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

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

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

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

There are several fruitful ways to understand management. An ordering system with terminals installed at thousand of client sites. What does management information system include? 1.1 What Are Organizations? Organizations are formal social units devoted to the attainment of specific goals. 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. Organizations use certain resources to pro duce outputs and thus meet their goals. A local government institution employs its resources (financed by the tax payers) to provide a benefit for the area population-thus. The range of this type of support is broad and growing. An individual may maintain his or her business calendar and communicate with co -workers through the medium of electronic mail in some systems. Decision support systems allow managers to consider various courses of future action and see projected results in order to plan future activities. even when the participants are widely dispersed. 1. A nonprofit hospital applies its resources to provide health care to its target population.3. and coordination are informa tion-intensive aspects of these managerial functions. monitoring. 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. In many cases. and controlling. and information) and aims to meet certain financial objectives. 1. Such interorganizational it formation systems speed the flow of information between companies and are frequently a source of competitive edge. staffing. organizing. or an expert system that helps to diagnose via telecommunication links how equipment installed at customer sites is operating. What do you understand by Management information system? 2. current. are prime exam ples of strategic information systems. Decision-making. materials. machinery. assist the various levels of management in their tasks and managers are able to obtain summary reports on past. a business firm that pro duces semiconductor memory chips consumes certain resources (money. the quality of . 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 motor vehicle bureau licenses drivers and vehicles. labor.2.3 Self Assessment Questions (for section 1.2) 1. Office information systems support diverse aspects of individual and group knowledge work.3 Organization and Management 1. 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. However.3. various interpersonal tasks have been found to make far greater demands on managers’ time than pure decision-making. Indeed.Management support systems.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. The classical way is to consider the managerial functions: planning. leading. For example. also by sending images. Other systems offer a variety of computerized supports for team work. and pro jected activity within their areas of responsibility. Detailed analyses have also been made of how managers actually spend their time.

The confusion often extends to the information systems context. 1. a branch of statistics concerned with measuring the efficiency of communication between people and/or machines. and conversely.1 Information as Processed Data Data are generally considered to be raw facts that have undefined uses and application. Information makes a market perfect by eliminating uncertainties about supply and demand. its actual arrival depends on unforeseen conditions. and the three terms maybe used interchangeably. Managers also define information in terms of its reducing uncertainty. and knowledge is considered to be an understanding derived from information distinctions among data. and summarized. 1. In macroeconomic theory. that the lead ership function receives scant support from MIS. data that have somehow been formatted.4 The Concept of Information 1. scientists talk about the information contained in the data and the knowledge acquired from their analyses. Taking an example of Federal Express in USA. the more uncertainty exists. An MIS. 1. obviously.4. data refer to unprocessed and unanalysed numbers. thereby increasing Federal Express’s ability to handle arriving packages.making process and the quality of the decision. The firm reduces its uncertainty by decoding these signals. filtered. the less uncertainty exists? In microeconomic theory the equilibrium of supply and demand depends on a market known as a perfect mar ket. defines information as the inputs and outputs of . although to different degrees.4.2 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.4.1. where all buyers and sellers have complete knowledge about one another and where uncertainty does not exist. Moreover.1. that is. for example. is designed to support managers in as many of their functions as possible. each incoming aircraft has a scheduled arrival time.1. Because managers must project the outcomes of alternatives in making decisions. information is considered to be processed data that influences choices. It is clear. When the data are analysed.3 Information as a Meaningful Signal Information theory. the more information is available.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. It could be described in three ways 1) as processed data. thus. the information that a manager brings to bear in a meeting is often a determinant of its success. The researcher collects data to test hypotheses. information.4. and 3) as a meaningful signal-to illus trate the richness of the concept of information. the reduction of uncertainty about the outcomes of various alternatives improves the effectiveness of the decision. but the planning function should be extensively supported. 1. that is. However. firms behave according to how they read the economic climate. 2) as the opposite of uncertainty. and knowledge may be derived from scientific terminology. 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.manage ment cannot be evaluated by measuring time allocations alone. Economic signals that measure and predict the direction of the economy provide information about the economic climate. the less information is available.

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.

Case workers at some public housing agencies. perform redundant activities in dealing with customers or suppliers. some employees may collect information while others process it or analyse it. 2. Although systems for information management by individuals generally have few components and even fewer procedures. individuals employ systems such as posting memo notes on a refrigerator. and calendars to organize information about future events. and bill paying. and managing resources.4. At home. developing. 1. such as when visiting prospective and actual clients. They typically maintain information about employee performance. 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. An individual who lacks such aids combined into a personal information system may miss important appointments or fail to accomplish important tasks. and other subjects. As managers become more sophisticated in performing their tasks. captured accurately. What are the various needs of information? . they require increasingly sophisticated systems to help them meet their information needs. Increasingly.4. setting alarm clocks. individuals use lap tops or other portable electronic equipment to meet their information needs. negotiating agreements.4. For example. Define information. Individual jobholders. or scheduling regular times to share information with family and friends.3 Organizational Needs Because of the value of information to organizational performance. What are the different uses of information? 3.1 Individual Needs Individuals need information systems both at work and at home. industry trends. or fail to respond quickly to changes in the marketplace or industry. and using information. and making decisions. investment tracking.1.4. Organizations that lack quality information systems may experience problems in accessing the data they need for executive decision making. and organized effectively. 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.5 Self Assessment Questions (for section 1. Explain the various cost involved with information 4.4. and an array of computer software facilitate such infor mation management. increasingly individuals are using sophisticated personal financial managers for personal budgeting.4. Many organizations even establish a special group that manages and develops information systems for the entire organization. They allow businesses to operate internationally by making information about transactions available to managers and other workers in any country. use a portable computer office. Consider a logistics agents like Blue Dart without a quality information system. various types of computer equipment. lose important data during a relocation or power failure. 1. and communicating with other organizational members.4. for example. customer preferences. maintaining. individuals use file folders or piles on a desk to organize infor mation stored on paper. Blue Dart may have massive data about package pickups but lack the procedures to trans late these data into efficient systems for package delivery. directory systems to organize files on a computer disk or diskette.4) 1. Information systems also make global news and information quickly available. most organizations develop procedures to ensure that important information is collected. At work. motivating.2 Managerial Needs Most managers require significant amounts of information to perform their jobs. 1.

Think about the availability of encyclopaedias. Significant strides have occurred in the development of hardware in the last decade. 1. Processing hardware converts or transforms data. such as data on employees.5.5. This technology allows managers to easily access. While processing power has increased. processing. in the form of computer code and its accompanying documentation. million-dollar computers of ten years ago. storage. for processing data electronically.2 Hardware Computer hardware refers to the equipment used in electronic infor mation processing. products.5. Information technology has allowed individuals. Software development tools such as computer languages and screen generators facilitate creating or modifying software to respond to an organization’s information needs. airline schedules. texts. Output hardware provides copies of data on paper. groups. Storage hardware includes removable and fixed media that allow rapid access to information. hardware. Input hardware captures raw data and information from interactive uses. retrieve. retrieval.1. the size of the hardware has decreased considerably.5. 1. and organizations to manage information effectively and efficiently.2 Components of Information Technology Information technology includes computer software.scientific information. Many homes have personal computers and household devices with computer microchips. This widespread availability of computer technology has dramatically changed the way people process. Applications software assists in the acquisition.2. and data communication systems. print. and retrieve information. microform. Systems software directs the functioning of the computer machinery. database management systems. marketing experts. and other information through data services. Individuals and organizations can purchase an array of software products. 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.1 The Role of Information Technology Modern technology provides many tools to help managers acquire. Today desktop and portable computers costs are continuously reducing and can outperform the room-sized. store. 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. store. and analyse databases of information along a variety of dimensions. voice. and video screens. In some circumstances these same employees may develop their own software that they modify over time to meet their changing work or personal needs. customers.2. . and suppliers.5 Information Technology 1. process. or human resources professionals.5. Now consider the ability to telephone or send mail electronically almost instantly from the United States to Europe and Asia.2. 1.1 Software Computer software provides the instructions. supermarket prices.3 Database Management Systems Database management system offers a vehicle for storing and supporting the processing of large quantities of non. Consider the large networks of data available to financial analysts. and communication of information. Offthe-shelf software is mass-produced software made for a variety of generic uses such as word processing. Significant advances-in information technology have made large quantities of information available to organizational members and other individuals at a relatively low cost. or other effects. sort. and communicate information. it offers varying quality for graphics.

They buy and sell products outside their home country. They also must identify the information they need for developing and implementing their organizational strategy. and communication. Diagnosisrequires a description of the existing problem. too. and the possible ways of securing the needed information. and other individuals must begin by assessing their needs for information within a particular situation they face.6.4 Data communication technology Data communication technology has dramatically improved the communication of information across short and long distances. Specifying in detail the information needs at each of these levels is the first step in the effective management of information. to facilitate the effective use of information in managerial decision making. among others. Diagnosis of information needs can occur at the individual. open subsidiaries.2 Evaluation Evaluation of the methods. 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. Society.2. for example. A manager.5) 1. employees. The current state of information technology has facilitated the expansion of organizational boundaries. or communicate . or organizational levels. such as by improving customer service.1 Diagnosis Managers. Advances in communication technology occur frequently. process store.1 Information Management Model An analytical model. uses information for communication. 1. and systems for handling information follows the diagnosis of needs. and generally improving the quality of life. Explain the role of information technology in the modern organisation 2. What are the various components of information technology 1. techniques. economic development. This model involves four steps diagnosis. reducing the cost and increasing the accuracy and speed of data transmission. computer networks. Organizations use information to increase their competitive advantage. cost control.5.5. the type of infor mation required to solve it. the context in which it occurs. video conferences. for example. and implementation. financial control. design.3 Self Assessment Questions (for section 1. One recent study of computer-based information systems in 72 companies in the People’s Republic of China. the type of information available. This step begins with an assessment of the current manual or computerized systems for handling information. project management. Managers often have needs for transaction processing. retrieve. evaluation. 1. or quality monitoring.1.1. The information management model is intended to complement 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. managerial.6 Managing Information in a Global Environment Organizations today function in a global environment. Individuals must assess their information needs at work and home.1.6. or distribution centers around the world.6. plants. 1. and communicate worldwide. and other electronic media. This usage differs significantly from that found in many United States companies. might first describe or identify the components of the information systems and technology used to acquire. 1. This model has some of the same characteristics as the systems development life cycle. the four-phase model is directed at users of information systems rather than information systems professionals or other systems designers.

information. 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. How do these components compare to available state-of-the art systems? 5. 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. They must also assess whether the information systems professionals function effectively throughout the four phases.6. implementation. Would other systems better respond to the information needs? 7. Are they manual or computerized? 3. What are the components of the information systems and technology used to acquire. monitoring such effects and providing solutions for problems that arise should be part of the implementation.4 Implementation The final step. . 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. Implementation also includes ensuring that the new systems perform as expected and that they result in the predicted costs and savings. What consequences will result from a change in the way information is handled? 9. store. Alternatively. he might design a system that incorporates additional computer equipment and communication software. or other organizational member combines information about individual. What information needs are not handled and cannot be handled. managerial.6. or communicate information? 4. retrieve.1. or organizational needs with the assessment of current information systems and technology and then designs coherent systems for information management. 1. What are the current systems for handling information? 2. focuses on issues associated with putting the new or altered systems to use. Questions for evaluating information systems and Technology 1. How well does the current system respond to the information needs? 6. or specialists from outside the organization will play. the manager or other user might determine what aspects of his or her information needs are not handled and which cannot be handled. process. Design involves correcting deficiencies in existing systems and integrating state-ofthe-a practices and technology into them. Would state-of-the-art systems significantly improve the handling of information? 8. information systems staff.1. Recognizing that the new system and technology likely will have unanticipated con sequences should be a key aspect of planning. information systems professional. regardless of the information technology a information systems used. Next he or she might compare these components to available systems. if he expects that the information management needs might increase and that individual managers might require access to data they currently lack. staff specialist. Specifying the timetable for implementation typically follows. regardless of the information technology or infor mation systems used? 1.3 Design A manager.

