of this unit.5. we shall start with the concept of Decision support system. the use of DSS in a firm that previously relied only on management reporting systems is a form of innovation. Personal DSS should be easy to develop-end-user-oriented tools should be at hand for the purpose. These systems vastly expand the abilities of knowledge workers to make decisions concerning ill-structured problems.

the principal domain of DSS is support of decision making for semi structured problems. Decision making in this problem environment is more typical in the work of middle and higher management. a decision regarding loan approval. In a way. where parts of the decision process itself often require very significant computer support. TYPE OF PROBLEM EXAMPLES OF PROBLEM AREAS CHARACTERISTICS Availability of an Order validation Structured Inventory reorder Sales forecasting Budgeting Semi-structured Risk analysis Promotion of personnel Introducing new Unstructured technology No standard Principally by a human. All DSS should be easy to use in the way that best supports the cognitive style of the individual decision maker. and management reporting systems. and following the work of Andrew Garry and Michael Scott Morton we arrive at the categories of problems shown in table below.An organizational DSS. This is so because a model (in some cases containing hundreds of equations) has to be applied against a database often comprising millions of data items. for example. DSS steer a middle course between the severe lim itations of management science models. a DSS may be employed for easy access to data. are in some cases supported by DSS in minor aspects. which make their user do most of the analysis and the relating of various items of information to each other. In ill structured both semi-structured and unstructured-problems. we should stress. where a number of unrealistic assump tions may have to be made. with some computer aspectssupport Programmable present aspects computer Human decision maker supported by algorithm {standard operating procedure) Fully computerized (TPS or MRS) HOW DECISIONS ARE MADE procedures or available As we can see.1 Ill structured problems What type of management decisions need DSS support’ Expanding Simon’s cat egorization of problems that have to be dealt with by people in organizations. 10. and therefore. with human judgment injected at critical junctures. however. that such problems occur at all three managerial levels. and in certain cases. often stemming from leading and organizing activities. Other systems that do not support the decisional aspect of this process assist the organizational aspect by bringing the collective wisdom of a group to bear on the problem through office information systems. used throughout an enterprise.2. but within narrow domains such as. the explo ration of alternative solutions cannot be completed before a choice must be made. . should be developed in a disciplined fashion. such a system should give its user a way to use models and databases in an interactive session that best supports his or her way of thinking about the problem at hand. Unstructured problems. We can therefore think of a DSS as a set of capabilities: within its area of application. Decision making to solve unstructured problems is now also supported by expert systems.

10. Those results led to the eventual dismissal of the project. Ohio built a DSS to assess the best strategy for rolling out a new brand of tires. The executive used this database to assist him in finding a competitive strategy. we were reviewing the results of his "what-if" questions. and sales estimates. 2) Houston Minerals Corporation was considering a joint venture with a petrochemicals company to build a chemical plant. However. and thus build sales forecasting models. California. 3) A portfolio manager of a large pension fund is responsible for investing billions of dollars in assets. and the funds are at all times placed in a complex array of investments. Using a DSS generator-a system for building DSS-the planning staff of the company built ill a few days a DSS projecting the risks of the venture. overall risk analysis with the use of a DSS permits the manager to balance various forms of investment and spread the funds over a variety of investments. volume. The manager needs to make constant investment decisions consistent with the objectives of the fund. Let us consider five different sample arenas of DSS application. 1) Firestone Rubber & Tire Company of Akron. These should give us insight into what a DSS can do for us. tactical. including data on their construction. When we say that one of a manager’s principal tasks is to deal with ambiguity. if an ill-structured problem is treated as struc tured and approached wholly with the aid of management science models without significant intervention from a human decision maker. taking prices. Certain aspects of this work can be handled by expert systems that suggest decisions. The results suggested that the project would have a positive outcome . service . this judgment was fully supported by the information made available by the DSS and by the insight of planners that went into the construction of the model.the use of DSS applies to operational. In the systems-theoretic sense.2 How DSS are Deployed To make all this more tangible to you. An officer could display a map on a VDT and call up for each zone the data showing police calls for service. A huge variety of investment vehicles with varying degrees of risk and reward are available at all times. and demand into consideration. supply. which we otherwise would probably have accepted. and with her or his experience and informal information. 4) A DSS for police-beat allocation was built for the city of San Jose. The system permits analysts to look for relationships between past financial results and external variables.2. and strategic organizational levels. the Firestone analysts were able to rapidly build for the corporate vice-president of technology a database on all 200 competitive brands of tires. tread. we mean that he or she will be called upon to solve many illstructured problems. the executive vice-president responsible for the decision requested an answer to the question: "What is the chance that this project will result in a disastrous outcome’" In the words of the company’s chief planner: "Within twenty minutes. However. The system enabled the organization to integrate the technological and financial aspects of a product decision and thus create a basis for joint decision making by the company’s various functional areas. then the open system being described is reduced to a closed or relatively closed system be cause most of the environmental factors are ignored. The use of a DSS makes it possible to include a variety of these environmental influences and thus ensures a more realistic open-system approach to problems. Thus. such as total car production and gross national product. Using the system containing these models. a DSS enabled the decision maker to bring his judgment to bear on the problem. there in the executive boardroom. with a variety of environmental factors. The availability of this system conferred a competitive advantage on Firestone. let us consider a few brief examples of DSS application.

