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.

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

In many cases. organizing. machinery. Indeed. various interpersonal tasks have been found to make far greater demands on managers’ time than pure decision-making. Decision support systems allow managers to consider various courses of future action and see projected results in order to plan future activities.2) 1. and coordination are informa tion-intensive aspects of these managerial functions. staffing. However. materials. and information) and aims to meet certain financial objectives. or an expert system that helps to diagnose via telecommunication links how equipment installed at customer sites is operating.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. There are several fruitful ways to understand management. even when the participants are widely dispersed. 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. also by sending images.3 Self Assessment Questions (for section 1.Management support systems. Office information systems support diverse aspects of individual and group knowledge work. and pro jected activity within their areas of responsibility. A local government institution employs its resources (financed by the tax payers) to provide a benefit for the area population-thus. leading. labor. Such interorganizational it formation systems speed the flow of information between companies and are frequently a source of competitive edge. Detailed analyses have also been made of how managers actually spend their time. a motor vehicle bureau licenses drivers and vehicles. 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.3. Decision-making. 1. assist the various levels of management in their tasks and managers are able to obtain summary reports on past. 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. A nonprofit hospital applies its resources to provide health care to its target population. 1. The range of this type of support is broad and growing. are prime exam ples of strategic information systems.2. monitoring. the quality of . Organizations use certain resources to pro duce outputs and thus meet their goals.3. 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. For example. current. What do you understand by Management information system? 2.3 Organization and Management 1.1 What Are Organizations? Organizations are formal social units devoted to the attainment of specific goals. An individual may maintain his or her business calendar and communicate with co -workers through the medium of electronic mail in some systems. The classical way is to consider the managerial functions: planning. and controlling. What does management information system include? 1. An ordering system with terminals installed at thousand of client sites. a business firm that pro duces semiconductor memory chips consumes certain resources (money. Other systems offer a variety of computerized supports for team work.

4.4. although to different degrees.making process and the quality of the decision.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. information is considered to be processed data that influences choices. It could be described in three ways 1) as processed data. and knowledge may be derived from scientific terminology. Information makes a market perfect by eliminating uncertainties about supply and demand. 1. that the lead ership function receives scant support from MIS. Because managers must project the outcomes of alternatives in making decisions. defines information as the inputs and outputs of . and conversely. 1.4 The Concept of Information 1.1. and the three terms maybe used interchangeably. that is. its actual arrival depends on unforeseen conditions. The confusion often extends to the information systems context.3 Information as a Meaningful Signal Information theory. 1. each incoming aircraft has a scheduled arrival time.1.1. information. An MIS. However.1 Information as Processed Data Data are generally considered to be raw facts that have undefined uses and application. data that have somehow been formatted. where all buyers and sellers have complete knowledge about one another and where uncertainty does not exist. When the data are analysed. a branch of statistics concerned with measuring the efficiency of communication between people and/or machines. 1. Economic signals that measure and predict the direction of the economy provide information about the economic climate. thereby increasing Federal Express’s ability to handle arriving packages.4. the reduction of uncertainty about the outcomes of various alternatives improves the effectiveness of the decision. the more information is available. the less information is available. is designed to support managers in as many of their functions as possible. scientists talk about the information contained in the data and the knowledge acquired from their analyses. It is clear.manage ment cannot be evaluated by measuring time allocations alone.4. Taking an example of Federal Express in USA. obviously. The researcher collects data to test hypotheses. that is. The firm reduces its uncertainty by decoding these signals. 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. data refer to unprocessed and unanalysed numbers. Managers also define information in terms of its reducing uncertainty. and 3) as a meaningful signal-to illus trate the richness of the concept of information. thus. for example. but the planning function should be extensively supported. and knowledge is considered to be an understanding derived from information distinctions among data.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. firms behave according to how they read the economic climate. the more uncertainty exists. and summarized. the information that a manager brings to bear in a meeting is often a determinant of its success. Moreover. 2) as the opposite of uncertainty. the less uncertainty exists? In microeconomic theory the equilibrium of supply and demand depends on a market known as a perfect mar ket. In macroeconomic theory. filtered.

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.

At work. some employees may collect information while others process it or analyse it. industry trends. Define information. and managing resources.4. As managers become more sophisticated in performing their tasks. 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. What are the different uses of information? 3. directory systems to organize files on a computer disk or diskette. maintaining. for example. For example. 1.4. individuals use file folders or piles on a desk to organize infor mation stored on paper. They typically maintain information about employee performance.1 Individual Needs Individuals need information systems both at work and at home. negotiating agreements. and making decisions. Increasingly managers use computerized systems to assist with obtaining. Executives at Matsushita Electric of Canada have given portable technology to their staff and managers to allow them to work outside the traditional workplace.4. and using information.4. Organizations that lack quality information systems may experience problems in accessing the data they need for executive decision making.4) 1.3 Organizational Needs Because of the value of information to organizational performance. lose important data during a relocation or power failure. such as when visiting prospective and actual clients. 2. They allow businesses to operate internationally by making information about transactions available to managers and other workers in any country. and an array of computer software facilitate such infor mation management. or fail to respond quickly to changes in the marketplace or industry. Consider a logistics agents like Blue Dart without a quality information system. 1. Increasingly. Although systems for information management by individuals generally have few components and even fewer procedures. 1. customer preferences. developing. various types of computer equipment.5 Self Assessment Questions (for section 1. Information systems also make global news and information quickly available.4.2 Managerial Needs Most managers require significant amounts of information to perform their jobs.4. individuals employ systems such as posting memo notes on a refrigerator. most organizations develop procedures to ensure that important information is collected. An individual who lacks such aids combined into a personal information system may miss important appointments or fail to accomplish important tasks.4. and organized effectively. and other subjects. setting alarm clocks. individuals use lap tops or other portable electronic equipment to meet their information needs. investment tracking. Many organizations even establish a special group that manages and develops information systems for the entire organization.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. and communicating with other organizational members. and calendars to organize information about future events. increasingly individuals are using sophisticated personal financial managers for personal budgeting. use a portable computer office. motivating. or scheduling regular times to share information with family and friends. captured accurately. What are the various needs of information? . At home. Explain the various cost involved with information 4. Individual jobholders. perform redundant activities in dealing with customers or suppliers. and bill paying. they require increasingly sophisticated systems to help them meet their information needs. Case workers at some public housing agencies.

and video screens. and retrieve information. groups.2. This technology allows managers to easily access.3 Database Management Systems Database management system offers a vehicle for storing and supporting the processing of large quantities of non. texts. Think about the availability of encyclopaedias. Today desktop and portable computers costs are continuously reducing and can outperform the room-sized. and data communication systems. Input hardware captures raw data and information from interactive uses.1 Software Computer software provides the instructions. Software development tools such as computer languages and screen generators facilitate creating or modifying software to respond to an organization’s information needs.2.2 Components of Information Technology Information technology includes computer software.5 Information Technology 1. retrieve. 1. While processing power has increased.5. microform.5. Systems software directs the functioning of the computer machinery. store.1.5. Many homes have personal computers and household devices with computer microchips. in the form of computer code and its accompanying documentation. such as data on employees. processing. Significant advances-in information technology have made large quantities of information available to organizational members and other individuals at a relatively low cost. for processing data electronically. and other information through data services. 1. Output hardware provides copies of data on paper. Significant strides have occurred in the development of hardware in the last decade. and communication of information. Storage hardware includes removable and fixed media that allow rapid access to information. Processing hardware converts or transforms data. In some circumstances these same employees may develop their own software that they modify over time to meet their changing work or personal needs. process. voice. storage. the size of the hardware has decreased considerably. supermarket prices. . This widespread availability of computer technology has dramatically changed the way people process. or human resources professionals. 1. Now consider the ability to telephone or send mail electronically almost instantly from the United States to Europe and Asia. store.2 Hardware Computer hardware refers to the equipment used in electronic infor mation processing. Individuals and organizations can purchase an array of software products. airline schedules.scientific information. 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. Consider the large networks of data available to financial analysts. products. hardware.2.5.5. Information technology has allowed individuals. database management systems. or other effects. million-dollar computers of ten years ago. customers. 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. Applications software assists in the acquisition. sort. and communicate information.1 The Role of Information Technology Modern technology provides many tools to help managers acquire. and suppliers. marketing experts. retrieval. Offthe-shelf software is mass-produced software made for a variety of generic uses such as word processing. it offers varying quality for graphics. and analyse databases of information along a variety of dimensions. and organizations to manage information effectively and efficiently. print.

video conferences. 1. retrieve. They buy and sell products outside their home country.3 Self Assessment Questions (for section 1. among others. This usage differs significantly from that found in many United States companies.1 Information Management Model An analytical model. the type of information available.6. Society. They also must identify the information they need for developing and implementing their organizational strategy. Individuals must assess their information needs at work and home.1. This step begins with an assessment of the current manual or computerized systems for handling information.1. plants. This model involves four steps diagnosis.1 Diagnosis Managers. economic development. The current state of information technology has facilitated the expansion of organizational boundaries.5. techniques. Specifying in detail the information needs at each of these levels is the first step in the effective management of information. A manager. uses information for communication. the type of infor mation required to solve it. financial control. The information management model is intended to complement the systems development life cycle. the context in which it occurs. and other individuals must begin by assessing their needs for information within a particular situation they face. 1. and communication. process store. to facilitate the effective use of information in managerial decision making. What are the various components of information technology 1. or distribution centers around the world. or quality monitoring. Diagnosisrequires a description of the existing problem. for example. or organizational levels. for example.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. managerial. or communicate .2 Evaluation Evaluation of the methods. Organizations use information to increase their competitive advantage. Advances in communication technology occur frequently. evaluation. and the possible ways of securing the needed information. and generally improving the quality of life.6.1. employees. and implementation. open subsidiaries. such as by improving customer service. Diagnosis of information needs can occur at the individual. reducing the cost and increasing the accuracy and speed of data transmission. too.5) 1. One recent study of computer-based information systems in 72 companies in the People’s Republic of China. design. the four-phase model is directed at users of information systems rather than information systems professionals or other systems designers. 1. project management. cost control. and other electronic media. computer networks. Managers often have needs for transaction processing. might first describe or identify the components of the information systems and technology used to acquire.6 Managing Information in a Global Environment Organizations today function in a global environment.6. Explain the role of information technology in the modern organisation 2.5.4 Data communication technology Data communication technology has dramatically improved the communication of information across short and long distances. and communicate worldwide. This model has some of the same characteristics as the systems development life cycle. 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. 1. and systems for handling information follows the diagnosis of needs.

store. focuses on issues associated with putting the new or altered systems to use. Questions for evaluating information systems and Technology 1. Design involves correcting deficiencies in existing systems and integrating state-ofthe-a practices and technology into them. Implementation also includes ensuring that the new systems perform as expected and that they result in the predicted costs and savings. retrieve. managerial. . Are they manual or computerized? 3. process.1. or organizational needs with the assessment of current information systems and technology and then designs coherent systems for information management. or other organizational member combines information about individual. information systems staff. Would state-of-the-art systems significantly improve the handling of information? 8. Alternatively.1.4 Implementation The final step. What are the current systems for handling information? 2. monitoring such effects and providing solutions for problems that arise should be part of the implementation. Would other systems better respond to the information needs? 7. regardless of the information technology a information systems used. he might design a system that incorporates additional computer equipment and communication software. 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. How do these components compare to available state-of-the art systems? 5. What information needs are not handled and cannot be handled. if he expects that the information management needs might increase and that individual managers might require access to data they currently lack. Next he or she might compare these components to available systems. or communicate information? 4. regardless of the information technology or infor mation systems used? 1. information systems professional. staff specialist. 1.6. How well does the current system respond to the information needs? 6. 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.3 Design A manager. implementation. the manager or other user might determine what aspects of his or her information needs are not handled and which cannot be handled. What are the components of the information systems and technology used to acquire. or specialists from outside the organization will play. Specifying the timetable for implementation typically follows. Recognizing that the new system and technology likely will have unanticipated con sequences should be a key aspect of planning. What consequences will result from a change in the way information is handled? 9.information.6. 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. They must also assess whether the information systems professionals function effectively throughout the four phases.

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

have their own lives in the reference disciplines. MIS as a discipline became established a full decade later. The organizational computing landscape was revolutionized by the emergence of personal computers in the late 1970s. UNIVAC I was also the first computer model used for business data processing when it was installed by General Electric in 1954. Developed in response to problems encoun tered by the military during World War II. Explain the various disciplines from which MIS has evolved. The authors concluded that what "we shall call … information technology" would have "definite and far reaching impact on managerial organization. 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. However.2 Self Assessment Questions (for section 1. 2. Technological developments re lated to computers and digital communication have continually driven the field in both practice and research. computers were thought of at the time as devices for doing precisely what their name impliescomputing. These notions have also influenced thinking on the role of information in organizations-that is.10 Multiple Choice Questions . The first papers analyzing the role of information systems in orga nizations started to appear in the second half of the 1950s.000 computers installed by the end of the 1950s. entitled Management in the 1980. Informal information sources must be cultivated and coordinated with the use of formal sources. Many areas of research in MIS overlap with the work done by computer scientists. the focus of the field of MIS. drawing in part on the findings and methodologies of several reference disciplines. MIS is not only a field of practice.8 Summary MIS are formal systems built around the hardware backbone of computer and telecommunications systems. Although the field of MIS originated in the late 1950s. When appropriate software became available. but also a discipline of scholarly inquiry. Today." They proceeded to set up a frame work for analyzing this impact. Write a note on information management model 1. with only some 4. 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. The first general purpose electronic computer. the predominant tasks of computers are storing and accessing organized informa tion and processing symbols. As we have stressed.7. perhaps only "thinkable") without computers. ENIAC. 1. 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. Mass production of computers started in 1951 when UNIVAC I was delivered commercially as the first such machine built on an assembly line.7) 1.9 Terminal Questions 1. MIS as an area of practice had a rather slow start. The development of MIS as a field of inquiry paralleled the technological de velopments. What do you understand by management. 1. The 1958 paper by Harold Leavitt and Thomas Whisler. the personal computer gave strength to end-user computing. management information systems are unthinkable (well. calculation is just one of the several functions com puters perform. was completed in 1946 at the University of Pennsylvania. was influential in focusing the discipline. 1.

K. A. Prahalad 1. ____________ defined modern or ganizations as information-based. 1960 2. All of the above 4. Peter Drucker C. 1954 D. 50 D. A. 1952 C. Information C. Maslow B.11 Answers Self Assessment Questions: . Organizations are formal social units devoted to the attainment of specific goals A.1. The first computer was introduced into a business organization in the year ______ . Decision support systems D. Organisation D. 1950 B. Management B. Gary Hamel D. ____________ which support the work of senior executives and of company boards by giving them ready access to a variety of summarized company A. 40 C. 30 B. Secretaries may spend as much as ____________ percent of their time looking for paper documents A. Transaction processing B. 60 5. Executive information systems 3. Management reporting systems C. C.

4.5.1 2. This has been mentioned in section 1. You will have to refer to section 1.1 Terminal Questions 1. Multiple Choice Questions: 1.2. C 2. This has been mentioned in section 1. A 5.3 1.2. B . D 3. This has been mentioned in section 1.5. This has been mentioned in section 1.2 3.3 4. C This has been mentioned in section 1.1. 2.2 2.1.2 Section 1.Section 1.3. This has been mentioned in section 1.3 1.1. This has been mentioned in section 1. You will have to refer to section 1.4 Section 1. Section 1.2 This has been mentioned in section 1. This has been mentioned in section 1.

1 Information needed by different levels of management 2. you should be able to .2 Finance 2.3. we shall begin with management and managers.3.3.1 Accounting 2. operations. finance.3.Unit-02-Management Information System from Managerial Outlook Structure: 2.4 Self Assessment Questions (for section 2. TQs and MCQs 2.1 Introduction With this unit.4 Operations 2.6 Self Assessment Questions (for section 2.5 Human Resources Answers to SAQs.6 Multiple Choice Questions 2.1 Functions of Managers 2.3 Information Required for the Process of Management 2.2) 2.3. marketing. We shall conclude by functional needs of information in the areas of accounting.3 Marketing 2.2. Objectives: At the end of this unit. and human resource management.4 Summary 2. the functions performed by managers.5 Terminal Questions 2.2 The Manager’s Job in a Global Environment 2.3 Functional Information Needs 2.2 Information and Levels of Management 2.2.1 Management and Managers 2.1 Introduction Objectives 2. Then discuss the various levels of management and their information needs.

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

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

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

and controlling. for example. For example. adver tising. Planning usually refers to both the specific of goals and the blueprint for achieving them. 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. and the possibility of additional rainfall. Operational planning. The shipping supervisor in a large manufacturing company must determine how often to schedule a third shift of workers. and their jobs to design the operational plan. and disturbance handlers. . Such distribution may occur in face-to-face conversations. At the same time manager must consider his or her own information needs in performing the four basic management functions of planning. The public works director of a small town must plan the monthly work schedules for the road crews she supervises. marketing. and the cost of various media. and pricing. for example. They also engage in decision making. or individuals outside the organization. organizational. constitutes additional information incorporated into the strategic plan. Tactical plans may focus on decisions about staffing. or at meetings. problem solvers. resources.2. in which they allocate resources and act as negotiators.medium and long-term periods. managers develop the organization’s mission: goals and the means to accomplish them. 2.3. through electronic media. group. and culture. the nature of advertising for those products. The top managers at LIC of India. or planning for the issues of implementation. The manager must have information about the environment in which the organization functions. leading. 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. its com petitors’ competencies. often accompanies strategic and tactical planning. the man may give bad news to subordinates and superiors in different ways. It can occur at the individual. Knowledge about technological developments and their applicability to the insurance company. technological developments.disseminates it to subordinates. this information may include data about industry trends. supervisors.1 Functions of Managers Planning Managers engage in a variety of planning activities that occur over short. Driven in part by the need to respond to competition. 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. their clients. Managers may engage in strategic. The manager should also have a strong knowledge of organization-its structure. Tactical objectives describe what units within an organization must do to accomplish strategic objectives. In each case. and customer demands. goals. What information does the public works director need. these managers require an array of information about their subordinates. Information about LIC’s capabilities. 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. and market requirements. as well as about the supply of various types of workers. the changing environment. organizing. 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. peers. or operational planning. tactical. or they may reflect other financial. In most organizations middle managers more often engage in medium or short-term planning known as tactical planning. The program chairperson must schedule the particular events that compose the national meeting of the Academy of Management. and tactical plans refer to the steps for attaining the tactical objectives. or extra-organizational level. for example. or human resource decisions. change agents.

