Management Information System

KMBN-208
Unit-2 (Information, Management and
Decision Making)

Avinash Saxena
 Table of content
• Attributes of information and its relevance to
Decision Making
• Types of information
• Models of Decision Making - Classical,
Administrative and Herbert Simon's Models
• Management Support Systems: Decision
Support Systems Group Decision Support
Systems, and Executive Information Systems
 Attributes of information
• Reliability− It should be verifiable and dependable.
• Timely− It must be current and it must reach the users well in time, so that important
decisions can be made in time.
• Relevant− It should be current and valid information and it should reduce uncertainties.
• Accurate− It should be free of errors and mistakes, true, and not deceptive.
• Sufficient− It should be adequate in quantity, so that decisions can be made on its basis.
• Unambiguous− It should be expressed in clear terms. In other words, in should be
comprehensive.
• Complete− It should meet all the needs in the current context.
• Unbiased− It should be impartial, free from any bias. In other words, it should have
integrity.
• Explicit− It should not need any further explanation.
• Comparable− It should be of uniform collection, analysis, content, and format.
• Reproducible− It could be used by documented methods on the same data set to
achieve a consistent result.
 Relevance of Information in Decision
Making
• Management information systems combine hardware,
software and network products in an integrated solution that
provides managers with data in a format suitable for analysis,
monitoring, decision-making and reporting.
• The system collects data, stores it in a database and makes it
available to users over a secure network.
• Information Access
– Managers need rapid access to information to make decisions about
strategic, financial, marketing and operational issues.
– Companies collect vast amounts of information, including customer
records, sales data, market research, financial records,
manufacturing and inventory data, and human resource records.
– However, much of that information is held in separate departmental
databases, making it difficult for decision makers to access data
quickly.
– A management information system simplifies and speeds up
information retrieval by storing data in a central location that is
accessible via a network.
– The result is decisions that are quicker and more accurate.
• Data Collection
– Management information systems bring together data
from inside and outside the organization. By setting up a
network that links a central database to retail outlets,
distributors and members of a supply chain, companies
can collect sales and production data daily, or more
frequently, and make decisions based on the latest
information.
• Collaboration
– In situations where decision-making involves groups, as
well as individuals, management information systems
makes it easy for teams to make collaborative decisions.
– In a project team, for example, management information
systems enable all members to access the same essential
data, even if they are working in different locations.
• Interpretation
– Management information systems help decision-makers
understand the implications of their decisions. The systems
collate raw data into reports in a format that enables
decision-makers to quickly identify patterns and trends that
would not have been obvious in the raw data.
– Decision-makers can also use management information
systems to understand the potential effect of change. A sales
manager, for example, can make predictions about the effect
of a price change on sales by running simulations within the
system and asking a number of “what if the price was”
questions.
• Presentation
– The reporting tools within management information
systems enable decision-makers to tailor reports to the
information needs of other parties.
– If a decision requires approval by a senior executive, the
decision-maker can create a brief executive summary for
review.
– If managers want to share the detailed findings of a report
with colleagues, they can create full reports and provide
different levels of supplementary data.
 MIS: Sources and Types of Information
• Sources of Information: The most popular data
collection techniques include-
– Surveys: A questionnaires is prepared to collect the data
from the field.
– Secondary data sources or archival data: Data is collected
through old records, magazines, company website etc.
– Objective measures or tests: An experimental test is
conducted on the subject and the data is collected.
– Interviews: Data is collected by the system analyst by
following a rigid procedure and collecting the answers to a
set of pre-conceived questions through personal interviews.
 Types of Information
• Classification by Characteristic

• Based on Anthony’s classification of Management, information used in

business for decision-making is generally categorized into three types −

– Strategic Information: Strategic information is concerned with long term policy

decisions that defines the objectives of a business and checks how well these
objectives are met. For example, acquiring a new plant, a new product,
diversification of business etc, comes under strategic information.
– Tactical Information: Tactical information is concerned with the information needed
for exercising control over business resources, like budgeting, quality control, service
level, inventory level, productivity level etc.
– Operational Information: Operational information is concerned with plant/business
level information and is used to ensure proper conduction of specific operational
tasks as planned/intended. Various operator specific, machine specific and shift
specific jobs for quality control checks comes under this category.
• Classification by Application

• In terms of applications, information can be categorized as −

– Planning Information: These are the information needed for establishing standard
norms and specifications in an organization. This information is used in strategic, tactical,
and operation planning of any activity. Examples of such information are time standards,
design standards.

– Control Information: This information is needed for establishing control over all business
activities through feedback mechanism. This information is used for controlling
attainment, nature and utilization of important processes in a system. When such
information reflects a deviation from the established standards, the system should
induce a decision or an action leading to control.

– Knowledge Information: Knowledge is defined as “information about information”.

Knowledge information is acquired through experience and learning, and collected from
archival data and research studies.
– Organizational Information: Organizational information deals with an organization’s
environment, culture in the light of its objectives. Karl Weick’s Organizational
Information Theory emphasizes that an organization reduces its uncertainty by
collecting, managing and using these information prudently. This information is used
by everybody in the organization; examples of such information are employee and
payroll information.

– Functional/Operational Information: This is operation specific information. For

example, daily schedules in a manufacturing plant that refers to the detailed
assignment of jobs to machines or machines to operators. In a service oriented
business, it would be the duty roster of various personnel. This information is mostly
internal to the organization.

– Database Information: Database information construes large quantities of

information that has multiple usage and application. Such information is stored,
retrieved and managed to create databases. For example, material specification or
supplier information is stored for multiple users.
 Models of Decision making
• Classical Model,
• Administrative Model
• Herbert Simon's Models
 Classical model
• On disagreement of a manager with a certain
decision making situation, the manager would
collect all the critical information and the data
that is required for performing a particular
activity and also would take the decision that
will certainly be for the betterment of the
organization.
 The Administrative Model
• In such a model, the manager has more concern for himself.

