Management Information System and Other Information Systems
Management Information System and Other Information Systems
Management information system (MIS) is a planned system for collecting, storing, and disseminating data in the form of information needed for carrying out different functions of the management. It provides information which the organization needs to manage itself efficiently and effectively.
MIS deals with information related to technologies, processes, operation, human resource, commercial activities, and such other things within the organization and in its environment. Information means data which have been shaped into a form which is meaningful and useful to its users in the organization. Data, in contrast, are streams of raw facts representing organizational activities before they have been organized and arranged into a form which the management and other organizational users can understand and use.
MIS is a systematic organization and presentation of information which is normally needed by the organizational management for taking better decisions. It is an information system which integrates data from all the departments it serves and provides the management and the users with the information they need it is distinct from other information systems in that it is used to analyze and facilitate strategic and operational activities.
MIS is an organized, automated, and diverse information system which gathers, stores, processes, and distributes data associated with different departments of the organization. This data is processed in various forms, such as graphs, diagrams, charts, and reports to generate accurate, relevant and valuable information for the management of the organization. This information is further communicated to the different organizational members to be used for decision-making.
MIS provides central storage of all the organizational information. MIS is used across all levels in the organization. For example, MIS provides important information at senior executive levels to help make strategic decisions. At other levels, MIS observes the organizational activities and distributes information. MIS is very important for the organization since it not only collects and manages information, but also represents it in different formats which are useful for the management to make important decisions. MIS is normally an automated information system which is used within the organization and includes all information and communication channels which are organized.
MIS is typically a computer system used for managing. The five primary components of the MIS are hardware, software, data (information for decision making), procedures (design, development and documentation), and people (individuals, groups, or organizational members). MIS resources can be divided into three broad categories namely human resource, technological resource, and relationship resource.
MIS is being defined in several ways such as (i) it is defined as a system which provides information support for decision-making in the organization, (ii) it is defined as an integrated system of man and machine for providing the information to support the users and the management for carrying out the decision-making function in the organization, (iii) it is defined as a system based on the data-base of the organization evolved for the purpose of providing information to the users in the organization, and (iv) it is defined as a computer-based information system. All these definitions converge on one single point that MIS is a system to support the decision-making function in the organization. Hence, MIS a computerized processing system generating information for the people in the organization for meeting their information needs for decision-making to achieve the organizational objectives.
MIS can be defined technically as a set of inter-related components which collect (or retrieve), process, store, and distribute information to support decision making, coordination and control in the organization. In addition to supporting decision-making, coordination, and control, MIS also helps to analyze different issues, to visualize complex subjects, and to bring forward new solutions.
MIS is also defined as an information system which evaluates, analyzes and processes the organizational data to produce meaningful and useful information on which the management takes right decision to ensure success and future growth of the organization.
As per another definition MIS is an information system which provides information in the form of standardized reports and displays for the management. MIS is a broad class of information system designed to provide information needed for effective decision-making.
Hence, MIS means a system for processing data in order to give proper information to the management for performing its functions. It is an organized approach to the study of the information needs of the organizational management at every level in making operational, tactical and strategic decisions. Its objective is to design and implement procedures, processes, and routines which provide suitably detailed reports in an accurate, consistent, and timely manner. MIS being a modern computerized system continuously gathers relevant data both from inside and outside of the organization. The data is then processed, integrated, and stored in a centralized data-base where it is continuously updated and made available to all the users who have the authority to access it, in a form which suits their purpose.
Concept of MIS – The concept of the MIS has evolved over a period of time comprising several different facets of the organizational function. MIS is a necessity for all the organizations. The initial concept of MIS has been to process data from the organization and present them in the form of reports at regular intervals. The system is largely capable of handling the data from collection to processing. It is more impersonal, needing users to pick and choose the processed data and use it for their need. This concept has been further modified when a distinction has been made between data and information.
The information is a product of an analysis of the data. This concept is similar to a raw material conversion into the finished product. What is needed is the information and not a mass of data. However, the data can be analyzed in a number of ways, producing different shades and specifications of the information product. Hence, it is needed that the system concept is to be an individual-oriented, since each user can have a different orientation towards the information. This concept has been further modified, in that the system is to present information in such a form and format that it creates an impact on the user, provoking a decision or an investigation. It has been later realized that even though such an impact is a welcome modification, some sort of selective approach is necessary in the analysis and reporting. Hence, the concept of exception reporting has been incorporated in MIS. The norm for an exception is necessary to be evolved by the organization. The concept remained valid as on now and to the extent that the norm for an exception remains true and effective.
Since the organizational environment is competitive and ever changing, fixation of the norm for an exception becomes a futile exercise at least for the people in the higher levels of the organization. The concept has then evolved to make the system capable of handling a need-based exception reporting. This need can be either for a user or a group of users. This need called for keeping all the data together in such a form that it can be accessed by all the users and can be processed to suit their needs. This concept shows that the data is one but it can be viewed by different users in different ways.
Over a period of time, when these conceptual developments have been taking place, the concept of the end user computing using multiple data-bases emerged. This concept brought a fundamental charge in the MIS. The change has resulted into the decentralization of the system and the users of the information have become independent of computer professionals. When this has become a reality, the MIS has acquired a decision-making role. At this stage, the job of the a computer professionals has become to manage the information resource and leave the task of information processing to the users. Presently the concept of MIS is that it is a system which handles the data-bases, and provides facilities to the end users and gives them a variety of decision-making tools.
The physical view of the MIS can be seen as assembly of several sub-systems based on the data-bases. These sub systems range from data collection, transaction processing and validating, processing, analyzing and storing the information in data-bases. The sub-system can be at a functional level or at the organizational level.
MIS is a product of a multi-disciplinary approach to the organizational management. It is a product which needs to be kept under a constant review and modification to meet the organizational needs of the information. It is prescribed product design for the organization. The three components of MIS which are described below, give it a more complete and focused definition, where system suggests integration and holistic view, information stands for processed data and management refers to the ultimate user and the decision makers.
Management in MIS covers the planning, control, and operations in the organization. For the management of the organization several decisions are needed to be taken at different management levels of the organization on a regular basis. Information, in MIS, means the processed data which helps the management in planning, controlling, and operations. Data means all the facts arising out of the operations of the organization. Data are processed, i.e., recorded, summarized, analyzed, compared and finally presented in the form which facilitates decision making. The presentation of the analyzed data is known as MIS report. Information is also called ‘interpreted data’ which are created from organized, structured, and processed in a particular context. Data are processed into information with the help of a system. A system is made up of inputs, processing, output and feedback or control. Fig 1 shows typical features of MIS.
