CHAPTER 2

MANAGEMENT INFORMATION SYSTEM

Learning Objectives:
• Executives and their responsibilities in business functions.
• The science and art of decision making process. Role of Information Systems in
decision-making process and other business activities.
• Management Information Systems — evolution, features, role in business operations, etc
versus misconceptions. MIS development — approaches and constraints.
• Integration of MIS with several levels of managerial activities and understanding the
impact of computer in MIS operations.
• MIS in Indian scenario.
• Comparison of MIS and other Information Systems.

5.0 ‘Information Systems’ for Business System

5.1 Importance of Information in Business activities

Executives are key personnel for any organisation because their deeds not only have a deep impact on present
operations but also have a long-term futuristic effect. As the apex body, executives perform dual role in any
organisation, namely:—
• they act as a commander, aiming to smoothen business operations by implementing, monitoring,
controlling and guiding internal state of affairs via their subordinates, the managers.
• they act as a protector. Assigned with the fundamental task of dynamic decision making and objective
formulation, executives enables the organisation to gain enough competitive advantage such that the
organisation can:
o establish itself in its environment
o win-over its competitors
o retain success through stability, profitability and growth.
2.2 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS
Managers need information to report to executives and to control course of actions. Thus, to a manager,
‘information is power’. Executives need information to gain knowledge, which applied with experience, skill and
tact determines the fate of the organisation. Accordingly, to an executive, ‘knowledge is power’.
‘Knowledge’ is nothing but ‘the sum total of what one knows’ (i.e., the range of one’s information).
‘Information’ is processed data. ‘Data’ is a collection of raw (i.e. unprocessed) facts and figures.
Information is a very critically vital resource to any organisation because it is an important ingredient for day-to-
day operation; for communication with individuals/organisations; for preparation and presentation of internal and
external reports; for decision making, planning; and lots more. Information is gathered from internal sources (e.g.,
production, sales, etc.); from external sources (e.g. market share, customer feedback, etc.); from past data (e.g.
historical records); from present data (e.g. current affairs); from forecasting-reports/futuristic-surveys; etc.
‘Information Systems’ are systems designed and build to cater the information requirements of other systems (e.g.
organisations, etc.).

5.2 Nature of Decision Making

‘Decision making’ is a course of action to bring a situation under control. It involves selection of best suitable set of
actions among available alternatives. The decision making process can be broken down into four stages, namely:–
• Trigger — an event or a piece of information that precipitates the need for a decision, i.e., recognise the
problem.
• Information gathering — identifies preliminary information needs; obtain information.
• Design — define and structure the problem; identify alternative courses of action.
• Evaluation — Build model to simulate reality; choose the course of action.
Decision making is a continuous process and an inseparable managerial process. All levels of management are
involved in the process of decision making. The type of decision making and the importance of the decision made
depend on the situation and the managerial level.
Thus, we can easily understand that although all the three management levels are involved in decision making, type
of decision making varies.
Decisions can be broken down into 3 main types:
1. ‘Structured decisions’ follow a set of rules. This means that:
o decisions can be taken objectively
o there is a clearly defined method of solving the problem
o generally, there is a right answer
There are a number of operational research techniques to help reach structured decisions. These include
linear programming and network analysis.
2. ‘Unstructured decisions’ are normally subjective and do not follow any definite set of rules. (Efforts are
made to turn unstructured decisions into structured ones by setting hard-and-fast criteria.)
3. ‘Semi-structured decisions’ lie between structured and unstructured decisions. Some parts of the decision
making process are programmable (structured), others not.
Other types of decisions are:
1. Analytical decisions. An analytical decision is one that is based on an analysis of information that has
been systematically acquired and evaluated. Much of the information will be quantitative.
2. Heuristic decisions. These solutions will usually depend on trial and error. Common sense, past
experience and general guidelines may be used to help, but the decision maker is not applying any
techniques that will guarantee the correct answer first time.
Chapter 2 2.3

5.3 Information Systems to support decision making

Information systems will vary according to the level of management they are providing information to.
Within this hierarchy, strategic planning will normally involve making unstructured decisions and operational
planning will normally involve making structured decisions. Tactical planning is caught in the middle and will
involve a mixture of both decision types. Following diagram will assist in clear understanding.

