CHAPTER FOUR

MIS, MANAGEMENT AND ORGANIZATION

Introduction

In the previous chapters we discussed about the fundamental concepts of MIS. Those concepts
help us to understand the issues in management information system. From now on, we are going
to see how MIS can be applied in the organization and management.

4.1. LEVELS OF MANAGEMENT

Before considering the information requirements of management, the different levels of

management must be explained. The information requirements of managers will vary depending
on their specific role. Within an organization is normally divided into three different levels:
strategic, tactical and operational.

Strategic level management: is concerned with monitoring and controlling organization as a

whole. Making decision in the areas such as opening new shops and factories or investment in
new product lines is done at strategic level. Managers concern is at the long-term objectives and
position of the company.

Tactical level: are involved with implementing the decision of strategic managers and ensuring
that the different divisions or departments within the organization are operating correctly.

Operating level managers: are responsible for the control of the day-to-day operation of the
organization, reporting queries or problems back to tactical management for decision as
necessary.

All the three levels involve both planning and controlling activities. However, at the strategic end
the emphasis is on planning whereas at the operational level it is on control. You remember that
all levels of management are involved in planning and controlling activities, although the mix
varies according to the level of management.

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4.2. Information Requirement at Different Levels

As has been discussed, the different decision levels within an organization need different types
of information. The information system providing that information must therefore vary so that
appropriate information is provided to each level of management.

Operational information systems

Operational decisions are programmable and require specific and detailed information. Many of
the decisions taken are able to be programmed into the computer. The outputs from these
systems are simple reports and sorted lists of transactions. Also used by operational managers
are reports comparing their performance with target, and with other operational managers.

Tactical levels information systems

Tactical information system is also largely fed from transaction processing system, although it
may also come from external sources. Tactical managers must make use of a wider variety of
data. Many tactical management information systems (MIS) will be informal and the tactical
manager will be responsible for knitting together the different strands of information available.
The formal MIS will concentrate on exception reporting as well as summaries of performance
within the manager’s sphere of influence. If exception report triggers action by the manager,
there is likely to be ability to delve deeper into the detailed operational data.

Strategic level information system

There is much wider range of information needs at the stage of the strategic level, which are
considerable more difficult to predict than at the other level of management. This usually leads a
greater reliance on informal and ad hoc information systems. The information system needs of
the organization have led to different types systems being developed- MIS, DSS, EIS, and ES.

4.3. Information Requirement of Different Functional Areas of Organization

In addition to the management levels they support basically information system can be classified
by the specific organizational function they serve. Following you will see information systems
which support the major functions of an organization.

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Sales and marketing information system: The sales and marketing functions is responsible for the
selling of organization’s product or service. Marketing is concerned with identifying the
customers for the firm’s products or services, determining what they need or want, planning and
developing products and services to meet their needs, advertising and promoting these products
and services. Sales are concerned with contacting customers, selling the products, selling the
products and services, taking order, and following up on sales. Sales and marketing information
systems support these activities.

Manufacturing and production systems: The manufacturing and production function is

responsible for actually producing the firm’s goods and services. Manufacturing and production
systems deal with the planning, development, and maintenance of production facilities; the
establishment of production goals, the acquisition, storage, and availability of production
materials; the scheduling of equipment, facilities, materials and labor required to produce the
product. Manufacturing and production systems support these activities.

Financing and accounting system: the finance function is responsible for managing the firm’s
financial assets such as cash, stocks, bonds and other investments in order to maximize the return
on these financial assets. The financial function is also in charge of managing the capitalization
of the firm (finding new financial assets in stocks, bonds, other forms of debt). The accounting
function is responsible for maintaining and managing the firm’s financial records-receipt,
disbursements, depreciations, patrol-to account for the flow of funds in a firm.

Human resource systems: The human resource function is responsible for attracting, developing
and maintaining the firm’s workforce. Human resource information system support activities
such as identifying potential employees, maintaining complete records on existing employees,
and creating programs to develop employee’s talents and skills.

4.4. Information, Management and Decision

4.4.1. Introduction to Decision Making

Information systems have helped managers to communicate and distribute information; however,
they have provided only limited assistance for management decision making. Because decision
making is an area that system designers have sought most of all to affect, we now turn attention

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to this issue. In this section we introduce the process; in the next two sections we examine
models of individual and organizational decision making.

4.4.2. Levels of Decision Making

Differences in decision making can be classified by organizational level. Anthony (1965)

grouped decision making in an organization into three categories: strategic, management control,
and operational control.

Strategic decision making

It focuses on determining the long-term objectives, resources, and policies of an organization. A

major problem at this level of decision making is predicting the future of the organization and its
environment and matching the characteristics of the organization to the environment.

Management control

It focuses on monitoring how efficiently or effectively resources are utilized and how well
operational units are performing. It requires close interaction with those who are carrying out the
tasks of the organization; it takes place within the context of board policies and objectives set out
by strategic decision making; and as the behaviorists have described, it requires an intimate
knowledge of operational decision making and task completion.

Knowledge-level decision making

It Deals with evaluating new ideas for products and services; ways to communicate new
knowledge; and ways to distribute information throughout the organization.

