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Management information
systemsChapter one
Introduction
By shibiru Ayalew
20091
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Management Information Systems
In order to make decisions, managers need the
right information to serve a wider range of needs.
A systems approach to managing this demand can
be met through management information systems(MIS).
It has been said that MIS are what the nervous
system is to the human body.
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Definitions of MIS
We live in an information age
The original definitions of information were associated
with knowledge.
Now, instead of thinking about the information itself,
knowing that we have got so much of it, we have tobecome much more aware ofwhat we are going to do
with it.
As the organisation grows, the management function is
performed by people who are more specialised and maybe removed from day-to-day activities. It is usually at
this time that management information systems (MIS)
are required.
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Definitions of MIS - history
The emergence of MIS goes back to the 1950s.The first electronic computer developed for business
purposes in 1951 must have posed many interesting
questions as to what to do with it.
In fact, early business applications centred onroutine clerical and accounting operations such as
payroll and billing.
These were mainly transaction applications,
named simply because they involved processingaccounting transactions.
The machines were prone to failure, difficult to
operate and painstakingly slow
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Definitions of MIS - history
Advances in disk technology made it possible to accessdata more quickly and in different ways.
New programming systems helped to develop and refine
operating systems.
Each development contributed to the rise of MIS.
As systems developed, though the transaction
processing part of the system provided the operational
data necessary to run an organisation more efficiently on
a day-to-day basis, the management component became
more important.Systems started to provide reports and information
that enabled managers to make more effective
decisions.
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Definitions of MIS - history
The increasing appearance of computer and communication
technologies in offices during the 1970s and 1980s gave rise
to links with MIS and created the potential for convergence,
based upon the needs of users around each organisation.
Some organisations used accounting information systems(AIS) and office information systems (OIS) for local
information and decision-making needs of various
departments and subsets of an organisation.
In many instances such user-led developments led todisparate islands of technology within the organisation.
In contrast, the aim today is for integration of such
technologies across the organisation.
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Definitions of MIS
The more recent role for information technologies isto think about them as a strategic weapon.
For example, information technology (IT) has the
power to:
change industry structures and alter the rules of
competition
create opportunities for competitive advantagewith the provision of new ways to outperform rivals
spawn new businesses and opportunities, often
from within an organisation's existing operations.7
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Definitions of MIS
Deconstructing the term MIS enables us to defineeach word in a business context:
Management - being managed or people
managing a business. Over recent years
management has become more scientific andsystem-oriented.
Information - knowledge made available to
people within an organisation.
Systems - sets of connected things or parts
within an organisation which tie the planning and
control by managers to the various operations.
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Definitions of MIS
There are a number of definitions of MIS, each with aslightly different emphasis or focus. Lucey (1995)
emphasises the decision focus of his definition:
'a system to convert data from internal and externalsources into information and to communicate that
information, in an appropriate form, to managers at
all levels in all functions to enable them to make
timely and effective decisions for planning, directingand controlling the activities for which they are
responsible.'
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Definitions of MIS
MIS are different from data-processing systems because
the key element is management involvement, so theemphasis is upon the use of information through user
processes and not how it is provided through MIS
processes
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Definitions of MIS
Parker and Case (1993) consider:
'a management information system (MIS) to be any
system that provides people with either data or
information relating to an organisation's operations.'
They then describe who the system is focused upon.
'Management information systems support the activities
of employees, owners, customers, and other key peoplein the organisation's environment - either by efficiently
processing data to assist with the transaction work load
or by effectively supplying information to authorised
people in a timely manner.' 11
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Definitions of MIS
MIS include a number of subsystems, such as the following.
1.Transaction processing systems (TPS) comprise routine
day-to-day accounting operations.
2.Management reporting systems (MRS) generate reports
for decision-making processes.
3.Decision support systems (DSS)provide a set of easy-to-
use modelling, retrieving and reporting requirements and areused by people making decisions.
4.Office information systems (OIS) involve the use of
computer-based office technologies such as desktop software
applications, including e-mail, teleconferencing and desktop
publishing.
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Definitions of MIS
It could be argued that managers have always
sought and utilised information, but in the pastmany were forced to rely upon haphazard
sources.
A modern management information system raises
the process of managing from the level ofguesswork and piecemeal information to the
development of a system of information with
sophisticated data process which enables
managers to solve complex problems and makeinformed decisions.
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Definitions of MIS
As can be seen in
Figure, MIS tie
together the three
components of
management,
information and
systems.
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Definitions of MIS
According to Murdick and Munson (1986), the
management information system:
'not only provides information to assist
managers in making decisions, but it may
also be designed to provide decisions for
repetitive classes of problems. The MIS, by
providing a common set of data and
information available to all managers,
integrates the management of the company.
Thus the company as a whole may be truly
operated as a system, with all elements
working towards common objectives.'
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Definitions of MIS
Information extracted from a management
information system might therefore be at avariety of levels for a range of users.
For example:
1.Strategic planning.The strategic planning process uses both
internal and external sources of information.
