Information (Data) Systems Vs. Data Processing Systems

Chapter 37 Review

Management Information Systems

Information (data) systems vs. data processing systems

Data processing systems is simply one, which records day-to-day transactions, which take place. An information system is one, which uses this data and turns it into useful information. For example:

·  Data on items sold is collected by data processing system using a barcode scanner and an EPOS system, and stored in a computer file.

·  An operational information system then reads the data and produces a list of items that need reordering.

·  A management information system may analyse the sales data to highlight sales trends and use this information to plan a new marketing campaign, adjust price levels or plan an increase or reduction in production facilities.

Internal and External information

Much information used by management concerns the internal operations of the company. External information about the environment in which the organisation exists is crucial to all organisations. This may include:

·  Intelligence gathering about competitors activities

·  Information about population shifts

·  Economic and social factors

·  Government legislation

This is beneficial for mangers who:

·  Are trying to shave production costs

·  Find new markets

·  Develop new products

·  Develop strategic decisions for future direction.

Information flow:

Information flows through an organisation through both formal and informal information systems. Informal ways of information include face-to-face conversations, meetings, telephone, conversations, newspapers, magazines, listening to radio, television, Internet.

Information can be given or received via newsletters, memos and notice boards, however these often pose the problem of too much information needed to be absorbed at once. Readers would forget.

Formal methods include:

·  Computerised information systems – which allow users to query databases over a company wide network. Internal data collected through transaction processing. External data collected through agencies for example (such as Dun and Bradstreet) which produces an on-line service called “Data Stream”.

·  Software packages – such as Lotus Notes enable people at different locations to have the same documentation on their screens and work on it simultaneously.

·  E-Mail allows correspondence and files to be transmitted throughout an organisation as well to others outside the organisation.

·  Company-wide intranets – (like an internal internet within an organisation).

The role of a management information system

The role of a management information system is to convert data from internal and external sources into information that can be used to aid in making effective decisions for planning, directing and controlling the activities for which they are responsible, An organisation may have dozens of different information systems. Some are used on a day-to-day basis others are used to make more strategic tactical decisions.

What managers Do

The five classical functions of managers (described over 70 years ago) are:

1.  Planning: Managers plan the direction a company is to take, whether to diversify, which areas of the world to operate in, how to maximise profit etc.

2.  Organising: Resources such as people, space equipment and services must be organised.

3.  Coordinating: Managers coordinate the activities of various departments

4.  Decision-making: Managers make decisions about the organisations; the products or services made or sold, the employees, the use of information technology.

5.  Controlling: This involves monitoring and supervising the activities of others,

MIS must be designed to support managers in as many of these functions as possible at different levels (operational, tactical, strategic) of an organisation.

Types of Decision

Management decisions can be classified into two different types:

Structured: Decisions, which are repetitive, routine and involve a definite procedure for handling them.

Unstructured: Decisions, which require judgement, insight and evaluation. They are often important decisions and there is no set procedure for making them.

Stages of decision-making

Making unstructured, non-routine decisions is a process that takes place over a period of time and consists of several stages.

1.  Recognition there is a problem. An information system is useful at this point to monitor different departments and to let them know where problems exist. The principle of exception reporting is especially important n this stage – in other words only situations which need some action are reported.

2.  Consideration of possible solutions. Most detailed information may be needed at this stage, or possible tools such as a spreadsheet, which can model the effect of different solutions such as price increases or decreases.

3.  Choosing a solution

4.  Implementing the solution: This may involve setting up a new management information system to report on the progress of the solution.

This can be represented within diagram 37.3 on page 206.

Most decisions do not proceed smoothly from one stage to the next and backtracking is often required if a chosen solution turns out to be impossible or new information comes to light.

Structured decisions are made easier with an information system, which provides information necessary to make the decision.

Desirable characteristics of a MIS:

System designers need to try to design management information systems which have the following characteristics:

·  They are flexible, allowing many different ways of analysing data and evaluating information.

·  They are capable of supporting a range of skills and knowledge.

·  They help managers get things done through interpersonal communication with other members of the organisation.

·  Because managers are busy people who can be overrun with tasks, they should not require extensive periods of concentration.

·  They should make it easy to interrupt the work and return to it at a later time.

·  They should protect a manager, as far as possible, from information overload.

Factors influencing success or failure of MIS

MIS are generally enormously complex and their selection, design and implementation will involve dozens of people from both within and outside the organisation.

Failure of management information systems can attributed to a number of reasons such as:

·  Inadequate analysis – The potential problems, exact needs and constraints are not fully understood before the design or selection of a new system.

·  Lack of management involvement in design – It is essential that all those expecting and needing to benefit from the system are involved, otherwise the information produced may not be sufficient or even understood.

·  Emphasis on the computer system – Selecting the right hardware and software is clearly essential to the system for both inputs and outputs.

·  Concentration on low-level data processing – One of the fundamental functions of a system within a company is the day-to-day processing of transactions. When designing a basic system the information presented must be accessible and easily understandable.

·  Lack of management knowledge of ICT systems and their capabilities – Managers require information for running companies or departments. Managers therefore must know what they want from a system but it cannot be assumed that they have full or even a slight grasp of the technology.

·  Lack of teamwork – The needs of the accounts department, the marketing department and production are likely to be different. Therefore the team must make sure that the use of ICT must meet all of the companies requirements of the business as a whole, not necessarily as each team members individual requirements.

·  Lack of professional standards – Clear documentation in a format that all users can understand. This is essential for implementation and training in the system. Both managers and users need to be sure that help is available. All people using the system must feel confident enough to be able to help others.