Operational control

It involves deciding how to carry out the specific tasks of the specified by upper and middle
management decision makers. Determining which unit will carry out tasks, establishing criteria
for completion and resource utilization, and evaluating outputs all require decisions about
operational control.

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4.4.3. Individual Models of Decision Making

A number of models attempt to decide how individuals make decision. The basic assumption
behind all these models is that human beings are in some sense rational.

Rational Model

A model of human behavior based on the belief that people, organization, and nations engage in
basically consistent and value-maximizing calculations or adaptations within certain constraints.

The rational model works as follows; an individual has goals or objectives and has payoffs,
utility, or preferences functions that permit that person to rank all possible alternatives actions by
the action’s contribution to the desired goals. The actor is presented with and understands
alternative course of action. Each alternative and has a set of consequences. The actor chooses
the alternative and consequences that rank highest in terms of the payoff functions; that is, that
contribute most to the ultimate goals. In a rigorous model of rational action, the actor has
comprehensive rationality, can accurately rank all alternatives and consequences, and can
perceive all alternatives and consequences.

There are three criticisms:

 In a human time frame, the model is computationally impossible

 It lacks realism in the sense that most individuals do not have singular goals and a
consciously used payoffs function, and they are not able to rank all alternatives and
consequences.

 In real life the idea of a finite number of alternative and consequences makes no sense.

Strong sides:

 It is remains a powerful and attractive model of human decision making

 It is rigorous, simple and instructive

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Bounded Rationality and Satisfying

Satisficing- choosing the first available alternative to move closer toward the ultimate goals
instead of searching for all alternatives and consequences. Bounded rationality–is based on the
idea that people will avoid new, uncertain alternative and sticks with tried-and true and
procedure.

Individuals have many goals-not a single consistent- and therefore they try to divide their goals
into separate programs, avoiding interdependencies when possible. In this way, rationality is
bounded.

“Muddling Through”

Is a method of decision making which involves successive limited comparisons where the test of
a good decision is whether people agree on it. First, individuals and organizational have
conflicting goals-they want freedom and security, rapid economic growth and minimal pollution,
faster transportation and minimal disruption due to highway construction, and so forth people
have to choose among policies that contains various mixes of conflicting goals.

Because of bounded human rationality, Lindblom proposes incremental decision making or

choosing decisions most like previous policy.

Finally, choices are not made. Instead, decision making is a continuous process in which final
decisions are always being modified to accommodate changing objectives, environments, value
preferences, and policy alternates provided by decision makers.

Psychological Types and Frames of Reference

Psychologists find that humans differ in how they maximize their values and in the frames of
reference they use to interpret information and make choices.

All decision makers choose goals, but they differ in terms of gathering and evaluating
information. Systematic thinkers impose order on perceptions and evaluation; intuitive thinkers
are more open to unexpected information and use multiple models and perspective when
evaluating information.

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Cognitive style – describes underlying personality disposition toward the treatment of
information, the selection of alternatives, and the evaluation of consequence. McKenney and Kee
(1974) describe two cognitive styles that have direct relevance to information systems: system
versus intuitive types.

Systematic decision making- is a cognitive style that describes people who approaches a
problem by structuring it in terms of some formal methods.

Intuitive decision makers - cognitive style that describes people who approach a problem with
multiple methods in an unstructured manner, and using trial and error to find a solution.

Neither of the types is superior to other, but some types of thinking are more appropriate for
certain tasks and roles in the organization.

4.4.4. Organizational Models of Decision Making

Model of decision making that takes into account the structure and political characteristics of an
organization. Bureaucratic, political, and even “garbage can” models have been proposed to
describe how decision making takes place in organization.

Bureaucratic Models

It is Model of decision making where decisions are shaped by the organizations standard
operating procedure (SOPs).

Goals are determined by resources constraints and existing human and capital resources; SOPs
are combined into Programs, programs into repositories; these determine what policies will be
chosen. The primary purpose of the organization is to survive; uncertainty reduction is the
principal goal. Policies are chosen that are incrementally different from the past.

Political Models of Organizational Choice

It is a model of decision making where decision results from completion and bargaining among
the organization interest groups and key leaders.

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The key players are involved in influence, power and bargaining. Organizational outcome are
determined by the beliefs and goals of players, their skills in playing the game, the resources they
bring to bear, and the limits on their attention and power.

Political models of organizations depict decision makers as having limited attention spans;
participating in tens (sometimes in hundreds) of games and issues; and being susceptible to
misperception, extraneous influences, miscommunication, and pressures of impending deadlines.
Players in the game entirely focus on short-term problem.

“Garbage can” Model

It is a model of decision making that states that organizations are not rational and that decisions
are not rational and that decisions are solutions that become attached to problems for accidental
reasons.

The preceding models of organizational choice take as their starting point the basic notion that
organizations try to adapt, and for the most part do so successfully, to changing environmental
conditions. Presumably, over the long run, organizations develop new programs and to meet their
goals of profit, survival, and so on.

In this model organizations are non-adaptive, temporary, and disappear overtime. Organizational
decisions are results of interactions among streams of problem, potential actions, participants,
and choice.