Fig 1 Typical features of management information system
Data are the life-blood of the present-day organization, and the effective and efficient management of data is considered an integral part of the organizational strategy. Successful organization collects high quality data which lead to high quality information. For a successful and effective decision-making, it is necessary to provide accurate, timely, and relevant information to the decision-makers. MIS is a type of information system which takes internal data from the system and summarizes it to meaningful and useful forms as reports for use in the decision-making. MIS improves the quality of the information and hence has an effect on the decision-making.
Normally, the organization is continuously capturing data, several of which are of no significance to it at all. However, other data are available which affords it a better understanding of itself and its own environment. These data are known as information. The information enables the users to make more accurate decisions. For this reason, the right quantity and quality of the information at the right time is a key factor for the management of the organization. The management takes decisions, prepares plans, and controls the organizational activities using information which it can get through the processing of the data got either from formal sources or through informal channels such as during process monitoring, face-to-face conversations, telephone calls, and social contacts etc.
Management is challenged by an increasingly complex and uncertain environment. In these conditions, management is theoretically required to be able to define and get the type of information it needs. However, this is not what happens in practice, rather the manner in which the management performs its work depends on the available information it has access to. Hence, majority of the decisions are taken in the absence of absolute knowledge, since either the information is not available or access to it is very expensive. Despite the difficulties in getting information, management needs relevant information on which it needs to carry-out its planning, control, and decision-making functions.
Although the terms data and information are sometimes used indiscriminately, they do have different meanings. Data are non-random symbols which represent the values of attributes or events. Hence, data are facts, events, and transactions stored as per an agreed code. Data are facts got through reading, observation, calculation, and measurement etc. For example, the quantities and other details got through the process monitoring are referred to as data. Data are got either automatically, the result of a routine procedure, or by measurement of the processes.
Information is a set of data which are transformed in such a way that it helps in reducing future uncertainty and, hence, contributes to the decision-making process. Information is data transformed in a way which makes sense to the user who receives it. In other words, it has a real or perceived value for the users when they act or take decisions. Information, moreover, is data which have been interpreted and understood by the recipient of the message. The relationship between data and information is similar to that of raw materials and the finished product. Information is meaningful in-so-far as it provides useful raw data for taking a specific decision. Fig 2 shows the process of transformation of data into action.
Fig 2 Transformation of data into action
The process of reflecting on and understanding information is what allows the message to have different meanings for different persons. This process also implies that the data analyzed, summarized, or processed to produce messages only become information, if its receiver understands its meaning. For data to be transformed into information, there need to be an awareness of what the persons receiving the message are going to use it for their use, and position in the organization and have familiarity with the language and calculations used in the message.
While the organizational persons need information, they do not need the same type of information. The kind of information needed by them depends on a range of factors e.g., their level in the hierarchy, the work they are carrying out, confidentiality, and urgency etc. Indeed, the usefulness of information is a debatable point, and what for one person is information, for another it is data. In the organization, e.g., when information is transferred from one organizational level to another its meaning can change considerably, such that at one hierarchical level it is regarded as significant information, whereas at another level it is simply data. Information is the receivers’ knowledge and comprehension of data. Information reduces uncertainty and affords the receivers something they do not know previously.
Information is one of the several resources of the organization, alongside capital, raw materials and human resource. This is since no organization is viable without information. Since information is a scarce resource, the management needs to consider the issue of information economics, in other words, how to establish the necessary relationship between the value of information and its cost. Information costs can be estimated by taking into account (i) the information content needed, (ii) how urgently the information is needed, (iii) the quantity of information needed, and (iv) how accessible the information is to be.
In contrast, information value is more difficult to determine. The concept of expected value of perfect information (EVPI) can be used to estimate information value. This concept can be defined as the difference between the average expected result with perfect information and the average expected result with the available information. The cost and the value of the information are to be compared in order to find out how to use this scarce resource, in what quantity, and what benefits can be expected from using it.
Information is a necessary factor for the organization in that the possession or otherwise of opportune information is a determining factor in the quality of the decisions it adopts, and as a result, of the strategy which it can design and put into practice at any given moment. A well-prepared information can go a long way for avoiding issues stemming from environmental uncertainty, either because of lack of clarity in certain aspects, or because of the huge quantity of accumulated data when a decision has to be taken urgently.
Characteristics of information – A good information provides value. Experience shows that good information presents several qualities as described below.
Relevance is a decisive quality. Relevant information is what increases knowledge and reduces uncertainty surrounding the issue under consideration. Reports and messages frequently contain irrelevant sections which lead to difficulties and cause frustration. Several erroneous management decisions are a result of the data overload. The right information is not taken from an excessive accumulation of data, which tends to cause a normal feeling of ineffectiveness regarding the issue, but rather it depends on getting hold of the relevant data. This characteristic is heavily influenced by the qualities as explained below.
Information is to be sufficiently accurate for the purpose of the management. No information is totally accurate, and spending more on information in pursuit of higher accuracy does not always result in more valuable information. The degree of accuracy is to be coherent with the importance of the decision to be taken and varies as per the level in the hierarchy of the decision-maker. The degree of information accuracy needed depends on the hierarchical level in question.
The completeness is another quality. In an ideal world, all the information needed to take a decision is to be available. However, in reality it is not possible. Information is considered to be completed if it informs the users on the key points of the issue, they are analyzing.
Source trust-worthiness is a quality. Trust in the information source increases when it has a proven track record. For increasing the trust-worthiness of the message, management uses reports from different sources, particularly where strategic decisions are to be taken.
Communication with the right person is also a quality. People in the organization are assigned specific areas of activities and responsibilities and are required to receive information for undertaking the tasks they are responsible for. However, this process does not always function as well as it is needed, and information does not reach the right level in the organization. For example, a superior does not provide all the information to the person who needs it, and vice versa. Also, subordinates can hold back information in an attempt to make them indispensable. Information providers are to be aware of information needs in order to ensure that it goes straight to where it is needed.
Punctuality is another quality. Good information is that which is delivered just when it is needed. To a certain extent, the need to get the information quickly can jeopardize its accuracy, although the present-day data processing methods can produce accurate information very rapidly. Important information for the organization can become worthless if it takes too long to get, or delays occur in processing and communicating the information. Although the punctuality of regularly produced information is important, how frequently information is produced is to be related to the type of decision or activity it is needed for. Frequently, the organization routinely produces reports at fairly arbitrary intervals (daily, weekly, or monthly) following traditions or calendar conventions without taking into account the time cycle of the activity involved.
Detail of the information is also a quality. Information is required to contain the minimum number of details for effective decision-making. Every superfluous character or data involves extra storage efforts, more processing, more assimilation of difficulties and probably inferior decisions. The level of detail varies with the level in the organization, i.e., the higher is the level in the organization, the higher is the degree of aggregation and synthesis. At times, particularly as lower levels, information is necessarily required to contain a lot of detail if it is to be useful, although the normal rule of minimum possible detail for coherence with efficient information use is to be followed.
