MIS Chapter1- Introduction

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Management information

systemsChapter one

Introduction

By shibiru Ayalew

20091


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Management Information Systems

In order to make decisions, managers need the

right information to serve a wider range of needs.

A systems approach to managing this demand can

be met through management information systems(MIS).

It has been said that MIS are what the nervous

system is to the human body.

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Definitions of MIS

We live in an information age

The original definitions of information were associated

with knowledge.

Now, instead of thinking about the information itself,

knowing that we have got so much of it, we have tobecome much more aware ofwhat we are going to do

with it.

As the organisation grows, the management function is

performed by people who are more specialised and maybe removed from day-to-day activities. It is usually at

this time that management information systems (MIS)

are required.

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Definitions of MIS - history

The emergence of MIS goes back to the 1950s.The first electronic computer developed for business

purposes in 1951 must have posed many interesting

questions as to what to do with it.

In fact, early business applications centred onroutine clerical and accounting operations such as

payroll and billing.

These were mainly transaction applications,

named simply because they involved processingaccounting transactions.

The machines were prone to failure, difficult to

operate and painstakingly slow

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Advances in disk technology made it possible to accessdata more quickly and in different ways.

New programming systems helped to develop and refine

operating systems.

Each development contributed to the rise of MIS.

As systems developed, though the transaction

processing part of the system provided the operational

data necessary to run an organisation more efficiently on

a day-to-day basis, the management component became

more important.Systems started to provide reports and information

that enabled managers to make more effective

decisions.

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The increasing appearance of computer and communication

technologies in offices during the 1970s and 1980s gave rise

to links with MIS and created the potential for convergence,

based upon the needs of users around each organisation.

Some organisations used accounting information systems(AIS) and office information systems (OIS) for local

information and decision-making needs of various

departments and subsets of an organisation.

In many instances such user-led developments led todisparate islands of technology within the organisation.

In contrast, the aim today is for integration of such

technologies across the organisation.

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Definitions of MIS

The more recent role for information technologies isto think about them as a strategic weapon.

For example, information technology (IT) has the

power to:

change industry structures and alter the rules of

competition

create opportunities for competitive advantagewith the provision of new ways to outperform rivals

spawn new businesses and opportunities, often

from within an organisation's existing operations.7


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Definitions of MIS

Deconstructing the term MIS enables us to defineeach word in a business context:

Management - being managed or people

managing a business. Over recent years

management has become more scientific andsystem-oriented.

Information - knowledge made available to

people within an organisation.

Systems - sets of connected things or parts

within an organisation which tie the planning and

control by managers to the various operations.

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Definitions of MIS

There are a number of definitions of MIS, each with aslightly different emphasis or focus. Lucey (1995)

emphasises the decision focus of his definition:

'a system to convert data from internal and externalsources into information and to communicate that

information, in an appropriate form, to managers at

all levels in all functions to enable them to make

timely and effective decisions for planning, directingand controlling the activities for which they are

responsible.'

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Definitions of MIS

MIS are different from data-processing systems because

the key element is management involvement, so theemphasis is upon the use of information through user

processes and not how it is provided through MIS

processes

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Definitions of MIS

Parker and Case (1993) consider:

'a management information system (MIS) to be any

system that provides people with either data or

information relating to an organisation's operations.'

They then describe who the system is focused upon.

'Management information systems support the activities

of employees, owners, customers, and other key peoplein the organisation's environment - either by efficiently

processing data to assist with the transaction work load

or by effectively supplying information to authorised

people in a timely manner.' 11


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Definitions of MIS

MIS include a number of subsystems, such as the following.

1.Transaction processing systems (TPS) comprise routine

day-to-day accounting operations.

2.Management reporting systems (MRS) generate reports

for decision-making processes.

3.Decision support systems (DSS)provide a set of easy-to-

use modelling, retrieving and reporting requirements and areused by people making decisions.

4.Office information systems (OIS) involve the use of

computer-based office technologies such as desktop software

applications, including e-mail, teleconferencing and desktop

publishing.

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Definitions of MIS

It could be argued that managers have always

sought and utilised information, but in the pastmany were forced to rely upon haphazard

sources.

A modern management information system raises

the process of managing from the level ofguesswork and piecemeal information to the

development of a system of information with

sophisticated data process which enables

managers to solve complex problems and makeinformed decisions.

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Definitions of MIS

As can be seen in

Figure, MIS tie

together the three

components of

management,

information and

systems.

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Definitions of MIS

According to Murdick and Munson (1986), the

management information system:

'not only provides information to assist

managers in making decisions, but it may

also be designed to provide decisions for

repetitive classes of problems. The MIS, by

providing a common set of data and

information available to all managers,

integrates the management of the company.

Thus the company as a whole may be truly

operated as a system, with all elements

working towards common objectives.'

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Definitions of MIS

Information extracted from a management

information system might therefore be at avariety of levels for a range of users.

For example:

1.Strategic planning.The strategic planning process uses both

internal and external sources of information.

