MANAGEMENT INFORMATION SYSTEM

Definition : Management Information Systems (MIS) is the term given to the discipline focused
on the integration of computer systems with the aims and objectives on an organization. 

The development and management of information technology tools assists executives and the
general workforce in performing any tasks related to the processing of information. MIS and
business systems are especially useful in the collation of business data and the production of
reports to be used as tools for decision making.

Management Information Systems (MIS), are information systems, typically computer based,
that are used within an organization. It is described an information system as "a system
consisting of the network of all communication channels used within an organization".

An information system is comprised of all the components that collect, manipulate, and
disseminate data or information. It usually includes hardware, software, people, communications
systems such as telephone lines, and the data itself. The activities involved include inputing data,
processing of data into information, storage of data and information, and the production of
outputs such as management reports.

As an area of study it is commonly referred to as information technology management. The study

of information systems is usually a commerce and business administration discipline, and
frequently involves software engineering, but also distinguishes itself by concentrating on the
integration of computer systems with the aims of the organization. The area of study should not
be confused with Computer Science which is more theoretical and mathematical in nature or
with Computer Engineering which is more engineering.

In business, information systems support business processes and operations, support decision
making, and support competitive strategies.

There are several frameworks that can be used to define and describe management information
systems. More than one will be used to discuss important concepts. Because more than one is
used, it indicates the difficult of capturing the key concepts of what is a management information

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system. Indeed, what is viewed as an effective and useful management information system is one
environment may not be of use or value in another.

Lastly, the historical perspective of management information systems cannot be ignored. This

perspective gives a sense of how these systems have evolved, been refined and adapted as new
technologies have emerged, and how changing economic conditions and other factors have
influenced the use of information systems.

The main characteristics of the management information system are:

1. The MIS supports the data processing functions of transaction handling and record keeping.

2. MIS uses an integrated database and supports a variety of functional areas.

3. MIS provides operational, tactical and strategic levels of the organization with timely, but for
the most part structured information (ad-hoc query facility is not available0.

4. MIS is flexible and can be adapted to the changing needs of the organization.

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 Decisions

• Made up of a composite of information, data, facts and belief.

• Data by itself does not constitute useful information unless it is analyzed and processed.

A decision is a choice between two or more alternatives. If you only have one alternative, you do
not have a decision.

A high quality decision comes with a warrant: a guarantee. Not a guarantee of a certain outcome
—remember this is the real world we’re talking about, and there are certain things that just aren’t
knowable until after they happen—but a warranty that the process you used to arrive at a choice
was a good one.

This level of confidence implies a process: a set of steps and rules that provide an assurance of
thoroughness and rigor. This means breaking decisions down into component parts and doing
one thing at a time.

The framework we use for breaking down and working decisions of virtually any size and
complexity begins with two large ideas: declaring a decision and working a decision. Each of
those larger elements is then broken down into three sub components, or what we call Decision
Points, which are illustrated in the following diagram.

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 Stages in the decision making process

Stage of Decision Making Information Requirement

1 Intelligence Exception reporting
2 Design Simulation prototype
3 Choice "What-if simulation
4 Implementation Graphics, charts

In practice, the stages of decision making do not necessarily follow a linear path from
intelligence to design, choice and implementation. Consider again the problem of balancing the
costs and benefits of establishing local buying points for the National Milling Corporation. At
any point in the decision making process it may be necessary to loop back to a previous stage.
For example, one may have reached stage 3 and all but decided that having considered the
alternatives of setting up no local buying points, local buying points in all regions, districts or
villages, the government decides to increase the amounts held in the strategic grain reserve. This
could cause the parastatal to return to stage 2 and reassess the alternatives. Another scenario
would be that having implemented a decision one quickly receives feedback indicating that it is

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not proving effective. Again, the decision maker may have to repeat the design and/or choice
stage(s).

Thus, it can be seen that information system designers have to take into account the needs of
managers at each stage of the decision making process. Each stage has its own requirements.

