Management Information Systems

Unit-01-Introduction to Management Information Systems
Structure:
1.1 Introduction
Objectives
1.2 What are Management Information Systems?
1.2.1 Introduction
1.2.2 Interpretation of MIS Concept
1.2.3 Self Assessment Questions (for section 1.2)
1.3 Organization and Management
1.3.1 What Are Organizations?
1.3.2 Management
1.4 The concept of information
1.4.1 Meaning
1.4.1.1 Information as Processed Data
1.4.1.2 Information as the Opposite of Uncertainty
1.4.1.3 Information as a Meaningful Signal
1.4.2 Uses of information
1.4.2.1 Information as a Resource
1.4.2.2 Information as an Asset
1.4.2.3 Information as a Commodity
1.4.3 The Cost of Information
1.4.3.1 Acquiring Information
1.4.3.2 Processing Information
1.4.3.3 Storing Information
1.4.3.4 Retrieving Information
1.4.3.5 Communicating Information
1.4.4 The Need for Information Systems
1.4.4.1 Individual Needs

1.4.4.2 Managerial Needs
1.4.4.3 Organizational Needs
1.4.5 Self assessment questions (for section 1.4)
1.5 Information Technology
1.5.1 The Role of Information Technology
1.5.2 Components of Information Technology
1.5.2.1 Software
1.5.2.2 Hardware
1.5.2.3 Database Management Systems
1.5.2.4 Data communication technology

1.6 Managing Information in a Global Environment
1.6.1 Information management model
1.6.1.1 Diagnosis
1.6.1.2 Evaluation
1.6.1.3 Design
1.6.1.4 Implementation
1.7 Management information system as a discipline
1.7.1 Relationship of MIS to Reference Disciplines
1.8 Summary
1.9 Terminal Questions
1.10 Multiple Choice Questions
1.11 Answers to SAQs, TQs and MCQs
1.1 Introduction
With this unit, we shall embark on the journey of “Management Information System”. Begin by
discussing a brief outline of MIS, management and organization. We shall conclude by the MIS as a
discipline.
Objectives:
At the end of this unit, you should be able to
· Define Management Information system
· Explain the various needs of the information
· Understand Management and organization
· Explain Information management model
· How MIS evolved from the past to the present
1.2 What are Management Information Systems?
1.2.1 Introduction
Management information system (MIS) is an organized portfolio of formal systems for obtaining,
processing, and delivering information in support of the business operations and management of an
organization. The functions of information systems have increased many folds since the first
computer was introduced into a business organization in 1954. Of course, we must not forget the
weighty ledgers, sedulously kept by the bookkeepers of yore, pigeons carrying news of battles won
and heralding profitable speculation op portunities for the recipient, and the clay tablets on which
the Babylonians kept records as long ago as 3500 B.C. There were information facilities before
computers. Manual calculation and non-electronic communications have not dis appeared, but could
they support the complex business of today’s organiza tions.
Today’s organizations have been profoundly affected by both the technology push created by
continual innovation in information tech nology, and the demand-pull, or the needs in the
marketplace, arising from the growing complexity of social organizations and from the recognition
of the power of information systems to solve complex problems. These two forces have led to the
evolution of the MIS concept itself and have changed the nature of
in formation systems. In turn, MIS transform organizations, the nature of work, and the products
offered in the marketplace.
1.2.2 Interpretation of MIS Concept
In our broad interpretation of the MIS concept, these information systems include all of the
following:
· Transaction processing systems for operational data processing that are needed, for example, to
register customer orders and to produce invoices and payroll checks.
· Management reporting systems capable of producing reports for specific periods, designed for
managers responsible for specific functions in a firm.
· Decision support systems (DSS) expressly designed for the support of individual and collective
decision making.
· Executive information systems, which support the work of senior executives and of company
boards by giving them ready access to a variety of summarized company data against a background
of general information on the industry and the economy at large.
· Office information systems, which support and coordinate knowledge work in an office
environment by handling documents and messages in a variety of forms-text, data, image, and
voice.
In a broader sense, knowledge work is also supported by computerized systems assisting

professionals in non-managerial functions. For example, diverse profes sional support systems help
designers, such as engineers, architects, commer cial artists, or scientists who model molecular
structures or study the genetic codes of living matter.
Fig. 1.1
From the organizational point of view, it is important to rec ognize that certain systems of different
types are interorganizational: they in tegrate the organization with other firms.
In figure 1.1, operational support systems assist in the day-to-day activities of the enterprise by
keeping track of its resources and commitments. Through such systems, a manufacturing company
can track the inventory of finished goods, a bank can maintain the status of demand deposits for its
customers, and a dis tributor’s system can answer customer queries regarding orders. The primary
function of operational support systems is thus transaction processing.
Management support systems, assist the various levels of management in their tasks and managers
are able to obtain summary reports on past, current, and pro jected activity within their areas of
responsibility. Decision support systems allow managers to consider various courses of future action
and see projected results in order to plan future activities. Executives are able to get an overview
of the company’s operations in attractive graphical form and "drill in" on any aspect they want to
pursue in more detail.
Office information systems support diverse aspects of individual and group knowledge work. The
range of this type of support is broad and growing. An individual may maintain his or her business
calendar and communicate with co -workers through the medium of electronic mail in some
systems, also by sending images. Other systems offer a variety of computerized supports for team
work, even when the participants are widely dispersed.
In many cases, the information systems of an organization become connected to those of its
suppliers and customers or to providers of information about the external environment in which the
firm operates. Such interorganizational it formation systems speed the flow of information between
companies and are frequently a source of competitive edge.
Indeed, it is increasingly common to design certain information systems to give a company a

superior competitive position in the marketplace by helping it offer its customers information-
related products or services that the competition will find difficult to match. An ordering system
with terminals installed at thousand of client sites, or an expert system that helps to diagnose via
telecommunication links how equipment installed at customer sites is operating, are prime exam
ples of strategic information systems.
1. What do you understand by Management information system?
2. What does management information system include?
1.3 Organization and Management
1.3.1 What Are Organizations?
Organizations are formal social units devoted to the attainment of specific goals. Organizations use
certain resources to pro duce outputs and thus meet their goals. For example, a business firm that
pro duces semiconductor memory chips consumes certain resources (money, materials, labor,
machinery, and information) and aims to meet certain financial objectives. A local government
institution employs its resources (financed by the tax payers) to provide a benefit for the area
population-thus, a motor vehicle bureau licenses drivers and vehicles. A nonprofit hospital applies
its resources to provide health care to its target population.
1.3.2 Management
Management is the process of providing an organizational environment in which individuals work and
employ available resources to attain aims that contribute to the overall goals of the organization.
There are several fruitful ways to understand management. The classical way is to consider the
managerial functions: planning, organizing, staffing, leading, and controlling. Decision-making,
monitoring, and coordination are informa tion-intensive aspects of these managerial functions.
Another way to look at management is to consider the roles managers play in their work-
entrepreneur and resource allocator are two examples of these roles. Detailed analyses have also
been made of how managers actually spend their time; various interpersonal tasks have been found
to make far greater demands on managers’ time than pure decision-making. However, the quality of
manage ment cannot be evaluated by measuring time allocations alone. Moreover, the information
that a manager brings to bear in a meeting is often a determinant of its success.
An MIS, obviously, is designed to support managers in as many of their functions as possible,

although to different degrees. It is clear, for example, that the lead ership function receives scant
support from MIS, but the planning function should be extensively supported.
1.4 The Concept of Information
1.4.1 Meaning
Information is a complex concept that has a variety of meanings depending on its context and the
perspective in which it is studied. It could be described in three ways
1) as processed data,
2) as the opposite of uncertainty, and
3) as a meaningful signal-to illus trate the richness of the concept of information.
1.4.1.1 Information as Processed Data
Data are generally considered to be raw facts that have undefined uses and application; information
is considered to be processed data that influences choices, that is, data that have somehow been
formatted, filtered, and summarized; and knowledge is considered to be an understanding derived
from information distinctions among data, information, and knowledge may be derived from
scientific terminology. The researcher collects data to test hypotheses; thus, data refer to
unprocessed and unanalysed numbers. When the data are analysed, scientists talk about the
information contained in the data and the knowledge acquired from their analyses. The confusion
often extends to the information systems context, and the three terms maybe used interchangeably.
1.4.1.2 Information as the Opposite of Uncertainty
A different perspective on information derives from economic theory and defines information as the
negative mea sure of uncertainty; that is, the less information is available, the more uncertainty
exists, and conversely, the more information is available, the less uncertainty exists? In
microeconomic theory the equilibrium of supply and demand depends on a market known as a
perfect mar ket, where all buyers and sellers have complete knowledge about one another and
where uncertainty does not exist. Information makes a market perfect by eliminating uncertainties
about supply and demand. In macroeconomic theory, firms behave according to how they read the
economic climate. Economic signals that measure and predict the direction of the economy provide
information about the economic climate. The firm reduces its uncertainty by decoding these signals.
Taking an example of Federal Express in USA, each incoming aircraft has a scheduled arrival time.
However, its actual arrival depends on unforeseen conditions. Data about when an aircraft departed
from its destination is information in the economic sense because it reduces uncertainty about the
aircraft’s arrival time, thereby increasing Federal Express’s ability to handle arriving packages.
Managers also define information in terms of its reducing uncertainty. Because managers must
project the outcomes of alternatives in making decisions, the reduction of uncertainty about the
outcomes of various alternatives improves the effectiveness of the decision- making process and the
quality of the decision.
1.4.1.3 Information as a Meaningful Signal
Information theory, a branch of statistics concerned with measuring the efficiency of

communication between people and/or machines, defines information as the inputs and outputs of
communication. Electronic, auditory, visual, or other signals that a sender and receiver interpret
similarly convey information. For example, in the recruitment scenario about, the resumes and
applications for the open positions are information because they are signals sent by the applicants,
and interpreted similarly by both.
The Managers in their roles as communicators both generate and receive information. They receive
reports that organize signals or data in a way that conveys their meaning. Reports of sales trends
become information; so do reports about hazardous waste sites. Managers derive meaning from the
information they see and hear as part of communication and use it to make decisions. This
definition of information requires a manager to interpret a given signal as it was intended. For
example, a manager’s incorrect interpretation of body language in a negotiation would not be
considered to be information from this perspective, although we know that managers use both
correct and incorrect perceptions as information in decision making and other managerial functions.
Again, this view of information suggests the complexity of the concept and the value of a
multifaceted definition.
1.4.2 Uses of information
Organizations may use information as a resource, as an asset, or as a commodity.
1.4.2.1 Information as a Resource
We generally think of organizations using money, people, raw materials, machinery, or even time as
resources-inputs to the production of outputs. Information can also be viewed as a resource. Social
workers use information about clients in helping them become more functional. Physicians use case
histories of patients as inputs to diagnosis and prescription.
Resources can also substitute for one another to some degree. Capital in the form of automated
equipment can reduce labor required for production. Similarly, information can replace either
capital or labor. Organizational members may also use information to decrease the cost or increase
the quality of the final product or service.
1.4.2.2 Information as an Asset
An asset is the property of a person or an organization that is used to produce a company’s output
and does not get used up as a resource does. Some resources are converted to assets that can be
used over an extended period, such as the use of capital to purchase equipment that, in turn,
becomes an asset. The information resource is similar, but not identical, to other resources in this
respect. Information, even if used immediately, is rarely actually consumer. For example, when
managers use data about a Department Store sale to determine whether inventory should be
replenished, the sales data remain available as a resource for use in other analyses. In some cases,
such as the Federal Express aircraft departures, the information quickly loses some value after its
use, although it may have subsequent value as a resource for historical analyses. As a corporate
asset, then, information is comparable to plant, equipment, and goodwill. It can even be viewed as
inventory, with information considered as a raw material, work in process, or finished goods.
The asset model of information encourages management to view information as an investment that
managers can use strategically. Unlike resources, which managers seek to use efficiently to produce
output, managers view assets as giving the organization an advantage over its competitors. For
example, the information collected by Department Store about its sales may be extremely valuable
to its suppliers and competitors.
1.4.2.3 Information as a Commodity
Like corn, automobiles, washing machines, or other commodities, information is a saleable product.
Some companies use information primarily to sell it. For example, credit bureaus collect information
on your credit history to sell to your potential creditors. In our service-oriented economy, an
increasing number of organizations are adopting a commodity view of information viewing it as a
saleable product.
1.4.3 The Cost of Information
Although information can be valuable, it is costly to use. Acquiring, processing, storing, retrieving,
and communicating information each have costs.
1.4.3.1 Acquiring Information
The acquisition of information is a first step in its use. We can obtain information from either formal
or informal sources. Formal sources provide information in a relatively organized and predictable
fashion, for example, business forms; electronic monitoring equipment such as digital
thermometers; and machine-readable purchased data such as an encyclopaedia (Personal records,
corporate annual reports, summarized transaction histories) on a compact disc. Informal sources
provide information in a less structured way and include conversations with customers, suppliers,
and other employees, as well as general observations of personal and organizational activities.
Generally, acquiring infor mation through informal sources costs less, but the information acquired
may be harder to organize and use effectively.
Data acquisition can occur manually or electronically. Managers often hand-write evaluation reports
or salespeople maintain written records of customer orders. Increasingly, managers can enter
evaluation data directly into the computer, and salespeople can use point-of sale terminals to
record detailed sales information electronically. Experts estimate that electronic forms for
capturing data cost at least 70 percent less to design, purchase, use, carry, and revise than the
equivalent paper forms.
1.4.3.2 Processing Information
Processing information describes transforming it into a usable form. Processing typically occurs at
two times: first, between the acquisition and storage of information, and second, between its
retrieval and communication. The processing that occurs between acquisition and storage generally
requires a large amount of personal labor. Manual processing, involves duplicating, sorting, and
filing data. Electronic processing, such as with electronic scanners, involves transforming and
entering the data into an electronic form. Although both manual and computerized processing may
require significant clerical time and incur high costs, electronic pro cessing can reduce these costs.
Processing occurs between storing and communicating information for both manual and
computerized systems. In manual systems, filing clerks typically perform the processes of retrieval,
formatting, and display. When summaries or special analyses are required, analysts with special
skills, such as skills in finance or accounting, may process the data. Manual information processing
involves high labour and time costs but low equipment costs. Manual pro cessing of large volumes of
data tends to be more expensive than computer processing. In computerized systems the processing
between retrieval and communication allows more analysis and display possibilities in a shorter
time. The costs of computerized processing include rental or depreciation of computer equipment,
the labor costs of operating the equipment, and the costs associated with programming software to
retrieve, format, and display information. Computerized processing involves lower labour and time
costs but higher equipment costs than manual processing.
1.4.3.3 Storing Information
The primary cost of storing information is the cost of the storage medium and space on
computerized storage uses paper, microform, or both. These media require much more phys ical
storage space than electronic media and typically incur a greater cost for leasing or buying space
than do electronic media. Computerized storage uses a variety of media, including hard disks,
diskettes, pen drives and CD-ROM, depending on the amount of information to be stored and the
desired speed of retrieval. The organizational overhead to monitor and control information storage,
including staff salaries and physical equipment, adds to the cost of information storage.
Most large companies keep duplicates of their electronically stored information at a secure site
remote from their processing facilities to ensure that the data can be retrieved in the event of a
disaster such as a fire or flood or terrorist strikes. In addition, most companies keep duplicate paper
or microform copies of much of their data. The cost of the media, physical facilities, and staff for
these backup systems also contributes to the storage costs.
Both document and electronic storage have an ancillary cost for storing the documentation needed
to locate information. Storing large amounts of data calls for simultaneously developing and storing
an index or map that assists in locating the data.
1.4.3.4 Retrieving Information
Retrieving desired data from manual systems can be time consuming and expensive executives spend
approximately six weeks a year on average looking for misplaced material. Secretaries may spend as
much as 30 percent of their time looking for paper documents and approximately 20 percent of that
time searching for misfiled items. Because paper files require large amounts of space, managers
may store the data on a different floor or even in a different building. The labour costs of retrieving
even small amounts of information exceed those for retrieving information electronically unless the
organization can create small and compact storage for its paper records.
Electronic systems provide rapid and inexpensive access to information stored electronically in an
organized fashion. The costs incurred are only those of using the computer equipment for a fraction
of a second, particularly when retrieval is part of ongoing processing. If an individual requests the
retrieval, it may require additional processing to translate the retrieval request from a form
understood by the person to a form understood by the computer. Then the information is stored in a
different place from where it is requested, the request must be transmitted electronically to where
the data are stored, and the retrieved data must be transmitted back. Communication costs are
relatively low for small amounts of infor mation, but the communication equipment and
infrastructure can be expensive unless amortized over a sufficiently large volume of data
communication. Companies that have small communication needs can pay to use the infrastructure
of third parties, such as telephone companies.
1.4.3.5 Communicating Information
Manual transmission of information occurs frequently and easily in most organizations. Most
organizational members rely on face-to-face communication in formal or informal setting or on
written publications for much of the information they require to do their jobs. Bu t face-to-face
communication requires ‘extensive amounts of time, a scarce resource in most organizations.
Written media, such as memos, reports, advertisements, or other document can effectively transmit
small amounts of information to large numbers of people. Transmitting information long distance or
exchanging large volumes of data can occur more effectively by electronic communication.
Telephone, television, videoconferencing, fax or other electronic data transmission can
instantaneously establish communication in among individuals, groups, organizations, or data
repositories or each unit of information transmitted, electronic media are much less expensive than
written or oral media.
1.4.4 The Need for Information Systems
Individuals, organizations, and society need to use a variety of systems to organize the collection,
storage, processing, retrieval, and communication of information. Personal needs tend to be simple
as individuals deal with relatively small amounts of data. Organizations collect extensive amounts of
information, have a great need to share information among their members, and so generally have
more formal and extensive systems for information management than do individuals. Individuals and
companies use a variety of systems to satisfy these needs.
1.4.4.1 Individual Needs
Individuals need information systems both at work and at home. At work, individuals use file folders
or piles on a desk to organize infor mation stored on paper, directory systems to organize files on a
computer disk or diskette, and calendars to organize information about future events. Increasingly,
individuals use lap tops or other portable electronic equipment to meet their information needs.
Case workers at some public housing agencies, for example, use a portable computer office, which
incorporates a small computer and cellular telephone to enable case workers to enter data onsite
and then transfer it later at the agency’s headquarters to a larger machine for processing.
Executives at Matsushita Electric of Canada have given portable technology to their staff and
managers to allow them to work outside the traditional workplace, such as when visiting prospective
and actual clients. At home, individuals employ systems such as posting memo notes on a
refrigerator, setting alarm clocks, or scheduling regular times to share information with family and
friends. An individual who lacks such aids combined into a personal information system may miss
important appointments or fail to accomplish important tasks. Although systems for information
management by individuals generally have few components and even fewer procedures, increasingly
individuals are using sophisticated personal financial managers for personal budgeting, investment
tracking, and bill paying.
1.4.4.2 Managerial Needs
Most managers require significant amounts of information to perform their jobs. They typically
maintain information about employee performance, customer preferences, industry trends, and
other subjects. Increasingly managers use computerized systems to assist with obtaining,
maintaining, and using information; motivating, developing, and communicating with other
organizational members; and making decisions, negotiating agreements, and managing resources. As
managers become more sophisticated in performing their tasks, they require increasingly
sophisticated systems to help them meet their information needs.
1.4.4.3 Organizational Needs
Because of the value of information to organizational performance, most organizations develop

procedures to ensure that important information is collected, captured accurately, and organized
effectively. Individual jobholders, various types of computer equipment, and an array of computer
software facilitate such infor mation management. For example, some employees may collect
information while others process it or analyse it. Organizations that lack quality information systems
may experience problems in accessing the data they need for executive decision making, lose
important data during a relocation or power failure, perform redundant activities in dealing with
customers or suppliers, or fail to respond quickly to changes in the marketplace or industry.
Consider a logistics agents like Blue Dart without a quality information system, Blue Dart may have
massive data about package pickups but lack the procedures to trans late these data into efficient
systems for package delivery. Many organizations even establish a special group that manages and
develops information systems for the entire organization. Information systems also make global
news and information quickly available. They allow businesses to operate internationally by making
information about transactions available to managers and other workers in any country.
1. Define information.
2. What are the different uses of information?
3. Explain the various cost involved with information
4. What are the various needs of information?

1.5 Information Technology
1.5.1 The Role of Information Technology
Modern technology provides many tools to help managers acquire, process, store, retrieve, and
communicate information. Information technology has allowed individuals, groups, and
organizations to manage information effectively and efficiently. Consider the large networks of data
available to financial analysts, marketing experts, or human resources professionals. Think about
the availability of encyclopaedias, texts, supermarket prices, airline schedules, and other
information through data services. Now consider the ability to telephone or send mail electronically
almost instantly from the United States to Europe and Asia.
Significant advances-in information technology have made large quantities of information available
to organizational members and other individuals at a relatively low cost. Many homes have personal
computers and household devices with computer microchips. This widespread availability of
computer technology has dramatically changed the way people process, store, and retrieve
information.
1.5.2 Components of Information Technology
Information technology includes computer software, hardware, database management systems, and
data communication systems. How does the computer system at Department Store know how to
process sales information? What tells the computer system at Federal Express how to record the
arrival or departure of aircraft?
1.5.2.1 Software
Computer software provides the instructions, in the form of computer code and its accompanying
documentation, for processing data electronically. Systems software directs the functioning of the
computer machinery. Applications software assists in the acquisition, processing, storage, retrieval,
and communication of information. Software development tools such as computer languages and
screen generators facilitate creating or modifying software to respond to an organization’s
information needs. Individuals and organizations can purchase an array of software products. Off-
the-shelf software is mass-produced software made for a variety of generic uses such as word
processing. Sometimes managers and other organizational members require experts to write
customized software because they have a unique need that no off-the-shelf software adequately
meets. In some circumstances these same employees may develop their own software that they
modify over time to meet their changing work or personal needs.
1.5.2.2 Hardware
Computer hardware refers to the equipment used in electronic infor mation processing. Significant
strides have occurred in the development of hardware in the last decade. While processing power
has increased, the size of the hardware has decreased considerably. Today desktop and portable
computers costs are continuously reducing and can outperform the room-sized, million-dollar
computers of ten years ago. Input hardware captures raw data and information from interactive
uses. Processing hardware converts or transforms data. Storage hardware includes removable and
fixed media that allow rapid access to information. Output hardware provides copies of data on
paper, microform, and video screens; it offers varying quality for graphics, print, voice, or other
effects.
1.5.2.3 Database Management Systems
Database management system offers a vehicle for storing and supporting the processing of large
quantities of non- scientific information, such as data on employees, products, customers, and
suppliers. This technology allows managers to easily access, sort, and analyse databases of
information along a variety of dimensions.
1.5.2.4 Data communication technology
Data communication technology has dramatically improved the communication of information across
short and long distances. Managers and other employees can easily send data from one plant
location to another or access data located halfway around the world using dial-in options, computer
networks, video conferences, and other electronic media. Advances in communication technology
occur frequently, reducing the cost and increasing the accuracy and speed of data transmission.
1. Explain the role of information technology in the modern organisation
2. What are the various components of information technology
1.6 Managing Information in a Global Environment
Organizations today function in a global environment. They buy and sell products outside their home
country, open subsidiaries, plants, or distribution centers around the world, and communicate
worldwide. The current state of information technology has facilitated the expansion of
organizational boundaries. One recent study of computer-based information systems in 72
companies in the People’s Republic of China, for example, suggested that most of these firms rely
on stand-alone microcomputers and use computer applications for sup port functions rather than
such pivotal functions as order entry or billing. This usage differs significantly from that found in
many United States companies.
1.6.1 Information Management Model
An analytical model, to facilitate the effective use of information in managerial decision making.
This model involves four steps diagnosis, evaluation, design, and implementation. This model has
some of the same characteristics as the systems development life cycle. The information
management model is intended to complement the systems development life cycle; the four-phase
model is directed at users of information systems rather than information systems professionals or
other systems designers.
1.6.1.1 Diagnosis
Managers, employees, and other individuals must begin by assessing their needs for information
within a particular situation they face. Diagnosisrequires a description of the existing problem, the
context in which it occurs, the type of information available, the type of infor mation required to
solve it, and the possible ways of securing the needed information.
Diagnosis of information needs can occur at the individual, managerial, or organizational levels.
Individuals must assess their information needs at work and home. Managers often have needs for
transaction processing, financial control, project management, and communication, among others.
Organizations use information to increase their competitive advantage, such as by improving
customer service, cost control, or quality monitoring. They also must identify the information they
need for developing and implementing their organizational strategy. Society, too, uses information
for communication, economic development, and generally improving the quality of life. Specifying
in detail the information needs at each of these levels is the first step in the effective management
of information.
1.6.1.2 Evaluation
Evaluation of the methods, techniques, and systems for handling information follows the diagnosis
of needs. This step begins with an assessment of the current manual or computerized systems for
handling information. A manager, for example, might first describe or identify the components of
the information systems and technology used to acquire, process store, retrieve, or communicate
information. Next he or she might compare these components to available systems. How well does
the current system respond to the information needs? Are systems available that would significantly
improve the handling of information? What consequences will result with a change in the way
information is handled? Finally, the manager or other user might determine what aspects of his or
her information needs are not handled and which cannot be handled, regardless of the information
technology a information systems used.
Questions for evaluating information systems and Technology
1. What are the current systems for handling information?
2. Are they manual or computerized?
3. What are the components of the information systems and technology used to acquire, process,
store, retrieve, or communicate information?
4. How do these components compare to available state-of-the art systems?
5. How well does the current system respond to the information needs?
6. Would other systems better respond to the information needs?
7. Would state-of-the-art systems significantly improve the handling of information?
8. What consequences will result from a change in the way information is handled?
9. What information needs are not handled and cannot be handled, regardless of the information
technology or infor mation systems used?
1.6.1.3 Design
A manager, staff specialist, information systems professional, or other organizational member

combines information about individual, managerial, or organizational needs with the assessment of
current information systems and technology and then designs coherent systems for information
management. Design involves correcting deficiencies in existing systems and integrating state-of-
the-a practices and technology into them. Alternatively, if he expects that the information
management needs might increase and that individual managers might require access to data they
currently lack, he might design a system that incorporates additional computer equipment and
communication software.
The final step, implementation, focuses on issues associated with putting the new or altered
systems to use. Who will be responsible for overseeing the implementation? How will it occur? What
additional resources will be required for implementation? What types of follow-up will occur? How
will the change affect other aspects of functioning an individual or organization? Identifying the
parties’ responsibility for implementation involves deter mining the roles individual managers,
information systems staff, or specialists from outside the organization will play. Specifying the
timetable for implementation typically follows. Top management must ensure that sufficient
resources are available for the implementation as well as for dealing with changes that occur as a
result of the implementation. They must also assess whether the information systems professionals
function effectively throughout the four phases. Recognizing that the new system and technology
likely will have unanticipated con sequences should be a key aspect of planning; monitoring such
effects and providing solutions for problems that arise should be part of the implementation.
Implementation also includes ensuring that the new systems perform as expected and that they
result in the predicted costs and savings.
1.7 Management Information System as a Discipline
Management information systems is both an area of practice and a discipline of scholarly inquiry,
because of the vital role information plays in a modern organization, proficiency in MIS is virtually a
prerequisite for organizational effectiveness.
1.7.1 Relationship of MIS to Reference Disciplines
As a discipline of study, MIS draws on several other established fields of scholarship to meld their
results and insights into its mission: an inquiry into how organizations can make effective and
efficient use of information. Drucker had defined modern or ganizations as information-based. Thus,
the discipline of MIS plays a major role in contributing to the effectiveness of social organizations.
The fields of scholarship, which underlie the discipline of MIS, are known as its reference disciplines.
MIS is influenced both by the technical fields, which con tribute the knowledge of technology and
algorithms for optimal use of a com pany’s resources, and by the behavioral fields, which
investigate organizations and the people in them. The discipline combines theoretical investigation
with a pragmatic orientation. MIS scholars learn much from the practical tasks of con structing new
types of systems, producing novel organizational solutions, and using new methodologies of systems
development.
The fundamental reference disciplines for MIS are computer science and the theory of organizations
and management. Computer science is the study of au tomatic processing of symbolic information. A
general processor of such information is the computer. Software engineering, computer commu
nications, database organization, and, more recently, artificial intelligence, are the fields of
computer science particularly important to the field of MIS. This highly dynamic discipline conveys
the technological push to the field of information systems. Thus, for example, expert systems,
created by artificial intelligence scholars in the early 1970s, entered the mainstream of MIS in the
mid-1980s.
Sociological approaches help us understand the organizational behavior of people. Cognitive

science, a new discipline incorporating the approaches of cognitive psychology and techniques
aspiring to understand how mind arises from the brain, contributes to our understanding of
understanding itself as it studies human information processing.
Management science, also known as operations research (OR), is a field of applied mathematics. It
provides us with mathematical tools for decision making in such areas as optimal resource
allocation, optimal selection of transportation routes, or optimal inventory quantities.
Systems theory contributes ap proaches for dealing with complexity-that of an organization or that
of a soft ware system. The use of computers in business began with accounting. MIS supports both
the financial and managerial accounting functions. Financial accounting is con cerned with reporting
the financial position and operating results of a business entity at the end of a specific time period,
such as a quarter or a year. Financial accounting reports provide information chiefly for entities
external to the com pany (for example, for the Securities and Exchange Commission). Managerial
accounting, far more important in the company decision-making process, sup plies the information
needed for cost planning and control through budgeting. Auditing techniques have also been
adapted from accounting practice.
The intellectual roots of the field of management information systems go back to the study of
management as a process in which the crucial aspect is decision making. The most prominent work
laying the foundations for this approach was Administrative Behavior by Herbert Simon, an
influential book that appeared in 1947. The late 1940s and early 1950s saw the development of
Norbert Wiener’s idea of cybernetics and Ludwig von Bertalanffy’s general system theory-both
searching for a general theory of control and communication in human and me chanical systems. A
classical 1948 paper by Claude Shannon led to the technical conceptualization of the idea of
information. The fundamental notions of de cision-making, information, systems, and their control
have their own lives in the reference disciplines. These notions have also influenced thinking on the
role of information in organizations-that is, the focus of the field of MIS.
As we have stressed, management information systems are unthinkable (well,

perhaps only "thinkable") without computers. Technological developments re lated to computers and
digital communication have continually driven the field in both practice and research. Many areas of
research in MIS overlap with the work done by computer scientists.
The first general purpose electronic computer, ENIAC, was completed in 1946 at the University of
Pennsylvania. Developed in response to problems encoun tered by the military during World War II,
computers were thought of at the time as devices for doing precisely what their name implies-
computing. Today, the predominant tasks of computers are storing and accessing organized informa
tion and processing symbols; calculation is just one of the several functions com puters perform.
Mass production of computers started in 1951 when UNIVAC I was delivered commercially as the first
such machine built on an assembly line. UNIVAC I was delivered commercially as the first such
machine built on assembly line. UNIVAC I was also the first computer model used for business data
processing when it was installed by General Electric in 1954. However, MIS as an area of practice
had a rather slow start, with only some 4,000 computers installed by the end of the 1950s.
The organizational computing landscape was revolutionized by the emergence of personal

computers in the late 1970s. When appropriate software became available, the personal computer
gave strength to end-user computing, furnishing an accessible means for users to de velop their own
applications and become true partners of MIS professionals in the use of technology for
organizational benefit.
The development of MIS as a field of inquiry paralleled the technological de velopments. The first
papers analyzing the role of information systems in orga nizations started to appear in the second
half of the 1950s. The 1958 paper by Harold Leavitt and Thomas Whisler, entitled Management in
the 1980, was influential in focusing the discipline. The authors concluded that what "we shall call …
information technology" would have "definite and far reaching impact on managerial organization."
They proceeded to set up a frame work for analyzing this impact. Their forecast of reduction in the
ranks of middle management due to senior managers’ ability to directly control an organization with
the support of information technology appears to have indeed come true.
1. Explain the various disciplines from which MIS has evolved.
1.8 Summary
MIS are formal systems built around the hardware backbone of computer and telecommunications
systems. Formal computer-based information systems are not the only informational sources in an
organization. Informal information sources must be cultivated and coordinated with the use of
formal sources.
MIS is not only a field of practice, but also a discipline of scholarly inquiry, drawing in part on the
findings and methodologies of several reference disciplines. Although the field of MIS originated in
the late 1950s, MIS as a discipline became established a full decade later.
1. What do you understand by management.
2. Write a note on information management model

1. The first computer was introduced into a business organization in the year ______ .
A. 1950
B. 1952
C. 1954
D. 1960
2. ____________ which support the work of senior executives and of company boards by giving them
ready access to a variety of summarized company
A. Transaction processing
B. Management reporting systems
C. Decision support systems
D. Executive information systems
3. Organizations are formal social units devoted to the attainment of specific goals
A. Management
B. Information
C. Organisation
D. All of the above
4. Secretaries may spend as much as ____________ percent of their time looking for paper
documents
A. 30
B. 40
C. 50
D. 60
5. ____________ defined modern or ganizations as information-based.
A. Maslow
B. Peter Drucker
C. Gary Hamel
D. C. K. Prahalad
1.11 Answers
Self Assessment Questions:

Section 1.2.3
1. This has been mentioned in section 1.2.1.
Section 1.4.5
1. This has been mentioned in section 1.4.1
Section 1.5.3
Section 1.7.2
This has been mentioned in section 1.7.1
Terminal Questions
1. You will have to refer to section 1.3.2
2. You will have to refer to section 1.6.1.
Multiple Choice Questions:
1. C
2. D
3. C
4. A
5. B
Unit-02-Management Information System from Managerial Outlook
Structure:
2.1 Introduction
Objectives
2.2 The Manager’s Job in a Global Environment
2.2.1 Management and Managers
2.2.2 Information and Levels of Management
2.2.2.1 Information needed by different levels of management
2.2.3 Information Required for the Process of Management
2.2.3.1 Functions of Managers
2.3 Functional Information Needs
2.3.1 Accounting
2.3.2 Finance
2.3.3 Marketing
2.3.4 Operations
2.3.5 Human Resources
2.4 Summary
2.1 Introduction
With this unit, we shall begin with management and managers. Then discuss the various levels of
management and their information needs, the functions performed by managers. We shall conclude
by functional needs of information in the areas of accounting, finance, marketing, operations, and
human resource management.
Objectives:

· Mention various levels of management and their needs for information
· Explain the functions of manager
· Bring out the information needs in the various functional areas
2.2 The Manager’s Job in a Global Environment
2.2.1 Management and Managers
Management is the process of achieving organizational goals by planning, organizing, leading, and
controlling organizational resources. What does a typical manager’s job look like, and what
information does he or she need to perform that job? Managers face a variety of chal lenges in
performing their work in a global environment. They must deal with increasing competition,
decreasing resources, and rapidly changing technology. They must understand and respond to
dramatic cultural differences, imposing legal constraints, and dynamic cus tomer requirements.
Managers at all levels cope with less-than-perfect information in an uncontrollab1e envi ronment.
For example, managers at companies doing business in the former East Germany after the fall of the
Berlin Wall initially experienced repeated difficulties with telephone ser vice, which caused
significant problems with voice communication and data processing. Top executives attempt to
analyze the economic, political, and technological aspects of the envi ronment and plot a strategy
to meet such changes. Often, however, they cannot anticipate changes in money rates, political
upheavals in distant locations, or the speed of technological advancement. Middle-level managers
may have information about production deadline forecasts, or hiring practices that proves to be
unreliable or dynamic and that requires to handle emergencies, reconsider the best way to perform
their jobs, or change the priorities in unexpected ways. Dealing globally increases the likelihood
that managers will have unreliable information and intensifies any existing deficiencies in the
information h both distance and cultural diversity affects information quality. First-line supervisors
may experience delays in receiving up-to-date information from their bosses who must directives
from a distant corporate headquarters. How do managers perform effectively such conditions?
Managers perform a great quantity of work at an unrelenting pace. This level of activity involves a
manager’s continually seeking and then quickly processing large amounts of information, generally
without time for leisurely reflection. Managers also participate in a variety of brief activities that
result in significant fragmentation of their time. They become accustomed to the rapid exchange of
information with others and hence must have the needed information readily available. Because
time is precious and managers tend to deal with issues that are current and specific, they seek ways
to secure information as efficiently as possible.
2.2.2 Information and Levels of Management
2.2.2.1 Information needed by different levels of management
Managers at different hierarchical levels in the organization have special concerns. At the highest
level, managers are concerned with setting long-term goals and directions for the organization. At
the lowest level, managers are concerned with supervising the conduct of day-to-day activities. As
one moves up the corporate ladder, decisions have a longer term and wider ranging impact on the
organization. These differences affect the characteristics of managers’ information needs. At all
levels managers cope with less-than-perfect information in an uncontrollable environment. They use
information systems to help them bring as much order and completeness to the available informal
possible.
Executive Management
Top-level managers establish the overall direction of an organization by setting its strategy and
policies. They may decide that cost cutting requires reducing the number of employees or that
introducing a new product line calls for hiring more workers. They typically develop, a mission,
reflected in a mission statement that defines the basic character and characteristics of the
organization, that is, who the organization is, why the organization is in business, and what the
organization is in the business to do. These executives also develop pre and activities in line with
stated profit or service objectives.
Top executives typically have both an internal and external orientation: They must that work gets
done within their particular subsidiary or division while they interact with executives in other
organizations and with the general public. Increasingly, such interactions span regional and national
boundaries, requiring executives to have large repositories of infor mation about an array of global
issues. They may need to know the cost of labor in Taiwan and zoning laws in Detroit. Top
executives may also spend large amounts of time in cere monial roles, representing their company
to the public. They must have knowledge of the customs and rituals of different cultures to perform
these responsibilities effectively.
What types of information do top-level managers typically need? Top executives often need
performance-related information about results of various divisions or product groups: they may
require summary data about sales, production levels, or costs to assess the organi zation’s
performance. Top executives also use information about new technology, customers, suppliers, and
others in the industry to gain a competitive advantage over other firms. As organizations increase
their international focus, top executives require economic, legal, and cultural information about
other countries in which the organization operates. Top-level managers may combine these various
types of information to formulate a strategy for the organization and a plan for implementing it. Of
course, they never have complete information and try to use the available information as effectively
as possible.
Consider the job of a senior marketing manager in the hair-care products division of a large
company. She must determine the best mix of products for the company, authorize advertising and
marketing research expenditures, and supervise a staff of managers responsi ble for accomplishing
the department’s goals. What types of information might she require? Now compare her information
needs with those of a senior financial manager or even with those of a senior marketing manager in
a computer software firm. Clearly these three managers have some needs in common, but they also
have needs unique to their job, organiza tion, and industry. Diagnosing the particular information
needs of senior executives requires tracking their organizational and job goals and then assessing
the information that help accomplish those goals.
Middle Management
Unlike top executives, middle managers focus primarily on implementing the policies and strategies
set by top management. Plant managers, regional sales managers, directors of staffing and other
middle managers usually deal with internal organizational issues, such finding ways to increase
productivity, profitability, and service. Middle managers must meet production schedules and
budgetary constraints while still acting independently. They all participate actively in various
personnel decisions, including the hiring, transfer, promotion or termination of employees. Middle
managers serve as the interface between executives at first-line supervisors: They disseminate top
management’s directives to lower levels of organization and communicate problems or exceptional
circumstances up the hierarchy. They may work in the home country or abroad, directly managing
one or more work teams, coordinating interdependent groups, or supervising support personnel.
Middle managers require more detailed information than executives do about the functioning of the
groups or workers they supervise, although generally they do not require as detail information as a
first-level supervisor requires. Often middle managers need detailed but data, extensive information
about workers’ performance, schedules, and skills, and data about their group’s products or services
to perform their jobs well and to ensure that their work group focuses on organizational goals. Often
they cannot obtain perfect information must use the best information they can secure.
Middle managers who act as project managers might be responsible for one or more unique projects,
such as the development of new spreadsheet software or a new computer chip, or ongoing projects,
such as the provision of accounting services to a small business. Project managers typically supervise
teams of workers who must accomplish a specific goal. Organizations consist of multiple,
overlapping teams, only some of which are formally recognized by group or departmental
boundaries. The manager must ensure that the project team works together effectively toward its
common goal. The manager must know each team member’s job responsibilities as well as the
member’s skills, abilities, and knowledge. The manager must also have information about the
individuals, group, organization, and its environment to help in leading, motivating, resolving
conflicts, and coordinating activities.
Middle managers might also serve as links between their own work groups and others in the
organization. Occasionally these links may extend beyond local or regional boundaries, posing
additional challenges for the manager. The middle manager, too, might require special knowledge
about managing a multicultural workforce or conducting business internationally. DuPont, for
example, charged five managerial teams around the world with ensuring employee retention in their
areas; they use conferencing by telephone to share ideas.
First-line Supervision
First-level managers have the most direct responsibility for ensuring the effective conduct of their
organization’s daily activities. The supervisor of long-distance telephone operators han dles any
problems that arise in servicing customers; the customer services manager in an insurance company
oversees the interactions between customer service representatives and policy holders. Such
supervisors might plan work schedules, modify a subordinate’s job duties, train a new worker, or
generally handle problems employees encounter. They ensure that their subordinates accomplish
their daily, weekly, and monthly goals and regularly provide workers with feedback about their
performance. They screen problems and may pass partic ularly significant, unusual, or difficult
problems to middle managers for handling. First-line supervisors also spend large amounts of time in
disturbance-handling roles, such as replacing absent workers, handling customer complaints, or
securing repairs for equipment. They, too, may experience imperfections in the information they
receive; they must recognize these deficiencies and respond accordingly.
Consider the night-shift nursing supervisor in the pediatrics ward of a hospital. What information
must she have to perform her job? Certainly she requires detailed information about pediatric
nursing procedures, knowledge about the skills of the nurses on the shift, and detailed listings of the
nursing services required for each patient. If the staff is union ized, she should also know the
provisions of the union contract. The head nurse might also require information about daily and
vacation schedules as well as the ability to secure tem porary employees. She should have a basic
knowledge about the equipment on the floor as well as how to obtain repairs for it. What
information does she need to solve an understaffing or absenteeism problem? Does she need the
same information to answer questions about administration of medications or delivery of meals to
patients on the floor? The night shift supervisor in a manufacturing plant might require comparable
information about the tasks, workers, and equipment. Of course, the specific details will differ as a
function of the setting. Both the nursing supervisor and the plant supervisor may encounter special
prob lems that require unique information. Diagnosis of information needs must be ongoing and
responsive to the particular situations these managers face.
2.2.3 Information Required for the Process of Management
Collecting and disseminating information serve as the cornerstone of management activity. The
manager gathers information from the environment inside or outside the organization. He or she
reviews written information about the company and its industry, attends meet ings that present
information about the organization, or participates in task forces or com mittees that provide
additional information about organizational functioning. What specific information might the new
manager of a neighborhood restaurant seek? What information might the manager of customer
service monitor in the organization or the environment? Monitoring the environment provides
particular challenges for the global man ager, who must scan worldwide for large amounts of diverse
information. Having collected information about the organization’s functioning, the manager then
disseminates it to subordinates, peers, supervisors, or individuals outside the organization. Such
distribution may occur in face-to-face conversations, through electronic media, or at meetings.
The manager must have information about the environment in which the organization functions; this
information may include data about industry trends, technological developments, and market
requirements. The manager should also have a strong knowledge of organization-its structure, goals,
resources, and culture. The manager should know the needs of various organizational members so
that he or she can choose the most appropriate information to convey and the most appropriate way
to disseminate it. For example, the man may give bad news to subordinates and superiors in
different ways. At the same time manager must consider his or her own information needs in
performing the four basic management functions of planning, organizing, leading, and controlling.
2.2.3.1 Functions of Managers
Planning
Managers engage in a variety of planning activities that occur over short- medium and long-term
periods. Driven in part by the need to respond to competition, the changing environment, and
customer demands, managers develop the organization’s mission: goals and the means to
accomplish them. Planning usually refers to both the specific of goals and the blueprint for
achieving them. It can occur at the individual, group, organizational, or extra-organizational level.
Managers may engage in strategic, tactical, or operational planning. They also engage in decision
making, in which they allocate resources and act as negotiators, problem solvers, change agents,
and disturbance handlers.
The top managers at LIC of India, for example, likely decide which insurance products and how to
sell them as part of their strategic planning the long-term planning for accomplishing the
organization’s mission. Information about LIC’s capabilities, its com petitors’ competencies, and
customer demands is essential for determining the organization’s goals and its strategic plan-long-
term activities the organization must undertake to accomplish its mission. Knowledge about
technological developments and their applicability to the insurance company, as well as about the
supply of various types of workers, constitutes additional information incorporated into the strategic
plan.
In most organizations middle managers more often engage in medium or short-term planning known
as tactical planning. Tactical objectives describe what units within an organization must do to
accomplish strategic objectives, and tactical plans refer to the steps for attaining the tactical
objectives. Tactical plans may focus on decisions about staffing, adver tising, and pricing, for
example; or they may reflect other financial, marketing, or human resource decisions. What types
of information would a manager need to determine the best advertising campaign for his or her
products? The manager might need to know what competitive prod ucts exist, the nature of
advertising for those products, and the cost of various media.
Operational planning, or planning for the issues of implementation, often accompanies strategic and
tactical planning. The public works director of a small town must plan the monthly work schedules
for the road crews she supervises. The shipping supervisor in a large manufacturing company must
determine how often to schedule a third shift of workers. The program chairperson must schedule
the particular events that compose the national meeting of the Academy of Management. In each
case, these managers require an array of information about their subordinates, their clients, and
their jobs to design the operational plan. What information does the public works director need, for
example, to meet the objective of rescuing people as the level of water is raising in the river due to
continuous rainfall? She needs to know the availability of crews equipment, and the possibility of
additional rainfall.
Managers at various levels determine the best way to reduce costs. A manager determines the
assignment of people to tasks, the allocation of money materials to individuals, departments, and
other work groups, and the scheduling of various organizational members’ time. Effective allocation
requires the manager to have information about individuals’ existing work assignments, capabilities,
and vacation schedules. The manager must also know the costs of various projects or products.
Consider the situation face, the manager of a product development team for a new shampoo at
Procter and Gamble or she must know how much overtime to budget into labor expenses to ensure a
timely product launch.
Managers frequently negotiate with their subordinates or other managers about the allocation of
resources or the best way to accomplish various group or organizational goals. In conjunction with
resource allocation and negotiation, the manager as a problem solver defines problems in a
situation, analyzes them, and then proposes solutions. When the prob lems can be handled in a
relatively long time frame, the manager acts as a change agent. When problems must be solved in a
short time frame, the manager engages in disturbance handling.
To plan effectively, managers often need forecasts about likely future conditions. For example,
prevailing interest rates may affect whether a company should raise cash through the sale of debt or
equity. The timing of a company’s plant opening can affect whether the company will purchase a
component of its product from a wholesaler or whether it will manufacture the component itself.
The forecasted market share of a competitor’s produce should influence a company’s production
levels and possibly affect hiring and capacity deci sions. No manager can be correct 100 percent of
the time. Part of decision making involves assessing the risks of being wrong versus the rewards of
being right. Managers may cushion the impact of incorrect foresight with contingency plans.
Nevertheless, managers can increase their chances of correctly assessing future conditions by using
quality forecasts.
Planning in organizations that function globally may pose special challenges. Managers may need to
account for significant currency fluctuations, unpredictable political conditions or an unknown labor
pool; they may need to consider variations in national customs, worker expectations, and product
acceptance. Consider the information needs of a manager who must close the company’s
manufacturing plants in a foreign country. He or she must know, for exam ple, the legal provisions
that govern the sale of assets as well as the legal regulations for com pensating terminated workers.
The information needs of global managers in these circum stances are extensive and particular to
the special business problems they must solve.
Decision making also involves significant information needs. Managers require informa tion about
individuals, groups, and organizations involved in or affected by the problem sit uation. They need
information about the alternatives available and the costs and benefits asso ciated with each.
Managers as change agents also need data about workers’ and management’s attitudes toward
change, the resources available for the change, and the consequences of sim ilar changes in other
situations. Managers should diagnose each decision situation to iden tify its unique information
needs.
Consider the decision that a manufacturer of outdoor clothing must make about whether to
purchase a small manufacturing plant in China. What information does the manufacturer require in
order to make that decision? What information does this manager need in order to make a quality
decision? Managers must diagnose their information needs in each particular situation and then seek
ways to obtain the required data.
Organizing
Managers must structure their organization and coordinate the organization’s resources to
accomplish its goals. Organizing generally means establishing a formal reporting structure and a
system of accountability among workers; it means forming employees into meaning ful work groups
with appropriate supervision. Defining the hierarchy of authority deter mining the location of
decision making, and providing for coordination all contribute to the organizing process. First-line
supervisors and middle managers generally establish a network of contacts within and even outside
the organization to gather information. The manager may use interactions with coworkers or
colleagues in other organizations to improve their job performance.
Man agers at all levels attempt to build effective work teams by encouraging cooperation and han
dling conflict that arises. Managing work groups generally calls for the open exchange of information
and ideas. Managers and workers may jointly develop group goals congruent with organizational
goals and orchestrate collaborative activities. Increasingly managers must supervise multicultural
teams of workers; managing these heterogeneous groups requires spe cial information about the
impact of cultural differences on job performance and the tech niques for handling them.
Managers need to know the status of group activities so that they can modify schedules and resource
allocations. Group members must receive and share information about the status of their activities
and thought processes. Organizing effectively requires information about the content of jobs, the
skills of workers, and the availability of resources in the organiza tion.
Managers must also understand the assets and liabilities of various structural forms, such as
functional structures, project structures, alliances, or networks. The options for organizing become
increasingly complex as managers deal internationally. Securing sufficient and appro priate
information to coordinate globally challenges managers to diagnose their information needs
effectively so that they do not obtain too much, too little, or irrelevant information.
Leading
Leading generally refers to taking actions that direct and motivate employees to accomplish
personal and organizational goals. Top executives, middle managers, and first-line supervisor help
subordinates develop the skills, knowledge, materials, equipment, and time to perform their jobs.
They offer guidance to subordinates about the best way to perform various job related activities.
Managers also evaluate their subordinates, and sometimes even peers and superiors, as part of their
leadership responsibilities.
The manager acquires information about how individuals view the goals the manager has set and
seeks information about what would encourage subordinates to accept these goal and work hard to
achieve them. What information does a manager need to handle the prob lem of a poorly performing
worker? The manager might need data about the employee’s skill level and attitude, the job’s
requirements, and any job-related goals set. The manager might also need information about
unusual factors, such as family illness or defective equipment that might have affected the worker’s
performance. The manager might also need infor mation about training programs in which the
worker has participated. Subordinates also acquire information about how the manager perceives
their efforts and adjust their perfor mance and priorities accordingly. In many organizations, formal
human resource manage ment systems provide mechanisms for this feedback.
What types of information do managers require in order to lead effectively? They first need a clear
understanding of the organization’s goals and of their responsibilities for accom plishing them. They
also benefit by having information about their boss’s needs and goals. Managers need data about the
skills, abilities, knowledge, needs, and experience of subordi nates; they must also regularly secure
information about their subordinates’ performance. Managers must also have a comprehensive
understanding of the situation to select the most appropriate leadership style for influencing
workers to perform effectively. Researchers sug gest that they need information about workers’
needs and maturity, the leader’s relationship with the subordinates, the task’s structure, the
organization’s structure, and the organization’s environment.
What information needs are inherent in the interpersonal roles required for leading? Man agers must
know the nature of the tasks being performed, the expected standards of perfor mance, and the
potential barriers to their accomplishment. They must also have detailed information about the
skills, experiences, and expectations of the workers they supervise. In addition, managers must have
information about colleagues from whom they might gather information for the organization, listings
of professional organizations, and data about col leagues employed by competitors. Effectively
motivating and developing subordinates as well as influencing others and building relationships likely
require extensive situation specific information that a manager should diagnose. Managers also
should diagnose the information required to solve employee-related problems. Effectively leading a
multicultural workforce creates both specific and generic information needs for managers
functioning in the global arena.
Controlling
Managers must also monitor the quality and impact of managerial actions. Controlling means
ensuring that performance meets established standards, that workers’ activities occur as planned,
and that the organization proceeds toward its established goals. Controlling, requires comparative
information about the optimal way to implement organizational processes and their actual
implementation. In the control process, managers establish standards and methods for measuring
performance, assess performance, and then compare performance with the standards. They require
information about the organization’s functioning to help them anticipate and handle organizational
problems and chal lenges.
Managers commonly use information provided in budgets and financial controls to guide and
constrain organizational activities. They also use cost information to maintain profitabil ity.
Executives at Russell Reynolds Associates, Inc., an executive search firm with offices worldwide,
determined that top management required consistent and more detailed information from all
offices. The director of interna tional finance there led a design project that resulted in standard
accounting procedures that conformed to USA, and international regulations.
1. Explain the various information needed by the managers in the organisation
2. What are the various functions performed by the manager.
2.3 Functional Information Needs
Managers require a broad range of information to perform their day-to-day functional roles.
Diagnosing information required to perform specific functional activities is an early step in effective
information management. In this section we discuss examples of information needs in the areas of
accounting, finance, marketing, operations, and human resource management; these functional
areas are not intended to be exhaustive but to portray com monly occurring functional needs.
2.3.1 Accounting
Accounting is the process of recording, classifying, and summarizing the financial activities of an
organization. Originally used to create a historical record of the firm, managers now regularly use
accounting information in making decisions. Financial accounting deals with preparing accounting
information for users outside the organization, such as regulatory bod ies, investors, shareholders,
and tax assessors. Managerial accounting refers to the provision of financial information that
managers within the organization need for their decision-mak ing. Accounts receivable, accounts
payable, payroll, fixed asset management, and general ledger describe types of accounting
information, as shown below.
Types and Examples of Accounting Information
Accounts Receivable
· Names and addresses of customers
· Invoice information
· Amounts owed
· Due dates
· Discounts available
Accounts Payable
· Names and addresses of suppliers Invoice information
· Amounts owed
· Due dates
· Discounts available
Payroll
· Labor rates
· Hours worked
· Employee benefit classifications Withholding rates and amounts
Fixed Asset Management
· Properties owned
· Depreciation schedules
· Depreciation taken
· Mortgage/rental renewal dates
General Ledger
· Transaction type and amount
· Account codes affected
· Account balances
Managers working in the functional area of accounting must keep track of money owed to the
organization. They require data about unpaid invoices, payments against these invoices, payment
histories of customers, and additional credit information that helps managers decide how much
credit to extend to customers. For companies such as utilities that have many customers and
operate largely on credit, accounts receivable management is crucial not only for generating
collections but also for addressing customer questions. Accounts receivable systems generally
include such accounting information.
Managers in the accounting function must also monitor money owed by their organiza tion. Such
tracking requires detailed data about bills received from suppliers and other cred itors as well as
information necessary for approval of the payment of such bills. At many companies, for example, a
supplier’s bill must match an outstanding purchase order, which authorizes the purchase, and
a receiving document, which verifies receipt of the purchased goods. Managers must also have
access to information that helps them time payments, allow ing them to benefit in the tradeoff
between taking early-payment discounts and retaining sufficient cash in the organization. Managers
also need information about checks written so that they can determine the amount still owed and
respond to questions from suppliers. Accounts payable systems perform many of these functions for
determining the money the organization owes to individuals or other organizations.
Accounting managers must also maintain and have access to employee information and tax
information necessary to pay employees. Accounting managers and staff must know employees’ pay
rates, deductions, tax withholdings, vacations, and hours worked so that the organization can
generate payroll checks and forms for government taxing bodies.
Managers must also know the value of an organization’s assets. Because many assets depre ciate, or
lose value, over time, the value of the organization that owns them will change as well; such
changes typically have consequences for the price of stock in the company. In addition,
organizations may keep funds that are used to renew or replenish the value of such assets; managers
should know the availability of such funds.Fixed asset systems organize the information about a
firm’s assets and any funds maintained for their renewal.
Top executives, particularly the corporate controller, must have up-to-date information about the
organization’s profit or loss to help determine the company’s financial worth. They must be able to
classify expenses and revenues in ways that allow managers to attribute prof its and losses to
departments or individual products. General ledger systems use information generated by accounts
payable, accounts receivable, payroll, and fixed asset systems to provide such profit and loss
information. Managers also use the information generated by general ledger systems to plan their
expenses and revenues for the future, a process called budgeting.
Managers in global organizations face peculiar information needs in their accounting prac tices
because the relative value among the currencies of different countries changes con stantly.
Managers may need access to data from uniquely international sources of informa tion, such as bills
of exchange. As a result, global accounting systems offer this information as well as information
about the amount, nature, and origin of financial transactions. In addi tion to these generic
information needs, accounting managers may have a set of needs spe cific to their job
responsibilities and particular situations. Increasingly, managers require unique accounting
information for various customer markets. At Johnson Wax, for example, managers in Johnson’s
Consumer Products Worldwide Innovation and Worldwide Service divisions discovered they needed
information for their special financial environments. IS Diag nosing these needs involves clearly
specifying the problems or issues and the information required to deal with them.
2.3.2 Finance
Financial managers focus their activities on the acquisition and use of money. They periodically
estimate the flow of funds into and out of the business, continuously monitor the use of funds within
the organization, identify and evaluate alternative sources of outside funding, and describe and
assess alternative uses of excess capital. Managers in global companies also use information about
exchange rates and currency futures to keep their cash and or assets in countries where they have
the greatest return or the least depreciation.
Managers use financial information for both planning and control. They need to know the financial
position of their company before they can make decisions about how to allocate financial resources.
They create budgets for each function of the company based on such factors as the company’s
financial status, the history of spending in prior years, operation plans and priorities, forecasts of
revenue, and projections of cash flow. At the department level, first-line supervisors or middle
managers create budgets in a similar fashion; senior management then uses the departmental
budgets in its development of a corporate budget; departmental managers, in turn, modify their
original budgets to reflect the parameters of the corporate budget. In the General Foods’ Corporate
Financial Planning and Control department for example, managers supervised analysts who used
microcomputers to consolidate financial data from 17 worldwide divisions and then report the data
to upper management for use. If, Reebok, Inc. wants to shorten the time required for closing its
books so that finance department can spend more time in data analysis for managerial
improvements.
Analytical computer systems support diverse types of investment management. Portfo lio accounting
systems provide both inventories and analyses of diverse types of assets. Finan cial managers must
continuously diagnose the specific information they require for per forming their job responsibilities
and dealing with problem situations.
2.3.3 Marketing
Marketing is a social process involving the activities necessary to enable individuals and
organizations to obtain the products and services they need and want through exchanges with
others. The concept of marketing derives from the idea of a marketplace where buy ers and sellers
meet to trade their goods and services for money or other goods and ser vices. Marketing managers
seek to ascertain consumers’ needs and preferences. This
knowl edge helps them guide product development, distribution, pricing, presentation, and
promotion so as to maximize the appeal to the consumer of an organization’s products and services.
Marketing managers also use sales information to improve interactions with suppli ers as well as
monitor business performance. Marketing activities that offer potential for decision support systems
include sales forecasting, budgeting, pricing, and product design. Examples of information used by
the marketing function is shown below.
Types and Examples of Marketing Information
Market Research
· Product evaluation surveys
· Results of test market promotions
· Coupon usage data
· Lists of consumers of related products
Promotion
· Impact of past advertising promotions
· Price of advertising by medium
· Impact of shelf space and placement
· Sales and rebates offered by competitors
Pricing
· Impact of price and volume changes on profit

· Price elasticity of product
· Price/performance curves for similar products
· Market segmentation information
Product Design
· Engineering drawings and mock-ups
· Packaging alternatives
Distribution Channel Development
· Relationships with distributors
· Franchising laws and regulations
Market Intelligence
· Competitors’ activities and strategies
· Information about new and existing products
Market research is the process of gathering information about what consumers want and need.
Marketing managers and their market research staff monitor what consumers buy; relate buying
patterns to consumer characteristics such as income, family size, and geographic location; conduct
surveys about hypothetical or real products; and test consumer responses to price, packaging, or
other product or service characteristics. Managers can also purchase market research information
from market research firms. For example, Nielsen, a division of Dunn & Bradstreet, and the Arbitron
Company sell information about what consumers watch on television; such information can help
managers decide whether to purchase air time to advertise a particular product. Managers also use
information generated by market research to support product design and manufacturing decisions.
Marketing may include additional activities, such as planning and budgeting for advertis ing,
participating in product design, and forecasting future trends. Each of these has associ ated
information needs. Marketing managers must diagnose the information they need to handle
particular marketing problems.
2.3.4 Operations
Operations management refers to the processes of planning, organizing, directing, and controlling
the physical operations of an organization. By operations, we mean the transfor mation of an
organization’s resources into the goods and services that are its sources of rev enue. Operations can
encompass both manufacturing and the provision of services. Manu facturing managers need
information that will allow them to integrate manufacturing with customer service and sales,
control systems, back-office operations, and engineering. For example, systems that take electronic
orders and use them to automatically trigger the man ufacturing process will become much more
common. Increasingly, manufacturing also requires information to incorporate into quality
programs. Other systems integrate engineering data into the management process.
The physical operations of a manufacturing organization include not only the manufacturing process,
but also the processes of transporting and warehousing and the process in which finished goods or
services are exchanged for money. The factory of the future may combine services with products,
causing manufacturing managers to have more direct contact with customers. This contact will
expand their information requirements to include data about customers and their needs. Group
Technologies, a maker of electronic components in Tampa, requires weekly updating of customer
requirements and uses these to effectively schedule production facilities. The physical operations of
retail service organizations include most of the same processes except that manufacturing is
replaced by product acquisition. For service organizations that deal primarily in information, such as
law and accounting firms, the physical processes relate to acquiring information, assembling it into
the proper form, and presenting it to the client. Despite these differences, the major components
of operations management and associated information needs are alike, as listed below.
Components of Operations Management and Examples of Their Information Needs and Uses
Transaction Processing
· Feeds information to all management functions
Product and Service Planning and Design
· Product costs
· Product prototypes
· Engineering options
Scheduling
· Staff expertise
· Forecasted production requirements
· Equipment maintenance schedules
Inventory Control
· Current inventory levels by product and location
· Holding costs, space, insurance
· Status of backorders
· Implications of stock out
Transaction processing describes the recording and filing of data about a company’s transactions
and serves as a source of much of a company’s internally generated information. It can be a major
component of the operations function, although it can exist in other functional areas as well. A
transaction describes a business event such as the sale of a product receipt of a payment, hiring of
an employee, or taking of a reservation. Hospitals process transactions as part of their system for
charging for medical coverage; in one case, switching to a diagnosis-related reimbursement (DRG)
system called for acquiring and processing information about a patient’s illness and treatment.
Managers require information about transactions for several reasons. First, a transaction may affect
the company’s income statement or balance sheet. Second, managers use information about
transactions in making marketing, financial, production, and human resource decisions. For
example, managers seek information about customers’ payments because the payments affect the
company’s cash position, which, in turn, influences the schedule of payments to suppliers as well as
the company’s credit decisions. Managers need information about hiring because it affects the
organization’s payroll, work schedule, production capacity estimates, and subsequent hiring
decisions.
Low-level managers often secure information from transaction processing in making rou tine
decisions. Consider, for example, a hotel manager who faces an irate customer claiming to have a
reservation that the desk clerk cannot find. What information does the manager require to solve the
customer’s problem? The manager needs information about the hotel’s bookings and the customer’s
record. Learning that the penthouse suite is unused and that the customer is a frequent guest, the
manager might decide to offer the customer the suite at the price of the discount room.
Product and service planning and design generate ideas, test them for feasibility, and finalize
them into the design of a product or service. Feasibility analysis typically requires the input and
review of managers at various levels and specialties throughout the company. For example, the
managers explore the financial, marketing, and distribution implications as well as available
capacity, physical resources, and financial resources to bring the plan to market. At this stage, the
ability to share information is critical. In addition, productivity can be increased if designers and
analysts can incrementally modify the designs without re-entering them.
Capacity planning refers to the process of determining how much to produce in the short and long
term. It requires information about demand and available organizational resources for meeting the
demand. Managers must translate the capacity decision into spe cific requirements for raw inputs,
employee time, and machine time. Capacity planning often uses sophisticated models of the
relationship between capacity needs and forecasts as well as sensitivity analyses on the assumptions
used to make capacity decisions.
Scheduling involves the process of matching equipment and employees to the processes. Inputs to
scheduling include process flow; equipment needs; personnel available expertise, and preferences;
and information about constraints such as those relating to work rules, safety, equipment, and
maintenance. Managers must have information to schedule multiple orders through sequential
manufacturing processes. To do this scheduling, they must determine the availability of equipment
and materials resources, including their location applicability for multiple use, and prior
commitments or schedules. They must be able prioritize objectives such as minimizing costs and
time, providing inventory as required, encouraging total quality.
Inventory control is the management of raw materials, partially completed goods services, and
completed but unshipped goods. Ideally, to minimize inventory carrying (managers maintain only an
inventory sufficient for completing the final product. Operations managers must know current levels
of inventory, the rate at which inventory can be replenished, and the rate at which inventory is
depleted to control inventory size and costs. Purchasing managers at retail chains such as Big Bazaar
use inventory information from stores to determine the size of additional toy orders. How can the
purchasing manager assist a store manager whose customers complain that an item is regularly out
of stock: purchasing manager can check inventory information to determine the item’s availability
in other stores, its anticipated arrival date, and whether it regularly goes out of stock.
2.3.5 Human Resources
Human resource management refers to the deployment, development, assessment, rewarding and
management of individual organizational members and worker groups. The func tions of human
resource management include planning, staffing, training and development, performance
management, compensation, labor-management relations, and administration as shown in the table
below.
Human Resource Functions and Examples of Their Information Needs and Uses
Human Resource Planning
· Marker rates and availability of types of labor
· Forecasts of staffing needs

· Position descriptions
Staffing
· Resumes of prospective employees
· Position descriptions
· Evaluation criteria
Training and Development
· Employee skills and credentials
· Position skill and credential requirements
· Availability of training staff and facilities
· Costs of outside training services Training materials
Performance Management
· Evaluations of past performance
· Objectives for future performance
Compensation
· Industry and organizational wage levels
· Central and state tax regulations
· Insurance costs and options
Labor-Management Relations
· Grievance procedures
· Industry and organizational wage levels
· Industry and organizational productivity
Administrative
Affirmative action plans and targets
Safety and health procedures Government-requested information
Human resource managers engage in the design of organization systems to perform these functions;
they assist line managers with implementing the implementing the resource policies. programs, and
practices.
Human resource planning involves determining the demand and supply for various categories of
workers. James Orr wanted a daily count of the number of employees in his organization; he could
compare this supply with the requirements for workers to do various jobs before making downsizing
decisions. Effective planning also requires information about other potential sources of workers,
such as high schools, colleges, and competitors.
Staffing describes the recruiting and selecting of individuals for job positions. Recruit ing requires
communicating information about job openings and the organization to those best qualified for the
positions. Many organizations offers employees extensive information about job openings:
Employees can review job openings by job code, title, divi sion, department, location, or posting
date; they can screen openings for required qualifications; and then they can enter their names,
qualifications, and desired positions if they want an internal transfer. Selection involves matching
job candidates to job openings. This process passes detailed information about the position to the
applicant and information about the applicant to the hiring manager, often through a human
resource professional who screens applicants. The hiring managers enter the requirements of the
job and their relative importance into a computer system. A human resource manager rates
applicants on each requirement based on history and skil1. The computer then generates a
screening list. The hiring manager interviews applicants from this list and adds to and updates the
ratings.
Training and development addresses deficiencies in skills, knowledge, or experience required for
quality job performance or advancement in the organization. Managers must assess individuals’
training needs, determine the training opportunities and programs available to meet these needs,
and choose the training options that best address the workers’ needs. Managers require extensive
information about workers’ skills, abilities, knowledge, job requirements, and training programs
already undertaken. When a manager encounters a poorly performing worker, the manager might
wish to know whether the worker partici pated in any training programs to help assess the causes of
the performance problem.
Performance management involves providing evaluation data for administrative and training
decisions and development activities. Managers assess past performance and offer ways to improve
it in the future. They may use observations, behavior checklists, or outputs measures as part of the
appraisal. They provide counseling and discuss job opportunities as a part of development. Data
about an individual’s actions, results, and attitudes, as well as about his or her job’s requirements
and goals are essential information for performance management. Managers use information
collected in the appraisal for making staffing, training and development, and compensation
decisions.
Compensation design and administration includes determining wages, benefits other forms of
compensation, such as bonuses or stock options. Effective compensation management requires
information about industry and organization wage levels as well as job and individual
characteristics. In designing compensation programs, human resource managers must also know
federal tax regulations and other relevant legislation. This information help answer questions such
as whether the company should offer a flexible benefits program whether it should introduce on-site
day care, or whether it should offer one-time b or salary increases for good performance. In global
organizations managers must know the differences in currency rates, living conditions, and
expectations about compensation in countries throughout the world. A manager who has difficulty
finding employees willing to work abroad for two years may need information to assess whether the
compensation package provides enough incentives for the relocation.
Administrative responsibilities involve monitoring and keeping records of the functions described
so far. Human resource professionals track affirmative action plans and targets. They monitor the
implementation and effectiveness of safety and health procedures. They also provide information
requested by various government agencies to check compliance with local ,state, and central
regulations.
Human resource management in a global environment adds additional information needs. Human
resource managers must have cross-cultural information about the various human resource functions
as well as detailed knowledge of practices in various countries or regions. They must understand the
needs of diverse types of workers and translate this understanding into effective policies. Finally,
they must effectively diagnose their specific information needs so that they can propose quality
programs that respond to the requirements of a multinational and multicultural work force.
Increasingly, human resource managers have required comprehensive, feature-rich information
systems that allow information to be used for and support interfaces among multiple functions.
Eventually human resource information systems may become an integral part of the administration
of each part of the human resource function.
1. Explain the needs of information in the following areas
a. Accounting
b. Finance
c. Marketing
d. Operations
e. Human resource management
2.4 Summary
Managers at all levels in an organization have significant information needs. Management refers
to the process of achieving organizational goals by planning, organizing, leading, and controlling
organizational resources. Managers in a global setting face a dynamic and unpredictable
environment that results in less-than-perfect information. Top, middle, and first line supervisors
have special information concerns. Executives require information to help them focus on
formulating the organization’s overall direction. Managers also require a broad range of information
to perform their daily activities. Infor mation needs exist in the areas of accounting, finance,
marketing, operations, and human resource management. These needs apply at all levels of
management.
1. Take an organisation of your knowledge and determine the information needed by different levels
of management in that organisation.
2. Make an organisation of your knowledge and assess the information needs in the various
functional areas.
1. As one moves ______ the corporate ladder, decisions have a longer term and wider ranging
impact on the organization
A. up
B. down
C. linearly
1. horizontally
2. ______ focus primarily on implementing the policies and strategies.
A. Middle managers
B. Top level management
C. First line supervisors
D. All of the above
3. In most organizations middle managers more often engage in medium- or short-term planning
known as
A. Strategic planning
B. tactical planning
C. Operational planning
D. All of the above
4. Operations encompass ___________
A. Manufacturing only
B. Services only
C. Non profit organizations
D. Manufacturing as well as services
5. ____________ is the process of gathering information about what consumers want and need.
A. Market research
B. Needs research
C. People research
D. all of the above
2.7 Answers
Self Assessment Questions

Section 2.2.4
2. This has been mentioned in section 2.2.3.1
Section 2.3.6
1. a. This has been mentioned in section 2.3.1
1. b. This has been mentioned in section 2.3.2
1. c. This has been mentioned in section 2.3.3
1. d. This has been mentioned in section 2.3.4

1. e. This has been mentioned in section 2.3.5
Terminal Questions
2. This has been mentioned in section 2.3
Multiple Choice Questions
1. A
2. A
3. B
4. D
5. A
Unit-03-Information needs of Organisation and Individuals
Structure:
3.1 Introduction
3.2 How information are selected and organized
3.2.1 The Components of Perception
3.2.2 Humans Versus Computers
3.2.3 Self Assessment Questions (for Section 3.2)
3.3 Development of Organisational Computing

3.4 Demands on Organizations in an Information Society
3.4.1 Components of an organizational information system
3.4.2 Informational responses to the new environment
3.4.2.1 Organizational Design for Knowledge Work
3.4.2.2 Mechanisms for Acquiring and Distributing External Information
3.5 Capabilities of information system in an organizational view
3.6 The Individual at Work
3.6.1 The Information Needs of Individual Job Holders
3.6.1.1 Task-Related Needs
3.6.1.2 Time Management Needs
3.6.1.3 Enhancing Personal Productivity
3.6.1.4 Career-Related Needs
3.6.2 Challenges of Information Management
3.6.2.1 Dealing with Quantities of Information
3.6.2.2 Facing Insufficient or Conflicting Information
3.6.2.4 Maintaining Technical Skills
3.7 Information Management Requirements
3.7.1 Acquiring Information

3.7.2 Storing Information
3.7.3 Retrieving Information
3.7.4 Communicating Information
3.7.5 Ensuring Privacy and Security
3.8 Summary
3.1 Introduction
In this unit, we describe how information are selected and organized by individuals, and how
individuals differ from the computer in various aspects. The different ways computers can help
individuals meet their needs for various types of information are narrated. We shall conclude by
understanding the requirements of information management.
Objectives:
· How individuals select and organize the information.
· How the organisational computing developed.
· What are the components of organizational information system
· What are the requirements for information management
3.2 How information are selected and organized
3.2.1 The Components of Perception
Perception is an active process by which an individual attends to certain stimuli and

then organizes them in a meaningful way. Individuals attend to certain features of a situation or
select specific pieces of information to see or hear because of their needs, personality, or
experiences. The information itself may also influence whether atten tion occurs: Individuals select
stimuli that are more intense, repetitive, in motion, novel, very familiar, or in contrast with their
background. People tend not to see information that they are exposed to repeatedly without
consequence. Try to recall, for example, the pictures and shapes on the back of a five hundred
rupee note. In addition, people tend to ignore information that runs counter to deep or long held
beliefs. Consider why companies such as IBM or Dig ital Equipment Corporation failed to recognize
the changing nature of the computer mar ket in the late 1980s. Clearly, the subjectivity of
perception limits the processing of infor mation.
Once individuals attend to information about a situation, they organize it in several ways. They may
try to fit it into prototypes or categories that represent typical aspects of similar situations. They
may match it to concrete examples. They may view it against a background, for example, within an
environmental or situational context. Finally, they may group stimuli into patterns, trying to form a
complete picture, sometimes even trying to do so using incom plete information.
An understanding of how people select and organize information is critical to designers of
information systems. Managers rely on information systems to collect and summarize data about
their organization, so systems designers must present information in ways that have the greatest
chance of being seen and remembered to ensure that users select the most impor tant information
and organize it in the most effective way. Extensive research in information systems has addressed
questions such as how much information to put into a single table, what type of data to present as
tables and what type as charts, and how best to use color to convey information and facilitate
quality decisions.
Managers and other jobholders also have a responsibility to ensure that they receive and select the
information they need in order to operate effectively. Some managers may receive insufficient
information for decision-making; others obtain so much information that they cannot separate the
important from the unimportant. Individuals who hold jobs that require extensive coordination with
other jobholders, as well as those who have a high ability and desire to communicate more
frequently, experience overload more than those who do not. This overload can be particularly
problematic: Decision quality declines as the amount of relevant information increases beyond a
manageable limit.
3.2.2 Humans versus Computers
Humans and computers are complementary in their ability to filter and save information. Humans
can effectively decide what is important; computers cannot. Computers generally can retain much
more information and collect it faster than humans collect. For example, computers at stores such
as Big Bazaar can maintain a complete, instanta neous, accurate inventory on the thousands of
items in a store; manual tabulation by a store clerk would take weeks. In addition, computers often
process information more accurately than indi viduals do. Marine biologists obtain the information
they require by counting fish, checking maps, and diagnosing equipment flaws under water;
underwater personal computers could make the data collection easier.
People can think easily in terms of symbols, objects, and concepts that have meaning. They can
draw conclusions from data. Increasingly computers are able to think in this way, but they still have
only a primitive ability to draw conclusions. Although physicians can use com puter programs to help
organize disparate symptoms into a pattern that assists with diagno sis, few patients would want a
computer acting alone to treat their life-threatening disease.
Computers can perform computations much more quickly and accurately than people can: They can
add a column of 50 ten-digit numbers in less than a second, whereas such addi tion would take even
the most facile individual several minutes. They can sort a list of one million addresses by ZIP code
to prepare envelopes for bulk mailing; to do so manually in a timely fashion would take hundreds of
people.
Humans Versus Computers
Human Assets
· Identify important information
· Think symbolically
· Evaluate information
· Recognize patterns
· Draw inferences and conclusions
Computer Assets
· Retain large quantities of information
· Collect information quickly and accurately
· Perform extensive computation rapidly and accurately
· Sort information rapidly and accurately
· Select information meeting preconditions
1. What do you understand by perception? Explain their components.
2. Write a short note on human and computer ability to filter and save information.
3.3 Development of Organisational computing
The role played by information systems in organizations has evolved over time. This evolution has
not led to wholesale discarding of the early types of sys tems – this would be quite expensive, and in
many cases the older systems are’ still useful after suitable modifications. The progressive
retargeting of MIS can be summarized as moving "up and out": progressive support of higher levels of
management in increasingly individualized fashion, and aiming MIS at com petitors to achieve
strategic advantage.
From the mid-1950s to the mid-1970s, companies generally had a single data processing department
(later to be renamed MIS department). All application systems were developed within this
department and largely at its discretion. Thus, end-user access to computer technology was
mediated: professional computer expertise was required to obtain information from the system. The
backlog of applications judged worthy of development yet having to wait for the availability of
professional time ran two to three years in most organizations. Access to com puting was thus
severely restricted.
The primary target of data processing departments was operational support, al though management
support was emerging toward the end of this period in the form of voluminous reports. Raising the
efficiency of company operations was the main objective of most applications.
The second era in organizational computing began in the late 1970s and was made possible by a
number of technological developments spanning a decade. The development of time-sharing
operating systems made it possible for a user on a terminal to access the computer directly.
Specialists devised information systems directly supporting the decision-making process and
organized com pany data in databases, making the data far more accessible and usable. Mini
computers made it not only possible but justifiable to break up the monopoly of a single MIS
department. The greatest impact was made by the personal com puter, which emerged on an
industrial scale in 1977 as Apple II. Propelled by the broadly used spreadsheet programs (initially,
VisiCalc), personal computers and end-user oriented software empowered the users themselves.
End-user computing had begun: in many cases, instead of requesting that a system be developed by
the MIS department, knowledge workers themselves began using a productivity software package (a
database management system or a spread sheet, for example), customizing it for their needs, and
even developing systems of their own. Many information systems were brought under control of
their users.
Organizations now entered a new stage in their reliance on information systems, which included
extensive operational and management support systems devel oped during the two earlier stages.
During the current, third era of MIS devel opment, firms expect information systems to carry them
beyond increased operational efficiencies and managerial effectiveness: systems are now geared to
help a company to compete in the marketplace. Business functions are reengi neered and
extensively supported with information technology. This requires close interaction between
developers and users; the sharp divide between the two groups often disappears when application
systems are concerned. End users initiate and participate in the development of many systems. They
also control some of the systems they use. In leading corporations, end-user computing is an
important contribution to overall MIS development and maintenance. Sys tems integration is a vital
concern.
3.4 Demands on Organizations in an Information Society
Transportation and communication networks spanning the globe have removed the protective space
and time buffers shielding companies from competition. This calls for constant innovation.
Complexity, turbulence, and a high volume of knowledge with potential impact on the company’s
operations characterize the operational environment of today’s organization.
An infrastructure is the structure of facilities and services necessary for organizations and
economies to function and grow. Fast and relatively inexpensive means of transportation,
telecommunications networks, and global financial markets are all components of the infrastructure
of the information society. These means of rapidly moving goods, information, and money have
shrunk the world. They have removed the advantages provided by the remoteness of potential
business competitors in the early industrial economy. Largely, firms no longer compete solely
against a known handful of other companies: they must develop a general competitive capability.
Runners may appreciate the analogy to the difficulty of achieving a record result running alone as
compared with running against others in a race.
Not only has the space buffer that formerly shielded companies from their remote competitors been
removed, but paced by computerized information systems, life cycles for product development have
been shortened dramatically. With the use of CAD/CAM (computer-aided design/computer-aided
engineering) tech nology, a new car model is developed in nine months instead of three years;
financial software and global securities markets make it possible to develop and bring to the market
a new financial product, such as a new type of bond, within ten days. Companies used to be able to
rely on "cash cows" products, which in mature markets bring significant profits without a need for
innovation. Now that time-related protection has also disappeared.
A highly dynamic information society requires constant innovation-both in marketed products and
services, and in the continual restructuring of organizations to adapt to changing market demands.
Moreover, successful organiza tions must not only react, but also proactively anticipate new
developments and changes in their markets.
Mergers, acquisitions, and organizational restructuring have indeed been the order of the day during
the past two decades. The stability and stolidity that were the hallmark of successful industrial
corporations have given way to constant corporate renewal. Robert Waterman, a well-known
management consultant, quotes the chief executive officer of IBM, John Akers, who "says they never
re organize except for a good business reason, but if they haven’t reorganized in a while, ‘that’s a
good business reason." However, this dynamism has to be com bined with a stable, "producing"
environment. The art of balancing in corporate renewal requires that an organization ensure a
sufficient degree of organizational stability to successfully carry out change. Perhaps the best way
to state it is to say that an information society requires an organization to maintain a con stant trait
of adaptability, rather than adaptation; in other words, a firm must possess the capability to keep
changing rather than to make a single change.
Management information systems must be vehicles built to facilitate rather than to put the brakes
on change, as unfortunately frequently occurs.
3.4.1 Components of an Organizational Information System
The environment in which organizations operate from the in formational perspective in terms
proposed by George Huber of the University of Texas, who has studied the organizational design
required by an information society. His conclusions provide a framework for determining what is
required of an organizational information system.
These, according to Huber, are the hallmarks of an information society:
1) Dramatic Increase of Available Knowledge
Whether measured in terms of the number of scholarly journals, patents and copyrights, or in terms
of the volumes of corporate communications, both the production and the distribution of knowledge
have undergone a manifold increase.
2) Growth of Complexity
Huber characterizes complexity in terms of numerosity, diversity, and interdependence. A growing

world population and the industrial revolution combined to produce numerosity, or a growing
number of human organizations. To succeed, people and organizations learned to specialize: they do
things differently and organize themselves differently to accomplish specialized tasks. These
differences lead to diversity.
Two principal factors have led to increased interdependence. The first as been the revolution in the
infrastructure of transportation and communication. The second factor is specialization in firms that
make narrowly defined products, as opposed to the self-sufficiency of companies producing a
complex product down to its minute elements. A company’s product is typically a part of a larger
system, produced with contributions from a number of interdependent firms (consider a car or a
computer). Moreover, interdependence has increased on a global scale. Even the most isolated of
countries participates in some way in the international division of labor.
Organizations operating in the public sector, while rarely in a competitive situation, are still
governed by the demands of society. Pressures on the public sector in democratic societies, along
with the pressures conveyed from the private sector, also make the environment in which public
organizations operate more complex.
3) Increased Turbulence
The pace of events in an information society is set by technologies. The speeds of today’s computer
and communication technologies have resulted in a dramatic increase in the number of events
occurring within a given time. Consider the volumes and speed of trades in the securities and
currency markets. Widespread use of telefacsimile, as another example, has removed the "float"-the
lag between sending and receiving-in written communications. Equally important, because of the
infrastructure discussed earlier, the number of events that actually influence an organization’s
activities (effective events) has also grown rapidly.
The great amount of change and turbulence pressuring organizations today thus calls for rapid
innovation in both product and organizational structure. To thrive, an organization must have
information systems able to cope with large volumes of information in a selective fashion.
Huber concludes that these factors – an increase of available knowledge, growth of complexity, and
increased turbulence-are not simply ancillary to a transition to the new societal form. Rather, they
will be a permanent characteristic of the information society in the future. Moreover, we should
expect that these factors would continue to expand at an accelerating rate (a positive feedback
exists). Bar ring some catastrophic event, we expect that the rapidly changing environment will be
not only "more so" but also "much more so." To succeed in an information society, organizations
must be compatible with this environment.
3.4.2 Informational responses to the new environment