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

knowledge. and time to perform their jobs. abilities. The manager might also need infor mation about training programs in which the worker has participated. or networks. First-line supervisors and middle managers generally establish a network of contacts within and even outside the organization to gather information. and the availability of resources in the organiza tion. They also benefit by having information about their boss’s needs and goals. Group members must receive and share information about the status of their activities and thought processes. and first-line supervisor help subordinates develop the skills. The manager may use interactions with coworkers or colleagues in other organizations to improve their job performance. materials. Organizing effectively requires information about the content of jobs. Defining the hierarchy of authority deter mining the location of decision making. they must also regularly secure information about their subordinates’ performance. and experience of subordi nates. 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. managing these heterogeneous groups requires spe cial information about the impact of cultural differences on job performance and the tech niques for handling them. Increasingly managers must supervise multicultural teams of workers. They offer guidance to subordinates about the best way to perform various job related activities. formal human resource manage ment systems provide mechanisms for this feedback. Managers must also have a comprehensive . Managers need data about the skills. 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. such as family illness or defective equipment that might have affected the worker’s performance. Managers also evaluate their subordinates. alliances. the job’s requirements. needs. Managers must also understand the assets and liabilities of various structural forms. and sometimes even peers and superiors. it means forming employees into meaning ful work groups with appropriate supervision. and any job-related goals set. and providing for coordination all contribute to the organizing process.decision? Managers must diagnose their information needs in each particular situation and then seek ways to obtain the required data. such as functional structures. Organizing Managers must structure their organization and coordinate the organization’s resources to accomplish its goals. Managing work groups generally calls for the open exchange of information and ideas. The manager might also need information about unusual factors. 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. equipment. Subordinates also acquire information about how the manager perceives their efforts and adjust their perfor mance and priorities accordingly. the skills of workers. as part of their leadership responsibilities. Man agers at all levels attempt to build effective work teams by encouraging cooperation and han dling conflict that arises. knowledge. In many organizations. or irrelevant information. Organizing generally means establishing a formal reporting structure and a system of accountability among workers. project structures. The options for organizing become increasingly complex as managers deal internationally. 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. Top executives. too little. Managers need to know the status of group activities so that they can modify schedules and resource allocations. middle managers. 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.

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

as shown below. fixed asset management. payroll. payments against these invoices. payment . and general ledger describe types of accounting information. 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.payable. They require data about unpaid invoices.

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

They create budgets for each function of the company based on such factors as the company’s financial status. in turn.Managers use financial information for both planning and control. Examples of information used by the marketing function is shown below. 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. Marketing activities that offer potential for decision support systems include sales forecasting. Portfo lio accounting systems provide both inventories and analyses of diverse types of assets. 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 . distribution. Marketing managers seek to ascertain consumers’ needs and preferences. This knowl edge helps them guide product development.3. If. operation plans and priorities.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. forecasts of revenue. and promotion so as to maximize the appeal to the consumer of an organization’s products and services. At the department level. first-line supervisors or middle managers create budgets in a similar fashion. senior management then uses the departmental budgets in its development of a corporate budget. modify their original budgets to reflect the parameters of the corporate budget. budgeting. presentation. Inc. departmental managers. and product design. They need to know the financial position of their company before they can make decisions about how to allocate financial resources. pricing. Analytical computer systems support diverse types of investment management. and projections of cash flow. pricing. the history of spending in prior years. In the General Foods’ Corporate Financial Planning and Control department for example. wants to shorten the time required for closing its books so that finance department can spend more time in data analysis for managerial improvements. Finan cial managers must continuously diagnose the specific information they require for per forming their job responsibilities and dealing with problem situations. Reebok. 2. managers supervised analysts who used microcomputers to consolidate financial data from 17 worldwide divisions and then report the data to upper management for use. Marketing managers also use sales information to improve interactions with suppli ers as well as monitor business performance.

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

the physical processes relate to acquiring information.retail service organizations include most of the same processes except that manufacturing is replaced by product acquisition. production capacity estimates. a transaction may affect the company’s income statement or balance sheet. Managers require information about transactions for several reasons. in turn. financial. Managers need information about hiring because it affects the organization’s payroll. space. or taking of a reservation. A transaction describes a business event such as the sale of a product receipt of a payment. Second. and presenting it to the client. and human resource decisions. work schedule. 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. For service organizations that deal primarily in information. managers use information about transactions in making marketing. such as law and accounting firms. hiring of an employee. switching to a diagnosis-related reimbursement (DRG) system called for acquiring and processing information about a patient’s illness and treatment. 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. 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. Hospitals process transactions as part of their system for charging for medical coverage. in one case. which. and subsequent hiring decisions. as listed below. It can be a major component of the operations function. the major components of operations management and associated information needs are alike. influences the schedule of payments to suppliers as well as the company’s credit decisions. For example. First. assembling it into the proper form. Despite these differences.

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

Human resource planning involves determining the demand and supply for various categories of workers.· 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. he could compare this supply with the requirements for workers to do various jobs before making downsizing . they assist line managers with implementing the implementing the resource policies. and practices. programs. James Orr wanted a daily count of the number of employees in his organization.

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

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

Operations encompass ___________ A.1 2.2.7 Answers Self Assessment Questions Section 2. Manufacturing as well as services 5. c. First line supervisors D. b. Operational planning D.4 .3.4 1. d.6 1. Non profit organizations D. People research D.3. a.2. Needs research C. Market research B. tactical planning C. ____________ is the process of gathering information about what consumers want and need. This has been mentioned in section 2. This has been mentioned in section 2.3 1.B.1 Section 2. This has been mentioned in section 2.3. This has been mentioned in section 2. All of the above 3.1 1. This has been mentioned in section 2.3. Strategic planning B. In most organizations middle managers more often engage in medium. Top level management C. This has been mentioned in section 2. Manufacturing only B. A. all of the above 2. Services only C.or short-term planning known as A.3. All of the above 4.

A 2. A 3. B 4. This has been mentioned in section 2.2 2. e. This has been mentioned in section 2.3.3 Multiple Choice Questions 1.1. D 5. A . This has been mentioned in section 2.5 Terminal Questions 1.2.

2 How information are selected and organized 3.4 Demands on Organizations in an Information Society 3.4 Career-Related Needs Mechanisms for Acquiring and Distributing External Information 3.Unit-03-Information needs of Organisation and Individuals Structure: Development of Organisational Computing Facing Insufficient or Conflicting Information 3.2.5 Capabilities of information system in an organizational view Self Assessment Questions (for Section 3.2 Challenges of Information Management 3.6.1 Dealing with Quantities of Information 3.4) 3.2 Informational responses to the new environment 3.2.1 Introduction The Information Needs of Individual Job Holders The Components of Perception 3.3 Self Assessment Questions (for section 3.4.6 The Individual at Work 3.2.1 Components of an organizational information system Maintaining Technical Skills 3.2 Time Management Needs 3.1 Organizational Design for Knowledge Work 3.2 Humans Versus Computers Enhancing Personal Productivity 3.7 Information Management Requirements 3.2) 3.3 Enhancing Personal Productivity 3.1 Task-Related Needs 3.6.1 Acquiring Information .

7. sometimes even trying to do so using incom plete information. TQs and MCQs 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.2. in motion. Try to recall. They may match it to concrete examples. · What are the components of organizational information system · What are the requirements for information management 3. we describe how information are selected and organized by individuals. · How the organisational computing developed.3. Once individuals attend to information about a situation.11 Answers to SAQs.3 Retrieving Information 3.8 Summary 3. they may group stimuli into patterns. In addition. trying to form a complete picture.4 Communicating Information 3. for example. Clearly.2 Storing Information 3. and how individuals differ from the computer in various aspects.7. they organize it in several ways. We shall conclude by understanding the requirements of information management. People tend not to see information that they are exposed to repeatedly without consequence.9 Terminal Questions 3. or in contrast with their background. the subjectivity of perception limits the processing of infor mation. The different ways computers can help individuals meet their needs for various types of information are narrated.7. The information itself may also influence whether atten tion occurs: Individuals select stimuli that are more intense.5 Ensuring Privacy and Security 3. repetitive. personality.7. people tend to ignore information that runs counter to deep or long held beliefs.2 How information are selected and organized 3. Individuals attend to certain features of a situation or select specific pieces of information to see or hear because of their needs. or experiences.10 Multiple Choice Questions 3. Finally. They may view it against a background. novel. They may try to fit it into prototypes or categories that represent typical aspects of similar situations. the pictures and shapes on the back of a five hundred rupee note. within an environmental or situational context. very familiar. for example.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.1 Introduction In this unit. Objectives: · How individuals select and organize the information. .

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

Huber concludes that these factors – an increase of available knowledge. Two principal factors have led to increased interdependence. To succeed. according to Huber. Moreover. These. has removed the "float"-the lag between sending and receiving-in written communications. while rarely in a competitive situation. are the hallmarks of an information society: 1) Dramatic Increase of Available Knowledge Whether measured in terms of the number of scholarly journals. Widespread use of telefacsimile. 3. 3) Increased Turbulence The pace of events in an information society is set by technologies. or a growing number of human organizations. Pressures on the public sector in democratic societies. and interdependence. To thrive. both the production and the distribution of knowledge have undergone a manifold increase. 2) Growth of Complexity Huber characterizes complexity in terms of numerosity.4. produced with contributions from a number of interdependent firms (consider a car or a computer). growth of complexity. Rather. The first as been the revolution in the infrastructure of transportation and communication. patents and copyrights. are still governed by the demands of society. Consider the volumes and speed of trades in the securities and currency markets. interdependence has increased on a global scale. organizations must be compatible with this environment. Even the most isolated of countries participates in some way in the international division of labor. The second factor is specialization in firms that make narrowly defined products. and increased turbulence-are not simply ancillary to a transition to the new societal form." To succeed in an information society. These differences lead to diversity. we should expect that these factors would continue to expand at an accelerating rate (a positive feedback exists). an organization must have information systems able to cope with large volumes of information in a selective fashion. as another example. A company’s product is typically a part of a larger system. Moreover. 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. diversity. The great amount of change and turbulence pressuring organizations today thus calls for rapid innovation in both product and organizational structure.2 Informational responses to the new environment . also make the environment in which public organizations operate more complex. His conclusions provide a framework for determining what is required of an organizational information system. the number of events that actually influence an organization’s activities (effective events) has also grown rapidly. or in terms of the volumes of corporate communications. people and organizations learned to specialize: they do things differently and organize themselves differently to accomplish specialized tasks. Equally important. along with the pressures conveyed from the private sector. we expect that the rapidly changing environment will be not only "more so" but also "much more so. Organizations operating in the public sector. Bar ring some catastrophic event. as opposed to the self-sufficiency of companies producing a complex product down to its minute elements.required by an information society. they will be a permanent characteristic of the information society in the future. A growing world population and the industrial revolution combined to produce numerosity. because of the infrastructure discussed earlier.

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

For example. leading companies add more value to their products by customizing them for smaller market segments and by flex ible manufacturing. A very large number of factors affect a company’s business: no supplier is too remote and no customer too foreign. while others help to maintain operational stability even as rapid change takes place. Organizations must have specialized information mechanisms as a part of boundary spanning. The difficulty lies. In the not-so-distant future. Information systems will then be customized for the individual. The principal capabilities of information systems include: 1) Fast and Accurate Data Processing.2 Mechanisms for Acquiring and Distributing External Information Unless organizational MIS is flexible. Information systems help companies add more value to their products than is possible in the manufacturing of commodity-type.how a company can successfully combine a product with customized service and information. with Large-Capacity Storage and Rapid Communication between Sites . firms need explicit mecha nisms for acquiring external information and distributing it to the appropriate knowledge workers. As we will see. more complex informational tasks will be delegated to infor mation systems.4. The competitive demands of the global market lead to a certain degree of homogeneity-many can play the competitive game.S. in determining what information is actually needed.2.and communications-based information systems offer a set of ca pabilities to be brought out in the development of individual systems. As the business environment has become global. If decision makers are not shielded from unneeded information. some of these capabilities help to provide dynamic action. or making an ad hoc search for information regarding a specific problem or opportunity. 3. What responses do organisations need to take in an information society? 3.or acquiring information about their environ ments. MIS users are able to define their pref erence profiles for incoming messages and rank them by order of importance. To flourish. enough to accommodate the change. The vast volume of knowledge in the information society calls for coping tech niques. with a consequent increase in the number of players. where wages are lower and raw materials more accessible. commodity production does not bring high profits.5 Capabilities of Information System in an Organizational View Computer. What are the hallmarks of an information society according to Huber? 2. the two objectivesmaintaining informational support and adapting organizational structures to fit the changing environment-will contradict each other. However. Thus. 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. standardized goods. Software screens and filters help in coping with information overload. 3.3 Self Assessment Questions (for Section 3. Many U. 2) Probing. regardless of their geo graphical locations. companies have found it advantageous in recent years to produce high-volume standardized products off the shores of the United States. expert systems will be able to define more precisely an individual user’s information-interest profile.4. A browsing mode will also be available for scanning. their effectiveness dwindles.4) 1. Two modes for collecting information about the business environment require support: 1) Continuous scanning of the economic environment for opportunities and potential problems. of course.

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

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

their favorite restaurants. He uses the information about sales history and customers businesses to help make these deci sions.2 Time Management Needs During a normal workday Ramesh constantly makes decisions about the best way to handle his clients.1. for example. or food services man ager. status. is even likely to disappear. uses information to perform a variety of tasks associated with his job. The key challenge for individuals on the job is to diagnose their particular information needs. All nine of the capabilities we have discussed are realized through organiza tional information systems. the names of their family members. The manager of manufacturing has different information needs from the manager of finance. To build a rapport with various distributors.3 Performance-Related Needs Not only do employees at all levels require information about the tasks they perform. managers who introduce such systems are not always motivated by strictly rational concerns about organizational welfare. Another advantage: computer-controlled production and processing machines can immediately reject defective components and alert operators to faulty processes. To identify potential customers he uses leads provided by his sales man ager. leading to higher quality output. in his supervisory role.6 The Individual at Work Individuals assume a variety of roles on the job. or credibility. for example. and stories he hears from contacts with prospective cus tomers and from salespeople in other fields. He also must know a great deal about his company’s and his competitors’ products. Ramesh also requires geographical information to be most productive.6. 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. acquires information about their birthdays. Compare the needs of the two employees of Bank – Loan. Some managers do implement systems to further personal goals.6. Individuals involved in quality efforts require ongoing and updated information about customer needs and product defects. 3. Ramesh.1. Although these roles all require various types of information. . and the types of entertainment they prefer. Do they have the same or different needs? Now compare the needs of two or more jobholders in an organization you know. thus assuring product diversity to satisfy a variety of customer needs. because the area covered by him is a large territory. 3. the accounts receivable clerk needs different information than the accounts payable clerk. such as en hancing their power. It is cost-effective in computerized manufacturing to produce small lots of products. Ramesh is most productive when he minimizes his travel time. Savings Accounts.1 The Information Needs of Individual Job Holders 3. 3. He might also determine that salespeople need new or better information about products to perform their jobs more effectively.integration progresses.1 Task-Related Needs Consider Ramesh. Computer technology can also meet the needs associated with ensur ing quality in the work place. 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. data published in trade journals and newspapers about the sales volume and number of employees in specific companies. 3.6. However. they also can provide information to management about ways to improve task performance.1. Flexibility and economies are the potential benefits of using computers in automated production processes. who is an Area Sales Manager of Airtel. the specific information needs vary considerably.6. whether to spend his time trying to close a new deal with a likely prospect or trying to appease an unhappy distributor. admissions clerk.