is a field of applied mathematics. Drucker had defined modern or ganizations as information-based. It provides us with mathematical tools for decision making in such areas as optimal resource allocation. or optimal inventory quantities. MIS is influenced both by the technical fields. which con tribute the knowledge of technology and algorithms for optimal use of a com pany’s resources. entered the mainstream of MIS in the mid-1980s. sup plies the information needed for cost planning and control through budgeting. Management science. The fundamental notions of de cision-making. such as a quarter or a year. systems. for example. This highly dynamic discipline conveys the technological push to the field of information systems.1. The discipline combines theoretical investigation with a pragmatic orientation. The fundamental reference disciplines for MIS are computer science and the theory of organizations and management. producing novel organizational solutions. are known as its reference disciplines. database organization. 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. Thus.7.7 Management Information System as a Discipline Management information systems is both an area of practice and a discipline of scholarly inquiry. Auditing techniques have also been adapted from accounting practice. artificial intelligence. a new discipline incorporating the approaches of cognitive psychology and techniques aspiring to understand how mind arises from the brain. more recently. computer commu nications. which investigate organizations and the people in them. and using new methodologies of systems development. Cognitive science. expert systems. information. A classical 1948 paper by Claude Shannon led to the technical conceptualization of the idea of information. The fields of scholarship.1 Relationship of MIS to Reference Disciplines As a discipline of study. Computer science is the study of au tomatic processing of symbolic information. because of the vital role information plays in a modern organization. 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. and their control . and. for the Securities and Exchange Commission). which underlie the discipline of MIS. The use of computers in business began with accounting. optimal selection of transportation routes. Software engineering. 1. contributes to our understanding of understanding itself as it studies human information processing. Financial accounting reports provide information chiefly for entities external to the com pany (for example. an influential book that appeared in 1947. the discipline of MIS plays a major role in contributing to the effectiveness of social organizations. Systems theory contributes ap proaches for dealing with complexity-that of an organization or that of a soft ware system. Sociological approaches help us understand the organizational behavior of people. Managerial accounting. also known as operations research (OR). and by the behavioral fields. The most prominent work laying the foundations for this approach was Administrative Behavior by Herbert Simon. 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. far more important in the company decision-making process. proficiency in MIS is virtually a prerequisite for organizational effectiveness. are the fields of computer science particularly important to the field of MIS. Thus. created by artificial intelligence scholars in the early 1970s. A general processor of such information is the computer. MIS supports both the financial and managerial accounting functions. 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.

calculation is just one of the several functions com puters perform. Although the field of MIS originated in the late 1950s. management information systems are unthinkable (well. 1. 2. Technological developments re lated to computers and digital communication have continually driven the field in both practice and research. Mass production of computers started in 1951 when UNIVAC I was delivered commercially as the first such machine built on an assembly line. perhaps only "thinkable") without computers. The development of MIS as a field of inquiry paralleled the technological de velopments.000 computers installed by the end of the 1950s. was completed in 1946 at the University of Pennsylvania. Developed in response to problems encoun tered by the military during World War II. with only some 4." They proceeded to set up a frame work for analyzing this impact. What do you understand by management. Explain the various disciplines from which MIS has evolved. The organizational computing landscape was revolutionized by the emergence of personal computers in the late 1970s. The first papers analyzing the role of information systems in orga nizations started to appear in the second half of the 1950s. MIS as a discipline became established a full decade later. However. the focus of the field of MIS. Many areas of research in MIS overlap with the work done by computer scientists. As we have stressed. The 1958 paper by Harold Leavitt and Thomas Whisler. Formal computer-based information systems are not the only informational sources in an organization. but also a discipline of scholarly inquiry. When appropriate software became available. UNIVAC I was also the first computer model used for business data processing when it was installed by General Electric in 1954. Write a note on information management model 1. UNIVAC I was delivered commercially as the first such machine built on assembly line. entitled Management in the 1980. These notions have also influenced thinking on the role of information in organizations-that is. computers were thought of at the time as devices for doing precisely what their name impliescomputing.7) 1. ENIAC.9 Terminal Questions 1. was influential in focusing the discipline.7. the personal computer gave strength to end-user computing.have their own lives in the reference disciplines. 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.8 Summary MIS are formal systems built around the hardware backbone of computer and telecommunications systems. 1. Their forecast of reduction in the ranks of middle management due to senior managers’ ability to directly control an organization with the support of information technology appears to have indeed come true. MIS as an area of practice had a rather slow start. the predominant tasks of computers are storing and accessing organized informa tion and processing symbols. The first general purpose electronic computer.2 Self Assessment Questions (for section 1. drawing in part on the findings and methodologies of several reference disciplines. The authors concluded that what "we shall call … information technology" would have "definite and far reaching impact on managerial organization. MIS is not only a field of practice. Today. 1. Informal information sources must be cultivated and coordinated with the use of formal sources.10 Multiple Choice Questions .

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

1 Terminal Questions 1.1. This has been mentioned in section 1. This has been mentioned in section 1.4.5 1.4.1 2. This has been mentioned in section 1.1. You will have to refer to section 1.3.2 Section 1.2 2. 4.5. C 4.2.2. 2.2 This has been mentioned in section 1. This has been mentioned in section 1.2.3 1. This has been mentioned in section 1.4. D 3. B . This has been mentioned in section 1.4 Section 1.6. A 5. This has been mentioned in section 1.5. You will have to refer to section 1. This has been mentioned in section 1. C 2.5. Multiple Choice Questions: 1.2 3. Section 1.7.Section 1.

3.4 Self Assessment Questions (for section 2.3 Information Required for the Process of Management 2.2. We shall conclude by functional needs of information in the areas of accounting.2 Information and Levels of Management 2.1 Accounting 2.5 Terminal Questions 2.3 Functional Information Needs 2.2 The Manager’s Job in a Global Environment 2.7 Answers to SAQs. marketing.2) 2. the functions performed by managers.2.1 Introduction With this unit.4 Summary Human Resources 2.4 Operations 2.1 Introduction Objectives 2.3 Marketing 2. TQs and MCQs 2. Objectives: At the end of this unit.3. and human resource management.6 Multiple Choice Questions 2. operations.2.3.3. you should be able to .2.2 Finance 2.2.1 Management and Managers 2.3. Then discuss the various levels of management and their information needs.6 Self Assessment Questions (for section 2.Unit-02-Management Information System from Managerial Outlook Structure: 2.3.1 Functions of Managers 2. we shall begin with management and managers.3) 2. finance.1 Information needed by different levels of management 2.

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

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

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

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

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

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

In the control process. these functional areas are not intended to be exhaustive but to portray com monly occurring functional needs. and summarizing the financial activities of an organization. experiences. Controlling Managers must also monitor the quality and impact of managerial actions. and expectations of the workers they supervise. shareholders. finance. In this section we discuss examples of information needs in the areas of accounting. The director of interna tional finance there led a design project that resulted in standard accounting procedures that conformed to USA. and the potential barriers to their accomplishment. and the organization’s environment. and international regulations. Diagnosing information required to perform specific functional activities is an early step in effective information management. Controlling. the leader’s relationship with the subordinates. Explain the various information needed by the managers in the organisation 2.3. Inc. Effectively motivating and developing subordinates as well as influencing others and building relationships likely require extensive situation specific information that a manager should diagnose.understanding of the situation to select the most appropriate leadership style for influencing workers to perform effectively.4 Self Assessment Questions (for section 2. the task’s structure. classifying. marketing. Effectively leading a multicultural workforce creates both specific and generic information needs for managers functioning in the global arena. an executive search firm with offices worldwide. 2. Executives at Russell Reynolds Associates. and data about col leagues employed by competitors. determined that top management required consistent and more detailed information from all offices. the organization’s structure. and tax assessors.2.. managers now regularly use accounting information in making decisions. managers establish standards and methods for measuring performance. that workers’ activities occur as planned.1 Accounting Accounting is the process of recording. 2. and that the organization proceeds toward its established goals. In addition. and then compare performance with the standards. Originally used to create a historical record of the firm. 2. They require information about the organization’s functioning to help them anticipate and handle organizational problems and chal lenges. listings of professional organizations. Controlling means ensuring that performance meets established standards.3 Functional Information Needs Managers require a broad range of information to perform their day-to-day functional roles. Managers commonly use information provided in budgets and financial controls to guide and constrain organizational activities. What are the various functions performed by the manager. requires comparative information about the optimal way to implement organizational processes and their actual implementation. Managers also should diagnose the information required to solve employee-related problems. investors. They also use cost information to maintain profitabil ity. Financial accounting deals with preparing accounting information for users outside the organization.2) 1. and human resource management. Researchers sug gest that they need information about workers’ needs and maturity. operations. accounts . They must also have detailed information about the skills. Managerial accounting refers to the provision of financial information that managers within the organization need for their decision-mak ing. What information needs are inherent in the interpersonal roles required for leading? Man agers must know the nature of the tasks being performed. managers must have information about colleagues from whom they might gather information for the organization. the expected standards of perfor mance. Accounts receivable. such as regulatory bod ies. assess performance.

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

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

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

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

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

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

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

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

3. Top. operations.6 Self Assessment Questions (for section 2.6 Multiple Choice Questions 1.4 Summary Managers at all levels in an organization have significant information needs. Operations e. Managers also require a broad range of information to perform their daily activities. down C. As one moves ______ the corporate ladder. 2. Eventually human resource information systems may become an integral part of the administration of each part of the human resource function. These needs apply at all levels of management. and controlling organizational resources. marketing. Infor mation needs exist in the areas of accounting. A. Explain the needs of information in the following areas a. Human resource management 2. Make an organisation of your knowledge and assess the information needs in the various functional areas. horizontally 2. ______ focus primarily on implementing the policies and strategies.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. Management refers to the process of achieving organizational goals by planning. Middle managers . decisions have a longer term and wider ranging impact on the organization A. 2. Accounting b. 2. and human resource management. linearly 1. organizing. Marketing d. feature-rich information systems that allow information to be used for and support interfaces among multiple functions. and first line supervisors have special information concerns. Executives require information to help them focus on formulating the organization’s overall direction. finance. 2. middle.3) 1. Finance c. up B. Managers in a global setting face a dynamic and unpredictable environment that results in less-than-perfect information. Increasingly. leading. human resource managers have required comprehensive.5 Terminal Questions 1. Take an organisation of your knowledge and determine the information needed by different levels of management in that organisation.

Non profit organizations D.3 1.2.4 .2. All of the above 4. Services only C. Strategic planning B.2.3. Manufacturing only B. This has been mentioned in section 2. Market research B.6 1. ____________ is the process of gathering information about what consumers want and need.3. Top level management C.or short-term planning known as A. all of the above 2. People research D. tactical planning C. c. This has been mentioned in section 2. This has been mentioned in section 2. This has been mentioned in section 2. This has been mentioned in section 2.3. First line supervisors D.3. b.1 1. All of the above 3.B. Operational planning D. Operations encompass ___________ A.2 1. a. d.1 2. This has been mentioned in section 2.1 Section 2. Needs research C.3.4 1.3. A. In most organizations middle managers more often engage in medium. Manufacturing as well as services 5.7 Answers Self Assessment Questions Section 2.

A 3.3 Multiple Choice Questions 1.5 Terminal Questions 1. B 4.2. e. A 2. A . D 5. This has been mentioned in section 2. This has been mentioned in section 2.1. This has been mentioned in section 2.2 2.3.

6.1 Introduction 3.3 Development of Organisational Computing 3.2) 3.6.2 How information are selected and organized 3.6.6 The Individual at Work 3.2.4) 3.1 Organizational Design for Knowledge Work 3.4.3 Enhancing Personal Productivity The Components of Perception 3.4 Demands on Organizations in an Information Society 3.2 Time Management Needs 3.3 Enhancing Personal Productivity Task-Related Needs 3.3 Self Assessment Questions (for Section 3.2.1 Acquiring Information . The Information Needs of Individual Job Holders Capabilities of information system in an organizational view 3.4 Career-Related Needs 3.1 Components of an organizational information system 3.6.7 Information Management Requirements Dealing with Quantities of Information 3.2 Mechanisms for Acquiring and Distributing External Information 3.6.2 Humans Versus Computers 3.2 Facing Insufficient or Conflicting Information 3.Unit-03-Information needs of Organisation and Individuals Structure: Self Assessment Questions (for section Maintaining Technical Skills 3.2 Challenges of Information Management Informational responses to the new environment 3.4.1.