Decision Levels

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We all recognize that some decisions are more important than others, whether in their immediate
impact or long term significance. As a means of understanding the significance of a decision so
that we can know how much time and resources to spend on it, three levels of decision have been
identified:

Figure 1: Levels of Decision-Making

1. Strategic :  Strategic decisions are the highest level. Here a decision concerns general
direction, long term goals, philosophies and values. These decisions are the least structured and
most imaginative; they are the most risky and of the most uncertain outcome, partly because they
reach so far into the future and partly because they are of such importance.

For example: Decisions about what to do with your life, what to learn, or what methods to use to
gain knowledge (travel, work, school) would be strategic. Whether to produce a low priced
product and gain market share or produce a high priced product for a niche market would be a
strategic decision.

Strategy Drives Decision Making

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With fewer geographic barriers and always-on connectivity, your organization
must behave differently to stand out from the crowd. You might choose to perform activities that
your competitors don't perform, not perform activities your competitors do, or (most likely)
perform the same activities but perform them differently.

Critical to behaving differently is an ability to decide differently. Deciding when to omit or add

an activity and when and how to change the way you perform an activity are essential. A
strategic advantage must make an impact on strategy, which means it must change your
decisions.

The decisions you must change could be occasional strategic decisions, such as whether to
acquire a certain company or enter a new market. Or they could be more tactical and operational,
focused on how you treat a customer the next time he calls your call center or how you price a
product on your Web site. All these decisions must be driven by your strategy if you are to
deliver effectively on that strategy. Although your organization probably focuses on getting
major strategic decisions correct, you might struggle to keep your operational activities—the
way front-line members of staff and applications behave—synchronized with your strategic
plans. For example:

 You might want to treat all gold customers a certain way, but you have a selfservice
application that doesn't differentiate between customers.
 You might want to get more aggressive about retaining customers who are likely to leave,
but your call center representatives have too many campaigns to remember, so they treat
everyone the same.
 You might want to offer dynamic pricing to suppliers, but the software that drives your
Web site does not use the pricing algorithms sales representatives use.

Unless your operational activities reflect your strategy accurately, your organization can't
succeed. You can't even be said to be implementing your strategy.

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The problem of ensuring that your operational activities match your strategy is exacerbated by
the need for business agility. Business agility is critical to survival in a rapidly changing world,
so your strategy can't be static. You must constantly refine and update it to keep up with
competitors, market shifts, and consumer preferences.

Most executives say their companies are facing a more competitive environment than they were
five years ago; in fact, 85 percent say "more" or "much more." Organizations that want to
compete effectively must change continuously and base those changes on feedback about what is
and isn't working. Those unwilling or unable to do so must recognize that they will soon be
competing with organizations that have changed, if they aren't doing so already. No organization
can remain immune; all will have to change somehow.

Not only must your strategy change more rapidly, but you also have more information about why
and how it must change than ever before. The growth in business intelligence and performance
management systems means you have more insight into how well (or poorly) you are doing. To
respond effectively to this new understanding, however, delivering new processes, skills, and
expertise rapidly to front-line workers and information systems is essential.

For instance, if your analysis of last week's sales shows that a competitor is eating into your
sales, and you decide a new pricing model is required, many factors influence how quickly you
can respond. Your cultural willingness to change, for example, or your escalation and sign-off
processes determine how quickly you go from recognizing a problem to intending to respond to
it. The key issue, however, is likely to be how quickly you can move from that intent to a change
in the operational behavior that implements your new strategy. After all, if your operations
haven't

2. Tactical : Tactical decisions support strategic decisions. They tend to be medium range,
medium significance, with moderate consequences.

 Acquire and arrange the resources (Computers, people etc) to meet the goals of an
organization.

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  Define the detailed tasks to be carried out at the operational level.

 Information needed involves review, summarization and analysis of data to help plan and
control operations and implement policy that has been formulated by upper management.

 Information is usually given to middle managers as summarized reports.

 Deals with semi structured decisions. (Tactical decisions)

 Semi structured decisions that must be made without a base of clearly defined
informational procedures. In most cases a semi structured decision is complex, requiring
detailed analysis and extensive computations

For example: If your strategic decision were to become a forest ranger, a tactical decision would
include where to go to school and what books to read. Or if your company decided to produce a
low priced product, a tactical decision might be to build a new factory to produce them at a low
manufacturing cost.

