MIS AND DECISION MAKING CONCEPTS

It is necessary to understand the concepts of decision making as they are relevant to thedesign of
the MIS. The Simon Model provides a conceptual design of the MIS and decision making, wherein the
designer has to design the system in such a way that the problem is identified in precise terms. That means
the data gathered for data analysis should be such that it provides diagnostics and also provides a path to
bring the problem to surface.
In the design phase of the model, the designer is to ensure that the system provides models for
decision making. These models should provide for the generation of decision alternatives, test them and
pave way for the selection of one of them. In a choice phase, the designer must help to select the criteria to
select one alternative amongst the many.
The concept of programmed decision making is the finest tool available to the MIS designer, whereby
he can transfer decision making from a decision maker to the MIS and still retain the responsibility and
accountability with the decision maker or the manager. In case of non-programmed decisions, the MIS
should provide the decision support systems to handle the variability in the decision making conditions.
The decision support systems provide a generalized model of decision making.
The concept of decision making systems, such as the closed and the open systems helps the designer
in providing design flexibility. The closed systems are deterministic and rule based; therefore, the design
needs to have limited flexibility, while in an open system, the design should be flexible to cope up with the
changes required from time to time. The methods of decision making can be used directly in the MIS
provided the method to be applied has been decided. A number of decision making problems call for
optimization,and OR models are available which can be made a part of the system. The optimization
models are static and dynamic, and both can be used in the MIS. Some of the problems call for a
competitive analysis, such as a payoff analysis. In these problems, the MIS can provide the analysis based
on the gains, the regrets and the utility.
The concepts of the organizational and behavioral aspects of decision making provide an insight to the
designer to handle the organizational culture and the constraints in the MIS.The concepts of the rationality
of a business decision, the risk averseness of the managers and the tendency to avoid an uncertainty, makes
the designer conscious about the human limitations, and prompts him to provide a support in the MIS to
handle these limitations. The reliance on organizational learning makes the designer aware of the strength
of the MIS and makes him provide the channels in the MIS to make the learning process more efficient.
The relevance of the decision making concepts is significant in the MIS design. The significance arises
out of the complexity of decision making, the human factors in the decision making, the organizational and
behavior aspects, and the uncertain environments.The MIS design addressing these significant factors turns
out to be the best design.

Todays managers depend on information systems for decision making. The managers
have handful of data around them but manually they cannot process the data
accurately and with in the short period of time available to them due to heavy
competition in modern world. Therefore mangers depend on information systems.

The concept of MIS:

Management: Management has been defined in a variety of ways, but for our
purposes it comprises the process or activities what managers do in the operation of
their organization: Plan, Organize, Initiate and Control operations.

Information:
 Data are facts and figures that are not currently being used in a decision processes
and usually take the form of historical records that are recorded and filed without
immediate intent to retrieve for decision making.

Information consists of data that have been retrieved, processed or otherwise used
for information or inference purposes, argument, or as a basis for forecasting or
decision making.

System can be described simply as a set of elements joined together for a common
objective. A subsystem is is part of a larger system with which we are concerned. All
systems are part of larger systems.

The objective of an MIS (Management Information System) is to provide information

for decision making on planning, initiating, organizing, and controlling the operations
of the subsystems of the form and to provide a synergetic organization in the
process.

Decision Support System: It is sometimes described as the next evolutionary step

after Management Information Systems (MIS) . MIS support decision making in both
structured and unstructured problem environments.. It supports decision making at
all levels of the organization .IS (Information Systems) are intended to be woven
into the fabric of the organizations , not standing alone. IS support all aspects of the
decision making process.MIS are made of people, computers, procedures, databases,
interactive query facilities and so on. They are intended to be evolutionary/adaptive
and easy for people to use.

Methods of Decision Making

Type of Decision Methods of decision making

OLD NEW
Programmed Habit Management Information
Repetitive and Routine Standard operating procedure System
Organization structure, policy etc
Non-Programmed Judgement, Intution, Insight Systematic Approach to
experience problem solving & Decision
Training and Learning making

MIS is a technique for making programmed decisions. If we include the computer

and management science as integral parts or tools of computer –based information
systems, the prospects for a revolution in programmed decision making are very
real. Just as a manufacturing process is becoming more and more automated so is
the automation of programmed decisions increasing to support this production and
other information needs through out the organization.