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. They may view it against a background. TQs and MCQs 3. personality. and how individuals differ from the computer in various aspects. trying to form a complete picture.10 Multiple Choice Questions 3.11 Answers to SAQs.1 Introduction In this unit. in motion. Once individuals attend to information about a situation. We shall conclude by understanding the requirements of information management. Try to recall. within an environmental or situational context. Finally. Clearly. In addition.7. The information itself may also influence whether atten tion occurs: Individuals select stimuli that are more intense. The different ways computers can help individuals meet their needs for various types of information are narrated. we describe how information are selected and organized by individuals. they organize it in several ways. or experiences. They may try to fit it into prototypes or categories that represent typical aspects of similar situations.2. They may match it to concrete examples. for example. · What are the components of organizational information system · What are the requirements for information management 3.3.4 Communicating Information 3.1 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. or in contrast with their background. repetitive. sometimes even trying to do so using incom plete information. People tend not to see information that they are exposed to repeatedly without consequence.2 Storing Information 3. novel. they may group stimuli into patterns. very familiar.7. the pictures and shapes on the back of a five hundred rupee note. . Objectives: · How individuals select and organize the information.9 Terminal Questions 3.8 Summary 3. people tend to ignore information that runs counter to deep or long held beliefs. for example. the subjectivity of perception limits the processing of infor mation.7.7. · How the organisational computing developed.5 Ensuring Privacy and Security 3. Individuals attend to certain features of a situation or select specific pieces of information to see or hear because of their needs.2 How information are selected and organized 3.3 Retrieving Information 3.

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

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

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

how a company can successfully combine a product with customized service and information. Many U.4. To flourish.4. The competitive demands of the global market lead to a certain degree of homogeneity-many can play the competitive game. enough to accommodate the change.S. or making an ad hoc search for information regarding a specific problem or opportunity. In the not-so-distant future.4) 1.2 Mechanisms for Acquiring and Distributing External Information Unless organizational MIS is flexible. with Large-Capacity Storage and Rapid Communication between Sites . 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. standardized goods. Two modes for collecting information about the business environment require support: 1) Continuous scanning of the economic environment for opportunities and potential problems. The principal capabilities of information systems include: 1) Fast and Accurate Data Processing.2. 3. Organizations must have specialized information mechanisms as a part of boundary spanning. 3. What are the hallmarks of an information society according to Huber? 2. What responses do organisations need to take in an information society? 3. the two objectivesmaintaining informational support and adapting organizational structures to fit the changing environment-will contradict each other.and communications-based information systems offer a set of ca pabilities to be brought out in the development of individual systems.3 Self Assessment Questions (for Section 3.or acquiring information about their environ ments. A very large number of factors affect a company’s business: no supplier is too remote and no customer too foreign. where wages are lower and raw materials more accessible. regardless of their geo graphical locations. Information systems will then be customized for the individual. However. Software screens and filters help in coping with information overload. 2) Probing. The difficulty lies. 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. while others help to maintain operational stability even as rapid change takes place. of course. in determining what information is actually needed. The vast volume of knowledge in the information society calls for coping tech niques.5 Capabilities of Information System in an Organizational View Computer. leading companies add more value to their products by customizing them for smaller market segments and by flex ible manufacturing. For example. with a consequent increase in the number of players. more complex informational tasks will be delegated to infor mation systems. Information systems help companies add more value to their products than is possible in the manufacturing of commodity-type. If decision makers are not shielded from unneeded information. A browsing mode will also be available for scanning. As we will see. their effectiveness dwindles. As the business environment has become global. firms need explicit mecha nisms for acquiring external information and distributing it to the appropriate knowledge workers. MIS users are able to define their pref erence profiles for incoming messages and rank them by order of importance. commodity production does not bring high profits. Thus. some of these capabilities help to provide dynamic action.

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

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

or credibility. thus assuring product diversity to satisfy a variety of customer needs. 3. Compare the needs of the two employees of Bank – Loan. the accounts receivable clerk needs different information than the accounts payable clerk.1. and the types of entertainment they prefer.3 Performance-Related Needs Not only do employees at all levels require information about the tasks they perform. the names of their family members.1 The Information Needs of Individual Job Holders 3. It is cost-effective in computerized manufacturing to produce small lots of products. Some managers do implement systems to further personal goals. data published in trade journals and newspapers about the sales volume and number of employees in specific companies.6 The Individual at Work Individuals assume a variety of roles on the job. managers who introduce such systems are not always motivated by strictly rational concerns about organizational welfare. Savings Accounts.6. 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.1. because the area covered by him is a large territory. 3. To identify potential customers he uses leads provided by his sales man ager. such as en hancing their power. Individuals involved in quality efforts require ongoing and updated information about customer needs and product defects. The key challenge for individuals on the job is to diagnose their particular information needs. uses information to perform a variety of tasks associated with his job. who is an Area Sales Manager of Airtel. 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. 3.6.1 Task-Related Needs Consider Ramesh. they also can provide information to management about ways to improve task performance. status. Flexibility and economies are the potential benefits of using computers in automated production processes. He might also determine that salespeople need new or better information about products to perform their jobs more effectively. Although these roles all require various types of information. However. Computer technology can also meet the needs associated with ensur ing quality in the work place.2 Time Management Needs During a normal workday Ramesh constantly makes decisions about the best way to handle his clients. Another advantage: computer-controlled production and processing machines can immediately reject defective components and alert operators to faulty processes. for example. He also must know a great deal about his company’s and his competitors’ products. and stories he hears from contacts with prospective cus tomers and from salespeople in other fields.6. 3. whether to spend his time trying to close a new deal with a likely prospect or trying to appease an unhappy distributor.integration progresses. All nine of the capabilities we have discussed are realized through organiza tional information systems. or food services man ager. To build a rapport with various distributors. for example. their favorite restaurants.6. the specific information needs vary considerably. Ramesh also requires geographical information to be most productive. acquires information about their birthdays. in his supervisory role. admissions clerk. The manager of manufacturing has different information needs from the manager of finance. leading to higher quality output. Ramesh. Ramesh is most productive when he minimizes his travel time. .1. is even likely to disappear. He uses the information about sales history and customers businesses to help make these deci sions. Do they have the same or different needs? Now compare the needs of two or more jobholders in an organization you know.

Fourth. Personal information needs include lists of personal skills. The member of the regional sales office might maintain such records to help with their personal planning and advancement.1. Often employees face an infoglut. Ramesh. month. she may not be able to secure the precise information she needs.3. users may also obtain conflicting information if one source updates information more frequently than another does. Third. The ability to show the cost-effectiveness of additional expenditures for diagnosing and meeting information needs is critical.2 Challenges of Information Management In identifying their information management requirements.6. such information may not address their needs.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. 3.4 Career-Related Needs Many individuals view their jobs in the context of a career. an overload of information. 3. Employees might also maintain logs of their own performance during a week. may wish to do some library research about com petitors’ products. Because computers process input from diverse sources. 3. their per formance. First. ASM of Airtel. they must acquire and maintain the technical skills needed for effective personal information management.6. To ensure high productivity.6. 3. information overload become an even more significant challenge. they may face insufficient or conflicting information. they must deal with large quantities of information that may create overload.2.2. not hinder. and specifications for transfers or advancements. individuals face four major chal lenges in addition to securing the most appropriate information. As individuals move higher in the orga nizational hierarchy and assume more managerial responsibility. employees must know how to use computers to facilitate. They must know how to access the information they require and recognize when manual data collection and processing is adequate.2. To avoid such overload individuals must carefully asses their information needs and then find effective ways of managing the required and available information.3 Enhancing Personal Productivity Employees in any organization increasingly use information technology to improve their personal productivity. Employees must also understand and demonstrate when advanced technol ogy is a detriment rather than an asset.6.4 Maintaining Technical Skills . They must also find ways to manage data better. Second. 3. they must find ways to enhance their personal productiv ity.2 Facing Insufficient or Conflicting Information Although compute rs can make large quantities of information available to individuals.6. In spite of the large amount of information in the library’s electronic cat alog. or year to incorporate into discussions about their personal training needs and career development.2. 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. job opportunities inside and outside the organization. Often employees must lobby their employ ers to add new technology that will help increase personal productivity.6.

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

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

3.the roles they perform. time management. Apple I B. Electronic demand interchange 3. This has been mentioned in section 3.3 1. Forecasting C. This has been mentioned in section 3. Windows 3.2 Section 3. performance-related. Apple II C. Electronic data interaction C. and can related needs.1 2. A. The greatest impact was made by the personal com puter.1 . 3.4. EDI stands for ________ A. What are the principal capabilities of information systems? 2.4. Apple III D. Subjectivity 2. The information needs include task-related.2. Objectivity D. TQs and MCQs Self Assessment Questions Section 3.2.2. Electronic demand interaction D. 3.10 Multiple Choice Questions 1.11 Answers to SAQs. Perception B.is an active process by which an individual attends to certain stimuli and then organizes them in a meaningful way A.3 1. Explain the requirements of information management. ––––––––. Electronic data interchange B.9 Terminal Questions 1. This has been mentioned in section 3. Take an organisation of your knowledge and determine the information needed by individual jobholders. which emerged on an industrial scale in 1977 as _________ .

A 2.2.2. This has been mentioned in section 3.6. This has been mentioned in section 3.6. This has been mentioned in section 3.7 3.3 1.1 Multiple Choice Questions Section 3. This has been mentioned in section 3.2 Terminal Question 1. B 3.1 2.5 2.6. This has been mentioned in section 3. A . This has been mentioned in section 3.

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

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

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



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

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

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

offer a partial solution to the problem. but a good part of it must be acquired from external sources.1 Internal versus External Information Increasingly. for example. Information for a decision must be obtained in a consistent fashion. A corporation can succeed only by adapting itself to the demands of its envi ronment. along with the principal informational demands generated by their presence. a firm’s employees. if qualitative ("soft") information is presented numerically. Such information is partially captured by the organizational TPS.4.2 lists principal external stakeholders of organizations. legal. of course. 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. tax. These groups are called the stakeholders of a firm. Table 4. and labor union negotiations information is generally difficult to quantify. 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. Group decision support systems. The internal stakeholders are. it may create a false impression of reliability. obtained via a series of focus groups · Geographical distribution of company stockholders Much external information is not quantitative. organizational advantages come from incorporating external in formation into the information system. The "battle of the printout" is a well-known deadlock situation in a meeting where several managers offer conflicting information. regulatory. . who may be classified in terms of their informational needs.(expressed in num bers). Most of the data captured by TPS relates to various aspects of the organization itself. 4.

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

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

DSS are very flexible and adaptable decision making tools. Some of these systems are rather simple and may be developed with a spreadsheet package (such as Excel or Lotus 1-2-3). and the manager interacting with the system supplies some parts. 4. the user considers alternative scenarios and their results. Moreover. "What if we increase advertising expenditures by 5 percent”’ In the goalseeking mode. and the system. who is considering alternative problem solutions. What are the characteristics of Management Reporting System? 2. a manager attempting to establish a price for a new product may use a marketing DSS. De cision Support Systems (DSS) are a type of MIS expressly developed to sup port the decisionmaking process. individual managers or a group of managers to support a range of decisions of concern to them. end users frequently perform DSS modifications. in which models express some of the dependencies between factors and their consequences. For example. Thus. 4) Projecting possible futures during a planning process is a particular strength of DSS. Unlike MRS. perhaps built with a spreadsheet.3 Self assessment Questions (Section 4. however indirectly. DSS facilitate a dialogue between the user. which enable the system itself to select a model appropriate to the problem-the user. By varying the price of the product in the model. Query languages provided by DBMS make data accessible for demand reporting. For example. In the process. 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. 4. a class of these systems supports group decision making. the manager using a DSS will consider a number of possible "what if" scenarios. While the maintenance of MRS is largely the province of MIS professionals. DSS are able to support unstructured or semi-structured decisions. the user asks. with it’s built in models and access to the database. and the promotion expense-to the projected profit (or loss) from the product sales over the first five years it is marketed. and often by. 3) DSS directly support the decision-making process. Some of the more elaborate systems contain limited model-management capabilities. The possibility of quick interaction with the system offers users a quantitative analysis literally at their fingertips.6 Decision Support Systems All information systems support decision making. 4. In the "what-if" mode. . The systems are interactive. thus does not need as thorough an understanding of models. The DSS database is often an extract from the general database of the enterprise. the cost of goods. which customize the spreadsheet for a particular set of applications.6.5) 1.1 Characteristics of DSS 1) DSS are developed with the participation of. and in a typ ical session.5. they also learn to make better decisions.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. 2) DSS are built to be modified. What report forms do MRS produce. DSS offer models for the structured (programmable) parts of the problem and allow the manager to use personal judgment in formulating the final decision. perhaps using prepackaged templates. The DSS contains a model relating various factors-such as the price of the product. Two principal modes of analysis are available. relieved of this responsibility. the manager can compare predicted results and then select a price.