To ensure high productivity.2 Facing Insufficient or Conflicting Information Although compute rs can make large quantities of information available to individuals. users may also obtain conflicting information if one source updates information more frequently than another does. and specifications for transfers or advancements.6.2 Challenges of Information Management In identifying their information management requirements. 3. They must also find ways to manage data better.1. an overload of information.3. ASM of Airtel. such information may not address their needs. their per formance. First.6. Ramesh. they must find ways to enhance their personal productiv ity. Third.6. Employees must also understand and demonstrate when advanced technol ogy is a detriment rather than an asset.6.3 Enhancing Personal Productivity Employees in any organization increasingly use information technology to improve their personal productivity. Employees might also maintain logs of their own performance during a week.4 Maintaining Technical Skills . information overload become an even more significant challenge. 3.6.2. They must know how to access the information they require and recognize when manual data collection and processing is adequate. 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. individuals face four major chal lenges in addition to securing the most appropriate information. To avoid such overload individuals must carefully asses their information needs and then find effective ways of managing the required and available information. employees must know how to use computers to facilitate. As individuals move higher in the orga nizational hierarchy and assume more managerial responsibility. she may not be able to secure the precise information she needs. or year to incorporate into discussions about their personal training needs and career development. Often employees must lobby their employ ers to add new technology that will help increase personal productivity.4 Career-Related Needs Many individuals view their jobs in the context of a career.2. Fourth. 3. Because computers process input from diverse sources. The ability to show the cost-effectiveness of additional expenditures for diagnosing and meeting information needs is critical. 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.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. they may face insufficient or conflicting information. they must deal with large quantities of information that may create overload. In spite of the large amount of information in the library’s electronic cat alog. they must acquire and maintain the technical skills needed for effective personal information management. Often employees face an infoglut. job opportunities inside and outside the organization.2. Second. 3.2. 3. may wish to do some library research about com petitors’ products.6. month. not hinder.

television. 3. Other information available electronically includes current and past stock prices. is still one of the most widely used information technologies. For example. What are the information needs of individual jobholders in an organisation? 2. sales con tacts. such as the newspa per. using information technology effectively requires continuous updating of technical skills.7. or a myriad of other details. 3. radio. indices. potentially at multiple or offsite locations.3 Retrieving Information Manual filing systems satisfy many personal needs for organizing and retrieving information. They may keep copies of past correspondence. assist people in acquiringinforma tion for use at work. 3. store.7. For example. and advertising industries. magazine.6. 3.3 Self assessment Questions (for Section 3. Computerizing some of this information can reduce the amount of paperwork and facilitate retrieval. Personal informa tion needs focus on managing time. but they may also facilitate its retrieval by supporting quick.Finally. The telephone. What are the challenges of information management? 3. Not only do computerized system assist in storing information. 3. and evaluations of prod ucts and services in either or both paper and electronic form. information technology has made it possible for individuals to communicate with one another more quickly and effectively.7. retrieve.6) 1. the best prices and vendors for a vari ety of goods and services. As a result. others do not. Central. Many industries publish directories. in these systems we typically can store informa tion in only one location (unless we reproduce copies). complete airline schedules are available in printed form as the Official Airline Guide and in electronic form from various for-profit and free sources.2 Storing Information Individuals also keep significant amounts of information it files at work. facsimile (fax) technology allows the transmission of written documents and .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. project documents. records. Nevertheless.1 Acquiring Information A variety of information industries. multiple parties can communicate simul taneously through conference calling. workers must acquire. In recent years.7. state. individ uals or companies that require patent information for scientific inventions can use software to perform sophisticated and rapid patent searches.4 Communicating Information Although direct speech and writing are the sim plest means of communication. the caller’s telephone number can appear on a. Although many companies provide training to their employees. In particular. repeated searches of data. it has become increasingly sophisticated: People can dial foreign countries with out the assistance of a telephone-company operator. display screen. and computerized bulletin boards of information. employees may find their mobility and productivity limited by the extent to which they can learn new technical skills indepen dently of their employer. or local regulations may call for the main tenance of specific corporate records for varying periods. and communicate information. they must also ensure the pri vacy and security of the information. Cur rently. and individuals can leave messages without using a separate answering machine. Ensuring that employees have the appropriate skills has both financial and time cost implications. invented in the nineteenth century. and personal documents.

Note that information thieves can bypass the key lock relatively easily by disassembling and reassembling the computer case. particularly because these security breaches are not easily noticeable. organizing them in a meaningful way. 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. and graphics capabilities of computers have affected the ease of producing and the appearance of written communication. such as a locked file cabinet. Individuals process information by first attending to certain stimuli and then or. such as calendar or address list. 2) Store a backup. 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. the telephone system will routinely communicate moving pic tures as well as words. and store personal documents. 4) Consider using encryption software when dealing with highly confidential material such as psychological records. This is particularly true if their organization lack norms that encourage security-related behavior. rather than paper. handle. away from heat and magnetism. Individuals at work require various types of information for . enabling them to immediately redesign documents to meet chang ing information needs. 3. Directions for Encouraging Security 1) Keep all diskettes in a secure.picture.over telephone lines. computer files are highly susceptible to theft and sabotage. Although most personal information sys tems are not meant to be shared.8 Summary The first step in effective management of information is a careful diagnosis of information needs. Soon. Employees responsible for publishing catalogs for companies could use electronic publishing to make their catalogs available to potential customers in computerized. fireproof location.5 Ensuring Privacy and Security Recall Ramesh. Ramesh keeps large amounts of information about his distributors on his personal computer. 3. 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. However. occasionally sharing some personal information. 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. Protecting personal privacy has also become a key issue as computer information systems can maintain large amounts of data about individuals without their knowledge. 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. may be desirable. 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. They may use dic tation or rough notes to record the information. A variety of techniques can be used to protect against the theft and destruction of valu able personal information. Privacy advocates call for policies and procedures to protect individuals’ privacy.7. Sophisticated software for word processing desktop publishing and graphics arts has enticed workers to create and mod ify their own documents. desktop publishing. ver sions. Humans and computers can play different roles in this process. Area Sales Manager of Airtel. Word processing. Workers must also prepare. second set of diskettes at a different site from the first set.

Electronic demand interchange 3.2 Section 3.1 2. and can related needs. time management. 3.10 Multiple Choice Questions 1.2. Windows 3.11 Answers to SAQs. This has been mentioned in section 3. What are the principal capabilities of information systems? 2. A. performance-related. ––––––––. Electronic data interaction C. The information needs include task-related. which emerged on an industrial scale in 1977 as _________ .4. The greatest impact was made by the personal com puter. 3.the roles they perform. This has been mentioned in section 3.9 Terminal Questions 1.4. Apple II C. Objectivity D.is an active process by which an individual attends to certain stimuli and then organizes them in a meaningful way A.3 1. Apple III D.2.1 .2. Take an organisation of your knowledge and determine the information needed by individual jobholders. Perception B. Electronic data interchange B. TQs and MCQs Self Assessment Questions Section 3. Forecasting C. This has been mentioned in section 3. Explain the requirements of information management.3 1. Apple I B. Electronic demand interaction D. EDI stands for ________ A. Subjectivity 2. 3.

2.6.6. This has been mentioned in section 3.5 2.1 2. This has been mentioned in section 3. A 2.2 Terminal Question 1.2. This has been mentioned in section 3. This has been mentioned in section 3.1 Multiple Choice Questions 1. This has been mentioned in section 3. B 3. This has been mentioned in section 3.6. A .4.1 Section 3.3 1.7 3.6.

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

4. holograms. The primary objective of management-oriented MIS com ponents is to improve the effectiveness of managerial decision making by pro viding appropriate informational support. Certain information should not be quantified .2 Office Information Systems Office Information Systems (OIS) support general knowledge work in the con text of a business office. stored. TPS secure automation. last year’s quarterly sales were Rs. 456 million. 750. They also accumulate relevant data in databases for subsequent use by the management-oriented MIS components. and exchanged in any format-as docu ments. Information should be com plete." The goal of OIS is to support multimedia communication within the firm and to offer gateways to the outside.3. 494.495 million better reflects the precision (degree of exactness) of the underlying data. quarterly sales for the year were Rs. data sets.3 Self assessment Questions (for Section 4. to use the term introduced by Shoshana Zuboff. and Rs. indeed.000. as traditional office technology. The figure of Rs. Transaction Processing Systems (TPS) support a firm’s business operations. computer confer encing. but the precision we selected is inappropriate. 408. still or moving images. with only relevant items brought to bear in the decision sit uation. it is not. and they will support conferencing at various levels of participants’ presence-from bul letin boards to teleconferencing. OIS have rapidly developed towards becoming the "office of the future.management level is often too reductive. relying on the data accumulated through TPS. the higher the manage ment level. The development of OIS as we know them today oc curred in the late 1970s. computer.1. OIS will ultimately allow messages to be created. Rs.3) 1. Relevance provides the main protection against information overload.3. Many considerations influence the choice of the appropriate form in which in formation will be presented to a manager. Since then. our figure is accurate. the less detailed-and thus more summarized-the information should be. Rs. while many con sider a DSS to be a support system for higher management. 610. it may well support operational managers-supervisors-as well. and the exchange of messages in various formats. Write short note on a. To neglect the "informating" aspect of MIS by limiting these systems to data processing means failing to take advantage of their full potential. Determining what information is needed is the crucial aspect of the information systems planning and analysis. when this field was revolutionized by the personal computer. Note the distinction between accuracy and precision. individual time scheduling and workflow coordination. while management-support systems aim to "informate" the organization. Generally. The table is. What do we mean when we demand quality information? The attributes we are talking about are summarized in table 4. Examples of activities supported by OIS include document processing. Office information system 4. and com munications technologies have converged. voice messages. Suppose that. yet concise. Thus. based on accurate figures rounded off to the next million dollars. If we report that average.4 Information for Management Operational-level information systems support the conduct of business with data processing. project management. Transaction processing system b. 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. 505.

The internal stakeholders are. Information for a decision must be obtained in a consistent fashion. along with the principal informational demands generated by their presence. and labor union negotiations information is generally difficult to quantify. Such information is partially captured by the organizational TPS. offer a partial solution to the problem. but a good part of it must be acquired from external sources. Table 4. 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. Group decision support systems. Most of the data captured by TPS relates to various aspects of the organization itself. of course. regulatory.(expressed in num bers). a firm’s employees. 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. The "battle of the printout" is a well-known deadlock situation in a meeting where several managers offer conflicting information.4. if qualitative ("soft") information is presented numerically. These groups are called the stakeholders of a firm. 4. for example.2 lists principal external stakeholders of organizations. 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. . it may create a false impression of reliability. who may be classified in terms of their informational needs. A corporation can succeed only by adapting itself to the demands of its envi ronment.1 Internal versus External Information Increasingly. tax. legal.

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. the distinction between ex ternal and internal data has become blurred.1 Characteristics of MRS . its operating units. and the relevant aspects of its environment. Today. and has made information itself an important product. present. Organizational MIS have become progressively embedded within these networks and markets so that now. 4. in that they maintained accounting data about company activities. in various areas. Continuing comparison of present and projected results is the fundamental tenet of management control. With the advent of on-line systems. some writers call MRS management information systems. 4. stockholders and government agencies) must also be kept informed by the organization.5. some of them (for example.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. For example. particularly with decision support systems. such as electronic data interchange (EDI) and other value-added networks. Indeed. planning became possible. and projected future of the company. Next. The development of the information society has created an infrastructure for transmission of various types of data. the name we reserve for the entire area of informational support of operations and management. it was possible to maintain up-to-date data about the present.5 Management Reporting Systems Management reporting systems (MRS) are the most elaborate of the management-oriented MIS components. MIS maintain information about the past.

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

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

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

000 THEN good customer The user to the system presents the set of facts describing a particular situation during a session. Fig 4. 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. Most frequently. The essential component of the knowledge base is heuristics-informal.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> $100.1 Simpler systems are usually implemented with expert system shells knowledge-based systems with empty knowledge bases. a heuristic rule in a credit evaluation system may read: IF good customer and credit requested < $5. For example. but rather serve as an assistant to a decision maker. A very common way is to encode it in the form of "if-then" pro duction rules. and then further enhanced as the system is used. The system .these tasks-and of the corresponding expert systems-varies widely. depending on the software used to implement the expert system. Expert systems are knowledge-based programs that imitate a reasoning process to suggest a problem solution within their domain of appli cation. Reliance on a knowledge base is the essential distinguishing characteristic of these systems. judg mental elements of knowledge within the expert system’s domain. 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 structure of an expert system from the point of view of its user (rather than that of a developer) is shown in figure below. The knowledge base is originally populated and subsequently enhanced as the system is tested on trial cases. these systems do not replace an expert. There are several methods of representing knowledge.

What do you understand by DSS? What are their characteristics? 2. Expert sys tems are of particular importance in decision support. software. distributed processing B. personnel. Database D. TQs and MCQs Self assessment Questions Section 4.3 . regional applicability. In a transaction processing system for order processing. limited natural language processing or limited speaker-independent speech recognition. database. Executive Information Systems (EIS). Information processing 2. and other constraints-this is a nontrivial problem that an order clerk would find difficult to handle on-line). where they may be used to suggest possible decisions based on problem constraints and the available outcome range.10 Terminal Questions 1. There are Five types of systems may make up an organizational MIS: Transaction Pro cessing Systems (TPS). order volume. EIS should offer the capability to _____ into the data A. for example. Decision Sup port Systems (DSS). What is EIS? What are their characteristics? 3. 4. _______ 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.9 Summary The physical components of MIS comprise the computer and communications hardware. Drill up C.3. usually interconnected into networks by means of telecommunications. Explain the role of Expert system 4. Drill down B. with an explanation of its reasoning (presented. and Office Information Systems (OIS).12 Answers to SAQs. and all the available promotional prices for the items ordered (because of the multiple promotions offered by companies today – with short duration. The use of multiple computers. Operating systems C. 4. Shared processing D. for example. Hardware B.11 Multiple Choice Questions 1. an expert system may determine an order price by considering the cus tomer. all of the above 4. Expert systems are sometimes combined with other technologies derived from artificial intelligence research. Drill diagonal D. and procedures. Management Reporting Systems (MRS). as a sequence of rules applied). Procedures.then gives a rec ommendation. Collaborative Processing C. 3. is called _________ A. A.

This has been mentioned in section 4.3. This has been mentioned in section 4.7 3. A .6 2. This has been mentioned in section 4. b.5. B 3.2 Terminal Questions 1.1 2. A 2. This has been mentioned in section 4.1 1.3 1. This has been mentioned in section Section 4. a.8 Multiple Choice Questions 1. This has been mentioned in section 4.3. This has been mentioned in section 4.5.

1.2.2 Strategies for Competitive Advantage 5.4.Unit-05-Information Needs for Strategic Planning Structure: 5.3.1 Introduction Objectives Differentiation Potential External Threats Potential External Opportunities 5.3.5 Expanding Globally .4.1 Major issues to consider in situational analysis 5.4 Linkage Using Information for Strategic Advantage 5.2.1 Strategy 5.2.3 Controlling Costs 5.3.5 Information Leadership 5.2 Cost Leadership Potential Internal Weaknesses Information and the Situational Analysis 5.3 Michael Porter’s Generic Strategies for Competitive Advantage Reacting to Market Conditions 5.3 Focus 5.4.1 Michael Porter’s Value Chains 5.2.2 Value Streams Michael Porter’s Competitive Force Model 5.4 Improving Quality 5.4.2 Improving Customer Service 5.4.1 Potential Internal Strengths 5.3 Information and Organizational Strategy 5.4.1.

6 Creating Strategic Alliances The Strategic Use of Information Systems 5. Objectives: At the end of this unit.9 Terminal Questions 5.4.1 Cost 5.6.5. How the organisation could use strategy as competitive advantage.1.3 Self Assessment Questions (for Section 5. We shall conclude by highlighting the organisational need for information and strategic use of information in organisation.1.3 International Corporation 5. we shall start with the concept of value chain and discuss the Porter’s Model of competitive advantage.5.1.1 Introduction With this unit.1 International Strategy 5.1.10 Multiple Choice Questions 5.6. TQs and MCQs 5. We will look into what ways the organisational strategy and information needs to be linked.2 Accessibility 5.11 Answers to SAQs. 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 .6.5.4) 5.6 Organizational Requirements of Information 5.2 Global Corporation 5.1 Multinational Corporation 5.4 Transnational Corporation 5.6.3 Reliability Organization Structure and Information 5.4 Security 5.5.8 Summary 5.

They have linkages amongst themselves. Bill and collect.2.5. which collectively create value for a customer.2. 5. Value streams are often cross-functional. Value activities do not operate independently. IS can add value by supporting the linkages. For example: Insurance Industry Value Stream: Customer Engagement Processes: Settle claims.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.2 Michael Porter’s Competitive Force Model . 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 Value Streams Value Stream is an end-to-end set of activities.

2.g.g. putting in a high cost of IS support system · Threat of substitute products 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 .g.1 Illustrations for overcoming threats · Reduce bargaining power of customers e. having alternative sources of supply · Threat of new entrants e. putting up flexible manufacturing facilities 5.g.Fig. putting terminals into customer’s offices · Reduce bargaining power of suppliers e. 5.

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

3. linkage. suppliers. 5. customer requirements.1 Differentiation A differentiation strategy seeks to distinguish the products and services of a business unit from those of its competitors through unique design. and information leadership. electronic conferencing can bring the expertise of a team of physicians in remote locations to a single problem. research and development. including detailed information about competitors’ products. Strategic management also involves business-level strategy. quality of the management team.3. business units with high ratings on both industry attractiveness and business strength make good financial investments.2.2. 5. Companies following the focus strategy concentrate their resources to become big players in small markets rather than small players in larger markets.3 Focus A focus strategy achieves competitive advantage by concentrating on a single market segment. and potential synergies with competitors. and diagnostic systems can support physicians’ diagnoses. competitive strengths and weaknesses.3. They require information about the nature of available markets and the characteristics of the players in them. and how it will deploy resources for advertising.4 Linkage A linkage strategy obtains a competitive advantage by establishing special. Complete information about costs makes costs easier to control and creates a competitive advantage. 5. those low on both dimensions have no growth potential.3. Even hospitals can use information technology to reduce costs by eliminating paperwork and improving services. Information systems can provide the information required to support one of these strategies. exclusive relationships with customers.3. 5. Managers can also supplement products with summary and activity .2. focus.3. equipment. identify preferred treatments.capability. customer service. 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. or other characteristics and thereby enable the business to charge a premium for its product or service. The company requires quality internal information to reduce costs by achieving efficiencies in production. Organizations require detailed information about customers’ needs. cost leadership. and specify their cost benefits. Strategic decisions include what products or services the company should offer. ability to compete on price and quality. customers’ requirements. For example. what customers it should service.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. quality. Bedside terminals can store patient records. distribution. features.2. 5. and managers should consider divesting or liquidating them. special arrangements with suppliers.5 Information Leadership An information leadership strategy increases the value of a product or service by infusing it with expertise and information.2. 5. Companies pursuing a differentiation strategy need current and accurate information about the market. and markets helps management determine its investment strategy. and changing environmental conditions. home health terminals allow patients to consult with doctors online.2 Strategies for Competitive Advantage Firms can adopt five strategies to reap a competitive advantage: differentiation. and even competitors. and staffing. and sales.