TACTICAL decision making has the added responsibility of

1. Making sure that current operations remain sustainable.

2. Making sure that the organization as a whole is successful in what it sets out to
accomplish. 
3. Making sure that sufficient synergies are unlocked from current operations to improve the
organization as a whole.
4. Making sure that new operations are designed and implemented so as to optimize the
value they will unlock for the organization.

3. Operational : These are every day decisions, used to support tactical decisions. They are often
made with little thought and are structured. Their impact is immediate, short term, short range,
and usually low cost. The consequences of a bad operational decision will be minimal, although

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a series of bad or sloppy operational decisions can cause harm. Operational decisions can be
preprogrammed, pre-made, or set out clearly in policy manuals.

For example: If your tactical decision is to read some books on forestry, your operational
decision would involve where to shop for the books. You might have a personal policy of
shopping for books at a certain store or two. Thus, the operational decision is highly structured:
"Whenever books are needed, look at Joe's Books."

An important comment should be made here. Issues should be examined and decisions should be
made at all of these levels. If you discover that nearly all of your thinking and decision making is
taking place at the operational level, then you are probably not doing enough strategic thinking
and planning. As a result you will lead a reactive life, responding only to the forces around you
and never getting control of your life, your direction or your goals.

Operational control decisions: These involve making decisions about carrying out the " specific
tasks set forth by strategic planners and management. Determining which units or individuals in
the organization will carry out the task, establishing criteria of completion and resource
utilization, evaluating outputs - all of these tasks involve decisions about operational control.

The focus here is on how the enterprises should respond to day-to-day changes in the business
environment. In particular, this type of decision making focuses on adaptation of the marketing
mix, e.g. how should the firm respond to an increase in the size of a competitor's sales force?
should the product line be extended? should distributors who sell below a given sales volume be
serviced through wholesalers rather than directly, and so on.

Within each of these levels, decision making can be classified as either structured or
unstructured. Unstructured decisions are those in which the decision maker must provide insights
into the problem definition. They are novel, important, and non-routine, and there is no well-
understood procedure for making them. In contrast, structured decisions are repetitive, routine,
and involve a definite procedure for handling them so that they do not have to be treated each
time as if they were new.

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Structured and unstructured problem solving occurs at all levels of management. In the past,
most of the success in most information systems came in dealing with structured, operational,
and management control decisions. However, in more recent times, exciting applications are
occurring in the management and strategic planning areas, where problems are either semi-
structured or are totally unstructured.

Making decisions is not a single event but a series of activities taking place over time. Suppose,
for example, that the Operations Manager for the National Milling Corporation is faced with a
decision as to whether to establish buying points in rural locations for the grain crop. It soon
becomes apparent that the decisions are likely to be made over a period of time, have several
influences, use many sources of information and have to go through several stages. It is worth
considering the question of how, if at all, information systems could assist in making such a
decision. To arrive at some answer, it is helpful to break down decision making into its
component parts.

The literature has described 4 stages in decision making: intelligence, design, choice and
implementation. That is, problems have to be perceived and understood; once perceived
solutions must be designed; once solutions are designed, choices have to be made about a
particular solution; finally, the solution has to be implemented.

Intelligence involves identifying the problems in the organisation: why and where they occur
with what effects. This broad set of information gathering activities is required to inform
managers how well the organisation is performing and where problems exist. Management
information systems that deliver a wide variety of detailed information can be useful, especially
if they are designed to report exceptions. For instance, consider a commercial organisation
marketing a large number of different products and product variations. Management will want to
know, at frequent intervals, whether sales targets are being achieved. Ideally, the information
system will report only those products/product variations which are performing substantially
above or below target.

Designing many possible solutions to the problems is the second phase of decision making. This
phase may require more intelligence to decide if a particular solution is appropriate. Here, more

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carefully specified and directed information activities and capabilities focused on specific
designs are required.

