Why Businesses Need an Efficient Management Information System?

We are living in a time of great change and working in an Information Age. Managers have to assimilate masses of data, convert that data into information, form conclusions about that information and make decisions leading to the achievement of business objectives. For an organization, information is as important resource as money, machinery and manpower. It is essential for the survival of the enterprise.

Before the widespread use of computers, many organizations found difficulties in gathering, storing, organizing and distributing large amounts of data and information. Developments in computer technology made possible for managers to select the information they require, in the form best suited for their needs and in time they want. This information must be current and in many cases is needed by many people at the same time. So it has to be accurate, concise, timely, complete, well presented and storable. Most firms nowadays depend on IT.

The term management information system (MIS) made its first appearance in U.S. navy report on the use of computers to construct a single integrated system to manage all navy resources.

A management information system (MIS) is a subset of the overall internal controls of a business covering the application of people, documents, technologies, and procedures by management accountants to solve business problems such as costing a product, service or a business-wide strategy. Management information systems are distinct from regular information systems in that they are used to analyze other information systems applied in operational activities in the organization. Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g. Decision Support Systems, Expert systems, and Executive information systems.

Read More: Introduction to Managment Information Systems

MIS combines tech with business to get people the information they need to do their jobs better/faster/smarter. MIS professionals work as systems analysts, project managers, systems administrators, etc., communicating directly with staff and management across the organization.” “A system to convert data from internal and external sources into information and communicate that information in an appropriate form, to managers at all levels in all functions to enable them to make timely and effective decisions for planning, directing and controlling the activities for which they are responsible.”(Bee and Bee, 1999)

An ‘MIS’ is a planned system of the collecting, processing, storing and disseminating data in the form of information needed to carry out the functions of management. In a way it is a documented report of the activities those were planned and executed.

According to Philip Kotler “A marketing information system consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.”

Management information systems are those systems that allow managers to make decisions for the successful operation of businesses. Management information systems consist of computer resources, people, and procedures used in the modern business enterprise.  MIS also refers to the organization that develops and maintains most or all of the computer systems in the enterprise so that managers can make decisions. The goal of the MIS organization is to deliver information systems to the various levels of corporate managers. MIS professionals create and support the computer system throughout the company. Trained and educated to work with corporate computer systems, these professionals are responsible in some way for nearly all of the computers, from the largest mainframe to the desktop and portable PCs.

Its purpose is to help managers to solve structured problems. But it should also fulfill a number of other purposes:

  • It should provide a basis to analyze warning signals that can originate both externally and internally; this is the main function of data base;
  • It should automate routine operations thus avoiding human work in the processing tasks;
  • It should assist management in making routine decisions;
  • It should provide the information necessary to make non-routine decisions;
  • It should serve as a strategic weapon to gain competitive advantages.

Computer-based or manual system transforms data into information useful in the support of decision making. MIS can be classified as performing three functions:

  1. To generate reports-for example, financial statements, inventory status reports, or performance reports needed for routine or non-routine purposes.
  2. To answer what-if questions asked by management. For example, questions such as “What would happen to cash flow if the company changes its credit term for its customers?” can be answered by MIS. This type of MIS can be called Simulation.
  3. To support decision making. This type of MIS is appropriately called Decision Support System (DSS). DSS attempts to integrate the decision maker, the data base, and the quantitative models being used.

When information systems are designed to provide information needed for effective decision making by managers, they are called management information systems. MIS is a formal system for providing management with accurate and timely information necessary for decision making.

The system provides information on the past, present and project future and on relevant events inside and outside the organization. It may be defined as a planned and integrated system for gathering relevant data, converting it in to right information and supplying the same to the concerned executives. The main purpose of MIS is to provide the right information to the right people at the right time.

A management information system is an integrated man – machine systems that provides information to support the planning and control function of manager in an organization. For example, an organization often processes a lot of data which it is required by law to furnish to various government regulatory agencies. Such a system, while it may have interfaces with an MIS, would not be a part of it, instances of such systems is salary disclosures and excise duty statements.

Generally, MIS deals with information that is systematically and routinely collected in accordance with a well-defined set of rules. Thus, and MIS is a part of the formal information network in an organization. Normally, the information provided by an MIS helps the managers to make planning and control decisions. Now, we will see, what is planning and control. Every organization in order to function must perform certain operations. For Example, a car manufacturer has to perform certain manufacturing activities; a wholesaler has to provide water to its area of jurisdiction. All these are operations that need to be done. Besides these operations, an organization must make plans for them that it must decide on how many and what type of cars to make next month or what commissions to offer retailers or what pumping stations to install in the next five years.

Also an organization must control the operations in the light of the plans and targets developed in the planning process. The car manufacturer must know if manufacturing operations are in line with the targets and if not, he must make decisions to correct the deviation or revise his plans. Similarly the wholesaler will want to know the impacts that his commissions have had on sales and make decisions to correct adverse trends.