Given the need to be concise and to direct attention to where it is needed, reports frequently highlight purposely those items whose performance deviates considerably from a fixed standard or budget. An example of this type of report is seen in the accounting technique of budgetary control in which actual expenditure, measured item by item, is compared with the budgeted or desired expenditure. Small variations in these reports can be accepted, but differences exceeding tolerance levels are highlighted. These exceptions are presented to the users, hence enabling them to carry out the control function more quickly.
Comprehension of information is also a quality. Comprehension is what transforms data into information. If the information is not understood it cannot be used and hence it cannot add value. Several factors intervene in understanding information such as user preferences, previous knowledge, environmental factors and language. As regards user preferences, some people prefer information in graphs or charts, while others prefer a narrative description. Some prefer presentations with statistics and figures, while others do not understand them. Different studies have shown that some people assimilate specific facts in detail, whereas others evaluate the overall picture without paying attention to the finer points. Inevitably, these variations mean that the same message can be interpreted in different ways. With respect to previous knowledge, comprehension is the result of memory in association with the received message. As regards environmental factors, group pressure, available time, and trust in the information system all influence comprehension. Language consists of information being codified in signs or messages.
Information needs – People live in a world of information. Every-day potential readers are presented with a multitude of books, journals, and newspapers. However, human capacity is limited and people can absorb only a small quantity of all this information. There are no clear procedures to help the people to identify all information of interest quickly. Information needs refer to the information needed to take decisions correctly and to carry out the tasks deriving from them. Three large sets of information needs are associated with the three stages in the strategic management process.
The first is that a strategic diagnosis is to be undertaken when a strategy is drawn up. In other words, an internal analysis and an environmental analysis, both general and specific, are to be carried out. Information is a necessary element in this strategic diagnosis stage. Information is needed on the main strategic environmental factors such as cultural, financial, political, competition, and technological. This information is needed to attend to the evolution of these factors, as well as their present state. An internal analysis needs information generated by the organization itself as a result of its activity. This information can be classified as per the organizational functions, such as marketing, production, finance, human resources, research and development, and management.
The second is that the members of the organization involved in implementing the strategy are to be aware of their particular responsibilities, and are required to receive information on the tasks they are to perform, and how to perform them, in order for the strategy and its component plans to be effectuated. In other words, those responsible for accomplishing these actions need information about what they have to do and how to do it. This information is normally passed down from higher levels to lower levels.
The third is the strategy control. Efficient control needs knowledge on the outcomes of the actions undertaken to effectuate the plans, and how the different environmental components are evolving, in order to verify whether the strategy is developing appropriately and whether any changes are influencing its viability. Some of the information used to draw up the strategy are also be needed in the control stage in order to compare the strategy targets with the results being achieved. Information on the results of implementing the plans also be needed at this stage. This information is to be delivered at the right time so that when any deviations are detected in the control, appropriate measures can be taken to correct them and achieve the target sets.
People can hence consider three sets of information needs in the management process, each one of which needs different information to be achieved in different ways. It is extremely important to restrict the information to what is actually needed, since there is a risk of information excess, and everything which goes beyond the strictly necessity impoverishes rather than enriches the system, since it affects the cost of getting the information. Information economics aims to determine the optimum quantity of information for a specific issue, based on comparing the marginal cost of the information and the value of the sample or additional information. Once people know what type of information they want to get, they then examine the sources of information which can be used to get it.
Sources of information – Information is a necessary, strategic resource which can be got from several sources. The internal information relating to the environment within the organization, and information about its external environment are to be distinguished. Several of the data captured by information systems refer to the functioning of the organization and are used to produce internal information. This internal information provides the management with knowledge about how the organization is functioning and whether or not it is achieving its objectives. Majority of the internal information comes from the accounting system and statistical analyses (sales, and production etc.). Other internal information sources such as surveys and interviews with the organizational members provide quantitative information on, for example, employees’ motivation levels or other indicators which are not easily quantified.
Organizational management also needs information on the environment such as sales volume of the most direct competitors, potential customer segments for the organizational product lines, and geographical distribution of its share-holders etc. The organization can only be successful if it adapts to the demands of its external environment. The environment is represented by a number of groups which vary in their capacity to influence the organizational fulfilment of its objectives. These interest groups and the different types of information about them which the organization needs are (i) customers – marketing, sales, and the levels of satisfaction, (ii) distributors – marketing and logistics (distribution), (iii) competitors – market penetration, innovations, and product quality, (iv) suppliers – transaction conditions, (v) employee unions – salaries and employee related issues, (vi) share-holders – organizational performance, (vii) financial institutions – financial conditions and investment opportunities, and (viii) government and statutory authorities – statutory compliance, legal and political developments.
The organization is to be informed constantly about each of these external groups and, at the same time, some of these groups (e.g., share-holders and the statutory authorities) are also to receive information from the organization. Information on the environment can be got from several sources such as (i) personal information sources, which provide information through contact with sales personnel, customers, suppliers, distributors, and bankers etc., and (ii) impersonal information sources, which range from general publications (e.g., reports on the current situation, bank and official entity reports, and specialized journals etc.) to specific studies (e.g., market studies, opinion studies, and consultants’ reports etc.).
There are several necessary aspects of information systems in the organization. These are described below.
The first is the concept of the information system. All systems can be divided into sub-systems. Since the organization behaves as a system, its different elements can be broken down into sub-systems. As per the organizational theory, the organization can be divided into several systems such as commercial, operations, financial, human resource, and information. The information system is related to all the other systems and the environment. The purpose of the organizational information system is to gather the information it needs and, following necessary transformations, ensure that it reaches those users, who need it, whether for decision making, strategic control, or for implementing decisions adopted by the organization. Hence, the performance of the people depends on their skills in exploiting the capacity of the information system in order to get positive operational outcomes.
As per Andreu, Ricart and Valor, the information system is defined as a formal set of processes which, working from a collection of data structured depending to the organizational needs, gathers, processes and distributes the information necessary for the organizational operations and for its corresponding management and control activities, hence supporting, at least in part, the decision-making processes necessary for the organization to perform its operational functions in line with its strategy. Hence, this definition only includes the formal information system, which is the part of the information system which the organizational members are familiar with and know how to use.
This does not mean that informal information systems are not important, but simply recognizes the limitation that they are, by their very nature, more difficult to study, plan and manage, at least from a cohesive and holistic point of view. Informal information systems are not the result of a designed process, rather they provide chance information. However, people are not to ignore the existence of informal information channels, and the speed and efficiency with which they can operate, on occasions spreading rumours through the organization more quickly than information which follows the standard channels.