The demands of the new environment call forth a set of responses from or ganizations, and all of
these responses have implications for information sys tems. Some of the requisite responses have
been pointed out by George Huber and Reuben McDaniel. They proposed an organizational design
based on the decision-making paradigm-that is, based on the view that decision-making is a central
organizing principle for current and future orga nizations. In this text, we consider the support of
decision making as only one of the contributions MIS make to organizational functioning.
3.4.2.1 Organizational Design for Knowledge Work
Here are the responses required of organizations in an information society:
1) Organizational design for knowledge work in general and decision making in particular.
2) Continuous product and process innovation through information and information systems.
3) Constant internal company renewal supported by information systems.
4) Explicit mechanisms for acquisition and targeted distribution of external information.
5) Protection from information overload
The volume and speed of decision making in an information society continue to increase
dramatically. To keep up, routine and noncritical decision-making must be done by the information
systems themselves, subject to human approval when appropriate.
Organizations also need to assimilate information technology for both indi vidual and-to an
increasing degree-group decision making. After all, orga nizations exist to leverage the work of an
individual through group work; hence, support of group work is essential. Industrial organizations
were built around groups of people doing physical work. An assembly line, though used only in some
industrial processes, became a powerful metaphor for the industrial age.
The new, information-based organizations are expected to rely to a much greater degree on
specialists-knowledge workers broadly distributed throughout an organization, rather than
concentrated at its headquarters. The organizations of the information era have to provide both the
structure and the technology not only for individual knowledge work, but also for group knowledge
work. The size of a group depends on the task. For example, a message broadcast over the company
network to all managers above a certain level (perhaps a hundred of them), requesting their
comments on a new bud geting policy to be implemented during the next quarter, may encompass a
large group. Five corporate planners collaborating over several months on drafting a new long-range
company plan form another type of group. This small, tightly collaborating group may use an
electronic meeting system with a group decision support facility since the members of the group
may be distributed over several company locations.
The metaphor for work in the information age is a personal workstation. The workstation is
generally built around a personal computer, with a modem connection to the telephone network
(though digital networks are being intro duced on ever-larger scales). A single workstation has a
significant processing capability of its own; but just as important, it connects with the workstations
of other workers and provides access to a number of informational services both within the company
(corporate databases, for example) and outside of it (such as a commercial demographic database).
An isolated (non-networked) personal computer is not an adequate tool for most knowledge-work
tasks. Massive installation of local area networks is proof of this.
Information systems have been increasingly used over the last decade to gain competitive advantage
for products and services. Information systems serve to develop new products, and information itself
may serve as all or a part of the product. This is called product innovation.However, information
systems also in novate in the ways products are manufactured and services are provided-this
is process innovation. The Federal Express vignette, which has become a classic example, illustrates
how a company can successfully combine a product with customized service and information.
Information systems help companies add more value to their products than is possible in the
manufacturing of commodity-type, standardized goods. Many U.S. companies have found it
advantageous in recent years to produce high-volume standardized products off the shores of the
United States, where wages are lower and raw materials more accessible. However, commodity
production does not bring high profits. To flourish, leading companies add more value to their
products by customizing them for smaller market segments and by flex ible manufacturing.
3.4.2.2 Mechanisms for Acquiring and Distributing External Information
Unless organizational MIS is flexible, enough to accommodate the change, the two objectives-
maintaining informational support and adapting organizational structures to fit the changing
environment-will contradict each other. As the business environment has become global, firms need
explicit mecha nisms for acquiring external information and distributing it to the appropriate
knowledge workers.
The competitive demands of the global market lead to a certain degree of homogeneity-many can
play the competitive game, regardless of their geo graphical locations, with a consequent increase
in the number of players. A very large number of factors affect a company’s business: no supplier is
too remote and no customer too foreign. Organizations must have specialized information
mechanisms as a part of boundary spanning,or acquiring information about their environ ments.
Two modes for collecting information about the business environment require support:
1) Continuous scanning of the economic environment for opportunities and potential problems;
2) Probing, or making an ad hoc search for information regarding a specific problem or opportunity.
The vast volume of knowledge in the information society calls for coping tech niques. The same
information technology that helps us obtain information and make decisions also contributes to what
we may call "positive informational feedback" as large numbers of knowledge workers produce an
ever-increasing volume of information. If decision makers are not shielded from unneeded
information, their effectiveness dwindles. The difficulty lies, of course, in determining what
information is actually needed.
Software screens and filters help in coping with information overload. For example, MIS users are
able to define their pref erence profiles for incoming messages and rank them by order of
importance. In the not-so-distant future, expert systems will be able to define more precisely an
individual user’s information-interest profile. Information systems will then be customized for the
individual. A browsing mode will also be available for scanning. Thus, more complex informational
tasks will be delegated to infor mation systems.
1. What are the hallmarks of an information society according to Huber?
2. What responses do organisations need to take in an information society?
3.5 Capabilities of Information System in an Organizational View
Computer- and communications-based information systems offer a set of ca pabilities to be brought

out in the development of individual systems. As we will see, some of these capabilities help to
provide dynamic action, while others help to maintain operational stability even as rapid change
takes place. The principal capabilities of information systems include:
1) Fast and Accurate Data Processing, with Large-Capacity Storage and Rapid Communication
between Sites
This is the fundamental property of computers and telecommunications systems. This capability is
exploited in the first order by operational-level systems, which process massive volumes of business
transactions, for example, entering incoming orders or printing payroll checks. This capability is also
used to derive management reports from the voluminous data stored on a semi permanent basis in
secondary and archival computer memories. Sophisticated computer models rely on this capability
for long-term planning based on a large number of factors and models for optimization of the use of
resources (such as raw materials).
2) Instantaneous Access to Information
In on-line systems, the contents of a computer database are generally available for queries in sub-
second time. Through the telecommunications capability, a query may be directed to some remote
site where the data are actually stored without the user’s awareness (that is, in a transparent
fashion). Ad-hoc (in other words, not predesigned) queries, introduced directly by end users, may in
some cases produce extensive reports. Moreover, the presentation of the data may be individualized
for a particular user-with various forms of graphics, for example. A firm’s databases serve as a vital
part of its corporate memory-a permanent record that facilitates management.
3) Means of Coordination
Information systems have become widely accessible, primarily because of the proliferation of
personal computers acting as workstations connected to telecommunications networks. This has
made MIS a tool for coordinating organizational activities. Coordination brings parts of an
organization together in a common effort, with the exchange of information playing a major role. In
the immediate sense, coordination is accomplished through office information systems. MIS have
widened their reach to create the "portable manager" complete with laptop and computerized home
office.
In a deeper sense, the role MIS play in organizational coordination is a restatement of the fact that
MIS have become crucial to management. Ifcoordinate means to harmonize in a common action or
effort, then planning with the use of appropriate information subsystems serves to establish
common goals at all levels, and control aims to ensure that, once goals are established, organization
members pursue them with vigor. Thus, MIS-assisted planning and control, combined with the
extensive communication capabilities that information systems give to people within an enterprise,
make MIS a coordination tool. Coordination activities are not limited to those that take place within
an organization. Information technology is used ever more extensively to coordinate the actions of
buyers and their suppliers, or to create electronic markets helping to match the needs of multiple
buyers and sellers.
4) Boundary Spanning
Aside from the internal role played by MIS within an organization, information systems increasingly
serve to link an organization to the outside world. This may be accomplished in a variety of ways,
some of which may be decisive for business success. For example, electronic data interchange (EDI)
systems eliminate the exchange of paper transaction records, resulting in economy, speed, and
reliability. Inter-organizational systems connect suppliers with customers.
Through boundary-spanning information systems, the organization receives intelligence about the
environment, which is necessary to compete successfully. Organizations also use boundary-spanning
systems to provide computerized information for various external constituencies.
5) Support for Decision Making
Along with coordination, decision-making is another basic aspect of management. All managerial
functions, which will be further discussed later in the text, involve both coordination and decision
making in varying degrees.
By informing managers and permitting them to select from among alternative courses of action, MIS
support both structured and unstructured decisions. Structured decisions occur when courses of
action under all possible circumstances may be programmed and thus fully automated. Management
reporting systems, for example, may rely on established inventory reorder formulas to determine
the quantity of supplies needed.Unstructured decisions require human judgment as a critical
component.
Suppose that a group of managers is responsible for determining· whether their firm will grant
credit to another company. Granting credit to a large company involves structured, semi structured,
and unstructured decisions. Various accounting ratios indicating company performance can be
obtained from a management reporting system, which may also determine whether each company
falls into the acceptable windows of approval-a highly structured process projections for the
company’s.
Future a semi-structured decision-can is made for various scenarios with the use of a decision
support system. However, no information system can replace visiting the company and "getting the
feel" of its management and operations; this is an unstructured decision. The managerial group may
then employ an expert system, which would suggest a solution to the credit-granting problem based
on a set of established financial criteria, on projections for the company’s future, and on applying
rules of thumb to the results of the on-site visit. With the expert system’s suggestion and its
explanation of how it arrived at its recommendation, the managers are able to make the final
decision.
Remember that people remain the ultimate decision makers in any organization. However, the
volume and complexity of decision making in an information society requires that decision makers
have MIS support.
6) Formalization of Organizational Practice
Operational systems handle transactions in a specific way in every organization. Electronic mail
systems and computer conferencing, both components of office information systems, provide a
protocol for the interaction of people within an organization. Authorizer’s Assistant-an expert
system for credit card purchases developed by American Express recommends authorization or
refusal of credit for most credit card transactions, assuring high consistency of response. These are
just some examples of how organizational practice may be defined through MIS. Formalizing does
not mean casting in concrete: properly designed systems should give an organization the capability
to evolve as the environment changes.
7) Differentiation of Products or Services
The strategic use of information systems leads to the use of information as a part of the product or
service. The capabilities to differentiate, customizes and individualize the product or service with
the use of information in a cost-effective fashion may produce a competitive advantage.
Modeling
Computers are broadly used to model future economic conditions, prospective products, and
environments where the products will operate. Software models are frequently substituted for the
use of physical resources (other than the resource of computer time) in making these projections.
Relatively inexpensive, fast, and comprehensive experimentation then becomes possible. Knowledge
workers increasingly manipulate models of reality in gaining understanding, designing, and studying
effects of possible changes.
9) Production Control
Computerized systems for production control are not considered a part of MIS in the strict sense.
However, the line between MIS and production control systems becomes blurred and, as system
integration progresses, is even likely to disappear. Flexibility and economies are the potential
benefits of using computers in automated production processes. It is cost-effective in computerized
manufacturing to produce small lots of products, thus assuring product diversity to satisfy a variety
of customer needs. Another advantage: computer-controlled production and processing machines
can immediately reject defective components and alert operators to faulty processes, leading to
higher quality output.
All nine of the capabilities we have discussed are realized through organiza tional information
systems. However, managers who introduce such systems are not always motivated by strictly
rational concerns about organizational welfare. Some managers do implement systems to further
personal goals, such as en hancing their power, status, or credibility.
3.6 The Individual at Work
Individuals assume a variety of roles on the job. Although these roles all require various types of
information, the specific information needs vary considerably. Compare the needs of the two
employees of Bank – Loan, Savings Accounts. How similar would they be? How would they differ?
Now compare the needs of these salespeople to those of hospital employees such as an operating
room nurse, admissions clerk, or food services man ager. Do they have the same or different needs?
Now compare the needs of two or more jobholders in an organization you know. The manager of
manufacturing has different information needs from the manager of finance; the accounts
receivable clerk needs different information than the accounts payable clerk. The key challenge for
individuals on the job is to diagnose their particular information needs.
3.6.1 The Information Needs of Individual Job Holders
3.6.1.1 Task-Related Needs
Consider Ramesh, who is an Area Sales Manager of Airtel, uses information to perform a variety of
tasks associated with his job. To identify potential customers he uses leads provided by his sales
man ager, data published in trade journals and newspapers about the sales volume and number of
employees in specific companies, and stories he hears from contacts with prospective cus tomers
and from salespeople in other fields. To build a rapport with various distributors, acquires
information about their birthdays, the names of their family members, their favorite restaurants,
and the types of entertainment they prefer. He also must know a great deal about his company’s
and his competitors’ products.
3.6.1.2 Time Management Needs
During a normal workday Ramesh constantly makes decisions about the best way to handle his
clients, for example, whether to spend his time trying to close a new deal with a likely prospect or
trying to appease an unhappy distributor. He uses the information about sales history and customers
businesses to help make these deci sions. Ramesh also requires geographical information to be most
productive; because the area covered by him is a large territory, Ramesh is most productive when
he minimizes his travel time.
3.6.1.3 Performance-Related Needs
Not only do employees at all levels require information about the tasks they perform, they also can
provide information to management about ways to improve task performance. Ramesh, for example,
in his supervisory role, might track the time his sales staff spends on various tasks so that he can
propose way of reordering those tasks or reallocating staff effort to increase efficiency. He might
also determine that salespeople need new or better information about products to perform their
jobs more effectively. Computer technology can also meet the needs associated with ensur ing
quality in the work place. Individuals involved in quality efforts require ongoing and updated
information about customer needs and product defects.
3.6.1.4 Career-Related Needs
Many individuals view their jobs in the context of a career. Personal information needs include lists
of personal skills, job opportunities inside and outside the organization, and specifications for
transfers or advancements. Employees might also maintain logs of their own performance during a
week, month, or year to incorporate into discussions about their personal training needs and career
development. The member of the regional sales office might maintain such records to help with
their personal planning and advancement.
3.6.2 Challenges of Information Management
In identifying their information management requirements, individuals face four major chal lenges
in addition to securing the most appropriate information.
First, they must deal with large quantities of information that may create overload.
Second, they may face insufficient or conflicting information.
Third, they must find ways to enhance their personal productiv ity.
Fourth, they must acquire and maintain the technical skills needed for effective personal
information management.
3.6.2.1 Dealing with Quantities of Information
The gap between the amount of information that an organization can collect and the ability of its
employees to make sense of that information has been widening rather than narrowing. The early
fear that comput ers would so improve a person’s ability to process and manage information that a
job holde r would need only one-third to one-half the time to do his or her job has been dispelled
The reverse has occurred. Often employees face an infoglut, an overload of information. As
individuals move higher in the orga nizational hierarchy and assume more managerial responsibility,
information overload become an even more significant challenge. To avoid such overload individuals
must carefully asses their information needs and then find effective ways of managing the required
and available information. They must also find ways to manage data better.
3.6.2.2 Facing Insufficient or Conflicting Information
Although compute rs can make large quantities of information available to individuals, such
information may not address their needs. Ramesh, ASM of Airtel, may wish to do some library
research about com petitors’ products. In spite of the large amount of information in the library’s
electronic cat alog, she may not be able to secure the precise information she needs. Because
computers process input from diverse sources, users may also obtain conflicting information if one
source updates information more frequently than another does.
Employees in any organization increasingly use information technology to improve their personal
productivity. To ensure high productivity, employees must know how to use computers to facilitate,
not hinder, their per formance. They must know how to access the information they require and
recognize when manual data collection and processing is adequate. Often employees must lobby
their employ ers to add new technology that will help increase personal productivity. The ability to
show the cost-effectiveness of additional expenditures for diagnosing and meeting information
needs is critical. Employees must also understand and demonstrate when advanced technol ogy is a
detriment rather than an asset.
3.6.2.4 Maintaining Technical Skills

Finally, using information technology effectively requires continuous updating of technical skills.
Although many companies provide training to their employees, others do not. Ensuring that
employees have the appropriate skills has both financial and time cost implications. As a result,
employees may find their mobility and productivity limited by the extent to which they can learn
new technical skills indepen dently of their employer.
3.6.3 Self assessment Questions (for Section 3.6)
1. What are the information needs of individual jobholders in an organisation?
2. What are the challenges of information management?
3.7 Information Management Requirements
Individuals must accurately and quickly determine the information needed to respond to the
demands of a changing environment and to ensure personal productivity. Personal informa tion
needs focus on managing time, records, and personal documents. In particular, workers must
acquire, store, retrieve, and communicate information; they must also ensure the pri vacy and
security of the information.
3.7.1 Acquiring Information
A variety of information industries, such as the newspa per, magazine, radio, television, and
advertising industries, assist people in acquiringinforma tion for use at work. Many industries publish
directories, indices, and evaluations of prod ucts and services in either or both paper and electronic
form. For example, complete airline schedules are available in printed form as the Official Airline
Guide and in electronic form from various for-profit and free sources. Other information available
electronically includes current and past stock prices, the best prices and vendors for a vari ety of
goods and services, and computerized bulletin boards of information.
3.7.2 Storing Information
Individuals also keep significant amounts of information it files at work. They may keep copies of
past correspondence, project documents, sales con tacts, or a myriad of other details. Central,
state, or local regulations may call for the main tenance of specific corporate records for varying
periods. Computerizing some of this information can reduce the amount of paperwork and facilitate
retrieval.
3.7.3 Retrieving Information
Manual filing systems satisfy many personal needs for organizing and retrieving information.
Nevertheless, in these systems we typically can store informa tion in only one location (unless we
reproduce copies). Not only do computerized system assist in storing information, but they may also
facilitate its retrieval by supporting quick, repeated searches of data, potentially at multiple or off-
site locations. For example, individ uals or companies that require patent information for scientific
inventions can use software to perform sophisticated and rapid patent searches.
3.7.4 Communicating Information
Although direct speech and writing are the sim plest means of communication, information
technology has made it possible for individuals to communicate with one another more quickly and
effectively. The telephone, invented in the nineteenth century, is still one of the most widely used
information technologies. In recent years, it has become increasingly sophisticated: People can dial
foreign countries with out the assistance of a telephone-company operator, multiple parties can
communicate simul taneously through conference calling, the caller’s telephone number can appear
on a, display screen, and individuals can leave messages without using a separate answering
machine. Cur rently, facsimile (fax) technology allows the transmission of written documents and
picture- over telephone lines. Soon, the telephone system will routinely communicate moving pic
tures as well as words.
Word processing, desktop publishing, and graphics capabilities of computers have affected the ease
of producing and the appearance of written communication. Employees responsible for publishing
catalogs for companies could use electronic publishing to make their catalogs available to potential
customers in computerized, rather than paper, ver sions. Workers must also prepare, handle, and
store personal documents. They may use dic tation or rough notes to record the information.
Sophisticated software for word processing desktop publishing and graphics arts has enticed workers
to create and mod ify their own documents, enabling them to immediately redesign documents to
meet chang ing information needs.
3.7.5 Ensuring Privacy and Security
Recall Ramesh, Area Sales Manager of Airtel, described earlier in this chapter. Ramesh keeps large
amounts of information about his distributors on his personal computer. How can he ensure the
integrity of the data? Users and devel opers of personal computer information systems are often lax
in their attention to issues of security and privacy. This is particularly true if their organization lack
norms that encourage security-related behavior. However, computer files are highly susceptible to
theft and sabotage, particularly because these security breaches are not easily noticeable.
A variety of techniques can be used to protect against the theft and destruction of valu able
personal information. Although most personal information sys tems are not meant to be shared,
occasionally sharing some personal information, such as calendar or address list, may be desirable.
Levels of security can be placed on information systems so that specified information can be shared
with others who use the same compute or who are attached to the computer by an electronic
network.
Directions for Encouraging Security
1) Keep all diskettes in a secure, fireproof location, such as a locked file cabinet, away from heat
and magnetism.
2) Store a backup, second set of diskettes at a different site from the first set.
3) Develop a key lock and/ or a password security system for your computer so that only a person
having a key or the appropriate password can turn on the computer. Note that information thieves
can bypass the key lock relatively easily by disassembling and reassembling the computer case.
4) Consider using encryption software when dealing with highly confidential material such as
psychological records. Encryption software uses a secret code to scramble (and unscramble) data
you have entered so that it cannot be read even by a thief who manages to physically remove the
magnetic storage device from your computer.
Protecting personal privacy has also become a key issue as computer information systems can
maintain large amounts of data about individuals without their knowledge. Privacy advocates call
for policies and procedures to protect individuals’ privacy, such as ensuring the legal collection of
only correct and up-to-date data that are relevant to the organization’s goals.
3.8 Summary
The first step in effective management of information is a careful diagnosis of information needs.
Individuals process information by first attending to certain stimuli and then or, organizing them in a
meaningful way. Humans and computers can play different roles in this process, with computers
much more able to handle large volumes of data quickly and hum able to deal more effectively with
symbols or objects that have meaning. Individuals at work require various types of information for
the roles they perform. The information needs include task-related, time management,
performance-related, and can related needs.
1. What are the principal capabilities of information systems?
2. Explain the requirements of information management.
3. Take an organisation of your knowledge and determine the information needed by individual
jobholders.
1. ––––––––- is an active process by which an individual attends to certain stimuli and

then organizes them in a meaningful way
A. Perception
B. Forecasting
C. Objectivity
D. Subjectivity
2. The greatest impact was made by the personal com puter, which emerged on an industrial scale
in 1977 as _________ .
A. Apple I
B. Apple II
C. Apple III
D. Windows
3. EDI stands for ________
A. Electronic data interchange B. Electronic data interaction
C. Electronic demand interaction D. Electronic demand interchange
Section 3.2.3
Section 3.4.3

Section 3.6.3
Terminal Question
1. A
2. B
3. A
Unit-04-The Structure of MIS
Structure:
4.1 Introduction
Objectives
4.2 The components of MIS
4.3 Types of Organizational Information
4.3.1 Transaction Processing Systems
4.3.2 Office Information Systems
4.1 Information for Management
4.4.1 Internal versus External Information
4.5 Management Reporting Systems
4.5.1 Characteristics of MRS
4.5.2 Reporting by MRS
4.6 Decision Support Systems
4.6.1 Characteristics of DSS
4.7 Executive Information Systems
4.7.1 Characteristics of Executive Information Systems
4.8 The Role of Expert Systems
4.9 Summary
4.1 Introduction
With this unit, we shall start with the physical components of MIS. We begin by discussing the
various types of organisational information and compare internal vs. external information. We shall
conclude by the highlighting Management Reporting system and introducing DSS, EIS and expert
system.
Objectives:
· Explain the different components of MIS
· Explain the five types of systems that make up an organizational MIS
· Identify the internal information and external information
· Explain Management Reporting System
4.2 The components of MIS
The physical components of MIS comprise the computer and communications hardware, software,
database, personnel, and procedures. Almost all organizations employ multiple computer systems,
ranging from pow erful mainframe machines (sometimes including supercomputers) through
minicomputers, to widely spread personal computers (also known as microcom puters). The use of
multiple computers, usually interconnected into networks by means of telecommunications, is
called distributed processing. The driving forces that have changed the information processing
landscape from centralized processing, relying on single powerful mainframes, to distributed
processing have been the rapidly increasing power and decreasing costs of smaller computers.
Though the packaging of hardware subsystems differs among the three cate gories of computers
(mainframes, minicomputers, and microcomputers), all of them are similarly organized. Thus, a
computer system comprises a central pro cessor (though multiprocessors with several central
processing units are also used), which controls all other units by executing machine instructions; a hi
erarchy of memories; and devices for accepting input (for example, a keyboard or a mouse) and
producing output (say, a printer or a video display terminal). The memory hierarchyranges from a
fast primary memory from which the central processor can fetch instructions for execution; through
secondary mem ories (such as disks) where on-line databases are maintained; to the ultra high
capacity archival memories that are also employed in some cases.
COMPONENT DESCRIPTION
Multiple computer systems: mainframes, minicomputers, personal

computers
Computer system components are: central processor(s), memory hierarchy,

input and output devices
Communications: local area networks, metropolitan area networks, and

Hardware wide area networks
Software Systems software and applications software
Database Organized collections of data used by applications software
Professional cadre of computer specialists; end users in certain aspects of

Personnel their work
Specifications for the use and operation of computerized information

systems collected in user manuals, operator manuals, and similar
Procedures documents
Multiple computer systems are organized into networks in most cases. Various network
configurations are possible, depending upon an organization’s need. Fast local area networks join
machines, most frequently clusters of personal computers, at a particular organizational site such as
a building or a campus. The emerging metropolitan area networks serve large urban com
munities. Wide area networks connect machines at remote sites, both within the company and in
its environment. Through networking, personal-computer users gain access to the broad
computational capabilities of large machines and to the resources maintained there, such as large
databases. This connectivity converts personal computers into powerful workstations.
Computer software falls into two classes: systems software and applications soft ware. Systems
software manages the resources of the system and simplifies programming. Operating
systems (UNIX, for example) control all the re sources of a computer system and enable multiple
users to run their programs on a computer system without being aware of the complexities of
resource allocation. Even if you are just using a personal computer, a complex series of actions
takes place when, for example, you start the machine, check out its hard ware, and call up a
desired program. All of these actions fall under the control of an operating system, such as DOS or
IBM OS/2. Telecommunications mon itors manage computer communications; database
management systems make it possible to organize vast collections of data so that they are
accessible for fast and simple queries and the production of reports. Software transla tors-compilers
or interpreters, make it possible to program an application in a higher-level language, such as
COBOL or C. The translator converts program statements into machine instructions ready for
execution by the computer’s cen tral processor.
Many categories of applications software are purchased as ready-to-use pack ages. Applications
software directly assists end users in their functions. Exam ples include general-purpose spreadsheet
or word processing programs, as well as the so-called vertical applications serving a specific industry
segment (for ex ample, manufacturing resource planning systems or accounting packages for small
service businesses). The use of purchased application packages is in creasing. However, the bulk of
applications software used in large organizations are developed to meet a specific need. Large
application systems consist of a, number of programs integrated by the database.
To be accessible, data items must be organized so that individual records and their components can
be identified and, if needed, related to one another. A simple way to organize data is to create
files. A file is a collection of records of the same type. For example, the employee file contains
employee records, each containing the same fields (for example, employee name and annual pay),
albeit with different values. Multiple files may be organized into a database, or an integrated
collection of persistent data that serves a number of applications. The individual files of a database
are interrelated.
Professional MIS personnel include development and maintenance managers, systems analysts,
programmers, and operators, often with highly specialized skills. The hallmark of the present stage
in organizational computing is the involve ment of end users to a significant degree in the
development of information sys tems. Procedures to be followed in using, operating, and
maintaining computerized systems are a part of the system documentation.
4.3 Types of Organizational Information
Five types of systems may make up an organizational MIS: Transaction

Pro cessing Systems (TPS), Management Reporting Systems (MRS), Decision Sup port Systems (DSS),
Executive Information Systems (EIS), and Office Information Systems (OIS). An information system in
a large organization would typically include multiple systems of each type, serving, for example,
different functional areas within the enterprise, as discussed later in this chapter. System types
differ in their processing focuses, and main objectives. The focus defines the mission of a system.
4.3.1 Transaction Processing Systems
Transaction processing systems sup port a company’s business operations, and office information
systems facilitate communication at all levels of a firm, while the remaining three system types
support management functions. A hierarchical classification of MRS, DSS, and EIS users by
management level is often too reductive. Thus, while many con sider a DSS to be a support system
for higher management, it is not; it may well support operational managers-supervisors-as well.
Transaction Processing Systems (TPS) support a firm’s business operations. They also accumulate
relevant data in databases for subsequent use by the management-oriented MIS components. TPS
secure automation, while management-support systems aim to "informate" the organization, relying
on the data accumulated through TPS, to use the term introduced by Shoshana Zuboff. To neglect
the "informating" aspect of MIS by limiting these systems to data processing means failing to take
advantage of their full potential.
4.3.2 Office Information Systems
Office Information Systems (OIS) support general knowledge work in the con text of a business
office. The development of OIS as we know them today oc curred in the late 1970s, when this field
was revolutionized by the personal computer. Since then, as traditional office technology,
computer, and com munications technologies have converged, OIS have rapidly developed towards
becoming the "office of the future." The goal of OIS is to support multimedia communication within
the firm and to offer gateways to the outside. Examples of activities supported by OIS include
document processing, individual time scheduling and workflow coordination, project management,
computer confer encing, and the exchange of messages in various formats. OIS will ultimately allow
messages to be created, stored, and exchanged in any format-as docu ments, data sets, voice
messages, holograms, still or moving images; and they will support conferencing at various levels of
participants’ presence-from bul letin boards to teleconferencing.
1. Write short note on
a. Transaction processing system
b. Office information system
4.4 Information for Management
Operational-level information systems support the conduct of business with data processing. The
primary objective of management-oriented MIS com ponents is to improve the effectiveness of
managerial decision making by pro viding appropriate informational support.
What do we mean when we demand quality information? The attributes we are talking about are
summarized in table 4.1. The table is, indeed, a summary: for a detailed listing of thirty-four
attributes of quality information
Many attributes of information are relative to the decision-making situation (or problem) in which
the information will be used. Information should be com plete, yet concise, with only relevant items
brought to bear in the decision sit uation. Relevance provides the main protection against
information overload. Determining what information is needed is the crucial aspect of the
information systems planning and analysis.
Note the distinction between accuracy and precision. Suppose that, based on accurate figures
rounded off to the next million dollars, last year’s quarterly sales were Rs. 505, Rs. 610, Rs. 408,
and Rs. 456 million. If we report that average, quarterly sales for the year were Rs. 494, 750,000,
our figure is accurate, but the precision we selected is inappropriate. The figure of Rs.495 million
better reflects the precision (degree of exactness) of the underlying data.
Many considerations influence the choice of the appropriate form in which in formation will be
presented to a manager. Generally, the higher the manage ment level, the less detailed-and thus
more summarized-the information should be. Certain information should not be quantified
(expressed in num bers); if qualitative ("soft") information is presented numerically, it may create a
false impression of reliability.
The "battle of the printout" is a well-known deadlock situation in a meeting where several managers
offer conflicting information. Information for a decision must be obtained in a consistent fashion.
Group decision support systems; offer a partial solution to the problem. Most of the data captured
by TPS relates to various aspects of the organization itself.
4.4.1 Internal versus External Information
Increasingly, organizational advantages come from incorporating external in formation into the
information system. Such information is partially captured by the organizational TPS, but a good
part of it must be acquired from external sources. Representative examples include:
· Sales volume of a firm’s primary competitor in a specific sales district
· Potential customer segments for various company product lines
· Questionnaire data regarding a projected new product, obtained via a series of focus groups
· Geographical distribution of company stockholders
Much external information is not quantitative; for example, legal, regulatory, tax, and labor union
negotiations information is generally difficult to quantify.
A corporation can succeed only by adapting itself to the demands of its envi ronment. This
environment is represented by a number of groups that affect the company’s ability to achieve its
objectives or that are affected by it. These groups are called the stakeholders of a firm. The
internal stakeholders are, of course, a firm’s employees, who may be classified in terms of their
informational needs. Table 4.2 lists principal external stakeholders of organizations, along with the
principal informational demands generated by their presence.
The boundary-spanning role of an information system consists in keeping the organization
continually informed about the activities of these external stake holders; some of them (for
example, stockholders and government agencies) must also be kept informed by the organization.
The development of the information society has created an infrastructure for transmission of various
types of data, such as electronic data interchange (EDI) and other value-added networks, and has
made information itself an important product. Organizational MIS have become progressively
embedded within these networks and markets so that now, in various areas, the distinction between
ex ternal and internal data has become blurred. For example, consider:
· Inventory data maintained by your organization in behalf of a customer firm that relies on your
company for all its supply needs within a certain product area (such as a hospital relying on a drug
distributor)
· An information processing subsidiary of a diversified corporation handling the information of

another business unit for the parent company
The original data processing systems were oriented toward the past, in that they maintained
accounting data about company activities. With the advent of on-line systems, it was possible to
maintain up-to-date data about the present. Next, planning became possible, particularly with deci-
sion support systems. Continuing comparison of present and projected results is the fundamental
tenet of management control.
Today, MIS maintain information about the past, present, and projected future of the company, its
operating units, and the relevant aspects of its environment.
4.5 Management Reporting Systems
Management reporting systems (MRS) are the most elaborate of the management-oriented MIS
components. Indeed, some writers call MRS management information systems, the name we reserve
for the entire area of informational support of operations and management.
The main objective of MRS is to provide lower and middle management with printed reports and
inquiry capabilities to help maintain operational and man agement control of the enterprise.
4.5.1 Characteristics of MRS

1) MRS are usually designed by MIS professionals, rather than end users, over an extensive period
time, with the use of life-cycle oriented development methodologies (as opposed to first building a
simpler prototype system and then refining it in response to user experience). Great care is
exercised in developing such systems because MRS is large and complex in terms of the number of
system interfaces with various users and databases.
2) MRS is built for situations in which information requirements are reasonably well known and are
expected to remain relatively stable. Modification of such systems, like their development, is a
rather elaborate process. This limits the informational flexibility of MRS but ensures a stable
informational environment.
3) MRS does not directly support the decision-making process as a search for alternative solutions to
problems. Naturally, information gained through MRS is used in the manager’s decision-making
process. Well-structured decision rules, such as economic order quantities for ordering inventory or
accounting formulas for computing various forms of return on equity, are built into the MRS itself.
4) MRS is oriented towards reporting on the past and the present, rather than projecting the future.
5) MRS generally has limited analytical capabilities-they are not built around elaborate models, but
rather rely on summarization and extraction from the database according to given criteria. Based on
simple processing of the data summaries and extracts, report information is obtained and printed
(or, if of limited size, displayed as a screen) in a prespecified format.
6) MRS generally report on internal company operations rather than spanning the company’s
boundaries by reporting external information.
4.5.2 Reporting by MRS
MRS may produce reports; either directly from the database collected through transaction
processing systems, or from databases spun off for the purpose. Sep arate spin-off databases may be
created for several reasons, such as avoiding in terference and delays in transaction processing,
maintaining the security of central databases, or economizing by using local databases accessible to
local managers to counter the heavy telecommunication costs of working with a cen tral database.
MRS provides the following report forms:
1) Scheduled (Periodic) Reports
These reports are furnished on a daily, weekly, biweekly, or other basis depending on the decision
making need. The sales manager to assess the performances of sales districts or individual
salespeople may use a weekly sales analysis report. A brand manager responsible for a particular
product might obtain weekly sales report containing information useful in his or her decision
making-showing regional sales and sales to various market segments.
2) Exception Reports
Another means of preventing information overload is resorting to exception reports, produced only
when preestablished "out-of-bounds" conditions occur and containing solely the information
regarding these conditions. For example, purchasing managers may need an exception report when
suppliers are a week late in deliveries. Such a report may be triggered automatically by the delay of
an individual supplier, or produced on a scheduled basis-but only if there are late suppliers. The
report might include a list of late suppliers, the extent to which each is late, and the supplies
ordered from each. Exception reporting helps managers avoid perusal of unneeded figures.
3) Demand (Ad Hoc) Reports

The ability of a manager to request a report or screen output as needed enhances the flexibility of
MRS use and gives the end user (the individual manager) the capability to request the information
and format that best suit his or her needs. Query languages provided by DBMS make data accessible
for demand reporting.
4.5.3 Self assessment Questions (Section 4.5)
1. What are the characteristics of Management Reporting System?
2. What report forms do MRS produce.
4.6 Decision Support Systems
All information systems support decision making, however indirectly.