S
EI
S tr a t-
-e g i c l e v e l

D
SS
T a c tic a l le ve l
S
TP

O p er a tio n a l le ve l

Fig. 5.1 — Decision making and Information Systems.

♦ Strategic level information systems.
Strategic information systems are informal and will normally be focused on external information
sources. The different information needs of the organisation have led to different types of systems
being developed: MIS, DSS, Executive Information System, Expert System, etc.
♦ Tactical level information systems.
Tactical information is largely fed from transaction processing systems, although it may also come
from external sources. Tactical level information systems will be informal, and the tactical
manager will be responsible for knitting together the different strands of information available.
♦ Operational level information systems.
Operational decisions are programmable and require specific and detailed information. Many of
the decisions taken are able to be programmed into the computer.
Most of the information used for operational decisions comes from the simplest form of
information system, transaction processing systems.
The outputs of these systems are simple reports and sorted lists of transactions.
Also used by operational managers are reports comparing their performance with target, and with
operational managers.

6.0 Management Information System

Management Information System can be defined in several ways, one of which may be :
“Management Information System (MIS) is an organized collection of people, procedures and devices used to
provide the right information to the right person at the right time for proper decision-making”.

6.1 Evolution of MIS

When computers were first used in the mid-1950s, the applications were primarily the simple processing of
transaction records and preparation of business documents and standard reports. This was termed Data Processing
(DP) or Electronic Data Processing (EDP). By the mid-1960s, many users and builders of information processing
systems developed a more comprehensive vision of what computers could do for organisations. This vision was
termed as Management Information System (MIS). It enlarged the scope of data processing to add systems for
supporting management and administrative activities including planning, scheduling, analysis and decision making.
2.4 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS
In the 1980s and 1990s, there was a merging of computer and communications technologies. The organisational use
of information technology was extended to Intranet (internal networks), Local Area Networks (LAN), external
networks that connects an organisation to its suppliers and customers, and communications systems that enable
employees to work alone or in groups. Innovative applications of information technology created value by
providing customized services at any time and at any location, and information systems began to prompt changes in
organisational structures and processes.
Although the scope of systems providing information technology services has increased dramatically, the broad
concept of MIS as a system that combines transaction and operational requirements with administrative and
management support remains valid. The term MIS is still in common use despite a recent tendency to use the
simpler term ‘Information Systems’.

6.2 MIS is an old management tool

MIS has attained new dimension after the advent of computer, so much so that people has now started to
understand that MIS is concerned all about study of computers. But in fact, it is not so. Apart from
computerization, MIS can also be used and implemented manually. MIS is an old management tool, which has been
used by the managers for better management and scientific decision making, dated back to the past when there was
no computer. As far as its evolution is concerned, it can be linked to the following four disciplines.
1. Management Accounting. The subject of Accountancy has two major areas: Financial accounting and
Management accounting. Financial accounting is concerned with recording, classifying, analyzing and
reporting financial transactions as valuable information to the investors. Management accounting is
associated with the task of providing information through analysis and forecast, which would be useful for
managerial activities such as control and decision making, by applying techniques such as capital
budgeting, standard costing, budgetary analysis, break-even analysis, etc.
These set of information are always a part of MIS, therefore the birth of MIS can be traced to management
accounting. However, the support systems which provide users with access to data and models are beyond
the scope of traditional management accounting.
2. Management Science/Operational Research. These are the application of scientific method and
quantitative analysis techniques to management problems, so as to assist systematic approach to problem
solving and application of scientific methods to investigation. It utilizes mathematical and statistical
models and procedures for analyzing problem. Finally, it aims at achieving optimal decision of optimum
policy.
Management science techniques have been incorporated in MIS to make quantitative and analytical
information available to the users of MIS.
3. Management and Organisation Theory. In view of the fact that MIS is a support system for organisation
functions, MIS draws upon concepts of organisation, organisation behaviour, management and decision
making. Out of several management theories, decision, quantitative and management process are most
relevant in MIS. The knowledge of these management theories enables the MIS designers to ascertain the
type of decisions taken/to-be-taken and functions performed/performable by management personnel.
4. Computer Science. Originally, MIS was not designed to take support from computer science regarding its
operation. However, with the invention and introduction of computer sciences, MIS has started utilizing
the benefits of computer science and information technology; so much so that people have now started to
believe that MIS is concerned with the study of Information Technology, Computer Science! However, this
is not the fact. Computers have been used in MIS because of its reliable consistency and accuracy,
affordable in high speed and less cost.
Chapter 2 2.5