Topic 2 Management Information Systems

In the exam you are expected to:

 • Understand the difference between an information system and a data
processing system.
• Understand the role and relevance of an information system in aiding
decision making.
• Recall Definition of a management information system (MIS)
• Recall that an MIS is a system to convert data from internal and
external sources into information. This is communicated in an
appropriate form to managers at different levels, enabling them to
make effective decisions for planning, directing and controlling
activities for which they are responsible.
• Describe the development and life cycle of an information system
• Recognise the existence of formal methods, the need for clear time
scales, agreed deliverables and approval to proceed.
• Describe the success or failure of a management information system
• Understand the factors influencing the success or failure of an
information system, e.g. inadequate analysis; lack of management
involvement in design; emphasis on computer system; concentration on
low-level data processing; lack of management knowledge of ICT
systems and capabilities; inappropriate/excessive management
demands; lack of teamwork; lack of professional standards.

The five classical functions of a manager are:

1. Planning – the direction a company takes e.g. diversifying, where to

operate.

2. Organising - resources such as people, space, equipment and services.

3. Coordinating - the activities of various departments.
4. Decision-making - about the organisation, products or services made or
sold, the employees, use of I.T.
5. Controlling - monitoring and supervising the activities of others.

The role of a management information system (MIS) is to provide a manager

with sufficient information to make informed decisions to help him to carry out
the above functions. The best definition of an MIS is:
The role of a management information system is to convert data
from internal and external sources into information that can be
used to aid in making effective decisions for planning, directing
and controlling.

We need to make the distinction between a data-processing system and an

information system:

• Data processing systems record day too day transactions, e.g. sale of a
CD to a customer.

• Operational Information systems read the collected data and do things

like producing lists of items that need to be re-ordered.

• The MIS will analyse the sales data to highlight sales trends of different
product lines, to enable decisions to be made as to whether the product
needs special promotion, or whether it should be discontinued.

The MIS deals with internal and external information. The internal information
can be got quite easily from the various systems on the company network, e.g.
sales figures for each product line. The external information is gathered from:

• Intelligence about competitors’ activities. This can come through

reading articles in the press, leaks, or even industrial espionage.

• Information about population shifts. As the population gets older, the

less likely they are to be interested in pop-music or customising cars,
but are more likely to be interested in weight-loss products or holidays
for the over 50s.

• Economic and social factors. Sales of cars would go down in an area

where a major employer had just closed down a plant.

• Government Legislation. Financial forecasts would change if the

minimum wage rose.

The MIS can be used to gather information from both formal and informal
flows of information.
• A formal flow of information is one in which a procedure is adopted,
e.g. the downloading of sales figures from several branches first thing on
a Monday morning. External data can be collected using specialised
data collection agencies such as Dun and Bradstreet who produce
economic data for academic and commercial organisations. Formal
flows can also come from people working on the same document at
several locations, or by use of e-mail, or by use of company intranets.

• Informal information flows come from chance meetings, reading

magazines or newspapers, or watching the news on TV.
The MIS must produce information for managers on three levels:

• Operational – day-to-day decisions such as ordering in more stock

• Tactical – decisions that have a short to medium term effect, e.g.

introducing a new product to a particular retail outlet;

• Strategic – long term decisions that will affect the future of the
organisation, e.g. whether to open a new store, or take over a rival
concern.

In 1973 a study showed the following about the time taken by a manager on
various different tasks:

• Desk work – 22 %

• Travel – 3 %

• Unscheduled meetings – 10 %

• Scheduled meetings (the practical alternative to work) – 59 %

• Telephone calls – 6 %.

Some chief executives have to change their attention rapidly form one task to
another. In some cases, half their activities last less than nine minutes.
Types of Decision

A manager can make two kinds of decision:

• Structured – which are repetitive and need a definite routine and

procedure to deal with them, e.g. stock is below 15 %, so an order need
to be place with a supplier.

• Unstructured – require knowledge, insight, and evaluation. They may

well crop up without warning, and the right decision can be critical.

Consider

solutions

Choose a

solution

Is there a problem

or opportunity?

Is the choice working

The manager may well go through the following stages when considering what
decision to take:

1. Recognise the problem. The MIS may give information about the
performance of the department, and where there is a problem.

2. Consider the solution. A spreadsheet could be used to consider

“What if” scenarios.