The above definition refers to the functions and strategies of the organization, by this, people aim to transmit the idea that the organizational information system is needed to serve its operational approach. In the end, the information system is only one of the several elements which the organization designs and uses to achieve its objectives, and as such, it is to be explicitly coordinated in line with these objectives. For completing the definition of an information system, people now attempt to clear up any confusion between information system and computer system. The computer system consists of a complex inter-connection of several hard-ware and soft-ware components, which are necessarily determinist, while the formal systems is that in which specific input always gives the same output. Information systems are social systems whose behaviour is largely influenced by the objectives, values, and beliefs of individuals and groups and by the performance of technology. The way an information system behaves is not determinist and does not follow the representation of any formal algorithmic model. Fig 3a shows computer and information systems.
Fig 3 Computer and information systems and value chain model
These days the information system of the organization is to deal with a large quantity of data and provide information structured in different ways to several decision-makers in the organization. Hence, the role of the computer system is important to the information system of the organization. Given the major role of information system, it is believed that the present-day organization cannot be efficiently and effectively managed without information system which incorporates a series of information technologies (IT). Hence, IT has become a fundamental aspect in managing both small and large organizations and enables them to seek out competitive advantages.
The information system is more than just a computer system. It is inseparable from the organizational environment system, and in the decision-making process people cannot expect that all the necessary information is going to be pre-determined, formalized, and computerized. Information circulates throughout the whole organization like a current in an electric circuit, flowing through formal and informal channels and both horizontally and vertically. The information system is the organizational structure which has to manage these information flows with the maximum efficiency and effectiveness
in order for the organization to carry out its functions as per its organizational plan or strategy.
The heart of every information system is that it provides the means by which the necessary information is delivered at the right moment and with the right structure to the members of the organization who need it, whether for taking decisions, for strategic control, or for implementing decisions which have been adopted. Majority of the issues which arise within the organizational information system are related to the organizational, social, or human factors rather than technical issues, which are quite scarce. Hence, the management is to focus on the appropriate strategic and tactical application of the information system.
Information system components – Information systems comprise hardware and software, tele-communications, data-bases, human resources, and procedures. For hardware, now-a-days all organizations use computers, normally personal computers (PCs). Large organizations use diverse computer systems including main-frames, mini-computers and most commonly, PCs. However, recent advances in the technical specifications of PCs now means that they perform several of the tasks initially performed by the mini-computers, and the difference between these two categories is becoming increasingly blurred. The three computer types have a similar arrangement. The component controlling all the system’s units is the central processor, which carries out the instructions given by a programme. Other devices are used to introduce data (key-board and mouse) and produce the system’s output (printers).
As regards software, there are two types of computer programmes namely system software and application software. System software programmes are used for managing the computer system’s resources and simplify programming. Applications, like spread-sheets or word processors, directly help the users to do their work.
The organizational information system is used as a vehicle for delivering data-bases. A data-base is a collection of inter-related data, such as the organizational human resource or product data-bases. The customer data-base is extremely valuable to the organization since it can be used to inform the customers of new products or to develop new products which meet their needs. A data-base is needed to be organized so it can be accessed as per its content. Data-bases are managed by software systems known as data-base management systems (DBMS).
Tele-communications are the means by which information is transmitted electronically over long distances. Now-a-days, computer systems are normally connected by tele-communications networks. Different network connections are available to suit the needs of the organization. In a small organization, PCs are connected by local area network (LAN), enabling the users to communicate and share data, tasks, and equipment. Wide area network (WAN) is used to connect computers at larger distances, either within the organization or in a different location. Internet, the ‘network of networks’, links up an immense variety of networks from diverse fields world-wide. These connections enable PC users to access the organizational data-bases and other computerized resources.
As regards human resources, two types of human resources can be distinguished namely information systems specialists and end users. Information systems specialists include systems analysts, programmers, and operators. End users are the people who use the information system or the output they generate, in other words, the large majority of the organizational members.
Procedures are the policies and methods which are to be followed when using, operating, and maintaining the information system. Procedures are to be used, e.g., for establishing when to run the organizational payroll programme, to determine how many times it is to be run, who is authorized to do so and who has access to the reports it produces.
Functions of the information system – The organization develops information system to help for performing the tasks for which it is specifically designed to do. All information systems carry out a series of functions which can be classified as (i) data capture and collection, (ii) storage, (iii) information processing, and (iv) distribution or dissemination of information.
The function of data capture and collection consists of capturing both external (related to the environment) and internal (generated within the organization) information and sending it through the communication system to the users within the information system responsible for organizing it to avoid duplication and useless information (noise). The people who capture the information depend on what type of the organization they work for. People at different levels in the hierarchy or members of the organization in direct contact with organizational environment can all act as information gatherers. The data capture and collection process is needed to be more intense in the areas or sectors of the environment and the organization which are subject to the highest changes. Once the information has been collected and filtered, and redundant information removed, it is stored in the system.
As regards storage, there are some issues which are to be considered. These issues are as described here. The first is how the information is to be stored, e.g., by classifying it as per to a particular criterion or at different points. The second is what type of system is to be used for storing the information. The system can vary from the traditional filing system to a computer processed data-base. The use of one system or another depends on the quantity of data to be stored, how frequently it is to be used, the number of users, and whether or not access is restricted. The third is how the user access to the stored information is to be managed. The information can be stored in different services and departments, or in a single location to which all users have access. The organization is to decide which of these two options is most appropriate, depending on how specific the information is. Access to or retrieval of the information can take several forms, e.g., passwords can be used to access a data-base, enabling only the authorized personnel to access the information when needed.
As regards, information processing, its purpose is to transform the stored information into useful information which is meaningful to the people who need. This is a key function of all information systems. Information processing is necessarily carried out by the computer sub-system. The spectacular development of computers has meant that on the one hand, the volume of stored and processed data is constantly increasing, and on the other hand, the falling cost of hardware has led to a generalized use of computers.
With respect to the distribution and dissemination of information, not only the information system is required to provide the information each user needs, but it is also to disseminate information to other people within the organization. Different organizational members need to be aware of certain information about the organization and the environment in order to respond more quickly and efficiently to everyday situations which need issues to be attended or decisions to be taken.
The information system and the value chain – The value chain covers all the activities which the organization undertakes in order to offer a product or service. Value chain activities fall into two main categories namely primary activities and support activities. Primary activities are more closely related to creating value. Support activities allow primary activities to take place by providing the necessary inputs and infra-structure. These activities link together to form the value chain (Fig 3b).
The primary activities which are shown in the bottom part of Fig 3b include (i) input logistics i.e., the procurement of raw materials and supplies from suppliers, (ii) operations i.e., the transformation of raw materials into finished products with the appropriate quality, time, and cost conditions, (iii) output logistics i.e., the transport of products to customers, (iv) marketing i.e., to detect customers’ needs and procure orders, (v) service i.e., activities designed for maintaining the conditions of use for the sold product.
