Fundamentals of Management Information System

Learning Outcomes:
At the end of this chapter, you should be able to:
1) Distinguish between data and information and understand the concept of system
and information system
2) Define Management Information System (MIS)
3) Explain the objective of MIS and benefits derived therefrom
4) Give the characteristics of an effective MIS
5) Know the guidelines in designing an efficient MIS
6) Enumerate the activities involved the development of a firms MIS
7) Know the primary management information subsystems and secondary
subsystems

Lesson 1: Information systems Basic Concepts

1. Data a raw fact or figure from which conclusion can be drawn.
2. Information selected data that have been processed and is meaningful and
useful to users.
3. System an entity consisting of interacting parts that are coordinated to achieve
one or more common objectives or output or information.
4. Information system a framework in which data is collected, processed,
controlled and managed through stages in order to provide information to users.
Business firms depend on information systems in order to stay competitive.
Lesson 2: Management Information System (MIS) Definition
A management Information System (MIS) may be defined as the means by which
information is provided to decision makers to allow them to make and implement the
necessary decisions to optimize the interrelationships of the available resources to most
effectively reach the organizations goals.
Other definitions:

A formal method of collecting timely information in a presentable form in order to

facilitate effective decision making and implementation, in order to carryout
organizational operations for the purpose of achieving the organizational goals.
Walter I. Kennevan
An MIS is a system designed to provide selected decision oriented information
needed by management to plan, control and evaluate the activities of the
corporation. It is designed within a framework that emphasizes profit planning,

performance planning and control at all levels. It contemplates the ultimate

integration of required business information, sub systems both financial and nonfinancial within the company. Management Information System Committee of
the Financial Executive Institute
The above definitions of MIS clarify that MIS is a system which helps management in
performing its job effectively. It provides relevant information to each manager to make
right decisions and stimulates his actions. It is a systematic approach to provide useful
information for effective managerial functioning in the form of suitable reports.

Lesson 3: Objective of MIS and benefits derived therefrom

Objective of MIS
The primary objective of MIS is to provide accurate, timely, and meaningful data for
management planning, analysis, control and decision making to optimize performance
of the organization. In short, it must enhance the management of the organization.
Value Added through Improved MIS
1. Better integration of information-producing activities leads to information that is
more complete and relevant. Managers are able to search, probe and find
answers to non-recurring questions that are normally available in regular reports.
2. Managers are freed from lower-level decisions and moved to higher-level
problems. They are given time to comprehend the scope of the problems for
which they are responsible.
3. Decisions are made more timely due to prompt availability of information.
4. Decisions are made with increased confidence derived from improved integrity of
underlying data.
5. Information technology and resources are focused where it will do the most good.
Lesson 4: Properties of an Effective and Efficient MIS
An MIS must be both effective and efficient. That is, the benefits should equal or exceed
the costs of communicating, and the MIS should be flexible in order to be adaptable to
changing conditions and needs.
An effective system will be fast and responsive, making efficient use of the system
resources and having minimal time between the time data are originated and the output
is delivered. The system should provide reliable, accurate with prescribed limits, the
required output. It should be economical, adaptable, and flexible.

The properties of an effective and efficient MIS may be expressed in terms of:

1. Relevance. Ability to define and support necessary action by appropriate

persons.
2. Accuracy. Ratio of correct information to the total amount of information
produced over a period of time.
3. Completeness. Provides all the relevant information needed to make a decision.
4. Timeless. Response interval does not impair the opportunity to take action.
5. Conciseness. Summarizes or extracts only those items of information that are
needed.
6. Flexibility. Adapted to changing conditions and needs.
7. Economy. Benefits equal or exceed costs.
Lesson 5: Guidelines in Designing an Effective Management Information System
In designing an efficient MIS, the following guidelines may be followed:
1. Apply resources to only those problems that have been identified. All activities
should be productive, that is they should directly accomplish results.
2. Work with fact, not opinion. Decisions by analysis prove better than decisions by
intuition.
3. Work on causes, not effects. The key or critical data will be found among the
causes.
4. Activities should be as simple as possible. Standardize as many terms,
procedures, routines, methods and equipment as much as possible.
5. Capture data as close to the source as possible. Avoid human intervention as
much as possible by using machine sensible media and direct communication.
6. Keep the user in mind. Provide the information the user requires in the most
useful format to him and at his optimum time and place.
7. Involve people who will be affected by any changes.
8. Select equipment compatible to job requirements and design the system to
maximize the use of this equipment.
9. Always follow up, evaluate and take corrective measures, if necessary.
Lesson 6: MIS Development
The key tasks involved in the development of a firms Management Information System
are:
1. Define the main and secondary goals and their priorities.
2. Identify those factors that are critical to the success of each goal. These factors
constitute points wherever decision-making requirements exist, either within the
organization structure itself or within individual activities. Determine how these
critical factors can be measured and what quantifiable measurements constitute
success.

3. Design a system structure to achieve the desired goals and priorities. This task
will involve the following steps.
a. Set control points or centers for each key variable.
b. Determine the information necessary for making the requisite decisions at
each control point.
c. Assign responsibility for each critical factor to some individual with
sufficient authority to enable his to change courses of action with
prescribed limits to maintain acceptable performance.
d. Select and arrange the appropriate means to acquire information that will
be needed to ensure achievement of success measurements. At all stages
of work, close coordination must be maintained with the various sections
available to carry out the system.
4. Implement the system.
5. Monitor and control the system. Tight control must be maintained to ensure that
the working system set-up is actually the system required.
Lesson 7: Primary and Secondary Management Information Subsystems
Primary Management Information Subsystems
-

Exist to a large extent in nearly all business organizations

Involve handling relatively large amounts of data that are recurring

I.

LOGISTICS INFORMATION SYSTEM

- Concerned with the physical flow of inventories and resources within and
through the organization
- Includes inventory control, production, planning and control, scheduling
and distribution
- The most adaptable to automation of all the management information
systems
Logistics movement management; the planning and control of the flow of
goods and materials through an organization or manufacturing process

II.

FINANCIAL INFORMATION SYSTEM

- Concerned with the flow of financial resources through the organization
- They are also adaptable to automation because of the characteristics of
the data

III.

PERSONNEL INFORMATION SYSTEM

- Concerned with the flow of information about people who work for the
organization
- The main concern is the efficient storing and retrieval of data

Secondary Management Information Subsystems

-

Some of the important secondary subsystems under each primary

subsystem in a typical business organization are as follows:

A. Logistics
1. Purchasing Subsystems
a) Vendor Selection
b) Ordering
c) Transportation
d) Receiving
e) Inspection
f) Control
2. Production Subsystems
a) Scheduling
b) Dispatching
c) Operation
d) Inspection
e) Packaging
f) Shipping
g) Control
3. Marketing Subsystems
a) Product Statistics
b) Customer histories
c) Product planning
d) Customer service
e) Product delivery
f) Pricing
g) Forecasting
h) Control
4. Order-Processing Subsystems
a) Originating
b) Editing
c) Pricing
d) Billing
e) Credit and Collection
f) Control
B. Financial Information System
1. Financial Subsystems
a) Treasury
b) Financial Accounting
c) Managerial/Cost Accounting

d)
e)
f)
g)

Tax Accounting
Payroll
Planning
Control

C. Personnel Information System

1. Personnel Subsystems
a) Candidates selection
b) Employee Histories
c) Manpower Distribution
d) Regulatory Compliance
e) Training
f) Welfare and Safety
g) Compensation
h) Control
D. Other Important Subsystems
1. Research and Development Information Subsystem
o Concerned with product development and research thrust of the
organization
2. Strategic Planning and policy Making Subsystems
o Concerned with vast array of types and sources of information
o Corporate Planning Group falls within this function
An effective management information system will therefore provide an
organization with potential sources of improved efficiency in the use of the firms
resources, cost reduction, improved effectiveness, competitive advantage and
enhanced profitability.