The system became a tool that helped its users to exercise their judgment. it updates the vessels’ positions from their original locations by considering the direction and speed of their movement-with all the initial information radioed in by the ships’ navigators. An experiment was run to compare an assignment made by an officer using the DSS with an assignment made by a linear programming model that did not rely on human judgment. 5) As the utilization of a DSS assisting the navigators of vessels on the lower Mississippi River increased. 10. 2) Help to rapidly obtain quantitative results needed to reach a decision. The officer-DSS team arrived at a superior solution.times. as opposed to operating in a generally scheduled fashion as management reporting systems do. The principal strong point of DSS is their support for the consideration of alternatives ("what-if" scenarios) and for the informed choice of the preferred solution. and accidents are thus prevented. The Coast Guard personnel use the system by watching blips on their consoles. 7) Offer flexibility-as opposed to a preordained pattern of use making it easy to accommodate the particular decision-making style of an individual. A manager can employ it to arrive at a decision that is organizational desirable and that will be supported by others during the implementation stage. 3) Operate in the ad hoc (as needed) mode to suit the current needs of the user. as we saw in the focus case. which frequently cut across departmental boundaries. a DSS can help to find a problem. 4) Support easy modification of models. and activity levels. and yet do require computer assistance for access to and processing of voluminous amounts of data. The officer could experiment with various alternatives involving the assignment of police patrols by interacting with the system. 6) Foster high-quality decision making by encouraging decisions based on the integration of available information and human judgment. precisely owing to the lack of structure. They alert navigators to developing situations of undue proximity to other vessels by radio communication. learn to communicate at a . Specifically. Since the system does not actually make a decision. problems do not lend themselves to full computerization.2. DSS can: 1) Support decision making in ill-structured situations-in which. DSS give decision makers a degree of confidence in their decisions unavailable to the decision maker who is wholly dependent on his or her judgment. By creating and exercising common models. which increases the organization’s responsiveness to the changing environment both within and outside an organization.3 Capabilities of DSS DSS have several features to offer in the general information system environment of an organization. Decision implementation may also be facilitated by the continuing use of the model to track progress and provide visibility to the effort. the number of accidents on this once extremely dangerous waterway decreased precipitously. in general. The system simulates the traffic of the vessels in the area by dead reckoning. However. 5) Support various stages of the decision-making process. some systems are more restrictive than others: they may lack certain models or impose a certain sequence of operations and thus constrain the user’s decision making. Facilitate the implementation of decisions. decision makers in the involved organizational units develop common assumptions and. We can construct a DSS model much faster than we can do modeling with other MIS components. which resemble air traffic control displays. and the model can be flexibly deployed with data as needed during the decision-making process. Restrictive systems may be simpler to use and may promote prescribed decision -making patterns. The creative generation of alternative solutions is expected of the human decision maker.

a principal feature of well-designed DSS. in general. 11) Give managers the opportunity to gain a better understanding of their business by developing and working with models.1 Data Management Subsystem The data management subsystem of a DSS relies. particularly at the operational level. 2. leading to more effective. Indeed. we have said that the power of DSS de rives from their ability to provide easy access to data.1. that leads to the adoption of suboptimal solutions so long as they are one’s own. Various commercial systems support DSS development and package these DSS capabilities in a variety of ways by distrib uting them among a series of optional modules.1: Components of DSS 10. This helps to fight the "not-invented-here" syndrome. 9) Support group decision making. and other knowledge workers to perform better. The user can work with the system in the style that best serves him or her. permit several people with a variety of experiences and areas of expertise to bring them to bear on a decision. What are the capabilities of DSS? 10. It is simply that maintaining the currency and integrity of a significant database of this kind is usually a daunting task.4 Self assessment Questions (Section 10. 10. 10) Provide user-friendliness. which we shall discuss later. higher-quality decision making. on a variety of in ternal and external databases. .3. These systems. Proliferation of personal databases also contradicts the principles of information resource management.2) 1. This is not to say that a simple. User -friendliness can make computer-supported problem solving attractive to individuals at all levels of an organization. professionals. particularly through group DSS (GDSS). It also enriches their jobs. Fig. 10.3 Components of DSS The three principal DSS subsystems and their principal capabilities are shown in figure 10. This helps managers.2. usually spreadsheet-based DSS for the personal use of a manager cannot rely on the manager’s limited personal database. Explain how DSS is deployed.deeper level. so common in organizations.