4. sales. plant location. 5. while adverse regulatory rulings represent a threat. other examples of informa tionalizing include producing "smarter" cars and allowing customers to design desired features on computers in dealers’ showrooms. Strengths and weaknesses are internal characteristics of the organization that enhance and impede its ability to compete.4 Information and the Situational Analysis Strategic management includes situational analysis-the process of collecting and analyzing information about a company’s strengths. Finance strategies focus on the acquisition.1 Major issues to consider in situational analysis 5. airlines can electronically track baggage in airports in ways that can correct problems before customers discover they have missing baggage. and human resource management can best support the orga nization’s strategies. opportunities. promotion. inventory. or information about related products and services. Marketing strategies focus on product development. 5. and wages. The acronym SWOT is often used for these four components of situational analysis. and pricing. Functional strategies direct the way individual departments perform their tasks to accomplish organizational objectives. and management of capital. For example. applied. product and market information relevant to the customer. marketing. Human resource strategies revolve around the deployment of employees and the relations between labor and management. allocation. weaknesses. research and development.4. or developmental research.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 .1. Weak competitors illustrate an opportunity. equipment. while having costs above the industry average typifies a weakness. 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. Research and development strategies emphasize basic. Strategic management also addresses how functions such as finance. and threats. operations.reports for an account or customer. A reputation for quality exemplifies a strength. Opportunities and threats are external or environmental factors that may help or hinder an organization in meeting its strategic goals. Operations strategies include decisions about plant size.

1.4.2 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 5.1.4.· Proven management · Ahead on experience curve · Better manufacturing capability · Superior technological skills 5.3 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 Potential External Threats .

Organizations can use them to maintain. organizations. and monitoring. a company must compare data on its internal condition with industry and competitor averages. 5. update. and customers. or access environmental and organizational data. information management is a backroom operation intended to support the other functions of the business. 75 percent agreed with the statement “I believe that information systems hold the key to competitive advantage for my organization in the 1990s. planning. reputation for quality or above-average costs.4. Quality information systems can assist organizations in securing comprehensive information for the SWOT analysis. financial data. Information systems can also be used proactively and strategically as competitive weapons.2 Using Information for Strategic Advantage In many. if not most. and communicate. To evaluate internal strengths and weaknesses. for example. such as demographic trends. schedule. Some firms go to extensive lengths to obtain information about the market and their competitors.” 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 . including hiring employees from competitors. and even buying competitors’ garbage. 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. Information systems help individuals plan. or staffing patterns. potential customer lists. suppliers. In a survey of 200 CEOs and CFOs.

Infor mation from computer systems can assist. Delta Airlines in USA. Restaurants can assess the impact of various pricing and promotion strategies on their profit margins. A resort hotel can evaluate the success of special promotional packages by tracking an individual guest’s expenditures by revenue center (e. It can more quickly introduce products that the consumer wants.2. It can keep its costs lower by reducing excess inventory and eliminating mistakes in purchasing or manufacturing products that will not sell. 5. It can react more quickly to lagging sales by adjusting advertising and price promotions.2.2 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. restaurant. maintained a list of competitors’ prices and could respond to changes within two hours. health club) and then adjusting the promotions offered to increase their effectiveness. being first in market gives a company the opportunity to be a market share leader.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.g. taking long or short positions and moving money quickly to where the opportunity for profit is the greatest. with resulting scale efficiencies in manufacturing and marketing. customers.4.. golf course.4. It can tailor its prices more accurately to what the market will bear. competitors · Provide information links · Create electronic markets 5. It can leverage its cash better.

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. who would then intervene in the process.4. in general. Going global remains one . user-friendly terminals. Nevertheless. programmable work stations. distribution. Toys "R" Us has expanded globally into Canada. in turn. travel management software. Systems to classify.5 Expanding Globally Prior to the 1980s. However. process. 5.2. and expert systems have together had a significant impact on the American travel industry. regulation of information flows. and lack of a communication infrastructure remain barriers to the exchange of information. Now companies operating around the globe can exchange information with nearly the same ease as if they were in the same country. who can intervene in a timely fashion to improve the process. eliminates rework. Automatic call distributors.4 Improving Quality Having a reputation for quality offers a strategic advantage for any organization. the India Railways had developed various options so that a passenger need not have to wait for a long time to get a ticket. Today’s competitive technology has reduced the barrier of distance. and other locations since 1984. as volume increases. therefore. and permits more orderly pro cessing. To improve quality. Information systems can easily serve this function. companies of all sizes now have the resources and information systems to allow them to operate glob ally. Budgetary information. each remote company. automatic ticket machines.The travel service industry in general has used technology extensively to meet customers’ needs. 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. Generally. after acquisition. Companies operating in this fashion necessarily shipped inferior goods and provided inferior services. and sales. information about the goods and services being produced must be processed immediately.2. Improving quality has also been shown to decrease costs as it reduces waste. Proposal of having a ticket counter in the ATM machines and other kiosks are under process. and made available to production workers. Most global corporations were holding companies that bought and sold regional companies in different parts of the world. a prerequisite to achieving cost reduction through volume growth. 5. Achieving quality requires production workers to have constant feedback about the production process so that they can spot problems immediately and correct them. Information systems meet the need for coordination of diverse enterprises in distant locations. Even in India. including databases. Although language differences. monitor. Management information systems were built to provide summary and exception reports to the managers. keeping track of and rationalizing business activities becomes more complex. satellite printers. analyzed. interfaces between personal computers and mainframes.4. 5.3 Controlling Costs Recall that one of the competitive strategies is to become a low-cost producer. England. To set budgets. managers need information about previous spending and about new plans and objectives. managers would know about production problems before the production workers did. Singapore. and summarize large amounts of information is.4. how does a firm keep costs below its industry’s average? Organizations can do so by achieving economies of scale in production.2. Its overseas stores are identical to Amer ican stores and rely on the same information processing systems as they do in the United States. Hong Kong. permits managers to optimize their resources within pre scribed limits. The ability to han dle. 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. would continue to operate in its own realm with minimal management by the holding company. and limit spending also facilitate cost control.

In Japan. Delta. or other areas in which the two organizations interface. Inter-organizational information systems (lOSs) can meet information needs by serving as information links or electronic markets. Because its competitive advantage may be tenuous. Electronic market systems are electronic. wholesalers. and producers of similar products. allowing greater flexibility in responding to local market needs. the strategic advantages achieved will last longer. suppliers. sales. 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. Companies can also secure a competitive advantage by forming alliances with customers. rather than physical. control costs. American Airlines provided travel agents with direct links to American’s SABRE reservation system. distributors. United. American Airlines provides a well-known case of lasting competitive advantage achieved through sharing information and information services. among others.S. 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. If an alliance can be cemented by the exchange of information and information technology. U.4.of the easiest ways for a company to expand its market. Information links pathways for communication between two organizations-meet the need for coordination among an organization and its customers and suppliers. or expand glob ally will be short-lived if competitors can copy its strategy. buyers’ ability to comparison shop reduces a seller’s power in the market and creates lower prices. Because the development of infor mation systems typically takes several years. sold. Computer information systems and communications technology form the backbone of such alliances and allow the joint ventures to operate effectively. . and TWA has emphasized these systems. American denies that flights are presented by SABRE in such a way as to favor the choice of American Airlines. Of all information technologies. In 1963 and the years immediately following. better integrating worldwide operations. and purchased. for example. and serving clients more innovatively. One developer of SABRE argues. 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. 5. shown. 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. the basic marketing strategic of major airlines such as American. 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. an organization must be constantly vigilant for new strategic opportunities. rather than buys from. 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. They increase competition and efficiency in vertical markets by providing information about industry players and prices. stores where products and services can be described. improve customer service. By sharing access to its reservation information. Information technology helps multinational companies compete internationally by supporting foreign subsidiaries. Information links enable or improve the collection and communication of information regarding inventory. American encouraged travel agents to book their clients on Amer ican flights. 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 1976.6 Creating Strategic Alliances The competitive advantage achieved by a company using information to react quickly to market conditions. Creating a mature technological environment abroad helps meet customer needs for new products and management’s needs for consistency and control in worldwide locations. improve quality. a company using information for strategic advantage needs time to establish its market share. used-car dealers buy and sell cars using their computers to participate in electronic auctions.2.

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

6. a transnational company attempts to retain the flexibility to respond to local needs and opportunities while achieving global integration.5. Although the bud get for information systems at most organizations falls between 1 and 3 percent of sales.4 Transnational Corporation A transnational corporation incorporates and integrates multinational.5. Ideally. Then collecting and maintaining the information in a cost-effective manner make up part of the subsequent steps of evaluation and design.2 Accessibility Designers of information systems seek to make the appropriate information available to users at the right time. in this case it may flow back and forth between the parent’s location and the subsidiary’s location.5. Although its strategy and marketing are based on the concept of a global market. As a result. reliability. a headquarters organization makes all major decisions. In practice. 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. the real cost of information is usually much higher. Because transnational operate on the premise of teamwork. and inter national strategies.6. We define net value of information as the difference between the value and the cost of information.1. 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. Diagnosing the required information is the first step of the four-step approach to infor mation management.6 Organizational Requirements of Information The information that an organization develops and retains should provide value to the company. they consider four characteristics of information: cost.3 International Corporation An international corporation exports the expertise and knowledge of the parent company to subsidiaries. designers cannot foresee every possible need for information. in the right place. 5. they demand the ability to share both information and information services. By linking local operations to one another and to headquarters. 5. Nevertheless. Although the information theoretically should stay within the subsidiary. 5. the value of information as an organizational asset can be . and security. and in the right format. manipulating. and maintaining information can affect its net value. subsidiaries often rely on the parent to exercise its knowledge for the subsidiaries’ benefit rather than simply to export it to the subsidiaries. Companies attempt to maximize the net value of information they collect organizationally. The overall cost of information tends to be high.2 Global Corporation A global corporation has rationalized its international operations to achieve greater efficiencies through central control. Here subsidiaries operate more autonomously than in global corporations. To do this.1. global. For example.1. 5. accessibility. a subsidiary without a great deal of human resources expertise may "pay" its parent to operate its human resources function.5. A high level of information flows from subsidiary to parent. while limited data move from parent to subsidiary. 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. Reducing such costs allows information to add more value to the firm. Designers of information systems should minimize the time and effort required to collect or enter data. Userfriendly touch screens offer one way to address this problem. 5.1 Cost The cost of acquiring. information flows from the parent to its subsidiaries.

competitors can also use stolen information about production schedules. Given the availability of these data. causing damage over an extended period. 5. The impact of "dirty data" on organizational performance can be immense. Not surprisingly. or unreliable data or data processing-existed in every company. 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. Many firms protect against the loss of data to fire or natural disaster by creating copies of the data. Users regularly generated reports and made decisions based on incomplete. The widespread use of personal computers has compounded the difficulty of security against corporate espionage. Despite the potential damage and difficulty of detection. 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. A New York securities firm missed a big trading opportunity that cost it more than $200 million. For example. or incorrect information. the U. 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. 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. most organizations assume that their information is relatively secure and take insufficient measures to protect against theft. and research and development breakthroughs may be sent directly to national laboratories or to competing organizations within the foreign country. and they quickly learned how to hide or delay the reporting of poor results. margins. the data lost their accuracy and their value. top management periodically confronted lower management with problems they had identified. and keeping them at another location.S. and performance reports as competitive tools. Improper use of information systems can also motivate organizational conflict.S. production methodologies. manipulation.S. The firm eventually traced the problem to its employees’ failure to enter key data into a new risk management system. Burglars thus can continue to raid an organization’s data. A recent study of end-user data at 21 random Fortune 500 companies showed that data pollution – faulty. A 1992 Computer world survey found that more than 60 percent of companies are aware of occasions when corrupted data negatively affected their operations. foreign intelligence agencies have used sophisticated technology to intercept data transmissions. or financial status. 5.3 Reliability The improper design and use of information systems can create unreliable data.6. which in turn results in the generation of unreliable data.7 The Strategic Use of Information Systems . The incorrect infor mation was relayed to banks. Divisional managers considered this behaviour to be meddling. Foreign and U. General Accounting Office determined that data about student loan payments entered incorrectly into the U. flawed. called backups. and loss of data. outstanding invoices. inventory. salaries. Information such as proprietary technology.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. which then allowed deadbeat students to continue to get loan renewals while deserving students were refused assistance. Both technical and organizational measures can be used to promote data security. For example.6. product data. Department of Education database had cost taxpayers $2 billion.4 Security Security means protection against theft. 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. 5. costs. inconsistent.

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

A 2.6. 5 C.1.3 1. 5.2 and 5.1.4 3. Apply to the organisation mentioned in section 5. 7 5.4 2. TQs and MCQs Self Assessment Questions Section 5. This has been mentioned in section 5.3. B 3.1. 5.1 and This has been mentioned in section 5.6. A Unit-06-Impact of IT – Managing in 21st Century . 5. 6 D.6. 5. This has been mentioned in section 5.11 Answers to SAQs.4.3 This has been mentioned in section 5.2 Multiple Choice Questions 1. This has been mentioned in section 5.1. There are –––––––– characteristics of information A.2 Terminal Questions 3. 4 B.2.4.

3 Enterprise Resource Planning (ERP) System Terminal Questions 6.1 Business needs of today Enterprise Management System (EMS) ERP Architecture 6.6 EMS and MIS 6.2 Business System 6.2 Characteristics of ERP Solution 6.4.1 Introduction Objectives 6.3 Benefits of the ERP 6.2.3 Implementation 6.3) 6.1.1 Vendor Evaluation Factors 6.3.7 Summary Technology 6.9 Multiple Choice Questions .2 ERP Solution Structure 6.5) 6.Structure: 6.4) 6.4.5 ERP Selection 6.3 Self Assessment Questions (for Section 6.4 Self Assessment Questions (for Section ERP Model and Modules 6.3 ERP Solution Evaluation 6.3.1 Business Operations 6.4 Self Assessment Questions (for section 6.3.1 ERP Basic Features 6.3.2 Technology Evaluation Factor 6.3.1 General Features 6.

All this requires operations and management of a couple of systems besides the normal sales application. viz. updating the business status and Worming the marketing representative for monitoring the marketing activities.2.2 Enterprise Management System (EMS) 6. which requires instant processing. Internet and the imaging Systems. It also requires event monitoring and updating systems such as the Paging. electronics. The architecture of ERP. interpret it and trigger the action. The dynamic business environment of today is full of challenge and opportunities. it must have an ability to sense the situation and act accordingly. the modules of ERP and we conclude by factors for selecting ERP. MRP. It also requires the management of interfaced systems such as CAD/CAM. In the very beginning acceptance possibility needs to be assessed and the customer should be informed immediately..1 Business needs of today Computer. which you are designing. Since. The business needs of today are beyond the transaction processing. the system. The dependence on the information. In such a scenario. is an enterprises wide.10 Answers to SAQs and TQs 6. is increasing. Objectives: At the end of this unit. booking the order and scheduling the same on shop floor for production. wherever it occurs.6. It needs the management of EDI systems to get hooked to the customer and vendor for a quick information communication. The system is extended beyond the Corporate boundaries. The word enterprise is chosen to convey that it encompasses the larger business community covering all the players and their participation in the business. We begin by discussing the various business needs of today and Enterprise Resource planning. communication. Every business activity has additional dimensions. It requires.1 Introduction With this unit. it has to take support of many other systems. . Take a simple example of customer order received in the Company. Next step will be of ordering the material on the vendor. It must catch an event. speed and time. and communicate it across to the enterprise. business is information hungry. etc. It requires an instant real time response in every case. 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. and audio video technologies have converged closely to produce a new style of operating business. as driving energy source. When the business requires online information to make the informed. we shall start with the concept of Enterprise management system. knowledge based decisions and have them executed in the business operations in a coordinated manner.

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

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

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

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

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

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

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

2 Technology The technology side of the ERP solution is managed through the database management technology for data acquisition to data base creation. 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 .2.3 Implementation The ERP implementation is multi-user and calls for the network usage for the work flow. Marketing.3. It is built with the function models like the Finance. Materials.3. the object oriented tools. The application develop ment is done through the client/ server technology. 6. The successful implementation of the ERP calls for a strong technology component appropriate to the environment.4 ERP Model and Modules The generic ERP package represents the commonly operated business model of the organisation. Using various information technology tools and application development tools. distribution. based on the design and the implementation strategy. The client/ server implementation could be two tier or three tier. 6. the application logic is developed to the business functionality.3 Self assessment Questions (For Section 6.3) What is an ERP architecture? What is a solution architecture? What is the difference between the two? 6. and Personnel and their sub-modules.3. etc. To reduce the development effort and for ease of maintenance. 6. and maintenance. These modules are then integrated to perform ensuring data and informa tion consistency and concurrency. Atypical ERP solution has the following modules: · Business forecasting. interfacing tools.The ERP solution then handles the interfacing requirement to the legacy or the third party systems as a support to the main ERP solution.2. communication and the access to the database(s) which may be at one location or distributed. 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. 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. the development approach is an object-oriented approach. where the class and the object libraries are built for reusability of the object and its code. application development tools. planning and control (Business) · Sales. Sales. updation. The tools arereport writers. query processing tools.

texts and master data. · Diagnostic functions · Transaction flow control · Help functions. and help. markets.4.1. · Action messages · Tuning · Enterprise Modeling: Structure / Policy / Rules / Guidelines 6. .6. groups. · Central table system for management of parameters. online logical · Checks and validations · Word-processing.2 Business System · Business forecasting for products. · Application logic · Common service functions such as the currency.1 General Features · Separation of the programme code and the data areas · Command language · Screen based flow control.4.1 ERP Basic Features 6. editing.1.4. date. text editing.

it has modular structure. they are characterized as described earlier.2 Characteristics of ERP Solution · Modular structure. technology and approach may be same or similar. In view of this. . Since the design/ developer has a choice of RDBMS. DSS for resource planning · Information base management for management application 6. which are less at the server end and more at the client’s end. look presentation. if installed on a particular hardware platform. · Interface capabilities. they differ in feel. Some of these packages run better. front end tools. Since. · Independence of hardware platform.· 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. one can implement the solution in a phased manner module by module.4. 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. more locations and more modules as well. the manner in which they are used decides the efficiency of the solutions. the changes are easy to make. processing efficiently and user-friendliness. · Scalable architecture. Due to object oriented technology and the client server architecture. · Seamless integration of modules. 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. The specific industry features have been taken care of more efficiently as customized solutions. Most of the ERP solutions need some changes to suit the environment. Since the whole solution is a package product. and used by a particular organisation. The ERP solution has an advantage of fast implementation as the design and development is eliminated being a package. and so on the package efficiency changes with the choice to tools. · PC download/upload facility. the interface tools. There are more than a dozen ERP solution available in the market each having its own specialty. · RDBMS independent. Some of these products are developed as an application in a particular organisation and then turned into a packaged solution. some of ERP solution are more useful and efficient in similar organisation. Though. It can be implemented first on a smaller scale and expanded subsequently with more users. Though tools.

the application of object technology and use of the front end tools. 14) The ERP implementation automatically leads to the usage of the best business procedures bringing the consistency of operation in the world of business. 3) Customer satisfaction increase due to shorter delivery cycle. 6. Due to strong interface capabilities. 12) The ERP remain a valid solution with the expansion of business. 10) The processes become faster due to work group technology and application of work flow automation. E-mail. making the ERP sensitive to the latest events in the business. Simultaneous increase in the productivity of the business possible. it make the management alert at a number of points demanding the decision or action. 2) Planning at function and process level. paperless office is a newer possibility as communication is faster and systems are connected directly. 18) The tools available to the decision maker are friendly whereby he is equipped to make decision and execute it simultaneously. market and technology.3 Benefits of the ERP 1) Better management of resources reducing the cost of operations.4. 11) Due to the support technologies like EDI.6. the human resource can be utilised better due to access to information across the databases distributed over the organisation.4) . 5) Business operations transparency between business partners cutting down the execution time of critical business operation. management becomes knowledge driven and the organisation becomes a learned one. office automation. the ERP design is proactive. Hence. releasing the burden on the middle management. management can see the information in their perspective and take different view of the business. 9) Since. 6) Intelligent ERP download the decision making at lower level.4.4 Self assessment Questions (For Section 6. 4) Simultaneous activisation of the decision centers because of instant inducement through triggers or updates. 16) The ERP scope can be enlarged through the Internet/lntranet access. Closer contact with the customer. the user service can be maintained at higher level. as it is a scalable architecture. 15) With the use of the data warehousing and data reverse engineering. 17) The quality of decision making improve as the user decision maker is made alert and he is made knowledgeable and better informed dynamically. 7) Due to faster processing technology and SQL. the process changes can be easily carried out in a short duration of time. 13) Due to the client/ server architecture.

