2 Chapter 1 ManaGement INFORMATION System ESSENTIAL FOR Manacers (But Wuy?) The first thing that comes to mind when the term Management Information System (MIS) is mentioned is that it is the domain of computer professionals and is not for management professionals. This leads to the following question: What is the importance of MIS for management professionals? As mentioned earlier, the role of a manager has become very dynamic and the decision-making process is not simple anymore; hence, managers take the help of MIS to take prompt and accurate decisions. In this book, the focus of MIS will be from the perspective of management professionals. Managers cannot work without MIS. This is because information is most essential for taking deci- sions. Managers need to search for relevant information. As organizations grow, this information becomes voluminous and it becomes impossible for managers to manually manage this large amount of information. Moreover, the life of information is also very short; managers need to be on their toes searching for new and relevant information. MIS helps managers to scan and filter relevant information and retract the redundant _ information. Management professionals should view the application of MIS only from the decision-making perspective. They should not view it from a technical point of view. That is, they need not worry about the programming or coding, which is of more, rel- evance to the engineering or MCA students. However, the other part of MIS—which deals with studying the business process, deciding about giving input to the system, and, most importantly, deciding about the output of the system—is a domain of the manage- ment professionals. The programmers will be designing the system depending on the demands of the managers; hence, the managers need to know about their requirements and the kinds of reports the information system should generate for taking accurate decisions. This book highlights the following aspects that are very crucial for the man- agement professionals: 1. Proper understanding of business processes. 2. In-depth knowledge of input requirements. 3. Various approaches that help to know the input requirements. . The planning of MIS. The designing part of MIS; that is, requirements about the output report Implementation issues regarding the MIS. |, Maintenance issues regarding the MIS. Manacement INrormation System (Management information system is a system that provides the information needed manage organizations effectivel: a) It is considered to be a subset of the overall inte Scanned with CamScannerFoundation Concepts 3 control procedures in a business, which includes people, documents, technologies, and procedures, working together to provide the right information to the right person. Miss widely used for collecting, analysing, and dissipating information to managers, thereby helping them to take quick decisi set acadeimically the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision-making, for example, decision support systems, expert Sys- tems, and executive information systems} Ea Basic Concepts oF MANAGEMENT INFORMATION SYSTEM anagement information system is a most widely used term nowadays. It has become buzzword in the field of management. However, the problem is that most people in the organizations think that MIS is the same as the basic automation of the 2 Mittal pro- cesses} This is the major flaw in the thought process of any organization. Thinking MIS to be simple automation can cause a huge loss to the organizations, and in the end, the MIS is blamed for not delivering the promised results. $o, it is very important to first understand the meaning of MIS. As mentioned earlier, Mis stands for management information system and has three sub-parts: 1. Management 2. Information 3, System Let us discuss the role of these three concepts in the overall development of the MIS. 1.4.1 Management The first component of MIS is the concept of management. This includes diverse func- tions, which are interrelated with one another for the accomplishment of the final goal. ‘These functions are as follows: ¢ Planning Organizing Staffing |. Directing ie . Controlling . Planning: It is the process of preparing for the future. A manager is also. as a planner in the organization. With the help of planning, the manager the gap between the actual scenario and the desired scenario. Planning is Freee ks formulating goals and objectives and thectghalking t the strategies to acd the set goals and objectives. However, to formul .¢ goals and then the to accomplish these goals, managers need information; this is used to Scanned with CamScannerChapter 1 environment, which is very dynamic, and the performance of the selected strategies to achiove the desired goafsJA manager cannot afford to be dormant; he has to anak: yae the actions taken by the competitors and then accordingly mould his strategies to overcome the competition, The organizations that do not scan the environment sufler losses. At one point of time, Bajaj used to be the leader in the two-wheeler market, but they failed to read the changing trend of the market, which was capital ived by Kinetic, as a result of which Bajaj suffered huge losses, However, information. systems can aid the managers to be proactive in their approach and successfully accomplish their tasks. Organizing: The whole essence of management is to organize the work in the most efficient way, Earlier, it was easy for the managers to manage the work. However, because of the increasing complexity and the competition, at present, it is virtually, impossible to organize the work