6.3 Elements of MIS

The three elements of MIS are as follows:
♦ Management. There are many different definitions of Management, which vary from author to author,
situation to situation and from occasion to occasion. A general definition is: “The art of getting things done
through people, with the people”. Management may be thought of as the sum total of these activities which
relate to the laying down of certain plans, policies and purposes, securing men, money, materials and
machinery needed for their goal achievements; putting all of them into operation, checking their
performance and providing material rewards and mental satisfaction to the men engaged in the operation.
• Information. In MIS, Information is data that has been processed into meaningful format for use by
decision makers within an organisation. Thus, Information is a source for increment in knowledge.
Information must possess certain qualities to be useful.
• System (i.e., Information System). We have discussed systems in the earlier chapter. An efficient system
uses its inputs economically in producing its outputs. An effective system produces the outputs that best
meet the objectives of formal information support to the members of the organisation.
These are the three basic elements or basic pillars on which MIS stands. These will be discussed in detail in the
following discussions.

6.3.1 Management
An organisation needs information for following basic managerial activities, such as:
o Planning
o Monitoring performance
o Control
o Decision making
o Recording and processing transactions
o Communication.
Information required by managers varies according to their specific role.

S tra te g ic le v e l

T actical lev e l

O p e ra tio n a l le v e l

Fig. 6.2 — Levels of Managemen.

♦ Strategic (Top) level — Top-level managers or Strategic managers are involved with long-term objective
setting and overall control of the organisation. However, strategic decision making may still involve short-
term decision making.
♦ Tactical (Middle) level — Tactical managers are involved with some detailed operational decisions as
well as implementing the policies of strategic management. They may be viewed as ‘administrative’ level.
♦ Operational (Lower) level — Operational managers are involved in day-to-day decision making in an
organisation.
All levels of management are involved in planning and controlling activities, although the mix varies according to
the level of management.
2.6 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS
P lan n in g activ ities

S tra te g ic le v e l

T actical lev el

O p e ra tio n a l le v e l
C o n tro llin g

Fig. 6.3 — Planning and controlling functions of different levels of management.

6.3.2 Information
Information must possess certain qualities to be useful. Such characteristics of information may be as described in
the following table:
Range of quality
Quality
from to
Time period Forecast Historical
Immediately
Timeliness Delayed
available
Objectivity Subjective Objective
Quantifiable Qualitative Quantitative
Accuracy Approximate Accurate
Certainty Uncertain Certain
Completeness Partial Complete
Breadth Broad Specific
Little detail Highly
Detail
(summary) detailed
Source Internal External

Within each management level, the quality of information expected will vary because the decision making of
managers within that level has a different focus.
♦ Strategic level — Strategic information will normally be summarised and mainly from external source,
although information from internal source is also required. Management needs historical for trend-analysis,
etc., for futuristic forecasting.
♦ Tactical level — Tactical information normally presents a mixture between strategic and operational
information. The nature of information required is less diverse and complex. Middle management is fed
with information both from top management and supervisory management. Middle level management does
not require much ‘futuristic information’ since they are not concerned with long range, strategic decision-
making. Tactical information systems are designed to generate a variety of reports, including summary
reports, exceptional reports, and ad-hoc reports.
♦ Operational level — Operational information is likely to be much detailed because they mostly need
internal information on operational aspects of the functioning of activity units. It receives information from
the middle management levels on operational plans and programmes. The nature of information is routing
and structured. It tends to be reliable and relatively complete. There is little element of complexity of
uncertainty involved in the information.
Chapter 2 2.7

6.3.3 Information Systems

Information systems are focused on the requirements of management and present information in different ways.