Usually. The performance of the transaction processing systems that access these databases. The specialist needs to pay particular attention to data consistency across multiple decision support systems that extract data from the corporate databases. Models have different areas of application and come from a variety of sources. the database component of DSS relies on ex tracts from the relevant internal and external databases. and so forth.2: Data Management Subsystem On the other hand. it is usually undesirable to provide a DSS with direct access to corporate databases. This is shown in figure 10.Fig. mathematical models to data. variances. 10.2 The Model Management Subsystem The power of DSS rests on the user’s ability to apply quantitative. therefore. These models include tools for the exploratory anal ysis of data-tools designed to obtain summarized measures such as mean and median values. The user is able to add to these data at will. by extending the trend of a curve by extrap olation techniques. If extracts for the DSS serving the same functional area are made at different times. or by . scatter plots.3. 10. Other statistical models help analyze series of data and forecast future outcomes by approximating a set of data with a mathematical equation. the extracted databases will differ and "battles of the printout" may result. as well as the responsiveness of the DSS. Software packages for developing DSS (so-called DSS generators) contain li braries of statistical models. The extraction procedure itself is generally specified by a specialist rather than an end user.2. would both be degraded.

These include models that allocate input resources (labor. These models aim to allocate resources to maximize profit or min imize cost or time. Two forms of such analysis are the what-if analysis and goal seeking. risk analysis. or marketing. Here are some examples of questions that can be directed toward appropriate models: . 10. Other models help establish (or reject) causal relationships between various factors (for ex ample. the decision maker asks "What if these are the values of the inputs?" The model recomputes outputs for each case.3. Other models optimize inventory levels or determine optimal network configurations. models that assign activities to personnel or equipment. Fig. Simulation models that generate input values randomly from a cer tain probability distribution (also called Monte Carlo models-after the city where the famous casino is. A number of such models are based on a linear programming technique. are available for use in DSS. materials.3: Model Management Subsystem Optimization models. whether the drop in sales volume is caused by the aging of our target market segment). and models that determine the best shipping schedules from several points of origin to several destinations. capital) among various products. When doing what-if analysis. of course) are employed for waiting-line problems.providing for seasonal adjustment. the decision maker creates multiple scenarios by assuming various realistic values for input data. Market response models show how sales depend on such factors as price and promotion. Specialized model libraries are available for financial modeling. developed by management scientists. such as establishing the number of operators needed for order taking or deciding on staffing levels for a service center. The capabilities of the model management component of DSS are summarized in figure 10. A particular advantage of DSS is the decision maker’s ability to use a model to explore the influence of various factors on outcomes (a process known as sen sitivity analysis). Thus.

This stands in contrast to management reporting systems. Edward Tufte gives a thorough and exciting presentation of the subject. in general. The field of artificial intelligence has made some notable contributions to dialog management. Ali Montazemi and Shuohong Wang. concluded that line graphics have time-saving ef fects on decision making for more complex decision tasks only. users can engage in the individual dialog styles that best support their decision-making styles. Thus. the decision maker asks "What will it take to achieve this goal?" Some examples of questions asked in this mode are: · What sales volume will be necessary to ensure a revenue growth of 10 percent next year? · How many service center employees will it take to ensure that every order is handled within three minutes? · What quarterly revenues will we need from each of our three products to gen erate the desired profits during these quarters? The actual form in which these questions may be asked depends on the options offered by the dialog management subsystem of the DSS." 10. This is very often the case-and the main reason why ex ecutive information systems. as opposed to the tabular display of data. The user would be able to present the problem in a system of this kind. Color graphics were found to improve decision quality. The notable feature is support of multiple forms of input and output. and the system would automatically select an appropriate model or construct one from the existing models and "building blocks. Gary Dickson and his colleagues found that. Summarizing the uses of graphical presentation of business information. Richard Scovill tells us that most business graphs are designed to answer just four ques tions: 1. that graphs outperform tables when a large amount of information must be presented and a relatively simple impression is desired. rely heavily on graphics. Significant attention has been devoted by researchers to the effectiveness of computer graphics. such as the ability to specify what is wanted in a subset of natural language or to activate the system by voice. Graphic representation of quantitative information requires considerable care to prevent distorted perception.What will be the cost of goods sold if the cost of raw materials increases by 10 percent? What will be the effects on the company bonus program if sales increase by 3 percent and direct expenses increase by 5 percent? When goal seeking. discussed later in this chapter. A variety of help and even training-by-example capabilities may be offered. By combining various input and output capabilities of a DSS. They did find. however. Who is the biggest? . one cannot claim an ad vantage (however intuitively appealing it may he) for graphics throughout all decision-related activities. which we shall discuss next. By analyzing the results of research in this area.3. a single advantage of DSS is the user-friendly and flexible interface between the human decision maker and such a system. the decision maker works backward from the assumed re sults to the needed input values. with the results displayed in screen windows (the user employs a mouse to move between the windows). The window capability enables the user to maintain several activities at the same time. but they did not reduce the time necessary to arrive at a deci sion.3 The Dialog Management Subsystem Along with DSS’s ability to apply models to large volumes of data from a variety of sources. There is significant research interest in providing a degree of automated model management. and are less d efective at providing precise information.