In a dynamic and changing business
environment information is geared towards
helping an organisation to use strategic
planning to adapt.
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Definitions of MIS
2. Management control. This is the process by which
managers ensure that resources are obtained andused effectively and efficiently in the
accomplishment of the organisation's objectives.
Control involves planning. For example, are sales
ahead of budget, does cost data support costing
estimates, are policies in line with predictions? Mostof the information for management
control is generated internally.
3. Operational control. This ensures that tasks are
carried out efficiently. At this level, tasks have been
specified and methods determined. Information for
operations involves providing those involved with
the responsibility of executing tasks with the
minimum of expenditure on resources. 17
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Definitions of MIS
As so many parts of an organisation'soperations and information processes
depend upon information, it is considered to
be a key resource within every organisation.
Skilfully handling information has become animportant business objective.
Though the terms data and information are
used by some to mean the same thing, there
are a number of differences.
For example:
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Definitions of MIS
data refer to stored facts - as data becomefiltered and disseminated, they take on
meaning, and so become information
data are inactive and just exist, whereasinformation is active and relevant and
provides a basis for things to be done
data are technology-based, whereasinformation is business-based and facilitates
business decision-making
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Definitions of MIS
though data may be gathered
from various sources, it is the
process of customising them
for the needs of various users
that transforms them into
information
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Definitions of MIS
As managers are frequently presented with statements
containing information and data, they need toascertain their quality. Information must bepertinent.
This means that it must relate to the organisation and
to matters of importance for the people dealing with
that information to enable them to deal with an issue.
Information must also be timelyand available when
required. Clearly, users do not want to be confused by
misleading information, so it must also be accurate.
Good information should therefore make a difference
and reduce uncertainty.
CASE STUDY: Comparing different systems
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Definitions of MIS
There are many different sources of information
for effective decision-making. Informationsources exist from many different potential
sources. A clear division can be made between
internal and external data.
Internal data are generated and made available
within an organisation. Such data may come
from a variety of sources such as cost
accounting information. Other data may be
more informal, for example word-of-mouth,
facts, gossip and from personal observations.
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Definitions of MIS
External data are those extracted from the
organisation's external environment. Forexample, it could include news of the launch of
a new product by a competitor, changes in
exchanges rates or new technological
developments by other organisations in anindustry. Informal external data would include
personal contacts within the external
environment. Given the broader nature of
external data, they are particularly useful for
making decisions about the direction of the
organisation in the future such as those for
strategic planning.23
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Definitions of MIS
Examples of formal data might include:
Internal External
Management reports Information services
Management audits Trade publications
Meetings Industry consultantsForecasts Forums
Examples of informal data might include:
Internal External Conversations Networking
Grapevine Trade shows
Observation Personal contacts
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Definitions of MIS
Internal and external data may also vary according to the
nature and type of business
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USE OF INFORMATION
The way in which an organization is structured is called its
organizational structure, and often this will determine how
information is used. For example, an organization may be
structured in the following ways:
By function - departmentalizing by work function
such as marketing, operations or personnel might mean
that organizations using this approach have a separate
MIS department. One of the advantages of this isthat all of the specialists are grouped together where they will have
specific information needs and requirements.
By product - where organizations such as Unilever or
Procter & Gamble have diverse product ranges, they may
structure along product lines. Organizations structuringin this way may have a separate MIS unit within each of
the major divisions.
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USE OF INFORMATION
By customer- publishers of books typically structure
their divisions by customer type. For example, this
book
has been developed by an educational publisher based
upon the needs of people in the institution you attend.
As a result, this influences the company's informationrequirements, both for the division and the
organisation as a whole.
By geography - where organisations are physically
dispersed, the local operation will require aninformation system which not only integrates it into
head office but also provides it with the flexibility it
requires to be competitive.27
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USE OF INFORMATION
Within large organizations, a combination ofstructural approaches is usually found.
For example, at corporate level strategic
activities usually have a functional orientation
such as marketing or group personnel.The next level of structuring may be by product
group, area or customer group.
The way an organization is structured will have a
significant effect upon how an organization'sinformation system evolves.
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USE OF INFORMATION
Traditional systems were centred upon different
departmental functions and processes. As aresult, data were treated as a separate
component of functional analysis and process
design. Traditional systems therefore replicated
existing processes and applications to produceuncoordinated and incompatible files in each
department or associated with each process.
The notion of integration mechanisms and
systems had simply not been addressed.
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USE OF INFORMATION
Integration of data processing involvesrearranging systems development
through organization-wide planning of
information requirements.
The focus then shifts from a process ordepartmental application through to a
data orientation.
This new data-centred approach is often
termed information engineering as itviews data as the foundation for the
design of an information system.
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USE OF INFORMATION
Where integration takes place
MIS can be accessed and
shared by multiple processesand users.
The focus point
of the stable data model is
integrated informationavailable across the
organisation, with individual
applications seen
as peripheral.