without proper information systems, Nowadays, organizations even use, dedicated software for organizing the activities of specific functional areas, such as the human resource information system and marketing. management information system, For example, human resource (HR) is an asset for any organization; it is very important that organizations not only recruit the right person for the right job but also keep the employee motivated) Here again, informa- tion systems play a vital role by helping, firstly, the organizations to scan the right candidate for the right job and, secondly, the managers to keep a vigil on the staff so that nobody feels neglected, Motivation can be given in the simplest of forms, such as an email of appreciation from the boss to the staff or wishes to a subordinate on his birthday, It is just a simple application of information system, but as a result, there is sense of belongingness among the staff, The HR information system also takes into account all the activities of the HR department, for example, recruitment and train- ing, and helps the manager to organize these critical activities in an efficient man- ner, Similarly, financial information system helps organizations to organize financi: activities such as the following (a) Managing daily financial information (b) Getting processed financial information (c) Storing financial information. (d) Managing long. erm fund and liquid fund ‘The inventory and production information system helps the managers to manaj inventory and production activities of the organization such as the following: (a) Production planning (b) Production control (©) Product design (d) Plant location and layout ‘ : When it is said that the customer is the king, it means that organizations listen to the needs and wants of the customer; but, nowadays, the customer it demanding and wants personalized attention from the organizations, ‘The here is identifying how organizations can read the nerve of the custome! ‘answer is provided by the information systems. With the help of information Scanned with CamScannerFoundation Concepts 5 organizations collect this vital information for designing their products and services. As marketing activities are currently becoming very complex, marketing informa- tion systems are being used by organizations to organize the following marketing activities (a) Segmentation (b) Identification of target market (©) Advertisement through print and electronic media and the internet (d) After sales service 3, Staffing: All managers know the importance of having the right person at the right place. However, itis easier said than done. To recruit the right person for the fight job requires information from vaxjous sources. It is very important to have the right infor- mation about the requiremeng. Presently, when organizations are working in differ- ent cities and countries, the requirement for the same job changes with the place and the nature of competition. The source of recruitment also changes with the place and requirement of the job. Information systems play a very important role in provid- ing this vital information to managers so that they can hire the right person for the right job. 4, Directing: A manager is also known as a troubleshooter. He has to direct his staff towards the right direction. Again, with the kind of dynamic environment and the global comperitign, shat currently exists, the area of scope of work for the managers has changed drastically. Managers have to be on their toes always because the staff needs constant direction and redirection for countering the competitors. Here, the role of information systems is very important, because the managers and the staff require quick information for directing their energies towards the overall goals and objectives of the organization. Controlling: Managers are entrusted with the key job of controlling the staff. Control is important because it is not possible to manage a situation without controlling it. Moreover, as an organization grows, it is very difficult for the managers to be present at all the places at all the times. Yet, they cannot afford to be complacent and have to keep an eye on the activities of the staff. In this scenario, informa- tion systems play a very important role. With the help of these systems, a man- ager can acquire information regarding the staff even when he is not physically Thus, this discussion makes it clear that information systems are essential for each and every activity of the management. The concept of information system should not be seen from the myopic view that it is related only to computers; rather, information system is a very broad concept and is of prime importance in the present-day scenario, when a lot of importance is given to information. wo 1.4.2 Information tion. Actually, it [fhe second component of MIS is the concept of informat involves two terms, namely data and information, which are often used Scanned with CamScanner d& Chapter 1 interchangeably in our day-to-day life. However, there is a difference between these two terms. Data is simple facts and information is the processed data. sThe easiest distinction between information-and data is that with the help of information managers can take vital decisions, whereas @lata is the raw form of information and does not help in the decision-making process. The most important task of any manager is decision- making, for which the right information is required at the right time. However, it should be kept in mind that these two terms; that is, data and information, are relative to the level of management) For example, when