10. This capability is equivalent to what is offered by most DBMS through a query language. These systems can be classified by the man agement level they offer support to (operational. to obtain a thorough view of the variety of capabilities these systems can deliver. An airline uses a system of this type to compare its performance with that of its competitors. 10. What is typical or exceptional? 4. The system’s database contains the data on the quarterly performances of all airlines. However. They can also be classified into personal and organizational systems. it is best to follow Steven Alter and consider a classification based on the degree to which the outputs of a given system can determine a decision.1 Data Access Systems These systems (which Alter calls "file-drawer systems") can provide user-friendly ad hoc access to the database.3 Forecast-Oriented Data Analysis Systems .4. either on demand (ad hoc) or periodically. Clearly. The portfolio analysis system we discussed earlier on belongs in this category. 10. However.4 Classification of DSS DSS can be broadly used throughout an organization. Data analysis systems are frequently oriented toward the consolidation (aggregation) of data. This classification yields an entire spectrum of systems ranging from the totally data-oriented to the more powerful model-oriented systems. finance.4.3. and so forth).3) 1. such systems are frequently set up to allow shop floor personnel to continuously monitor the shop floor or a particular piece of machinery. Only very simple models are employed. the purpose of this categorization is to review the variety of capabilities offered by the DSS approach rather than to give you tags to put on a particular system. 10. it has been established that different decision makers and tasks are best supported by different display formats. How well does one fact predict another? In general. Write short note on : a. However. such as summarizing the performances of a firm’s subunits and presenting the summaries in graphs. This again proves that the advantage of DSS in the area of dialog management lies in providing a variety of dialog styles. or strategic) or by the functional area they are used in (marketing.2 Data Analysis Systems These systems help to analyze historical and current data. Data management subsystem b. submitted to the Civil Aeronautics Board of the federal government in US. thus they fulfill operational control purposes. How do circumstances change over time? 3.2. tactical.4.4 Self assessment Questions (For Section 10. Dialog Management Subsystem 10. a given DSS often possesses a mix of these capabilities-in which case we would classify it with respect to its most powerful capability. Model Management Subsystem c.

as an organi zation’s sophistication in DSS use grows. subject to a variety of constraints. Such a system may suggest product price. introduced in the focus case for this chapter. These are frequently simulation models which yield probabilistic results. The market analyst at Parke-Davis. Using such a model. or even in constructing a model employed in it. Rather. it would require a ready sales forecast). this depends on the technology employed and on the nature of the decision task that needs support.5. these models are used by a human decision maker to arrive at a solution that considers environmental factors not included in the model itself solutions within narrow domains of knowledge are more and more frequently based on expert system technology. The implementation of a decision is facilitated if the future implementers were involved in arriving at the decision with the use of DSS. such as those employed in systems that rely on accounting models. for example. which considers such key factors as costs of resources (labor. and an outcome. the rate of insurance renewal. Such systems typically produce estimated (pro forma) income statements. In general. The "what-if" mode of operation is typically employed to compare alternatives. a company faced with temporary supply limitations was able to adjust the supply of raw materials it needed for its products to meet this temporary constraint. Their operation is based on access to a variety of internal and external marketing and product databases. produced a representational model of customer response to promotional devices. such as sales. and so on) and product demand.4. Ad hoc use for planning purposes by a staff analyst or a marketing manager is typical. Data-oriented DSS (or DSS components) primarily support earlier phases of the decision-making process. such as the price of a product. The systems in this category include only the simpler of the variety of marketing models.4. which show how existing trends in the marketplace will extend in the future if similar conditions prevail 10.5 Building a decision support system How does a manager acquire a DSS? As we shall see. representational models show the dependence between a controllable variable. 10. balance sheets. Using the techniques of linear programming.6 Systems Based on Optimization Models Optimization models are developed by management scientists to determine optimal allocation of resources or best possible schedules. In a DSS setting. and analyses of competitive actions. or production volume. a shift takes place toward model oriented DSS.These systems (which Alter calls "analysis information systems") generally assist in developing product plans.5 Systems Based on Representational Models These systems go beyond the use of ready standard formulas. 10. or other measures of financial performance. including market segment forecasts. The design and choice phases are supported by model-oriented DSS.1 DSS Technology . A system of this type accepts estimates of costs and revenues as inputs rather than forecasting them (for example.4 Systems Based on Accounting Models These are used to consider alternative options for planning purposes. in particular the intelligence phase involving dis covery of a problem or opportunity. 10. based on accounting definitions and relationships. including series of historical data. sales forecasts. 10. one is able to establish the mix of products that must be produced to maximize an objective such as profit. Another example is a risk analysis model.4. raw materials.