The support activities which are shown at the top of Fig 3b include (i) organizational infrastructure i.e., the organizational frame-work which impacts all primary activities in a generalized way and includes all managerial activities, such as drawing up strategies, and planning and control, (ii) human resource management i.e., all activities related to the selection, training, and motivation of the organizational employees, (iii) technological development, i.e., all activities designed to procure and subsequently manage technologies, and (iv) material management i.e., procurement of the materials needed to carry out the production process.
The information system forms part of the support activity known as organizational infra-structure. This means that all the value chain activities need support based on the information system. Since all the support activities sustain each other, the role of the information system is to interact with all the basic or support activities of the organization. IT can have a profound effect on each one of these activities, sometimes by simply improving efficiency, and at other times by changing the activity in a fundamental way, e.g., supply logistics where IT can have major repercussions on the supply of materials to manufacturing points. Some large organizations are directly linked to several of their suppliers. This link improves deliveries and reduces stock volumes, and affords higher flexibility to respond to changing demand almost immediately.
IT can also affect organizational operations. Also, it has a major impact on the way in which products and services are produced and delivered to the customers. Marketing and sales activity, somewhat forgotten during the initial decades of the IT revolution, is now the area where these technologies are having the highest repercussions. IT can improve after sales service. Other areas where IT can impact the organizational strategy are the management control and the decision-making process.
The systematic examination of the organizational added value chain is an effective way of finding advantageous its applications. All the value chain activities, whether basic or support activities, need and generate information. The information system compiles information generated by different activities which is later needed for other activities to function. The information system distributes this information to each activity (Fig 4a). From this perspective, the information system plays an important role in coordinating the different value chain activities. This role involves coordinating i.e., between basic activities (e.g., ensuring that orders reach the production department), between basic activities and support activities (e.g., any control activity), and between support activities (e.g., monitoring human resources involved in support activities). Hence, the information system plays a central role in ensuring the smooth working of inter-actions among value chain activities (Fig 4a).
Fig 4 Value chain with information system and organizational infrastructure
The information system is also highly relevant to the links between the value chain activities, e.g., the systematic compilation of customer complaints by the information system can help to guide quality control procedures during the manufacturing process. The links between activities in the value chain can be improved through the information system. Exploitation of the links between the activities can, in some cases, bring about a re-configuration of the value chain, leading to new approaches to the same operation and even to notable competitive advantages. Hence, the information system influences the design of the organizational structure.
The information system compiles and distributes the information necessary for taking decisions or implementing initiatives throughout the whole value chain when this information is generated in other activities of the chain. For example, sales information can be relevant in taking decisions on after sales service. It can also be useful in designing the most appropriate service actions for a given set of conditions.
By considering the information system as an integral part of the organizational infra-structure, the information which it manages, although it is generated or used by specific activities, does not belong to any activity in particular but rather to the organization as a whole. However, it is possible that some value chain activities need to produce, process, and use considerable volumes of information which are not needed in other areas of the organization. For providing for these conditions, there are information systems or sub-systems which are limited to specific activities. These are not part of the basic information system which is integral to the organizational infra-structure. These information system or sub-systems processes can also use or generate relevant information for other activities, so long as the quantity of this information is relatively small.
Some applications belonging to specific functional sub-systems of the organization are (i) marketing – sales forecasts, sales planning, customer and sales analysis and evolution, and campaign effectiveness etc. (ii) manufacturing – production and schedule planning, and cost control and analysis etc., (iii) logistics – planning and control of purchasing, distribution, inventories, and transport routes etc., (iv) human resource – employee vacancies, evaluation (performance analysis), and personnel administration (payroll) etc. (v) accounting and finances – accounting, costs, and financial analysis etc. and (vi) general management – strategic planning, and resource allocation etc.
The information system and the organizational infra-structure – Every person in the organization needs or generates information, and hence no person in the organization can be totally detached from its information system. The organizational information system cannot be associated with any one of its activities in particular. It is not a new department, nor is it accountable to any one of the traditional functional departments. The information system is needed to have the commitment of all the members of the organizational hierarchical structure. It is not a data processing centre, a mis-conception held frequently by some members of the organization, including management since a data processing centre is just one information resource, and one area of information activities.
A broad vision of the organization is to be taken when designing the organizational information system. If the system is to work properly, management is to actively guide the process, since it is the one with a global vision of the organization. The organizational management is to take responsibility for adapting its organization, structure and personnel to changes in the environment. If these changes involve a shift towards technological development, the responsibility for adopting new technologies in the organization lies with the management, who is to match the IT to the organizational needs. The impact of the IT on the organization is so important that the management is to always take full responsibility for guiding the organizational IT and information system. However, several managements have traditionally been somewhat ill disposed to technological changes and have avoided their responsibilities in this area. This reticence is because of the fact that several top-level executives are in position before the wide scale introduction of computer technology. As a result, they are not comfortable dealing with its issues, and have frequently delegated this area of responsibility to technical personnel, who although they are experts in their field, do not normally have much interest in the operational activities of the organization.
In order to manage the IT and the information system, management is to learn and advance in the organizational learning process, which involves incorporating, assimilating and exploiting IT and the information system as a strategic tool. It is to understand the role of the organizational information system and how it works in harmony with other management systems. The information system is one of the several elements in the organizational infra-structure and is to be consistent with other systems such as planning, control, incentives, or the organizational structure. The information system is to be coherent with other systems which make up the organizational infra-structure, all of which are to work in a coordinated manner with each other. The organizational infra-structure is designed as per its target objectives (Fig 4b).
Fig 4b represents the internal structure of the organizational infra-structure. Information systems are an integral part of the whole infra-structure in the organization. There is a complete, direct inter-dependence among all the systems. In other words, it is a mistake to think that the information system and the control system are only inter-dependent through the organizational structure. They are, in fact, directly inter-dependent, in the same way which the information system and the planning system are. It is important to remember that the information system comprises a set of elements which are to be coherent and coordinated with all the other systems within the organizational infra-structure.
The set of systems is to be coherent both internally, and with the organizational objectives, which it is to expressly contribute to achieving. This dual coherence has different implications. On the one hand, internal coherence implies that a balance is needed to be established in order to respect the inter-dependencies between the systems. This balance is not easy to achieve, but it can frequently be reached by making subsequent adjustments through compromises among the objectives of all the systems involved. On the other hand, coherence between the different systems and the organizational objectives can only be achieved if the systems’ design thoroughly and explicitly takes these objectives into account.
This concept of balance between systems is crucial and has a number of consequences. When any changes are to be introduced into any element of the whole, an imbalance occurs which, at the same time, sets off a ‘balance recovery’ process with potential implications for the other systems involved. In sum, it is difficult to successfully introduce changes in one element (e.g., the information system) if the implications of these changes the other systems, in other words the organizational infra-structure, are not taken into account. Hence, any changes made is to be highly balanced for minimizing the resulting imbalances and spread them out over time, hence allowing the rebalancing tendency of the whole to solve the issue of its own accord. The best strategy for introducing changes depends on the organization and on the corresponding balance at any given moment, although human aspects, both group and individual, also have a part to play. Management with responsibilities for changes in the organizational information system is required to take the following aspects into account.