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

these tasks-and of the corresponding expert systems-varies widely. Most frequently. depending on the software used to implement the expert system. A very common way is to encode it in the form of "if-then" pro duction rules.1 Simpler systems are usually implemented with expert system shells knowledge-based systems with empty knowledge bases.000 THEN good customer The user to the system presents the set of facts describing a particular situation during a session. judg mental elements of knowledge within the expert system’s domain. but rather serve as an assistant to a decision maker. There are several methods of representing knowledge. Expert systems are knowledge-based programs that imitate a reasoning process to suggest a problem solution within their domain of appli cation. and then further enhanced as the system is used. 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. For example. Reliance on a knowledge base is the essential distinguishing characteristic of these systems. 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. a heuristic rule in a credit evaluation system may read: IF good customer and credit requested < $5. The system . Fig 4. these systems do not replace an expert. The essential component of the knowledge base is heuristics-informal. All the developer (a knowledge engineer or an end user) needs to do is populate the knowledge base with the specifics of the problem domain.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. The knowledge base is originally populated and subsequently enhanced as the system is tested on trial cases.

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

This has been mentioned in section Terminal Questions 1.1 2. a.7 3. This has been mentioned in section 4.3.8 Multiple Choice Questions 1. This has been mentioned in section 4.5. A .6 2. B 3. This has been mentioned in section 4.1 1. b.3 1.2 Section 4. This has been mentioned in section 4.3. This has been mentioned in section 4. A 2. This has been mentioned in section 4.5.

5 Information Leadership Expanding Globally .2 Value Streams Information and the Situational Analysis 5.1 Differentiation Introduction Objectives Focus 5.3.2 Strategies for Competitive Advantage Linkage 5.2.2 Potential External Opportunities 5.4 Improving Quality 5.1 Major issues to consider in situational analysis Michael Porter’s Generic Strategies for Competitive Advantage Information and Organizational Strategy 5.2 Improving Customer Service 5.2.1 Reacting to Market Conditions 5.2 Using Information for Strategic Advantage Strategy 5.2 Cost Leadership Potential External Threats 5.1 Potential Internal Strengths 5.3 Potential Internal Weaknesses 5.Unit-05-Information Needs for Strategic Planning Structure: 5.1.3 Controlling Costs 5.2.1 Michael Porter’s Value Chains 5.2.2 Michael Porter’s Competitive Force Model 5.

4 Security 5.4 Transnational Corporation 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 .3 International Corporation 5.6.6 Organizational Requirements of Information 5. How the organisation could use strategy as competitive advantage.1.6.2 Accessibility 5.7 The Strategic Use of Information Systems 5.5 Organization Structure and Information 5.1 Multinational Corporation 5. We will look into what ways the organisational strategy and information needs to be linked.5.1 International Strategy 5.5.3 Self Assessment Questions (for Section 5.8 Summary 5.10 Multiple Choice Questions 5.1.1 Cost 5.9 Terminal Questions 5. we shall start with the concept of value chain and discuss the Porter’s Model of competitive advantage.2 Global Corporation 5.5. Objectives: At the end of this unit. We shall conclude by highlighting the organisational need for information and strategic use of information in organisation.3 Reliability 5.11 Answers to SAQs.1.6 Creating Strategic Alliances 5.4.5. TQs and MCQs 5.1 Introduction With this unit.

Bill and collect.2 Value Streams Value Stream is an end-to-end set of activities. They have linkages amongst themselves.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. Value activities do not operate independently. 5.5. 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 5.2.2. For example: Insurance Industry Value Stream: Customer Engagement Processes: Settle claims. IS can add value by supporting the linkages. which collectively create value for a customer.2 Michael Porter’s Competitive Force Model . Value streams are often cross-functional.

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

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

and changing environmental conditions. business units with high ratings on both industry attractiveness and business strength make good financial investments. ability to compete on price and quality.2. electronic conferencing can bring the expertise of a team of physicians in remote locations to a single problem.2. suppliers. special arrangements with suppliers.3. Complete information about costs makes costs easier to control and creates a competitive advantage. Strategic decisions include what products or services the company should offer.2. Information systems can provide the information required to support one of these strategies. and diagnostic systems can support physicians’ diagnoses. quality. identify preferred treatments. 5. customers’ requirements. competitive strengths and weaknesses. They require information about the nature of available markets and the characteristics of the players in them.3. and markets helps management determine its investment strategy. 5. customer service.3. Even hospitals can use information technology to reduce costs by eliminating paperwork and improving services. those low on both dimensions have no growth potential.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. and information leadership.3. Organizations require detailed information about customers’ needs.2.3 Focus A focus strategy achieves competitive advantage by concentrating on a single market segment. home health terminals allow patients to consult with doctors online. Companies following the focus strategy concentrate their resources to become big players in small markets rather than small players in larger markets. features. 5.3. 5. exclusive relationships with customers. and even competitors.capability. research and development. The company requires quality internal information to reduce costs by achieving efficiencies in production. and staffing. Companies pursuing a differentiation strategy need current and accurate information about the market. focus. and sales. distribution. including detailed information about competitors’ products.2.4 Linkage A linkage strategy obtains a competitive advantage by establishing special. quality of the management team.3.1 Differentiation A differentiation strategy seeks to distinguish the products and services of a business unit from those of its competitors through unique design. equipment. and managers should consider divesting or liquidating them. 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. 5. or other characteristics and thereby enable the business to charge a premium for its product or service. Managers can also supplement products with summary and activity . and specify their cost benefits. linkage. and potential synergies with competitors.2 Strategies for Competitive Advantage Firms can adopt five strategies to reap a competitive advantage: differentiation. customer requirements. and how it will deploy resources for advertising. Strategic management also involves business-level strategy. Bedside terminals can store patient records.5 Information Leadership An information leadership strategy increases the value of a product or service by infusing it with expertise and information. For example. what customers it should service. 5. cost leadership.

The acronym SWOT is often used for these four components of situational analysis. Strategic management also addresses how functions such as finance. 5. For example. and threats.1 Major issues to consider in situational analysis 5. A reputation for quality exemplifies a strength. opportunities.4. equipment. and management of capital. Functional strategies direct the way individual departments perform their tasks to accomplish organizational objectives. research and development. Strengths and weaknesses are internal characteristics of the organization that enhance and impede its ability to compete. operations. Opportunities and threats are external or environmental factors that may help or hinder an organization in meeting its strategic goals. and human resource management can best support the orga nization’s strategies. sales. Marketing strategies focus on product development.4 Information and the Situational Analysis Strategic management includes situational analysis-the process of collecting and analyzing information about a company’s strengths.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 . and wages. airlines can electronically track baggage in airports in ways that can correct problems before customers discover they have missing baggage. Human resource strategies revolve around the deployment of employees and the relations between labor and management. promotion. Operations strategies include decisions about plant size. inventory.reports for an account or customer. or developmental research. product and market information relevant to the customer. while having costs above the industry average typifies a weakness. and pricing. plant location. or information about related products and services.4.1. Finance strategies focus on the acquisition. other examples of informa tionalizing include producing "smarter" cars and allowing customers to design desired features on computers in dealers’ showrooms. Weak competitors illustrate an opportunity. weaknesses. while adverse regulatory rulings represent a threat. 5. Research and development strategies emphasize basic. applied. allocation. 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. marketing.

4.1.2 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 5.4 Potential External Threats .4.3 Potential Internal Weaknesses · No clear strategic direction · Obsolete facilities · Lack of managerial depth and talent · Missing key skills or competence · Poor track record in implementing strategy · Plagued with internal operating problems · Falling behind in R&D · Too narrow a product line · Weak market image · Weaker distribution network · Below-average marketing skills · Unable to finance needed changes in strategy · Higher overall unit costs relative to key competitors 5.1.1.· Proven management · Ahead on experience curve · Better manufacturing capability · Superior technological skills 5.4.

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

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

Today’s competitive technology has reduced the barrier of distance. Companies operating in this fashion necessarily shipped inferior goods and provided inferior services. Its overseas stores are identical to Amer ican stores and rely on the same information processing systems as they do in the United States. and permits more orderly pro cessing. Systems to classify. programmable work stations. Generally. including databases. managers need information about previous spending and about new plans and objectives. To improve quality. distribution.3 Controlling Costs Recall that one of the competitive strategies is to become a low-cost producer. and sales. England. monitor. regulation of information flows. who can intervene in a timely fashion to improve the process. 5. 5. Management information systems were built to provide summary and exception reports to the managers. permits managers to optimize their resources within pre scribed limits. automatic ticket machines. user-friendly terminals. Even in India. Toys "R" Us has expanded globally into Canada. the India Railways had developed various options so that a passenger need not have to wait for a long time to get a ticket. after acquisition. companies of all sizes now have the resources and information systems to allow them to operate glob ally. satellite printers. and other locations since 1984. Now companies operating around the globe can exchange information with nearly the same ease as if they were in the same country. Most global corporations were holding companies that bought and sold regional companies in different parts of the world. who would then intervene in the process. a prerequisite to achieving cost reduction through volume growth. However. Hong Kong. Automatic call distributors. and summarize large amounts of information is.4.2. each remote company. Proposal of having a ticket counter in the ATM machines and other kiosks are under process.The travel service industry in general has used technology extensively to meet customers’ needs.2.4. Improving quality has also been shown to decrease costs as it reduces waste. travel management software. Information systems meet the need for coordination of diverse enterprises in distant locations. Budgetary information.2. 5. process. 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. Although language differences. Going global remains one . keeping track of and rationalizing business activities becomes more complex. in general. The ability to han dle. therefore. in turn. as volume increases. 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. would continue to operate in its own realm with minimal management by the holding company. To set budgets.5 Expanding Globally Prior to the 1980s. analyzed. how does a firm keep costs below its industry’s average? Organizations can do so by achieving economies of scale in production. eliminates rework. Singapore. Nevertheless. information about the goods and services being produced must be processed immediately. Achieving quality requires production workers to have constant feedback about the production process so that they can spot problems immediately and correct them.4 Improving Quality Having a reputation for quality offers a strategic advantage for any organization. interfaces between personal computers and mainframes. and lack of a communication infrastructure remain barriers to the exchange of information. Information systems can easily serve this function.4. and made available to production workers. managers would know about production problems before the production workers did. and expert systems have together had a significant impact on the American travel industry. 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. and limit spending also facilitate cost control.

and producers of similar products. an organization must be constantly vigilant for new strategic opportunities. or other areas in which the two organizations interface. American encouraged travel agents to book their clients on Amer ican flights. a company using information for strategic advantage needs time to establish its market share. 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. 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. American denies that flights are presented by SABRE in such a way as to favor the choice of American Airlines. improve customer service. Companies can also secure a competitive advantage by forming alliances with customers.of the easiest ways for a company to expand its market. used-car dealers buy and sell cars using their computers to participate in electronic auctions. Delta. among others. suppliers. American Airlines provides a well-known case of lasting competitive advantage achieved through sharing information and information services.S. Creating a mature technological environment abroad helps meet customer needs for new products and management’s needs for consistency and control in worldwide locations. In Japan. By sharing access to its reservation information. the strategic advantages achieved will last longer. and serving clients more innovatively. 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. wholesalers. shown. or expand glob ally will be short-lived if competitors can copy its strategy. rather than buys from. Electronic market systems are electronic. Inter-organizational information systems (lOSs) can meet information needs by serving as information links or electronic markets. Information links enable or improve the collection and communication of information regarding inventory. 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. distributors. 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. 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. and purchased. They increase competition and efficiency in vertical markets by providing information about industry players and prices. . 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. Computer information systems and communications technology form the backbone of such alliances and allow the joint ventures to operate effectively. sales. Of all information technologies. allowing greater flexibility in responding to local market needs.4.2.6 Creating Strategic Alliances The competitive advantage achieved by a company using information to react quickly to market conditions. the basic marketing strategic of major airlines such as American. If an alliance can be cemented by the exchange of information and information technology. sold. Because its competitive advantage may be tenuous. United. U. buyers’ ability to comparison shop reduces a seller’s power in the market and creates lower prices. One developer of SABRE argues. improve quality. rather than physical. stores where products and services can be described. and TWA has emphasized these systems. control costs. Information links pathways for communication between two organizations-meet the need for coordination among an organization and its customers and suppliers. for example. American Airlines provided travel agents with direct links to American’s SABRE reservation system. Because the development of infor mation systems typically takes several years. better integrating worldwide operations. 5. Information technology helps multinational companies compete internationally by supporting foreign subsidiaries. In 1963 and the years immediately following.