joint venture evaluation. In some cases. DSS Tools A variety of tools-such as a programming language with good capabilities for accessing arrays of data (for example. Their common characteristic is that much of the processing and data accessing functionality needed in a specific DSS is already programmed into the generator and can be combined into the context of a specific DSS without much programming. and forecasting. Spreadsheet packages. NOMAD2. 1. fourth generation languages of various micro based DBMS. elaborate customization may approach the complexity of using a DSS generator (which we discuss next). specialized for its individual application area. on the number of variables that may be used in a model). There now exist a variety of specific DSS in the software marketplace. 3. Such a generator may become a source of competitive advantage. DSS Generators A DSS generator is a software package that provides capabilities for building specific DSS rapidly and easily. The capabilities of spreadsheets and DBMS are combined in integrated packages such as Framework. We shall consider them by progressing from the level closest to the actual DSS to the one most distant from it. Our examples of DSS for portfolio allocation.Three levels of DSS technology have been identified by Ralph Sprague. The main distinction between simply using a spreadsheet and producing a DSS is that in the latter there is a clear separation of the data from the models. Specific DSS A specific DSS is the actual system that a manager works with during the decision process. such as FOCUS. Sometimes personal DSS are indeed built with APL. offer ever increasing capabilities for generating simpler DSS. from the ground up. a DSS usually undergoes extensive modification as it is used.5. a plain spreadsheet. the second for personal workstations. or Ramis II. any specific DSS may be expected to evolve as time passes. Linkage between PCs and a mainframe is available for generator products of the same family. such as EXPRESS and pcEXPRESS of Information Resources (Chicago). A specific DSS is constructed with the use of DSS generators or tools. combined with the capability of accessing multiple databases for querying and reporting. I have observed many an actuary do so and find the experience rewarding and stimulating.2 Who builds a DSS . a statistical package. Specialized templates (prewritten models for a specific area of application) and non-procedural languages are available to simplify the use of spreadsheets for DSS generation. using these tools. On the other end of the spectrum. Nonprocedural. or police-beat allocation were systems of this type. they require customization to the actual environment in which they are to be used. they also include comprehensive graphics packages. financial modeling. The first of these systems was designed for a mainframe environment. Generators based on personal workstations generally offer the same capabilities as those based on minis or mainframes but impose various limitations (for example. incorporate a variety of tools for data analysis. Capabilities of generators vary widely. or Symphony (Lotus Development). 10. provide another avenue for generating a specific DSS. APL). or a DBMS with its query facility-may be employed as building blocks to construct a DSS generator or a specific DSS. such as Lotus 1-2-3 (Lotus Development Corporation) or Excel (Microsoft). a company may decide to build its own DSS generator. which we shall later describe in more detail. 2. As we said. Elaborate DSS generators. however. Therefore.

as well as with the capabilities of the generator. 4) The technical support specialist is usually a member of the information systems department who installs and maintains various modules of the generator package as they are needed. 2) In some cases. In some organizations. these professionals are members of a DSS group which supports the use of DSS technology throughout the enterprise. 3) A DSS builder employs a DSS generator to build a specific DSS for the given end users. This role may range from simply running the system in behalf of and on detailed instructions from the manager to the more substantive contribution of framing the problem for exploiting the capabilities of specific DSS and displaying the information in an appropriate fashion.4 Five roles involved in exploiting the DSS technologies can be identified: 1) The manager is the end user of a specific DSS: this is the knowledge worker who actually employs the system to make decisions. This person .Both end users and MIS professionals become involved in the development of DSS. Ralph Sprague analyzed the roles in DSS development related to the tech nologies we just discussed The technologies and the roles played by organizational actors are shown in figure 10. Jack Hogue found that 95 percent of managers in his sample used intermediaries at least occasionally. an intermediary assists the manager. The builder is familiar with the business problem. 10.4. as a business analyst would be. Fig.

a decision support system has a more customized orientation than a TPS or an MRS: it is a collection of capabilities that support the decision making process of a certain individual or a relatively small group of people. and networks. an analysis process is not likely to surface a clear set of requirements. a DSS generator or a very large model-based organizational DSS that affects a number of functional units in an organization may be fruitfully built using such a methodology. a DSS generator is employed (frequently a spreadsheet with templates). To construct a DSS. such as databases. Traditional Life-Cycle Development This process begins with detailed system planning and analysis. so the DSS are built either by the manager or by the builders from a more or less formal DSS group. personal workstations. and dialog) have to be built with the use of facilities offered by the DSS . Indeed. Iterative (or evolutionary) development of DSS relies on the creation of such a prototype and its progressive refinement. The process is lengthy.also ensures the linkages between the generator and other elements of the organizational computing environment. directly in specific DSS). 3. sometimes. all three of its components (database. the quick-hit approach is employed as an early stage in the process of technology assimilation. We shall distinguish three prominent approaches to building DSS-even though a large spectrum of possibilities exists between the first two extremes. The risks associated with enduser computing. In some organizations. as we shall see later. Moreover. Unless it is used as a springboard to more advanced stages of DSS assimilation into the organization. this opportunistic approach results in little organizational learning. and goes on to implementation – this is the development life cycle. frequently exist in these cases. most DSS are built for the personal use of a decision maker. But in the development of a specific DSS. the quick-hit approach is the way most DSS come into being. The level of investment is very low and the payoff high. As the needs of these people change. the future user or group of users generally do not know what they want from the system. progresses through the design stages followed by coding and testing. The initiative usually comes from an individual manager. Therefore. we learn what we want from an activity by starting to perform it. This is indeed the case when a DSS generator is to be built. To do so in decision making with a DSS. in particular those which affect many users and in which informational requirements can be established early through the analysis process. such usage is the exception rather than the rule. 5) The toolsmith develops the building blocks employed by the generator (or. the DSS should change with them-DSS are truly built to be changed. 1. Generally. 10. 2.5. As in many other activities in life. The Quick-Hit Approach So dubbed by Sprague. ignoring many of its aspects. The builder then constructs a simple version of the system.3 How DSS are developed By its very nature. in which case it is later replaced by an orderly process of development for larger DSS. Iterative Development In DSS practice. including lack of maintainability. we need a prototype of the system-a simple initial version used to experiment with and learn about the desired features of the system. The process begins when the future user and the DSS builder discuss the system for a few hours. is suitable for complex systems. They identify the most useful screens. however. This development methodology. These technical experts usually work for software vendors. model. and there is no partial system to work with before the system is completed.