3. The solution is chosen using the manager’s experience as well as

the information produced by the MIS.

4. The solution is implemented and reviewed. Again the MIS can

provide the data on which the solution is evaluated.

Often solutions do not proceed smoothly and there may have to be

backtracking from one stage to another.
Desirable features of an MIS

• Be flexible - allowing for different ways of analysing data and evaluating

information.

• Be able to support a range of skills and knowledge.

• Provide interpersonal communication with other people

in the organisation.

Not require extensive periods of concentration as managers

switch between different tasks.

• Make it easy to interrupt the work and return to it at a later time

• Protect a manager, from information overload.

Systems Life Cycle

The construction of a specialist computer system often involves large teams of

people, and it is absolutely critical that they are managed correctly. If they
are not, the project will be at best inefficiently run or at worst go belly-up.
There are a good number of sophisticated computer projects that have
attracted publicity for all the wrong reasons, usually with the waste of many
millions of euros of public money.

There are a number of ways that computer projects can be managed. We will
look at

• the systems life cycle

 • the waterfall model

• prototyping.

The systems life cycle was the traditional way in which projects were carried
out. Each stage was completed before the next was started.

Testing

Feasibility study

Maintenance

Design

Analysis

Implementation
You will have done something fairly similar with your project. This system had
its drawbacks, in that experience in a later stage could not inform work that
had been done previously.

In the waterfall model, it is possible to rework earlier stages in the light of

experience gained at a later stage. Each stage is signed off and the next stage
is proceeded with. However the end user is rarely involved in the development
stage, even though they may well be involved in signing off. It is therefore
critical that the analysts and the programmers understand the end-users’
requirements. This can be quite difficult with the waterfall model.

Analysis

Design

Implementa-tion

Review and maintenance

Feasibility Study

Requirements analysis

Design

Coding and Testing

Conversion

Post-implementation review
The waterfall model has disadvantages, which can be overcome using
prototyping, in which a model of the system is developed in partnership with
the end-user. The features are worked out with the end user using a
prototype, and the end user can have a considerable input into the
development of a project. The approach is shown below:

Establish an outline specification

Develop a prototype

Evaluate
Specify

Design and Implement

Benefits are:

• Misunderstandings are detected at early stages

• the user will notice any missing functions, incomplete or inconsistent

requirements.

• can be built quickly to demonstrate systems

• it can be used for training before the system is finished

Drawbacks are:

• Project management can be discoordinated or even sloppy.

• Meetings with end users can become time consuming.

• The final result could be completely different to what was requested in

the first place.

There are several different ways of prototyping:

 • Piloting – Test the feasibility of the design proposal

• Modelling – building to develop an understanding of the user’s

requirements

• Throw-away prototyping – Pilot and modelling are throw away types –

once they achieve their purpose the real system is built.

• Evolutionary prototyping – each prototype built is a step closer to

solution.

What Prompts a New System?

1. The current system may not do what it should.

2. Technological developments may have made the current system outdated.

3. The current system may be too inflexible or expensive to maintain.

Feasibility Study

The scope and objectives of the system are specified. The aim is to understand
the problem and see if it is worth continuing. A feasibility report is produced
by the systems analyst which considers the five main factors which are
(TELOS):

• Technical feasibility – investigating if the technology exists to implement

the system
• Economic Feasibility – establishing the cost-effectiveness of the system –
do the benefits outweigh the costs?
• Legal Feasibility – Is there any conflict with system and legal
requirements e.g. Data Protection Act
• Operational Feasibility – are work practices and procedures able to
support new system. Also considers social factors e.g. how will it affect
working lives.
• Schedule feasibility – How long it will take to develop and if it can be
done in specified time frame.

Telos is a Greek word meaning a target.

Once the feasibility study concludes that the project is viable, it proceeds to
the requirements analysis. This involves:

• Interviewing staff at all levels of the organisation to get their views on

exactly what they want.
• Sending out questionnaires which need to be carefully constructed to
avoid ambiguous responses.
• Examining all the documentation, from the most day-to-day to those
used by the most senior of the managers.
• Observation of current procedures and practices.

All of this is carried out by systems analysts who produce data flow diagrams
to picture the company’s operations. Click HERE to see a DFD.

The analysts also consider the costs and benefits implications. They also
consider the way the project will be implemented:

• Will it be done in-house or using consultants;

• What hardware would be used;
• What software could be used?