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

5. 5. Diagnosing the required information is the first step of the four-step approach to infor mation management. Userfriendly touch screens offer one way to address this problem. Although the information theoretically should stay within the subsidiary.6 Organizational Requirements of Information The information that an organization develops and retains should provide value to the company. and maintaining information can affect its net value.5. By linking local operations to one another and to headquarters.1. 5. they demand the ability to share both information and information services. In practice.1. subsidiaries often rely on the parent to exercise its knowledge for the subsidiaries’ benefit rather than simply to export it to the subsidiaries. We define net value of information as the difference between the value and the cost of information. 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.5. a transnational company attempts to retain the flexibility to respond to local needs and opportunities while achieving global integration. Designers of information systems should minimize the time and effort required to collect or enter data. and security. information flows from the parent to its subsidiaries. Here subsidiaries operate more autonomously than in global corporations. the value of information as an organizational asset can be . and inter national strategies.3 International Corporation An international corporation exports the expertise and knowledge of the parent company to subsidiaries.6.6. Companies attempt to maximize the net value of information they collect organizationally. a subsidiary without a great deal of human resources expertise may "pay" its parent to operate its human resources function. global. in this case it may flow back and forth between the parent’s location and the subsidiary’s location. Because transnational operate on the premise of teamwork. designers cannot foresee every possible need for information.1 Cost The cost of acquiring. in the right place. As a result. accessibility. a headquarters organization makes all major decisions. and in the right format. Ideally. the real cost of information is usually much higher. Although the bud get for information systems at most organizations falls between 1 and 3 percent of sales.2 Accessibility Designers of information systems seek to make the appropriate information available to users at the right time. Nevertheless. they consider four characteristics of information: cost.2 Global Corporation A global corporation has rationalized its international operations to achieve greater efficiencies through central control. 5. A high level of information flows from subsidiary to parent. 5. 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. reliability. Although its strategy and marketing are based on the concept of a global market. 5. The overall cost of information tends to be high. Then collecting and maintaining the information in a cost-effective manner make up part of the subsequent steps of evaluation and design. To do this.4 Transnational Corporation A transnational corporation incorporates and integrates multinational.1. 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. manipulating. For example. while limited data move from parent to subsidiary.5. Reducing such costs allows information to add more value to the firm.

flawed. product data. 5. outstanding invoices. 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. or financial status. Improper use of information systems can also motivate organizational conflict. Given the availability of these data. Not surprisingly. Despite the potential damage and difficulty of detection. competitors can also use stolen information about production schedules. General Accounting Office determined that data about student loan payments entered incorrectly into the U. margins. Burglars thus can continue to raid an organization’s data. Foreign and U. 5. Both technical and organizational measures can be used to promote data security. production methodologies. 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. Users regularly generated reports and made decisions based on incomplete. For example.S.4 Security Security means protection against theft. manipulation. and they quickly learned how to hide or delay the reporting of poor results. inventory. Information such as proprietary technology. most organizations assume that their information is relatively secure and take insufficient measures to protect against theft. The firm eventually traced the problem to its employees’ failure to enter key data into a new risk management system. and loss of data. A New York securities firm missed a big trading opportunity that cost it more than $200 million.S. which then allowed deadbeat students to continue to get loan renewals while deserving students were refused assistance. and research and development breakthroughs may be sent directly to national laboratories or to competing organizations within the foreign country. causing damage over an extended period. A recent study of end-user data at 21 random Fortune 500 companies showed that data pollution – faulty. 5.6. or unreliable data or data processing-existed in every company. 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. The widespread use of personal computers has compounded the difficulty of security against corporate espionage. inconsistent. foreign intelligence agencies have used sophisticated technology to intercept data transmissions. and keeping them at another location.7 The Strategic Use of Information Systems . the data lost their accuracy and their value. the U.3 Reliability The improper design and use of information systems can create unreliable data. Divisional managers considered this behaviour to be meddling. Many firms protect against the loss of data to fire or natural disaster by creating copies of the data. The incorrect infor mation was relayed to banks.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. costs. The impact of "dirty data" on organizational performance can be immense. top management periodically confronted lower management with problems they had identified. called backups. A 1992 Computer world survey found that more than 60 percent of companies are aware of occasions when corrupted data negatively affected their operations. Department of Education database had cost taxpayers $2 billion.S. For example. 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. and performance reports as competitive tools. salaries. 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. or incorrect information. which in turn results in the generation of unreliable data.6.

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

This has been mentioned in section 5.1.3 2. 4 B.6.3 2. 6 D. 5.4 3.1. 5.3.6. 5.2 Multiple Choice Questions 1. This has been mentioned in section Terminal Questions 3.1.1. 5. TQs and MCQs Self Assessment Questions Section Apply to the organisation mentioned in section 5.6. 7 5. A 2. This has been mentioned in section 5.1. B 3.11 Answers to SAQs. This has been mentioned in section 5. A Unit-06-Impact of IT – Managing in 21st Century .1. 5.1 and 5. This has been mentioned in section 5. There are –––––––– characteristics of information A.2 and 5.5. 5 C.6. Terminal Questions 6.2 Technology 6.3 Self Assessment Questions (for Section Self Assessment Questions (for section Business needs of today 6.1 Vendor Evaluation Factors 6.5.3 Benefits of the ERP 6.1 General Features 6.3.4) 6.4 Self Assessment Questions (for Section 6.1 Introduction Objectives 6.1 ERP Basic Features 6.5.3 Implementation 6.2 Enterprise Management System (EMS) 6.2 Characteristics of ERP Solution Business System ERP Solution Structure Technology Evaluation Factor 6.5 ERP Selection 6.3 Enterprise Resource Planning (ERP) System 6.7 Summary 6.6 EMS and MIS 6.5) 6.1 ERP Architecture 6.Structure: 6.5.1 Business Operations 6.9 Multiple Choice Questions .4 ERP Model and Modules 6.3 ERP Solution Evaluation 6.3.

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

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

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

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

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

on receipt of an item send E-mail to the Purchase Manager. viz. The drill down facility helps him to use the information the way he wants. These components can be built with the client server role definitions. The architecture could be a two tier or three tier as shown in Fig 6.2 below. 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. 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. the Application Logic. to form the judgments on the business happenings. the architecture required is to separate the data and its management from its application. it also allows you to define the action to respond to the alert. The alert in this case can be defined as.. the end of chosen period processing. Then he wishes to see the sales revenue over a time. Having raised the alert. The user requires the choice of using the data as it suits him the most. This database update is an event for using the alert. The drill down helps to run through the system to locate the weak spot for action and control. It allows the user to define the events. It is also capable of taking multiple actions through the stored procedures. Fig.1 ERP Architecture Any information system has three basic components. 6. the sales manager is viewing the sales by region by product line. The help facilities make the ERP user-friendly and easy to learn. the posting by choice. These events alerts are triggered by the database inserts or updates. All the ERP solutions provide ‘Drill Down’ and ‘Context Sensitive’ helps to use the system. The receipt would update the database and the system will have an updated stock status. Hence. The ERP sends the electronic mail and executors the SQL statements. Since. Sup pose. and the hold transactions. alert and schedule them at his choice. the Production Planner and further. The drill down could be multi-dimensional to analyse the critical business information. the application logic has to be separate from the data. 6. The help could be for information. etc. and the Presentation. The context sensitive help provides an access to help library which can be used by the user by calling help. The client is a user and the server provides the services required by the user the to run the system. the flexible valuation procedures. There is also variability in the manner how the application logic is developed and presented. show the work orders which are scheduled where this items is in use. the information needs are dynamically changing. the Data Management. guidance and understanding of the term or process or formats. in order to better understand the seasonality in the business. Take an example of an item receipt in stores.2: Client/Server Model – Architecture .solution provides facilities like the trial posting.3.

In this architecture three distinct roles are defined and three hardware platforms are made responsible to perform. With the application logic. The ERP solutions are multi-users which are distributed over the organisation. . in a given environment. The data management is by the server and its processing is through the application logic by client. 6. In a two-tier system architecture. in each case of implementation. is the one which is user-friendly. customization should suit the specifics of the business or customer. the ERP solution uses a scalable architecture and a parallel processing technology by installing the suitable servers at the required locations. The servers play two distinct roles of handling the data and the applications logic. it creates a reduced traffic intensity due to GUI interface. The network is typically the bottleneck in any client/ server system. where the data is being managed. Here the application logic is split into two.6.3: 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 affects the load on the server and the response time to the user increases. However. there could be an application which deals with high volume and complex data structure and this approach is more efficient. The architecture choice is influenced by this requirement. This ensures good performance with a continuous increa sed load conditions. This architecture is useful when there is not much change in the application logic and it is complex. this architecture is useful when the user does not want to change the application logic but may want to change the presentation logic. spread over to any length. appropriately divided between client and server. the ERP is a generic solution for the business operations. The logic. The third possibility is a golden mix of the two architectures. there is a rigid division of roles. Then the three tier architecture is suitable.3 Fig. 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. Two main technology solutions are available to the designer and the implementer of the ERP. The client uses the GUI (Graphical User Interface) tools for simplicity while the application logic is processed on another machine.Since. One is the Graphical User Interface (GUI) and the Network Management. Further. In the choice of architecture. Accompanying the network efficiency and the GUI. what is important is the user environment and the information needs and how the user handles them? The best architec ture. if response issue is taken care of by the high end multiple CPU and the parallel processing hardware platforms. The GUI is chosen since it allows the customization for a particular business entity. is left to the client platform as shown in Fig. which deals with the presentation and the specific needs of the user. 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 logic which deals with the data more is attached to the server platform. easy to understand and easy to maintain. The technology solutions are available to implement this philosophy. In this architecture all the requirements are sent to the server by all the users in the network.

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

3. application development tools. query processing tools. communication and the access to the database(s) which may be at one location or distributed. where the servers handle the specific or the general functions as the case may be and the client play the role of processing interactively and locally for meeting the information needs. 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. 6. 6.4 ERP Model and Modules The generic ERP package represents the commonly operated business model of the organisation. the application logic is developed to the business functionality. Atypical ERP solution has the following modules: · Business forecasting. The tools arereport writers. Marketing.2 Technology The technology side of the ERP solution is managed through the database management technology for data acquisition to data base creation. The client/ server implementation could be two tier or three tier. based on the design and the implementation strategy. To reduce the development effort and for ease of maintenance.2.3 Implementation The ERP implementation is multi-user and calls for the network usage for the work flow. etc. updation. and Personnel and their sub-modules. The application develop ment is done through the client/ server technology.3) What is an ERP architecture? What is a solution architecture? What is the difference between the two? 6.2. and maintenance. These modules are then integrated to perform ensuring data and informa tion consistency and concurrency. Materials. Sales. the development approach is an object-oriented approach. distribution. planning and control (Business) · Sales. 6.3. where the class and the object libraries are built for reusability of the object and its code. It is built with the function models like the Finance. The seamless integration of the modules allows the user at any level to take a micro and a macro view of the function and process view of the transaction across the function. the object oriented tools. The successful implementation of the ERP calls for a strong technology component appropriate to the environment.3.3 Self assessment Questions (For Section 6. 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 . Using various information technology tools and application development tools.

1 ERP Basic Features 6. date.1 General Features · Separation of the programme code and the data areas · Command language · Screen based flow control.4.4. markets.6.4. · Diagnostic functions · Transaction flow control · Help functions.1.1. · Action messages · Tuning · Enterprise Modeling: Structure / Policy / Rules / Guidelines 6. groups. . texts and master data. editing. · Central table system for management of parameters. and help. text editing. online logical · Checks and validations · Word-processing. · Application logic · Common service functions such as the currency.2 Business System · Business forecasting for products.

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

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

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

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

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

Such legal contract should list the obligations. The process definition now goes beyond the organizations boundary. Explain the various vendor evaluation factors considered for ERP selection 2. potentially the ERP is designed for productivity rise. The ERP is a tool to manage the enterprise resources to achieve the business objective. 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. duties. 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 decision models are built across the business management functions. The success of the ERP lies in its implementation with commitment. Since. Since. there should be clauses relating to safeguarding the interests of each other to cover the risk arising out of the technology failure. It is a supporting system and does not solve all the problems of business management. the management must exploit it to its advantage by adopting the best practices or changing the practices through the business process reengineering.5) 1. The decision making support is required for the process optimization.5. the vendor and organisation enter into a legal contract. It is to be appreciated as a managerial tool and not as a labour saving device. the management requires the information support in the process management and not in the function management. responsibilities. i. where the critical business pro cesses and the critical success factors are a focus area.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. the ERP is a product of several technologies. ..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. the Top Management also needs a set of the additional reports. It requires full participation of the organisation.e. Price by module and number of users ii. It connects the organisation to other agencies. Besides the normal MIS reports required for the top management. Payment terms 15) Process of acceptance of the ERP by stages and linking with the payments Once the ERP decision is made. 6. deliverables and the value com ponents. The management focus is shifting from the function to the process. What factors are considered to evaluate an ERP Solution? Why is implementation effort necessary even though ERP package is chosen? 6.4 Self Assessment Questions (For Section 6. The emphasis on the automation of processes with a strong Information Tech nology implementation.