De cision Support Systems (DSS) are a type of MIS expressly developed to sup port the decision-
making process. DSS facilitate a dialogue between the user, who is considering alternative problem
solutions, and the system, with it’s built in models and access to the database. The DSS database is
often an extract from the general database of the enterprise. The systems are interactive, and in a
typ ical session, the manager using a DSS will consider a number of possible "what if" scenarios. For
example, a manager attempting to establish a price for a new product may use a marketing DSS,
perhaps built with a spreadsheet. The DSS contains a model relating various factors-such as the
price of the product, the cost of goods, and the promotion expense-to the projected profit (or loss)
from the product sales over the first five years it is marketed. By varying the price of the product in
the model, the manager can compare predicted results and then select a price.
4.6.1 Characteristics of DSS
1) DSS are developed with the participation of, and often by, individual managers or a group of
managers to support a range of decisions of concern to them. Some of these systems are rather
simple and may be developed with a spreadsheet package (such as Excel or Lotus 1-2-3), perhaps
using prepackaged templates, which customize the spreadsheet for a particular set of applications.
While the maintenance of MRS is largely the province of MIS professionals, end users frequently
perform DSS modifications.
2) DSS are built to be modified. The development processes itself and the pattern of use of a DSS
entail continuing adaptation of these systems to changing user requirements. DSS are very flexible
and adaptable decision making tools.
3) DSS directly support the decision-making process. Moreover, a class of these systems supports
group decision making. Unlike MRS, DSS are able to support unstructured or semi-structured
decisions, in which models express some of the dependencies between factors and their
consequences, and the manager interacting with the system supplies some parts. Thus, DSS offer
models for the structured (programmable) parts of the problem and allow the manager to use
personal judgment in formulating the final decision. The possibility of quick interaction with the
system offers users a quantitative analysis literally at their fingertips. In the process, they also learn
to make better decisions.
4) Projecting possible futures during a planning process is a particular strength of DSS. Two principal
modes of analysis are available. In the "what-if" mode, the user considers alternative scenarios and
their results. For example, "What if we increase advertising expenditures by 5 percent”’ In the goal-
seeking mode, the user asks, "What would it take-in terms of input factors-to achieve a particular
performance?"
5) The analytical capabilities expressed in DSS models are the reason for the existence of these
systems. Some of the more elaborate systems contain limited model-management capabilities,
which enable the system itself to select a model appropriate to the problem-the user, relieved of
this responsibility, thus does not need as thorough an understanding of models.
6) The combination of internal and external information is important in many DSS.
7) In DSS, a graphics repertoire is usually available to portray a decision situation more succinctly
than it can be done with a tabular display of data.
Executive information systems (EIS) provide direct support for top managers. Characteristically,
senior managers employ a great variety of informal sources of information, so that computerized
information systems are able to provide only limited assistance. However, the chief executive
officer, senior and exec utive vice presidents, and the board of directors also need to be able to
track the performance of their company and of its various units, assess the business en vironment,
and develop strategic directions for the company’s future. In partic ular, these executives need a
great diversity of external information to compare their company’s performance to that of its
competition, and to investigate the general trends of the economies in the many countries where
the company may be doing business. Frequently, top managers equip a special "war room" with large
screens onto which the EIS projects color displays.
4.7.1 Characteristics of Executive Information Systems
1) EIS provide immediate and easy access to information reflecting the key success factors of the
company and of its units.
2) "User-seductive" interfaces, such as color graphics and video, allow the EIS user to grasp trends at
a glance. Users’ time is at a high premium here.
3) EIS provide access to a variety of databases, both internal and external, through a uniform
interface-the fact that the system consults multiple databases should be transparent to the users.
4) Both current status and projections should be available from EIS. It is frequently desirable to
investigate different projections; in particular, planned projections may be compared with the
projections derived from actual results.
5) An EIS should allow easy tailoring to the preferences of the particular user or group of users (such
as the chief executive’s cabinet or the corporate board).
6) EIS should offer the capability to "drill down" into the data: It should be possible to see
increasingly detailed data behind the summaries.
Executive information systems are a superior tool for exercising the control function of
management. Thanks to these systems, many an executive has been able to widen his or her span of
management control-in other words, to expand the number of people reporting directly to him or to
her.
4.8 The Role of Expert Systems
Expert systems are a leading-edge technology that was successfully introduced from the research
domain of artificial intelligence into MIS practice in the mid-1980s. Expert systems suggest a
decision based on a computerized process resembling logical reasoning. In doing so, they rely on
a knowledge base about the narrow domain of their application; on the facts of the case, they need
to decide upon, and on the built-in inferencing (reasoning) mechanism. Expert systems may be
incorporated into all types of organizational information systems or used as stand-alone advisory
tools. In particular, they are increasingly com bined with conventional programming technologies in
transaction processing and decision support systems. Expert systems are used to select the cheapest
way to mail a package, to render a consumer credit decision, to diagnose equip ment malfunction,
to plan an investment portfolio, or to configure a complicated equipment order. Complexity of
these tasks-and of the corresponding expert systems-varies widely. Most frequently, these systems
do not replace an expert, but rather serve as an assistant to a decision maker.
The essential component of the knowledge base is heuristics-informal, judg mental elements of
knowledge within the expert system’s domain. Reliance on a knowledge base is the essential
distinguishing characteristic of these systems. The knowledge base is originally populated and
subsequently enhanced as the system is tested on trial cases, and then further enhanced as the
system is used.
Expert systems are knowledge-based programs that imitate a reasoning process to suggest a
problem solution within their domain of appli cation. The structure of an expert system from the
point of view of its user (rather than that of a developer) is shown in figure below.
Fig 4.1
Simpler systems are usually implemented with expert system shells knowledge-based systems with
empty knowledge bases. All the developer (a knowledge engineer or an end user) needs to do is
populate the knowledge base with the specifics of the problem domain. There are several methods
of representing knowledge, depending on the software used to implement the expert system. A very
common way is to encode it in the form of "if-then" pro duction rules.
For example, a heuristic rule in a credit evaluation system may read:
IF good customer
and credit requested < $5,000
and loan term < 1 year
THEN grant credit
Another rule in the same knowledge base would define a "good customer" as:
IF first contact> 5 years
and default number = 0
and business volume> $100,000
THEN good customer
The user to the system presents the set of facts describing a particular situation during a session.
The inference engine of the expert system then acts as a reasoning mechanism and attempts to
draw a conclusion by comparing the facts of the case to the knowledge base of rules. The system
then gives a rec ommendation, with an explanation of its reasoning (presented, for example, as a
sequence of rules applied). In a transaction processing system for order processing, an expert
system may determine an order price by considering the cus tomer, order volume, and all the
available promotional prices for the items ordered (because of the multiple promotions offered by
companies today – with short duration, regional applicability, and other constraints-this is a
nontrivial problem that an order clerk would find difficult to handle on-line). Expert sys tems are of
particular importance in decision support, where they may be used to suggest possible decisions
based on problem constraints and the available outcome range.
Expert systems are sometimes combined with other technologies derived from artificial intelligence
research, for example, limited natural language processing or limited speaker-independent speech
recognition.
4.9 Summary
The physical components of MIS comprise the computer and communications hardware, software,
database, personnel, and procedures. There are Five types of systems may make up an
organizational MIS: Transaction Pro cessing Systems (TPS), Management Reporting Systems (MRS),
Decision Sup port Systems (DSS), Executive Information Systems (EIS), and Office Information
Systems (OIS).
1. What do you understand by DSS? What are their characteristics?
2. What is EIS? What are their characteristics?
3. Explain the role of Expert system
1. The use of multiple computers, usually interconnected into networks by means of

telecommunications, is called _________
A. distributed processing B. Collaborative Processing
C. Shared processing D. Information processing
2. _______ controls all the re sources of a computer system and enables multiple users to run their
programs on a computer system without being aware of the complexities of resource allocation.
A. Hardware B. Operating systems
C. Database D. Procedures.
3. EIS should offer the capability to _____ into the data
A. Drill down B. Drill up
C. Drill diagonal D. all of the above
Self assessment Questions
Section 4.3.3
Section 4.5.3
Terminal Questions
1. A 2. B 3. A
Unit-05-Information Needs for Strategic Planning
Structure:
5.1 Introduction
Objectives
5.2 Value Streams
5.2.1 Michael Porter’s Value Chains
5.2.2 Michael Porter’s Competitive Force Model
5.2.3 Michael Porter’s Generic Strategies for Competitive Advantage
5.3 Information and Organizational Strategy
5.3.1 Strategy
5.3.2 Strategies for Competitive Advantage
5.3.2.1 Differentiation
5.3.2.2 Cost Leadership
5.3.2.3 Focus
5.3.2.4 Linkage
5.3.2.5 Information Leadership
5.4 Information and the Situational Analysis
5.4.1 Major issues to consider in situational analysis
5.4.1.1 Potential Internal Strengths
5.4.1.2 Potential External Opportunities
5.4.1.3 Potential Internal Weaknesses
5.4.1.4 Potential External Threats
5.4.2 Using Information for Strategic Advantage
5.4.2.1 Reacting to Market Conditions
5.4.2.2 Improving Customer Service
5.4.2.3 Controlling Costs
5.4.2.4 Improving Quality
5.4.2.5 Expanding Globally

5.4.2.6 Creating Strategic Alliances
5.5 Organization Structure and Information
5.5.1 International Strategy
5.5.1.1 Multinational Corporation

5.5.1.2 Global Corporation
5.5.1.3 International Corporation
5.5.1.4 Transnational Corporation
5.6 Organizational Requirements of Information
5.6.1 Cost
5.6.2 Accessibility
5.6.3 Reliability
5.6.4 Security
5.7 The Strategic Use of Information Systems
5.8 Summary
5.1 Introduction
With this unit, we shall start with the concept of value chain and discuss the Porter’s Model of
competitive advantage. We will look into what ways the organisational strategy and information
needs to be linked. How the organisation could use strategy as competitive advantage. We shall
conclude by highlighting the organisational need for information and strategic use of information in
organisation.
Objectives:
· Explain the competitive force model by Porter
· What are the strategies for competitive advantage
· Explain the various international strategy
· What are the information needs of the organisation

5.2 Value Streams
Value Stream is an end-to-end set of activities, which collectively create value for a customer.
Value streams are often cross-functional. For example: Insurance Industry
Value Stream: Customer Engagement
Processes: Settle claims, Bill and collect, Satisfy customer inquiry
Basis for value added or differentiation strategies
· Who is our customer?
· What is valued by customer?
· Who are our competitors?
· How difficult is our product to imitate?
Problems with value chains
· No owner for value stream
· Nobody focuses on customer satisfaction
· Long time delays
· Pass on problems to each other
· Seepages through the cracks
· Considerable rework
5.2.1 Michael Porter’s Value Chains
Value chains help in developing leverage points where the costs needs to be contained and the value
can be enhanced. Value activities do not operate independently. They have linkages amongst
themselves. IS can add value by supporting the linkages.
5.2.2 Michael Porter’s Competitive Force Model

Fig. 5.1
Illustrations for overcoming threats
· Reduce bargaining power of customers
e.g. putting terminals into customer’s offices
· Reduce bargaining power of suppliers
e.g. having alternative sources of supply
· Threat of new entrants
e.g. putting in a high cost of IS support system
· Threat of substitute products
e.g. putting up flexible manufacturing facilities
5.2.3 Michael Porter’s Generic Strategies for Competitive Advantage
Strategy 1: Perform value activities at lower costs
Example: Automating a manual process to reduce costs
Reducing inventory carrying cost
Strategy 2: Differentiate own products by value activities
Example: Putting terminals in customers’ offices (for locking the customer)
Providing name for each adopted doll
Strategy 3: Fill niche markets by value activities

Example: Special plans for luxury car buyers
Home PC sales (additional market) to network customers (existing customers)
5.3 Information and Organizational Strategy
Each organization must develop a strategy-its long-term direction or intended set of activities for
attaining its goals. An organization needs extensive information to determine and then implement
its strategy. Strategic-level decisions include plans for accomplishing long- term goals of market
share, profitability, return on investment, service, and performance. They require determining the
organization’s distinctive competence by answering questions such as
· What kind of business should we be in?
· What should be the organization’s markets?
· What market niches exist in which the organization can compete?
· What products or services should the organization offer?
· What technological investment is required?
· What human resources are available and required?
· What financial, time, material, or other resources are available and required?
· Where should the company allocate its resources and energies?
Answering these questions calls for obtaining information from both outside and inside the
organization. Successful pharmaceutical companies, for example, must remain informed about
changes within an array of scientific disciplines and integrate, the knowledge throughout the
organization to maintain innovation. Hyatt Hotels needed information to help shorten check-in lines
as a way of improving customer service and becoming more competitive; Wal-Mart needed
information to assist in improving its pur chasing and distribution systems so that it could compete
more effectively against larger rivals.
5.3.1 Strategy
Corporate level strategy addresses which lines of business a company should pursue. It views an
organization as a portfolio, agglomeration, federation, or amalgam of businesses or subunits.
Strategic management at the corporate level focuses on decisions about acquiring new businesses,
divesting old businesses, establishing joint ventures, and creating alliances with other organizations.
Determining its corporate-level strategy requires top management to obtain information about
business growth rate-the speed of industry growth-and market share-the portion of the industry
market captured by the business unit, among other information. Information on industry growth and
market share is often public, due to the disclosures required of companies issuing stocks and bonds.
Industry lobbyists, stock market researchers, trade magazine journalists, and other researchers also
act as sources of this information. Information systems can regularly provide organizations with such
information by tapping into commercially sold databases that offer extensive economic,
technological, demographic, and even legal information. This ongoing availability of information
allows organizations to determine their strategic position as well as the appropriate actions for
maintaining or changing this position.
Information systems can provide the information for making resource allocation and other
investment decisions. Information about market share, profit margins, patent ownership, technical
capability, competitive strengths and weaknesses, quality of the management team, ability to
compete on price and quality, customer requirements, and markets helps management determine
its investment strategy. For example, business units with high ratings on both industry
attractiveness and business strength make good financial investments; those low on both dimensions
have no growth potential, and managers should consider divesting or liquidating them.
Strategic management also involves business-level strategy, matching the strengths and weaknesses
of each business unit or product line to the external environment to determine how each unit can
best compete for customers. Strategic decisions include what products or services the company
should offer, what customers it should service, and how it will deploy resources for advertising,
research and development, customer service, equipment, and staffing.
5.3.2 Strategies for Competitive Advantage
Firms can adopt five strategies to reap a competitive advantage: differentiation, cost leadership,
focus, linkage, and information leadership. Information systems can provide the information
required to support one of these strategies.
5.3.2.1 Differentiation
A differentiation strategy seeks to distinguish the products and services of a business unit from
those of its competitors through unique design, features, quality, or other characteristics and
thereby enable the business to charge a premium for its product or service. Companies pursuing a
differentiation strategy need current and accurate information about the market, including detailed
information about competitors’ products, customers’ requirements, and changing environmental
conditions.
5.3.2.2 Cost Leadership
A cost leadership strategy seeks to achieve competitive advantage by allowing the business unit to
make more profit than its competitors when selling to customers at the same price. Complete
information about costs makes costs easier to control and creates a competitive advantage. The
company requires quality internal information to reduce costs by achieving efficiencies in
production, distribution, and sales. Even hospitals can use information technology to reduce costs by
eliminating paperwork and improving services. Bedside terminals can store patient records;
electronic conferencing can bring the expertise of a team of physicians in remote locations to a
single problem; home health terminals allow patients to consult with doctors online; and diagnostic
systems can support physicians’ diagnoses, identify preferred treatments, and specify their cost
benefits.
5.3.2.3 Focus
A focus strategy achieves competitive advantage by concentrating on a single market segment.

Companies following the focus strategy concentrate their resources to become big players in small
markets rather than small players in larger markets. They require information about the nature of
available markets and the characteristics of the players in them.
5.3.2.4 Linkage
A linkage strategy obtains a competitive advantage by establishing special, exclusive relationships

with customers, suppliers, and even competitors. Organizations require detailed information about
customers’ needs, special arrangements with suppliers, and potential synergies with competitors.
5.3.2.5 Information Leadership
An information leadership strategy increases the value of a product or service by infusing it with
expertise and information. Managers can also supplement products with summary and activity
reports for an account or customer, product and market information relevant to the customer, or
information about related products and services. Informationalizing refers to this strategy of using
information-based enhancements to revitalize mature businesses by enabling them to create or sell
information as a core product. For example, airlines can electronically track baggage in airports in
ways that can correct problems before customers discover they have missing baggage; other
examples of informa tionalizing include producing "smarter" cars and allowing customers to design
desired features on computers in dealers’ showrooms.
Strategic management also addresses how functions such as finance, marketing, research and
development, operations, and human resource management can best support the orga nization’s
strategies. Functional strategies direct the way individual departments perform their tasks to
accomplish organizational objectives. Marketing strategies focus on product development,
promotion, sales, and pricing. Finance strategies focus on the acquisition, allocation, and
management of capital. Operations strategies include decisions about plant size, plant location,
equipment, inventory, and wages. Research and development strategies emphasize basic, applied,
or developmental research. Human resource strategies revolve around the deployment of employees
and the relations between labor and management.
5.4 Information and the Situational Analysis
Strategic management includes situational analysis-the process of collecting and analyzing

information about a company’s strengths, weaknesses, opportunities, and threats. The acronym
SWOT is often used for these four components of situational analysis. Strengths and weaknesses are
internal characteristics of the organization that enhance and impede its ability to compete. A
reputation for quality exemplifies a strength, while having costs above the industry average typifies
a weakness. Opportunities and threats are external or environmental factors that may help or
hinder an organization in meeting its strategic goals. Weak competitors illustrate an opportunity,
while adverse regulatory rulings represent a threat.
5.4.1 Major issues to consider in situational analysis
5.4.1.1 Potential Internal Strengths
· A distinctive competence
· Adequate financial resources
· Good competitive skill
· Well thought of by buyers
· An acknowledged market leader
· Well-conceived functional area strategies
· Access to economies of scale
· Insulated (at least somewhat) from strong competitive pressures
· Proprietary technology
· Cost advantages
· Better advertising campaigns
· Product innovation skills

· Proven management
· Ahead on experience curve
· Better manufacturing capability
· Superior technological skills
5.4.1.2 Potential External Opportunities
· Serve additional customer groups
· Enter new markets or segments
· Expand product line to meet broader range of customer needs
· Diversify into related products
· Vertical integration
· Falling trade barriers in attractive foreign markets
· Complacency among rival firms
· Faster market growth
5.4.1.3 Potential Internal Weaknesses
· No clear strategic direction
· Obsolete facilities
· Lack of managerial depth and talent
· Missing key skills or competence
· Poor track record in implementing strategy
· Plagued with internal operating problems
· Falling behind in R&D
· Too narrow a product line
· Weak market image
· Weaker distribution network
· Below-average marketing skills
· Unable to finance needed changes in strategy
· Higher overall unit costs relative to key competitors
5.4.1.4 Potential External Threats

· Entry of lower-cost foreign competitors
· Rising sales of substitute products Slower market growth
· Adverse shifts in foreign exchange rates and trade policies of foreign governments
· Costly regulatory requirements
· Vulnerability to recession and business cycle
· Growing bargaining power of customers or suppliers
· Changing buyer needs and tastes
· Adverse demographic changes
Situational analysis requires extensive internal and external data. To evaluate internal strengths and
weaknesses, for example, reputation for quality or above-average costs, a company must compare
data on its internal condition with industry and competitor averages. Some firms go to extensive
lengths to obtain information about the market and their competitors, including hiring employees
from competitors, suppliers, and customers, and even buying competitors’ garbage. Quality
information systems can assist organizations in securing comprehensive information for the SWOT
analysis. Organizations can use them to maintain, update, or access environmental and
organizational data, such as demographic trends, potential customer lists, financial data, or staffing
patterns.
5.4.2 Using Information for Strategic Advantage
In many, if not most, organizations, information management is a backroom operation intended to

support the other functions of the business. Information systems assist managers in communicating,
planning, and monitoring. Information systems help individuals plan, schedule, and communicate.
Information systems can also be used proactively and strategically as competitive weapons. In a
survey of 200 CEOs and CFOs, 75 percent agreed with the statement “I believe that information
systems hold the key to competitive advantage for my organization in the 1990s.”
Ways Information Systems Help Achieve a Competitive Advantage
Company Gains a Competitive Advantage by:
· Reacting to market conditions
· Improving customer service
· Controlling costs
· Improving quality
· Expanding globally
· Creating strategic alliances
IS Assists by Helping Organization to:
· Reduce excess inventory
· Tailor prices to the market

· React quickly to lagging sales
· Leverage cash
· Introduce new products
· Set prices
· Maintain appropriate inventory
· Respond to customers’ needs
· Monitor customer service
· Classify expenditures
· Monitor spending
· Control budgets
· Provide feedback
· Give production workers immediate access to analyses
· Ease communication
· Support coordination
· Share information with suppliers, customers, competitors
· Provide information links
· Create electronic markets
5.4.2.1 Reacting to Market Conditions
A firm that can respond quickly to market conditions has an advantage over its slower competitors in
a number of ways. It can keep its costs lower by reducing excess inventory and eliminating mistakes
in purchasing or manufacturing products that will not sell. It can tailor its prices more accurately to
what the market will bear. It can react more quickly to lagging sales by adjusting advertising and
price promotions. It can leverage its cash better, taking long or short positions and moving money
quickly to where the opportunity for profit is the greatest. It can more quickly introduce products
that the consumer wants; being first in market gives a company the opportunity to be a market
share leader, with resulting scale efficiencies in manufacturing and marketing.
Companies can also use competitive pricing to give them a strategic advantage. Infor mation from
computer systems can assist. Restaurants can assess the impact of various pricing and promotion
strategies on their profit margins. A resort hotel can evaluate the success of special promotional
packages by tracking an individual guest’s expenditures by revenue center (e.g., golf course,
restaurant, health club) and then adjusting the promotions offered to increase their effectiveness.
Delta Airlines in USA, maintained a list of competitors’ prices and could respond to changes within
two hours.
5.4.2.2 Improving Customer Service

The travel service industry in general has used technology extensively to meet customers’ needs.
Automatic call distributors, automatic ticket machines, satellite printers, travel management
software, including databases, user-friendly terminals, programmable work stations, interfaces
between personal computers and mainframes, and expert systems have together had a significant
impact on the American travel industry. Even in India, the India Railways had developed various
options so that a passenger need not have to wait for a long time to get a ticket. Proposal of having
a ticket counter in the ATM machines and other kiosks are under process.
5.4.2.3 Controlling Costs
Recall that one of the competitive strategies is to become a low-cost producer. Nevertheless, how
does a firm keep costs below its industry’s average? Organizations can do so by achieving economies
of scale in production, distribution, and sales. However, as volume increases, keeping track of and
rationalizing business activities becomes more complex. The ability to han dle, process, and
summarize large amounts of information is, therefore, a prerequisite to achieving cost reduction
through volume growth. Information systems can easily serve this function.
Systems to classify, monitor, and limit spending also facilitate cost control. To set budgets,
managers need information about previous spending and about new plans and objectives. Budgetary
information, in turn, permits managers to optimize their resources within pre scribed limits.
5.4.2.4 Improving Quality
Having a reputation for quality offers a strategic advantage for any organization. Consumers will
usually be willing to pay more for a product or service that they know will always meet their
expectations than for one whose quality will vary. Improving quality has also been shown to
decrease costs as it reduces waste, eliminates rework, and permits more orderly pro cessing.
Achieving quality requires production workers to have constant feedback about the production
process so that they can spot problems immediately and correct them. In the past systems were
built so that production workers collected and entered data about production but did not have
immediate access to analyses performed on the data that they had collected. Management
information systems were built to provide summary and exception reports to the managers, who
would then intervene in the process. Generally, managers would know about production problems
before the production workers did. Companies operating in this fashion necessarily shipped inferior
goods and provided inferior services. To improve quality, information about the goods and services
being produced must be processed immediately, analyzed, and made available to production
workers, who can intervene in a timely fashion to improve the process.
5.4.2.5 Expanding Globally
Prior to the 1980s, the inability of a company to obtain information about its foreign operations time
to compete with foreign companies operating in their own countries pre vented organizations from
operating globally. Most global corporations were holding companies that bought and sold regional
companies in different parts of the world; each remote company, after acquisition, would continue
to operate in its own realm with minimal management by the holding company.
Today’s competitive technology has reduced the barrier of distance. Now companies operating
around the globe can exchange information with nearly the same ease as if they were in the same
country. Toys "R" Us has expanded globally into Canada, England, Singapore, Hong Kong, and other
locations since 1984. Its overseas stores are identical to Amer ican stores and rely on the same
information processing systems as they do in the United States.
Although language differences, regulation of information flows, and lack of a communication

infrastructure remain barriers to the exchange of information, in general, companies of all sizes now
have the resources and information systems to allow them to operate glob ally. Information systems
meet the need for coordination of diverse enterprises in distant locations. Going global remains one
of the easiest ways for a company to expand its market. A company pursuing the strategy of rapid
growth and high market share increases its opportunities for success by considering the entire world
as its market and using information systems to help it attain the information it requires functioning
internationally. Information technology helps multinational companies compete internationally by
supporting foreign subsidiaries, better integrating worldwide operations, allowing greater flexibility
in responding to local market needs, and serving clients more innovatively. Creating a mature
technological environment abroad helps meet customer needs for new products and management’s
needs for consistency and control in worldwide locations.
5.4.2.6 Creating Strategic Alliances
The competitive advantage achieved by a company using information to react quickly to market
conditions, improve customer service, control costs, improve quality, or expand glob ally will be
short-lived if competitors can copy its strategy. Because the development of infor mation systems
typically takes several years, a company using information for strategic advantage needs time to
establish its market share. Because its competitive advantage may be tenuous, an organization must
be constantly vigilant for new strategic opportunities. Companies can also secure a competitive
advantage by forming alliances with customers, suppliers, distributors, and producers of similar
products, among others. If an alliance can be cemented by the exchange of information and
information technology, the strategic advantages achieved will last longer.
Inter-organizational information systems (lOSs) can meet information needs by serving as

information links or electronic markets. Information links pathways for communication between two
organizations-meet the need for coordination among an organization and its customers and
suppliers. Information links enable or improve the collection and communication of information
regarding inventory, sales, or other areas in which the two organizations interface. Electronic
market systems are electronic, rather than physical, stores where products and services can be
described, shown, sold, and purchased. They increase competition and efficiency in vertical markets
by providing information about industry players and prices; buyers’ ability to comparison shop
reduces a seller’s power in the market and creates lower prices. In Japan, used-car dealers buy and
sell cars using their computers to participate in electronic auctions. A seller of surgical gauze in New
York City found a low-cost supplier in China through an electronic bulletin board and now sells to,
rather than buys from, U.S. wholesalers.
American Airlines provides a well-known case of lasting competitive advantage achieved through
sharing information and information services. In 1963 and the years immediately following,
American Airlines provided travel agents with direct links to American’s SABRE reservation system.
Because studies indicate that an airline that supplies a travel agency’s computerized reservation
system is as much as 30 percent more likely to have tickets on its flights sold to the agency’s
customers, the basic marketing strategic of major airlines such as American, Delta, United, and TWA
has emphasized these systems. By sharing access to its reservation information, American
encouraged travel agents to book their clients on Amer ican flights. One developer of SABRE argues,
for example, that agency use of computer reservation systems is the primary reason that passengers
now book more than 80 percent of their tickets through agencies compared with less than 40
percent in 1976.
Allegations of favoritism in the presentation of flight information was a basis for several lawsuits
that have been filed against American Airlines by other airlines seeking relief from such
anticompetitive practices. American denies that flights are presented by SABRE in such a way as to
favor the choice of American Airlines. In the 1990’s SABRE has lost its ability to control alliances to
some degree because the increasing standardization of microcomputer and network hardware makes
it relatively easy for an agency to switch partners.
Computer information systems and communications technology form the backbone of such alliances
and allow the joint ventures to operate effectively. Of all information technologies, high-speed
networking was rated in one survey of IS managers as the one most likely to have the greatest
impact on their company’s strategy over the next five years.
1. List down the potential internal strengths and weaknesses that organisations face.
2. List down the external opportunities and threats that an organisation can have.
3. Explain how information can be used for strategic advantage
5.5 Organization Structure and Information
An organization’s structure refers to the division of labor, coordination of positions, and for mal
reporting relationships that exist in the organization. Effective organizations have a structure that is
congruent with their strategy. The structure chosen may promote specific information needs for the
organization. We can characterize the organizations of the next century in two ways.
First, increasing decentralization of decision making replaces centralization of this managerial

function. A faster response to a dynamic and unpredictable environment requires that lower-level
managers assume greater responsibility and accountability in an organization. Empowering of
workers to make decisions calls for ensuring the ready availability of diverse types of infor mation
throughout the organization.
Second, organizations more frequently assume a more organic structure. In addition to pushing
decision making down in the organization, this structure involves more flexible inter actions among
parts of the organization. A bank manager may serve on a task force to develop new products for
the bank and several months later participate in a reorganization of the sales functions in the bank.
Project and product management structures group workers according to the project or product on
which they work; the matrix structure simultaneously groups workers functionally and by project or
product. These structures create intense information needs for workers throughout the organization
to ensure the coordination of activities. In more bureaucratic structures, in contrast, such
coordination occurs through the hierarchy or by standard rules and procedures rather than through
the widespread dissemination of information. The more organic structures also have a high
information-processing capacity, which reduces barriers to lateral communication. Electronic media
can further increase the information processing capacity of such organizations.
These flatter, more decentralized organizations will become more information based, that is,
"composed of specialists who direct and discipline their own performance through organized
feedback from colleagues, customers, and headquarters. Such a structure can replace managers,
service staffs (e.g., legal, public relations), and central management with systems that make
information readily available to workers at all levels in the organization. In infor mation-based
organizations individuals take responsibility for identifying their information needs and creating links
to the sources of the required information. A recent study suggests that information technology will
eventually result in more individuals acting as sources of information, fewer individuals formally
included in an organizational subunit, fewer organizational levels involved in processing information,
and more rapid decision making.
5.5.1 International Strategy
In a global market, an organization may adopt a variety of strategies, including multinational,

global, international, or transnational, to deal with its foreign subsidiaries.
5.5.1.1 Multinational Corporation
A multinational corporation has built or acquired a portfolio of national companies that it operates
and manages with sensitivity to its subsidiaries’ local environments. The subsidiaries operate
autonomously, often in different business areas. A company that follows a multinational strategy has
little need to share data among its subsidiaries or between the parent and subsidiaries except to
consolidate financial positions at year’s end.
5.5.1.2 Global Corporation
A global corporation has rationalized its international operations to achieve greater efficiencies
through central control. Although its strategy and marketing are based on the concept of a global
market, a headquarters organization makes all major decisions. A company pursuing a global
strategy needs to transfer the operational and financial data of its foreign subsidiaries to
headquarters in real time or on a frequent basis. A high level of information flows from subsidiary to
parent, while limited data move from parent to subsidiary.
5.5.1.3 International Corporation
An international corporation exports the expertise and knowledge of the parent company to
subsidiaries. Here subsidiaries operate more autonomously than in global corporations. Ideally,
information flows from the parent to its subsidiaries. In practice, subsidiaries often rely on the
parent to exercise its knowledge for the subsidiaries’ benefit rather than simply to export it to the
subsidiaries. For example, a subsidiary without a great deal of human resources expertise may "pay"
its parent to operate its human resources function. Although the information theoretically should
stay within the subsidiary, in this case it may flow back and forth between the parent’s location and
the subsidiary’s location.
5.5.1.4 Transnational Corporation
A transnational corporation incorporates and integrates multinational, global, and inter national
strategies. By linking local operations to one another and to headquarters, a transnational company
attempts to retain the flexibility to respond to local needs and opportunities while achieving global
integration. Because transnational operate on the premise of teamwork, they demand the ability to
share both information and information services.
5.6 Organizational Requirements of Information
The information that an organization develops and retains should provide value to the
company. Diagnosing the required information is the first step of the four-step approach to infor
mation management. Then collecting and maintaining the information in a cost-effective manner
make up part of the subsequent steps of evaluation and design. We define net value of
information as the difference between the value and the cost of information. Companies attempt to
maximize the net value of information they collect organizationally. To do this, they consider four
characteristics of information: cost, accessibility, reliability, and security.
5.6.1 Cost
The cost of acquiring, manipulating, and maintaining information can affect its net value. Reducing
such costs allows information to add more value to the firm. Although the bud get for information
systems at most organizations falls between 1 and 3 percent of sales, the real cost of information is
usually much higher.
The overall cost of information tends to be high, so small percentage reductions in the cost of
information can have a large impact on its net value and on the profit of the firm. Information
systems specialists need to focus on the tasks of collecting and maintaining infor mation as well as
on the value of the outputs of an information system when justifying its cost. Designers of
information systems should minimize the time and effort required to collect or enter data. User-
friendly touch screens offer one way to address this problem.
5.6.2 Accessibility
Designers of information systems seek to make the appropriate information available to users at the
right time, in the right place, and in the right format. Nevertheless, designers cannot foresee every
possible need for information. As a result, the value of information as an organizational asset can be
maximized by making it as widely available as possible to all those who might need it and who have
authority to see and use it.
5.6.3 Reliability
The improper design and use of information systems can create unreliable data. A recent study of
end-user data at 21 random Fortune 500 companies showed that data pollution – faulty, flawed, or
unreliable data or data processing-existed in every company. Users regularly generated reports and
made decisions based on incomplete, inconsistent, or incorrect information. The problems in this
study were caused by users who incorrectly entered data from reports generated by an MIS
department into personal computers and then used these data as a source for further analysis.
Improper use of information systems can also motivate organizational conflict, which in turn results
in the generation of unreliable data. One multidivisional company created a state of-the-art
information system to provide managers with real-time summaries of sales and distribution data at
the touch of a button. Given the availability of these data, top management periodically confronted
lower management with problems they had identified. Divisional managers considered this
behaviour to be meddling, and they quickly learned how to hide or delay the reporting of poor
results. Not surprisingly, the data lost their accuracy and their value.
The impact of "dirty data" on organizational performance can be immense. A 1992 Computer world
survey found that more than 60 percent of companies are aware of occasions when corrupted data
negatively affected their operations. For example, the U.S. General Accounting Office determined
that data about student loan payments entered incorrectly into the U.S. Department of Education
database had cost taxpayers $2 billion. The incorrect infor mation was relayed to banks, which then
allowed deadbeat students to continue to get loan renewals while deserving students were refused
assistance. A New York securities firm missed a big trading opportunity that cost it more than $200
million. The firm eventually traced the problem to its employees’ failure to enter key data into a
new risk management system.
5.6.4 Security
Security means protection against theft, manipulation, and loss of data. Theft of data should
concern members of an organization because data theft is not as easily detected as theft of other
corporate resources: Stealing data means taking only copies of data and leaving the original copy
undisturbed. Burglars thus can continue to raid an organization’s data, causing damage over an
extended period. Despite the potential damage and difficulty of detection, most organizations
assume that their information is relatively secure and take insufficient measures to protect against
theft.
The widespread use of personal computers has compounded the difficulty of security against
corporate espionage. Competitors and foreign governments can pay employees to Surreptitiously
steal key information on diskettes or portable computers or disgruntled employees may steal or
modify essential information. For example, foreign intelligence agencies have used sophisticated
technology to intercept data transmissions. Information such as proprietary technology, production
methodologies, product data, and research and development breakthroughs may be sent directly to
national laboratories or to competing organizations within the foreign country. Foreign and U.S.
competitors can also use stolen information about production schedules, costs, margins, salaries,
and performance reports as competitive tools.
Many firms protect against the loss of data to fire or natural disaster by creating copies of the data,
called backups, and keeping them at another location. Companies that fail to retain backups off
site as well as provide for backup processing run the risk of suffering significant damage if they lose
information about their customers, outstanding invoices, inventory, or financial status. Both
technical and organizational measures can be used to promote data security.
5.7 The Strategic Use of Information Systems

Computerized information systems can assist and improve strategic management in organizations.
Information systems can be used strategically to support the strategic planning process and provide
competitive advantage. In the first case, a strategic decision support system addresses strategic
problems, directly supports strategic decision making, recognizes the lack of structure in strategic
decisions, and has the characteristics of a decision support system. For example, some organizations
use strategic decision support systems as tools that collate and analyse information to assist their
strategic planning.
In the second case, information systems act as a resource similar to capital and labor in determining
strategic plans. Information systems can change a business’s or an industry’s products and services,
markets, and economics of production. For example, airlines used their information systems as a
resource in implementing their strategy of increasing market share by obtaining a greater
percentage of ticket sales from ticket agents and quickly revising prices to respond to price changes
by competitors.
5.8 Summary
Organizations need information to make strategic decisions and can use it to develop an advantage
over their competitors. Firms can adopt the following strategies to obtain a competitive advantage:
differentiation, cost leadership, focus, linkage, and information leadership. Strategic management
often includes a SWOT analysis. Top management requires infor mation to determine an
organization’s strengths, weaknesses, opportunities, and threats.
1. What do you understand by Multinational corporation, Global corporation, International

corporation, Transnational corporation.
2. What are the four characteristics of information.
3. Take an organisation of your knowledge and determine how information could be used for
strategic advantage in that organisation
5.10 Multiple choice questions
1. Value chains help in developing ________ where the costs needs to be contained and the value
can be enhanced.
A. leverage points
B. Break even point
C. Mid point
D. All of the above
2. A ________ strategy seeks to achieve competitive advantage by allowing the business unit to
make more profit than its competitors when selling to customers at the same price.
A. Differentiation
B. cost leadership
C. Focus
D. Linkage
3. There are –––––––– characteristics of information
A. 4
B. 5
C. 6
D. 7
Section 5.4.3
1. This has been mentioned in section 5.4.1.1 and 5.4.1.3
2. This has been mentioned in section 5.4.1.2 and 5.4.1.4
Terminal Questions
1. This has been mentioned in section 5.5.1.1, 5.5.1.2, 5.5.1.3, 5.5.1.4
2. This has been mentioned in section 5.6.1, 5.6.2, 5.6.3, 5.6.4
3. Apply to the organisation mentioned in section 5.4.2
1. A
2. B
3. A
Unit-06-Impact of IT – Managing in 21st Century

Structure:
6.1 Introduction
Objectives
6.2 Enterprise Management System (EMS)
6.2.1 Business needs of today
6.3 Enterprise Resource Planning (ERP) System
6.3.1 ERP Architecture
6.3.2 ERP Solution Structure
6.3.2.1 Business Operations
6.3.2.2 Technology
6.4 ERP Model and Modules
6.4.1 ERP Basic Features
6.4.1.1 General Features
6.4.1.2 Business System
6.4.2 Characteristics of ERP Solution
6.4.3 Benefits of the ERP
6.5 ERP Selection
6.5.1 Vendor Evaluation Factors
6.5.2 Technology Evaluation Factor
6.5.3 ERP Solution Evaluation
6.6 EMS and MIS
6.7 Summary