The first is resistance to change. There is normally a natural resistance to change within the organization. Since changes in the information system can involve modifications to the structure, culture, and policies of the organization, there is frequently considerable resistance to changes in the development of information systems. However, the management is required to drive and lead these changes even though the process can be more complicated and slower than initially envisaged.
The second is adapting technology to the organization. The information system is there to serve the organization and its objectives and, hence, the technology the system uses is to be adapted to the organization. The information system is required to provide the necessary information to perform all the organizational functions in the organization and to that end, the most appropriate technologies are to be chosen.
The third is understanding of the limits of the IT. People normally use technology for solving the organizational and human issues, but they are always to remember that correct, beneficial computer use depends on the user’s intelligence and know-how.
Experience shows that the organization which derives the highest benefit from its information system does not always uses the most technologically sophisticated systems, rather it has understood how to integrate the information system into the organizational strategy so as to achieve its objectives, and has good communication channels between management and the employees. The information system is hence inter-dependent with the other systems in the organization. The harmonious balance established among all these systems does not only depend on the information system.
Information system categories – Given the complexity of information processing and the varying degrees or levels into which data and processes can be structured, depending on the issue, several categories of information systems are needed to deal with all the information needs of the organization. Different types of information systems are needed to be developed to meet the whole range of information needs in the organization such as systems for processing transactions, MIS, and decision support systems (DSS). The different information system categories remain coherent through their integration in a common data architecture. Fig 5 shows the management levels and information system categories.
Fig 5 Management levels and information system categories
Transaction processing system (TPS) – TPS is the corner-stone of the organizational information system and compile the daily organizational operations. Several organizations cannot operate without this type of system. As operations are carried out in the organization, TPS gather, process and store data and reflect organizational transactions such as sales, purchases, and payments etc.
TPS is the most defined or structured information process in the organization, automating the central core of its operations. Its purpose is to improve the organizational routine activities. The majorities of the transactions include invoicing, payrolls, production and reception of orders. Organization aims to carry out these activities quickly, systematically and efficiently. All these activities are carried out at the operational level in the organization and have similar common characteristics which are (i) these operations are repeated several times in the organization, (ii) the way these transactions are carried out is very similar in the entire organization, (iii) the activities can be separated into well understood stages (procedures) which can be described in detail, (iv) there are very few exceptions to the standard procedures.
The above characteristics allow routines to be established for managing transactions. The large volume of transactions at the operational level of the organization leads several organizations to try and develop more efficient and effective ways of processing the data generated through this type of activity. TPS is faster and more accurate than the manual procedures used for performing the same routine activities. A TPS replaces manual procedures with computer-based procedures to perform well structured routine tasks. The output of TPS can take the form of transaction documents or data-base queries.
Several TPSs produce transaction documents, such as invoices, purchase orders or payroll lists. These documents can be classified as action documents or information documents. Action documents imply that some kind of action is taken. Information documents confirm that a transaction has taken place or informs about one or several transactions.
A wide variety of information can be extracted from a data-base using a DBMS and user-oriented fourth generation languages. These queries can provide lists of all transactions processed during a specific time period, or error reports with a list of erroneously processed transactions.
MIS can be defined as information system which provides information for users with similar needs. The main purpose of MIS is to provide users with the information it needs for taking decisions and solve different issues. MIS is supported by organizational data-bases, which include data generated by transaction processing. The organization has to take decisions on several issues which arise on a regular basis, whether weekly, monthly, or quarterly, for which certain information is needed. Since the decision-making processes are clearly defined, the information needed to take decisions can easily be identified.
An administrative information system can prepare regular reports on which to base these decisions. These reports are prepared and presented in a previously designed format. Hence, MIS provides support for structured decisions, since the management knows before-hand which factors are to be taken into account in the decision-making process and the MIS provides clearly structured reports with all the necessary information to take these structured decisions. The content of these reports can be improved by including the concept of management by exception. In this case, the information processor compares real performance with previously established standards, and when performance falls outside acceptable limits, the attention of the management is drawn to the fact.
Management by exception can be incorporated into the reports of MIS in four ways. The first is by preparing a report only when exceptions occur. The second is by using the sequence function of the report to highlight exceptions. The entries in the report can be arranged in ascending or descending order, as per one or more key areas, such that entries needing higher attention appear at the top of the list. The third is by grouping exceptions together. In this case, the reports are prepared so the user can find exceptions in certain areas as per a particular criterion. The fourth is by showing deviation from the norm. Results of actions are compared with forecast actions and any difference is presented as a deviation.
In the 1960s, attempts have been made to develop an information system which automatically meets all the organizational information needs by means of an administrative information system known as the MIS. The MIS represents a formal commitment by the management to make IT available to all those organizational members needing it. The idea of the MIS is to maintain a continuous flow of information to the management. Fig 6 shows the relationship between the MIS, the organizational management and the environment in which it operates. The environment is represented at the top of Fig 6, the central section represents the management and the different sub-systems of the organization, and MIS appears in the bottom section. Information and data flow from the environment to management and to the MIS. In addition, management sends information and data to the MIS (MIS inputs), which are processed by information processors specially designed to provide output in the form of documents and reports to management groups at strategic, tactical, and operational levels, as well as to the environment. The data-base contains data from the accounts information system and also incorporates data from the environment.
Fig 6 MIS-organizational management relationship
Management defines the organizational objectives, and sets targets, plans and standards (centre of Fig 6). These plans and standards provide another type of input to the MIS, establishing the bases on which control and feed-back can operate. The software uses the data-base to produce its regular reports. The MIS output is to be relevant information sent in the right way to the right person at the right time. This information is to be carefully selected to help the decision-making processes at strategic, technical, and operational levels (management). This output is used by those who are responsible for resolving the organizational issues.
The information is normally compiled in (i) strategic level reports to provide the users with the information they need for planning activities such as defining and reviewing the organizational objectives, setting long-term targets (more than three years), and establishing organizational policies, (ii) tactical (and status) situation reports for enabling the management to draw up new or revised short-term plans (ranging from 1 year to 3 years) on a continual basis, and for performing its planning and control functions efficiently so that the sub-systems can be properly coordinated, and (iii) operational reports with daily information for keeping the users fully informed of the current situation of the organization, hence enabling them to carry out the control functions. In addition, much of the information, the organization sends to the environment is provided by the MIS.
Since the MIS hosts an information system structured as per certain previously determined decisions, it cannot be used to make decisions when an unexpected issue arises. The idea behind the MIS is to help interpret the information needed for taking previously defined decisions, and particularly at the strategic level, information needs are not easily identified. Given the limitations of an information system like the MIS in supporting non-programmed decisions, information system designers have needed to look at the issue from a completely different angle.