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

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

This has been mentioned in section 6. 6.2 and 6. This has been mentioned in section 6. This has been mentioned in section 6.6 3.10 Answers to SAQs. This has been mentioned in section 6.5 2. A 2.1. Read the material from their website and relate with the concepts discussed Multiple Choice Questions 1.5. This has been mentioned in section 6. A .5. This has been mentioned in section TQs and MCQs Self Assessment Questions Section 1.3.3 This has been mentioned in section 6.2 3.3 Terminal Questions 2.4 1.3 Section 6. This has been mentioned in section 6. Select the relevant points Section 6. This has been mentioned in section 6.4.2 3. B 3.4.5.

4 The system development schedule 7.1 Organisational Information .2 Ethical and Social issues with E-Commerce Data Security and Data Privacy Self Assessment Questions (For Section 7.4.1 Introduction Other Remote Options and Privacy Issues Structure: 7.1 Introduction Objectives 7.5 Hardware and software plan 7.5 Privacy and Databases 7.3 Ethical and social issues with network 7.4 Development of long range plans of the MIS 7.2) 7.2 Business Decisions and Information Assurance 7.3 Major threats to IT installations 7.3) MIS goals and objectives 7.1 The Value of Telecommuting Self Assessment Questions (For Section 7.3 The architecture of the MIS Risks of Internet to Organizations 7.2 Strategy for the plan achievement 7.2 MIS plan is linked to the business plan Contents of MIS Plan 7.1.3 Ascertaining the class of information 7.2.1 Home Office 7.1.2 Common Business Exposures 7.

and certain legal obligations have been met. Mitigation action has been taken to minimize risks to the system. Problems with cash flow. Objectives: At the end of this unit. we shall start with the importance of information on business decisions. We begin by discussing the common business exposures and threats of using internet by the organization.3 Knowledge Information 7.4.8 Terminal Questions 7. you should be able to · Explain the ethical and social issues with network · What are the common business exposures and Risk of using internet by the organization · How to implement MIS in the organisation · What are the guidelines for the successful implementation of MIS · How to manage quality in MIS 7. 2 Business Decisions and Information Assurance 7. Increased costs.3.9 Multiple Choice Questions 7.4.6 Management of Quality in the MIS 7.3.10 Answers to SAQs.7. We shall conclude by guidelines for successful implementation of MIS.4) All concerned need an assurance that the right information is being made available: · Growing public awareness and concern · Growing shareholder awareness and concern .4.3. In any organisation.1 Introduction With this unit.3.4 Decision Support Information 7.5 Implementation of the Management Information System 7.2 Functional Information 7.1 Introduction Business decisions are becoming increasingly dependent on high quality information. Fines and/or sanctions.7 Summary 7. Impact of discontinuity in service are: Competitive disadvantage. TAQs and MCQs 7.4 Self Assessment Questions (For Section 7.5 Operational Information 7. Loss of revenue. management needs assurance that: Organizational goals are being achieved.

· 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

credit cards and income tax .3.g.e. · Big brother is watching syndrome. thefts. There is no law against Spamming i. Massive flaming of large quantity of e-mail to one address. · Purpose for use of data · Possible misuse of accumulated data · Right of individual to inspect gathered data .3.4.4 Data Security and Data Privacy Data security is concerned with physical security of data from inside and outside causes: · Frauds. sending unsolicited mail 5. and maliciousness · Systems errors · Accidents and disasters Where as Data privacy is concerned with ethical/moral protection of data: · Right of organization to accumulate data · Integration of data from multiple sources e.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. The question arises – Is sending/receiving large quantity of mail ethical? 7.

the information is recognised as a major resource like capital. However. Most of the organisations do not recognise ‘Information’ as a resource. the same being true for MIS.3) 1. in the function of Storage.It often arises as to what are the primary reasons for renewed importance for data security and data privacy? · Growing sizes of databases · Distributed systems · Data being viewed as resources 7. For example: credit card transactions dealt with personal information in corporate databases. this function is misinterpreted as data processing for expeditious generation of reports and returns. Computers can now ‘be tool for information processing and communication. In this approach. Many organisations have purchased computers for data processing and for meeting the statutory requirements of filing the returns and reports to the Government. time and capacity. . distance. They have looked at information as one of the many necessities for conducting the business activity. the scene has been changing since late eighties when the computers became more versatile.3. understanding of language and speed are broken. the information processing function of the computers in the organisation never got its due regard as an important asset to the organisation. And if this resource is to be managed well.5 Privacy and Databases Privacy: one’s right to control information about oneself. What are the ethical and social issues of E-Commerce? 7. due regard is often not given for its planned development and use. It can be used for knowing the current status of any aspect of the business due to its on-line real time processing capability. it calls upon the management to plan for it and control it for the appropriate use in the organisation. 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. Hence. and not as information processing for management actions and decisions. In fact. . The plan for development and its implementation is a necessity for MIS. data in patient’s medical records. Many organisations have spent financial resources on computers purely to expedite the activity of data collection and processing. Proliferation of better and inexpensive use of IT leads to collection of personal data from large number of sources. The computers have become user-friendly. employee performance records. Intelligence and Language.6 Self assessment Questions (For Section 7. Databases can accumulate and use vast amount of data in an inexpensive manner. Legal databases. In MIS.3. information and physical resources of other computers. What do you understand by telecommuting? Evaluate the advantages and disadvantages of the same 2. The computer technology is so advanced that the barriers of storage.4 Development of long range plans of the MIS Any kind of business activity calls for long-range plans for success. They can communicate to any distance and share data. Communications. loan databases 7. Computers are used mainly for computing and accounting the business transactions and have not been considered as a tool for information processing. It can be used for storing base or knowledge base.

7.4. if necessary.2.4. The information needs are then traced to the source data and the system in the organisation which generate such a data.1 Contents of MIS Plan A long-range MIS plan provides direction for the development of the systems. The information he implementation of the business plan should find place in the MIS. The MIS goals and objectives will consider management philosophy policy constraints. objectives. Table shows equivalence of Business Plan and MIS Plan. consistent to the business goals and objectives. business risks. The system of information generation is so planned that strategic information is provided for the strategic planning. matching the plan Management plan for execution and control execution. The details of information are provided to the operations management to assess the status of an activity and to find ways to make up. The plan of development of the MIS is linked with the steps of the implementation in a business development plan. it is left for the designer to evolve a plan of development and implementation. which will be dealt by the designer under a support from the top management. 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. and provides a basis for achieving the specific targets or tasks against a time frame. control information is provided for a short term planning and execution. The plan of MIS is concurrent to the business plan of the organisation. Once the management translated into information needs. . internal and external environment of the organisation and the business. keeping in view the plan of the business management of the organisation. To ensure such an alignment possibility. It can be achieved only if the MIS is planned. Information strategy for the business implementation playing a supportive role. The plan would have the following contents. 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. it is necessary that the business plan-strategic or otherwise. states information needs. markets and the accounts balances. plan Business goals and objectives Business plan and strategy Strategy planning and decisions Architecture of the Management Information System to support decisions. Operation plan for the execution 7. System development schedule.1 MIS goals and objectives It is necessary to develop the goals and objectives for the MIS which will support the business goals.4.2 MIS plan is linked to the business plan 7. The design l an open system is a complex task. Business plan MIS Plan Management information system.Any organization requires Management Information System flexible enough to deal with the information needs of the organisation. Hardware and software plan for the procurement and the implementation.

and storage to printing. It is important to note the following points: . linkages. They are: (a) Development strategy : online. coupling and decoupling of subsystems. are linked with the goals and objectives of the business. The process is to match decisions with the financial decisions. (c) Resource for system development: In-house versus external. a real time. · The focus of the system will be on the end user computing and access facilities. also given to logical system development. Then the plan of procurement is made after selecting the hardware and software. programmer skills and know how.· The query processing should not exceed more than three seconds. This development schedule is to be weighed against the time scale for achieving a certain information requirement linked to a business plan. under-utilisation and are not he critical information requirements.3 The architecture of the MIS The architecture of the MIS plan provides a system and subsystem structure and their input.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. Accounting versus Analysis.2. 7. analysis to modelling. distributed versus Decentralised processing. whenever necessary. it is necessary to develop the accounting system first and then the analysis. It also provides a way to handle the systems or subsystems by way of simplification. 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. customised development versus the use of packages. one Database versus Multiple database. it is necessary to revise schedule and the development schedule. · Information support will be the first in the strategic areas of management such as marketing or service or technology. The organisations which do not care to take proper decisions in these areas suffer from over-investment. The selection of the architecture. the economics of investment is worked out.2. 7. While preparing the schedule due consideration is given to the importance of the system in the overall information requirement.4. For example. One can take the phased approach of investment starting from the lower configuration of hardware are going over to higher as development takes place. (b) System development strategy: Any approach to the system development-Operational versus Functional. a batch. unless the systems are fully developed their integration is not possible. 7. If these are not fully met.2.2. 7. Database versus Conventional approach.4. It spells out in detail the subsystems lentry to processing.5 Hardware and software plan With regard to the technical and operational feasibility. (d) Manpower composition: analyst.4.4 The system development schedule A schedule is made for the development of the system. The system development schedule is he information requirements which in turn. Further.4.

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

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

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

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

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

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

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

6. Impact of discontinuity in service are _________ . Loss of revenue C. Problems with cash flow D. Back-up of the data and files are taken to safeguard corruption or loss of data. The implementation of the system is a management process. 8. The system audit is conducted from time to time to ensure that the computer system specifications are not violated. Competitive disadvantage B. it affects people and changes their work style. Intermediate processing checks are introduced to ensure that the complete data is processed right through. 2. All of the above . In the process of implementation. and for any successful implementation he has to handle the human factors carefully. The assurance of quality is a continuing function and needs to be evolved over a period and requires to be monitored properly. the system designer acts as a change agent or a catalyst. The system modifications are approved by following a set procedure which begin with authorisation of a change to its implementation followed by an audit. process control and access control. Increased costs. systems are developed with standard specification of design and development 11. A. the implementation is very important.8 Terminal Question 1. Any kind of business activity calls for long-range plans for success. Impact of discontinuity in service are: Competitive disadvantage. How do you manage the quality in MIS 7. The access to the data files is protected and secured through an authorisation scheme. 7. The user of the information is the best judge of the quality. 7.9 Multiple Choice Questions 1. It brings about organisational change.e. Problems with cash flow. 9. the same being true for MIS. Utility of information and its relevance are the two other measures of quality.4. Fines and/or sanctions. 5. run to run controls. periods and so on. Information technology has made it possible for many people to perform their job functions using their home as an office. i. 7. To reap the benefits of MIS. Loss of revenue. What guidelines should you consider to have an successful implementation of system. Due attention is given to the proper file selection in terms of data. 10. It cannot be assessed in physical units of measure.. computer system processing is controlled through programme control.7 Summary Business decisions are becoming increasingly dependent on high quality information.

C 3. Zonal offices 7. D 2. The possible cause of fraud could be ______ A. This has been mentioned in section 7. Satellite offices D.2 2. _________ established away from the city center and near employee residences offer an alternative to the home office. This has been mentioned in section 7. TQs and MCQs Self Assessment Questions Section 7. This has been mentioned in section 7.3 Terminal Questions 1.2. Deliberate communication of wrong information D. This has been mentioned in section 7.2 Section 7. This has been mentioned in section 7.1 2.4.1 2.3.3 Section 7.6 1.3.5 2.2.4. A. Regional offices C.4. This has been mentioned in section 7.4 1. This has been mentioned in section 7. Violation of laws B.10 Answers to SAQs. Lack of adequate safeguards over organizational resources 3.6 Multiple Choice Questions 1. This has been mentioned in section 7. C . reporting regulations C. Head offices B. 1.