• On confrontation of a manager with a certain decision making

situation, the manager would collect what ever information or
the data that will be available and then will take a decision,
which may not be in the best interests of the organization but
will certainly be good for fulfilling his personal interests.

• Suitability and the opportunism, both act as the hallmarks of

the Administrative Model.
 Herbert Simon's Models
• This model is linked with the decision making process.
• Explains the core of the decision making.
• Used as the base for explaining the decision making process.
• According the Herbert Simon Model, the process of the
decision making consists of the following phases:
• The Intelligence Phase
– In this phase, the various activities for finding out the problems related to the searching of the
operating environment are involved. By this, the identification of the various conditions can be
done which ultimately helps in taking the decisions at the different levels. Extensive and the
comprehensive database is must for the intelligence phase, making this phase very suitable for
searching or scanning of the environment.

– In this phase, the type of the environment forms a very major factor and hence the types of the
environment can be categorized as the follows:

• The Societal Environment: Mainly includes the economic, the legal and the social environment and it is
this type of the environment in which the organization operates.

• The Competitive Environment: Includes the understanding and the analyzing of the characteristics, the
trends and the behavior of or at the market place and also the various players of the market in which the
organization operates.

• The Organizational Environment: Includes the various capabilities, the strengths, the weaknesses, the
constraints and the various other factors that affect the ability of the organization to discharge or operate
its various types of the activities.
• The Design Phase
– The inventing, the developing and the analyzing of the various
alternatives or the solutions to the particular problem forms a
major part of this phase. The various steps that are to be
followed in this phase can be summarized as the follows:
– Support in getting the in depth knowledge of the problem. A
correct model of the situation can be made and the assumptions
of the model need to be tested.
– Support for the generation of the solutions can be obtained by:
• Manipulation of the model for the development of the insights.
• Creation of the database retrieval system.
– Support for testing the feasibility of the solutions.
• The Choice Phase
– The selection of a specific alternative or the course of the
action from the ones which have been generated and
considered during the design phase, takes place during this
phase. The choice procedure and the implementation of the
chosen alternative form a very major part of the Choice phase.

– The flow of the activities takes place from the intelligence

phase to the design phase and then finally to the choice phase.
But one very important point that must be remembered here is
that at any phase there may be a return to a previous phase.
 Management Support Systems
• Management support systems focus on managerial uses of
information resources. These systems provide information to
manage for planning and decision making. The information
provided by these systems is based on both the internal and
external data using various data analysis tools.

• They also offer a choice to the user to select out of these tools
for the purpose of data analysis. These systems serve the
information needs of managers at middle and top levels in the
managerial hierarchy.
 Decision Support Systems
• Decision support systems (DSS) are designed to support the
decision making process of managers to improve their
effectiveness and thereby efficiency of the enterprise.

• They are based on the premise that managerial judgment

cannot be replaced by any computer based solution.

• However, by offering the support of data and models, it is

possible to improve the decision making process even in the
case of semi-structured and unstructured problems.
• The basic purpose of DSS is to extend the capability of a
manager’s decision making process by supporting tools
and data made available to him under his direct control.
• Thus, it gives flexibility to the manager to decide the
input data, tool of analysis, depth of analysis and
reliance on the outcome of Analysis for decision
making.
• DSS offers an interactive environment for users and
thus permits manager to experiment with data and
models to develop the optimal decision making strategy
in a given situation.
 Group Decision Support Systems
• Globalization has not only expanded the
product markets. It has also made
organizations geographically more dispersed.
Therefore, the way the business is done and
decisions are made has also changed
significantly.
• Collaborative decision-making has become
more valuable than ever.
• There is an increased emphasis on developing and
implementing communications-driven group decision
support systems.
• Decision making, in the current business environment, is a
collaborative process with participation from in-house and
remotely located teams or temporary work groups or task
forces.
• In such a scenario, communications-driven group DSS
makes it easier for every participant to send and receive
communication and interact with others in real time, from
their respective locations, without meeting physically.
• A communications driven group decision support
system:
– Is a type of hybrid computer-based interactive decision
support system
– That uses communications and network technologies
– To facilitate communication, resource/information sharing,
face-to-face meetings and collaboration
– Among a group of decision makers that are separated by a
distance
• Group Support Tools
• There are a number of tools and technologies that can be
incorporated in a GDSS (Group Decision Support System), in
order to promote better decision making. These include:

– Groupware: A software system to enhance collaboration among

participants/ decision makers and support group/s in completing
tasks.

– Multimedia Decision Support: An integration of computer, video

and decision-support technologies, facilitating information
sharing, group decision tasks, collaboration and coordination.
– Electronic Meeting System: A software system to
facilitate creative problem solving and decision
making using electronic technologies.

– Collaborative Workgroup Software: A web-based

team collaboration and project management
software facilitating group tasks and live
discussions for better decision making.
 Executive Information Systems
• DSS are designed to cater to the information needs
of managers at middle to top levels. They relate to
rule-based work doing modeling and analysis of
data in order to make it useful in decision making.
• However, at the top of managerial level, there is a
need to focus more on packaging and delivery of
information than on generation of information.
• The top manager deserves better environment for
information access than that provided by DSS.
• The top executives need fast access to up-to-date,
concise information and exception reports with facilities
to personalized information and analysis.
• The information systems designed to cater to such
needs of top executives are called Executive Information
Systems (EIS) or Executive Support Systems.
• These systems act as electronic briefing systems and
offer tremendous flexibility in use. EIS uses internal as
well as external information and offers an interactive
and a user friendly operating environment.