Rather than being structured from the perspective of the user who interprets the pre-determined information needs, the information system is to be conceived to give the highest possible flexibility to the decision maker. In this way, instead of previously establishing what type of decisions are to be taken, information is to be arranged as per its origin and type, based on general knowledge of the decision-makers, so that the necessary information is available to them when they are to take a decision. Hence, the design of the data-base of the organization is crucial. It is to enable information to be used rationally, and allow the information system to be properly integrated. The data-base of the organization is to be flexible enough to be structured as per the particular needs of different decision-makers. This reveals the need for more inter-active system which helps the decision-maker to take non-structured or only slightly structured decisions.
Not all the decisions of the organization are recurrent, and some have to be taken infrequently or perhaps only once. DSS provides a tool for dealing with less precisely structured or defined issues which arise infrequently. DSS helps the management who is required to take non-structured decisions. A decision is understood to be non-structured if there is no clear procedure in place to take the decision, and it is not possible to identify before-hand all the factors which are needed to be considered for taking the decision.
It can be said that all information systems support decision-making, even if only indirectly. DSS has been expressly developed for supporting the decision-making process. This system facilitates dialogue with the users when they are considering alternative solutions to an issue, and the system provides data-base access and models constructed to present information. DSS is inter-active, and aims to expand human reasoning capacity for resolving specific non-structured decision-making issues. This type of system focuses on the decision-making processes and is required to provide relevant facts relating to the decision easily, quickly and accurately. It also offers inter-active access to processing media which can be used creatively and which allows the user to explore a range of alternatives, and provides the information necessary to respond to the issue.
When the management uses a DSS, it considers a number of possible scenarios by asking ‘what happens if…, e.g., users who are deciding the price to be set for a new product can use the marketing area of the DSS. The system has a model which combines different factors such as product price, the cost of materials, advertising costs, all of which affect profit forecasts for product sales over a five-year period. By varying the price of the product in the model, the users can compare forecast results and select a price accordingly.
Unlike administrative information systems, DSS can help to make decisions for which a procedure cannot be fully programmed in a computer. To this end, some of the dependent relations between factors and their consequences are shown by computer models, and value judgements are introduced when the users interact with the system. Spread-sheets, which can help to manage data by representing them in columns and rows in a table, are frequently used to construct simple DSSs.
The main purpose of DSS is to help the decision-maker in the decision-making process. Unlike TPS and administrative information systems, DSS is not structured or formalized, since it is normally used for ad-hoc processes and hence it needs to be flexible and adaptable. The key aspect of a DSS is that it supports decision-making in situations, where the computer data processing capacity is needed in conjunction with the criteria or rationale of the decision-maker.
The main emphasis of DSS lies in its support function, and not the automation of the decisions. The task of the computer is to provide access to data and to offer the chance to test alternative solutions, but it does not replace the users’ criteria. In other words, it does not attempt to offer responses or impose a sequence of pre-defined analyses, rather it is the user who chooses how to tackle the issue and in the final stage, takes the decision.
A DSS uses data from the TPS and administrative information system of the organization as well as data from external sources. In fact, the data needed for generating information can come from a range of sources, not only the data-base as in the case of the TPS and the administrative information system. Moreover, a DSS can store and later reprocess previously obtained data. The users interact with the system by making requests, creating or modifying models to adapt them to variations and to help understand the issue, managing data and designing the format and content of reports, which can include text, structured information, or figures.
In using the DSS, it is necessary to determine which information is necessary. In well-structured situations, this information can be identified before-hand, but this becomes complicated in non-structured environments. Once the management has certain information, it realizes that more information is necessary, i.e., in other words certain information reveals a need for further information. In these cases, neither the format nor the content of the reports of the system can be designed previously. Hence, DSS is to be more flexible than TPS or administrative information system. The users are to be able to define the content of each report they want. Hence, the users own criteria play an important role in taking decisions on non-structured issues. While DSS helps the users, it is no substitute for the users’ own criteria.
DSS is an inter-active information system which help the decision-maker to deal with fairly unstructured issues by offering analytical models and access to data-bases. This system is designed to help in the decision-making process. One of the main features of this system is its flexibility. Personal DSS is easy to use since the tool is oriented to the final user for this purpose. On the other hand, the organizational DSS, used widely by several users of the organization, is to be the result of a well-planned process. All types of DSS are to be easy to use. Within its area of application, a DSS offers the users a way to apply models and data-bases inter-actively which improves the support it gives to deal with the issue the users face.
The way people in the organization tackle a problem varies as per the structure of the issue. In other words, it depends on the extent to which pre-defined procedures are in place to take decisions on the matter in hand. Principally, DSS is to take decisions on semi-structured issues, where some phases in the decision process frequently need considerable computer support. This is since a model, which can contain hundreds of relationships, is applied to a data-base which frequently contains a large quantity of data, the decision-maker intervenes in the selection of this data. DSS can also be used to take decisions on non-structured issues. These decisions can also be taken with the support of expert systems, although with a very limited field. The main tasks facing users involve a high level of ambiguity. In other words, they normally have to deal with non-structured or semi-structured issues.
A model is a representation of something, designed for a specific purpose. It is normally an abstraction or a simplification of a phenomenon. A model represents the relationships between the aspects resulting from the phenomenon. A model is constructed by adopting a series of suppositions or assuming a series of premises about the dependence between variables. Different alternatives can then be analyzed by changing some variables and seeing what happens if the premises are modified and then comparing the results (‘what happen if…’), e.g., what happens if the selling price of a product is changed. What value a variable need to have to achieve a certain result. What volume of sales is needed to get a targeted net profit.
The spread-sheet programme is widely used in the work environment and is now the standard software used to manage information in the commercial world. Despite this wide-spread use, it is believed that a low percentage of users take full advantage of the potential of the spread-sheet. The spread-sheet can be better exploited by applying the logic used to construct models with different scenarios. In several cases, poor use of the spread-sheet leads to considerable loss of time and on occasions, the programme cannot be used to carry out some types of analysis.
The purpose of the spread-sheet is not to perform complicated mathematical operations, a calculator is sufficient for that. The spread-sheet comes into its own precisely when the result of the first calculation appears, which is to lead on to an analysis of this result. The spread-sheet can also help achieve higher productivity when it is used to perform regular repetitive operations. The spread-sheet also includes logical functions and search functions which allow the user to delegate more mechanical decisions to the computer, e.g., ‘if this value is lower than that one, then multiply by x’.