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

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

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

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

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

as driving energy source.The ERP through such an MIS design. improves the decision making skills of the individuals very effectively. signature D. 5 D. is increasing. Attendance Management Systems B. transaction processing and data base creation. MIS in ERP environment is a sophisticated design serving the needs of the organisation. 6. Authorisation C. advocacy B. It provides autonomy in global system operations. A. It requires. Always management system C. MIS design uses ERP which in turn uses other systems for inputs in terms of data capture. The business needs of today are beyond the transaction processing. 6.9 Multiple Choice Questions 1. With the ERP. Advanced management system D. _________is a feature provided for ensuring that the transaction is completed with regards to the business rules set by the management. Can you be sure that if ERP Solution is implemented. Any information system has ______ basic components. AMS stands for ___________ . A. wherever it occurs. 6 . 3.7 Summary The dependence on the information. viz. Every business activity has additional dimensions. speed and time. the MIS design is more flexible highly decision intensive and efficient. Adding management systems 2. The ERP packages build information base and provide knowledge base for planning and control of the business through the business function management. 2. A.. Study the literature of any ERP package and match the offerings with your concept of ERP. Make a small note on ERP package selection for management. 3 B.ERP along with other systems becomes an EMS. policy formulation 3. 6. MIS is in place? Discuss. 4 C.8 Terminal Questions 1. It requires an instant real time response in every case.

5 2.4.5. Read the material from their website and relate with the concepts discussed Multiple Choice Questions 1. This has been mentioned in section and 6.2. A .3 Section 6. This has been mentioned in section 6.2.6. B 3.1 2.4. This has been mentioned in section 6.2 3. This has been mentioned in section 6. TQs and MCQs Self Assessment Questions Section 6.4 1.1 2.10 Answers to SAQs. This has been mentioned in section 6. 6.3.6 3. A 2.3. This has been mentioned in section 6.5.4 1.3 This has been mentioned in section 6.4.5. Select the relevant points Section 6.3 Terminal Questions 1.3.3. This has been mentioned in section 6.3. This has been mentioned in section 6.2 3.

1 Contents of MIS Plan Organisational Information .3.4 Self Assessment Questions (For Section 7.4 The system development schedule Privacy and Databases 7.3 Ethical and social issues with network 7.1 The Value of Telecommuting 7.2.Unit-07-Quality and Privacy Issues Structure: 7.2 Ethical and Social issues with E-Commerce 7.1 MIS goals and objectives Development of long range plans of the MIS 7.2 Other Remote Options 7.3 Major threats to IT installations 7.1 Introduction Objectives 7.6 Self Assessment Questions (For Section 7.4.4 Data Security and Data Privacy 7.1.2 Business Decisions and Information Assurance The architecture of the MIS Home Office 7.2.3 Risks of Internet to Organizations 7.2) 7.2.5 Hardware and software plan 7.3.2 Strategy for the plan achievement 7.4.2 Common Business Exposures 7.1 Introduction MIS plan is linked to the business plan 7.2.3 Ascertaining the class of information 7.

4. Problems with cash flow. Objectives: At the end of this unit. In any organisation. Impact of discontinuity in service are: Competitive disadvantage. we shall start with the importance of information on business decisions.4.10 Answers to SAQs.3. Fines and/or sanctions.4 Decision Support Information 7.2 Functional Information 7.2. and certain legal obligations have been met. We shall conclude by guidelines for successful implementation of MIS. We begin by discussing the common business exposures and threats of using internet by the organization.1 Introduction With this unit.5 Implementation of the Management Information System 7.4 Self Assessment Questions (For Section 7.8 Terminal Questions 7.9 Multiple Choice Questions 7.6 Management of Quality in the MIS 7.4) 7.5 Operational Information 7.4.1 Introduction Business decisions are becoming increasingly dependent on high quality information.7 Summary 7. Increased costs.3 Knowledge Information 7.4. 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 7.3. All concerned need an assurance that the right information is being made available: · Growing public awareness and concern · Growing shareholder awareness and concern . TAQs and MCQs Mitigation action has been taken to minimize risks to the system. management needs assurance that: Organizational goals are being achieved.7. 2 Business Decisions and Information Assurance 7. Loss of revenue.

· 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

· Big brother is watching syndrome. thefts. 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.3.e. The question arises – Is sending/receiving large quantity of mail ethical? 7. sending unsolicited mail 5. credit cards and income tax . · Purpose for use of data · Possible misuse of accumulated data · Right of individual to inspect gathered data . Massive flaming of large quantity of e-mail to one address.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. There is no law against Spamming i.3.4 Data Security and Data Privacy Data security is concerned with physical security of data from inside and outside causes: · Frauds.g.

They have looked at information as one of the many necessities for conducting the business activity. For example: credit card transactions dealt with personal information in corporate databases. It can be used for storing base or knowledge base. the scene has been changing since late eighties when the computers became more versatile. In fact. the same being true for MIS.3.6 Self assessment Questions (For Section 7. The computer technology is so advanced that the barriers of storage. Proliferation of better and inexpensive use of IT leads to collection of personal data from large number of sources. They can communicate to any distance and share data. The computers have become user-friendly. employee performance records. time and capacity. understanding of language and speed are broken. Databases can accumulate and use vast amount of data in an inexpensive manner. data in patient’s medical records.3) 1. Most of the organisations do not recognise ‘Information’ as a resource. Many organisations have spent financial resources on computers purely to expedite the activity of data collection and processing. in the function of Storage. However. the information is recognised as a major resource like capital. the information processing function of the computers in the organisation never got its due regard as an important asset to the organisation.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. It can be used for knowing the current status of any aspect of the business due to its on-line real time processing capability. Many organisations have purchased computers for data processing and for meeting the statutory requirements of filing the returns and reports to the Government. And if this resource is to be managed well. distance. . . information and physical resources of other computers. it calls upon the management to plan for it and control it for the appropriate use in the organisation. In MIS. Hence. The plan for development and its implementation is a necessity for MIS. In this approach.3. 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. What do you understand by telecommuting? Evaluate the advantages and disadvantages of the same 2. What are the ethical and social issues of E-Commerce? 7.4 Development of long range plans of the MIS Any kind of business activity calls for long-range plans for success. this function is misinterpreted as data processing for expeditious generation of reports and returns.5 Privacy and Databases Privacy: one’s right to control information about oneself. 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. Communications. due regard is often not given for its planned development and use. Legal databases. and not as information processing for management actions and decisions. Intelligence and Language. Computers can now ‘be tool for information processing and communication.

Once the management translated into information needs. business risks.4.2. The information needs are then traced to the source data and the system in the organisation which generate such a data. objectives. it is left for the designer to evolve a plan of development and implementation. internal and external environment of the organisation and the business.4. if necessary. 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. The plan would have the following contents. Hardware and software plan for the procurement and the implementation. plan Business goals and objectives Business plan and strategy Strategy planning and decisions Architecture of the Management Information System to support decisions. System development schedule. matching the plan Management plan for execution and control execution.1 MIS goals and objectives It is necessary to develop the goals and objectives for the MIS which will support the business goals. Operation plan for the execution 7. states information needs.2 MIS plan is linked to the business plan 7. Business plan MIS Plan Management information system. control information is provided for a short term planning and execution. The MIS goals and objectives will consider management philosophy policy constraints. Information strategy for the business implementation playing a supportive role. keeping in view the plan of the business management of the organisation. 7. The details of information are provided to the operations management to assess the status of an activity and to find ways to make up. and provides a basis for achieving the specific targets or tasks against a time frame. Table shows equivalence of Business Plan and MIS Plan. it is necessary that the business plan-strategic or otherwise. It can be achieved only if the MIS is planned.4. markets and the accounts balances. consistent to the business goals and objectives. which will be dealt by the designer under a support from the top management.1 Contents of MIS Plan A long-range MIS plan provides direction for the development of the systems. To ensure such an alignment possibility. .Any organization requires Management Information System flexible enough to deal with the information needs of the organisation. The plan of MIS is concurrent to the business plan of the organisation. 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. The information he implementation of the business plan should find place in the MIS. The system of information generation is so planned that strategic information is provided for the strategic planning. The plan of development of the MIS is linked with the steps of the implementation in a business development plan. The design l an open system is a complex task.

it is necessary to develop the accounting system first and then the analysis. the economics of investment is worked out.4.4. The organisations which do not care to take proper decisions in these areas suffer from over-investment. They are: (a) Development strategy : online. · The focus of the system will be on the end user computing and access facilities.4 The system development schedule A schedule is made for the development of the system. The selection of the architecture. It also provides a way to handle the systems or subsystems by way of simplification. It is important to note the following points: . one Database versus Multiple database. Further. programmer skills and know how. are linked with the goals and objectives of the business. (c) Resource for system development: In-house versus external.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. Then the plan of procurement is made after selecting the hardware and software.2. under-utilisation and are not he critical information requirements. 7.2. a batch. · Information support will be the first in the strategic areas of management such as marketing or service or technology. One can take the phased approach of investment starting from the lower configuration of hardware are going over to higher as development takes place. It spells out in detail the subsystems lentry to processing. (d) Manpower composition: analyst. coupling and decoupling of subsystems.4. The system development schedule is he information requirements which in turn. analysis to modelling. a real time. If these are not fully met. linkages.2. also given to logical system development. The process is to match decisions with the financial decisions. customised development versus the use of packages. and storage to printing. whenever necessary.4. For example.3 The architecture of the MIS The architecture of the MIS plan provides a system and subsystem structure and their input.2. 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. distributed versus Decentralised processing. (b) System development strategy: Any approach to the system development-Operational versus Functional. 7.· The query processing should not exceed more than three seconds. Database versus Conventional approach.5 Hardware and software plan With regard to the technical and operational feasibility. Accounting versus Analysis. This development schedule is to be weighed against the time scale for achieving a certain information requirement linked to a business plan. 7. it is necessary to revise schedule and the development schedule. While preparing the schedule due consideration is given to the importance of the system in the overall information requirement. unless the systems are fully developed their integration is not possible.

The classification could be as shown in table below. achieved? Organisation and executionManpower and delegation details. Architecture of the plan Information Technology details. locations. turnover and variety of the details of each . The organisation’s strategic plan should be the basis for the MIS strategic plan. 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. Model of MIS Plan Contents Particulars Business environment operat ions. guidelines. services. new mission/ Corporate mission/ goals/Current and objectives objectives. the type of business. 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 complexity can be handled if the information is classified on the basis of its application and the user.Many users at all the levels. products. of the plan Internal and external resources. Class Organisational Example of information User The number of employee’s.3 Ascertaining the class of information Ascertaining the information needs of the management for the business execution is a complex task. Who will achieve it? Details on the investment schedule and benefits. 3.4. which becomes the basis for the ascertainment. the risk? Business strategy policy andDetails of the strategic and policyHow do we achieve the decisions affecting the business. and current Where are we? What is the foundation of business? goals/ Where do we want to reach? Focus Corporate information Corporate philosophy Policy. The information system development schedule should match with the implementation schedule of the business plan. 2. How much will it cost? Budget 7. goals and objectives? What is information? the key Information needs Strategic/ planning.1. culture. The choice of information technology is a strategic business decision and not a financial decision. operational.

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

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

4. It would be determined by studying the work design and procedures and the responsibility which the manager holds for the business performance. 10 million. For example. decide and act. It is. · Total sales per month is Rs. Knowledge information is tracked continu ously and reported in a fixed format. The action or decision may fall in other functional areas of business operations. for consistency and at fixed intervals for updating the knowledge base. 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 functional information would emanate from the work design and procedures. necessary the manager on the achievements of these targets on a continuous basis. · 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. That information which measures the business activity and evaluates the performance on the key target areas. and with reference to the functional goals and objectives. It contains business results and comparative analysis of the performance.2 million · Capacity utilisation should be minimum 85 per cent. To summarize. The decision may fall in the domain of top management or the middle management. not to exceed Rs. Hence. Most of such goals and objectives are potentially achievable within the managerial and physical resources that the manager has at his disposal. 1 million. The knowledge information is reported in graphic formats for a quick grasp and managerial response. The nature of this information is analytical and relates to the past. · Employee attendance per month should be 99 per cent. 0. The product is failing continuously on one aspect and the reason of failure is the process of manufacturing. 7. the managerial responsibility accounting. therefore. planned and implemented the business plan. is the functional information.4. Functional goals and objectives are necessary to achieve overall corporate achievements. one for justifying the need of a decision.3 Knowledge Information Knowledge information creates an awareness of those aspects of business where manager is forced to think. . the current and the future. The support may act in two ways. Considering an example.Each function has its own objective which is derived out of the corporate goals. whether the sales are declining and the trend is likely to continue in the quarter. The knowledge infor mation is required by the middle and the top management as they are the ones who have conceived. Such information pin-points the area or entity and forces the managers to act. The knowledge information may cut across the functional boundaries of the organisation.3.3. It highlights the deviations from the norm or standard and also any abnormal developments which are not in congruence with forecasts or expectations. the overall business plan objectives gives rise to the objectives for each business function. the knowledge information supports the functions of the middle and the top management. 7. Such an information shows the trend of the activity or a result against the time scale. · Finished goods inventory. Information is used in a decision support system for model building and problem solving.4 Decision Support Information Most of the information required by the middle and the top management is for decision making. The source of such information are the managers and their functional heads who together execute the business activity. and the other as an aid to decision making.

the role may reduce his importance in the organisation. These decisions do not fall in the category of the managerial decisions. There are certain guidelines for the systems designer for successful implementation of the system and the system designer should. What are the contents of a MIS Plan? 2. The process evokes a behaviour response.4. On many occasions. the designer should respect the demands of the user. the work design may make the new job impersonal. Care has to be taken to assure the user that such fears are baseless and the responsibility. These decisions are such that they make the routine administration of the business smooth and efficient.4.4) 1. change the job from one machine . draw additional material. rests with the designer. used by the managers in the decision making. send a reminder to the supplier for the supply of material. It brings about organisational change. The source of this information could be internal or external to the organisation.to the other. 2. 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. and a fear complex may get reinforced that the career aspects may be affected. . The designer should not recommend modifications of the needs. It can be determined by identifying the tools techniques. In the process of implementation. therefore. He should try to develop suitable design with appropriate technology to meet the information needs. 1. 4.4 Self assessment Questions (Section 7. it affects people and changes their work style. 3. unless technically infeasible. Not mix up technical needs with the information needs. In short.5 Implementation of the Management Information System The implementation of the system is a management process. The decisions may be to stay on overtime. The demand forecasts information aids in the decision on determining the economic order quantity for production or a sale. Not forget that his role is to offer a service and not to demand terms. which could be either favourable or unfavourable depending upon the strategy of the implementation.5 Operational Information This information is required by the operational and the lower levels of the management. 7. and for any successful implementation he has to handle the human factors carefully. Not question beyond a limit the information need of the user. The main purpose of this information is fact finding and taking such actions or decisions which will affect the operations at a micro level. 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. Second fear is about the role played by the person in the organisation and how the change affects him. 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. 7. the system designer acts as a change agent or a catalyst. The user of the system has a certain fear complex when a certain cultural work change is occurring. models and procedures. 7.3.For example. the information on the non-moving inventory justifies the decision of its disposal at a throwaway prices. Explain with relevant examples the ascertaining the class of information need for the business execution.