Effective management information systems are needed by all business organization because of the increased complexity and rate of change of today’s business environment. For Example, Marketing manager need information about sales performance and trends, financial manger returns, production managers needs information analyzing resources requirement and worker productivity and personnel manager require information concerning employee compensation and professional development? Thus, effective management information systems must be developed to provide modern managers with the specific marketing, financial, production and personnel information products they required to support their decision making responsibilities.

An MIS provides the following advantages.

  1. It facilitates planning: MIS improves the quality of plants by providing relevant information for sound decision making. Due to increase in the size and complexity of organizations, managers have lost personal contact with the scene of operations.
  2. In Minimizes information overload: MIS change the larger amount of data in to summarize form and there by avoids the confusion which may arise when managers are flooded with detailed facts.
  3. MIS Encourages Decentralization: Decentralization of authority is possibly when there is a system for monitoring operations at lower levels. MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures.
  4. It brings Coordination: MIS facilities integration of specialized activities by keeping each department aware of the problem and requirements of other departments. It connects all decision centers in the organization.
  5. It makes control easier: MIS serves as a link between managerial planning and control. It improves the ability of management to evaluate and improve performance. The used computers has increased the data processing and storage capabilities and reduced the cost.
  6. MIS assembles, process, stores, retrieves, evaluates and disseminates the information.

To function effectively as an interacting, interrelated, and interdependent feedback tool for management and staff, MIS must be “useable.” The five elements of a useable MIS system are: timeliness, accuracy, consistency, completeness, and relevance. The usefulness of MIS is hindered whenever one or more of these elements are compromised.

  • Timeliness: To simplify prompt decision making, an institution’s MIS should be capable of providing and distributing current information to appropriate users. Information systems should be designed to expedite reporting of information. The system should be able to quickly collect and edit data, summarize results, and be able to adjust and correct errors promptly.
  • Accuracy: A sound system of automated and manual internal controls must exist throughout all information systems processing activities. Information should receive appropriate editing, balancing, and internal control checks. A comprehensive internal and external audit program should be employed to ensure the adequacy of internal controls.
  • Consistency: To be reliable, data should be processed and compiled consistently and uniformly. Variations in how data is collected and reported can distort information and trend analysis. In addition, because data collection and reporting processes will change over time, management must establish sound procedures to allow for systems changes. These procedures should be well defined and documented, clearly communicated to appropriate employees, and should include an effective monitoring system.
  • Completeness: Decision makers need complete and pertinent information in a summarized form. Reports should be designed to eliminate clutter and voluminous detail, thereby avoiding “information overload.”
  • Relevance: Information provided to management must be relevant. Information that is inappropriate, unnecessary, or too detailed for effective decision making has no value. MIS must be appropriate to support the management level using it. The relevance and level of detail provided through MIS systems directly correlate to what is needed by the board of directors, executive management, departmental or area mid-level managers, etc. are in the performance of their jobs.

Core Competencies:

Every market leading enterprise will have at least one core competency – that is, a function they perform better than their competition. By building an exceptional management information system into the enterprise it is possible to push out ahead of the competition. MIS systems provide the tools necessary to gain a better understanding of the market as well as a better understanding of the enterprise itself.

Enhance Supply Chain Management:

Improved reporting of business processes leads inevitably to a more streamlined production process. With better information on the production process comes the ability to improve the management of the supply chain, including everything from the sourcing of materials to the manufacturing and distribution of the finished product.

Quick Reflexes:

As a corollary to improved supply chain management comes an improved ability to react to changes in the market. Better MIS systems enable an enterprise to react more quickly to their environment, enabling them to push out ahead of the competition and produce a better service and a larger piece of the pie.

MIS which meets the five elements of use ability is a critical ingredient to an institution’s short- and long-range planning efforts. To achieve sound MIS, the organization’s planning process should include consideration of MIS needs at both the tactical and strategic levels. For example, at a tactical level MIS systems and report output should support the annual operating plan and budgetary processes. They should also be used in support of the long term strategic MIS and business planning initiatives. Without the development of an effective MIS, it is more difficult for management to measure and monitor the success of new initiatives and the progress of ongoing projects. Two common examples of this would be the management of mergers and acquisitions or the continuing development and the introduction of new products and services.

Management needs to ensure that MIS systems are developed according to a sound methodology that encompasses the following phases:

  • Appropriate analysis of system alternatives, approval points as the system is developed or acquired, and task organization.
  • Program development and negotiation of contracts with equipment and software vendors.
  • Development of user instructions, training, and testing of the system.
  • Installation and maintenance of the system.

Depending on the size and complexity of its MIS system, an institution may need to use different manuals for different users such as first-level users, unit managers, and programmers.

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]
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