a customer visits a bank, the cheque that he deposits in the bank is a vital piece of information for the clerk; that is, at the opera- tional control level, but the same is not true for the bank manager. It is of no use to the manager, as he is more interested in knowing the overall transactions in a particular day. Thus, the consolidated statement that the cashier makes at the end of the day is information for the bank managéf: 1.4.3 System The third component of MIS is the concept of system. It is a set of related activities that are joined together to achieve a common goal. Even the human body is a system com- posed of various parts, which are working together towards a common objective; that is, to live. Systems can be of open or closed type. An open system is one that constantly interacts with the environment, ‘such as the human body. The human body feels hot | and cold depending on the changes in the climate, in essence responding to the differ- ent types of weather. In contrast, a closed system does not interact with the environ- ment and does not change with the change in the environment. In every organizati there are various departments performing different activities, but all the activ connected so that the common objective of the organization is achieved Simi activities of the information systems are integrated together so that the end is achieved. This concept plays a pivotal role when information systems are as all the activities should be in relation and should result in fulfilling the ove: tives of the organization When the feedback is applied to a system, the system as a cybernetic system. Currently, there is a demand for such type of s\ organizations are constantly taking feedback from the customers)This fe! the organizations to deliver products and services according to the demat customers. This discussion puts forward an important point that organizations view information systems as merely computer application software; rat should be viewed from the three perspectives—management, informat system. If an organization opts for computerization without taking into con: these three sub-parts, its information system will fail miserably, In tem follows a yery scientific approach, which takes into account a holist Scanned with CamScannerFounéaten Concepts 7 pe organization and its competitors. This is why information system is now treated s a separate subject and is not limited onl TT); rather, the area of information sy: pagement, irrespective of whether it is IT, ns. a clear understanding of the concepts, the next scope of MIS. Again going back to the concept rent levels (Figure 1-1): control level agement control level 3. Operational control level FIGURE 1-1 THE THREE LEVELS OF MANAGEMENT Scanned with CamScanner8 Chapter 1 The operational control level répresents the bottom level of management. At this vel, the supervisors perform routine tasks and require very precise information to manage these tasks. FoF example, in a product manufacturing firm, the main task at the supervisor level is to ensure that the product is made according to the specifica. tions provided to them by the middle level managers. So, supervisors need to have Proper information regarding the dimensions of the prodiict. However, at thé manage. | ment control level, the area of application is very wide. It encounters different types | of decisions. The middle level managers not only take directions from the top level | but also provide constant feedback to the top level. Sometimes, the top level manage- ] ment takes the opinion of the middle level management in order to make some erith | cal decisions. The middle level managers also interact constantly with the operational ! control level. Thus, the middle level management should have precise information regarding the overall operations of the organization. The MIS is basically designed to Cater to the needs of the management control level; that is, the middle level managers. MIS has to be very dynamic in nature because this level constantly interacts with the strategic control level as well as the operational control level(The strategic control evel represents the top level of the management, At this levk-the prime job of the managers is to take action and formulate strategies for fulfilling the long-term goals and objectives. This level takes the help of strategic information system (SIS) for formulating strategies, but again MIS plays a crucial role, This is because the strategic level has to interact with the management control level, and MIS is important for this interaction) Ea CLassiFIcATION OF INFORMATION SYSTEMS 5 Information systems can be classified as follows: “1, Transaction processing system 79 Management information system 4 |¢ Decision support system oq Expert system -¢ Strategic information system $)S . Fuzzy logic based information system Papen The type of information system also changes with the level.of management. At geerational control level, generally routine decisions are taker{‘The information sys that is required here is very basic in nature. The managers in the operational cont level will not be taking any critical decisions so their requirements are very much ed tobi kind of information system that is required here is kn as Me transaction processing system (TPS). The output of the TPS cannot be J At the management control level, the requirements are Scanned with CamScannerex Foundation Concepts 9 jere_is known as the MIS. The output of this system is very mui je used to take critical decisions. However, the decisions taken at the strategic control pvel are very much unstructured in