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

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

computer system processing is controlled through programme control. It cannot be assessed in physical units of measure. the implementation is very important. The user of the information is the best judge of the quality. All of the above .. Loss of revenue C.9 Multiple Choice Questions 1. To reap the benefits of MIS. The system modifications are approved by following a set procedure which begin with authorisation of a change to its implementation followed by an audit. 7. Utility of information and its relevance are the two other measures of quality. 7. The assurance of quality is a continuing function and needs to be evolved over a period and requires to be monitored properly. Problems with cash flow. i. process control and access control. Problems with cash flow D. How do you manage the quality in MIS 7. Fines and/or sanctions. 7. Increased costs. Competitive disadvantage B. periods and so on. What guidelines should you consider to have an successful implementation of system.8 Terminal Question 1. it affects people and changes their work style. 9. 10. Loss of revenue. In the process of implementation. Back-up of the data and files are taken to safeguard corruption or loss of data. and for any successful implementation he has to handle the human factors carefully. 2.e. 6. A. The access to the data files is protected and secured through an authorisation scheme. The implementation of the system is a management process. Due attention is given to the proper file selection in terms of data. run to run controls. It brings about organisational change. Intermediate processing checks are introduced to ensure that the complete data is processed right through.7 Summary Business decisions are becoming increasingly dependent on high quality information. Impact of discontinuity in service are: Competitive disadvantage. the same being true for MIS. The system audit is conducted from time to time to ensure that the computer system specifications are not violated. Information technology has made it possible for many people to perform their job functions using their home as an office. the system designer acts as a change agent or a catalyst.4. 8. systems are developed with standard specification of design and development 11. Any kind of business activity calls for long-range plans for success. 5. Impact of discontinuity in service are _________ .

Zonal offices 7.2. This has been mentioned in section 1. This has been mentioned in section 7. C . C 3. Regional offices C.10 Answers to SAQs. The possible cause of fraud could be ______ A. Head offices B. This has been mentioned in section 7. reporting regulations C. Deliberate communication of wrong information D. TQs and MCQs Self Assessment Questions Section 7.3 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. Lack of adequate safeguards over organizational resources 3.4.4 1.2. D 2.6 Multiple Choice Questions 1.1 2.1 2. This has been mentioned in section 7.2. This has been mentioned in section 7.2 2.3 Terminal Questions 1. Violation of laws B. This has been mentioned in section 7.5 2.3.2 Section 7. This has been mentioned in section 7. Satellite offices D. A.4.

3.4 Summary 8. Objectives: At the end of this unit.3 Redesigning of Processes 8.1 Introduction In this unit.2.2 Business process 8.2 Organisation and Business Process Reengineering 8.1 Introduction Objectives 8. Then we analyze the business process and value stream model of organisation.4 Value stream model of organisation 8.7 Answers to SAQ’s. we would start with the definition and meaning of Business process reengineering. 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 .6 Multiple Choice Questions 8. We conclude the unit with the relevance of IT and the link with BPR and MIS.2.2 Relevance of Information Technology (IT) 8.1 What delays the business process? 8.3. TQ’s and MCQ Process model of the Organisation 8.5 Self Assessment Questions (For Section 8.4 Self Assessment Questions (For Section 8.2.2) 8.1 Definition and Approach 8.3) 8.2.5 Terminal Questions 8.2.Unit-08-Business Process Re-engineering Structure: 8.3 MIS and BPR 8.

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

customer door. The mindset should change from direct cost to this cost of busin ess performance. business performance is measured in terms of order book. hour to minute and minute to nano second. Another change would be in measuring the performance of business in terms of customer satisfaction. etc. The flow of information will be free from barriers. The direct cost is material and labour. The procurement cycle from the requisition of material to physical arrival of the material is import ant. The organisation will now be described using processes running across the departments and functions. which in any case should be few. tools and techniques. resulting into the value in which the customer is interested. 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. order processing cycle time is important. from physical aspect to time aspect of the business. It is analyzed based on cost. Fast response whether it is order delivery or complaint handling is what the customer is looking for and is what the organisation should provide. are not meaningful in the present competitive business world. Instead of orders. customer complaints. distribution. though not wrong. overheads. though this cost does not add any additional value to the customer. general administration. The process thinking and multiple process integration will make the organisation seamless. storage. 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. Procuring the right material of the right quality is important but how soon can the material be procured is vital. In the present world. For example. Business re-engineering requires a major change in the mindset. pend ing orders and queries. The fundamental redesign of the business processes requires a significant change in the mindset of the people across the organisation. Customer satisfaction would be measured now not by the number of complaints. etc. it has to be done in the shortest possible time. day to hour. the cost of the order processing. procurement. Whatever is done. 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. The units of measuring time will gradually shift from week to day. 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. When cost is to be controlled so that it is affordable to the customer. 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.. Hence. lesser the stocks and lesser the cost of procurement. but how quickly the customer problem is solved and his service expectations fulfilled. delivery. It calls for new rules of business to manage the multiple processes. The business should be thought in terms of time and process cycle time. 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. the service and the speed of delivery. i. 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.e. turnover. the quality. The shorter the cycle time. use of better materials. But adequate attention is not paid to the cost of business execution. What is required by re-engineering is a change of focus. These measures and methods. inventory. is the costs of the business execution. payables and receivables. The business strategy should be competitive rather than protective to . the main process and the sub processes which contribute to the result of the main process. communication. 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. Another radical change in the mind set is from the cost and overhead to the performance cost.

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

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

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

participating people are considered as a team working with the sole objective of achieving the customer expectation on value. activity. are not considered. It will not permit thinking on the task basis within the confines of the function or department. In re-engineering exercise all the six entities. The need for constructing a process model of the organisation is to force some fundamental thinking. general administration.Fig. expectation and perception are affected. As discussed earlier. It will help to redesign the process in terms of input. interest. Such processes contribute to substantial overheads and could be considered for cost control leading to the price reduction under the reengineering methodology. audit.2.3 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 stimulus to activate the process could be external or internal and it flows across the departments where the data is gathered.1 shows this work model comprising six elements. 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. budgeting and accounting. and powers within the scope of function of the department they are handling. viz. processed. The change breaks the hierarchy.. A process may begin in one department and run across other departments producing a business result of some value. In such process.. The process is handled by a number of people having different status in the organisation. the old conventions and practices of business processing undergo a radical change. analyzed. paper. security. They are backed by authority. decision and product stand to scrutiny through a fundamental rethinking for radical redesign to produce dramatic results. and redesigning that will bring a dramatic change in the working and the end result of the organisation. where the resources are used intelligently and the productivity is the highest. The process model of the organisation considers only those processes where the’ end’ of each process produces a result whereby the customer concern. It considers only those processes which produce value for the customer. etc. and removes the barriers on . The people who manage the business are engaged in the series of such work modules distributed across the organisation. 8. process and effectiveness and productivity. For constructing the process model.1: Work model Figure 8. people. it is a business process. the decisions are taken and the intermediate results are passed on to the next stage for further processing. information. When such work modules are viewed together as a single entity. and promote process optimization. The process view of the organisation will prevent functional and local suboptimisation. 8. canteen. the processes which are essential for the smooth working of the business such as the employee related processes. The classical organisation model is recast on the basis of processes ignoring the people hierarchy. Every activity in the process will be evaluated from the stand point of an ultimate result. Once the process view of the organisation is taken. rules.

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

The existing processes shall be redesigned if they suffer from defective philosophy. smarter products and an intelligent software. suppliers and customers should be made business partners so that they work for achieving common business goals. All these arrangements and changes should be tested based on value improvement. and efficient. They are supported by a knowledge database and decision support systems. The processes in which the staff is best in all respects should be retained in the organisation. rest all should be commissioned outside. would make them faster no doubt but they would continue to be inefficient. 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. knowledgeable workers using smarter machines. Hence. . When the information technology is embedded into the process. The extensive use of Expert and AI systems is made to improve the decision making process and the decision quality. training and support. the organisation will have less or no bureaucracy and hierarchy. 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. the organisation becomes seamless with free information flow. The processes should then be scrutinized by questioning the Philosophy. Procedure. The whole process is faster making human resource more efficient and productive. The changes in process design must cut down the cost. Pride.update instantaneous. the people in the team are empowered to make decision through education. policy and rules. delayering will make the organisation slim. Policy. All value streams are linked through the information paths installed on Local Area Networks and the Wide Area Networks. it is necessary to normalize the processes by segregating them based on internal and external customers. The use of information technology. Some processes should be considered for sub-contracting or outsourcing if they fall in the area outside core competency. improve the quality. In other words. For the effective process organisation build. and make the delivery faster and response to the changing needs of the customer quicker. The reengineered process organisation will have process managers. While building the process organisation. keeping the existing processes as it is. and Practices followed by management over a period. The relationship between the suppliers and customers should be such that they cooperate and participate in the processes as equal partners and team members.

access. 2. a number of processing steps are repeated across the process. The exercise of the process organisation building begins from the top management group whose initiative and commitment to re-engineering matters and is inevitable. fulfilling various other needs outside that process in the organisation. and if conventionally designed and implemented on functional lines. All will have a common goal of realizing customer satisfaction. c) the terms and conditions of supplies are fully met. The number of steps in any business process related to the data search. Explain the value stream model of the organisation. collating.3.2) 1.5 Self Assessment Questions (Section 8.2. d) the value declarations are correct and complete. Explain with relevant example the concept of business process. compute.Building process organisation is a complex job of implementing a change. a transaction when processed with the information technology application. The process will be transparent and results will be visible. The knowledge will become impersonal and available to all. The re-engineered process organisation will have less people using very little space. The aspects are whether: a) the receipt is against the valid purchase order. The power structure would break the spirit of authority and the dominance will be replaced by cooperation and a participative affinity. Also mention their elements 3. Through this process. saving the process time considerably. confirming and conforming are carried out only once in the redesigned process with the help of information technology. It will be managed by people of vision capable of producing innovative ideas and possessing a high tendency to change. The willingness to do some fundamental thinking and redesigning radically is a key to success. The change will affect the work culture and management philosophy. a typical business transaction is settled for acceptance. . 8. validating. The process operators repeatedly search. This increases the process cycle time.2 shows the approach to select re-engineering opportunities. The issues are related to the choice of technology. Table 8. The organisation will be flexible and responsive to the customer needs. 8. 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.3 Redesigning of Processes 8.1 What delays the business process? A business process is complex and lengthy. 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. b) goods received are as per specifications both in terms of quality and quantity. What do you understand by the term Business process Reengineering? How does it differ from the traditional concepts. For example. refers. its matching. settles a number of aspects of this one transaction. which requires careful handling of a number of issues simultaneously. and e) amount payable is computed and kept ready for confirmation through the bill of the supplier. the receipt of goods. human resource management and defining the business and its scope for the organization.

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

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

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

3. The triggers could be business rules and stored procedures. work culture and style and the value system. therefore. The Manage ment Information System in a re-engineered organisation would be process centred. 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. Building the MIS is a long-term project.3. 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. This would change the platform of business calling for a different MIS. where triggers are used to move the process. The decision support systems will be integrated in the business process itself. Are-engineered value stream process will generate the transactions to effect the business result. It is. etc.4 Self Assessment Questions (Section 8. analysis and report ing would be process central and performance efficiency would be evaluated in relation to the value generated by the processes. material. 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 MIS will concentrate more on the performance parameter evaluation which is different in the re-engineered organisation. evaluating customer satisfaction. The data capture.and the decision support systems are drivers for the process performance. however. essential to have a relook at the organisation where the mission and goals of the organisation are likely to be replaced. 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. 8. learning and strategic effectiveness The traditional role of the MIS as a decision supporter will continue. enabling the process to become automotive in its execution. Explain the link between MIS and BPR.4 Summary The approach to re-engineering aims at customer focus. What are the possible reasons for the delay in the business process? 2. 8. 8. production. The business itself would undergo a qualitative change in terms of the business focus. The traditional MIS is function-centered like finance. processing. the . the quality.3) 1. expectations and perceptions.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. 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.

_______ is traditional measure. productivity D.5 1.2. Michael Hammer B. All of the above 8. 2. This has been mentioned in section 8. 2. A. quality C. Micheal Jackson D. A.7 Answers to SAQ’s.2. 8.2. The modem information technology provides very powerful communication facilities with no limitation of distance. 8. Michael Clarke 2.1. service and speed’. Explain the relevance of IT in BPR. Business re-engineering requires a major change in the _______ . mindset C. Machine B.service and the speed of delivery. ______ 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. TQ’s and MCQ Self Assessment Questions Section 8. A. infrastructure 3.5 Terminal Questions 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. cost B. material D. This has been mentioned in section 8.2 . quality. The hardware and the software heterogeneity do not pose any problems. Michael Schumacher C.6 Multiple Choice Questions 1.

This has been mentioned in section 8.3. This has been mentioned in section 8. This has been mentioned in section 8. Multiple Choice Questions 1.3 Terminal Questions 1. Read the entire chapter and relate to the situation.4 1. This has been mentioned in section 8.3. B 3.3.4 Section 8.2 2. D .3.3.1 2. A 2.2.

you should be able to · What are the various roles of managers and how MIS support managers.3. Objectives: At the end of this unit.2.2 Self Assessment Questions (For Section 9.6 Terminal Questions 9.1 Rational decision making and its limits 9.4) 9.1 Managerial Roles and Their MIS Support 9. Then discuss the decision making in the organization.3) 9. .1 Organizational Limits to Rational Decision Making 9.3.5 Summary 9. the rational decision making and their limitation during decision making.2.1.1 Creativity in decision making by individuals and groups 9.3 Decision Making 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.2 What do Mangers Accomplish? 9.2) 9.4.7 Multiple Choice Questions Software that assists your creativity 9.Unit-09-Manager and Decision Making Structure: 9.2 Self Assessment Questions (For Section 9.2 Individual Limits to Rational Decision Making 9.4 Individual differences and cognitive styles 9.1 Introduction Objectives 9.2 Self Assessment Questions (For Section 9.3.4. 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.3.8 Answers to SAQs and TQs 9.1.

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

Thus. . such as Coordinator (from Action Technologies). through such activities. support a con versation (rather than a one-sided message) as a unit of social interaction in an organizational setting. managers influence their subordinates to carry out their tasks so as to satisfy their own goals as well as the organizational goals. There is just no substitute for personal contact in very many cases. 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.1 Managerial Roles and Their MIS Support Henry Mintzberg classified managerial activities into ten roles falling into three categories. As leaders. as shown in table below. these managers attempt to develop a vision for their subunit and for the organization as a whole. However. Even in roles requiring more personal contact. actions do not preclude reflective thinking. By their very nature. when the work of an individual manager was still very poorly supported by MIS. managers build and exercise their personal networks of people. a busy executive can participate in a teleconference when she or he cannot be there in person. the function of MIS in interpersonal roles is limited.term agenda.2. By developing liaisons vertically and laterally. office information systems have provided significant support for the liaison role. Certain kinds of office infor mation systems. 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.. 9. In table above listing of the extent of MIS support available today. Office information systems enhance communication be tween individuals and between various work groups. As a figurehead. These efforts range from quiet thinking time without telephone calls or visitors to executive retreats away from everyday concerns.

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

3 Decision Making A manager is a problem solver. highly creative processes. . often they require multiple decisions to solve. The intuitive grasp of a problem most often relics on such an ability to establish an analogy. but most of the tools we shall discuss below rely’ on human ingenuity-informed by MIS. Innovative companies seek out customer opinions about their products. A well-established model of the decision-making process has been proposed by Herbert Simon (1960). and the phases of intelligence and design may be rather tightly interlocked itera tions: garnering more information leads to new alternatives. Proactive managers of information systems work closely with end users to see what problems they can solve for them. Solutions to the problems we are discussing are actually courses of action-there are many aspects to such a solution. Simon’s three-step model is shown in figure 9. because problem finding requires a search of the environment: problems frequently do not present them selves for some time. Systems developed to address the critical success factors (CSF) of an individual manager are likely to spotlight a problem. and opportunities do so even more rarely. Some decision support systems offer a certain assistance here.1." Effective managers thus do not avoid problems-they seek them out. find rather scant support from automated systems. Executive in formation systems and carefully designed management reporting systems contain built-in triggers and exceptions that help alert a manager to a problem. Problem framing and development of alternatives. Problems that require decisions are sometimes difficult to perceive. The activity that Simon called design involves the development of alternative solutions to a problem.9.1: Simons three step model More and more. which in turn call for more information. and the fundamental activity in problem solving is decision making. This is a creative. developing alternative solutions. 9. and choosing and implementing one of them. and even more difficult to define (or "frame"). Fig. This first stage of the decision-making process is called intelligence. An experienced manager often recognizes a problem as similar to one he or she has already encountered. chief executives turn to their executive information systems each morning to look for first signs of developing problems or opportunities. divergent (leading in many directions) process. The process begins with a search for a problem or an opportunity-bold people do call problems "opportunities in disguise. based on the formulation of methodical thinking by the philosopher John Dewey (though it can be traced back to Aristotle). Some of the solutions may require more intelligence-more informa tion gathering about the problem. Once a manager finds a problem. Decision making is the process of identifying a problem. he or she needs to formulate or "frame" it.

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

we should be able to identify both the organizational and individual factors that limit it.3. In other words. If we consider the concept of bounded rationality more broadly. Charles Lindblom analyzed how the decision-making process. Making a decision is not concluded by the "choice" of an alternative. The need to reconcile the diverging interests of various stake holders (for example. several studies of budget development clearly point to it being a po litical process. Therefore.incremental changes from existing actions and policies. The important criteria in this decisionmaking mode are avoiding the uncertainty of major changes and maintaining the consensus of all involved. He contended that decision making in large organizations under ordinary circumstances is a process of "muddling through"-making small. blocking out certain types of information or certain alternative courses of action-to the possible detriment of quality decision making. various types of group decision support systems (GDSSs) can help these groups to negotiate. which constrains their choices and prevents creative problem solving as they opt for the "safe and tried. government. This prevents them from settling on mini malistic departures from standard operating procedures. 9. labor. political/competitive behavior. These frames of reference act as filters. These firms are unable to adapt to the changing environment. and pro grammed choice making. Human ability to process information is limited by what Princeton University psychologist George Miller called "the magical number seven. chance-driven choice making. A decision process generally includes several participants. As you shall see. Other aspects include incremen talism. it is rather a continuous process. and much of their decision making consists of attaching solutions to problems in a rather random manner.1. differs from the rational model. Other aspects of organizational decision making are reflected by what George Huber called the political/competitive model. they follow stan dard operating procedures. Rational decision making in organizations is also limited by programmed be havior. we cannot retain in . Individuals have frames of reference based on their experience. raising the aspiration levels of managers and heightening their expectations is one technique for teaching them innovative decision making. most of these decision-making behaviors are rooted in the divergent interests of the people involved in making a decision. and cultural back grounds. For example. 9. particularly in large organizations (including governments). chance does playa role in providing a solution to many an organizational problem. and others) often leads participants to avoid making major departures from current policies-and is thus one of the reasons for incremental decision making. during which any chosen course of action may be modified as it is implemented. plus or minus two". In one sense. assisted by information systems.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. senior management.The alternative chosen by a satisficing decision maker satisfies his or her aspi ration level and risktaking propensity. and most pessimistic.1. and manage a crisis. each of whom may seek to influence the decision in a direction favorable to themselves or to the unit they represent.3. The more recent. foresee.2 Individual Limits to Rational Decision Making Individual capability to make rational decisions is also limited. may help decision makers relax the constraints of programmed choice making. or to look at a broad array of alternatives before arriving at a decision. 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. "garbage-can" decision making is present to some extent in all companies: because of the dif ficulty in forecasting outcomes. When decision makers engage in this type of behavior. Therefore. knowledge." An analysis of the results of previous choices.