Finally a report is written with a recommendation to proceed or abandon the

project.

The next stage is the system design:

• Hardware profile, including the technical data of the machines on which

the programs will be run.
• Software profile, including the programming language, packages, and
database management systems;
• Inputs, including entry screens;
• Outputs, such as reports;
• The user interface.
• The modular design structure for the program. The program is built up
in discrete sub-units and put together;
• Test plan and data;
 • Conversion plan;
• Documentation, including a user manual.

You will have done much of this in your Module 3 project (didn’t you?).

Then there’s the implementation, where the system is coded and tested. Also
Hardware is installed, ready to convert from the old system to the new.

• Hardware is installed, which may need extensive work on cabling and/or

redesigning offices;
• Users are trained;
• Conversion of master files, or creation of new master files.

There are several ways of conversion:

 • Direct changeover, in which the old is topped and the new is
introduced. Usually this is over a weekend or some other slack time.
The advantage is that there is a minimum of duplication. The drawback
is there can be serious disruption if the new system has errors in it.
• Parallel conversion where the two systems are run alongside each
other, minimising disruption due to errors. However this does involve
duplication of the work.
• Phased conversion where bits of the new system are introduced, one at
a time.
• Pilot conversion where the system is implemented initially in a few
branches.

Once the system is up and running, there is a post-implementation review. It

is usually in the first few weeks and months that errors become apparent.

So system maintenance may be needed:

• Perfective maintenance – although the system is running well, there

may be room for improvement;
• Adaptive maintenance – where new functions are added to take into
account the changing needs of the company;
• Corrective maintenance to get rid of errors.

What are Management Information Systems?

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

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

Applications of MIS

With computers being as ubiquitous as they are today, there's hardly any large business
that does not rely extensively on their IT systems.

However, there are several specific fields in which MIS has become invaluable.

* Strategy Support
While computers cannot create business strategies by themselves they can assist
management in understanding the effects of their strategies, and help enable effective
decision-making.

MIS systems can be used to transform data into information useful for decision making.
Computers can provide financial statements and performance reports to assist in the
planning, monitoring and implementation of strategy.

MIS systems provide a valuable function in that they can collate into coherent reports
unmanageable volumes of data that would otherwise be broadly useless to decision
makers. By studying these reports decision-makers can identify patterns and trends that
would have remained unseen if the raw data were consulted manually.

MIS systems can also use these raw data to run simulations – hypothetical scenarios that
answer a range of ‘what if’ questions regarding alterations in strategy. For instance, MIS
systems can provide predictions about the effect on sales that an alteration in price would
have on a product. These Decision Support Systems (DSS) enable more informed
decision making within an enterprise than would be possible without MIS systems.

* Data Processing

Not only do MIS systems allow for the collation of

vast amounts of business data, but they also provide a
valuable time saving benefit to the workforce. Where
in the past business information had to be manually
processed for filing and analysis it can now be
entered quickly and easily onto a computer by a data
processor, allowing for faster decision making and
quicker reflexes for the enterprise as a whole.
Management by Objectives

While MIS systems are extremely useful in generating statistical reports and data analysis
they can also be of use as a Management by Objectives (MBO) tool.

MBO is a management process by which managers and subordinates agree upon a series
of objectives for the subordinate to attempt to achieve within a set time frame. Objectives
are set using the SMART ratio: that is, objectives should be Specific, Measurable,
Agreed, Realistic and Time-Specific.

The aim of these objectives is to provide a set of key performance indicators by which an
enterprise can judge the performance of an employee or project. The success of any MBO
objective depends upon the continuous tracking of progress.

In tracking this performance it can be extremely useful to make use of an MIS system.
Since all SMART objectives are by definition measurable they can be tracked through the
generation of management reports to be analysed by decision-makers.

Benefits of MIS

The field of MIS can deliver a great many benefits to enterprises in every industry.
Expert organisations such as the Institute of MIS along with peer reviewed journals such
as MIS Quarterly continue to find and report new ways to use MIS to achieve business
objectives.

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.

A management information system is a system that has important tools to supports,

analyse, delivery and adding reliability to any organisation. Also this helps to solve
businesses problems. The term MIS is often used to submit to a group of information
management methods tied to the support of human decision making, e.g. Decision
Support Systems, Expert systems, and Executive information systems.
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