nature. The top level has to scan both the internal nd external environments. There are various factors that are not in the control of the yp level management but they have to be taken into account. So, the system used at ¢ strategic level is known as the decision support system (DSS). Yet another type f system that is fast coming into play is th SIS“This system not only provides the nec- ssary information to the users but also helps them to constantly review the goals and bjectives of the organization. The SIS guides the organizations to implement the type of ystem that takes into account not only the internal factors but also the external factors. rhis type of system is designed according to the goals and objectives of the organiza- ion. Any organization in today's competitive world cannot afford to be dormant; once fhe organization has formulated its goals and designed its strategies, it does not mean fhat those strategies are going to work forever. Organizations have to constantly evalu- te themselves as well as their competitors; otherwise, they will lose the battle. This is what happened with Bharat Sanchar Nigam Limited (BSNL). The organization that sed to have the largest share of landline phones failed to read the pulse of customers, s a result of which mobile companies such as Spice and Airtel took away its landline ustomers by providing them the facility of mobile phones. So, it is imperative for the ganizations to have a close watch over the changing preferences of the customers and en change their goals and strategies accordingly. The SIS helps the organizations to formulate strategies and also to evaluate them for realignment according to the chang- ing environment. The following subsections provide a detailed discussion of the various types of infor- mation systems. 1.6.1 Transaction Processing System atro Large seate is is the basic type gf information system, which was used extensively until MIS came into being. Even no} sed at the operational control leve]) TPS just automates the routine transactions. For example, consider a situation wherein a customer visits a bank and gives the withdrawal form to the cashier for withdrawing cash. The cashier makes _ an entry in the system and gives the cash to the customer. Using the TPS, the cashier automates the routine transaction (withdrawal of money){TPS helps to manage records}\for example, in the cage, of banks, updating and maintaining man ona daily basis is a very pie job, but with the help of TPS it has become very: However] there is one major limitation to the TPS; that is, the output of data; which is not processed (Figure 1-2). It means the “manager cannot take based on the reports made by the TPS.Jin the given example, the entry made by cashier will not solve any purpose for the branch manager, who is more int knowing the consolidated statement at the end of the day. Scanned with CamScanner10 Chapter 1 URE 1-2 TRANSACTION PROCESSING SYSTEM = >| Process —>| The input is data and this data is processed, but the output is also data. FISURE 1-3. MANAGEMENT INFORMATION SYSTEM. From TPS Process Information }e——| Process _ 1.6.2 Management Information System 5) fin the past, the competition was not intense and the needs of managers were very limited; hence, the TPS worked efficiently. However, as the competition increased, the needs of managers became very demanding; they needed a type of information syste: that can help them to take prompt decisions. This resulted in the MIS, in which though the input is data, it is processed and the resulting information is given as the output, which is utilized by the managers to take decisiong) In fact, the TPS and MIS work in” close coordination. The output of the TPS is processed to get the output of the MIS as’ information (Figure 1-3). In the earlier example, the cashier inputs all the records of the customers in and the manager get the consolidated statement regarding the cash receil disbursed; based on this information, the ma ager can take critical finan W\ 1.6.3 Decision Support System This is a specialized type of information system. It uses operation reseat TB properly maintained databases, with the facility of dialogue, which helps analyse 4 complex problem from different perspectives and guides them to) ‘decisions. A DSS has the following three subsystems (Figure 1-4): 1, Database management subsystem 2. Model base subsystem 3. Dialogue-based subsystem Scanned with CamScanner—s ' Foundation Concepts 11 ori ‘DECISION SUPPORT SYSTEM 1GURE 1-4 Decision support system. nay Database management subsystem ‘Model base subsystem Dialogue-based subsystem J Gamicnshp) (Modeie) [Uncertainty] (Certain } (Risk )(Command |(@aA) |} (Menus based Icon |] Speech With the help of these three subsystems, the DSS helps managers in the analysis of vari- ous complex problems and guides them in the decision-making process. 