Explain the individual capability of decision-making and their limitations 9. People frequently perceive a causal relationship between two factors when there are no grounds for doing so. items listed first or last have a greater impact than those in the middle. which we usually need to dial right after being told what it is.short-term memory and consider simultaneously during decision making more than five to nine "chunks" of information. Explain the concept to rational decision-making and their limitations 3. Amos Tversky and Daniel Kahneman have established that people are highly averse to possible loss and will undergo significant risk to prevent it. others concern individual cognitive behavior. Explain the decision making process proposed by Herbet Simon 2. For ex ample.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. For ex ample. Our understanding of probabilistic information is generally poor. as are other phenomena such as learning or understanding language. People more readily accept infor mation that confirms. their current convictions. In their analysis of how . The form in which information is displayed influences people’s understanding of it. Individuals who tend to access information to a greater degree exhibit a low degree of dogmatism.3) 1. even though they would not incur such a risk when seeking gain. Much of the research regarding individual differences has been summarized by Robert Zmud. On the other hand. 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). an internal locus of control. All this means that people’s perception of information and their decision making based on that information may be manipulated. Decision making is a cognitive activity. It also points up the need to consider carefully the way information is presented in order to avoid biasing decision making. Decision makers are more likely to use only readily available information rather than transform that information into a potentially more useful form. To cope. human cognition is human information processing. Vivid events that are easily recalled or events in the recent past are unjustifiably assigned higher probability and weigh more heavily in the decision. Human decision making is distorted by a variety of biases. 9. 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. In general. It is partly because of this limitation that we analyze or design information systems through a process of stepwise refinement. we are thus able to handle the system by dealing with only a few components at a time.3. People display distinct cognitive styles in the ways they gather and evaluate information. 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.2 Self Assessment Questions (For Section 9. the skill of decision making can and must be acquired through training and reflective practice. It has been recognized that people do not necessarily understand their own in formation requirements. a higher risk-taking propensity. Some of these are differences in the attitudes of system users. with neglect of available statistical techniques for ensuring the reliability of such con clusions. unwarranted inferences are frequently drawn from small samples. and low tolerance for ambiguity. rather than challenges.

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

S. Group work has to be carefully organized. 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?). lobster.000 words and phrases and a natural-language user interface. we may note that the committee seems to have come up with an animal that has contributed immensely to human civilization. some of the analytical work ex ploring the reasons for this is cited by Nunamaker. Little Red Riding Hood. Let us say you are preparing a marketing campaign. the greater the likelihood of coming up with several good alternatives . the better-the more ideas the group generates. Idea Fisher will first guide you through a series of questions to help you clarify your goal (far example. Janis of Yale University meaning . the synectics process. advertising agencies. 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. You can then cull from the list the notions you may want to use in your campaign. 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. IdeaFisher does the brainstorming for you. and red sky at night. Red Square. and again. · 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. a founder of one of the most suc cessful U. and cogni tive styles to bear on a problem. internal judgment by participants should be suspended . certain individuals do not perform well in group settings. The opposite of cre ative work in a group is groupthink. The program can give you tens or hundreds of associations with the topic you select. The goal of a brainstorming session is to generate ideas. a rather elaborate program developed by Fisher Idea Systems.1 Software that assists your creativity Idea Fisher. has the capacity to come up with new associations between ideas for you. With a knowledge base of 675. hot. It is sometimes said in jest that the camel is a horse designed by a committee. "What symbolic meanings does the object have?" or "What is its purpose or function?"). Another technique for creative problem solving. fluency that should result in significant output. Not that you did not know most of these concepts-they simply may not have sprung to your mind when you needed them. the program helps you think through a concept. the category "red" will bring out.4." People in a group are able to bring diverse backgrounds. among others: crimson. communism. 9. and their ideas are then cir culated and evaluated. originated by Alex Osborn (1953). with one of the members acting as a recorder. a term coined by Irving L.1. The ground rules of brainstorming are: · No criticism-group members make no evaluation of ideas as they are freely generated. Groups can also constrain individual creativity. Synectics encourages thinking by analogy (for example.As soon as we have classified obstacles in this fashion. is more selective-only the best ideas are further considered as the process progresses. This is of use at several stages of the decision-making process when the group is framing the problem or identifying the pertinent information. listing ideas as they are presented. A group of five to ten people participates. red alert. and particularly when they are generating alternative solutions. expertise. To use a term we discuss in the chapter. For example. · The more. we can identity our prin cipal inadequacies and deal with them. · "Anything goes"-wild ideas are encouraged. Brainstorming aims at fluency in the idea-generating process. Finding new associations between ideas underlies creative thinking.

9. well-established model of the decision-making process has been proposed by Herbert Simon in the year ______ .5 Summary Managers play three types of roles in carrying out their functions. 2. Interpersonal roles are mainly based on face-to-face interactions. 9.3 minutes. Consider the structured decision that you make in your daily life.dysfunctional decision-making behavior in a group. Decision making is a fundamental managerial activity. Individual creativity is the cornerstone of good decision making? Elucidate. C. 1970 . 9. choice. people display distinct cognitive styles as well as individual differences. What is brainstorming. and implementation. which make information available. A. design. 1950 B. though in some cases computerized communications media may be employed. Explain. This drive for preservation of the group unit at the expense of grappling with the issues fosters over optimism. Blake Ives and Margrethe Olson have determined that the average activity of an information systems manager lasts ________ .6 Terminal Questions 1. It may be conceptualized as consisting of four stages: intelligence. 10 Minutes B. 2. 9. The rational decision making model applies to a rather limited class of structured decisions.4. and collective ra tionalization of decisions and opinions that are not valid on rational grounds.2 Self Assessment Questions (Section 9. In their information-processing activities. Informational and decisional roles are supported by a variety of information systems. Explain the various cognitive style as identified by James McKinney and Peter Keen. Rationality is limited ("bounded") by both organizational and human limitations. Evaluate in terms of decision making process. the illusion of invulnerability.4) 1.7 Multiple choice questions 1. A. 11 minutes D. assist in decision making. cannot be determined 2. 10. 1960 D. and serve as a means of communication. 1955 C. Pressure on or the removal of dissenters from the group is a part of this behavior.

3. Unstructured decisions D. B 2.3 2.3.4. A.2 Section 9.4. This has been mentioned in section 9.3.2 1.4 2.2 1. Structured decisions 9.2.1 Multiple Choice questions 1.1.2 This has been mentioned in section 9.1 Section 9. This has been mentioned in section 9. TQs and MCQs Self Assessment Questions Section 9.1. Ill structured decisions C.4. This has been mentioned in section 9.3. This has been mentioned in section 9. Consider example in the frame work explained 2. This has been mentioned in section 9. D .2.1 Terminal Questions 1. Semi structured decision B. C 3.8 Answers to SAQs. are repetitive and can be represented as algorithms-programmable procedures. This has been mentioned in section 9.1.1 3. This has been mentioned in section 9.3.

3.2 Data Analysis Systems 10.3.5 Systems Based on Representational Models 10.1 DSS Technology 10.3) 10.3 Capabilities of DSS 10.1 Data Access Systems 10.3 Components of DSS Introduction Objectives 10.4 Classification of DSS The Dialog Management Subsystem 10.4.2 How DSS are Deployed 10.1 Ill structured problems 10.1 Data Management Subsystem The model Management Subsystem 10.Unit-10-DSS and EIS Structure: 10.5 Building a decision support system 10.3 Forecast-Oriented Data Analysis Systems 10.4.4 Self Assessment Questions (For Section 10.4.2 When should you use the decision support approach ? 10.4.3 How DSS are developed .4.4 Self Assessment Questions (For Section 10.3.2) 10.2 Who builds a DSS 10.6 Systems Based on Optimization Models 10.4 Systems Based on Accounting Models 10.3.5.

We shall conclude by the organizational aspects of DSS and EIS. The hallmark of DSS is flexibility. 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 10.10. These systems vastly expand the abilities of knowledge workers to make decisions concerning ill-structured problems. we shall start with the concept of Decision support system.9 Terminal Questions 10. Personal DSS should be easy to develop-end-user-oriented tools should be at hand for the purpose. Objectives: At the end of this unit.7 Organisational aspects of DSS and EIS 10. Peter Keen. . the use of DSS in a firm that previously relied only on management reporting systems is a form of innovation.6 Executive Information Systems 10.5 Self Assessment Questions (For Section 10.1 Introduction With this unit.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.5.4 Developmental trends in DSS 10.11 Answers to SAQs. thus. Decision support systems are a type of MIS that represent a distinct approach to computerized support of managerial decision making. 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. As stressed by another pioneer in the area.5) 10. We begin by discussing how it supports the management and organization.5. The development of these systems arose from dissat isfaction with the rigidity of reporting systems that defined the early MIS envi ronment.8 Summary 10.10 Multiple Choice Questions 10. since entirely new capabilities are now available. TQs and MCQs 10. 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. their hallmark is (or should be) flexibility.

We can therefore think of a DSS as a set of capabilities: within its area of application. In ill structured both semi-structured and unstructured-problems. we should stress. and therefore. used throughout an enterprise. 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. the explo ration of alternative solutions cannot be completed before a choice must be made. where a number of unrealistic assump tions may have to be made. 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. and following the work of Andrew Garry and Michael Scott Morton we arrive at the categories of problems shown in table below. 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. often stemming from leading and organizing activities. Unstructured problems.2. for example. and in certain cases. however. In a way. that such problems occur at all three managerial levels. with human judgment injected at critical junctures. should be developed in a disciplined fashion. 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. a DSS may be employed for easy access to data. the principal domain of DSS is support of decision making for semi structured problems. DSS steer a middle course between the severe lim itations of management science models. are in some cases supported by DSS in minor aspects. 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. which make their user do most of the analysis and the relating of various items of information to each other. . a decision regarding loan approval. Decision making in this problem environment is more typical in the work of middle and higher management.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 management reporting systems.An organizational DSS. Decision making to solve unstructured problems is now also supported by expert systems. where parts of the decision process itself often require very significant computer support. All DSS should be easy to use in the way that best supports the cognitive style of the individual decision maker. but within narrow domains such as.

there in the executive boardroom. 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.2. including data on their construction. 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. However. such as total car production and gross national product. and thus build sales forecasting models. 4) A DSS for police-beat allocation was built for the city of San Jose. 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. Those results led to the eventual dismissal of the project. In the systems-theoretic sense.the use of DSS applies to operational. service . When we say that one of a manager’s principal tasks is to deal with ambiguity. a DSS enabled the decision maker to bring his judgment to bear on the problem. the Firestone analysts were able to rapidly build for the corporate vice-president of technology a database on all 200 competitive brands of tires. The executive used this database to assist him in finding a competitive strategy. and demand into consideration. 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. tactical. The availability of this system conferred a competitive advantage on Firestone. 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. Using the system containing these models. 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. volume. taking prices. Let us consider five different sample arenas of DSS application. 3) A portfolio manager of a large pension fund is responsible for investing billions of dollars in assets. An officer could display a map on a VDT and call up for each zone the data showing police calls for service. and the funds are at all times placed in a complex array of investments. 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. let us consider a few brief examples of DSS application. we mean that he or she will be called upon to solve many illstructured problems. Ohio built a DSS to assess the best strategy for rolling out a new brand of tires. California. Thus. These should give us insight into what a DSS can do for us. The results suggested that the project would have a positive outcome . then the open system being described is reduced to a closed or relatively closed system be cause most of the environmental factors are ignored. we were reviewing the results of his "what-if" questions. supply. with a variety of environmental factors. A huge variety of investment vehicles with varying degrees of risk and reward are available at all times. and with her or his experience and informal information. which we otherwise would probably have accepted. tread. 10. and sales estimates. The manager needs to make constant investment decisions consistent with the objectives of the fund. 1) Firestone Rubber & Tire Company of Akron. 2) Houston Minerals Corporation was considering a joint venture with a petrochemicals company to build a chemical plant.2 How DSS are Deployed To make all this more tangible to you. The system permits analysts to look for relationships between past financial results and external variables. Certain aspects of this work can be handled by expert systems that suggest decisions. However. and strategic organizational levels.

Restrictive systems may be simpler to use and may promote prescribed decision -making patterns. 3) Operate in the ad hoc (as needed) mode to suit the current needs of the user. which frequently cut across departmental boundaries. Facilitate the implementation of decisions. a DSS can help to find a problem. The system became a tool that helped its users to exercise their judgment. decision makers in the involved organizational units develop common assumptions and. Decision implementation may also be facilitated by the continuing use of the model to track progress and provide visibility to the effort. Since the system does not actually make a decision. which resemble air traffic control displays. However. and the model can be flexibly deployed with data as needed during the decision-making process.2. We can construct a DSS model much faster than we can do modeling with other MIS components. 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. the number of accidents on this once extremely dangerous waterway decreased precipitously. Specifically. 10. By creating and exercising common models. and yet do require computer assistance for access to and processing of voluminous amounts of data. The creative generation of alternative solutions is expected of the human decision maker. 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. 6) Foster high-quality decision making by encouraging decisions based on the integration of available information and human judgment. 5) Support various stages of the decision-making process. 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. learn to communicate at a . The officer-DSS team arrived at a superior solution. as opposed to operating in a generally scheduled fashion as management reporting systems do. 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. and accidents are thus prevented. 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. 2) Help to rapidly obtain quantitative results needed to reach a decision. in general. DSS can: 1) Support decision making in ill-structured situations-in which. 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. 5) As the utilization of a DSS assisting the navigators of vessels on the lower Mississippi River increased. precisely owing to the lack of structure. 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. problems do not lend themselves to full computerization. The officer could experiment with various alternatives involving the assignment of police patrols by interacting with the system.3 Capabilities of DSS DSS have several features to offer in the general information system environment of an organization. 4) Support easy modification of models. They alert navigators to developing situations of undue proximity to other vessels by radio communication. which increases the organization’s responsiveness to the changing environment both within and outside an organization. as we saw in the focus case.times. and activity levels. The system simulates the traffic of the vessels in the area by dead reckoning.

This helps managers. 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.2.1. 2. This helps to fight the "not-invented-here" syndrome. 9) Support group decision making. Explain how DSS is deployed. which we shall discuss later. . 10) Provide user-friendliness. User -friendliness can make computer-supported problem solving attractive to individuals at all levels of an organization. Proliferation of personal databases also contradicts the principles of information resource management. particularly through group DSS (GDSS). professionals. What are the capabilities of DSS? 10. 10.4 Self assessment Questions (Section 10.2) 1. 10. in general. It also enriches their jobs. and other knowledge workers to perform better. particularly at the operational level.1: Components of DSS 10. The user can work with the system in the style that best serves him or her. leading to more effective. usually spreadsheet-based DSS for the personal use of a manager cannot rely on the manager’s limited personal database. on a variety of in ternal and external databases.deeper level. Indeed. 11) Give managers the opportunity to gain a better understanding of their business by developing and working with models. we have said that the power of DSS de rives from their ability to provide easy access to data. These systems.3 Components of DSS The three principal DSS subsystems and their principal capabilities are shown in figure 10. higher-quality decision making.1 Data Management Subsystem The data management subsystem of a DSS relies. Fig. so common in organizations. a principal feature of well-designed DSS.3. permit several people with a variety of experiences and areas of expertise to bring them to bear on a decision. that leads to the adoption of suboptimal solutions so long as they are one’s own. It is simply that maintaining the currency and integrity of a significant database of this kind is usually a daunting task. This is not to say that a simple.