the prototype becomes the actual system after an evolutionary process of refinement.5 The use of the system engenders new iterations: decision problems evolve and the users’ needs change. Hogue found that DSS development time varies considerably: from one week to four years in his sample of eighteen companies with multiple DSS. is tested and documented and eventually becomes the DSS. Iterative development of DSS is an example of the general prototyping technique broadly used in software engineering. the process of iterative development tightly binds users and builders to ensure that the DSS satisfies actual user requirements (rather than what the users may think they want-until they work with the actual system). 10. The prototype.generator or with DSS tools. repetitive process of prototype refinement follows. The process of iterative development is shown in figure 10. refined over several such iterations. the prototype often serves to clarify user requirements. Particular attention is paid initially to the dialog component. Fig. in the engineering of large software systems. considering the importance of this type of MIS. Builders analyze these suggestions and modify the emerging DSS. . Now the users have something to experiment with and react to. By contrast. The DSS is modified to satisfy these changing requirements. Each successive modification may thus be thought of as another iteration during the total evolutionary process of keeping DSS current with user needs. End users offer suggestions for modifying the current version of the system. The iterative. after which it is discarded ("throwaway prototyping").5. As we can see. He also found that master plans for the organizational development of DSS were virtually nonexistent-a severe deficiency. In the version of the technique generally used for DSS development.

DECISION TYPE Independent CHARACTERISTICS SUPPORT SYSTEM Decision maker makes a complete decision. Personal DSS Each decision maker individually makes a part of a decision and passes the results to the next decision maker. or both. The anonymity of many GDSS interactions and the ability to work with the system rather than directly interacting with others playa role in preventing dysfunctional group behaviors. we may use the classification of decision types and their corresponding support systems offered by Peter Keen and Richard Hackathorn and summarized here in table below. Three levels of GDSS capabilities may be distinguished Level-1 GDSS facilitate communication among group members.5. such as corporate boards. we noted that dys functional behaviors may develop in a group’s work. com bined with the team orientation of the contemporary organizational design. Settings for a GDSS session range from a face-to-face meeting for an executive planning group to a "meeting" of widely dispersed insurance com pany sales agents discussing possible new rates through their VDTs and a tele communications network with the support of an electronic meeting system. task forces. For example. while counteracting possible negative group dynamics. increasingly form the basic work cells throughout an en terprise. Level-2 GDSS contain the communication capabilities of the Level-1 GDSS and provide support for the decision-making process.4 Developmental trends in DSS Lively research in the area of decision support systems continues apace.10. or perhaps deferred to others. All of these factors. to participate actively in the decisionmaking process. vote. facilities for remote conferencing. When we discussed the decision-making process. A group working with a GDSS is actually participating in a decision-related meeting. More or less permanent groups. lead us to believe that decision support systems that support group work will grow in importance. exchange ideas. Two prominent directions this research is taking are toward the integration of expert system technology into DSS and the development of group DSS (GDSS). or teams of coworkers. They provide the technology necessary to communicate decision rooms. Group Decision Support Systems (GDSS) Group decision support systems (GDSS) are expressly designed to support group communication and decision processes. and arrive at a consensus-among other possible in teractions. explore alternative solutions with the use of models and data. Many decisions are complex and call for the par ticipation of a number of experts. they furnish DSS modeling capabilities and software that . In contrasting the capabilities of GDSS with DSS. Organizational DSS Sequential Interdependent Decision makers interact and negotiate to Pooled Interdependent arrive at a decision GDSS A GDSS should support a process that brings together a group of decision makers to share information. It is the objective of a GDSS to enable group members to bring their skills to bear on the decision process. Thus. We also know from the previous chapter that a decision-making process may benefit significantly if people representing var ious political interests are explicitly brought into it. We know from our analysis of the organizational environment in the information society that the volume of ‘necessary decision making will con tinue to increase dramatically. interactions in a GDSS setting frequently encourage group mem bers who would have otherwise kept their counsel.