6.10 Answers to SAQs and TQs
6.1 Introduction
With this unit, we shall start with the concept of Enterprise management system. We begin by
discussing the various business needs of today and Enterprise Resource planning. The architecture of
ERP, the modules of ERP and we conclude by factors for selecting ERP.
Objectives:
· What are the various business needs of today
· Explain the concept of ERP
· What is the architecture of ERP
· What are the benefits of using ERP
· Explain the different modules of ERP
· How to select the ERP for an organisation
6.2 Enterprise Management System (EMS)
6.2.1 Business needs of today
Computer, electronics, communication, and audio video technologies have converged closely to
produce a new style of operating business. The dynamic business environment of today is full of
challenge and opportunities. The dependence on the information, as driving energy source, is
increasing. Every business activity has additional dimensions, viz., speed and time. The business
needs of today are beyond the transaction processing. It requires. It requires an instant real time
response in every case, wherever it occurs.
The word enterprise is chosen to convey that it encompasses the larger business community covering
all the players and their participation in the business. The system is extended beyond the Corporate
boundaries. In such a scenario, the system, which you are designing, is an enterprises wide. It must
catch an event, interpret it and trigger the action, and communicate it across to the enterprise.
Since, business is information hungry, it must have an ability to sense the situation and act
accordingly. When the business requires online information to make the informed, knowledge based
decisions and have them executed in the business operations in a coordinated manner, it has to take
support of many other systems.
Take a simple example of customer order received in the Company, which requires instant
processing. In the very beginning acceptance possibility needs to be assessed and the customer
should be informed immediately. Next step will be of ordering the material on the vendor, booking
the order and scheduling the same on shop floor for production, updating the business status and
Worming the marketing representative for monitoring the marketing activities. All this requires
operations and management of a couple of systems besides the normal sales application. It needs
the management of EDI systems to get hooked to the customer and vendor for a quick information
communication. It also requires the management of interfaced systems such as CAD/CAM, MRP, etc.
It also requires event monitoring and updating systems such as the Paging, Internet and the imaging
Systems.
Take another simple example of employee management, where the arrival of the persons or their
absence raises a number of triggers in the Organisation. The well-known attendance recording
system monitors the employee movement from all angles-availability, assigning, security,
permissions, and salary and wages.
In the business today, the demand is a paperless operation, a wireless communication as, a result of
fully transparent and automated operations at all centres in an integrated and coordinated manner
taking care of the business, actions and decision needs. To support such demands of the business,
systems of information processing and communication are needed. These systems may be automated
or mechanized interfaced with the other systems for data communication and pro cessing. There
should also be audio video and imaging systems to bring realism in information and remote sensing
systems for security and communication.
Though the tools, the technologies, and the well designed solutions and systems are available to
support all such needs of the business, what is needed is an integrated solution out of these
technologies and the systems offering an enterprise wide management support. Such an integrated
solution is called as the Enterprise Management System (EMS).
· ERP – Enterprise Resource Planning Systems.
· EDI – Electronic Data Interchange System for commerce, communicator
and action.
· CAD – Computer Aided Design, Manufacturing and Engineering Systems for Production Management.
· AMS – Attendance Management Systems, i.e., employee attendance and presence management for
the role management or Data Capture Systems on floors, in stores, at gates, etc.
· DMS – Document Management Systems, viz., imaging, copying and text management and
dispatching document DBMS.
· CMS – Communication Management Systems, such as, paging, cordless mobile telephone systems
and the audio video systems.
· SMS – Security Management Systems such as the close circuit television alarm or warning systems,
movement tracing systems, etc.
In the EMS, the Enterprise Resource Planning (ERP) system plays the role of front running system.
The major decision making and its execution takes place through the ERP. It is a system of managing
all functions of the business with information support corning through the ERP. It handles the
operational systems to run the business and provides the required inputs to planning and control
systems handled by the middle management. With the internal sources of information and the use of
information from the external sources, it provides a decision support information for strategic
planning and control to the top management.
The ERP is supported by various other support systems which manage, independently, the specific
requirements and simultaneously provide inputs to the ERP. The Electronic Data Inter change (EDI)
system assists the ERP in connecting two systems electronically for E-Mail, Docu ments Transfer,
Data Transfer, etc. It is designed to handle the commercial functions of the business popularly
known as the electronic commerce. It also acts as a gateway to interact with the vendor, the
customer, and the other associated institutions of the organizations.
The CAD / CAM/ CAE, i.e., the Computer Aided Design/ Computer Aided Manufacture / Com puter
Aided Engineering systems are the systems which handle design, manufacturing and en gineering
functions. It will provide the drawings and design engineering information to the ERP in its execution
of manufacturing, purchase and inspection functions. They are also equipped with the database
management facilities and there database act as a back up support to the ERP.
The AMS, i.e., Attendance Management System keeps track of the employee related information for
personnel planning, availability and scheduling. It provides static information about an em ployee
through the human resources management system and the current dynamic information such as his
or her presence, shift rotation, the kind of job handled, the cost and so on.
The OMS, i.e., the Document Management System is designed to keep important documents in the
database for viewing, sending messages, and for documenting support in the transactions handled.
The system provides text edit facility for document manipulation for the purpose of transaction
handling. In the ERP it is used for cross-checking the key information and also to confirm the
authenticity of the transaction. It handles the document access, editing, copying and mixing the
information and sending the information to the various destinations for execution. It uses scanning,
imaging, work flow automation and Document Data Base Management System.
The CMS or the Communication Management Systems are used for tracking the important re source
for action. These resources are located, altered and advised to act from the location where they
are. Their attention is drawn to an event and advised to act to handle the situation. The ERP uses
the CMS, as a tool, for all its communication needs of recording an event.
The SMS, i.e., the Security Management System handles the security, entry access requirement of
the business operations. It may be a person, a vehicle, or material, its movement, availability and
access if tracked, monitored, and guarded for security and safety. It provides a support to the ERP
by clearing the situation to act further. A truck will not be allowed to enter unless it is an
authorized one, and then it will be weighed and its weight will be transferred to the ERP for
processing further information. An employees movement can be restricted or prohibited to select
areas before his time is recorded and sent to the ERP for further processing.
Fig. 6.1: Components of Enterprise Management System
These six systems together act as the support systems to the ERP. All these systems are exten sively
used for the main purpose for which they are installed. Each one of them have a specific technology
to handle the function and are equipped to capture, store, process and transfer the data to the ERP.
Each of these systems operate on their native systems and are interfaced to the ERP through the
gateway by using a specific software. These systems are a part and parcel of the ERP System
network. The EMS, therefore, can be defined as a Network System comprising the ERP, the EDI, the
CAD / CAM / CAE, the CMS, the SMS, and the OMS.
6.3 Enterprise Resource Planning (ERP) System
The ERP system deals with the planning and use of resources used in the business. The resources are
finance, materials, manufacturing capacity and human resource. The ERP provides method ology of
assessing the resource needs for a given business plan to achieve certain business objectives. It also
helps to execute the strategies, plans, decisions, and actions in a time bound manner The ERP
provides a support system in the transaction processing, updation, and reporting across the
functions. The ERP is a package encompassing all major functions of the business. The production is
generic in nature and is supposed to incorporate the best business practices, generally followed in
most of the companies.
The product philosophy is to implement the system as it is with some customization which may be
typical to the customer requirement. The system design of the ERP is integrated with the features
and functions providing an enterprise wide solution to handle all the process functionalities. For
example, it provides capability to process the purchase order from ordering to bill processing, and
also meets the information needs of purchase, stores, manufacturing accounts and finance.
The ERP packages build information base and provide knowledge base for planning and control of
the business through the business function management. The ERP is the main system, interfaced or
assisted by the other systems in the organisation. These systems may stand-alone or from a part of
the manufacturing or commercial processing systems.
These systems provide the database to the ERP or support the ERP by the basic data input directly
or through the data transfer. For example, the manufacturing system module of the ERP is
interfaced with the Drawing, Engineering database for query, viewing and usage of the drawings and
it accepts the data of work order by process operations, for costing and for building the, standards
for the future.
The architecture is client/server and uses object oriented technology for design and development of
the system. These packages are RDBMS based with the front-end tools. The key benefit of he ERP is
that it provides an integrated solution for all the requirements of the business. It addresses the issue
of data integrity, information transparency, seamless integration and information communication.
Simultaneously it respects the organisational hierarchy of authority, while con ducting the business
transactions through the system.
The implementation of most of the ERP packages begin with the enterprise modeling which defines
the enterprise structure, the authority functions, the processes and the business rules. The
enterprise model is the platform for the ERP system implementation. The ERP solutions are
available on the Unix platform and also on Windows NT. The solution is structured in the modular
fashion to cover the entire business operation. A typical ERP package solution has following
modules:
1) Sales, Marketing, Distribution
2) Manufacturing
3) Stores Management
4) Finance
5) Personnel
6) Maintenance
7) Purchase, Inventory
Planning and Control
These modules are designed for data capture, data transaction validation, it analysis, accounting
updation and reporting. All the ERP solutions provide report writer for the user to create the
reports. The standard reports like the trial balance, the stores ledger, the employee attendance
report, the income tax return, etc. are provided with the solution at a generic level.
The ERP features are many. The important ones are security authorisation, referencing respon
sibility, and the implementation of the business rules. These are provided to safeguard the business
of the organisation from illegal practice and also to protect the valuable information from misuse
These features help to keep the system, the information and the data integrity at the highest level.
The ERP is activated by its users. The security is built for authorised usage and also for selective
access.
The ERP usage can be controlled at all levels, viz., the data, transaction, information and analysis
level. The security system of the ERP is built around the as security and the additional features are
provided while designing the system. It provides access and updation rights to the users as per the
control requirement of the management.
Authorisation is a feature provided for ensuring that the transaction is completed with regards to
the business rules set by the management. The system provides the mapping capability to tie the
data, information or process to the user. This means that only the authorised user can handle a
particular aspect of the transaction and unless the authorised users sign, the transaction is not
posted in the system for further processing and usage. For example, in the purchase order
transactions the price and discount are confirmed by one user, the terms are decided by the other
users and the purchase order is signed by the third user. The system provides defined levels to the
and there are no limitations on the number of levels.
Referencing is a feature, provided for tracking the chain of events for monitoring, progress checking
and control. For example, if one wants to check the status of customer order, the referring feature
helps to link the customer order to work order to delivery note to Excise gate pass to bill. It is
possible to establish the link through cross reference of the transaction number or code of the
previous transactions. For example, a work order will give a reference of customer order, a delivery
note would give a reference of work order, a bill would give a reference to a delivery note and
customer order. The feature does not allow the transaction to proceed unless such references are
established.
The business organisation runs through the rules and the responsibility allocation. A strict adherence
to them is essential for creation of the controlled environment. The ERP satisfies this need of the
business. It provides a facility to ensure that the user-location (Department/ Division) transaction
integrity is confirmed through check and validation and then ERP allows to proceed. For example, a
cash transaction is allowed at the Finished Goods Store and in the Accounts Department by the
authorised users only. At any other place evolving cash transaction is prohibited.
The material indents are processable in the stores while the vouchers are process able in the
Accounts Department. The order entry is permissible in marketing. The ERP provides such facili ties
to ensure that the business is operated on the rules and the guidelines set by the management.
The ERP system provides a variety of technology supports to implement the solution very fast in
execution mode. The solution provides the E-mail facility for communication of memos, remind ers,
and text to the selected list. It also sends copies to the concerned persons as stipulated. Through
the EDI connectivity, it can transact directly to the vendor or the customer in its own format.
ERP provides an aid to create the transaction by a cut and paste mechanism. It can raise a purchase
order on the vendor by picking up and choosing the old purchase orders, which saves the generation
time. The ERP solutions are built for a user friendly flexible approach to manage the business with
the changing needs. This requires processing in a different manner to assess the impact. The
solution provides facilities like the trial posting, the end of chosen period processing, the posting by
choice, the flexible valuation procedures, and the hold transactions, etc. Through these facilities
the management can conduct an impact analysis to judge the financial results and make the
business decisions.
The ERP also provides an intelligent support in business management. It allows the user to define
the events, alert and schedule them at his choice. These events alerts are triggered by the database
inserts or updates. Having raised the alert, it also allows you to define the action to respond to the
alert. The ERP sends the electronic mail and executors the SQL statements. It is also capable of
taking multiple actions through the stored procedures.
Take an example of an item receipt in stores. The receipt would update the database and the
system will have an updated stock status. This database update is an event for using the alert. The
alert in this case can be defined as, on receipt of an item send E-mail to the Purchase Manager, the
Production Planner and further, show the work orders which are scheduled where this items is in
use. If the receipt of this item closes the Purchase Order then raise an automatic Purchase Order on
the same vendor with the same terms and conditions.
All the ERP solutions provide ‘Drill Down’ and ‘Context Sensitive’ helps to use the system. The drill
down helps to run through the system to locate the weak spot for action and control. Sup pose, the
sales manager is viewing the sales by region by product line. Then he wishes to see the sales
revenue over a time, in order to better understand the seasonality in the business. The drill down
facility helps him to use the information the way he wants, to form the judgments on the business
happenings. The drill down could be multi-dimensional to analyse the critical business information.
The context sensitive help provides an access to help library which can be used by the user by
calling help. The help could be for information, guidance and understanding of the term or process
or formats. The help facilities make the ERP user-friendly and easy to learn.
6.3.1 ERP Architecture
Any information system has three basic components, viz., the Data Management, the Application
Logic, and the Presentation. These components can be built with the client server role definitions.
The client is a user and the server provides the services required by the user the to run the system.
Since, the information needs are dynamically changing, the architecture required is to separate the
data and its management from its application. The user requires the choice of using the data as it
suits him the most. Hence, the application logic has to be separate from the data. There is also
variability in the manner how the application logic is developed and presented. The architecture
could be a two tier or three tier as shown in Fig 6.2 below.
Fig. 6.2: Client/Server Model – Architecture

Since, the ERP is a generic solution for the business operations, in each case of implementation,
customization should suit the specifics of the business or customer. The architecture choice is
influenced by this requirement. In a two-tier system architecture, there is a rigid division of roles.
The data management is by the server and its processing is through the application logic by client.
In this architecture all the requirements are sent to the server by all the users in the network. This
affects the load on the server and the response time to the user increases. However, there could be
an application which deals with high volume and complex data structure and this approach is more
efficient, if response issue is taken care of by the high end multiple CPU and the parallel processing
hardware platforms.
There could be a case where the user is dumb and is required to use the system in a guided manner
with the ‘help’ assistance. Then the three tier architecture is suitable. The client uses the GUI
(Graphical User Interface) tools for simplicity while the application logic is processed on another
machine. In this architecture three distinct roles are defined and three hardware platforms are
made responsible to perform. The servers play two distinct roles of handling the data and the
applications logic. This architecture is useful when there is not much change in the application logic
and it is complex. Further, this architecture is useful when the user does not want to change the
application logic but may want to change the presentation logic.
The third possibility is a golden mix of the two architectures. Here the application logic is split into
two. The logic which deals with the data more is attached to the server platform, where the data is
being managed. The logic, which deals with the presentation and the specific needs of the user, is
left to the client platform as shown in Fig.6.3
Fig. 6.3: Client/Server Model – Architecture
It is very difficult to recommend one or the other architecture as the solution to overcome a typical
requirement problem. In the choice of architecture, what is important is the user environment and
the information needs and how the user handles them? The best architec ture, in a given
environment, is the one which is user-friendly, easy to understand and easy to maintain. The
technology solutions are available to implement this philosophy.
The ERP solutions are multi-users which are distributed over the organisation, spread over to any
length. Two main technology solutions are available to the designer and the implementer of the
ERP. One is the Graphical User Interface (GUI) and the Network Management. The GUI is chosen
since it allows the customization for a particular business entity. The GUI screens are so developed
that the process running across the organisation is mapped to the business flows instead of the
discrete business functions.
The network is typically the bottleneck in any client/ server system. With the application logic,
appropriately divided between client and server, it creates a reduced traffic intensity due to GUI
interface. Accompanying the network efficiency and the GUI, the ERP solution uses a scalable
architecture and a parallel processing technology by installing the suitable servers at the required
locations. This ensures good performance with a continuous increa sed load conditions.
For most of the customers, the ERP offers a basic business functionality. However, some users have
particular needs for which they want an additional support through the tools or other modules. Most
of these requirements are extensions to the basic business functions. These customer specific needs
are met through a popular and a widely used, client/server tool set.
The business being complex requires a variety of systems to run efficiently. The presence of existing
systems is not challenged or minimised by the ERP solution. In fact, most of the ERP solutions use
open application programme interfaces that enable easy coexistence and integration with the legacy
and the third party systems. The solutions also provide the gateways to the popular databases which
are used in business.
The ERP solutions are designed to make the office of the business paperless. It keeps all the business
information online. Then, the users use the Work Flow Technology to move the process in a screen
format from person to person for the changes, the approvals and the execution. With the multi-
media technology, the servers can be configured to keep the business information online in any
format, including the text, the spreadsheet, the image audio and the network video.
The solution offers support for the electronic notifications, through the EOI, the E-mail, or the
internet to the business partners. For example, you can create a purchase order, get it justi fied
and approved by the authorized person sitting at the other location, attach the engineer ing drawing
to the purchase order by accesses to the CAD system, assemble the documents of the purchase
order, and have it sent through the EOI to a vendor located at a distant location without creating
any the paper documents.
6.3.2 ERP Solution Structure
The Enterprise Resource Planning solution structure is built in three layers namely, technology
business and implementation as shown in Fig. 6.4 below:
Fig. 6.4: Solution Structure
6.3.2.1 Business Operations
On the business side, it provides solution for the data entry, data capture, transaction processing
and data base updates. It then support an analysis of the processed results in single or the multi-
dimensions for one period or successive periods. It offers a support on the comparative analysis the
budget versus the actual, the target versus the actual, the standard versus the actual and so on. The
analysis also throws light on the exception conditions, for immediate attention and action.
The ERP solution provides the decision making capabilities either built-in or through the de cision
support systems when it comes to implementation. It provides the database functionalities for data
and information management. It then has the front end tools to develop the application in an
exclusive manner.
The ERP solution then handles the interfacing requirement to the legacy or the third party systems
as a support to the main ERP solution. Using various information technology tools and application
development tools, the application logic is developed to the business functionality. The tools are-
report writers, interfacing tools, query processing tools, application development tools, the object
oriented tools, etc.
6.3.2.2 Technology
The technology side of the ERP solution is managed through the database management technology
for data acquisition to data base creation, updation, and maintenance. The application develop
ment is done through the client/ server technology, where the servers handle the specific or the
general functions as the case may be and the client play the role of processing interactively and
locally for meeting the information needs. The client/ server implementation could be two tier or
three tier, based on the design and the implementation strategy. To reduce the development effort
and for ease of maintenance, the development approach is an object-oriented approach, where the
class and the object libraries are built for reusability of the object and its code.
The ERP implementation is multi-user and calls for the network usage for the work flow,
communication and the access to the database(s) which may be at one location or distributed. The
successful implementation of the ERP calls for a strong technology component appropriate to the
environment.
6.3.3 Self assessment Questions (For Section 6.3)
What is an ERP architecture? What is a solution architecture? What is the difference between the
two?
6.4 ERP Model and Modules
The generic ERP package represents the commonly operated business model of the organisation. It is
built with the function models like the Finance, Materials, Marketing, Sales, and Personnel and their
sub-modules. These modules are then integrated to perform ensuring data and informa tion
consistency and concurrency.
The seamless integration of the modules allows the user at any level to take a micro and a macro
view of the function and process view of the transaction across the function. Atypical ERP solution
has the following modules:
· Business forecasting, planning and control (Business)
· Sales, distribution, invoicing (Sales)
· Production planning and control (Production)
· Materials management (Materials)
· Finance and accounting (Finance)
· Personnel management (Personnel)
Table shows the sub-module details of each module

6.4.1 ERP Basic Features
6.4.1.1 General Features
· Separation of the programme code and the data areas
· Command language
· Screen based flow control.
· Application logic
· Common service functions such as the currency, date, editing, and help.
· Diagnostic functions
· Transaction flow control
· Help functions.
· Central table system for management of parameters, texts and master data, online logical
· Checks and validations
· Word-processing, text editing.
· Action messages
· Tuning
· Enterprise Modeling: Structure / Policy / Rules / Guidelines
6.4.1.2 Business System
· Business forecasting for products, groups, markets.

· Target fixing and allocation by the key parameters
· Business planning in terms of the resources to execute
· Strategy formulation and implementation
· MIS for strategy monitoring and control
· Business modeling for the strategy development and testing. DSS for resource planning
· Information base management for management application
6.4.2 Characteristics of ERP Solution
· Modular structure.
· Scalable architecture.
· Seamless integration of modules.
· RDBMS independent.
· Independence of hardware platform.
· Interface capabilities.
· PC download/upload facility.
Most of the ERP solutions need some changes to suit the environment. The Commerce and Corporate
Laws differ from country to country and the ERP in such cases need customization to satisfy the
local requirements of the business.
The ERP solution has an advantage of fast implementation as the design and development is
eliminated being a package. Due to object oriented technology and the client server architecture,
the changes are easy to make, which are less at the server end and more at the client’s end.
Since, it has modular structure; one can implement the solution in a phased manner module by
module. It can be implemented first on a smaller scale and expanded subsequently with more users,
more locations and more modules as well. Since the whole solution is a package product, the
manufacturer of the package brings out newer versions of the product offering more facilities to the
user to improve the utility of the solution.
There are more than a dozen ERP solution available in the market each having its own specialty.
Though, they are characterized as described earlier, they differ in feel, look presentation,
processing efficiently and user-friendliness.
Some of these products are developed as an application in a particular organisation and then turned
into a packaged solution. In view of this, some of ERP solution are more useful and efficient in
similar organisation. The specific industry features have been taken care of more efficiently as
customized solutions. Since the design/ developer has a choice of RDBMS, front end tools, the
interface tools, and so on the package efficiency changes with the choice to tools. Some of these
packages run better, if installed on a particular hardware platform; and used by a particular
organisation.
Though tools, technology and approach may be same or similar, the manner in which they are used
decides the efficiency of the solutions.
6.4.3 Benefits of the ERP
1) Better management of resources reducing the cost of operations.
2) Planning at function and process level. Simultaneous increase in the productivity of the business
possible.
3) Customer satisfaction increase due to shorter delivery cycle. Closer contact with the customer.
4) Simultaneous activisation of the decision centers because of instant inducement through triggers
or updates.
5) Business operations transparency between business partners cutting down the execution time of
critical business operation.
6) Intelligent ERP download the decision making at lower level, releasing the burden on the middle
management.
7) Due to faster processing technology and SQL, management can see the information in their
perspective and take different view of the business.
Due to strong interface capabilities, the human resource can be utilised better due to access to
information across the databases distributed over the organisation.
9) Since, the ERP design is proactive, it make the management alert at a number of points
demanding the decision or action.
10) The processes become faster due to work group technology and application of work flow
automation.
11) Due to the support technologies like EDI, E-mail, office automation, paperless office is a newer
possibility as communication is faster and systems are connected directly.
12) The ERP remain a valid solution with the expansion of business, as it is a scalable architecture.
13) Due to the client/ server architecture, the application of object technology and use of the front
end tools, the process changes can be easily carried out in a short duration of time. Hence, the user
service can be maintained at higher level.
14) The ERP implementation automatically leads to the usage of the best business procedures
bringing the consistency of operation in the world of business.
15) With the use of the data warehousing and data reverse engineering, management becomes
knowledge driven and the organisation becomes a learned one.
16) The ERP scope can be enlarged through the Internet/lntranet access, making the ERP sensitive
to the latest events in the business, market and technology.
17) The quality of decision making improve as the user decision maker is made alert and he is made
knowledgeable and better informed dynamically.
18) The tools available to the decision maker are friendly whereby he is equipped to make decision
and execute it simultaneously.

1. Write a short note on the basic features of ERP.
2. Explain the characteristics of ERP Solution.
3. What benefits does an organisation have after implementing ERP?
6.5 ERP Selection
Since, the market offer a number of ERP packages, the buyer has a choice to make. Each product
has its own USP and differs in a number of ways in content, scope, an ease of implementation, etc.
The selection can be made on three dimensions, viz, the vendor, the technology, the solution scope,
and architecture.
6.5.1 Vendor Evaluation Factors
1) Business strength of the vendor.
2) Product share in total business of the vendor.
3) R & D investment in the product.
4) Business philosophy of the vendor.
5) Future plans of the vendor.
6) Market reach and resource strength of the vendor.
7) Ability to execute the ERP solution.
Strength in the other technology knowledge and the ability to use them.
9) Perspective plan of the ERP improvement with technology development.
10) Image in the business and in the information technology world.
11) Financial strength of the vendor to sustain and handle the business and technology risk.
12) Organisation for product development and support.
13) The global experience of the vendor and commitment to the product for long term.
6.5.2 Technology Evaluation Factor
1) Client server architecture and its implementation-two tier or three tier.
2) Object orientation in development and methodology.
3) Handling of server and client based data and application logic.
4) Application and use of standards in all the phases of development and in the product.
5) Front end tools and back end data based management system tools for the data, process
presentation management.
6) Interface mechanism: Data transfer, real time access, OLE/ODBC compliance.

7) Use of case tool, screen generators, report writers, screen painter and batch processor.
Support system technologies like bar coding, EDI, imaging, communication, network.
9) Down loading to PC based packages, MS-Office, lotus notes, etc.
10) Operating system and its level of usage in the system.
11) Hardware-software configuration management.
6.5.3 ERP Solution Evaluation
Factor
1) ERP fit for the business of the organisation in terms of the functions, features and processes,
2) business scope versus application scope and so on.
3) The degree of deviation from the standard ERP product.
4) Ease of use: Easy to learn, implement and train.
5) The ability to migrate to the ERP environment from present status.
6) Flexible design.
7) The level of intelligent usage of ‘help’ , error messages, dictionaries.
The ability for a quick start on implementation.
9) Versatility of the solution for implementation on a platform with the project of saving the
investment.
10) Rating on performance, response and integration.
11) Product quality in terms of security, reliability, and precision in results.
12) Documentation for system handling and administration.
13) Product rating in its class of products.
14) Solution architecture and technology.
The methodology of selection will begin first with the study of organisation in terms of the business
focus, critical application, sensitive business process, etc. Since, the ERP solution is a tool to change
the style of business management, it requires thorough understanding of the business, the business
issues, the management criticalities, and the socio-cultural factors. Such a study will help find out if
the ERP is fit for the organisation. It is a very important to find out that the ERP is fit or not, as it is
the most important and critical success factor.
The price of the ERP package is difficult to judge and often it is a negotiable point in favour of the
buyer in competitive scenario. Since the ERP implementation is a two three year’s project, the ERP
solution will sustain and be adequate for the current and the future business needs for a period of
five to seven years. After that, it would become a platform for the future expansions and growth.
It is advisable for the organisation to form a committee for selection of the ERP solution. It should
have important functional head, a strong Information Technology person and a person from cor
porate planning function. The committee should be headed by a CEO or his designated authority.
This committee should prepare a requirement document spelling out the business goals, and ob
jectives, the futuristic scenario of business, the critical functions, processes, business focus and
customer deliverables. A note on the management philosophy, procedures, practices and style will
be a valuable input.
When such a document is ready, the selected ERP vendors should be called for seeking the ERP
offer. The document should be given to the vendors, and they should be allowed to study the
organisation and its business. All the vendors should be asked to submit a technical proposal
explaining the fit of the ERP to the organisation. The submission of the vendors should be
scrutinized by the committee for short-listing. The short-listed vendors then should be asked to give
the product presentation to the selected group of decision makers to seek their opinion on the
product.
When the product presentation is over, product demonstration should be arranged, for a de tailed
security and evaluation. In this process, the committee should confirm whether the critical
requirement of business, in terms of information, process handling facilities, features, etc. are avail
able or not. If some of them are not available then there is a possibility of work around to achieve
the same result.
A second evaluation note should be made for a comparative analysis of the ERP solutions and then a
critical evaluation of this analysis should lead to the choice list. Simultaneously, the committee
should gather information on the experience of the other organisation where the ERP is
implemented. This information should be on how successful the vendor is, in the implementation of
the ERP? The strengths and the weaknesses of the vendor, the product and the post sales pro cesses
should be ascertained. The choice list should be weighed by these points.
Though such an approach is appropriate, it is not always possible to bring out a clear win in the
evaluation, as many factors are intangible in nature. In such an event, the committee should
examine the trade off involvement in the selection. It should not happen that organisational issue
dominate the choice of the ERP and in the process the best product is rejected. Ideally, the
organisation should be carrying out business process engineering and reengineering study,
restructure the organisation, modify the processes functionalities before the ERP decision is made.
Once the committee makes the decision, the vendor should be asked to resubmit the technical and
commercial proposal with price and the terms of offer. The proposal should have the following
details:
1) Scope of supply
2) Objectives
3) Modules and deliverables
4) Implementation methodology
5) Plan and schedules of hardware and software implementation
6) Resource allocation
7) Responsibility division between the organisation and the vendor
Process of implementation
9) Organisation of implementation
10) Progress monitoring and control of the important events
11) Process of resolving the issue all levels
12) The official product literature
13) Association with the other vendor its purpose
14) Commercial submission:
i. Price by module and number of users
ii. Payment terms
15) Process of acceptance of the ERP by stages and linking with the payments
Once the ERP decision is made, the vendor and organisation enter into a legal contract. Such legal
contract should list the obligations, duties, responsibilities, deliverables and the value com ponents.
It should also include the clauses on issues arising out of unforeseen circumstances and how to
resolve them with the legal remedy available to both the parties. Since, the ERP is a product of
several technologies, there should be clauses relating to safeguarding the interests of each other to
cover the risk arising out of the technology failure.
The ERP is a tool to manage the enterprise resources to achieve the business objective. It is a
supporting system and does not solve all the problems of business management. The success of the
ERP lies in its implementation with commitment. It requires full participation of the organisation. It
is to be appreciated as a managerial tool and not as a labour saving device. Since, potentially the
ERP is designed for productivity rise, the management must exploit it to its advantage by adopting
the best practices or changing the practices through the business process reengineering.
6.5.4 Self Assessment Questions (For Section 6.5)
1. Explain the various vendor evaluation factors considered for ERP selection
2. What are the technology evaluation factors that need to be considered during ERP selection?
3. What factors are considered to evaluate an ERP Solution? Why is implementation effort necessary
even though ERP package is chosen?
6.6 EMS and MIS
There is a qualitative change in the MIS design due to the complexity of the business operations and
the risk involved in handling the business. The management focus is shifting from the function to the
process, i.e., the management requires the information support in the process management and not
in the function management.
The process definition now goes beyond the organizations boundary. It connects the organisation to
other agencies. The emphasis on the automation of processes with a strong Information Tech nology
implementation. The MIS is now required to maximize the process productivity and performance.
The decision making support is required for the process optimization. The decision models are built
across the business management functions. Besides the normal MIS reports required for the top
management, the Top Management also needs a set of the additional reports, where the critical
business pro cesses and the critical success factors are a focus area.
The ERP solution caters to this requirement very easily. The ERP solution is an integrated solution.
The solution operation is seamless, disregarding the hardware or the software platform. The ERP
solution takes care of data integrity and consistency across the organisation, which may have
multiple locations.
In today’s competitive world, the shift of decision-making is towards strategic management of the
business. The ERP solution, due to its scope and coverage, and supported by a variety of tools,
enables Strategic Management based on the strategic information for decision-making.
The management attention on the focused area is easily possible. The conventional MIS design is
more or less embedded in the ERP solution. They provide all the routine reports at any time for the
middle management of the organisation. The ERP, over and above this, provides executive
information for the strategic management of business. It further helps to formulate the strategies to
achieve these goals taking its implementation further.
The ERP design provides transparency to the users of information giving them an access to the
sensitive information to locate, define and resolve the problems. The ERP enables the work group
management efficiently and effectively. The effective uses of the variety of tools, like the data rep
lication, the work flow automation, the EDI/E-mail, the data warehousing, the EIS, the bar coding,
and the paging systems are built in ERP. The effective use of these variety of tools also speeds up
processing, cuts down the operation cycle time and raises the ability of the management to take
decisions. Once the ERP is built in the organisation, it takes care of the data, the information and its
storage and, therefore, provides the capability to modify the Management Information System from
time to time as per the changing information needs.
All the ERP solutions use the client-server architecture in the solution, where the data process ing,
and the application level processing logic is taken care in the server level giving freedom to the
user, as a client, to define the problem and evolve the solution using the front-end tools. The front-
end hardware and the tools are so powerful that an individual can develop his own MIS based on his
decision making information needs beside the usual MIS like corporate, functional, etc. The decision
maker can operate as an individual in isolation from the others, if need be.
Fig. 6.5: EMS Model: Structure, Role, Objectives

The ERP through such an MIS design, improves the decision making skills of the individuals very
effectively. It provides autonomy in global system operations. With the ERP, the MIS design is more
flexible highly decision intensive and efficient.ERP along with other systems becomes an EMS, MIS
design uses ERP which in turn uses other systems for inputs in terms of data capture, transaction
processing and data base creation, MIS in ERP environment is a sophisticated design serving the
needs of the organisation.
6.7 Summary
The dependence on the information, as driving energy source, is increasing. Every business activity
has additional dimensions, viz., speed and time. The business needs of today are beyond the
transaction processing. It requires. It requires an instant real time response in every case, wherever
it occurs. The ERP packages build information base and provide knowledge base for planning and
control of the business through the business function management.
1. Make a small note on ERP package selection for management.
2. Can you be sure that if ERP Solution is implemented, MIS is in place? Discuss.
3. Study the literature of any ERP package and match the offerings with your concept of ERP.
1. AMS stands for ___________ .
A. Attendance Management Systems
B. Always management system
C. Advanced management system
D. Adding management systems
2. _________is a feature provided for ensuring that the transaction is completed with regards to the
business rules set by the management.
A. advocacy
B. Authorisation
C. signature
D. policy formulation
3. Any information system has ______ basic components.
A. 3
B. 4
C. 5
D. 6
Section 6.3.3
This has been mentioned in section 6.3.2.1, 6.3.2.2 and 6.3.2.3. Select the relevant points
Section 6.4.4
Section 6.5.4
Terminal Questions
3. Read the material from their website and relate with the concepts discussed
1. A
2. B
3. A
Unit-07-Quality and Privacy Issues
Structure:
7.1 Introduction
Objectives
7.2 Business Decisions and Information Assurance
7.2.1 Introduction
7.2.2 Common Business Exposures
7.2.3 Major threats to IT installations
7.3 Ethical and social issues with network
7.3.1 Home Office
7.3.1.1 The Value of Telecommuting
7.3.1.2 Other Remote Options
7.3.2 Ethical and Social issues with E-Commerce
7.3.3 Risks of Internet to Organizations
7.3.4 Data Security and Data Privacy
7.3.5 Privacy and Databases
7.4 Development of long range plans of the MIS
7.4.1 Contents of MIS Plan
7.4.2 MIS plan is linked to the business plan
7.4.2.1 MIS goals and objectives
7.4.2.2 Strategy for the plan achievement
7.4.2.3 The architecture of the MIS
7.4.2.4 The system development schedule
7.4.2.5 Hardware and software plan
7.4.3 Ascertaining the class of information
7.4.3.1 Organisational Information

7.4.3.2 Functional Information
7.4.3.3 Knowledge Information
7.4.3.4 Decision Support Information
7.4.3.5 Operational Information
7.5 Implementation of the Management Information System
7.6 Management of Quality in the MIS
7.7 Summary
7.10 Answers to SAQs, TAQs and MCQs
7.1 Introduction
With this unit, we shall start with the importance of information on business decisions. We begin by
discussing the common business exposures and threats of using internet by the organization. We
shall conclude by guidelines for successful implementation of MIS.
Objectives:
· Explain the ethical and social issues with network
· What are the common business exposures and Risk of using internet by the organization
· How to implement MIS in the organisation
· What are the guidelines for the successful implementation of MIS
· How to manage quality in MIS
7. 2 Business Decisions and Information Assurance
7.2.1 Introduction
Business decisions are becoming increasingly dependent on high quality information. Impact of
discontinuity in service are: Competitive disadvantage, Loss of revenue, Problems with cash flow,
Increased costs, Fines and/or sanctions. In any organisation, management needs assurance that:
Organizational goals are being achieved, Mitigation action has been taken to minimize risks to the
system, and certain legal obligations have been met. All concerned need an assurance that the right
information is being made available:
· Growing public awareness and concern
· Growing shareholder awareness and concern

· Legal responsibilities of management
7.2.2 Common Business Exposures
Business Exposure Some of the Possible Causes
Erroneous record keeping Incomplete or inaccurate processing of transactions
Improper interpretation or Willful disregard for accounting

Unacceptable accounting practices
Many factors including irreparable damage to organizational

Business interruption databases
Misleading information or failing to acquire necessary

Erroneous management decisions information
Fraud or embezzlement Deliberate communication of wrong information
Statutory sanctions Violation of laws or reporting regulations
Excessive costs Failure to acquire approvals for high-value expenditures
Loss or destruction of resources Lack of adequate safeguards over organizational resources
Many factors including use of poor IS/IT to satisfy customer

Loss of competitive advantage requirements
7.2.3 Major threats to IT installations
1. Unreliable systems
- Power failure e.g. power outage .
- HW failure e.g. disk failure
- Systems SW failure e.g. as failure
- Application SW failure e.g. incorrect update
- Personnel failure e.g. poor training, intoxication
2. Disasters
- Natural disasters e.g. fire, water, earthquakes
- Financial disasters e.g. law suits, strikes
3. Holistic action
- External e.g. sabotage, espionage
- Internal e.g. fraud, theft, malice

1. What are the common business exposures and what could be their probable causes?
2. What are the major threats to IT installations?
7.3 Ethical and social issues with network
7.3.1 Home office
Information technology has made it possible for many people to perform their job functions using
their home as an office. Many of the salespeople, may spend most of their time working from home
because they require minimal interaction with the corporate office. Computer programmers
increasingly work at home because they essentially require only a computer, modem, and telephone
line to perform their job. These and other forms of telecommuting, where an individual works from
home and typically communicates extensively with the corporate office using electronic media,
have increased in popularity. In 1991, for example, the National Association for the Cottage Industry
estimated that 38 million Americans spend a significant amount of time working out of a home
office. Experts estimate that about 75 percent of all information workers, encompassing more than
55 percent of the U.S. workforce, are potential telecommuters. Even in India, the telecommuting is
welcomed and more and more of the organisation are adopting, as they find it has various
advantages.
7.3.1.1 The Value of Telecommuting
A home office offers a worker increased flex ibility in work hours, increased ability to deal with
family issues, less time spent in com muting, and the ability to purchase less costly homes distant
from city centers; it also increases personal autonomy and control. An organization that allows
employees to spend most of their time working from a home office may hire or retain talented and
unique employees who avoid a more traditional work location. Apple Computer, AT&T, exemplify
the growing number of companies whose policies include telecommuting as an accepted corporate
practice. Many professionals who deal in foreign markets or with foreign companies maintain an
office in their home in addition to or instead of an office at their company. This remote location
permits them to work more easily throughout the night to stay in touch with key clients and branch
offices and to monitor key market information as it evolves. In India it has helped organizations to
retain female computer professionals, as they get wedlock and leave the organisation due to their
commitment towards the bringing up of the child. Telecommuting has helped to reduce such
numbers to a large extent.
The major disadvantage of telecommuting is a decrease in face-to-face communication with others

in the organization. In the near future, however, the increasing availability and lower cost of tele
conferencing equipment that permits transmission of video images across the phone lines may
reduce this problem. Some small cities are trying to attract telecommuters as residents by
significantly upgrading their communication capabilities. Managers may oppose telecommuting
because they fear a loss to control over workers, are concerned about an employee’s legal
obligations to the company when off-site, or fail to understand the benefits of this arrangement to
the organization. Improvements in telecommunication, greater acceptance of employee autonomy,
and a greater number of successful home offices may address this problem.
7.3.1.2 Other Remote Options
Some individuals perform only part of their work at home, rather than doing the majority of it at
home on a computer during regular work hours. For example, may spend several hours a day working
at home so that they can travel in off-peak hours. Workers may participate in after hours
telecommuting, where they perform their work on the computer at home outside regular office
hours. This type of alternative work arrangement potentially increases workers’ flexibility by
helping them handle multiple responsibilities, spend more time with children, and con trol the
pacing of work. Although this flexibility should reduce the conflict between work and family,
research suggests that the reverse has occurred. In particular, after-hour telecommuting has two
consequences. First, it increases role overload because of the increase in the number of hours spent
per week working. Second, it interferes with workers’ performing multiple roles because work spills
into family time and intrudes on nonwork respon sibilities.
Satellite offices, established away from the city center and near employee residences offer an
alternative to the home office. Employees can share time between a home office one or more
satellites, and the main office. This option retains the flexibility of the home office, reduces
commuting and traffic problems, and increases the opportunities for face-to -face contact. Few
companies in USA are experimenting.
The typical home office is equipped with a telephone, a tele phone answering machine, a copier,
and a variety of computer equipment. A personal com puter, often portable, aids in composing
documents and receiving data in electronic form. A modem receives and transmits data between
computers over the telephone line. Facsimile (fax) machines transmit and receive images over
telephone lines. Telecommuting is on the rise, thereby facilitating more and more persons to work
from home.
Advantages
1. Saves travel time, travel cost, travel infrastructure, decreases pollution.
2. Allows flexi-time
3. Allows "home-bound" people to enter workforce
4. Less office space and infrastructure
5. Reduced operational costs
6. Improves productivity
Problem areas
1. No contact with others
2. Tendency to work longer hours
3. Lack of control over workforce
4. Difficulty in assessing quality of work
5. Who did the work? Appraisal etc
6. Drop in certain businesses (e.g. travel, eating)
7.3.2 Ethical and Social issues with E-Commerce
1. Internet can be used in illegal ways, as there are no laws related to its use. Many servers contain
illegal, immoral, defamatory information (which cannot be legally communicated using facilities like
TV, radio, etc.).
2. There is minimal or no control over the Internet (unlike telephone, radio, TV, etc.). Limited
banning of material in Internet is not possible i.e. all-or-none rule.
3. Free speech advocates say that screening of incoming material is the responsibility of the
receiving end
4. There is no law against Spamming i.e. sending unsolicited mail
5. Massive flaming of large quantity of e-mail to one address. The question arises – Is
sending/receiving large quantity of mail ethical?
7.3.3 Risks of Internet to Organizations
· Contracting viruses
· Interception of passwords by hackers
· Interception of sensitive/commercial data
· Illegal/objectionable use of site by users
· Inability to effectively disconnected Internet to own employees
· Misrepresentation of identity by site visitors
· Legal loopholes in electronic contracts
· No security against eavesdropping
· No security against interception
· Misuse of supplied/captured information
· Misrepresentation of identity of site
7.3.4 Data Security and Data Privacy
Data security is concerned with physical security of data from inside and outside causes:
· Frauds, thefts, and maliciousness
· Systems errors
· Accidents and disasters
Where as Data privacy is concerned with ethical/moral protection of data:
· Right of organization to accumulate data
· Integration of data from multiple sources
e.g. credit cards and income tax .
· Big brother is watching syndrome.
· Purpose for use of data
· Possible misuse of accumulated data
· Right of individual to inspect gathered data

It often arises as to what are the primary reasons for renewed importance for data security and data
privacy?
· Growing sizes of databases
· Distributed systems
· Data being viewed as resources
7.3.5 Privacy and Databases
Privacy: one’s right to control information about oneself. Proliferation of better and inexpensive use
of IT leads to collection of personal data from large number of sources. Databases can accumulate
and use vast amount of data in an inexpensive manner. For example: credit card transactions dealt
with personal information in corporate databases, data in patient’s medical records, employee
performance records, Legal databases, loan databases
1. What do you understand by telecommuting? Evaluate the advantages and disadvantages of the
same
2. What are the ethical and social issues of E-Commerce?
7.4 Development of long range plans of the MIS
Any kind of business activity calls for long-range plans for success, the same being true for MIS. The
plan for development and its implementation is a necessity for MIS. In MIS, the information is
recognised as a major resource like capital, time and capacity. And if this resource is to be managed
well, it calls upon the management to plan for it and control it for the appropriate use in the
organisation. Most of the organisations do not recognise ‘Information’ as a resource. They have
looked at information as one of the many necessities for conducting the business activity. Hence,
due regard is often not given for its planned development and use. Many organisations have spent
financial resources on computers purely to expedite the activity of data collection and processing.
Many organisations have purchased computers for data processing and for meeting the statutory
requirements of filing the returns and reports to the Government. Computers are used mainly for
computing and accounting the business transactions and have not been considered as a tool for
information processing.
The organisations have invested in computers and expanded its use by adding more or bigger
computers to take care of the numerous transactions in the business. In this approach, the
information processing function of the computers in the organisation never got its due regard as an
important asset to the organisation. In fact, this function is misinterpreted as data processing for
expeditious generation of reports and returns, and not as information processing for management
actions and decisions.
However, the scene has been changing since late eighties when the computers became more
versatile, in the function of Storage, Communications, Intelligence and Language. The computer
technology is so advanced that the barriers of storage, distance, understanding of language and
speed are broken.
The computers have become user-friendly. They can communicate to any distance and share data, ,
information and physical resources of other computers. Computers can now ‘be tool for information
processing and communication. It can be used for storing base or knowledge base. It can be used for
knowing the current status of any aspect of the business due to its on-line real time processing
capability.
Any organization requires Management Information System flexible enough to deal with the
information needs of the organisation. It should be conceived as an open system sly interacting with
the business environment with a built-in mechanism to desired information as per the new
requirements of the management. The design l an open system is a complex task. It can be achieved
only if the MIS is planned, keeping in view the plan of the business management of the organisation.
The plan of MIS is concurrent to the business plan of the organisation. The information he
implementation of the business plan should find place in the MIS. To ensure such an alignment
possibility, it is necessary that the business plan-strategic or otherwise, states information needs.
The information needs are then traced to the source data and the system in the organisation which
generate such a data. The plan of development of the MIS is linked with the steps of the
implementation in a business development plan. The system of information generation is so planned
that strategic information is provided for the strategic planning, control information is provided for
a short term planning and execution. The details of information are provided to the operations
management to assess the status of an activity and to find ways to make up, if necessary. Once the
management translated into information needs, it is left for the designer to evolve a plan of
development and implementation.
7.4.1 Contents of MIS Plan
A long-range MIS plan provides direction for the development of the systems, and provides a basis
for achieving the specific targets or tasks against a time frame. The plan would have the following
contents, which will be dealt by the designer under a support from the top management. Table
shows equivalence of Business Plan and MIS Plan.
Business plan MIS Plan
Management information system, objectives,

Business goals and objectives consistent to the business goals and objectives.
Information strategy for the business plan

Business plan and strategy implementation playing a supportive role.
Architecture of the Management Information

Strategy planning and decisions System to support decisions.
System development schedule, matching the plan

Management plan for execution and control execution.
Hardware and software plan for the procurement

Operation plan for the execution and the implementation.
7.4.2 MIS plan is linked to the business plan
7.4.2.1 MIS goals and objectives
It is necessary to develop the goals and objectives for the MIS which will support the business goals.
The MIS goals and objectives will consider management philosophy policy constraints, business risks,
internal and external environment of the organisation and the business.
The goals and the objectives of the MIS would be so stated that they can be measured
The typical statements of the goals are as under:
· Provide an online information on the stocks, markets and the accounts balances.
· The query processing should not exceed more than three seconds.
· The focus of the system will be on the end user computing and access facilities.
· Information support will be the first in the strategic areas of management such as marketing or
service or technology.
7.4.2.2 Strategy for the plan achievement
The designer has to take a number of strategic decisions for the achievement of the MIS goals and
objectives. They are:
(a) Development strategy : online, a batch, a real time.
(b) System development strategy: Any approach to the system development-Operational versus
Functional; Accounting versus Analysis; Database versus Conventional approach; distributed versus
Decentralised processing; one Database versus Multiple database.
(c) Resource for system development: In-house versus external, customised development versus the
use of packages.
(d) Manpower composition: analyst, programmer skills and know how.
7.4.2.3 The architecture of the MIS
The architecture of the MIS plan provides a system and subsystem structure and their input,
linkages. It also provides a way to handle the systems or subsystems by way of simplification,
coupling and decoupling of subsystems. It spells out in detail the subsystems lentry to processing,
analysis to modelling, and storage to printing.
7.4.2.4 The system development schedule
A schedule is made for the development of the system. While preparing the schedule due
consideration is given to the importance of the system in the overall information requirement, also
given to logical system development. For example, it is necessary to develop the accounting system
first and then the analysis.
Further, unless the systems are fully developed their integration is not possible. This development
schedule is to be weighed against the time scale for achieving a certain information requirement
linked to a business plan. If these are not fully met, it is necessary to revise schedule and the
development schedule, whenever necessary.
7.4.2.5 Hardware and software plan
With regard to the technical and operational feasibility, the economics of investment is worked out.
Then the plan of procurement is made after selecting the hardware and software. One can take the
phased approach of investment starting from the lower configuration of hardware are going over to
higher as development takes place. The process is to match decisions with the financial decisions.
The system development schedule is he information requirements which in turn, are linked with the
goals and objectives of the business.
The selection of the architecture, the approach to the information system development and the
choice of hardware and software are the strategic decisions in the design and development of the
MIS in the organisation. The organisations which do not care to take proper decisions in these areas
suffer from over-investment, under-utilisation and are not he critical information requirements. It is
important to note the following points:
1. The organisation’s strategic plan should be the basis for the MIS strategic plan.
2. The information system development schedule should match with the implementation schedule of
the business plan.
3. The choice of information technology is a strategic business decision and not a financial decision.
Model of MIS Plan
Contents Particulars Focus
Business environment and current

Corporate information operat ions. Where are we?
What is the foundation of

Corporate philosophy Policy, guidelines, culture. business?
Corporate mission/ goals/Current and new mission/ goals/

objectives objectives. Where do we want to reach?
Clear quantitative statements on these

factors showing a trade off between theWhat is the risk? Is it worth
Business risk and rewards risk and rewards. the risk?
Business policy andDetails of the strategic and policyHow do we achieve the

strategy decisions affecting the business. goals and objectives?
What is the key

Information needs Strategic/ planning, operational. information?
When and the tools for

Architecture of the plan Information Technology details. achievement?
Details of the systems and subsystems

and their linkages charted against theWhen and how will it be
Schedule of development time scale. achieved?
Organisation and executionManpower and delegation details.

of the plan Internal and external resources. Who will achieve it?
Details on the investment schedule and

Budget benefits. How much will it cost?
7.4.3 Ascertaining the class of information
Ascertaining the information needs of the management for the business execution is a complex task.
The complexity can be handled if the information is classified on the basis of its application and the
user, which becomes the basis for the ascertainment. The classification could be as shown in table
below.
Class Example of information User
Organisational The number of employee’s. products,Many users at all the levels.

services, locations, the type of business,
turnover and variety of the details of each
one of these entities.
Purchases, sales. production, stocks.

receivables, payables, outstanding, budgets,
Functional statutory information. Functional heads.
The trends in sales, production technology.