1.6.4 Expert System pulsing satel (this is a specialized system that solves the problems pertaining\Jo a specific domain and requires technical knowledge. The expert systems act like a technical expert to solve a particular problem. Nowadays, organizations cannot generalize their problems. The intense competition and the uncertain futur pel organizations to use expert systems for solving their problems, The expert systems have the following subsystems: 1. Knowledge base . Inference engine . User interface . Updating facility) ASN .6.5 Strategic Information System With the intense competition and dynamic environment currently prevailing, informa- tion systems such as SIS help organizations to gain competitive advantage. The SIS is specialized type of inférmation system that not only takes into account the internal factors for processing information but also takes into consideration the external factors that influence the Cpesoan ae it will nét be wrong to say that the SIS focuses more on the external factors afd hence helps organizations to frame strategies. It is also important to evaluate the strategies from time to time, because the environment Scanned with CamScanner 7)12 Chapter 1 is changing very rapidly and organizations need to change their strategies to gaint come petitive advantage. The SIS helps the organizations to evaluate their strategies vis. changing environmental needs. A.6.6 Fuzzy Logic Based Information System It has already been mentioned that expert systems are developed to help the manag. ers in taking decisions. However, considering the fact that the conditions under which managers take decisions are highly uncertain, there is a need to add this uncertainty in the system. The fuzzy logic provides this uncertainty in the system. For such uncertain situations, it is very important to give hazy boundaries to the logic. Fuzzy logic helps the system to create these uncertain boundarie: are KY. HARACTERISTICS oF ManaGement INFoRMATION System The following are the important characteristics of the MIS: 1. Focus on Management Control Level: The MIS is specially designed for middle level managers or management control level. There are specific types of information systems for each level of hierarchy. For top level SIS is generally used, for operational control level TPS is used, and for management control level MIS is used. 2- Accurate Information: Managers need accurate information for taking decisions. An important characteristic of the MIS is that it provides accurate information to middle level managers. 4. Functional Application: Organizations are divided HR, marketing, production, inventory, and finance. MIS provides the facility of ing the needs of each and every funct when MIS is used for the marketing department, ment information system. i e r [ps managers to scan all such rel sources of information, which will help in taking accurate decisions. 6. Authenticated Source: Managers have to take critical decisions, which have a term effect on the organization. MIS is supported by a proper database. In thi base, Proper records are maintained by using the concepts of database manag system, which is an authenticated source for future reference, 7. Tailor-made Approach: MIS is planned and designed taking into consideratio1 needs of a manager. So, the same information system cannotbe university imple! - Scanned with CamScannerFoundation Concepts 13 in every organization. An important characteristic of the MIS is that it cannot be gener- alized; rather, it is tailor-made according to the requirements of the particular manager or the organization, support to Other Technologies: Organizations work under intense competition; so, various advanced technologies, such as business intelligence, data mining, data warehousing, and enterprise resource planning, are now implemented in them. MIS is designed in such a way that it supports‘or even supplements these advanced technologies. Secure: The most precious asset of any organization is its data. It is very important that this data be secure. MIS provides proper safety and security of stored data. It is designed in such a way that only authorized persons can access the data. UNCTIONS OF MANAGEMENT INFORMATION SYSTEM fhe follo Scanning of Data:(Of late, competition has increased drastically and organizations are going the extra mile to collect important data) While collecting this datafit is very important to scan all possible sources of data, Manual scouting of sources of informa- tion is an impossible task( MIS helps managers to scan all possible sources for data collection) Storing of Data: It is not manually possible to store all data in one place and then ‘segregate it into different functional categories. However, MIS helps not only in the storing of voluminous data but also in segregating the data for further use. Refining of Datatlt is very important to refine the raw data so that proper informa- tion can be obtained. Sometimes, the data has to be analysed from different perspec- tives to bring out the hidden information)MIS helps managers to analyse and refine the data for taking out relevant information. Providing Information: Information is the buzzword in present time. It is very important that the right person gets the right information( MIS helps in providing the right information to the right person. For example, all the information regarding sales will be made available to the marketing manager, and the HR manager will get information regarding the salaries. . Making Decisions: Decision-making is a very crucial task that a manager performs. MIS helps in visualizing the same problem from different aspects, which helps man- agers while taking decisions) Moreover, using MIS, managers can create various reports or even customize reports according to any particular situation, which is again of great help in taking decisions. Pulfilling Functional Requirements: There are various functional departments in an organization, for example, HR, marketing, finance, and production The require- ments of each functional department are different, and the MIS helps in fulfilling the requirements of each and every functional manager. For example, the MIS for inventory provides important information regarding the time of replenishment and economic order quantity levels. A wing are the important functions of the MIS: Scanned with CamScanner BRN