10. The principal settings for GDSS use are: a) A face-to-face session in a decision room or a similar conference room. Level-3 GDSS. This component. and arrival at a consensus) or a brainstorming session (eliminating redundant ideas and summarizing the results). such a session may be dispersed in time as well as place (the memories of the computers. such as anonymity of interactions.supports group decision processes. A collection of such protocols from the more important decision-making sessions may be preserved as a part of organizational memory. the layout of the decision room. for example. GDSS also contain a communication component. and the design of the dialog subsystem. or various computer conferencing facilities. model. What are the various approaches for developing DSS . may include electronic mail. would formalize group interaction patterns-possibly by including expert systems that would suggest rules to be applied during a meeting. 5) GDSS expand the model base to include models supporting group decision-making processes. 3) GDSS should offer facilities for prompting and summarizing the votes and ideas of participants.5. 4) GDSS features. teleconferencing. this person should be able. b) A teleconference session taking place in several decision rooms at the same time. and ranking should accompany other statistical models. 6) It should be possible with a GDSS to obtain the protocol of a session for later analysis. 7) GDSS should support a facilitator to assist the orderly progress of a session. these are connected with video and telecommunication links. to route individual screen contents to the large common display. Level 2 GDSS thus facilitate activities involving the Delphi technique. These are the distinguishing characteristics of GDSS at their present stage of development: 1) Aside from the database. which at this time are still at the research stage. Models for voting. and the nominal group technique. c) An interfaced session. which is implemented with the organization’s local or wide area communication facilities. should encourage both the formation of a cohesive group and the active participation of all its members. It should be possible to run a Delphi session (with rounds of voting. 2) Complete decision ("war") rooms are often provided and equipped in a fashion conducive to a group effort. a large common screen display is an essential facility. with terminals and a large public display screen.5 Self assessment Questions (ForSection 10. make asynchronous sessions possible). Explain the roles played by organisational actors in building a DSS? 3. in which participants work at remote terminals and do not see each other. Explain the various level of DSS technology as identified by Ralph Sprague? 2. Some sessions also profit from the presence of a leader. rating. and dialog components of DSS. brainstorming. anonymous opinion sharing.5) 1. in conjunction with the appropriate software.

or they may be given access to the actual corporate databases. and the ability to control the system in a very easy way. The feature of EIS is to access to a large variety of internal and external data. as DSS do. Analysts and middle managers can subsequently use a DSS to suggest a solution to the problem. is shown in figure 10. basis. They can be best understood by contrasting them with DSS. EIS and DSS. The relationship between these two types of information systems. More recently. these capabilities make EIS a strategic planning tool. in addition to their other features. Fig. The technical problems of EIS data access pale in comparison with the problem of potential resistance from managers below the top level. EIS may work on the data extraction principle. executives may define just the few indicators of corporate performance they need. With the drill down capability.6 Executive Information Systems Executive information systems (EIS). are becoming the primary tools of top-level control in some organizations.and lower-level man agers to project the future. Once an EIS has been set up. Speaking tersely: while DSS are primarily used by middle. developers frequently rely on the critical success factors (CSF) methodology developed by John Rockart of MIT. An executive who is experienced with such a system can perceive a trend (and a problem) in seconds. 10.4. sometimes daily. . EIS primarily assist top management in uncovering a problem or an opportunity.6. Many executives have already fallen into the habit of reviewing these indicators on a regular.6 Seen in the light of the structure of a decision-making process. He de fined CSFs as "those few critical areas where things must go right for the busi ness to flourish. its executive users are able to obtain virtually instantly any information supported by the EIS data-unfiltered and unable to know their subordinates." With the use of this methodology. which they com plement. the ability to "drill down" on more and more detailed data. EIS also have forecasting capabilities that can be used in an "automatic pilot" fashion. In the design of EIS. EIS primarily serve the control needs of higher-level management. they can obtain more detailed data behind the indicators. They help an executive to spot a problem. or a trend. The first kind of EIS can fully reside on personal worksta tions. Explain the concept of GDSS 10. terse presentation of information with colorful graphics. EIS of the second kind need the power of minis or mainframes to access corporate data. an opportunity. EIS-type applications are coming into use by middle managers as well At the heart of an EIS lies access to data.