The deviations from the budgets, targets,
norms etc. Competitor s information,
industry and business information planMiddle and-the Top
Knowledge performance and target; and its analysis. Management.
Status information on a particular aspect,

such as utilisation, profitability standard,
requirement versus availability. Information
for problem solving and modelling.
Quantitative information on the business
status. Non-moving inventory, overdueMiddle Management and
Decision support payments and receivables. Operations Management.
Information on the production, sales.

Purchase, despatches consumptions, etc. in
the form of planned versus actual. TheOperational and
information for monitoring of executionManagement Supervisor,
Operational schedules. Section officer
The design of the MIS should consider the class of information as a whole and provide suitable
information system architecture to generate the information for various users in the organisation.
Let us now proceed to ascertain the information needs of each class
7.4.3.1 Organisational Information
One can define the organisational information as the information required by a number of
personnel, departments and divisions or the functions in the organisation. Such information can be
determined by constructing a matrix of information versus user as shown in the table below.
Manager Manager Manager Manager
Information entity (personnel) (production) (Administration) (Accounts)
Employees attendance x x x
Salary wages & overtime x x x x
Human resource information x x x
It can be observed from the table that the information entity is one, but its usages are different. For
example, the employee attendance information would be used by the personnel department for
legal compliance of maintaining the muster recommended by the Factory Inspector. The production
manager would use it for scheduling, rescheduling and loading of the jobs on the shop floor
depending upon the persons present. The corporate planning and administration will use it for
manpower assessment and control and manpower forecasting.
The organisational information requirement needs to be studied thoroughly and critically as it is

used across the organisation. It is necessary therefore to map the information in terms of data
source, generation and usage, so that the designer can provide the path from the acquisition to the
generation and the storage.
Since the usage of the organisational information is at different levels for different purposes, it is
advisable to store the data in the form of the database which will be used by the users for
generating their respective information needs. The determination of the information can be done by
taking each business function, such as Personnel, Sales, Marketing, Production, Commercial, etc.
and develop the information versus the user matrix.
7.4.3.2 Functional Information
The functional information is defined as a set of information required by the functional head in
conducting the administration and management of the function. This information is purely local to
that function and by definition, does not have a use elsewhere. This information is used by a
manager to plan and control his function.
Functional information is largely factual, statistical and detailed in multi-dimensions of the

function. For example, if you take the sales information, it can be processed in seven ways, viz. the
product, the product groups, the market segment, the geographic zones, locations, the customer,
and the sales organisation structure.
The functional information is normally generated at equal time intervals, say monthly, quarterly,
etc. for understanding the trend and making comparisons against the time scale. Such an
information is used for planning, budgeting and controlling the operations of the function.
Functional information is also used for assessing particular aspects of the business. For example, the
stocks of finished goods, receivables, and orders on hand throw a light on marketing function of the
organisation. The raw material stocks, WIP, orders pending payable throw light on the purchase
function. These information sets have a functional utility and are required in detail revolving around
several dimensions.
The functional information can be assessed on the following three parameters-the work design, the
responsibility and the functional objectives.
Work Design
For example, for the customer order scrutiny the available stock, the price, the terms of payment
and the probable delivery is an information set evolved out of the work design of customer order
processing. The procedure of the order processing requires this information.
Responsibility
The managers in the functional areas of management are responsible for achieving the targets and
accomplishing the goals and objectives. It is, therefore, necessary to inform and update the
information on targets at regular intervals to enable him to make or change decisions in domain of
operations. Most of these targets are business targets such as the turnover, production, utilization,
stocks and so on.
For example, the marketing manager has a monthly target of Rs 1 million order booking, half a
million invoicing, and not more than two months receivables. Since, he is responsible for achieving
the targets, it would be necessary to inform him on these aspects at regular intervals. This
information is used for the responsibility accounting and decision making for achieving the targets.
The manager would be assessed on the basis of responsibility he discharges in conducting the
business.
Functional objectives
Each function has its own objective which is derived out of the corporate goals. For example, the
overall business plan objectives gives rise to the objectives for each business function. Some of the
business plan objectives are given below based on which each function in the organisation derives
its objectives.
· Total sales per month is Rs. 10 million.
· Finished goods inventory, not to exceed Rs. 1 million.
· Outstanding more than six months not to exceed Rs. 0.2 million
· Capacity utilisation should be minimum 85 per cent.
· Employee attendance per month should be 99 per cent.
Functional goals and objectives are necessary to achieve overall corporate achievements. Most of
such goals and objectives are potentially achievable within the managerial and physical resources
that the manager has at his disposal. It is, therefore, necessary the manager on the achievements of
these targets on a continuous basis.
To summarize, the functional information would emanate from the work design and procedures, the
managerial responsibility accounting, and with reference to the functional goals and objectives. It
would be determined by studying the work design and procedures and the responsibility which the
manager holds for the business performance. That information which measures the business activity
and evaluates the performance on the key target areas, is the functional information. The source of
such information are the managers and their functional heads who together execute the business
activity.
7.4.3.3 Knowledge Information
Knowledge information creates an awareness of those aspects of business where manager is forced
to think, decide and act. Such an information shows the trend of the activity or a result against the
time scale. Considering an example, whether the sales are declining and the trend is likely to
continue in the quarter. The product is failing continuously on one aspect and the reason of failure
is the process of manufacturing. Such information pin-points the area or entity and forces the
managers to act. It highlights the deviations from the norm or standard and also any abnormal
developments which are not in congruence with forecasts or expectations.
The knowledge information may cut across the functional boundaries of the organisation.
The action or decision may fall in other functional areas of business operations. The decision may
fall in the domain of top management or the middle management. The knowledge infor mation is
required by the middle and the top management as they are the ones who have conceived, planned
and implemented the business plan. Hence, the knowledge information supports the functions of the
middle and the top management. Knowledge information is tracked continu ously and reported in a
fixed format, for consistency and at fixed intervals for updating the knowledge base. The nature of
this information is analytical and relates to the past, the current and the future. The knowledge
information is reported in graphic formats for a quick grasp and managerial response. It contains
business results and comparative analysis of the performance.
7.4.3.4 Decision Support Information
Most of the information required by the middle and the top management is for decision making. The
information does not act as a direct input to the decision making procedure or formula but supports
the manager in the efforts of decision making. Information is used in a decision support system for
model building and problem solving. The support may act in two ways, one for justifying the need of
a decision, and the other as an aid to decision making.
For example, the information on the non-moving inventory justifies the decision of its disposal at a
throwaway prices. The demand forecasts information aids in the decision on determining the
economic order quantity for production or a sale.
The decision support information can be determined for the company at the entity level leaving its
use to the decision makers in a suitable manner. The source of this information could be internal or
external to the organisation. It can be determined by identifying the tools techniques, models and
procedures, used by the managers in the decision making.
7.4.3.5 Operational Information
This information is required by the operational and the lower levels of the management. The main
purpose of this information is fact finding and taking such actions or decisions which will affect the
operations at a micro level. The decisions may be to stay on overtime, draw additional material,
change the job from one machine ,to the other, send a reminder to the supplier for the supply of
material. These decisions are such that they make the routine administration of the business smooth
and efficient. These decisions do not fall in the category of the managerial decisions.
1. What are the contents of a MIS Plan?
2. Explain with relevant examples the ascertaining the class of information need for the business
execution.
7.5 Implementation of the Management Information System
The implementation of the system is a management process. It brings about organisational change,
it affects people and changes their work style. The process evokes a behaviour response, which
could be either favourable or unfavourable depending upon the strategy of the implementation. In
the process of implementation, the system designer acts as a change agent or a catalyst, and for any
successful implementation he has to handle the human factors carefully. The user of the system has
a certain fear complex when a certain cultural work change is occurring.
The first and the foremost fear is about the security to the person if the change-over from the new
is not a smooth one. Care has to be taken to assure the user that such fears are baseless and the
responsibility, therefore, rests with the designer.
Second fear is about the role played by the person in the organisation and how the change affects
him. On many occasions, the role may reduce his importance in the organisation, the work design
may make the new job impersonal, and a fear complex may get reinforced that the career aspects
may be affected.
There are certain guidelines for the systems designer for successful implementation of the system
and the system designer should;
1. Not question beyond a limit the information need of the user.
2. Not forget that his role is to offer a service and not to demand terms.
3. Remember that the system design is for the use of the user and it is not the designer’s
prerogative to dictate the design features. In short, the designer should respect the demands of the
user.
4. Not mix up technical needs with the information needs. He should try to develop suitable design
with appropriate technology to meet the information needs. The designer should not recommend
modifications of the needs, unless technically infeasible.
5. Impress upon the user the global nature of the system design which is required to meet the
current and prospective information need.
6. Not challenge the application of the information in decision making. It is the sole right of the user
to use the information the way he thinks proper.
7. Impress upon the user that the quality of information depends on the quality of input which he
provides.
8. Impress upon the user that he is one of the users in the organisation and that the information is a
corporate resource and he is expected to contribute to the development of the MIS.
9. Ensure that the user makes commitment to all the requirements of the system design
specifications. Ensure that he appreciates that his commitments contribute largely to the quality of
the information and successful implementation of the system.
10. Ensure that the overall system effort has the management’s acceptance.
11. Enlist the user’s participation from time to time, so that he is emotionally involved in the
process of development.
12. Realise that through serving the user, he is his best guide on the complex path of development.
13. Not expect perfect understanding and knowledger form the user as he may be the user of non
computerised system. Hence the designer should be prepared to change the system specifications or
even the design during the course of development.
14. Impress upon the user that the change, which is easily possible in manual system, is not that
easy in the computer system as it calls for changes in the programs.
15. Impress upon the user that perfect information is non-existent, his role therefore still has an
importance in the organisation.
16. Ensure that the problems in the organisation are resolved first before the system is taken for
development.
17. Conduct a periodical user meetings on systems where you get the opportunity to know the
ongoing difficulties of the users.
18. Train the user in computer appreciation and systems analysis as his perception of the
computerised information system will fall short of the designer’s expectation.
Implementation of the MIS in an organisation is a process where organisational transformation takes

place. This change can occur in a number of ways. The Lewin’s model suggests three steps in this
process. The first step is Unfreezing the organisation to make the people more receptive and
interested in the change. The second step is Choosing a course of action where the process begins
and reaches the desired level and the third step is Refreezing, where the change is consolidated and
equilibrium is reinforced. Many a times, this process is implemented through an external change
agent such as a consultant, playing the role of a catalyst.
The significant problem in this task is the resistance to change. The resistance to change occur due
to three reasons, viz., the factors internal to the users of information, the factors inherent in the
design of the system and the factors arising out of the interaction between the system and its users.
The problem of resistance can be handled through education, persuasion, and participation. This
itself can be achieved by improving the human factors, and providing incentives to the users, and
eliminating the organisational problems before implementing the system.
7.6 Management of Quality in the MIS
Information is a corporate resource, as important as the capital, labour, know-how, etc. and is
being used for decision making. Its quality, therefore, is required to be very high. A low quality
information would adversely effect the organisational performance as it affects decision making.
The quality of information is the result of the quality of the input data, processing design, system
design, system and procedures which generate such a data and the management of the data
processing function. Quality, unlike any other product, is not an absolute concept. Its level is
determined with reference to the context and its use, and the user. Perfect quality just as perfect
information is non-achievable and has cost benefit implications.
However, it is possible to measure the quality of information on certain parameters. All these
parameters need not have a very high value in terms of the unit of measure. Some parameters may
have lesser importance in the total value on account of their relevance in the information and its
use. The parameters which are generally considered are as shown below:
Parameter of quality Example Comments
Complete data of allAll invoices of the month. AllThis achieves integrity of data with
transactions vouchers of the month. respect to the time period.
Only correct transaction types are

permitted in the system. Only that
Valid transaction and inputdata which meet the designEnsures the validity of the data and
data specifications can be used. in turn. assures a valid information.
Assures that the results are

accurate and precisely correct
Correct use of the formula orbased on rule. act or law using
Accuracy and precision procedure and relevant data. complete data.
It should be relevant to the user forIf the relevance is appropriate. the

Relevance to the user a decision making. quality required is high.
If the information is received late it

Information on the sales despatch,becomes useless from a point of
Timely information pending position. view of decision making.
Production information should be

reported in terms of quantity,
quality and groups, or family. andIncomplete information forces the
rejection and reasons. It should beuser to infer or interpret
Meaningful and completegiven in a proper format, witherroneously leading to a wrong
information references. decision.
The quality of these important parameters is ensured by conducting a proper systems analysis,
designing a suitable computer system and ensuring its maintenance from time to time, and also
subjecting it to audit checks to ensure the system integrity.
The quality of the parameters is assured if the following steps are taken.
1. All the input is processed and controlled.
2. All updating and corrections are completed before the data processing begins.
3. Inputs (transactions. documents, fields and records) are subjected to validity checks.
4. The access to the data files is protected and secured through an authorisation scheme.
5. Intermediate processing checks are introduced to ensure that the complete data is processed
right through, i.e., run to run controls.
6. Due attention is given to the proper file selection in terms of data, periods and so on.
7. Back-up of the data and files are taken to safeguard corruption or loss of data.
8. The system audit is conducted from time to time to ensure that the computer system
specifications are not violated.
9. The system modifications are approved by following a set procedure which begin with
authorisation of a change to its implementation followed by an audit.
10. systems are developed with standard specification of design and development
11. computer system processing is controlled through programme control, process control and
access control.
The assurance of quality is a continuing function and needs to be evolved over a period and requires
to be monitored properly. It cannot be assessed in physical units of measure. The user of the
information is the best judge of the quality. Utility of information and its relevance are the two
other measures of quality.
7.7 Summary
Business decisions are becoming increasingly dependent on high quality information. Impact of
discontinuity in service are: Competitive disadvantage, Loss of revenue, Problems with cash flow,
Increased costs, Fines and/or sanctions. Information technology has made it possible for many
people to perform their job functions using their home as an office. Any kind of business activity
calls for long-range plans for success, the same being true for MIS. The implementation of the
system is a management process. It brings about organisational change, it affects people and
changes their work style. In the process of implementation, the system designer acts as a change
agent or a catalyst, and for any successful implementation he has to handle the human factors
carefully.
7.8 Terminal Question
1. To reap the benefits of MIS, the implementation is very important. What guidelines should you
consider to have an successful implementation of system.
2. How do you manage the quality in MIS
1. Impact of discontinuity in service are _________ .
A. Competitive disadvantage
B. Loss of revenue
C. Problems with cash flow
D. All of the above

2. The possible cause of fraud could be ______
A. Violation of laws
B. reporting regulations
C. Deliberate communication of wrong information
D. Lack of adequate safeguards over organizational resources
3. _________ established away from the city center and near employee residences offer an
alternative to the home office.
A. Head offices
B. Regional offices
C. Satellite offices
D. Zonal offices
Section 7.2.4
Section 7.3.6

Section 7.4.4
Terminal Questions
1. D
2. C
3. C
Unit-08-Business Process Re-engineering
Structure:
8.1 Introduction
Objectives
8.2 Organisation and Business Process Reengineering
8.2.1 Definition and Approach
8.2.2 Business process
8.2.3 Process model of the Organisation
8.2.4 Value stream model of organisation
8.3 Redesigning of Processes
8.3.1 What delays the business process?
8.3.2 Relevance of Information Technology (IT)
8.3.3 MIS and BPR
8.4 Summary
8.7 Answers to SAQ’s, TQ’s and MCQ
8.1 Introduction
In this unit, we would start with the definition and meaning of Business process reengineering. Then
we analyze the business process and value stream model of organisation. We conclude the unit with
the relevance of IT and the link with BPR and MIS.
Objectives:
· Define Business Process management
· Understand business process and its elements
· Explain value stream model of organization
· Relevance of IT in BPR
· How MIS and BPR are linked
8.2 Organisation and Business Process Reengineering
8.2.1 Definition and Approach
Michael Hammer defines re-engineering as ‘the fundamental rethinking and radical redesign of
Business process to achieve dramatic improvements in the critical contemporary measures of
performance such as cost, quality, service and speed’.
The approach to re-engineering aims at customer focus. It requires one to take a different view of
the business-the view based on the process and not on the tasks or functions. It requires
organisation restructuring and redesigning based on the process, which terminates at the customer
door contributing to the value desired by the customer.
The definition of re-engineering is loaded with a number of important concepts and its
understanding is necessary for successful re-engineering of business. The first and the foremost is
fundamental rethinking. The fundamental rethinking calls for questioning everything that is being
followed, practiced and found acceptable for centuries. It rejects old legacies and ‘proven’
practices. For example, one can question the necessity of an invoice for billing and recovery of
money. Is there any other way whereby the sales transaction can be registered and money
recovered without raising the invoice document. It requires questioning on the basic principles of
management and administration which are used for decades. The old principles like when it is a
money matter it is for finance and accounts to handle, when it is a matter of quality it is the
responsibility of the quality assurance department, etc. are to be rejected. The fundamental
rethinking calls for starting all over again rejecting the past. It requires a vision, an innovation and
an imagination.
Radical redesign is the second important concept used in the definition of re-engineering. For
example, the business is conducted in a certain manner, i.e., you buy raw material, process it, pack
the finished goods, sell and distribute the goods to the customer. There are standard procedures
and designs for these activities. The radical redesign calls for trimming and chopping of these
designs so that the cost is reduced, service is improved and the customer gets higher value at a
higher speed. The redesign calls for a change in the technology, tools and techniques. It calls for
pushing down decision making to the lowest level by enlightening and empower ing the people.
The radical redesign calls for off-loading the activity outside the business organisation if it
contributes to the cost and not to the customer desired value. It begins with the objective of
activity elimination, then improvisation and finally outsourcing. It suggests only to do what can be
done best, and rest to be done through outsource.
The fundamental rethinking and radical redesign’ mentioned in the definition is that exercise which
produces dramatic improvements. Any re-engineering exercise, if it produces only marginal
improvements is then not a result of fundamental rethinking and a radical redesign.
The conventional approach of organisation development, work study, automation, mechanization,

computerization, value engineering and so on do not fall into this basic approach to re engineering.
The improvement that re-engineering expects to generate is to set a new benchmark. The new
benchmark may replace the cost, quality, service and the speed at which it delivers. When the re-
engineering exercise is complete, the organisation will have fewer people, less space a product or
service of excellence and highest customer satisfaction. It will further generate and. frame new
rules of the business game. The new rules will force one to think in terms of ‘process and not tasks
or functions.
The new rules will consider the customer for whom the organisation and the business is established.
The business and its management in terms of marketing, production, sales and accounting functions
will be replaced by the ‘management of processes’ which starts in the organisation and end at the
customer door. It calls for new rules of business to manage the multiple processes, resulting into the
value in which the customer is interested.
The organisation will now be described using processes running across the departments and
functions. The process thinking and multiple process integration will make the organisation
seamless. The flow of information will be free from barriers. The organisation chart of the business
will not be shown with the hierarchical structure of people bound by functions but it will be
described in the hierarchical structure of processes, i.e., the main process and the sub processes
which contribute to the result of the main process.
The re-engineering exercise will measure the process efficiency and effectiveness of the existing
processes and bring in a dramatic improvement in all the performance criteria of business such as
the cost, the quality, the service and the speed of delivery. It will retain mainly those processes
which affect the contemporary measures of performance and cond uct them in such a manner to
produce an additional value to the customer.
Business re-engineering requires a major change in the mindset. In the present world, business
performance is measured in terms of order book, turnover, inventory, payables and receivables,
etc. It is analyzed based on cost, overheads, customer complaints, pend ing orders and queries.
These measures and methods, though not wrong, are not meaningful in the present competitive
business world. For example, the order book may be full if it takes a long time to process the order
but the business is exposed to the risk of not getting the repeat business orders.
What is required by re-engineering is a change of focus, from physical aspect to time aspect of the
business. Instead of orders, order processing cycle time is important. Procuring the right material of
the right quality is important but how soon can the material be procured is vital. The procurement
cycle from the requisition of material to physical arrival of the material is import ant. The shorter
the cycle time, lesser the stocks and lesser the cost of procurement. The business should be thought
in terms of time and process cycle time. Whatever is done, it has to be done in the shortest possible
time. The units of measuring time will gradually shift from week to day, day to hour, hour to minute
and minute to nano second.
Another change would be in measuring the performance of business in terms of customer

satisfaction. Customer satisfaction would be highest if the price paid by the customer is convincingly
appropriate for the value the product or service offers and there is no better option elsewhere.
Customer satisfaction would be measured now not by the number of complaints, which in any case
should be few, but how quickly the customer problem is solved and his service expectations
fulfilled. Fast response whether it is order delivery or complaint handling is what the customer is
looking for and is what the organisation should provide.
Another radical change in the mind set is from the cost and overhead to the performance cost.
When cost is to be controlled so that it is affordable to the customer, the planning should be in
terms of direct cost of execution of business. The direct cost is material and labour. While the cost
of execution is the aggregate of all the costs incurred in the business pro cesses directly associated
with or supportive to the main activity of converting the raw material into the finished goods.
Hence, the cost of the order processing, procurement, storage, delivery, distribution,
communication, general administration, etc. is the costs of the business execution. The mindset
should change from direct cost to this cost of busin ess performance. The reason for the emphasis on
this point is that all the organizations take efforts to control the direct cost through change in the
product design and the technology, use of better materials, tools and techniques. But adequate
attention is not paid to the cost of business execution, though this cost does not add any additional
value to the customer.
The fundamental redesign of the business processes requires a significant change in the mindset of
the people across the organisation. The re-engineering of business calls for a change in the
management philosophy. The business strategy should be competitive rather than protective to
maintain leadership and growth. It should be such that it keeps the organisation under a constant
state of alert. These are the times when like an earthquake, the product will be replaced suddenly;
or overnight, a new technology would bring down the cost; or the business will be threatened by an
altogether new development and so on.
Another change in the management philosophy should be from delegation to empowerment down
the line. The relationship should be based on trust and not on command control principle. Once the
business has been re-engineered the management thinking would be oriented towards customer
satisfaction. The focus would shift from the management of the company to the management of
corporate relations between the management, the suppliers and the customers. These relations
would be of business partner, much more than just contractual and legal. The relations should be
such that they support the mission and the goals of the organisation. The management of the
organisation would boldly and openly express these relations as an asset of the organisation. These
relations would take shape in the arrangement such as an alliance, a franchise strengthening the
endeavor of the organisation to service the customer.
Michael Hammer’s definition is comprehensive to cover all these aspects of change. Dramatic
improvements are possible only if there is change in the mindset and the management philosophy in
tune with the requirements of business.
Re-engineering calls for a change in the performance measures. The traditional performance
measures, viz., the cost, quality, productivity, efficiency, overheads and many others are useful but
would not be relevant in the coming decades. For example, there is no doubt that the cost of
production should be less and less than that of the competitors. But now this is not sufficient. The
correct measure would be the value it generates for the customers. The question is, are you
competitive on the ‘value’?
Yet another important measure, the’ quality’ also needs different interpretation. It is imperative
that the management should ensure the quality the product is claimed to have. But the real
measure is whether the quality fulfils the expected satisfaction of the customer. The concentration
on the productivity is necessary but the emphasis should be on the process productivity and not on
the task or the function productivity. For example, the productivity of the order processing task in
the marketing department is not important.
Productivity can be improved by various methods but still the customer receives the delivery of the
product very late. Hence for the productivity gain, the entire process of the order receipt to the
delivery and recovery of money should be considered. The focus should be on process productivity
where the process terminates at the customer end. The same is true of overheads. The control of
overheads should be exercised on the process and not on the functions.
Market share is also an important yardstick. The market should be measured in terms of the share in
niche and not as a percentage in the large segment. Measuring the sales in a niche in itself has a
very sharp focus. Instead of delivery promise, the appropriate measure would be service fulfillment.
The service is all comprehensive measure than just the delivery promise.
In short, traditional measures like the cost, quality, productivity and efficiency which are all task-
based should be measured for the process. Further, the change is from cost to value, quality to
satisfaction, efficiency to effectiveness and productivity to performance.
The significant addition to the traditional performance measures is the knowledge resource. It is not
very important as to how many people are engaged in the business though undoubtedly, their
number needs to be controlled. What is important is how much knowledge they have about the
various aspects of business. It is not the number but the quality and the level of knowledge they
have.
The business in the coming decades will largely depend on the knowledge the people have. If
knowledge is inadequate, outdated and irrelevant, then the management is running a high risk
business. The learning ability of people will build the knowledge resource.
Traditional performance measures will continue to play important role as before. But when it comes
to comparison with others, the new measures suggested here are critical and important. Table 8.1
gives the business performance measures-traditional to modern form.
8.2.2 Business process
For initiating business re-engineering, one is required to make some very basic and fund a- mental
changes in one’s conventional thinking. The business is re-engineered through process re engineering
and the business has a number of processes which together produce the business results. You
concentrate on the ‘process’ and not on the task when it comes to re- engineering.
The business process is defined as ‘a set of activities performed across the organisation creating an
output of value to the customer’. Every process has a customer who may be internal or external to
the organisation. The scope of the process runs across the departments and functions and ends up in
substantial value addition which can be measured against the value expectation of a customer.
For example, the order processing scope in the traditional sense is within the marketing
department. But when it comes to re-engineering, the scope expands to manufacturing, storing,
delivering and recovering the money. Likewise, the scope of the bill payment is not limited to the
accounts and finance departments but it covers ordering the vendors, receipt and acceptance or
goods and paying the bill amount.
In a classical organisational set-up, the different processes are handled in parts within the four walls
of the department and the functions are limited to the responsibility assigned to them. When the
bill payment process is to be re-engineered, it will be re-engineered right from the purchase
ordering to cheque payment to the vendor. The reason for covering the purchase ordering as a part
of the bill payment process, is that the purchase order information decides the number of aspects of
bill payment.
The basic element of the processes is motivation to perform certain activities. In the process
execution, the data is gathered, processed and stored. The data is used in the process to generate
the information which would be checked, validated and used for decision making. The decision is
then communicated. The process is executed through the basic steps such as receiving the input,
measuring the input, analysing the document, performing, processing, recording, accessing data,
producing the results and communicating them.
Basic elements of business process are:
· Motivation to perform
· Data gathering, processing and storing
· Information processing
· Checking, validating and control
· Decision making
· Communication
All these relate to human initiative.
A business process in any area of the business organisation performs through basic steps, such as,
receive input, measure, analyze, document, perform, process, record / store, access, produce and
communicate. These steps are performed a number of times across the execution process. When the
process is performed, it consumes resources and time. The re-engineering approach attempts to
eliminate or shorten the steps so that resource consumption is reduced and time of process
execution is shortened. It eliminates redundancy by eliminating the steps, which do not contribute,
to the value customer is looking for.
A business process defined for re-engineering has a clear cut ’start and end’, resulting into a
business result. In organisation, there are long processes and short processes. There are critical
processes and not so critical processes. The critical business processes are those, which contribute
to the value significantly. While the non-critical processes do not contribute much to the value, the
customer is looking for.
For example, the process of receiving a visitor in the organisation could be considered as non
critical. But the process of new product development from the concept to the prototype is critical
as it is expected to contribute high value to the customer. If the external customer focus is taken as
a criterion for process selection, then all the processes which generate and add value to the
customer are called the value stream processes. The value stream processes are critical and become
the immediate candidates for re engineering. The other processes in the organisation contribute to
the overheads of performing the business function. For example, the processes involving
attendance, leave, payment of wages, security, travelling and accounting are not value stream
processes as the resources employed in them do not create a value or improve a value to the
customer. Such processes are a second priority as far as re-engineering is concerned. Every process
is made of a series of activities. In each activity some ‘work’ is done which produces some result for
processing into the next activity. If the work done under any activity is analyzed, it will be seen that
the people are moving papers and products to achieve some result. In the process they collect the
information for decision making and then carry out a physical activity of pushing the product or the
output using the paper for record, document and communication.
Fig. 8.1: Work model
Figure 8.1 shows this work model comprising six elements.
The people who manage the business are engaged in the series of such work modules distributed
across the organisation. When such work modules are viewed together as a single entity, it is a
business process. In such process, participating people are considered as a team working with the
sole objective of achieving the customer expectation on value. In re-engineering exercise all the six
entities, viz., people, paper, activity, information, decision and product stand to scrutiny through a
fundamental rethinking for radical redesign to produce dramatic results.
8.2.3 Process model of the Organisation
The re-engineering initiative begins with viewing the organisation through the processes and not by
the tasks or functions. As discussed earlier, process runs across the department of the functions
where the department or the function heads hold same or similar positions at par in the organisation
structure. A process may begin in one department and run across other departments producing a
business result of some value. The process is handled by a number of people having different status
in the organisation. They are backed by authority, rules, and powers within the scope of function of
the department they are handling.
The classical organisation model is recast on the basis of processes ignoring the people hierarchy.
The stimulus to activate the process could be external or internal and it flows across the
departments where the data is gathered, analyzed, processed, the decisions are taken and the
intermediate results are passed on to the next stage for further processing.
The process model of the organisation considers only those processes where the’ end’ of each
process produces a result whereby the customer concern, interest, expectation and perception are
affected. It considers only those processes which produce value for the customer. For constructing
the process model, the processes which are essential for the smooth working of the business such as
the employee related processes, audit, budgeting and accounting, security, canteen, general
administration, etc., are not considered. Such processes contribute to substantial overheads and
could be considered for cost control leading to the price reduction under the reengineering
methodology.
The need for constructing a process model of the organisation is to force some fundamental
thinking, and redesigning that will bring a dramatic change in the working and the end result of the
organisation. It will not permit thinking on the task basis within the confines of the function or
department. Every activity in the process will be evaluated from the stand point of an ultimate
result. It will help to redesign the process in terms of input, process and effectiveness and
productivity. The process view of the organisation will prevent functional and local suboptimisation,
and promote process optimization, where the resources are used intelligently and the productivity is
the highest.
Once the process view of the organisation is taken, the old conventions and practices of business
processing undergo a radical change. The change breaks the hierarchy, and removes the barriers on
the access and use of information. It deviates from the command control system to a system of work
group called as team. The team members are at par and perform as equals. As a team member their
role is self contained and complete in every respect. They are empowered fully to perform at the
stage where they are mobilized and do not have to seek approval or sanction elsewhere. They lose
their function or departmental identity as a team member. The managerial or supervisory role is
abandoned and replaced by a role of facilitator.
The team is not a committee where the subject is discussed, analyzed and the decision alternatives
recommended for approval and sanction. The work group culture is a radical cultural change in the
working of the organisation where the information technology plays a significant role.
8.2.4 Value stream model of organisation
The organisation is established to fulfill customer needs, having associated customer values. The
value is a measure, an intangible measure, which is difficult to count in clear terms or specifications
as different customers have different value priorities, value mix and buying decision criteria.
However, if the value expectations are fulfilled, the customer satisfaction is automatic. The
customer is satisfied when he believes that the price paid by him fulfils the value expectations. The
value is an intangible concept and the customer has his own perceptions on the value. The customer
puts value based on which he evaluates the product or the service on about twenty-one parameters.
He may consider all the parameters or only a few of them for his buying decision. The business
organisation, however, has to decide which customer segment it will like to serve and then evolve
various business strategies. The organisation is required to design such processes, which will fulfill
the basic needs of the customer by producing a product, which will satisfy the value perceptions of
the customer. Depending upon the value choice of the customer, the processes of the organisation
become critical and relevant. Only these critical processes really matter for business success in
terms of survival, growth, leadership and competitive advantage.
The process model, therefore, can be seen as a value stream model, relevant to the organisation.
For example, an organisation in food business will consider those processes critical and relevant
which produce food products fulfilling basic needs of appetite and taste and meets the value
expectations on availability, perceived belief, packaging, price, and ease of access. Every
organisation, therefore, must identify value streams in the process model consistent with the
business, the goods manufactured and the nature of business and its objectives.
All organizations have some processes that are critical from value viewpoint. For example, order
processing, procurement processing, manufacturing, delivery, customer relations and product
development and design are value streams in any process model. Processes like invoicing, recovery,
bill payment, supplier relations; communication processes etc. are the secondary processes that
support value delivery to the customer. All these processes deal with some aspect of business, which
affect the cost, the quality, the service and the speed. Further, these processes create a
competitive and strategic environment and clear customer focus. These processes, if redesigned
properly, give sustainable business advantage to the organisation. They give clear guidelines where
the organisation should invest for high returns in business through re-engineering.
Once the process model and the value stream model is built, the process organisation can be
implemented. In the process execution, people come together to form a work group. The work
group, as a team, executes a complete process cycle. To improve the performance of the team a
number of measures are used. On the technology front, the team uses information technology
extensively. It facilitates freeing data from ownership. It is put into database, which is designed,
independent of its application or use. The access is free to all concerned but at the same time it is
secured properly to prevent unauthorized access to the information.
In the information technology application, the team members stay where they are but work or. the
information database to achieve the desired result. Due to information technology usage, the data
search is faster, the analysis quicker, the decision making intelligent and purposeful and information
update instantaneous. The whole process is faster making human resource more efficient and
productive.
While building the process organisation, the people in the team are empowered to make decision
through education, training and support. They are supported by a knowledge database and decision
support systems. The extensive use of Expert and AI systems is made to improve the decision making
process and the decision quality. When the information technology is embedded into the process,
the organisation becomes seamless with free information flow. All value streams are linked through
the information paths installed on Local Area Networks and the Wide Area Networks.
For the effective process organisation build, it is necessary to normalize the processes by
segregating them based on internal and external customers. The processes should then be
scrutinized by questioning the Philosophy, Policy, Pride, Procedure, and Practices followed by
management over a period. The existing processes shall be redesigned if they suffer from defective
philosophy, policy and rules. The use of information technology, keeping the existing processes as it
is, would make them faster no doubt but they would continue to be inefficient.
Some processes should be considered for sub-contracting or outsourcing if they fall in the area
outside core competency. The processes in which the staff is best in all respects should be retained
in the organisation, rest all should be commissioned outside. In other words, suppliers and
customers should be made business partners so that they work for achieving common business goals.
The relationship between the suppliers and customers should be such that they cooperate and
participate in the processes as equal partners and team members. All these arrangements and
changes should be tested based on value improvement. The changes in process design must cut
down the cost, improve the quality, and make the delivery faster and response to the changing
needs of the customer quicker. The broad steps of building the process organisation are as follows:
· Motivation to perform
· Free Data/Information from ownership
· Build seamless information flow
· Provide access unlimited
· Empower person(s) through support
· Recast business operations into process (Client and Server)
· Designate process managers
· Segregate processes where customer is internal, from external
· Take the process beyond the organisation
· Think in terms of business partners / associates and not as buyers and sellers
· Retain only those processes which contribute to the value to the customer and sub contract others
Since the people in the process are empowered themselves, the organisation will have less or no
bureaucracy and hierarchy. Hence, delayering will make the organisation slim. and efficient. The re-
engineered process organisation will have process managers, knowledgeable workers using smarter
machines, smarter products and an intelligent software.
Building process organisation is a complex job of implementing a change, which requires careful
handling of a number of issues simultaneously. The issues are related to the choice of technology,
human resource management and defining the business and its scope for the organization. The
change will affect the work culture and management philosophy. The knowledge will become
impersonal and available to all. The power structure would break the spirit of authority and the
dominance will be replaced by cooperation and a participative affinity. All will have a common goal
of realizing customer satisfaction.
The re-engineered process organisation will have less people using very little space. The process will
be transparent and results will be visible. The organisation will be flexible and responsive to the
customer needs. It will be managed by people of vision capable of producing innovative ideas and
possessing a high tendency to change. The exercise of the process organisation building begins from
the top management group whose initiative and commitment to re-engineering matters and is
inevitable. The willingness to do some fundamental thinking and redesigning radically is a key to
success. Table 8.2 shows the approach to select re-engineering opportunities.
8.2.5 Self Assessment Questions (Section 8.2)
1. What do you understand by the term Business process Reengineering? How does it differ from the
traditional concepts.
2. Explain with relevant example the concept of business process. Also mention their elements
3. Explain the value stream model of the organisation.
8.3 Redesigning of Processes
8.3.1 What delays the business process?
A business process is complex and lengthy, and if conventionally designed and implemented on
functional lines, a number of processing steps are repeated across the process. The process
operators repeatedly search, access, refers, compute, and analyze the same data or a set of the
data in different contexts across the process for achieving the local objectives of the department or
function. This increases the process cycle time.
The information technology capabilities can be put to use while redesigning the process so that such
repetition is eliminated and all the decisions covering all aspects of the busin ess are settled in one
stroke, saving the process time considerably. The number of steps in any business process related to
the data search, its matching, collating, validating, confirming and conforming are carried out only
once in the redesigned process with the help of information technology.
Through this process, a typical business transaction is settled for acceptance, fulfilling various other
needs outside that process in the organisation. For example, the receipt of goods, a transaction
when processed with the information technology application, settles a number of aspects of this one
transaction. The aspects are whether:
a) the receipt is against the valid purchase order,
b) goods received are as per specifications both in terms of quality and quantity,
c) the terms and conditions of supplies are fully met,
d) the value declarations are correct and complete, and
e) amount payable is computed and kept ready for confirmation through the bill of the supplier.
Since all such aspects with the variations are settled at one place in one stroke, the dependent
steps in the rest of the business functions are expedited reducing the total process cycle time. The
modem information technology provides intelligent capabilities to incorporate business rules in the
application system, whereby the decision making at all levels can be rationalized, normalized and
expedited. Though using these capabilities, the information technology uses its own data and
knowledge bases for decision-making. In the conventional functional processing, a transaction
awaits for scrutiny, analysis and approval by the decision maker. If all methods of scrutiny, analysis,
approval, and decision-making are put in the redesigned process using information technology
capabilities the time taken in the transaction and processing is saved.
The delays arising out of queuing and hold up due to the absence of the decision maker, the time
taken for signatures and counter signatures, filling and updating the records, and communication to
all the concerned agencies are saved reducing the process cycle time. The entire business process is
normalized by removing the decision makers and giving their role to the information technology.
The process team members perform a wider comprehensive role in the information technology
dominated redesigned business process.
IT is capable of triggering the action if certain conditions framed by the management in terms of the
policy, rule, formula and procedure are satisfied. IT is capable of analyzing the situation created by
a business transaction and further interpreting the transaction results in terms of the policy and
rules and then triggering action at various points. The action may call for generation of documents
or communication to the concerned agencies for the knowledge and action, if necessary.
Taking the example of receipt of goods once again, the Information Technology helps to generate
the goods rejection note for the information of the suppliers. If the goods are accepted, it updates
the purchase order status, the stock status and generates an indent for material issue. It will give an
effect in the accounts payable as per due date and generate payment voucher for accounting and
cheque for payment to the supplier.
The information technology is capable of handling progressive updation and documentation of a