An example of
an integrated data-centred
approach is shown in the
figure 31
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USE OF INFORMATION
The formal organisation has a pattern of
relationships defined by official rules, policies
and systems. It is usually the one depicted on
organisation charts with diagrams showing
official relationships, departments and levels of
management.
Within the formal organisation there is:
a unity of objectives and effort
well-defined relationships, duties and
responsibilities
stability and predictability
clear hierarchy of control and command.
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USE OF INFORMATION
Informal organisation focuses more upon people.
Information arises from social relationshipsbetween teams of individuals who develop informal
ways of getting things done.
Informal organisation exists within every organisation
to some extent.Social groups develop their own beliefs and ways of
getting things done which are sometimes not the
same as that of the formal organisation.
For example, informal organisation may:
use unofficial methods which are more efficient
provide more satisfaction for employees
coordinate activities more efficiently
be more flexible and improve communication.33
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USE OF INFORMATION
According to Lucey (1995),
'Organisations choose structures which are thoughtto be most efficient for their particular
circumstances and operating conditions'.
This means that in order to be flexible they tend to
combine the best features of functional, productand geographical organisational structures.
Such organisations are often viewed as organic
because they adapt to changing conditions and
develop features such as network controlstructures, motivating management styles, flexible
working practices and flatter organisational
structures, all of which help to empower employees
through the use of information and technologies.34
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USE OF INFORMATION
One particular concept that has developed from
high technology industries is that of the matrix
structure.Within a matrix structure, project teams
are combined with a conventional functional
structure.
The matrix is thus a combination of structureswhich enables employees to contribute to a
number of activities or teams.
In information terms it enables team members to
use information to focus upon a number of aimsat the same time, while also providing the
flexibility to respond to new markets and
opportunities as and when they arise.35
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USE OF INFORMATION
The terms centralised and decentralised are
important management concepts that are
inextricably linked to the use and
distribution of information.
They are often used to describe the
distribution of authority and decision-
making within an organisation.
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USE OF INFORMATION
Centralised organisations are organisations with
a clear-cut hierarchical structure in whichdecisions are made at the top of the hierarchy.
Within such organisations there are likely to be
different information requirements at the top of
the hierarchy which are distinct from thosefurther down.
By contrast, within decentralised organisations
decision-making is distributed as far down the
management hierarchy as possible. Thisprovides lower-level managers with
considerable practice in making decisions and
prepares them for moving up the hierarchy.37
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USE OF INFORMATION
Issues of confidentiality
Though it is often said that no system can be 100% secure,
confidentiality, security and privacy are key issues when
dealing with information.
One of the main elements in developing an information
system is to ensure that databases and systems are
secure.
There are a number of reasons that these issues are of
fundamental importance. For example, accidental,
negligent or intentional disclosure of information tounauthorised people may enable them to use that
information in a way that is neither intended nor legal.
Similarly, information may be destroyed, modified or
used incorrectly if it gets into the wrong hands.38
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USE OF INFORMATION
Confidentiality refers to the limits on the use of
information collected from individuals. This meansthat personal information should only be distributed
to those who have a need to know and use that
information, and should not be disseminated
outside the organisation.
In order for information to be confidential it must be
secure. Security is a technical condition for
achieving privacy and confidentiality. It refers to the
policies, procedures and technical measures used
to prevent unauthorised theft, access or alterationto record systems. It can be promoted with a range
of tools designed to protect access to software,
hardware and communications networks.39
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USE OF INFORMATION
Privacy is a broader term often used toencompass security and confidentiality.
Three elements to privacy are:
limits on the collection of information
specific rights of individuals to access,
review and challenge information kept
about them management responsibility for record
systems.
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USE OF INFORMATION
Data Protection Act
The Data Protection Act 1984 was passed to
regulate the use of information for
processing systems which relate to
'individuals and the provision of servicesin respect of such information'.
The Act covers only the holding of computer
records and not manual records.
The Act requires those using personal data toregister with the Data Protection Register.
Registered data users must then follow the
eight principles of the Act.41
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USE OF INFORMATION1. Data must be obtained and processed fairly and
lawfully.
2. Data must be held only for specific lawful purposeswhich are described in the entry into the register.
3. Data should not be used in any other way than those
related to such purposes.
4. Data should be adequate, relevant and not excessivefor
those purposes.
5. Personal data should be accurate and kept up to date.
6. Data should be held no longer than is required.
7. Individuals should be entitled to access their data and,
if necessary, have it corrected or erased.
8. Data must be protected with appropriate security
against unauthorised access or alteration.42
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USE OF INFORMATION
There are a number of exemptions to the Act,
including information kept by government
departments for reasons of national security,information the law requires to be made
public, mailing lists (as long as the subjects
are asked if they object to data being held for
this purpose), payrolls and pensions
information, clubs and personal data held by
individuals in connection with recreational or
family purposes.
To ensure that data is held only for legitimate
purposes, many organisations appoint a
data protection officer.
CASE STUDY: Code of Fair Information Practice43