There are a variety of organizational arrangements for DSS groups. In analyzing a number of companies. tech nical support. The CEO of Lincoln National Corporation has fourteen direct reports and no executive assistant-and he attributes his ability to maintain this span of management to the EIS and electronic mail. Multiple DSS. Michigan) and Pilot EIS (by Pilot Executive Software of Boston) lead the EIS field. DSS groups are a resource that can play a crucial role in this change process. Resistance to change should be expected. are in place in most of the medium-sized and larger firms. on the other hand. A single EIS is generally implemented in an organization. Commander EIS (by Comshare of Ann Arbor. As we have already seen. the strategic business objectives methodology of EIS development takes a company-wide perspective. 10. Most fre quently. The introduction of DSS.As opposed to the CSF methodology. In the United States. Following the identifica tion of the strategic business objectives of a firm. treated as a technology. England) is a leader in Europe. EIS have by their very nature a significant organiza tional impact. RE· SOLVE from Metapraxis (New York and of Kingston upon Thames. . A well-designed EIS can immensely increase the span of management of executives. Hugh Watson and his colleagues analyzed how organizations actually support their DSS efforts. which help to configure a specific EIS. All of these systems are actually EIS generators. such as the corporate planning department. the DSS group is located either in an information center (with DSS com puting considered an end-user activity) or in a staff analysis department in a functional area. This ability alone is also a potential source of resistance to EIS. a process of organizational change should be conducted as a part of the general implementation process. The organizational advantage of EIS lies in its support for a tight control from the top. as EIS use at the Mellon Bank of Pittsburgh expands from the top corporate level down to the departmental management level. Since top management can easily track the performance of virtually any company subunit. so that the DSS ultimately influence organizational processes (rather than only isolated individuals). and then the information needed to support these processes is defined-to be obtained with the EIS that is being planned. and training. They found that DSS groups in most organizations include five or fewer professional members.7 Organisational aspects of DSS and EIS Both DSS and EIS are proliferating in organizations in the private and public sectors. The refreezing phase of the organizational change is especially important: users should actually feel committed to using their DSS and allow these systems to change their work lives. with more and more executives given access to it. organizational DSS are conceptually more complex than the rather well-structured EIS. the critical business processes are identified and prioritized. EIS use has already made possible profound organizational changes. Thus. lends itself to the process of technology assimilation. primarily due to the model-management component of DSS. The support offered by the DSS groups ranges from acting as builders and promoters of DSS to providing consulting services. which relies on the individual critical suc cess factors. Institutionalization means that knowledge workers throughout the enterprise consider the merits of the DSS approach when appropriate and implement and use these systems. and with the system playing an integra tive role. In general. The objective is to institutionalize the use of DSS. company decision making may be decentral ized-and controlled with the EIS. it is expected that the system will provide a shared understanding of the business throughout the management structure. This methodology avoids the frequent pitfall of aligning an EIS too closely to a par ticular sponsor. Richard Epich concluded that a successful integration of DSS into a company’s computing environment is primarily dependent on top level commitment to the technology (as is the case with virtually all advanced information technologies) and the quality of the DSS support groups.

Primarily applied in planning. The availability of EIS as potent tools for top-level control will shape many or ganizational solutions in the future. top man agement has imposed a limit on drilldown depth. though simpler DSS tools may also be deployed. At Xerox. Specific DSS that are actually employed by users are generally developed with DSS generators. A.9 Terminal Questions 1. CSF D. CAD C. but also from the executives themselves. which need to be refreshed daily in many cases. Group DSS (GDSS) expressly support group decision processes. EIS give top executives the capability to bypass the chain of authority. Future DSS are expected to incorporate expert system technology for various aspects of their operation. EIS developers frequently rely on the ______ . Explain the organisation aspects of DSS and EIS 10. must be expected and managed. ABC B. DSS generators . CDE 2. 10.10 Multiple Choice Questions 1.EIS have weighty political aspects: they could give a top executive the capability of probing into the work of any manager without the manager’s knowledge. DSS are used either directly or through intermediaries by all levels of management. EIS are no better than the data contained in their data bases-and much resistance must be overcome from a variety of quarters to obtain this data on a regular basis. As analyzed by Rockart and David De Long. In particular. the role of an executive sponsor is critical. Application of CSF methodology and a superior interface design can go a long way toward allaying these apprehen sions. Executive information systems rely on databases.8 Summary Decision support systems (DSS) are flexible interactive information systems that support managers in reaching decisions concerning ill-structured problems. Software packages for developing DSS are called as A. where the use of EIS pervades the work of high-level managers. Resistance to these systems. such as the Delphi technique or brainstorming. who in some cases feel that the information will be inadequate for their needs or that the system will be difficult to use. resistance is to be expected not only from the staff personnel who support the executives and middle managers. DSS Programmers B. 10. managers can drill down no deeper than three layers from the top. organizational measures must be taken to ensure support for EIS. Executive information systems (ElS) support higher-level management control by making data regarding all aspects of corporate operations accessible in a timely and easily handled fashion. What do you understand by Executive information system? 2. Combined with electronic mail. therefore. Sometimes.

This has been mentioned in section 10. This has been mentioned in section 10. This has been mentioned in section 10.1 2. This has been mentioned in section 10.2. TQs and MCQs Self Assessment Questions Section 10.4 1. Unstructured D. This has been mentioned in section 10.7 Multiple Choice questions 1. All of the above 10. This has been mentioned in section 10. Semi structured B.3. A .2 1.3 4.1 1.5.C. b.3 Section 10. This has been mentioned in section 10.2 2.5. This has been mentioned in section 10.3 Section 10. C 2.5.2 3. DSS Scripter 3.6 2.2. a. Sales forecasting is an example for ____________ type of problem A. c.3. DSS Writers D. This has been mentioned in section 10. B 3. Structured C.5 1.2.3. This has been mentioned in section 10. This has been mentioned in section 1.3.4 Terminal Questions 1.11Answers to SAQs.

Jane P. Stephen Haag 6. Laudon 4. Management Information System – Sadagopan . Management Information System – James A. O’Brien 5. Management Information System – CSV Murthy 3. Laudon. Management Information System – Zwass 7. Kenneth C. Management Information Systems for Information Age – Amy Philips. Kaeve Cummings. Management Information System – Jane Laudon. Management Information System – Gordon and Gordon 8.References: 1. Management Information System – Kumar N 2.

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