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

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

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

4. However. a given DSS often possesses a mix of these capabilities-in which case we would classify it with respect to its most powerful capability. 10. Data analysis systems are frequently oriented toward the consolidation (aggregation) of data. This capability is equivalent to what is offered by most DBMS through a query language. it has been established that different decision makers and tasks are best supported by different display formats.3.3) 1. tactical. The portfolio analysis system we discussed earlier on belongs in this category.2. 10. However. 10. either on demand (ad hoc) or periodically. An airline uses a system of this type to compare its performance with that of its competitors.3 Forecast-Oriented Data Analysis Systems .1 Data Access Systems These systems (which Alter calls "file-drawer systems") can provide user-friendly ad hoc access to the database.2 Data Analysis Systems These systems help to analyze historical and current data. Data management subsystem b. How well does one fact predict another? In general. Clearly. What is typical or exceptional? 4. Model Management Subsystem c. How do circumstances change over time? 3. These systems can be classified by the man agement level they offer support to (operational. 10. finance. such systems are frequently set up to allow shop floor personnel to continuously monitor the shop floor or a particular piece of machinery. They can also be classified into personal and organizational systems. or strategic) or by the functional area they are used in (marketing. and so forth).4.4 Classification of DSS DSS can be broadly used throughout an organization. This again proves that the advantage of DSS in the area of dialog management lies in providing a variety of dialog styles. The system’s database contains the data on the quarterly performances of all airlines. 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.4 Self assessment Questions (For Section 10. However. This classification yields an entire spectrum of systems ranging from the totally data-oriented to the more powerful model-oriented systems. Dialog Management Subsystem 10. 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. Only very simple models are employed. to obtain a thorough view of the variety of capabilities these systems can deliver. thus they fulfill operational control purposes. Write short note on : a.4. submitted to the Civil Aeronautics Board of the federal government in US. such as summarizing the performances of a firm’s subunits and presenting the summaries in graphs.

as an organi zation’s sophistication in DSS use grows.5 Building a decision support system How does a manager acquire a DSS? As we shall see. Their operation is based on access to a variety of internal and external marketing and product databases. such as the price of a product. or even in constructing a model employed in it. produced a representational model of customer response to promotional devices.1 DSS Technology . this depends on the technology employed and on the nature of the decision task that needs support. 10. The market analyst at Parke-Davis. representational models show the dependence between a controllable variable. Using the techniques of linear programming. Ad hoc use for planning purposes by a staff analyst or a marketing manager is typical. introduced in the focus case for this chapter. These are frequently simulation models which yield probabilistic results. Rather. 10. 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. Such a system may suggest product price. 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. it would require a ready sales forecast). the rate of insurance renewal. or other measures of financial performance. one is able to establish the mix of products that must be produced to maximize an objective such as profit.4. such as those employed in systems that rely on accounting models. The design and choice phases are supported by model-oriented DSS. The systems in this category include only the simpler of the variety of marketing models. and analyses of competitive actions. which considers such key factors as costs of resources (labor. Using such a model. including market segment forecasts. for example.These systems (which Alter calls "analysis information systems") generally assist in developing product plans. A system of this type accepts estimates of costs and revenues as inputs rather than forecasting them (for example. including series of historical data.5. and an outcome. based on accounting definitions and relationships. and so on) and product demand. Another example is a risk analysis model. 10. such as sales. Such systems typically produce estimated (pro forma) income statements. which show how existing trends in the marketplace will extend in the future if similar conditions prevail 10. or production volume. Data-oriented DSS (or DSS components) primarily support earlier phases of the decision-making process. sales forecasts.4 Systems Based on Accounting Models These are used to consider alternative options for planning purposes.4. 10. subject to a variety of constraints. a shift takes place toward model oriented DSS. raw materials. The implementation of a decision is facilitated if the future implementers were involved in arriving at the decision with the use of DSS. In general. in particular the intelligence phase involving dis covery of a problem or opportunity.4.6 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. The "what-if" mode of operation is typically employed to compare alternatives. balance sheets.5 Systems Based on Representational Models These systems go beyond the use of ready standard formulas.

financial modeling.2 Who builds a DSS . elaborate customization may approach the complexity of using a DSS generator (which we discuss next). such as Lotus 1-2-3 (Lotus Development Corporation) or Excel (Microsoft).5. 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. In some cases. a company may decide to build its own DSS generator. NOMAD2. Such a generator may become a source of competitive advantage. As we said. any specific DSS may be expected to evolve as time passes. a plain spreadsheet. DSS Generators A DSS generator is a software package that provides capabilities for building specific DSS rapidly and easily. the second for personal workstations. 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. fourth generation languages of various micro based DBMS. We shall consider them by progressing from the level closest to the actual DSS to the one most distant from it. On the other end of the spectrum. Elaborate DSS generators. Therefore. provide another avenue for generating a specific DSS. from the ground up. or Symphony (Lotus Development). Nonprocedural. such as FOCUS. 10. or a DBMS with its query facility-may be employed as building blocks to construct a DSS generator or a specific DSS. or police-beat allocation were systems of this type. 2. There now exist a variety of specific DSS in the software marketplace. The first of these systems was designed for a mainframe environment. 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. 1. such as EXPRESS and pcEXPRESS of Information Resources (Chicago). or Ramis II. Capabilities of generators vary widely.Three levels of DSS technology have been identified by Ralph Sprague. which we shall later describe in more detail. joint venture evaluation. on the number of variables that may be used in a model). 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. a DSS usually undergoes extensive modification as it is used. a statistical package. combined with the capability of accessing multiple databases for querying and reporting. Our examples of DSS for portfolio allocation. I have observed many an actuary do so and find the experience rewarding and stimulating. A specific DSS is constructed with the use of DSS generators or tools. The capabilities of spreadsheets and DBMS are combined in integrated packages such as Framework. however. they also include comprehensive graphics packages. APL). Specific DSS A specific DSS is the actual system that a manager works with during the decision process. and forecasting. Spreadsheet packages. DSS Tools A variety of tools-such as a programming language with good capabilities for accessing arrays of data (for example. using these tools. specialized for its individual application area. they require customization to the actual environment in which they are to be used. offer ever increasing capabilities for generating simpler DSS. Linkage between PCs and a mainframe is available for generator products of the same family. Sometimes personal DSS are indeed built with APL. 3.

3) A DSS builder employs a DSS generator to build a specific DSS for the given end users. 2) In some cases. This person . The builder is familiar with the business problem. 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 10.4 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. In some organizations. 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. these professionals are members of a DSS group which supports the use of DSS technology throughout the enterprise. as well as with the capabilities of the generator. an intermediary assists the manager. 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. Jack Hogue found that 95 percent of managers in his sample used intermediaries at least occasionally.Both end users and MIS professionals become involved in the development of DSS. 10. Fig. as a business analyst would be.4.

we need a prototype of the system-a simple initial version used to experiment with and learn about the desired features of the system. all three of its components (database. frequently exist in these cases. the DSS should change with them-DSS are truly built to be changed. Therefore. 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. To construct a DSS. This development methodology. 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. directly in specific DSS). and there is no partial system to work with before the system is completed. The process is lengthy. is suitable for complex systems. The builder then constructs a simple version of the system. the quick-hit approach is employed as an early stage in the process of technology assimilation. The Quick-Hit Approach So dubbed by Sprague. 5) The toolsmith develops the building blocks employed by the generator (or. Traditional Life-Cycle Development This process begins with detailed system planning and analysis.also ensures the linkages between the generator and other elements of the organizational computing environment.3 How DSS are developed By its very nature. Iterative Development In DSS practice. progresses through the design stages followed by coding and testing. Unless it is used as a springboard to more advanced stages of DSS assimilation into the organization. personal workstations. this opportunistic approach results in little organizational learning. ignoring many of its aspects. in particular those which affect many users and in which informational requirements can be established early through the analysis process. and goes on to implementation – this is the development life cycle. 2. Indeed. such usage is the exception rather than the rule. As in many other activities in life. we learn what we want from an activity by starting to perform it. such as databases. a DSS generator is employed (frequently a spreadsheet with templates). The risks associated with enduser computing. in which case it is later replaced by an orderly process of development for larger DSS. 1. They identify the most useful screens. The initiative usually comes from an individual manager. We shall distinguish three prominent approaches to building DSS-even though a large spectrum of possibilities exists between the first two extremes. 10. Generally. Iterative (or evolutionary) development of DSS relies on the creation of such a prototype and its progressive refinement. As the needs of these people change. These technical experts usually work for software vendors. sometimes. In some organizations. however.5. 3. as we shall see later. model. To do so in decision making with a DSS. the future user or group of users generally do not know what they want from the system. so the DSS are built either by the manager or by the builders from a more or less formal DSS group. The level of investment is very low and the payoff high. But in the development of a specific DSS. The process begins when the future user and the DSS builder discuss the system for a few hours. most DSS are built for the personal use of a decision maker. Moreover. including lack of maintainability. the quick-hit approach is the way most DSS come into being. and dialog) have to be built with the use of facilities offered by the DSS . This is indeed the case when a DSS generator is to be built. and networks.

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

DECISION TYPE Independent CHARACTERISTICS SUPPORT SYSTEM Decision maker makes a complete decision.5. 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. Personal DSS Each decision maker individually makes a part of a decision and passes the results to the next decision maker. to participate actively in the decisionmaking process. It is the objective of a GDSS to enable group members to bring their skills to bear on the decision process. we noted that dys functional behaviors may develop in a group’s work. 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. In contrasting the capabilities of GDSS with DSS. they furnish DSS modeling capabilities and software that . 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. Group Decision Support Systems (GDSS) Group decision support systems (GDSS) are expressly designed to support group communication and decision processes. A group working with a GDSS is actually participating in a decision-related meeting. When we discussed the decision-making process. Many decisions are complex and call for the par ticipation of a number of experts. Three levels of GDSS capabilities may be distinguished Level-1 GDSS facilitate communication among group members. increasingly form the basic work cells throughout an en terprise. facilities for remote conferencing. 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. and arrive at a consensus-among other possible in teractions. Two prominent directions this research is taking are toward the integration of expert system technology into DSS and the development of group DSS (GDSS). while counteracting possible negative group dynamics. or teams of coworkers. vote. 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. 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. such as corporate boards. For example. Thus. com bined with the team orientation of the contemporary organizational design. Level-2 GDSS contain the communication capabilities of the Level-1 GDSS and provide support for the decision-making process. All of these factors. More or less permanent groups. lead us to believe that decision support systems that support group work will grow in importance.10.4 Developmental trends in DSS Lively research in the area of decision support systems continues apace. or both. exchange ideas. They provide the technology necessary to communicate decision rooms. interactions in a GDSS setting frequently encourage group mem bers who would have otherwise kept their counsel. task forces. explore alternative solutions with the use of models and data. or perhaps deferred to others.

a large common screen display is an essential facility. Models for voting. model. Level 2 GDSS thus facilitate activities involving the Delphi technique. and arrival at a consensus) or a brainstorming session (eliminating redundant ideas and summarizing the results). The principal settings for GDSS use are: a) A face-to-face session in a decision room or a similar conference room. It should be possible to run a Delphi session (with rounds of voting. these are connected with video and telecommunication links. this person should be able. Explain the roles played by organisational actors in building a DSS? 3. should encourage both the formation of a cohesive group and the active participation of all its members. These are the distinguishing characteristics of GDSS at their present stage of development: 1) Aside from the database. 4) GDSS features. 3) GDSS should offer facilities for prompting and summarizing the votes and ideas of participants. and the nominal group technique. and the design of the dialog subsystem. Explain the various level of DSS technology as identified by Ralph Sprague? 2. 10.5. A collection of such protocols from the more important decision-making sessions may be preserved as a part of organizational memory. 5) GDSS expand the model base to include models supporting group decision-making processes. or various computer conferencing facilities. such as anonymity of interactions. in conjunction with the appropriate software. and dialog components of DSS. b) A teleconference session taking place in several decision rooms at the same time. with terminals and a large public display screen. anonymous opinion sharing. such a session may be dispersed in time as well as place (the memories of the computers. This component. rating. may include electronic mail. 7) GDSS should support a facilitator to assist the orderly progress of a session. GDSS also contain a communication component. teleconferencing. for example. c) An interfaced session. to route individual screen contents to the large common display.5 Self assessment Questions (ForSection 10. which is implemented with the organization’s local or wide area communication facilities. Some sessions also profit from the presence of a leader. make asynchronous sessions possible). 2) Complete decision ("war") rooms are often provided and equipped in a fashion conducive to a group effort. the layout of the decision room. Level-3 GDSS. in which participants work at remote terminals and do not see each other. which at this time are still at the research stage. would formalize group interaction patterns-possibly by including expert systems that would suggest rules to be applied during a meeting.supports group decision processes. and ranking should accompany other statistical models. brainstorming. What are the various approaches for developing DSS .5) 1. 6) It should be possible with a GDSS to obtain the protocol of a session for later analysis.

10.6. Many executives have already fallen into the habit of reviewing these indicators on a regular. sometimes daily. are becoming the primary tools of top-level control in some organizations. is shown in figure 10." With the use of this methodology. The first kind of EIS can fully reside on personal worksta tions. Fig. they can obtain more detailed data behind the indicators. In the design of EIS. in addition to their other features. They help an executive to spot a problem. terse presentation of information with colorful graphics. The relationship between these two types of information systems. The technical problems of EIS data access pale in comparison with the problem of potential resistance from managers below the top level. EIS of the second kind need the power of minis or mainframes to access corporate data. its executive users are able to obtain virtually instantly any information supported by the EIS data-unfiltered and unable to know their subordinates. Once an EIS has been set up. as DSS do. these capabilities make EIS a strategic planning tool. EIS-type applications are coming into use by middle managers as well At the heart of an EIS lies access to data. or a trend. With the drill down capability. Explain the concept of GDSS 10. . EIS primarily assist top management in uncovering a problem or an opportunity. and the ability to control the system in a very easy way. Analysts and middle managers can subsequently use a DSS to suggest a solution to the problem. or they may be given access to the actual corporate databases. an opportunity. EIS may work on the data extraction principle.and lower-level man agers to project the future.4. More recently. Speaking tersely: while DSS are primarily used by middle.6 Executive Information Systems Executive information systems (EIS). executives may define just the few indicators of corporate performance they need. EIS also have forecasting capabilities that can be used in an "automatic pilot" fashion. EIS primarily serve the control needs of higher-level management. An executive who is experienced with such a system can perceive a trend (and a problem) in seconds.6 Seen in the light of the structure of a decision-making process. EIS and DSS. the ability to "drill down" on more and more detailed data. basis. developers frequently rely on the critical success factors (CSF) methodology developed by John Rockart of MIT. They can be best understood by contrasting them with DSS. The feature of EIS is to access to a large variety of internal and external data. which they com plement. He de fined CSFs as "those few critical areas where things must go right for the busi ness to flourish.

This methodology avoids the frequent pitfall of aligning an EIS too closely to a par ticular sponsor. which relies on the individual critical suc cess factors. This ability alone is also a potential source of resistance to EIS. The introduction of DSS. and then the information needed to support these processes is defined-to be obtained with the EIS that is being planned. Most fre quently. As we have already seen. The objective is to institutionalize the use of DSS. as EIS use at the Mellon Bank of Pittsburgh expands from the top corporate level down to the departmental management level. company decision making may be decentral ized-and controlled with the EIS. tech nical support. treated as a technology. are in place in most of the medium-sized and larger firms. which help to configure a specific EIS. Hugh Watson and his colleagues analyzed how organizations actually support their DSS efforts. and training. it is expected that the system will provide a shared understanding of the business throughout the management structure. There are a variety of organizational arrangements for DSS groups. DSS groups are a resource that can play a crucial role in this change process. 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. so that the DSS ultimately influence organizational processes (rather than only isolated individuals). organizational DSS are conceptually more complex than the rather well-structured EIS. They found that DSS groups in most organizations include five or fewer professional members. A single EIS is generally implemented in an organization. Thus. the critical business processes are identified and prioritized. Institutionalization means that knowledge workers throughout the enterprise consider the merits of the DSS approach when appropriate and implement and use these systems. a process of organizational change should be conducted as a part of the general implementation process. 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. In general. with more and more executives given access to it. the strategic business objectives methodology of EIS development takes a company-wide perspective. Multiple DSS. The organizational advantage of EIS lies in its support for a tight control from the top. England) is a leader in Europe. and with the system playing an integra tive role. lends itself to the process of technology assimilation. on the other hand. Commander EIS (by Comshare of Ann Arbor. such as the corporate planning department. A well-designed EIS can immensely increase the span of management of executives. Following the identifica tion of the strategic business objectives of a firm. 10. All of these systems are actually EIS generators. Since top management can easily track the performance of virtually any company subunit. 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. 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. 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. EIS have by their very nature a significant organiza tional impact. . In analyzing a number of companies. In the United States. EIS use has already made possible profound organizational changes. Michigan) and Pilot EIS (by Pilot Executive Software of Boston) lead the EIS field.7 Organisational aspects of DSS and EIS Both DSS and EIS are proliferating in organizations in the private and public sectors. RE· SOLVE from Metapraxis (New York and of Kingston upon Thames. Resistance to change should be expected.As opposed to the CSF methodology.

but also from the executives themselves. DSS generators . 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. 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. where the use of EIS pervades the work of high-level managers. which need to be refreshed daily in many cases. DSS Programmers B. Software packages for developing DSS are called as A. Specific DSS that are actually employed by users are generally developed with DSS generators. CAD C. In particular. Explain the organisation aspects of DSS and EIS 10. At Xerox. Application of CSF methodology and a superior interface design can go a long way toward allaying these apprehen sions. such as the Delphi technique or brainstorming. A. Future DSS are expected to incorporate expert system technology for various aspects of their operation. Sometimes. though simpler DSS tools may also be deployed. 10. 10. ABC B. who in some cases feel that the information will be inadequate for their needs or that the system will be difficult to use. must be expected and managed. therefore. top man agement has imposed a limit on drilldown depth. Group DSS (GDSS) expressly support group decision processes. DSS are used either directly or through intermediaries by all levels of management. Combined with electronic mail. EIS give top executives the capability to bypass the chain of authority.10 Multiple Choice Questions 1.9 Terminal Questions 1. 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. managers can drill down no deeper than three layers from the top. resistance is to be expected not only from the staff personnel who support the executives and middle managers. CSF D. What do you understand by Executive information system? 2. Primarily applied in planning.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. EIS developers frequently rely on the ______ . As analyzed by Rockart and David De Long. Resistance to these systems. The availability of EIS as potent tools for top-level control will shape many or ganizational solutions in the future. the role of an executive sponsor is critical. CDE 2. organizational measures must be taken to ensure support for EIS.

7 Multiple Choice questions 1.5. This has been mentioned in section 10. This has been mentioned in section 10. TQs and MCQs Self Assessment Questions Section 10.5.2. This has been mentioned in section 10.4 Terminal Questions 1. A .6 2. This has been mentioned in section 10.C. This has been mentioned in section 10.2.2 3.11Answers to SAQs.5. b. c. This has been mentioned in section 10. DSS Writers D. B 3. This has been mentioned in section 10. Semi structured B.4 1. This has been mentioned in section 10.3 4.3.3 Section 10.3.1 1.2. This has been mentioned in section 10. C 2.3. a.5 1.5. All of the above 10. Structured C.5.2 2.2 1.4 1. Unstructured D.3 Section 10. This has been mentioned in section 10. Sales forecasting is an example for ____________ type of problem A. DSS Scripter 3.1 2.3. This has been mentioned in section 10.

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

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