3) 8. We conclude the unit with the relevance of IT and the link with BPR and MIS.3 MIS and BPR 8.2 Relevance of Information Technology (IT) 8. 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 .5 Self Assessment Questions (For Section 8.7 Answers to SAQ’s.4 Value stream model of organisation 8.2. we would start with the definition and meaning of Business process reengineering.4 Self Assessment Questions (For Section 8.Unit-08-Business Process Re-engineering Structure: 8.2) 8. Then we analyze the business process and value stream model of organisation.1 Introduction Objectives 8.3.3 Redesigning of Processes 8.2.3 Process model of the Organisation 8.1 Definition and Approach 8.3.2 Organisation and Business Process Reengineering Introduction In this unit. TQ’s and MCQ 8.1 What delays the business process? 8.2 Business process 8. Objectives: At the end of this unit.5 Terminal Questions 8.4 Summary 8.6 Multiple Choice Questions 8.2.3.

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

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

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

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

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

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

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

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

1 What delays the business process? A business process is complex and lengthy.2) 1.2 shows the approach to select re-engineering opportunities. The number of steps in any business process related to the data search. 8. All will have a common goal of realizing customer satisfaction. refers. 2. and e) amount payable is computed and kept ready for confirmation through the bill of the supplier. Also mention their elements 3. collating. The organisation will be flexible and responsive to the customer needs. Table 8. validating. The change will affect the work culture and management philosophy. What do you understand by the term Business process Reengineering? How does it differ from the traditional concepts. a transaction when processed with the information technology application. The re-engineered process organisation will have less people using very little space.2. a typical business transaction is settled for acceptance. d) the value declarations are correct and complete. c) the terms and conditions of supplies are fully met. confirming and conforming are carried out only once in the redesigned process with the help of information technology. settles a number of aspects of this one transaction. fulfilling various other needs outside that process in the organisation. The power structure would break the spirit of authority and the dominance will be replaced by cooperation and a participative affinity. The issues are related to the choice of technology. The willingness to do some fundamental thinking and redesigning radically is a key to success. The exercise of the process organisation building begins from the top management group whose initiative and commitment to re-engineering matters and is inevitable. The knowledge will become impersonal and available to all. compute. Through this process. . b) goods received are as per specifications both in terms of quality and quantity. saving the process time considerably. and analyze the same data or a set of the data in different contexts across the process for achieving the local objectives of the department or function. a number of processing steps are repeated across the process. its matching. For example. It will be managed by people of vision capable of producing innovative ideas and possessing a high tendency to change. access. human resource management and defining the business and its scope for the organization. The process operators repeatedly search. The process will be transparent and results will be visible. the receipt of goods.3.Building process organisation is a complex job of implementing a change. which requires careful handling of a number of issues simultaneously. 8. This increases the process cycle time. Explain with relevant example the concept of business process.3 Redesigning of Processes 8.5 Self Assessment Questions (Section 8. The aspects are whether: a) the receipt is against the valid purchase order. 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. and if conventionally designed and implemented on functional lines. Explain the value stream model of the organisation.

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

sanction. it is possible for the team leader or manager acting as a facilitator to take quick action.2 Relevance of Information Technology (IT) It is experienced that the role of the information technology as an enabler is very important and significant in re-engineering. The 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 redesigned process would extensively use the information technology. The capability of the information technology is phenomenally higher and assures dramatic results in the cost. the database can be distributed at the different locations and still can be viewed and used as one database. Since. It is possible to distribute appropriate information technology facilities at different locations and connect them in a network. is considerably cut down. the information technology can analyse and identify the ‘where. knowledge. advice. the people intervention for consultation. if the process is showing signs of inefficiency and ineffectiveness. study and suggestions. The range of technologies in all fields. The advertising firm can design and develop the advertisement on their system and send the same to the system of the client for viewing. Any business process in the course of execution gathers and processes the data and stores it for further use. The integration of all types of data for business processing is possible. know-how.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. a transaction. service and delivery. The hierarchy in the organisation is reduced eliminating the bureaucratic interference. reducing the process cycle time. the redesigned process with Informa tion Technology support will be response driven. The delay arising out of mailing. processes need not wait for the data or information. The information technology needs intelligent handling and application for redesigning the process. if the process is redesigned to meet the enterprise requirement. Its contribution. person. therefore. and skills are provided. The storage capacity has no limitation and the hardware-software capability is no problem in IT. 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. it is possible to cut down drastically the new product advertisement processing time. they can be redesigned to access and take any information from any other distributed database. The facilities are capable of handling private and public databases to provide information to the decision makers. Since. or position. decision making and opinion seeking is eliminated. For example. With this technology. based on the microprocessor applications affect a number of factors of the business processes. Since. discussion. the team members are motivated to work for the elimination of delay and to achieve superior business process results. 8.3. With these facilities. and no delays are experienced in handling a complex business transaction. In the conventional process design. With this possibility data. Since. 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. the rules and the business intelligence is an integral part of the redesigned process. time. when and why’ of the delay in the process. etc. message and document transfer to the supplier or the customer is easily possible without any time delay. gets processed very fast independent of the location. Each process stage is complete and self reliant. the process operators acted as individuals in isolation creating the barriers in movement of papers and information. is a very strong potential enabler in the business process reengineering. simple or complex. The information technology. . It increases the people productivity and process effectiveness. At each stage in the redesigned process the functional tools. approval. compared to other technologies to the radical redesigning of the process is maximum. The client performs this task and transfers the advertisement to the firm for further processing.

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

however. etc.3) 1. It requires one to take a different view of the business-the view based on the process and not on the tasks or functions. What are the possible reasons for the delay in the business process? 2. The decision support systems will be integrated in the business process itself. 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. where triggers are used to move the process. The traditional MIS is function-centered like finance. expectations and perceptions.and the decision support systems are drivers for the process performance. Building the MIS is a long-term project. Are-engineered value stream process will generate the transactions to effect the business result. 8.3.4 Self Assessment Questions (Section 8. The business itself would undergo a qualitative change in terms of the business focus. analysis and report ing would be process central and performance efficiency would be evaluated in relation to the value generated by the processes. therefore. enabling the process to become automotive in its execution. This would change the platform of business calling for a different MIS. essential to have a relook at the organisation where the mission and goals of the organisation are likely to be replaced. The triggers could be business rules and stored procedures. The MIS will concentrate more on the performance parameter evaluation which is different in the re-engineered organisation. the . 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.3. the quality.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. Explain the link between MIS and BPR. material. evaluating customer satisfaction. It is. learning and strategic effectiveness The traditional role of the MIS as a decision supporter will continue. The Manage ment Information System in a re-engineered organisation would be process centred. work culture and style and the value system. 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. processing. 8. 8. production. The data capture. 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.4 Summary The approach to re-engineering aims at customer focus.

8. ______ 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.service and the speed of delivery.2. Explain the relevance of IT in BPR.2. A. quality. 2. 2. productivity D. service and speed’. infrastructure 3. mindset C. Business re-engineering requires a major change in the _______ . quality C. Find out a relevant case in which BPR has been adapted and relate the concepts that you find in this chapter with that case. All of the above 8. Micheal Jackson D. cost B. A. This has been mentioned in section 8.5 1. Michael Clarke 2. The modem information technology provides very powerful communication facilities with no limitation of distance. _______ is traditional measure. This has been mentioned in section 8.2 . A. The hardware and the software heterogeneity do not pose any problems. material D.6 Multiple Choice Questions 1.7 Answers to SAQ’s. Michael Schumacher C. 8.1.5 Terminal Questions 1.2. Michael Hammer B. Machine B. TQ’s and MCQ Self Assessment Questions Section 8.

4 1. This has been mentioned in section 8. Read the entire chapter and relate to the situation.3. D .3.2 2.2. Multiple Choice Questions 1. A 2.3. B 3.3 Terminal Questions 1.4 Section 8. This has been mentioned in section 8. This has been mentioned in section 8.3.3. This has been mentioned in section 8.1 2.

8 Answers to SAQs and TQs 9.4.3. Then discuss the decision making in the organization.5 Summary 9.1 Software that assists your creativity 9.2 Self Assessment Questions (For Section 9.1 Organizational Limits to Rational Decision Making 9.7 Multiple Choice Questions 9.Unit-09-Manager and Decision Making Structure: Introduction With this unit we shall begin with roles and activities performed by managers and the role played by MIS to fulfill them.2 Self Assessment Questions (For Section 9.6 Terminal Questions 9.1 Rational decision making and its limits Individual Limits to Rational Decision Making 9.3. the rational decision making and their limitation during decision making.1 Managerial Roles and Their MIS Support 9.4) 9.1 Creativity in decision making by individuals and groups 9.2. you should be able to · What are the various roles of managers and how MIS support managers.3 Decision Making 9.2) 9.1. .1.3) 9.2 What do Mangers Accomplish? 9.4.2 Self Assessment Questions (For Section 9. 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.2. Objectives: At the end of this unit.4 Individual differences and cognitive styles 9.1 Introduction Objectives 9.

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

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

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

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

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

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

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

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

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

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

3. A.2 Section 9.2 This has been mentioned in section 9. Unstructured decisions D. Structured decisions 9.1 Multiple Choice questions 1. D .1. Ill structured decisions C. This has been mentioned in section 9.1. B 2.4 2.2 1. C 3.1 3. Semi structured decision B. are repetitive and can be represented as algorithms-programmable procedures. This has been mentioned in section 9.4. Consider example in the frame work explained 2. This has been mentioned in section 9.3 2.8 Answers to SAQs.1 Terminal Questions 1. This has been mentioned in section This has been mentioned in section 9.3. This has been mentioned in section 9.4.4. This has been mentioned in section 9.1 Section 9.3. TQs and MCQs Self Assessment Questions Section 9.

3 Forecast-Oriented Data Analysis Systems Data Analysis Systems Systems Based on Representational Models 10.4 Self Assessment Questions (For Section 10.2) 10.4 Self Assessment Questions (For Section 10.1 Data Management Subsystem 10.1 Ill structured problems 10.2 Who builds a DSS 10.6 Systems Based on Optimization Models 10.5.1 DSS Technology 10.2 How DSS are Deployed 10.4.1 Data Access Systems 10.3) 10.2.4 Systems Based on Accounting Models 10.5 Building a decision support system 10.2 When should you use the decision support approach ? 10.3 How DSS are developed .4.3 Capabilities of DSS 10.4.3 Components of DSS 10.2.4.Unit-10-DSS and EIS Structure: 10.4 Classification of DSS 10.5.2 The model Management Subsystem 10.3 The Dialog Management Subsystem 10.1 Introduction Objectives 10.2.4.

10.9 Terminal Questions 10.4 Developmental trends in DSS 10. their hallmark is (or should be) flexibility. We begin by discussing how it supports the management and organization.5 Self Assessment Questions (For Section 10.8 Summary 10. we shall start with the concept of Decision support system. Peter Keen. These systems vastly expand the abilities of knowledge workers to make decisions concerning ill-structured problems. We shall conclude by the organizational aspects of DSS and EIS. 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. The development of these systems arose from dissat isfaction with the rigidity of reporting systems that defined the early MIS envi ronment. The approach was artic ulated in the early 1970s by Michael Scott Morton and has since become a broad area of information system practice and research.5.5) 10.11 Answers to SAQs. TQs and MCQs 10.1 Introduction With this unit. . the use of DSS in a firm that previously relied only on management reporting systems is a form of innovation.10 Multiple Choice Questions 10.2 When should you use the decision support approach ? Decision support systems offer managers a package of capabilities for prompt and flexible access to data and to models that work with the data to produce needed information.5. since entirely new capabilities are now available. As stressed by another pioneer in the area. Personal DSS should be easy to develop-end-user-oriented tools should be at hand for the purpose. 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.7 Organisational aspects of DSS and EIS 10. The hallmark of DSS is flexibility. Objectives: At the end of this unit.6 Executive Information Systems 10. Decision support systems are a type of MIS that represent a distinct approach to computerized support of managerial decision making. thus.

however. for example. the explo ration of alternative solutions cannot be completed before a choice must be made. a decision regarding loan approval. DSS steer a middle course between the severe lim itations of management science models. Unstructured problems. are in some cases supported by DSS in minor aspects.2. 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. a DSS may be employed for easy access to data. Decision making in this problem environment is more typical in the work of middle and higher management. In a way. 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. but within narrow domains such as. and therefore. All DSS should be easy to use in the way that best supports the cognitive style of the individual decision maker. In ill structured both semi-structured and unstructured-problems. used throughout an enterprise. with human judgment injected at critical junctures. 10.1 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. We can therefore think of a DSS as a set of capabilities: within its area of application. which make their user do most of the analysis and the relating of various items of information to each other. where parts of the decision process itself often require very significant computer support. where a number of unrealistic assump tions may have to be made. and in certain cases. . we should stress. that such problems occur at all three managerial levels. 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.An organizational DSS. often stemming from leading and organizing activities. and management reporting systems. the principal domain of DSS is support of decision making for semi structured problems. 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. 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. and following the work of Andrew Garry and Michael Scott Morton we arrive at the categories of problems shown in table below. should be developed in a disciplined fashion. Decision making to solve unstructured problems is now also supported by expert systems.