Hence, when the users are about to start a task with the spread-sheet, they can have two aims namely (i) to construct a model for decision-making support, in which case the target is to be to achieve maximum possible flexibility, and (ii) to mechanize a repetitive process which the user is to do on a regular basis, repeating the same calculations, which aims to be both convenient and secure. When constructing a spread-sheet, it is necessary to know exactly what the objectives are since this helps the users take the right approach to achieve the objectives.
In general, the decision-making process has four stages. During the first stage, known as the intelligence stage, the environment is explored in order to find or define the issue. During the second stage, the design stage, different alternatives are drawn up for comparison during the selection stage. The solution is then applied and improved where necessary. Each one of these stages can provide feed-back to a previous stage in order to redefine the issue or select a better solution. DSS can help at different stages of the decision-making process.
Spread-sheets are normally used to construct simple decision-making models. They do, however, have limitations. Their data-handling capacity is limited and they cannot work with very large data-bases.
Executive information system (EIS) – DSS mainly support planning tasks, whereas the essential feature of the powerful EIS tool is its support for the control activities. An executive who uses an EIS has a higher capacity to analyze all aspects of the organizational operations and to seek out issues and opportunities. Since organizations have slowly began to adopt IT, there has been a growing conviction that it cannot easily be applied to the managerial tasks, i.e., the more complex and ambiguous the activity is, the less useful computer-based tools prove to be.
This conviction can easily be verified in the real organizational context. Computers are now widely used by administrative personnel and increasingly by middle management level personnel. However, the image of a senior level executive of a large organization busily working in front of a computer screen does not easily spring to mind. The daily routine of a senior-level executive is inevitably assumed to be a round of meetings, telephone calls, conferences, and conversations etc. Studies have shown that the activities of the senior level executives are more oriented to verbal communication, and highly analytical reports and documents are relatively unimportant. However, there is a wide-spread interest in linking up high-level management with the computer tools.
The evolution of information systems – Since their its beginnings, information systems have clearly been conceived as a source of solutions for the organizational management. The stages described here show the path of its development. First to appear has been TPS, which replaced manual procedures for clearly structured routine tasks with faster and more accurate computer-based procedures. Some of the most common transactions now performed by TPS are invoicing, accounting, and payroll management. At the end of the 1970s, the concept of the MIS attempted to meet all the organizational information needs at the strategic, tactical, and operative levels, structured as per the specific pre-defined decisions. However, in practice these systems have not been useful to senior-level executives, since they normally have to deal with new situations which need non-structured decisions for which information needs are not previously established. For this reason, MIS is particularly suitable to cover the information needs of the lower-level executives.
Once it has become clear that comprehensive strategic information system models are not viable, DSS has been introduced. It provided solutions for particular decision-making contexts, and in the end has proved to be more suitable for certain areas of the organizational employees.
The idea of providing regular and relevant information to high-level executives has attracted the attention of information system developers since it has been first introduced into the organizations. Different types of computerized information systems have pursued this ambitious goal. Both the MIS and DSS have first offered as systems to fulfil these needs. However, several developers have found that both MIS and DSS, while useful for other levels in the organizational hierarchy, fail to satisfy the information needs of senior-level executives. Fig 7 shows evolution of organizational information systems.
Fig 7 Evolution of company information systems
Given that the undertakings and responsibilities of the senior level executives differ substantially from those of other people in the organization, their tasks clearly cannot be seen as a mere extension or intensification of the work done at lower levels in the organizational hierarchy, for whom suitable computer-based solutions are available. As a result, senior level executives need specific computer support, which differs from the support provided for other members of the organization. It is in this context that EIS appeared as the next candidate to provide senior level executives with the information they need. These systems have been designed to offer reliable information to executives about key indicators of the working and the operation of the organization.
EIS can be understood as a computer-based information system designed specifically for use by the senior level executives, providing internal and external information which they can use as a support in performing their work. Although definitions of EIS vary, there is a general consensus on the characteristics which they all share, which are detailed below.
The first is the capacity to access and manage information. EIS is to gather the internal and external information which is relevant to the senior level executives, and hence they are to be able to access and manage information from a range of sources and in different formats, and handle quantitative and qualitative, structured and non-structured information. An EIS provides direct access to information without the need for intermediaries.
The second is the presentation of information. The information is to be presented to the users in a meaningful and manageable way, which involves combining data from different sources in the same report or on the same screen, and filtering and condensing a wide range of information. As well as its capacity to aggregate information, the EIS is also to allow the senior level executives for exploring more deeply and get additional more detailed information on a specific aspect if they consider it necessary. The presentation of information is to be adapted to the users’ personal preferences, e.g., by offering choices on how the system can alert the senior level executives to deviations in any variable.
The third is the orientation to the critical success factors (CSF). The EIS is to provide information on key operational variables, and is to be flexible enough to adapt to possible changes occurring in the organizational internal and external environments, ensuring that the system remains oriented to the CSFs. For this reason, the design of the EIS is to allow for constant evolution. The EIS is to be able to accurately determine the users’ information needs in order for it to have the right orientation, to a large extent, its success or failure depends on this capacity.
The fourth is the capacity for communication and the organization of time. The EIS is also to act as a support for communication, through electronic mail, and in organizing the work of the senior level executives in the diary or calendar which normally comes with the system.
The fifth is the ease of use. EIS is to match the users’ profile, in this case, senior level executives who do not normally have any IT training and moreover do not have the time to get it. This means that EIS is to be easy to use and allow direct, intuitive access to its features. The learning curve of EIS is to be no longer than a few minutes.
EIS is one of the most promising tools which the technology has made available for the organizations. It allows the senior level executives to understand and analyze the forces acting in the organization and in the market without moving from their own desk. Senior level executives can use EIS in two ways, to read information about the current situation and forecasted trends, and as a tool to perform personalized analysis.
Senior level executives use EIS in two completely different ways namely (i) to access information on the current situation and on foreseeable trends, and (ii) to perform personalized analyses of the available data.
The first is the access to information When the senior level executives have ‘read-only’ access to the latest data or reports on the situation of key variables, they can examine the information but do little, or perhaps nothing, in terms of processing the data. This type of access can be widely used in sectors where the environment conditions change quickly, where the senior level executives have to keep up with a lot of reports, or where hour-by-hour monitoring of operations is important.
The second is the personalized analysis. Naturally, senior level executives can use the computer not only to gain exclusive access to information, but also as an analytical tool. The type of analysis can vary from one senior level executive to another. Some simply calculate new ratios or extrapolate current trends for application to future scenarios. Others highlight trends of particular interest on figures or graphs to gain an additional visual perspective. Some work with simulated models to determine where capital investments is going to be most productive. What is important is that the EIS allows the senior level executives to consider, change, extend, and operate data as per the procedures which are meaningful to them at a personal level. For this method to be efficient, senior level executives inevitably are to spend a lot of their own time and effort in defining the data they need and learning what the computer can do. Hence, the senior level executives need at least some initial training and assistance with the computer languages involved.
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