Choosing among alternative solutions is the third step in the decision making process. Here a
manager needs an information system which can estimate the costs, opportunities and
consequences of each alternative problem solution. The information system required at this stage
is likely to be fairly complex, possibly also fairly large, because of the detailed analytic models
required to calculate the outcomes of the various alternatives. Of course, human beings are used
to making such calculations for themselves, but without the aid of a formal information system,
we rely upon generalisation and/or intuition.

Implementing is the final stage in the decision making process. Here, managers can install a
reporting system that delivers routine reports on the progress of a specific solution, some of the
difficulties that arise, resource constraints, and possible remedial actions. Table 9.1 illustrates the
stages in decision making and the general type of information required at each stage.

Example - In 2004, an Opinion Research Corporation survey of executives found a clear

opportunity to automate and improve decisions. Operational decisions were high-impact, but
only a fraction had been automated, and maintenance cost and time to market were real
problems. Specifically, the findings included the following:

 More than 90 percent felt that front-line operational decisions affected profitability.
 About half had not yet automated about 25 percent of these decisions, and nearly 80
percent still lacked automation for more than half of them.
 Making the right decisions with a high degree of accuracy and precision was very
important to more than 90 percent of respondents. More than 60 percent also rated
consistency of decision making and effective management as important.
 85 percent expressed difficulty in changing decision-making criteria in their systems,
with more than 50 percent saying it took months to get business changes implemented in
production.
 60 percent felt that automated decisions were carried out inconsistently or they were
forced to deal with redundant logic in multiple systems to prevent this problem.

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  70 percent of chief information officers/chief technology officers (CIOs/CTOs) didn't
believe they were getting the most value they could from their data. The most common
reason was that their inability to blend business rules with data prevented them from
maximizing the value of their data.

Case Study on MIS: Information System in Restaurant

A waiter takes an order at a table, and then enters it online via one of the six terminals located in
the restaurant dining room. The order is routed to a printer in the appropriate preparation area:
the cold item printer if it is a salad, the hot-item printer if it is a hot sandwich or the bar printer if
it is a drink. A customer’s meal check-listing (bill) the items ordered and the respective prices
are automatically generated. This ordering system eliminates the old three-carbon-copy guest
check system as well as any problems caused by a waiter’s handwriting. When the kitchen runs
out of a food item, the cooks send out an ‘out of stock’ message, which will be displayed on the
dining room terminals when waiters try to order that item. This gives the waiters faster feedback,
enabling them to give better service to the customers. Other system features aid management in
the planning and control of their restaurant business. The system provides up-to-the-minute
information on the food items ordered and breaks out percentages showing sales of each item
versus total sales. This helps management plan menus according to customers’ tastes. The
system also compares the weekly sales totals versus food costs, allowing planning for tighter cost
controls. In addition, whenever an order is voided, the reasons for the void are keyed in. This
may help later in management decisions, especially if the voids consistently related to food or
service. Acceptance of the system by the users is exceptionally high since the waiters and
waitresses were involved in the selection and design process. All potential users were asked to
give their impressions and ideas about the various systems available before one was chosen.

Questions:

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 1. In the light of the system, describe the decisions to be made in the area of strategic
planning, managerial control and operational control? What information would you
require to make such decisions?
2. What would make the system a more complete MIS rather than just doing transaction
processing?
3. Explain the probable effects that making the system more formal would have on the
customers and the management.

Solution

1. A management information system (MIS) is an organized combination of people,     hardware,

communication networks and data sources that collects, transforms and distributes information in
an organization. An MIS helps decision making by providing timely, relevant and accurate
information to managers. The physical components of an MIS include hardware, software,
database, personnel and procedures.

Management information is an important input for efficient performance of various managerial

functions at different organization levels. The information system facilitates decision making.
Management functions include planning, controlling and decision making. Decision making is
the core of management and aims at selecting the best alternative to achieve an objective. The
decisions may be strategic, tactical or technical. Strategic decisions are characterized by
uncertainty. They are future oriented and relate directly to planning activity. Tactical decisions
cover both planning and controlling. Technical decisions pertain to implementation of specific
tasks through appropriate technology. Sales region analysis, cost analysis, annual budgeting, and
relocation analysis are examples of decision-support systems and management information
systems.