transaction. It can handle first the receipt of goods, then in warding, and the acceptance followed
by inspection. At each stage, no separate document is generated. The information technology
provides the capability of updating a receipt transaction in stages with the appropriate comments or
remarks. This saves paper flow and delay due to non-attendance of documents.
The issues revolving around secrecy, confidentiality and safety of the data and information can also
be handled effectively using IT. In the conventional approach of processing, such data is kept under
the custody of the senior people in the organisation and its availability is person-dependent. The
information technology provides the capability of handling this aspect of the information whereby
the access, usage, and update rights can be given to selected trained people and the system keeps
an account of its use in all aspects-who, when, why and from which location. The use of this
capability reduces bureaucratic dependence on the senior person in the hierarchy or the authority
reducing the processing time.
The modem information technology provides very powerful communication facilities with no
limitation of distance. The hardware and the software heterogeneity does not pose any problems.
Communication is possible in all media-text, voice, image and video, etc. The inputs in these media
are possible to handle without regard to the distance. Video conferencing, multimedia processing,
Electronic Data Interchange and E-mail has made it possible to process any input at any location and
transfer the output in any medium to the other location. The swift and versatile communication
capabilities cut down not only the mailing time but also provides facilities for follow-up, message
processing and action.
In the functional approach, when the business process is complex due to the business rules and
methodology, it is handled by breaking the process in a series of smaller tasks and con necting them
by information linkage or decoupling them by providing the data and information in the stored form.
This causes a delay in processing and tackling a transaction efficiently and effectively. The
information technology can handle such complexity in the business world through the business
performance rules embedded into the process and in its informa tion system. Since, the rules and
the business intelligence is an integral part of the redesigned process, a transaction, simple or
complex, gets processed very fast independent of the location, person, or position, and no delays
are experienced in handling a complex business transaction.
The storage capacity has no limitation and the hardware-software capability is no problem in IT. It is
possible to distribute appropriate information technology facilities at different locations and
connect them in a network. With these facilities, the database can be distributed at the different
locations and still can be viewed and used as one database. The facilities are capable of handling
private and public databases to provide information to the decision makers. With this technology,
processes need not wait for the data or information, they can be redesigned to access and take any
information from any other distributed database. The integration of all types of data for business
processing is possible, if the process is redesigned to meet the enterprise requirement.
The working of the organisation is made seamless and transparent to all by the information
technology and its working can be changed keeping in view the supplier and the customer needs.
The processing can be redesigned in such a way that the systems in the organisation and that of the
supplier or the customer can communicate directly to each other. With this possibility data,
message and document transfer to the supplier or the customer is easily possible without any time
delay. For example, it is possible to cut down drastically the new product advertisement processing
time. The advertising firm can design and develop the advertisement on their system and send the
same to the system of the client for viewing, study and suggestions. The client performs this task
and transfers the advertisement to the firm for further processing. The delay arising out of mailing,
discussion, etc. is considerably cut down.
Since, the redesigned process would extensively use the information technology, the people
intervention for consultation, advice, approval, sanction, decision making and opinion seeking is
eliminated, reducing the process cycle time. The hierarchy in the organisation is reduced
eliminating the bureaucratic interference. At each stage in the redesigned process the functional
tools, knowledge, know-how, and skills are provided. Each process stage is complete and self
reliant.
In the conventional process design, the process operators acted as individuals in isolation creating
the barriers in movement of papers and information. The capabilities of the Infor mation Technology
enable the organisation to redesign the processes for a team of persons working for a common goal
and customer satisfaction. Since, the redesigned process with Informa tion Technology support will
be response driven, it is possible for the team leader or manager acting as a facilitator to take quick
action, if the process is showing signs of inefficiency and ineffectiveness. Since, the information
technology can analyse and identify the ‘where, when and why’ of the delay in the process, the
team members are motivated to work for the elimination of delay and to achieve superior business
process results.
The information technology needs intelligent handling and application for redesigning the process.
The capability of the information technology is phenomenally higher and assures dramatic results in
the cost, time, service and delivery. It increases the people productivity and process effectiveness.
The information technology, therefore, is a very strong potential enabler in the business process re-
engineering.
8.3.2 Relevance of Information Technology (IT)
It is experienced that the role of the information technology as an enabler is very important and
significant in re-engineering. Its contribution, compared to other technologies to the radical
redesigning of the process is maximum. The range of technologies in all fields, based on the
microprocessor applications affect a number of factors of the business processes. Any business
process in the course of execution gathers and processes the data and stores it for further use.
The business process requires the formation and its analysis for decision-making. In the course of
execution, it checks, validates and controls a number of aspects of the business process before
taking a decision for implementation. It performs the validating, checking, computing,
communicating and processing at a mind-boggling speed and precision.
The search capabilities of the IT are so versatile that an unknown entity can be searched with a
limited or a hazy clue. Since, the speed is very high, such search is handled with the quick access
capabilities.
Similarly, IT provides storage capabilities in a number of ways. There are different media to store
the data and information. The storage of the data can be structured around the hardware and
software. It is possible to store data in a distributed order in different locations and still be one
database in the whole organisation sharable by all. It is possible to process the data at one location
and effect the update at other different locations. The data can be an on-line data or an off-line
data as the need be. The capacity of the storage medium is very high. Day by day the storage
medium is becoming smaller in size but at the same time its data holding capacity is increasing.
The capability of the IT for data capture, speedy processing and storage and communication to any
location helps to build the knowledge database. The knowledge database can be used for decision
making by all. If any business process is analyzed it has two parts-one physical processes such as
movement and handling of paper and goods, and other related to the proce ssing of the data,
information and decision-making. The first part of the process identifies searches, locates, picks up
and then moves the paper or goods to the next stage for further processing. The IT provides work
flow automation software, Bar Coding Technology, and intelligent material handling systems using
microprocessor based technology to handle the physical side of the business process.
The processes on the shop floor and warehouses can use the IT effectively to expedite all the steps
of movement, handling, shifting, picking, locating, relocating and distribution of the goods.
Intelligent material handling systems are available which use data for locating picking, assembling
and packing.
The second major component in the business process is data analysis and decision making to trigger
a suitable action. Once the action is complete in the process, the necessary document would be
generated and records at various locations be updated for further reference. The Information
Technology provides different capabilities to deal with these requirements of the business process.
The physical processes and the data handling processes go hand in hand. They are complementary
and supportive to each other.
Since, each business process is to be redesigned for a dramatic improvement, its key areas of attack
are time and resource used by the processes. Our goal in re-engineering is to save the process time
considerably and use minimum direct and indirect resources. The Information Technology, being
efficient and effective in meeting the goals of re-engineering, its relevance to business process re-
engineering is very apt. It is a process improvement enabler in Re-engineering the business process.
The relevance of the Information Technology is appropriate due to its merit as the catalyst and the
process partner for improvement. The Information Technology, in fact, takes over all human
functions related to data, processing, and decision making. A business process, is found riddled with
a number of steps where the Information Technology can playa role of an enabler to improve the
process parameters.
The speed and response of the basic steps such as searching, access, computing, analysing,
transferring and communicating, printing, plotting, etc. are improved by IT. Beyond this, the
Information Technology capabilities provide very mature and intelligent support in manufacturing,
material handling, warehousing and reducing the process cycle-time. IT is an intelligent partner in
the re-engineering project with its range of technologies.
The use of Information Technology enables the re-engineering of the value stream process to be an
expeditious process. The information technology is an enabler, the information systems are tools,
and the decision support systems are drivers for the process performance. Are-engineered value
stream process will generate the transactions to effect the business result. The management
information system will capture the data on the various milestones in the process and create the MIS
report for management at all levels.
8.3.3 MIS and BPR
Any exercise towards building design of the management information system will be preceded by an
exercise of business process re-engineering. Building the MIS is a long-term project. It is, therefore,
essential to have a relook at the organisation where the mission and goals of the organisation are
likely to be replaced. The business itself would undergo a qualitative change in terms of the
business focus, work culture and style and the value system. This would change the platform of
business calling for a different MIS.
The MIS will concentrate more on the performance parameter evaluation which is different in the
re-engineered organisation. The data capture, processing, analysis and report ing would be process
central and performance efficiency would be evaluated in relation to the value generated by the
processes.
The decision support systems will be integrated in the business process itself, where triggers are
used to move the process. The triggers could be business rules and stored procedures, enabling the
process to become automotive in its execution. The MIS in the re-engineered organisation would be
more of a performance monitoring tool to start with and then a control for the performance. The
traditional MIS is function-centered like finance, production, material, etc. The Manage ment
Information System in a re-engineered organisation would be process centred, evaluating customer
satisfaction, expectations and perceptions.
The role of Management Information System will be raised to a level where the following activities
would be viewed for the management action:
· Control of process cycle time
· Work group efficiency
· Customer satisfaction index
· Process efficiency and effectiveness
· Effectiveness of the Management in enterprise management and not in enterprise resource
· The strength of the organisation in terms of knowledge, learning and strategic effectiveness
The traditional role of the MIS as a decision supporter will continue, however.
1. What are the possible reasons for the delay in the business process?
2. Explain the link between MIS and BPR.
8.4 Summary
The approach to re-engineering aims at customer focus. It requires one to take a different view of
the business-the view based on the process and not on the tasks or functions. The re-engineering
exercise will measure the process efficiency and effectiveness of the existing processes and bring in
a dramatic improvement in all the performance criteria of business such as the cost, the quality, the
service and the speed of delivery. The modem information technology provides very powerful
communication facilities with no limitation of distance. The hardware and the software
heterogeneity do not pose any problems.
1. Explain the relevance of IT in BPR.
2. Find out a relevant case in which BPR has been adapted and relate the concepts that you find in
this chapter with that case.
1. ______ defines re-engineering as ‘the fundamental rethinking and radical redesign of Business
process to achieve dramatic improvements in the critical contemporary measures of performance
such as cost, quality, service and speed’.
A. Michael Hammer
B. Michael Schumacher
C. Micheal Jackson
D. Michael Clarke
2. Business re-engineering requires a major change in the _______ .
A. Machine
B. mindset
C. material
D. infrastructure
3. _______ is traditional measure.
A. cost
B. quality
C. productivity
D. All of the above
8.7 Answers to SAQ’s, TQ’s and MCQ
Section 8.2.5

Section 8.3.4
Terminal Questions
2. Read the entire chapter and relate to the situation.
1. A
2. B
3. D
Unit-09-Manager and Decision Making
Structure:
9.1 Introduction
Objectives
9.2 What do Mangers Accomplish?
9.2.1 Managerial Roles and Their MIS Support
9.3 Decision Making
9.3.1 Rational decision making and its limits
9.3.1.1 Organizational Limits to Rational Decision Making
9.3.1.2 Individual Limits to Rational Decision Making
9.4 Individual differences and cognitive styles
9.4.1 Creativity in decision making by individuals and groups
9.4.1.1 Software that assists your creativity
9.5 Summary
9.8 Answers to SAQs and TQs
9.1 Introduction
With this unit we shall begin with roles and activities performed by managers and the role played by
MIS to fulfill them. Then discuss the decision making in the organization, the rational decision
making and their limitation during decision making. We shall conclude by discussing how the success
of a management information system in supporting a decision maker depends heavily on certain
characteristics of the individual.
Objectives:
· What are the various roles of managers and how MIS support managers.
· Explain Herbert Simon’s model of decision making
· Rationality in decision-making and the limitations during decision-making.
· How creativity is important in decision making
9.2 What do Mangers Accomplish?
Management information systems have evolved from offering generalized support to the controlling
and, later, to the planning functions of management, to supporting the daily work of virtually every
manager. Even the most computer-resistant managers are included in electronic mail networks and
use reports produced by MIS. This leads us to a question: what are the activities of a manager? In
answering this question, we will also answer another: what information-system support does a
manager need?
Whereas the classical model of managerial functions derived from Fayol’s work provided us with a
summarized view of management activities, behavioral studies of managers give us a detailed view
of how these activities are actually carried out.
A realistic behavioral picture of a modern manager has emerged from the work of Henry Mintzberg
(1973). He described the daily work of a manager as hundreds of brief activities of great variety,
requiring rapid shifts of attention from one issue to another, very often initiated by emerging
problems. Half of the activities of chief executives last less than 9 minutes, with only 10 percent of
them taking more than an hour. Confirming these findings, Blake Ives and Margrethe Olson have
determined that the average activity of an information systems manager lasts 10.3 minutes.
Managers have a "bias for action" (rather than reflection). They strongly prefer verbal media, which
offer flexibility and responsiveness, and they spend most of their time in face-to-face meetings,
where body language and nuance of expres sion enhance communication. The distribution of time
spent by executives is shown below. Ives and Olson have determined that MIS managers dis tribute
their time in a very similar fashion.
Activities % of time
Telephone calls 6
Desk work 22
Tours and travels 3
Unscheduled meetings 10
Scheduled meetings 59
A manager maintains a complex web of contacts, both outside and inside of the organization. A
successful manager is not swamped by the onslaught of these activities: he or she maintains a
personal agenda. This conclusion is confirmed by John Kotter’s analysis of the work of effective
managers. Kotter described their activities as establishing personal goals and agendas, building a
personal network of people at all levels of the organization, and implementing their personal
agendas with the help of this network. Though personal agendas are related to organizational plans,
they are separate from them-but it is through these individual agendas that organizational plans are
implemented.
Effective managers carve out, as it were, their own informal structure within the corporate
structure, and they use this network to keep themselves informed and to influence others. It has
been observed that proactive managers make special efforts to develop a long-term view and a long-
term agenda. These efforts range from quiet thinking time without telephone calls or visitors to
executive retreats away from everyday concerns; through such activities, these managers attempt
to develop a vision for their subunit and for the organization as a whole. Thus, actions do not
preclude reflective thinking.
9.2.1 Managerial Roles and Their MIS Support
Henry Mintzberg classified managerial activities into ten roles falling into three categories, as shown
in table below.
Role Dominant MIS Support
Interpersonal Roles Assistance in
Figurehead Communication:
leader Teleconferencing
Personal
liaison Interaction Office Information Systems
Informational Roles
Monitor
Extensive: Management Reporting Systems
Disseminator Executive Information Systems
Information
Spokesperson transfer Office Information Systems
Decisional Roles Assistance in Decision Making and

Communication:
Entrepreneur
Decision Support and Executive Information
Disturbance Handler Systems
Resource Allocator Crisis Management Systems Decision Support

Systems Group DSS and Negotiation Support
Negotiator Decision making Systems
Mintzberg’s work was done during the first era of organizational computing, when the work of an
individual manager was still very poorly supported by MIS. In table above listing of the extent of MIS
support available today..
As a figurehead, a manager (particularly a high-level executive) represents the organization to his or

her subordinates and to the outside world. As leaders, managers influence their subordinates to
carry out their tasks so as to satisfy their own goals as well as the organizational goals. By
developing liaisons vertically and laterally, managers build and exercise their personal networks of
people. By their very nature. the function of MIS in interpersonal roles is limited, particu larly in the
case of figurehead and leader roles. There is just no substitute for personal contact in very many
cases. However, office information systems have provided significant support for the liaison role.
Certain kinds of office infor mation systems, such as Coordinator (from Action Technologies),
support a con versation (rather than a one-sided message) as a unit of social interaction in an
organizational setting. Office information systems enhance communication be tween individuals and
between various work groups. Even in roles requiring more personal contact, a busy executive can
participate in a teleconference when she or he cannot be there in person.
In their informational roles, managers receive (monitor) and disseminate information, both inside
(as disseminators) and outside of the organization (as spokespersons). On-line management
information systems have taken over many of these managerial roles. Reductions in the ranks of
middle management, people whose work to a large degree consists in playing these roles, is due in
part to this fact. Management reporting and executive support systems, complemented by office
information systems, make much of the information accessible to those who need to know.
It would be misleading to assert that at the present time MIS satisfies most man agers’ needs in their
informational roles. Particularly when facing uncertainty or equivocality, managers prefer to deal
with so-called "information-rich" sources. Richard Daft and Robert Lengel found that these preferred
sources are, in order of decreasing richness: face-to-face conversations, telephone con versations,
personal documents (letter or memos), impersonal documents, and numeric reports. We stress the
personal and responsive nature of the "rich" media.
All managerial roles have an element of decision making; the decisional roles are the ones where
this is the crucial aspect. An entrepreneur initiates new market-oriented activities and, in the
Mintzberg model, also introduces innovations in organizational activities. In this role, a manager
brings together re sources in a novel way. Decision support systems assist an entrepreneur in
considering options, selecting one, and planning for its implementation. Handling disturbances is a
part of managerial control; the emerging crisis manage ment systems will help here. Resource
allocation is the essence of planning, and decision support systems have become indispensable in
many organizations for this purpose.
The activity of any organization can be viewed as a multiplicity of negotiated conflicts; mediation
between parties is a frequent role for a manager. Indeed, to implement a personal agenda, a
manager in today’s organization will have to negotiate: with superiors for resources, with
subordinates for committed work. Using a group decision support system, or even an executive
information system, may help to develop common assumptions and resolve conflicts. Another form
of negotiation is dealing with customers, suppliers, and other stakeholders. Being informed of the
facts-garnered to a large degree through information sys tems-is a basis for any negotiation. A class
of systems specifically designed for the collective work of negotiating parties is presently evolving.
As you can see, the tasks of decision making and communication that underlie management activity
find relatively extensive support in information systems. This support will undoubtedly increase. It
is, however, up to managers to use information technology in a creative fashion.
Because of the nature of a manager’s work-which is characterized by brevity, variety, and

fragmentation-information systems used directly by managers need to have these characteristics:
· They should not require extensive periods of concentration.
· They should make it easy to interrupt the work and to return to it at a later time
· They should offer the manager the capability to do various things at the same time-as is possible
with a windowing environment.
· They should make it possible to control communication time an electronic communication medium
makes possible an asynchronous conversation, as opposed to a telephone, which requires the
presence of both parties at the same time.
· Multimedia systems, including voice and imaging, can enhance communication by offering a
nonverbal communication content.
What are the various managerial roles classified by Mintzberg and relate the MIS support for the
same.
9.3 Decision Making
A manager is a problem solver, and the fundamental activity in problem solving is decision making.
Decision making is the process of identifying a problem, developing alternative solutions, and
choosing and implementing one of them. Problems that require decisions are sometimes difficult to
perceive, and even more difficult to define (or "frame"); often they require multiple decisions to
solve.
A well-established model of the decision-making process has been proposed by Herbert Simon
(1960), based on the formulation of methodical thinking by the philosopher John Dewey (though it
can be traced back to Aristotle). Simon’s three-step model is shown in figure 9.1.
The process begins with a search for a problem or an opportunity-bold people do call problems
"opportunities in disguise." Effective managers thus do not avoid problems-they seek them out.
Innovative companies seek out customer opinions about their products. Proactive managers of
information systems work closely with end users to see what problems they can solve for them.
Fig. 9.1: Simons three step model
More and more, chief executives turn to their executive information systems each morning to look
for first signs of developing problems or opportunities. This first stage of the decision-making
process is called intelligence, because problem finding requires a search of the environment:
problems frequently do not present them selves for some time, and opportunities do so even more
rarely. Executive in formation systems and carefully designed management reporting systems
contain built-in triggers and exceptions that help alert a manager to a problem. Systems developed
to address the critical success factors (CSF) of an individual manager are likely to spotlight a
problem.
Once a manager finds a problem, he or she needs to formulate or "frame" it. An experienced
manager often recognizes a problem as similar to one he or she has already encountered. The
intuitive grasp of a problem most often relics on such an ability to establish an analogy. The activity
that Simon called design involves the development of alternative solutions to a problem. This is a
creative, divergent (leading in many directions) process. Some of the solutions may require more
intelligence-more informa tion gathering about the problem. Solutions to the problems we are
discussing are actually courses of action-there are many aspects to such a solution, and the phases
of intelligence and design may be rather tightly interlocked itera tions: garnering more information
leads to new alternatives, which in turn call for more information.
Problem framing and development of alternatives, highly creative processes, find rather scant
support from automated systems. Some decision support systems offer a certain assistance here, but
most of the tools we shall discuss below rely’ on human ingenuity-informed by MIS.
The choice of an alternative often has to be made in an environment of consid erable risk or
uncertainty. No satisfactory solution may be found among the avail able alternatives, in which case
the decision makers may have to go back to the design stage to develop other alternatives, or even
to the intelligence stage to reformulate the problem. The what-if mode of decision support systems
directly supports this phase. Expert systems begin to support it as well.
Implementation of a decision is a broad issue. In general, both the quality of the decision and of its
implementation are higher if the people who make the decision are also responsible for its
implementation. Many implementation dif ficulties have been tracked to the separation of these
functions. Organizational change processes, may need to be activated to implement more far
reaching decisions. The effects of such decisions may be tracked with management reporting and
executive support systems. As in any control process, corrective actions may have to be initiated
when necessary-indeed, managers may have to rethink the de cision. Project management software
is used to schedule human resources and to track project timelines.
Simon has also classified all decisions into two classes, now called structured and
unstructured. Structured decisions are repetitive and can be represented as algorithms-
programmable procedures. Thus, they can be relegated with ease to computer
processing. Unstructured decisionsrequire human judgment, while the decision-making process can
usually profit from computerized sup port.
9.3.1 Rational decision making and its limits
The classical concept of a perfectly rational decision maker does not apply to the plethora of
situations in organizational decision making. Most decision making is subject to bounded, limited
rationality. Some of the limits arise from the way organizations function, some from our cognitive
limitations as human individuals.
The classical model of a decision maker was formulated in economic theory and is usually attributed
to Adam Smith. This model is normative (prescriptive); that is, it describes how a
person should make a decision. The process the model describes is known as rational decision-
making.The model makes the fol lowing very strong assumptions:
· The rational decision maker seeks to maximize the payoff from a decision (for example, profit or
market share attained by a firm); in more general terms, the decision maker seeks to optimize.
· The decision maker knows all possible courses of action (alternatives).
· The decision maker knows the outcome of each course of action.
The model approximates certain real situations, and we shall discuss techniques for applying it.
However, with more complex, less structured decisions, it is impos sible to specify all the
alternatives and their outcomes, owing both to their ex cessive number and to lack of information.
The impossibility of centralized planning of a nation’s economy, even with the use of any computing
power avail able in the foreseeable future, is just one proof that the decision-making model based
on full rationality is, in general, not realistic.
Since full rationality, with its goal of optimizing, is an impossibility in most re alistic situations, an
alternative theory of decision-making behavior has evolved. In this theory, proposed by Herbert
Simon (1960), the decision maker exhibits bounded rationality. Since a decision maker’s ability to
perceive all the alter natives and their outcomes is limited by cognitive abilities, financial
resources, and time pressures, this model suggests that decision makers do not actually optimize
when making decisions. Rather, they satisfice (word coined by Simon). That is, decision makers
choose the first alternative that moves them toward their goal; the goal itself may be adjusted as
incremental decisions suc ceed or fail.
The alternative chosen by a satisficing decision maker satisfies his or her aspi ration level and risk-
taking propensity. Therefore, raising the aspiration levels of managers and heightening their
expectations is one technique for teaching them innovative decision making. This prevents them
from settling on mini malistic departures from standard operating procedures. If we consider the
concept of bounded rationality more broadly, we should be able to identify both the organizational
and individual factors that limit it.
9.3.1.1 Organizational Limits to Rational Decision Making
The rational model of organizational decision making reflects only some aspects of the decision-
making environment: those that lend themselves most readily to receiving support from information
systems. Other aspects include incremen talism, chance-driven choice making, political/competitive
behavior, and pro grammed choice making. As you shall see, most of these decision-making
behaviors are rooted in the divergent interests of the people involved in making a decision.
Therefore, various types of group decision support systems (GDSSs) can help these groups to
negotiate, foresee, and manage a crisis, or to look at a broad array of alternatives before arriving at
a decision.
Charles Lindblom analyzed how the decision-making process, particularly in large organizations
(including governments), differs from the rational model. He contended that decision making in
large organizations under ordinary circumstances is a process of "muddling through"-making
small,incremental changes from existing actions and policies. The important criteria in this decision-
making mode are avoiding the uncertainty of major changes and maintaining the consensus of all
involved. Making a decision is not concluded by the "choice" of an alternative; it is rather a
continuous process, during which any chosen course of action may be modified as it is implemented.
The more recent, and most pessimistic, so-called garbage can theory of orga nizational decision
making is based on the premise that not all organizations are destined to succeed-many companies
(even those consid ered excellent at some point) will fail. These firms are unable to adapt to the
changing environment, and much of their decision making consists of attaching solutions to problems
in a rather random manner. In one sense, "garbage-can" decision making is present to some extent in
all companies: because of the dif ficulty in forecasting outcomes, chance does playa role in
providing a solution to many an organizational problem.
Other aspects of organizational decision making are reflected by what George Huber called
the political/competitive model. A decision process generally includes several participants, each of
whom may seek to influence the decision in a direction favorable to themselves or to the unit they
represent. For example, several studies of budget development clearly point to it being a po litical
process. The need to reconcile the diverging interests of various stake holders (for example, senior
management, labor, government, and others) often leads participants to avoid making major
departures from current policies-and is thus one of the reasons for incremental decision making.
Rational decision making in organizations is also limited by programmed be havior. When decision
makers engage in this type of behavior, they follow stan dard operating procedures, which
constrains their choices and prevents creative problem solving as they opt for the "safe and tried."
An analysis of the results of previous choices, assisted by information systems, may help decision
makers relax the constraints of programmed choice making.
9.3.1.2 Individual Limits to Rational Decision Making
Individual capability to make rational decisions is also limited. Individuals have frames of
reference based on their experience, knowledge, and cultural back grounds. These frames of
reference act as filters, blocking out certain types of information or certain alternative courses of
action-to the possible detriment of quality decision making.
Human ability to process information is limited by what Princeton University psychologist George
Miller called "the magical number seven, plus or minus two". In other words, we cannot retain in
short-term memory and consider simultaneously during decision making more than five to nine
"chunks" of information. A simple example is the number of digits in an international long-distance
telephone number, which we usually need to dial right after being told what it is. To cope, we
organize the individual digits into larger chunks (a familiar area code or country code is such a
chunk-we remember it as a single unit). It is partly because of this limitation that we analyze or
design information systems through a process of stepwise refinement; we are thus able to handle
the system by dealing with only a few components at a time.
Human decision making is distorted by a variety of biases. Amos Tversky and Daniel Kahneman have
established that people are highly averse to possible loss and will undergo significant risk to prevent
it, even though they would not incur such a risk when seeking gain. People frequently perceive a
causal relationship between two factors when there are no grounds for doing so. Vivid events that
are easily recalled or events in the recent past are unjustifiably assigned higher probability and
weigh more heavily in the decision. People more readily accept infor mation that confirms, rather
than challenges, their current convictions.
Our understanding of probabilistic information is generally poor. For ex ample, unwarranted

inferences are frequently drawn from small samples, with neglect of available statistical techniques
for ensuring the reliability of such con clusions. This is why "lying with statistics" often encounters
low resistance.
Decision makers are more likely to use only readily available information rather than transform that
information into a potentially more useful form. The form in which information is displayed
influences people’s understanding of it. For ex ample, items listed first or last have a greater impact
than those in the middle.
All this means that people’s perception of information and their decision making based on that
information may be manipulated. It also points up the need to consider carefully the way
information is presented in order to avoid biasing decision making. On the other hand, the skill of
decision making can and must be acquired through training and reflective practice.
1. Explain the decision making process proposed by Herbet Simon
2. Explain the concept to rational decision-making and their limitations
3. Explain the individual capability of decision-making and their limitations
9.4 Individual differences and cognitive styles
The success of a management information system in supporting a decision maker depends heavily on
certain characteristics of the individual. Some of these are differences in the attitudes of system
users; others concern individual cognitive behavior.
Much of the research regarding individual differences has been summarized by Robert Zmud.
Individuals who tend to access information to a greater degree exhibit a low degree of dogmatism, a
higher risk-taking propensity, an internal locus of control, and low tolerance for ambiguity.
It has been recognized that people do not necessarily understand their own in formation
requirements. This underscores the need for MIS specialists to bring these requirements to light and
the importance of using techniques such as prototyping of information sys tems.
Decision making is a cognitive activity, as are other phenomena such as learning or understanding
language. In general, human cognition is human information processing. People display
distinct cognitive styles in the ways they gather and evaluate information. In their analysis of how
managers’ minds work, James McKinney and Peter Keen have classified the information related
modes of thought along two dimensions: information gathering and information evaluation.
The information-gathering dimension focuses on perception, on the way a person organizes the
verbal and visual stimuli he or she encounters. Preceptive indi viduals bring to bear concepts
("precepts") to filter incoming stimuli; from the framework of these concepts, they look for specific
conformities with or devia tions from the concepts they have already formed. Receptive decision
makers focus on details rather than on a pattern and attempt to form a general picture of the
situation from these details (a characteristic of inductive thinking).
Information evaluation relates to the way an individual brings information to bear in the process of
decision making. A systematic (or analytic) decision maker approaches a problem by structuring it
and applying a well-defined method ex pected to lead to a solution. An intuitive individual applies
heuristics (rules of thumb) and shortcuts and uses trial and error to find a solution; these people are
more willing to go with their "gut feeling" about the problem. McKinney and Keen stress that all of
these modes of thought are appropriate in certain situations, and some combinations of them are
particularly fit in certain occu pations.
While the importance of individual cognitive style in the design of MIS has been contested, the fact
that significant differences exist among individual decision-making processes should inform the way
systems are designed. In particular, developers of information systems tend to be systematic
individuals and thus tend to assume that the users are (or should be) the same. End-user system
development and a number of available packages have ad dressed the necds of intuitive (or
heuristic) decision making. These systems allow the user to play out a variety of scenarios; the user
is able to identify and test new alternatives. Such systems should not impose a preset processing
order, but rather allow the user the freedom to set this order as he or she is working. It is desirable
that the system allow an easy shift back and forth between sum marized and detailed data (needed
by receptive individuals). A variety of tabular and graphical output formats should also be available.
Much of this wish list is now fulfilled in well-designed DSS and EIS.
9.4.1 Creativity in decision making by individuals and groups
Individual creativity is the cornerstone of good decision making? Cornerstones, however, do not
houses make, and organizational departures from rational de cision making, as we discussed, are a
frequent reason for the demise of creative problem solving.
Creative thinking offers new approaches to often ill-defined problems that are worth solving. The
creative process requires cultivation, and much of it can be learned. A well-regarded approach to
"creativity in business" is described in a book with that title by Michael Ray and Rochelle Myers. Ray
and Myers postulate that creativity consists in learning to release the human poten tial present in all
of us. James Adams sees the road to individual creativity as a process of overcoming the following
obstacles:
· Perceptual blocks: stereotyping, preconceived notions, inability to see a problem from various
viewpoints
· Emotional blocks: fear of taking risks, desire for orderliness, lack of a sense of challenge
· Cultural blocks: avoidance of fantasizing and ret1ection, feeling bound by tradition, fear of right-
brained thinking (because we have been trained to believe that analytical thinking is superior to
intuitive or qualitative judgments)
· Environmental blocks: lack of support within the organization
· Intellectual blocks: lack of information, int1exible use of problem-solving strategies, inadequate

skills in expressing ideas (for example, verbally, mathematically, or visually)
As soon as we have classified obstacles in this fashion, we can identity our prin cipal inadequacies
and deal with them. Finding new associations between ideas underlies creative thinking. Recent
analyses indicate that much creative decision making in organizations is performed or stimulated by
groups-from a work team to the chief executive’s "cabinet."
People in a group are able to bring diverse backgrounds, expertise, and cogni tive styles to bear on a
problem. It is sometimes said in jest that the camel is a horse designed by a committee; we may
note that the committee seems to have come up with an animal that has contributed immensely to
human civilization. Group work has to be carefully organized; certain individuals do not perform
well in group settings.
9.4.1.1 Software that assists your creativity
Idea Fisher, a rather elaborate program developed by Fisher Idea Systems, has the capacity to come
up with new associations between ideas for you. With a knowledge base of 675,000 words and
phrases and a natural-language user interface, the program helps you think through a concept.
Let us say you are preparing a marketing campaign. Idea Fisher will first guide you through a series
of questions to help you clarify your goal (far example, "What symbolic meanings does the object
have?" or "What is its purpose or function?"). The program can give you tens or hundreds of
associations with the topic you select. For example, the category "red" will bring out, among others:
crimson, Little Red Riding Hood, lobster, Red Square, communism, red alert, hot, and red sky at
night. You can then cull from the list the notions you may want to use in your campaign. Not that
you did not know most of these concepts-they simply may not have sprung to your mind when you
needed them. To use a term we discuss in the chapter, IdeaFisher does the brainstorming for you.
Probably the best known among group problem-solving techniques is brain storming, originated by
Alex Osborn (1953), a founder of one of the most suc cessful U.S. advertising agencies. The goal of a
brainstorming session is to generate ideas. This is of use at several stages of the decision-making
process when the group is framing the problem or identifying the pertinent information, and
particularly when they are generating alternative solutions. A group of five to ten people
participates, with one of the members acting as a recorder, listing ideas as they are presented. The
ground rules of brainstorming are:
· No criticism-group members make no evaluation of ideas as they are freely generated.
· "Anything goes"-wild ideas are encouraged, and again, internal judgment by participants should be
suspended .
· The more, the better-the more ideas the group generates, the greater the likelihood of coming up
with several good alternatives .
· Build on the ideas of others-participants should feel free to combine or modify ideas generated by
others and thus come up with superior ideas.
Brainstorming aims at fluency in the idea-generating process, fluency that should result in
significant output. Another technique for creative problem solving, the synectics process, is more
selective-only the best ideas are further considered as the process progresses. Synectics encourages
thinking by analogy (for example, what can your experience playing baseball teach you about the
way your project team should be organized?). The nominal group tech nique addresses the needs of
groups in which broad differences of goals and opinions are certain to lead to antagonism and
argumentation: large parts of the sessions are spent by participants working alone, and their ideas
are then cir culated and evaluated.
Groups can also constrain individual creativity; some of the analytical work ex ploring the reasons
for this is cited by Nunamaker. The opposite of
cre ative work in a group is groupthink, a term coined by Irving L. Janis of Yale University meaning
dysfunctional decision-making behavior in a group. This drive for preservation of the group unit at
the expense of grappling with the issues fosters over optimism, the illusion of invulnerability, and
collective
ra tionalization of decisions and opinions that are not valid on rational grounds. Pressure on or the
removal of dissenters from the group is a part of this behavior.
1. Explain the various cognitive style as identified by James McKinney and Peter Keen.
2. Individual creativity is the cornerstone of good decision making? Elucidate.
9.5 Summary
Managers play three types of roles in carrying out their functions. Interpersonal roles are mainly
based on face-to-face interactions, though in some cases computerized communications media may
be employed. Informational and decisional roles are supported by a variety of information systems,
which make information available, assist in decision making, and serve as a means of
communication.
Decision making is a fundamental managerial activity. It may be conceptualized as consisting of four

stages: intelligence, design, choice, and implementation. The rational decision making model
applies to a rather limited class of structured decisions. Rationality is limited ("bounded") by both
organizational and human limitations. In their information-processing activities, people display
distinct cognitive styles as well as individual differences.
1. Consider the structured decision that you make in your daily life. Evaluate in terms of decision
making process.
2. What is brainstorming. Explain.
9.7 Multiple choice questions
1. Blake Ives and Margrethe Olson have determined that the average activity of an information
systems manager lasts ________ .
A. 10 Minutes
B. 10.3 minutes.
C. 11 minutes
D. cannot be determined
2. well-established model of the decision-making process has been proposed by Herbert Simon in the
year ______ .
A. 1950
B. 1955
C. 1960
D. 1970
3. are repetitive and can be represented as algorithms-programmable procedures.
A. Semi structured decision
B. Ill structured decisions
C. Unstructured decisions
D. Structured decisions
Section 9.2.2
This has been mentioned in section 9.2.1
Section 9.3.2
Section 9.4.2
Terminal Questions
1. This has been mentioned in section 9.3. Consider example in the frame work explained
Multiple Choice questions
1. B
2. C
3. D
Unit-10-DSS and EIS
Structure:
10.1 Introduction
Objectives
10.2 When should you use the decision support approach ?
10.2.1 Ill structured problems
10.2.2 How DSS are Deployed
10.2.3 Capabilities of DSS
10.3 Components of DSS
10.3.1 Data Management Subsystem
10.3.2 The model Management Subsystem
10.3.3 The Dialog Management Subsystem
10.4 Classification of DSS
10.4.1 Data Access Systems
10.4.2 Data Analysis Systems
10.4.3 Forecast-Oriented Data Analysis Systems
10.4.4 Systems Based on Accounting Models
10.4.5 Systems Based on Representational Models
10.4.6 Systems Based on Optimization Models
10.5 Building a decision support system
10.5.1 DSS Technology
10.5.2 Who builds a DSS
10.5.3 How DSS are developed