E xe c u tiv e S u p p o rt S y s te m
S tra te g ic
L ev el
M an a gem en t

T a c t ic a l L e v e l
M a n a g e m e n t I n fo r m a t i o n S y s t e m
M a n a g em en t level D e c is io n S u p p o rt S y s te m level

K n o w led g e level K n o w led g e W o rk S y s te m K n o w led g e

O f fi c e A u t o m a t i o n S y s t e m level

O p e ra tio n a l T ra n s a c tio n P ro c e s s in g S y s te m
L evel

Fig. 6.4 — Different Information Systems for different managerial levels.

Following are major types of Information Systems:
• Executive Support System (ESS) — ESS is an interactive method of allowing executives and managers
to access information for monitoring the operations of the organisation and scanning general business
conditions.
• Executive Information System (EIS) — EIS try to provide information when it is needed by managers,
rather than wait for specific reports to be printed from other information systems.
• Management Information System (MIS) — MIS is an integrated, computer-based, user-machine system
that provides information for supporting operations and decision making functions.
• Decision Support System (DSS) — DSS are computer-based systems that helps decision makers
confronts ill-structured problems through direct interaction with data and analysis models.
• Knowledge Work System (KWS) — KWS is a computerized package designed to provide knowledge
workers with the means to create and integrate new knowledge into an organisation.
• Office Automation System (OAS) — OAS is a computerised package designed to increase the
productivity of data workers by providing access to basic systems such as electronic mail and word-
processing.
• Transaction Processing System (TPS) — TPS is a computerised package designed to record the basic
transaction data within an organisation.
Support Systems provide support or assistance in respective field of action, whereas Information System only
reveals information (i.e., makes the unknown, known).
2.8 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS

6.4 An insight to the Management-levels of any Organisation

S.
Characteristics Top Level Middle Level Lower Level
No.
1 Scope of activity Very wide Functional Well defined, hence
narrow (i.e. focused)
2 Time horizon Future Current Historical
3 Result of activity Plans, policies and Implementation End product
strategies schedules
4 Level of complexity Most complex — Less complex — Straight forward
many variables better defined
variables
5 Nature of activity Unstructured Moderately Highly structured
structured
6 Time Frame Long-term (5 years Short term (within a Very short term
or even more) year or little beyond) (day-to-day, if not
hour-to-hour!)
7 Type of information Unstructured Semi-structured Structured
8 Source of Mostly External Internal, more Internal with high
information structured accuracy
9 Mental attributes Creative, Responsible, Efficient, effective
innovative persuasive,
administrative
10 Focus on planning Heavy Moderate Minimum
11 Focus on control Moderate Heavy Heavy
12 Job measurement (very) difficult, if Less difficult Relatively easy
not impossible
13 Reporting accuracy Low Moderate High
14 Number of people Few Moderate Many

6.5 Role of MIS in an Organisation

MIS is not as important for smaller organisations as it is for the larger corporations. The smaller locally run
businesses are run usually by owners who rarely need instant access of information that larger companies require.
Large corporates with varied product lines definitely can not do without a computer based MIS in order to survive
and keep pace with competitors.
An MIS performs various roles in an organization, namely:—
• Supports day-to-day business operations
• Supports managerial decision-making
• Supports strategic decision-making and competitive advantage
• Optimizing operational cost
• Provide timely and accurate information
• Provide expert advice to the managers on selected domains
For example, an organisation may use MIS to keep track of inventory, evaluate sales trend of different products,
keep information about client and employees, etc.
Chapter 2 2.9
MIS provides information to all levels of management for the following purposes —
• To define the objectives of the organization
• To formulate strategies and policies to achieve the objectives set by the management
• To report the organization performance to tax authorities, shareholders, regulatory authorities and other
stakeholders such as suppliers and customers, etc.
• To prepare future plans for short and long term basis
• To exercise day-to-day control on various operations in the different functional areas in the organization
• To allocate different type of resources to different functional areas
• To allow management by exception
• To develop database of business partners and to devise procedures to deal with them
• To develop the training tools for the new recruits in the organization at all levels.