There are 3 areas in the organization. They are strategic, managerial and operational control.

Strategic decisions are characterized by uncertainty. The decisions to be made in the area of
strategic planning are future oriented and relate directly to planning activity. Here basically

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planning for future that is budgets, target markets, policies, objectives etc. is done. This is
basically a top level where up-to-the minute information on the food items ordered and breaks
out percentages showing sales of each item versus total sales is provided. The top level where
strategic planning is done compares the weekly sales totals versus food costs, allowing planning
for tighter cost controls. Executive support systems function at the strategic level, support
unstructured decision making, and use advanced graphics and communications. Examples of
executive support systems include sales trend forecasting, budget forecasting, operating plan
development, budget forecasting, profit planning, and manpower planning.

The decisions to be made in the area of managerial control are largely dependent upon the
information available to the decision makers. It is basically a middle level where planning of
menus is done and whenever an order is voided, the reasons for the void are keyed in which later
helps in management decisions, especially if the voids are related to food or service. The
managerial control that is middle level also gets customer feedback and is responsible for
customer satisfaction.

The decisions to be made in the area of operational control pertain to implementation of specific
tasks through appropriate technology. This is basically a lower level where the waiter takes the
order and enters it online via one of the six terminals located in the restaurant dining room and
the order is routed to a printer in the appropriate preparation area. The item’s ordered list and the
respective prices are automatically generated. The cooks send ‘out of stock’ message when the
kitchen runs out of a food item, which is basically displayed on the dining room terminals when
waiter tries to order that item. This basically gives the waiters faster feedback, enabling them to
give better service to the customers. Transaction processing systems function at the operational
level of the organization. Examples of transaction processing systems include order tracking,
order processing, machine control, plant scheduling, compensation, and securities trading.

The information required to make such decision must be such that it highlights the trouble spots
and shows the interconnections with the other functions. It must summarize all information
relating to the span of control of the manager. The information required to make these decisions
can be strategic, tactical or operational information.

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Advantages of an online computer system:

 Eliminates carbon copies

 Waiters’ handwriting issues
 Out-of-stock message
 Faster feedback, helps waiters to service the customers

Advantages to management:

 Sales figures and percentages item-wise

 Helps in planning the menu
 Cost accounting details

2. If the management provides sufficient incentive for efficiency and results to their customers, it
would make the system a more complete MIS and so the MIS should support this culture by
providing such information which will aid the promotion of efficiency in the management
services and operational system. It is also necessary to study the keys to successful Executive
Information System (EIS) development and operation. Decision support systems would also
make the system a complete MIS as it constitutes a class of computer-based information systems
including knowledge-based systems that support decision-making activities. DSSs serve the
management level of the organization and help to take decisions, which may be rapidly changing
and not easily specified in advance.

Improving personal efficiency, expediting problem solving (speed up the progress of problems
solving in an organization), facilitating interpersonal communication, promoting learning and
training, increasing organizational control, generating new evidence in support of a decision,
creating a competitive advantage over competition, encouraging exploration and discovery on
the part of the decision maker, revealing new approaches to thinking about the problem space
and helping automate the managerial processes would make the system a complete MIS rather
than just doing transaction processing.

3.  The management system should be an open system and MIS should be so designed that it
highlights the critical business, operational, technological and environmental changes to the

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concerned level in the management, so that the action can be taken to correct the situation. To
make the system a success, knowledge will have to be formalized so that machines worldwide
have a shared and common understanding of the information provided. The systems developed
will have to be able to handle enormous amounts of information very fast.

An organization operates in an ever-increasing competitive, global environment. Operating in a

global environment requires an organization to focus on the efficient execution of its processes,
customer service, and speed to market. To accomplish these goals, the organization must
exchange valuable information across different functions, levels, and business units. By making
the system more formal, the organization can more efficiently exchange information among its
functional areas, business units, suppliers, and customers.

As the transactions are taking place every day, the system stores all the data which can be used
later on when the hotel is in need of some financial help from financial institutes or banks. As the
inventory is always entered into the system, any frauds can be easily taken care of and if
anything goes missing then it can be detected through the system.

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