In a dynamic and changing business

environment information is geared towards

helping an organisation to use strategic

planning to adapt.

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Definitions of MIS

2. Management control. This is the process by which

managers ensure that resources are obtained andused effectively and efficiently in the

accomplishment of the organisation's objectives.

Control involves planning. For example, are sales

ahead of budget, does cost data support costing

estimates, are policies in line with predictions? Mostof the information for management

control is generated internally.

3. Operational control. This ensures that tasks are

carried out efficiently. At this level, tasks have been

specified and methods determined. Information for

operations involves providing those involved with

the responsibility of executing tasks with the

minimum of expenditure on resources. 17


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Definitions of MIS

As so many parts of an organisation'soperations and information processes

depend upon information, it is considered to

be a key resource within every organisation.

Skilfully handling information has become animportant business objective.

Though the terms data and information are

used by some to mean the same thing, there

are a number of differences.

For example:

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Definitions of MIS

data refer to stored facts - as data becomefiltered and disseminated, they take on

meaning, and so become information

data are inactive and just exist, whereasinformation is active and relevant and

provides a basis for things to be done

data are technology-based, whereasinformation is business-based and facilitates

business decision-making

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Definitions of MIS

though data may be gathered

from various sources, it is the

process of customising them

for the needs of various users

that transforms them into

information

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Definitions of MIS

As managers are frequently presented with statements

containing information and data, they need toascertain their quality. Information must bepertinent.

This means that it must relate to the organisation and

to matters of importance for the people dealing with

that information to enable them to deal with an issue.

Information must also be timelyand available when

required. Clearly, users do not want to be confused by

misleading information, so it must also be accurate.

Good information should therefore make a difference

and reduce uncertainty.

CASE STUDY: Comparing different systems

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Definitions of MIS

There are many different sources of information

for effective decision-making. Informationsources exist from many different potential

sources. A clear division can be made between

internal and external data.

Internal data are generated and made available

within an organisation. Such data may come

from a variety of sources such as cost

accounting information. Other data may be

more informal, for example word-of-mouth,

facts, gossip and from personal observations.

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Definitions of MIS

External data are those extracted from the

organisation's external environment. Forexample, it could include news of the launch of

a new product by a competitor, changes in

exchanges rates or new technological

developments by other organisations in anindustry. Informal external data would include

personal contacts within the external

environment. Given the broader nature of

external data, they are particularly useful for

making decisions about the direction of the

organisation in the future such as those for

strategic planning.23


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Definitions of MIS

Examples of formal data might include:

Internal External

Management reports Information services

Management audits Trade publications

Meetings Industry consultantsForecasts Forums

Examples of informal data might include:

Internal External Conversations Networking

Grapevine Trade shows

Observation Personal contacts

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Definitions of MIS

Internal and external data may also vary according to the

nature and type of business

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USE OF INFORMATION

The way in which an organization is structured is called its

organizational structure, and often this will determine how

information is used. For example, an organization may be

structured in the following ways:

By function - departmentalizing by work function

such as marketing, operations or personnel might mean

that organizations using this approach have a separate

MIS department. One of the advantages of this isthat all of the specialists are grouped together where they will have

specific information needs and requirements.

By product - where organizations such as Unilever or

Procter & Gamble have diverse product ranges, they may

structure along product lines. Organizations structuringin this way may have a separate MIS unit within each of

the major divisions.

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USE OF INFORMATION

By customer- publishers of books typically structure

their divisions by customer type. For example, this

book

has been developed by an educational publisher based

upon the needs of people in the institution you attend.

As a result, this influences the company's informationrequirements, both for the division and the

organisation as a whole.

By geography - where organisations are physically

dispersed, the local operation will require aninformation system which not only integrates it into

head office but also provides it with the flexibility it

requires to be competitive.27


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USE OF INFORMATION

Within large organizations, a combination ofstructural approaches is usually found.

For example, at corporate level strategic

activities usually have a functional orientation

such as marketing or group personnel.The next level of structuring may be by product

group, area or customer group.

The way an organization is structured will have a

significant effect upon how an organization'sinformation system evolves.

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USE OF INFORMATION

Traditional systems were centred upon different

departmental functions and processes. As aresult, data were treated as a separate

component of functional analysis and process

design. Traditional systems therefore replicated

existing processes and applications to produceuncoordinated and incompatible files in each

department or associated with each process.

The notion of integration mechanisms and

systems had simply not been addressed.

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USE OF INFORMATION

Integration of data processing involvesrearranging systems development

through organization-wide planning of

information requirements.

The focus then shifts from a process ordepartmental application through to a

data orientation.

This new data-centred approach is often

termed information engineering as itviews data as the foundation for the

design of an information system.

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USE OF INFORMATION

Where integration takes place

MIS can be accessed and

shared by multiple processesand users.

The focus point

of the stable data model is

integrated informationavailable across the

organisation, with individual

applications seen

as peripheral.