6.6 Features of MIS

Some of the main characteristics of MIS are as follows:
1. Management oriented. MIS starts from an appraisal of management needs and overall business
objectives. It provides for information needs at all levels of management.
2. Sub-system. MIS is actually an amalgamation of several sub-systems, such that each of them shares the
goal of the MIS and of the organisation.
3. Integration. Sub-systems are to be integrated, so that the activities of each are inter-related with those of
the others. Integration makes information processing more efficient by reducing both intermediate
processing and the incidence of independent generation of the same data by multiple departments. An even
more important benefit of integration is that it provides more timely, complete and relevant information.
Total information of sub-systems is neither achievable nor desirable. A substantial degree of integration is
required for an effective MIS.
4. Common data flows. Common input, processing and output should be used to the extent possible. This
helps in reducing duplication of same information as well as simplifies operations.
5. Common Data Base. Data Base is ‘super-file’ which consolidates and integrates data record formerly
stored in many data files. It should be integrated to allow different users to access it commonly.
6. Information source and reporting format. MIS combines information from multiple data resources into
a structured report that enables managers to monitor and organise the organisation in a better way. Provides
Summary information of the organisation. The level of detailing depends on the situation and to which
level, the reporting is being made.
7. MIS is useful to structured decisions. As MIS focuses generally on internal information and the input to
MIS is the internal data, MIS is more useful mainly for making structured decisions. Structured decisions
are those decisions which are predictable in nature and are pre-planned and pre-specified.
8. Relevant information. A MIS should provide only relevant information. Determining what information is
relevant for a particular manager, in a particular situation, is a difficult job which is to be carefully
considered by systems designers during the process of MIS designing and maintaining.
9. Computerised. Although it is possible to have a MIS without using a computer, however, the use of
computers increases the efficiency of the MIS as well as makes it more accurate, consistent and cost-
efficient.
10. Flexible. MIS provides alternative ways of data processing and information reporting, which may vary
from situation to situation and time to time. MIS is enough flexible to absorb the inevitable changes in the
information needs of the business, while acquiring information as well as while reporting.
2.10 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS
11. Versatile. Managers differ in their style of information gathering, processing, reporting (we have come to
know about it in the earlier chapter). In the same level, in the same situation, the style or pattern of the
works of one manager is not identically same as that of the other manager in the same situation and level.
MIS must be such that it should absorb all such alterations or personal-variations. This makes MIS,
‘versatile’ in nature.
12. Analytic. To be effective, an Information System must be analytical in the sense that the system must
indulge in rigorous analysis of data using multiple quantitative and intuitive models and must keep track of
alternative ways as well. Information systems should help the manager in not only selecting the appropriate
tool for analysis but also in interpretation of the results of applying the tool to available data.

6.7 Limitations of Management Information System

Limitations of an MIS are:-
1. MIS cannot replace managerial judgement in decision making and human intention in strategic activities.
Thus, MIS is not a substitution to managerial activities, and instead, an important tool in managerial
activities.
2. MIS has to be application specific i.e., customized. It is not possible to have a generalised MIS package
which will suit all firms in a particular industry.
3. Just like any other systems, in MIS also, the quality of inputs governs the quality of outputs.
4. MIS takes into account mainly quantitative factors, thereby ignoring non-quantitative factors like morale,
attitudes of members of the organisation, which have an important bearing on decision-making process of
executives.
5. Effectiveness of MIS decreases due to frequent changes in organisation structure, management personnel
and concerned operational team.