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

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

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

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

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

Thus. The field of artificial intelligence has made some notable contributions to dialog management. Significant attention has been devoted by researchers to the effectiveness of computer graphics. and the system would automatically select an appropriate model or construct one from the existing models and "building blocks. There is significant research interest in providing a degree of automated model management. in general. Gary Dickson and his colleagues found that. a single advantage of DSS is the user-friendly and flexible interface between the human decision maker and such a system.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. This is very often the case-and the main reason why ex ecutive information systems. however. Richard Scovill tells us that most business graphs are designed to answer just four ques tions: 1.3 The Dialog Management Subsystem Along with DSS’s ability to apply models to large volumes of data from a variety of sources. such as the ability to specify what is wanted in a subset of natural language or to activate the system by voice." 10. which we shall discuss next. as opposed to the tabular display of data. discussed later in this chapter. that graphs outperform tables when a large amount of information must be presented and a relatively simple impression is desired. By combining various input and output capabilities of a DSS. Summarizing the uses of graphical presentation of business information. the decision maker works backward from the assumed re sults to the needed input values. and are less d efective at providing precise information. The user would be able to present the problem in a system of this kind. Edward Tufte gives a thorough and exciting presentation of the subject.3. rely heavily on graphics. concluded that line graphics have time-saving ef fects on decision making for more complex decision tasks only. one cannot claim an ad vantage (however intuitively appealing it may he) for graphics throughout all decision-related activities. The notable feature is support of multiple forms of input and output. This stands in contrast to management reporting systems. Color graphics were found to improve decision quality. Ali Montazemi and Shuohong Wang. Who is the biggest? . with the results displayed in screen windows (the user employs a mouse to move between the windows). users can engage in the individual dialog styles that best support their decision-making styles. A variety of help and even training-by-example capabilities may be offered. By analyzing the results of research in this area. The window capability enables the user to maintain several activities at the same time. They did find. but they did not reduce the time necessary to arrive at a deci sion. 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. Graphic representation of quantitative information requires considerable care to prevent distorted perception.

However. However. 10.4 Classification of DSS DSS can be broadly used throughout an organization. Model Management Subsystem c. a given DSS often possesses a mix of these capabilities-in which case we would classify it with respect to its most powerful capability. thus they fulfill operational control purposes. such systems are frequently set up to allow shop floor personnel to continuously monitor the shop floor or a particular piece of machinery. submitted to the Civil Aeronautics Board of the federal government in US. 10.3 Forecast-Oriented Data Analysis Systems .3) 1.4 Self assessment Questions (For Section 10. What is typical or exceptional? 4. it has been established that different decision makers and tasks are best supported by different display formats. tactical. How do circumstances change over time? 3. The portfolio analysis system we discussed earlier on belongs in this category. 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.3. 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. These systems can be classified by the man agement level they offer support to (operational. Data analysis systems are frequently oriented toward the consolidation (aggregation) of data.1 Data Access Systems These systems (which Alter calls "file-drawer systems") can provide user-friendly ad hoc access to the database.4. 10.2 Data Analysis Systems These systems help to analyze historical and current data. The system’s database contains the data on the quarterly performances of all airlines. 10. This again proves that the advantage of DSS in the area of dialog management lies in providing a variety of dialog styles. However. An airline uses a system of this type to compare its performance with that of its competitors.4. Data management subsystem b. They can also be classified into personal and organizational systems. or strategic) or by the functional area they are used in (marketing. Clearly. either on demand (ad hoc) or periodically. This classification yields an entire spectrum of systems ranging from the totally data-oriented to the more powerful model-oriented systems. How well does one fact predict another? In general. and so forth). such as summarizing the performances of a firm’s subunits and presenting the summaries in graphs.2. Dialog Management Subsystem 10. Write short note on : a. to obtain a thorough view of the variety of capabilities these systems can deliver. finance. This capability is equivalent to what is offered by most DBMS through a query language.4.

such as those employed in systems that rely on accounting models. 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. for example.4. 10.4. raw materials.6 Systems Based on Optimization Models Optimization models are developed by management scientists to determine optimal allocation of resources or best possible schedules. introduced in the focus case for this chapter. as an organi zation’s sophistication in DSS use grows. The "what-if" mode of operation is typically employed to compare alternatives.5 Systems Based on Representational Models These systems go beyond the use of ready standard formulas. In general. a shift takes place toward model oriented DSS. Another example is a risk analysis model. subject to a variety of constraints. the rate of insurance renewal. or even in constructing a model employed in it. 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.4. The systems in this category include only the simpler of the variety of marketing models. Such systems typically produce estimated (pro forma) income statements. produced a representational model of customer response to promotional devices. including series of historical data. or production volume. These are frequently simulation models which yield probabilistic results. In a DSS setting. this depends on the technology employed and on the nature of the decision task that needs support.1 DSS Technology . 10. Data-oriented DSS (or DSS components) primarily support earlier phases of the decision-making process. and an outcome. representational models show the dependence between a controllable variable. such as the price of a product. 10. The implementation of a decision is facilitated if the future implementers were involved in arriving at the decision with the use of DSS.5. Their operation is based on access to a variety of internal and external marketing and product databases. Rather. in particular the intelligence phase involving dis covery of a problem or opportunity. Using the techniques of linear programming. sales forecasts. such as sales. one is able to establish the mix of products that must be produced to maximize an objective such as profit. including market segment forecasts. based on accounting definitions and relationships. it would require a ready sales forecast). which considers such key factors as costs of resources (labor. Such a system may suggest product price. 10. or other measures of financial performance. and so on) and product demand. The design and choice phases are supported by model-oriented DSS. A system of this type accepts estimates of costs and revenues as inputs rather than forecasting them (for example.These systems (which Alter calls "analysis information systems") generally assist in developing product plans. which show how existing trends in the marketplace will extend in the future if similar conditions prevail 10. The market analyst at Parke-Davis.4 Systems Based on Accounting Models These are used to consider alternative options for planning purposes. and analyses of competitive actions. balance sheets. Ad hoc use for planning purposes by a staff analyst or a marketing manager is typical. Using such a model.5 Building a decision support system How does a manager acquire a DSS? As we shall see.

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

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

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

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

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. while counteracting possible negative group dynamics. increasingly form the basic work cells throughout an en terprise.10. interactions in a GDSS setting frequently encourage group mem bers who would have otherwise kept their counsel. More or less permanent groups. Thus. 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. Personal DSS Each decision maker individually makes a part of a decision and passes the results to the next decision maker. Many decisions are complex and call for the par ticipation of a number of experts. Level-2 GDSS contain the communication capabilities of the Level-1 GDSS and provide support for the decision-making process. lead us to believe that decision support systems that support group work will grow in importance. DECISION TYPE Independent CHARACTERISTICS SUPPORT SYSTEM Decision maker makes a complete decision. we noted that dys functional behaviors may develop in a group’s work. 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. explore alternative solutions with the use of models and data. and arrive at a consensus-among other possible in teractions. 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. Three levels of GDSS capabilities may be distinguished Level-1 GDSS facilitate communication among group members. Two prominent directions this research is taking are toward the integration of expert system technology into DSS and the development of group DSS (GDSS). In contrasting the capabilities of GDSS with DSS. task forces. A group working with a GDSS is actually participating in a decision-related meeting. They provide the technology necessary to communicate decision rooms. 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. 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. facilities for remote conferencing.5. or teams of coworkers.4 Developmental trends in DSS Lively research in the area of decision support systems continues apace. they furnish DSS modeling capabilities and software that . For example. or both. When we discussed the decision-making process. All of these factors. or perhaps deferred to others. Group Decision Support Systems (GDSS) Group decision support systems (GDSS) are expressly designed to support group communication and decision processes. exchange ideas. com bined with the team orientation of the contemporary organizational design. vote. It is the objective of a GDSS to enable group members to bring their skills to bear on the decision process. to participate actively in the decisionmaking process. such as corporate boards.

should encourage both the formation of a cohesive group and the active participation of all its members. 6) It should be possible with a GDSS to obtain the protocol of a session for later analysis. brainstorming. and dialog components of DSS.5) 1. Level-3 GDSS. and ranking should accompany other statistical models. and the nominal group technique. This component. make asynchronous sessions possible). Explain the various level of DSS technology as identified by Ralph Sprague? 2.5 Self assessment Questions (ForSection 10. Level 2 GDSS thus facilitate activities involving the Delphi technique. GDSS also contain a communication component. which is implemented with the organization’s local or wide area communication facilities. 2) Complete decision ("war") rooms are often provided and equipped in a fashion conducive to a group effort. may include electronic mail. 4) GDSS features.5. 7) GDSS should support a facilitator to assist the orderly progress of a session. Explain the roles played by organisational actors in building a DSS? 3. and arrival at a consensus) or a brainstorming session (eliminating redundant ideas and summarizing the results). for example. 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. to route individual screen contents to the large common display. 10. 3) GDSS should offer facilities for prompting and summarizing the votes and ideas of participants. c) An interfaced session. teleconferencing. anonymous opinion sharing. 5) GDSS expand the model base to include models supporting group decision-making processes. a large common screen display is an essential facility. and the design of the dialog subsystem. such a session may be dispersed in time as well as place (the memories of the computers. the layout of the decision room. Models for voting. in conjunction with the appropriate software. in which participants work at remote terminals and do not see each other. Some sessions also profit from the presence of a leader. or various computer conferencing facilities. A collection of such protocols from the more important decision-making sessions may be preserved as a part of organizational memory. with terminals and a large public display screen. These are the distinguishing characteristics of GDSS at their present stage of development: 1) Aside from the database. would formalize group interaction patterns-possibly by including expert systems that would suggest rules to be applied during a meeting.supports group decision processes. model. such as anonymity of interactions. What are the various approaches for developing DSS . rating. this person should be able. b) A teleconference session taking place in several decision rooms at the same time. which at this time are still at the research stage.

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

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

CSF D. the role of an executive sponsor is critical. where the use of EIS pervades the work of high-level managers. Explain the organisation aspects of DSS and EIS 10. though simpler DSS tools may also be deployed. 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. which need to be refreshed daily in many cases. resistance is to be expected not only from the staff personnel who support the executives and middle managers. Specific DSS that are actually employed by users are generally developed with DSS generators. The availability of EIS as potent tools for top-level control will shape many or ganizational solutions in the future. Executive information systems rely on databases. CDE 2. Future DSS are expected to incorporate expert system technology for various aspects of their operation.9 Terminal Questions 1. As analyzed by Rockart and David De Long. EIS developers frequently rely on the ______ . EIS give top executives the capability to bypass the chain of authority. Software packages for developing DSS are called as A. top man agement has imposed a limit on drilldown depth. CAD C. A.8 Summary Decision support systems (DSS) are flexible interactive information systems that support managers in reaching decisions concerning ill-structured problems. Primarily applied in planning. At Xerox. DSS generators . Combined with electronic mail. organizational measures must be taken to ensure support for EIS.10 Multiple Choice Questions 1. therefore. Resistance to these systems.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. 10. Sometimes. DSS are used either directly or through intermediaries by all levels of management. Application of CSF methodology and a superior interface design can go a long way toward allaying these apprehen sions. but also from the executives themselves. ABC B. managers can drill down no deeper than three layers from the top. What do you understand by Executive information system? 2. DSS Programmers B. who in some cases feel that the information will be inadequate for their needs or that the system will be difficult to use. Group DSS (GDSS) expressly support group decision processes. 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. In particular. 10. must be expected and managed. such as the Delphi technique or brainstorming.

3 Section 10. This has been mentioned in section 10.3.5. This has been mentioned in section 10. This has been mentioned in section 10.1 2. c.3.3 Section 10. This has been mentioned in section 10.2 3. Structured C. This has been mentioned in section 10.2 2.5 1. This has been mentioned in section 10.4 1. This has been mentioned in section 10. This has been mentioned in section 10. Semi structured B.5. C 2. This has been mentioned in section 1.6 2.C. A .2 1.5.11Answers to SAQs.3. TQs and MCQs Self Assessment Questions Section 10. Unstructured D.7 Multiple Choice questions 1. B 3.4 Terminal Questions 1. a.2. DSS Writers D. b. DSS Scripter 1.3 4. All of the above 10. Sales forecasting is an example for ____________ type of problem A. This has been mentioned in section 10. This has been mentioned in section 10.2.

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

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