An example of

an integrated data-centred

approach is shown in the

figure 31


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USE OF INFORMATION

The formal organisation has a pattern of

relationships defined by official rules, policies

and systems. It is usually the one depicted on

organisation charts with diagrams showing

official relationships, departments and levels of

management.

Within the formal organisation there is:

a unity of objectives and effort

well-defined relationships, duties and

responsibilities

stability and predictability

clear hierarchy of control and command.

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USE OF INFORMATION

Informal organisation focuses more upon people.

Information arises from social relationshipsbetween teams of individuals who develop informal

ways of getting things done.

Informal organisation exists within every organisation

to some extent.Social groups develop their own beliefs and ways of

getting things done which are sometimes not the

same as that of the formal organisation.

For example, informal organisation may:

use unofficial methods which are more efficient

provide more satisfaction for employees

coordinate activities more efficiently

be more flexible and improve communication.33


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USE OF INFORMATION

According to Lucey (1995),

'Organisations choose structures which are thoughtto be most efficient for their particular

circumstances and operating conditions'.

This means that in order to be flexible they tend to

combine the best features of functional, productand geographical organisational structures.

Such organisations are often viewed as organic

because they adapt to changing conditions and

develop features such as network controlstructures, motivating management styles, flexible

working practices and flatter organisational

structures, all of which help to empower employees

through the use of information and technologies.34


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USE OF INFORMATION

One particular concept that has developed from

high technology industries is that of the matrix

structure.Within a matrix structure, project teams

are combined with a conventional functional

structure.

The matrix is thus a combination of structureswhich enables employees to contribute to a

number of activities or teams.

In information terms it enables team members to

use information to focus upon a number of aimsat the same time, while also providing the

flexibility to respond to new markets and

opportunities as and when they arise.35


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USE OF INFORMATION

The terms centralised and decentralised are

important management concepts that are

inextricably linked to the use and

distribution of information.

They are often used to describe the

distribution of authority and decision-

making within an organisation.

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USE OF INFORMATION

Centralised organisations are organisations with

a clear-cut hierarchical structure in whichdecisions are made at the top of the hierarchy.

Within such organisations there are likely to be

different information requirements at the top of

the hierarchy which are distinct from thosefurther down.

By contrast, within decentralised organisations

decision-making is distributed as far down the

management hierarchy as possible. Thisprovides lower-level managers with

considerable practice in making decisions and

prepares them for moving up the hierarchy.37


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USE OF INFORMATION

Issues of confidentiality

Though it is often said that no system can be 100% secure,

confidentiality, security and privacy are key issues when

dealing with information.

One of the main elements in developing an information

system is to ensure that databases and systems are

secure.

There are a number of reasons that these issues are of

fundamental importance. For example, accidental,

negligent or intentional disclosure of information tounauthorised people may enable them to use that

information in a way that is neither intended nor legal.

Similarly, information may be destroyed, modified or

used incorrectly if it gets into the wrong hands.38


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USE OF INFORMATION

Confidentiality refers to the limits on the use of

information collected from individuals. This meansthat personal information should only be distributed

to those who have a need to know and use that

information, and should not be disseminated

outside the organisation.

In order for information to be confidential it must be

secure. Security is a technical condition for

achieving privacy and confidentiality. It refers to the

policies, procedures and technical measures used

to prevent unauthorised theft, access or alterationto record systems. It can be promoted with a range

of tools designed to protect access to software,

hardware and communications networks.39


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USE OF INFORMATION

Privacy is a broader term often used toencompass security and confidentiality.

Three elements to privacy are:

limits on the collection of information

specific rights of individuals to access,

review and challenge information kept

about them management responsibility for record

systems.

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USE OF INFORMATION

Data Protection Act

The Data Protection Act 1984 was passed to

regulate the use of information for

processing systems which relate to

'individuals and the provision of servicesin respect of such information'.

The Act covers only the holding of computer

records and not manual records.

The Act requires those using personal data toregister with the Data Protection Register.

Registered data users must then follow the

eight principles of the Act.41


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USE OF INFORMATION1. Data must be obtained and processed fairly and

lawfully.

2. Data must be held only for specific lawful purposeswhich are described in the entry into the register.

3. Data should not be used in any other way than those

related to such purposes.

4. Data should be adequate, relevant and not excessivefor

those purposes.

5. Personal data should be accurate and kept up to date.

6. Data should be held no longer than is required.

7. Individuals should be entitled to access their data and,

if necessary, have it corrected or erased.

8. Data must be protected with appropriate security

against unauthorised access or alteration.42


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USE OF INFORMATION

There are a number of exemptions to the Act,

including information kept by government

departments for reasons of national security,information the law requires to be made

public, mailing lists (as long as the subjects

are asked if they object to data being held for

this purpose), payrolls and pensions

information, clubs and personal data held by

individuals in connection with recreational or

family purposes.

To ensure that data is held only for legitimate

purposes, many organisations appoint a

data protection officer.

CASE STUDY: Code of Fair Information Practice43

Documents

MIS Chapter1- Introduction