10.5.4 Developmental trends in DSS
10.7 Organisational aspects of DSS and EIS
10.8 Summary
10.1 Introduction
With this unit, we shall start with the concept of Decision support system. We begin by discussing
how it supports the management and organization. We shall conclude by the organizational aspects
of DSS and EIS.
Objectives:
· When DSS could be used in the organization
· What are the capabilities of DSS
· What are the various components of DSS
· How DSS are deployed
· How EIS differs from DSS
10.2 When should you use the decision support approach ?
Decision support systems offer managers a package of capabilities for prompt and flexible access to
data and to models that work with the data to produce needed information. These systems vastly
expand the abilities of knowledge workers to make decisions concerning ill-structured problems. The
hallmark of DSS is flexibility.
Decision support systems are a type of MIS that represent a distinct approach to computerized
support of managerial decision making. The approach was artic ulated in the early 1970s by Michael
Scott Morton and has since become a broad area of information system practice and research. As
stressed by another pioneer in the area, Peter Keen, the use of DSS in a firm that previously relied
only on management reporting systems is a form of innovation, since entirely new capabilities are
now available.
Decision support systems are interactive information systems that assist a de cision maker in
approaching ill-structured problems by offering analytical models and access to databases. The
development of these systems arose from dissat isfaction with the rigidity of reporting systems that
defined the early MIS envi ronment; thus, their hallmark is (or should be) flexibility. Personal DSS
should be easy to develop-end-user-oriented tools should be at hand for the purpose.
An organizational DSS, used throughout an enterprise, should be developed in a disciplined fashion.
All DSS should be easy to use in the way that best supports the cognitive style of the individual
decision maker. We can therefore think of a DSS as a set of capabilities: within its area of
application, such a system should give its user a way to use models and databases in an interactive
session that best supports his or her way of thinking about the problem at hand. In a way, DSS steer
a middle course between the severe lim itations of management science models, where a number of
unrealistic assump tions may have to be made, and management reporting systems, which make
their user do most of the analysis and the relating of various items of information to each other.
10.2.1 Ill structured problems
What type of management decisions need DSS support’ Expanding Simon’s cat egorization of
problems that have to be dealt with by people in organizations, and following the work of Andrew
Garry and Michael Scott Morton we arrive at the categories of problems shown in table below.
TYPE OF EXAMPLES OF HOW DECISIONS
PROBLEM PROBLEM AREAS CHARACTERISTICS ARE MADE
Availability of an
Order validation algorithm {standard Fully computerized
Structured Inventory reorder operating procedure) (TPS or MRS)
Sales forecasting
Human decision maker
Budgeting supported by
Programmable aspects
Semi-structured Risk analysis present computer
Promotion of
personnel
Introducing new No standard Principally by a human,

with some computer
Unstructured technology procedures or aspectssupport
available
As we can see, the principal domain of DSS is support of decision making for semi structured
problems, where parts of the decision process itself often require very significant computer
support. This is so because a model (in some cases containing hundreds of equations) has to be
applied against a database often comprising millions of data items, with human judgment injected
at critical junctures.
Unstructured problems, often stemming from leading and organizing activities, are in some cases
supported by DSS in minor aspects; and in certain cases, a DSS may be employed for easy access to
data. Decision making to solve unstructured problems is now also supported by expert systems, but
within narrow domains such as, for example, a decision regarding loan approval. Other systems that
do not support the decisional aspect of this process assist the organizational aspect by bringing the
collective wisdom of a group to bear on the problem through office information systems.
In ill structured both semi-structured and unstructured-problems, the

explo ration of alternative solutions cannot be completed before a choice must be made. Decision
making in this problem environment is more typical in the work of middle and higher management;
we should stress, however, that such problems occur at all three managerial levels, and therefore,
the use of DSS applies to operational, tactical, and strategic organizational levels. When we say that
one of a manager’s principal tasks is to deal with ambiguity, we mean that he or she will be called
upon to solve many illstructured problems.
In the systems-theoretic sense, if an ill-structured problem is treated as struc tured and approached
wholly with the aid of management science models without significant intervention from a human
decision maker, then the open system being described is reduced to a closed or relatively closed
system be cause most of the environmental factors are ignored. The use of a DSS makes it possible
to include a variety of these environmental influences and thus ensures a more realistic open-system
approach to problems.
10.2.2 How DSS are Deployed
To make all this more tangible to you, let us consider a few brief examples of DSS application.
Let us consider five different sample arenas of DSS application. These should give us insight into
what a DSS can do for us.
1) Firestone Rubber & Tire Company of Akron, Ohio built a DSS to assess the best strategy for rolling
out a new brand of tires. The system permits analysts to look for relationships between past
financial results and external variables, such as total car production and gross national product, and
thus build sales forecasting models.
Using the system containing these models, the Firestone analysts were able to rapidly build for the
corporate vice-president of technology a database on all 200 competitive brands of tires, including
data on their construction, tread, volume, and sales estimates. The executive used this database to
assist him in finding a competitive strategy. The system enabled the organization to integrate the
technological and financial aspects of a product decision and thus create a basis for joint decision
making by the company’s various functional areas. The availability of this system conferred a
competitive advantage on Firestone.
2) Houston Minerals Corporation was considering a joint venture with a petrochemicals company to
build a chemical plant. Using a DSS generator-a system for building DSS-the planning staff of the
company built ill a few days a DSS projecting the risks of the venture, taking prices, supply, and
demand into consideration. The results suggested that the project would have a positive outcome .
However, the executive vice-president responsible for the decision requested an answer to the
question: "What is the chance that this project will result in a disastrous outcome’" In the words of
the company’s chief planner: "Within twenty minutes, there in the executive boardroom, we were
reviewing the results of his "what-if" questions. Those results led to the eventual dismissal of the
project, which we otherwise would probably have accepted.
Thus, a DSS enabled the decision maker to bring his judgment to bear on the problem; this judgment
was fully supported by the information made available by the DSS and by the insight of planners that
went into the construction of the model.
3) A portfolio manager of a large pension fund is responsible for investing billions of dollars in
assets. A huge variety of investment vehicles with varying degrees of risk and reward are available
at all times, and the funds are at all times placed in a complex array of investments. The manager
needs to make constant investment decisions consistent with the objectives of the fund, with a
variety of environmental factors, and with her or his experience and informal information. Certain
aspects of this work can be handled by expert systems that suggest decisions. However, overall risk
analysis with the use of a DSS permits the manager to balance various forms of investment and
spread the funds over a variety of investments.
4) A DSS for police-beat allocation was built for the city of San Jose, California. An officer could
display a map on a VDT and call up for each zone the data showing police calls for service, service
times, and activity levels. The officer could experiment with various alternatives involving the
assignment of police patrols by interacting with the system. The system became a tool that helped
its users to exercise their judgment. An experiment was run to compare an assignment made by an
officer using the DSS with an assignment made by a linear programming model that did not rely on
human judgment. The officer-DSS team arrived at a superior solution.
5) As the utilization of a DSS assisting the navigators of vessels on the lower Mississippi River
increased, the number of accidents on this once extremely dangerous waterway decreased
precipitously. The system simulates the traffic of the vessels in the area by dead reckoning; it
updates the vessels’ positions from their original locations by considering the direction and speed of
their movement-with all the initial information radioed in by the ships’ navigators. The Coast Guard
personnel use the system by watching blips on their consoles, which resemble air traffic control
displays. They alert navigators to developing situations of undue proximity to other vessels by radio
communication, and accidents are thus prevented.
10.2.3 Capabilities of DSS
DSS have several features to offer in the general information system environment of an
organization. Specifically, DSS can:
1) Support decision making in ill-structured situations-in which, precisely owing to the lack of
structure, problems do not lend themselves to full computerization, and yet do require computer
assistance for access to and processing of voluminous amounts of data.
2) Help to rapidly obtain quantitative results needed to reach a decision. We can construct a DSS
model much faster than we can do modeling with other MIS components, and the model can be
flexibly deployed with data as needed during the decision-making process.
3) Operate in the ad hoc (as needed) mode to suit the current needs of the user, as opposed to
operating in a generally scheduled fashion as management reporting systems do.
4) Support easy modification of models, which increases the organization’s responsiveness to the
changing environment both within and outside an organization.
5) Support various stages of the decision-making process, as we saw in the focus case, a DSS can
help to find a problem. The creative generation of alternative solutions is expected of the human
decision maker. The principal strong point of DSS is their support for the consideration of
alternatives ("what-if" scenarios) and for the informed choice of the preferred solution. Since the
system does not actually make a decision. A manager can employ it to arrive at a decision that is
organizational desirable and that will be supported by others during the implementation stage.
Decision implementation may also be facilitated by the continuing use of the model to track
progress and provide visibility to the effort.
6) Foster high-quality decision making by encouraging decisions based on the integration of

available information and human judgment. DSS give decision makers a degree of confidence in their
decisions unavailable to the decision maker who is wholly dependent on his or her judgment.
7) Offer flexibility-as opposed to a preordained pattern of use making it easy to accommodate the
particular decision-making style of an individual. However, some systems are more restrictive than
others: they may lack certain models or impose a certain sequence of operations and thus constrain
the user’s decision making. Restrictive systems may be simpler to use and may promote prescribed
decision -making patterns.
Facilitate the implementation of decisions. which frequently cut across departmental

boundaries. By creating and exercising common models, decision makers in the involved
organizational units develop common assumptions and, in general, learn to communicate at a
deeper level. This helps to fight the "not-invented-here" syndrome, so common in organizations,
that leads to the adoption of suboptimal solutions so long as they are one’s own.
9) Support group decision making, particularly through group DSS (GDSS). These systems, which we
shall discuss later, permit several people with a variety of experiences and areas of expertise to
bring them to bear on a decision, leading to more effective, higher-quality decision making.
10) Provide user-friendliness, a principal feature of well-designed DSS. User -friendliness can make
computer-supported problem solving attractive to individuals at all levels of an organization. The
user can work with the system in the style that best serves him or her. This helps managers,
professionals, and other knowledge workers to perform better. It also enriches their jobs,
particularly at the operational level.
11) Give managers the opportunity to gain a better understanding of their business by developing
and working with models.
1. Explain how DSS is deployed.
2. What are the capabilities of DSS?
10.3 Components of DSS
The three principal DSS subsystems and their principal capabilities are shown in figure 10.1. Various
commercial systems support DSS development and package these DSS capabilities in a variety of
ways by distrib uting them among a series of optional modules.
Fig. 10.1: Components of DSS
10.3.1 Data Management Subsystem
The data management subsystem of a DSS relies, in general, on a variety of in ternal and external
databases. Indeed, we have said that the power of DSS de rives from their ability to provide easy
access to data. This is not to say that a simple, usually spreadsheet-based DSS for the personal use
of a manager cannot rely on the manager’s limited personal database. It is simply that maintaining
the currency and integrity of a significant database of this kind is usually a daunting task.
Proliferation of personal databases also contradicts the principles of information resource
management.
Fig. 10.2: Data Management Subsystem
On the other hand, it is usually undesirable to provide a DSS with direct access to corporate
databases. The performance of the transaction processing systems that access these databases, as
well as the responsiveness of the DSS, would both be degraded. Usually, therefore, the database
component of DSS relies on ex tracts from the relevant internal and external databases. The user is
able to add to these data at will. This is shown in figure 10.2.
The extraction procedure itself is generally specified by a specialist rather than an end user. The
specialist needs to pay particular attention to data consistency across multiple decision support
systems that extract data from the corporate databases. If extracts for the DSS serving the same
functional area are made at different times, the extracted databases will differ and "battles of the
printout" may result.
10.3.2 The Model Management Subsystem
The power of DSS rests on the user’s ability to apply quantitative, mathematical models to data.
Models have different areas of application and come from a variety of sources. Software packages
for developing DSS (so-called DSS generators) contain li braries of statistical models. These models
include tools for the exploratory anal ysis of data-tools designed to obtain summarized measures
such as mean and median values, variances, scatter plots, and so forth. Other statistical models
help analyze series of data and forecast future outcomes by approximating a set of data with a
mathematical equation, by extending the trend of a curve by extrap olation techniques, or by
providing for seasonal adjustment. The capabilities of the model management component of DSS are
summarized in figure 10.3.
Other models help establish (or reject) causal relationships between various factors (for ex ample,
whether the drop in sales volume is caused by the aging of our target market segment). Market
response models show how sales depend on such factors as price and promotion. Simulation models
that generate input values randomly from a cer tain probability distribution (also called Monte Carlo
models-after the city where the famous casino is, of course) are employed for waiting-line
problems, such as establishing the number of operators needed for order taking or deciding on
staffing levels for a service center.
Fig. 10.3: Model Management Subsystem
Optimization models, developed by management scientists, are available for use in DSS. These
models aim to allocate resources to maximize profit or min imize cost or time. A number of such
models are based on a linear programming technique. These include models that allocate input
resources (labor, materials, capital) among various products; models that assign activities to
personnel or equipment; and models that determine the best shipping schedules from several points
of origin to several destinations. Other models optimize inventory levels or determine optimal
network configurations. Specialized model libraries are available for financial modeling, risk
analysis, or marketing.
A particular advantage of DSS is the decision maker’s ability to use a model to explore the influence
of various factors on outcomes (a process known as sen sitivity analysis). Two forms of such analysis
are the what-if analysis and goal seeking.
When doing what-if analysis, the decision maker creates multiple scenarios by assuming various
realistic values for input data, Thus, the decision maker asks "What if these are the values of the
inputs?" The model recomputes outputs for each case. Here are some examples of questions that can
be directed toward appropriate models:
What will be the cost of goods sold if the cost of raw materials increases by 10 percent?
What will be the effects on the company bonus program if sales increase by 3 percent and direct
expenses increase by 5 percent?
When goal seeking, the decision maker works backward from the assumed re sults to the needed
input values. Thus, the decision maker asks "What will it take to achieve this goal?" Some examples
of questions asked in this mode are:
· What sales volume will be necessary to ensure a revenue growth of 10 percent next year?
· How many service center employees will it take to ensure that every order is handled within three
minutes?
· What quarterly revenues will we need from each of our three products to gen erate the desired
profits during these quarters?
The actual form in which these questions may be asked depends on the options offered by the dialog
management subsystem of the DSS, which we shall discuss next.
There is significant research interest in providing a degree of automated model management. The
user would be able to present the problem in a system of this kind, and the system would
automatically select an appropriate model or construct one from the existing models and "building
blocks."
10.3.3 The Dialog Management Subsystem
Along with DSS’s ability to apply models to large volumes of data from a variety of sources, a single
advantage of DSS is the user-friendly and flexible interface between the human decision maker and
such a system. This stands in contrast to management reporting systems. The notable feature is
support of multiple forms of input and output. By combining various input and output capabilities of
a DSS, users can engage in the individual dialog styles that best support their decision-making styles.
The field of artificial intelligence has made some notable contributions to dialog management, such
as the ability to specify what is wanted in a subset of natural language or to activate the system by
voice. The window capability enables the user to maintain several activities at the same time, with
the results displayed in screen windows (the user employs a mouse to move between the windows).
A variety of help and even training-by-example capabilities may be offered. Significant attention has
been devoted by researchers to the effectiveness of computer graphics, as opposed to the tabular
display of data. Gary Dickson and his colleagues found that, in general, one cannot claim an ad
vantage (however intuitively appealing it may he) for graphics throughout all decision-related
activities. They did find, however, that graphs outperform tables when a large amount of
information must be presented and a relatively simple impression is desired. This is very often the
case-and the main reason why ex ecutive information systems, discussed later in this chapter, rely
heavily on graphics.
By analyzing the results of research in this area, Ali Montazemi and Shuohong Wang, concluded that
line graphics have time-saving ef fects on decision making for more complex decision tasks only, and
are less
d efective at providing precise information. Color graphics were found to improve decision quality,
but they did not reduce the time necessary to arrive at a deci sion. Graphic representation of
quantitative information requires considerable care to prevent distorted perception; Edward Tufte
gives a thorough and exciting presentation of the subject.
Summarizing the uses of graphical presentation of business information, Richard Scovill tells us that
most business graphs are designed to answer just four ques tions:
1. Who is the biggest?

2. How do circumstances change over time?
3. What is typical or exceptional?
4. How well does one fact predict another?
In general, it has been established that different decision makers and tasks are best supported by
different display formats. This again proves that the advantage of DSS in the area of dialog
management lies in providing a variety of dialog styles.
1. Write short note on :
a. Data management subsystem
b. Model Management Subsystem
c. Dialog Management Subsystem
10.4 Classification of DSS
DSS can be broadly used throughout an organization. These systems can be classified by the man
agement level they offer support to (operational, tactical, or strategic) or by the functional area
they are used in (marketing, finance, and so forth). They can also be classified into personal and
organizational systems.
However, to obtain a thorough view of the variety of capabilities these systems can deliver, it is
best to follow Steven Alter and consider a classification based on the degree to which the outputs of
a given system can determine a decision. This classification yields an entire spectrum of systems
ranging from the totally data-oriented to the more powerful model-oriented systems. Clearly, a
given DSS often possesses a mix of these capabilities-in which case we would classify it with respect
to its most powerful capability. However, the purpose of this categorization is to review the variety
of capabilities offered by the DSS approach rather than to give you tags to put on a particular
system.
10.4.1 Data Access Systems
These systems (which Alter calls "file-drawer systems") can provide user-friendly ad hoc access to
the database. This capability is equivalent to what is offered by most DBMS through a query
language. However, such systems are frequently set up to allow shop floor personnel to continuously
monitor the shop floor or a particular piece of machinery; thus they fulfill operational control
purposes.
10.4.2 Data Analysis Systems
These systems help to analyze historical and current data, either on demand (ad hoc) or
periodically. The portfolio analysis system we discussed earlier on belongs in this category. An
airline uses a system of this type to compare its performance with that of its competitors. The
system’s database contains the data on the quarterly performances of all airlines, submitted to the
Civil Aeronautics Board of the federal government in US. Data analysis systems are frequently
oriented toward the consolidation (aggregation) of data, such as summarizing the performances of a
firm’s subunits and presenting the summaries in graphs. Only very simple models are employed.
10.4.3 Forecast-Oriented Data Analysis Systems

These systems (which Alter calls "analysis information systems") generally assist in developing
product plans, including market segment forecasts, sales forecasts, and analyses of competitive
actions. Their operation is based on access to a variety of internal and external marketing and
product databases, including series of historical data. Ad hoc use for planning purposes by a staff
analyst or a marketing manager is typical. The systems in this category include only the simpler of
the variety of marketing models, which show how existing trends in the marketplace will extend in
the future if similar conditions prevail
10.4.4 Systems Based on Accounting Models
These are used to consider alternative options for planning purposes, based on accounting
definitions and relationships. Such systems typically produce estimated (pro forma) income
statements, balance sheets, or other measures of financial performance. A system of this type
accepts estimates of costs and revenues as inputs rather than forecasting them (for example, it
would require a ready sales forecast). The "what-if" mode of operation is typically employed to
compare alternatives.
10.4.5 Systems Based on Representational Models
These systems go beyond the use of ready standard formulas, such as those employed in systems
that rely on accounting models. Rather, representational models show the dependence between a
controllable variable, such as the price of a product, and an outcome, such as sales. These are
frequently simulation models which yield probabilistic results.
The market analyst at Parke-Davis, introduced in the focus case for this chapter, produced a
representational model of customer response to promotional devices. Another example is a risk
analysis model, which considers such key factors as costs of resources (labor, raw materials, and so
on) and product demand.
10.4.6 Systems Based on Optimization Models
Optimization models are developed by management scientists to determine optimal allocation of

resources or best possible schedules. Using the techniques of linear programming, for example, one
is able to establish the mix of products that must be produced to maximize an objective such as
profit, subject to a variety of constraints. Using such a model, a company faced with temporary
supply limitations was able to adjust the supply of raw materials it needed for its products to meet
this temporary constraint.
In a DSS setting, these models are used by a human decision maker to arrive at a solution that
considers environmental factors not included in the model itself solutions within narrow domains of
knowledge are more and more frequently based on expert system technology. Such a system may
suggest product price, the rate of insurance renewal, or production volume.
Data-oriented DSS (or DSS components) primarily support earlier phases of the decision-making
process, in particular the intelligence phase involving dis covery of a problem or opportunity. The
design and choice phases are supported by model-oriented DSS. The implementation of a decision is
facilitated if the future implementers were involved in arriving at the decision with the use of DSS,
or even in constructing a model employed in it. In general, as an organi zation’s sophistication in
DSS use grows, a shift takes place toward model oriented DSS.
10.5 Building a decision support system
How does a manager acquire a DSS? As we shall see, this depends on the technology employed and
on the nature of the decision task that needs support.
10.5.1 DSS Technology

Three levels of DSS technology have been identified by Ralph Sprague. We shall consider them by
progressing from the level closest to the actual DSS to the one most distant from it.
1. Specific DSS
A specific DSS is the actual system that a manager works with during the decision process. Our
examples of DSS for portfolio allocation, joint venture evaluation, or police-beat allocation were
systems of this type.
A specific DSS is constructed with the use of DSS generators or tools, which we shall later describe in
more detail. There now exist a variety of specific DSS in the software marketplace; however, they
require customization to the actual environment in which they are to be used. In some cases,
elaborate customization may approach the complexity of using a DSS generator (which we discuss
next).
As we said, a DSS usually undergoes extensive modification as it is used. Therefore, any specific DSS
may be expected to evolve as time passes.
2. DSS Generators
A DSS generator is a software package that provides capabilities for building specific DSS rapidly and
easily. Capabilities of generators vary widely. Their common characteristic is that much of the
processing and data accessing functionality needed in a specific DSS is already programmed into the
generator and can be combined into the context of a specific DSS without much programming.
Elaborate DSS generators, such as EXPRESS and pcEXPRESS of Information Resources (Chicago),
incorporate a variety of tools for data analysis, financial modeling, and forecasting, combined with
the capability of accessing multiple databases for querying and reporting; they also include
comprehensive graphics packages. The first of these systems was designed for a mainframe
environment, the second for personal workstations. Generators based on personal workstations
generally offer the same capabilities as those based on minis or mainframes but impose various
limitations (for example, on the number of variables that may be used in a model). Linkage between
PCs and a mainframe is available for generator products of the same family. Spreadsheet packages,
such as Lotus 1-2-3 (Lotus Development Corporation) or Excel (Microsoft), offer ever increasing
capabilities for generating simpler DSS. Specialized templates (prewritten models for a specific area
of application) and non-procedural languages are available to simplify the use of spreadsheets for
DSS generation. Nonprocedural, fourth generation languages of various micro based DBMS, such as
FOCUS, NOMAD2, or Ramis II, provide another avenue for generating a specific DSS. The capabilities
of spreadsheets and DBMS are combined in integrated packages such as Framework, or Symphony
(Lotus Development). The main distinction between simply using a spreadsheet and producing a DSS
is that in the latter there is a clear separation of the data from the models.
3. DSS Tools
A variety of tools-such as a programming language with good capabilities for accessing arrays of data
(for example, APL), a plain spreadsheet, a statistical package, or a DBMS with its query facility-may
be employed as building blocks to construct a DSS generator or a specific DSS.
Sometimes personal DSS are indeed built with APL. I have observed many an actuary do so and find
the experience rewarding and stimulating. On the other end of the spectrum, a company may
decide to build its own DSS generator, specialized for its individual application area, from the
ground up, using these tools. Such a generator may become a source of competitive advantage.
10.5.2 Who builds a DSS

Both end users and MIS professionals become involved in the development of DSS. Ralph Sprague
analyzed the roles in DSS development related to the tech nologies we just discussed The
technologies and the roles played by organizational actors are shown in figure 10.4.
Fig. 10.4
Five roles involved in exploiting the DSS technologies can be identified:
1) The manager is the end user of a specific DSS: this is the knowledge worker who actually employs
the system to make decisions.
2) In some cases, an intermediary assists the manager. This role may range from simply running the
system in behalf of and on detailed instructions from the manager to the more substantive
contribution of framing the problem for exploiting the capabilities of specific DSS and displaying the
information in an appropriate fashion. Jack Hogue found that 95 percent of managers in his sample
used intermediaries at least occasionally.
3) A DSS builder employs a DSS generator to build a specific DSS for the given end users. The builder
is familiar with the business problem, as a business analyst would be, as well as with the capabilities
of the generator. In some organizations, these professionals are members of a DSS group which
supports the use of DSS technology throughout the enterprise.
4) The technical support specialist is usually a member of the information systems department who
installs and maintains various modules of the generator package as they are needed. This person
also ensures the linkages between the generator and other elements of the organizational
computing environment, such as databases, personal workstations, and networks.
5) The toolsmith develops the building blocks employed by the generator (or, sometimes, directly in
specific DSS). These technical experts usually work for software vendors.
10.5.3 How DSS are developed
By its very nature, a decision support system has a more customized orientation than a TPS or an
MRS: it is a collection of capabilities that support the decision making process of a certain individual
or a relatively small group of people. As the needs of these people change, the DSS should change
with them-DSS are truly built to be changed. We shall distinguish three prominent approaches to
building DSS-even though a large spectrum of possibilities exists between the first two extremes.
1. The Quick-Hit Approach
So dubbed by Sprague, the quick-hit approach is the way most DSS come into being. Indeed, most
DSS are built for the personal use of a decision maker. The initiative usually comes from an
individual manager, so the DSS are built either by the manager or by the builders from a more or
less formal DSS group. Generally, a DSS generator is employed (frequently a spreadsheet with
templates). The level of investment is very low and the payoff high.
Unless it is used as a springboard to more advanced stages of DSS assimilation into the organization,
this opportunistic approach results in little organizational learning. The risks associated with end-
user computing, including lack of maintainability, frequently exist in these cases.
In some organizations, however, the quick-hit approach is employed as an early stage in the process
of technology assimilation, in which case it is later replaced by an orderly process of development
for larger DSS.
2. Traditional Life-Cycle Development
This process begins with detailed system planning and analysis, progresses through the design stages
followed by coding and testing, and goes on to implementation – this is the development life cycle.
The process is lengthy, and there is no partial system to work with before the system is completed.
This development methodology, as we shall see later, is suitable for complex systems, in particular
those which affect many users and in which informational requirements can be established early
through the analysis process. This is indeed the case when a DSS generator is to be built. Therefore,
a DSS generator or a very large model-based organizational DSS that affects a number of functional
units in an organization may be fruitfully built using such a methodology. But in the development of
a specific DSS, such usage is the exception rather than the rule.
3. Iterative Development
In DSS practice, the future user or group of users generally do not know what they want from the
system. Moreover, an analysis process is not likely to surface a clear set of requirements. As in many
other activities in life, we learn what we want from an activity by starting to perform it. To do so in
decision making with a DSS, we need a prototype of the system-a simple initial version used to
experiment with and learn about the desired features of the system.
Iterative (or evolutionary) development of DSS relies on the creation of such a prototype and its
progressive refinement. The process begins when the future user and the DSS builder discuss the
system for a few hours. They identify the most useful screens. The builder then constructs a simple
version of the system, ignoring many of its aspects. To construct a DSS, all three of its components
(database, model, and dialog) have to be built with the use of facilities offered by the DSS
generator or with DSS tools. Particular attention is paid initially to the dialog component. Now the
users have something to experiment with and react to.
The iterative, repetitive process of prototype refinement follows. End users offer suggestions for
modifying the current version of the system. Builders analyze these suggestions and modify the
emerging DSS. The prototype, refined over several such iterations, is tested and documented and
eventually becomes the DSS. The process of iterative development is shown in figure 10.5.
Fig. 10.5
The use of the system engenders new iterations: decision problems evolve and the users’ needs
change. The DSS is modified to satisfy these changing requirements. Each successive modification
may thus be thought of as another iteration during the total evolutionary process of keeping DSS
current with user needs. As we can see, the process of iterative development tightly binds users and
builders to ensure that the DSS satisfies actual user requirements (rather than what the users may
think they want-until they work with the actual system).
Iterative development of DSS is an example of the general prototyping technique broadly used in
software engineering. In the version of the technique generally used for DSS development, the
prototype becomes the actual system after an evolutionary process of refinement. By contrast, in
the engineering of large software systems, the prototype often serves to clarify user requirements,
after which it is discarded ("throwaway prototyping").
Hogue found that DSS development time varies considerably: from one week to four years in his
sample of eighteen companies with multiple DSS. He also found that master plans for the
organizational development of DSS were virtually nonexistent-a severe deficiency, considering the
importance of this type of MIS.
10.5.4 Developmental trends in DSS
Lively research in the area of decision support systems continues apace. Two prominent directions
this research is taking are toward the integration of expert system technology into DSS and the
development of group DSS (GDSS).
Group Decision Support Systems (GDSS)
Group decision support systems (GDSS) are expressly designed to support group communication and
decision processes. We know from our analysis of the organizational environment in the information
society that the volume of ‘necessary decision making will con tinue to increase dramatically. Many
decisions are complex and call for the par ticipation of a number of experts. We also know from the
previous chapter that a decision-making process may benefit significantly if people representing var
ious political interests are explicitly brought into it. All of these factors, com bined with the team
orientation of the contemporary organizational design, lead us to believe that decision support
systems that support group work will grow in importance.
In contrasting the capabilities of GDSS with DSS, we may use the classification of decision types and
their corresponding support systems offered by Peter Keen and Richard Hackathorn and summarized
here in table below.
DECISION TYPE CHARACTERISTICS SUPPORT SYSTEM
Independent Decision maker makes a complete decision. Personal DSS
Each decision maker individually makes a

Sequential part of a decision and passes the results to
Interdependent the next decision maker. Organizational DSS
Decision makers interact and negotiate to

Pooled Interdependent arrive at a decision GDSS
A GDSS should support a process that brings together a group of decision makers to share
information, exchange ideas, explore alternative solutions with the use of models and data, vote,
and arrive at a consensus-among other possible in teractions. More or less permanent groups, such
as corporate boards, task forces, or teams of coworkers, increasingly form the basic work cells
throughout an en terprise. When we discussed the decision-making process, we noted that dys
functional behaviors may develop in a group’s work. It is the objective of a GDSS to enable group
members to bring their skills to bear on the decision process, while counteracting possible negative
group dynamics. The anonymity of many GDSS interactions and the ability to work with the system
rather than directly interacting with others playa role in preventing dysfunctional group behaviors.
For example, interactions in a GDSS setting frequently encourage group mem bers who would have
otherwise kept their counsel, or perhaps deferred to others, to participate actively in the decision-
making process.
A group working with a GDSS is actually participating in a decision-related meeting. Settings for a
GDSS session range from a face-to-face meeting for an executive planning group to a "meeting" of
widely dispersed insurance com pany sales agents discussing possible new rates through their VDTs
and a tele communications network with the support of an electronic meeting system.
Three levels of GDSS capabilities may be distinguished
Level-1 GDSS facilitate communication among group members. They provide the technology
necessary to communicate decision rooms, facilities for remote conferencing, or both.
Level-2 GDSS contain the communication capabilities of the Level-1 GDSS and provide support for
the decision-making process. Thus, they furnish DSS modeling capabilities and software that
supports group decision processes. Level 2 GDSS thus facilitate activities involving the Delphi
technique, brainstorming, and the nominal group technique.
Level-3 GDSS, which at this time are still at the research stage, would formalize group interaction
patterns-possibly by including expert systems that would suggest rules to be applied during a
meeting.
These are the distinguishing characteristics of GDSS at their present stage of development:
1) Aside from the database, model, and dialog components of DSS, GDSS also contain a
communication component. This component, which is implemented with the organization’s local or
wide area communication facilities, may include electronic mail, teleconferencing, or various
computer conferencing facilities.
The principal settings for GDSS use are:
a) A face-to-face session in a decision room or a similar conference room, with terminals and a large
public display screen.
b) A teleconference session taking place in several decision rooms at the same time; these are
connected with video and telecommunication links.
c) An interfaced session, in which participants work at remote terminals and do not see each other;
such a session may be dispersed in time as well as place (the memories of the computers, in
conjunction with the appropriate software, make asynchronous sessions possible).
2) Complete decision ("war") rooms are often provided and equipped in a fashion conducive to a
group effort; a large common screen display is an essential facility.
3) GDSS should offer facilities for prompting and summarizing the votes and ideas of participants.
4) GDSS features, such as anonymity of interactions, the layout of the decision room, and the design
of the dialog subsystem, should encourage both the formation of a cohesive group and the active
participation of all its members.
5) GDSS expand the model base to include models supporting group decision-making processes.
Models for voting, rating, and ranking should accompany other statistical models. It should be
possible to run a Delphi session (with rounds of voting, anonymous opinion sharing, and arrival at a
consensus) or a brainstorming session (eliminating redundant ideas and summarizing the results).
6) It should be possible with a GDSS to obtain the protocol of a session for later analysis. A
collection of such protocols from the more important decision-making sessions may be preserved as
a part of organizational memory.
7) GDSS should support a facilitator to assist the orderly progress of a session; this person should be
able, for example, to route individual screen contents to the large common display. Some sessions
also profit from the presence of a leader.
10.5.5 Self assessment Questions (ForSection 10.5)
1. Explain the various level of DSS technology as identified by Ralph Sprague?
2. Explain the roles played by organisational actors in building a DSS?
3. What are the various approaches for developing DSS

4. Explain the concept of GDSS
Executive information systems (EIS), are becoming the primary tools of top-level control in some
organizations. They can be best understood by contrasting them with DSS, which they com plement.
The feature of EIS is to access to a large variety of internal and external data, terse presentation of
information with colorful graphics, the ability to "drill down" on more and more detailed data, and
the ability to control the system in a very easy way.
Speaking tersely: while DSS are primarily used by middle- and lower-level man agers to project the
future, EIS primarily serve the control needs of higher-level management. They help an executive to
spot a problem, an opportunity, or a trend. EIS also have forecasting capabilities that can be used in
an "automatic pilot" fashion; in addition to their other features, these capabilities make EIS a
strategic planning tool. The relationship between these two types of information systems, EIS and
DSS, is shown in
figure 10.6.
Fig. 10.6
Seen in the light of the structure of a decision-making process, EIS primarily assist top management
in uncovering a problem or an opportunity. Analysts and middle managers can subsequently use a
DSS to suggest a solution to the problem. More recently, EIS-type applications are coming into use
by middle managers as well
At the heart of an EIS lies access to data. EIS may work on the data extraction principle, as DSS do,
or they may be given access to the actual corporate databases. The first kind of EIS can fully reside
on personal worksta tions; EIS of the second kind need the power of minis or mainframes to access
corporate data. The technical problems of EIS data access pale in comparison with the problem of
potential resistance from managers below the top level. Once an EIS has been set up, its executive
users are able to obtain virtually instantly any information supported by the EIS data-unfiltered and
unable to know their subordinates.
In the design of EIS, developers frequently rely on the critical success factors (CSF) methodology
developed by John Rockart of MIT. He de fined CSFs as "those few critical areas where things must
go right for the busi ness to flourish." With the use of this methodology, executives may define just
the few indicators of corporate performance they need. Many executives have already fallen into
the habit of reviewing these indicators on a regular, sometimes daily, basis. With the drill down
capability, they can obtain more detailed data behind the indicators. An executive who is
experienced with such a system can perceive a trend (and a problem) in seconds.
As opposed to the CSF methodology, which relies on the individual critical suc cess factors, the
strategic business objectives methodology of EIS development takes a company-wide perspective.
Following the identifica tion of the strategic business objectives of a firm, the critical business
processes are identified and prioritized, and then the information needed to support these processes
is defined-to be obtained with the EIS that is being planned. This methodology avoids the frequent
pitfall of aligning an EIS too closely to a par ticular sponsor.
In the United States, Commander EIS (by Comshare of Ann Arbor, Michigan) and Pilot EIS (by Pilot
Executive Software of Boston) lead the EIS field. RE· SOLVE from Metapraxis (New York and of
Kingston upon Thames, England) is a leader in Europe. All of these systems are actually EIS
generators, which help to configure a specific EIS.
In general, organizational DSS are conceptually more complex than the rather well-structured EIS,
primarily due to the model-management component of DSS.
10.7 Organisational aspects of DSS and EIS
Both DSS and EIS are proliferating in organizations in the private and public sectors. A single EIS is
generally implemented in an organization, with more and more executives given access to it, and
with the system playing an integra tive role. Thus, as EIS use at the Mellon Bank of Pittsburgh
expands from the top corporate level down to the departmental management level, it is expected
that the system will provide a shared understanding of the business throughout the management
structure. Multiple DSS, on the other hand, are in place in most of the medium-sized and larger
firms.
The introduction of DSS, treated as a technology, lends itself to the process of technology
assimilation. In analyzing a number of companies, Richard Epich concluded that a successful
integration of DSS into a company’s computing environment is primarily dependent on top level
commitment to the technology (as is the case with virtually all advanced information technologies)
and the quality of the DSS support groups. The objective is to institutionalize the use of
DSS. Institutionalization means that knowledge workers throughout the enterprise consider the
merits of the DSS approach when appropriate and implement and use these systems, so that the DSS
ultimately influence organizational processes (rather than only isolated individuals).
Resistance to change should be expected; a process of organizational change should be conducted as

a part of the general implementation process. The refreezing phase of the organizational change is
especially important: users should actually feel committed to using their DSS and allow these
systems to change their work lives.
DSS groups are a resource that can play a crucial role in this change process. There are a variety of
organizational arrangements for DSS groups. Most fre quently, the DSS group is located either in an
information center (with DSS com puting considered an end-user activity) or in a staff analysis
department in a functional area, such as the corporate planning department. Hugh Watson and his
colleagues analyzed how organizations actually support their DSS efforts. They found that DSS
groups in most organizations include five or fewer professional members. The support offered by the
DSS groups ranges from acting as builders and promoters of DSS to providing consulting services,
tech nical support, and training.
As we have already seen, EIS have by their very nature a significant organiza tional impact. The
organizational advantage of EIS lies in its support for a tight control from the top. This ability alone
is also a potential source of resistance to EIS. A well-designed EIS can immensely increase the span
of management of executives. EIS use has already made possible profound organizational changes.
Since top management can easily track the performance of virtually any company subunit, company
decision making may be decentral ized-and controlled with the EIS. The CEO of Lincoln National
Corporation has fourteen direct reports and no executive assistant-and he attributes his ability to
maintain this span of management to the EIS and electronic mail.
EIS have weighty political aspects: they could give a top executive the capability of probing into the
work of any manager without the manager’s knowledge. Combined with electronic mail, EIS give top
executives the capability to bypass the chain of authority. Resistance to these systems, therefore,
must be expected and managed. In particular, the role of an executive sponsor is critical.
Executive information systems rely on databases, which need to be refreshed daily in many cases.
EIS are no better than the data contained in their data bases-and much resistance must be overcome
from a variety of quarters to obtain this data on a regular basis. As analyzed by Rockart and David
De Long, resistance is to be expected not only from the staff personnel who support the executives
and middle managers, but also from the executives themselves, who in some cases feel that the
information will be inadequate for their needs or that the system will be difficult to use. Application
of CSF methodology and a superior interface design can go a long way toward allaying these
apprehen sions.
Sometimes, organizational measures must be taken to ensure support for EIS. At Xerox, where the
use of EIS pervades the work of high-level managers, top man agement has imposed a limit on drill-
down depth; managers can drill down no deeper than three layers from the top. The availability of
EIS as potent tools for top-level control will shape many or ganizational solutions in the future.
10.8 Summary
Decision support systems (DSS) are flexible interactive information systems that support managers in
reaching decisions concerning ill-structured problems. Primarily applied in planning, DSS are used
either directly or through intermediaries by all levels of management.
Specific DSS that are actually employed by users are generally developed with DSS generators,
though simpler DSS tools may also be deployed. Future DSS are expected to incorporate expert
system technology for various aspects of their operation. Group DSS (GDSS) expressly support group
decision processes, such as the Delphi technique or brainstorming. Executive information systems
(ElS) support higher-level management control by making data regarding all aspects of corporate
operations accessible in a timely and easily handled fashion.
1. What do you understand by Executive information system?
2. Explain the organisation aspects of DSS and EIS
1. EIS developers frequently rely on the ______ .
A. ABC
B. CAD
C. CSF
D. CDE
2. Software packages for developing DSS are called as
A. DSS Programmers
B. DSS generators
C. DSS Writers
D. DSS Scripter
3. Sales forecasting is an example for ____________ type of problem
A. Semi structured
B. Structured
C. Unstructured
D. All of the above
10.11Answers to SAQs, TQs and MCQs
Section 10.2.4
Section 10.3.4
1. c. This has been mentioned in section 10.3.3
Section 10.5.5
Terminal Questions
Multiple Choice questions
1. C
2. B
3. A
References:
1. Management Information System – Kumar N
2. Management Information System – CSV Murthy
3. Management Information System – Jane Laudon, Jane P. Laudon, Kenneth C. Laudon
4. Management Information System – James A. O’Brien
5. Management Information Systems for Information Age – Amy Philips, Kaeve Cummings, Stephen
Haag
6. Management Information System – Zwass
7. Management Information System – Gordon and Gordon
8. Management Information System – Sadagopan

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Unit-01-Introduction to Management Information Systems

1.2 What are Management Information Systems?

1.2.2 Interpretation of MIS Concept

1.2.3 Self Assessment Questions (for section 1.2)

1.3 Organization and Management

1.3.1 What Are Organizations?

1.4 The concept of information

1.4.1.1 Information as Processed Data

1.4.1.2 Information as the Opposite of Uncertainty

1.4.1.3 Information as a Meaningful Signal

1.4.2 Uses of information

1.4.2.1 Information as a Resource

1.4.2.2 Information as an Asset

1.4.2.3 Information as a Commodity

1.4.3 The Cost of Information

1.4.3.1 Acquiring Information

1.4.3.2 Processing Information

1.4.3.3 Storing Information

1.4.3.4 Retrieving Information

1.4.3.5 Communicating Information

1.4.4 The Need for Information Systems

1.4.4.1 Individual Needs

1.4.4.3 Organizational Needs

1.4.5 Self assessment questions (for section 1.4)

1.5 Information Technology

1.5.1 The Role of Information Technology

1.5.2 Components of Information Technology

1.5.2.3 Database Management Systems

1.5.2.4 Data communication technology

1.5.3 Self assessment questions (for section 1.5)

1.6.1 Information management model

1.7 Management information system as a discipline

1.7.1 Relationship of MIS to Reference Disciplines

1.7.2 Self assessment questions (for section 1.7)

1.9 Terminal Questions

1.10 Multiple Choice Questions

1.11 Answers to SAQs, TQs and MCQs

At the end of this unit, you should be able to

· Define Management Information system

· Explain the various needs of the information

· Understand Management and organization

· Explain Information management model

· How MIS evolved from the past to the present

1.2 What are Management Information Systems?

1.2.2 Interpretation of MIS Concept

In a broader sense, knowledge work is also supported by computerized systems assisting

Indeed, it is increasingly common to design certain information systems to give a company a

1.2.3 Self Assessment Questions (for section 1.2)

1. What do you understand by Management information system?

2. What does management information system include?

1.3 Organization and Management

1.3.1 What Are Organizations?

An MIS, obviously, is designed to support managers in as many of their functions as possible,

1.4 The Concept of Information

2) as the opposite of uncertainty, and

3) as a meaningful signal-to illus trate the richness of the concept of information.

1.4.1.1 Information as Processed Data

1.4.1.2 Information as the Opposite of Uncertainty

1.4.1.3 Information as a Meaningful Signal

Information theory, a branch of statistics concerned with measuring the efficiency of

1.4.2 Uses of information

Organizations may use information as a resource, as an asset, or as a commodity.