6.8 Constraints in operating MIS

These are as follows:-
1. Non-availability of experts. There is a deficiency of qualified MIS people, who can — identify the
information needs for decision making process; design and implement an effective MIS as per this
information needs; etc..
2. Difficulty in obtaining experts to operate MIS. The source of availability of experts for running MIS
effectively is not always known to management.
3. Non-standardized. Due to varied business objectives, MIS has varied applicability — which makes it
impossible to standardise MIS. As a result, difficulty arises in designing, implementing and maintaining the
MIS.
4. Limitation in financial sourcing. In order to operate, implement and execute effective MIS, appropriate
financial sourcing is required, which poses problem at times.
5. Perceptual problem. The utility obtained from MIS, cannot however, be readily perceptible.

6.9 Types of MIS

Within most MIS there are four system types:-
1. Database systems. These systems process and store information, which becomes the organisation’s
memory.
2. Direct Control systems. These systems monitor and report on activities such as output levels, sales ledger
and credit accounts in arrears.
3. Enquiry systems. These are systems based on databases, which provide specific information such as the
performance of a department or an employee.
Chapter 2 2.11
4. Support systems. Support systems are systems that provide computer-based methods and procedures for
conducting analyses, forecasts and simulations.
These systems reflect the overall approach of the MIS to summarising information from the various TPSs within
the organisation and presenting that information in a usable summary form to management.

6.10 Prerequisites of an MIS

MIS plays a vital role in the management, administration and operations of an organisation as it helps in
information generation, communication and problem identification in the process of decision making. The main
pre-requisites of effective MIS are as below:
1. Hardware. Hardware is the physical components of a computer system consisting of mechanical,
magnetic and electronic design, structure and devices.
2. Software. A set of computer programs, procedures and associated documents related to the effective
operation of a computer system.
3. Database. Database is the ‘super-file’ which consolidates data and records data in several files (tables),
such that access to data is improved and redundancy is reduces, resulting in proper data-integrity.
4. MIS professional. The role of MIS professionals is to adequately service the needs of diverse user
community. For an MIS professional, understanding business functions (e.g. marketing, manufacture,
finance, etc.) is fundamental significance; knowledge of computers is crucial; understanding of decision-
making and human behaviour in interaction with computer systems is of central importance. Apart from
these understanding the dynamics of organisational change is of very vital importance and critical
significance. This is where the skill and expertise of an individual is put to ultimate use.
5. Support of top-management. MIS cannot be effective unless they receive the full support of top
management.
6. Periodic evaluation. There should be a periodic evaluation procedure to ensure that the objectives of
installing MIS are being achieved.

6.11 Approaches to MIS development

There are three mutually exclusive approaches towards MIS development.

6.11.1 Top Down approach

The Top level defines the business objective/constraints and other parameters. A model of information flow is
designed. Thus, several sub-systems and their modules come into existence. The information system so developed
is viewed as a total system fully integrated rather than as a collection of loosely coordinated sub-systems.
The advantage of this system is that, since the top level management becomes eager in development of top down
approach, the development procedure seldom faces resource requirement.
The disadvantage is that, the lower level may not be in the stage to adapt the new MIS. As a consequent, they may
not be fully co-operative and participative in the system development and implementation process. Moreover, the
functions/modules defined by the top level, may, in practical operation, need certain alterations, which the lower
level may understand but may not be able to put to reality because it has been designed by someone above his rank.

6.11.2 Bottom Up approach

Here, the development of MIS starts right from the grass-root level. Life-stream systems are identified and
developed. Life stream system is those systems, which are essential for the day-to-day business activities. The
examples of life stream include: payroll, sales order, etc. After ascertaining these, data/information requirement and
flows are identified. Steps are taken to ensure data-flow and data-integration between these sub-systems. The next
stage is the addition of decision models and various planning models for supporting the planning activities involved
in the model base facilitate and support higher management activities.
2.12 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS
The advantage of this approach is that, it is more realistic, more practical and less theoretical.
The disadvantage of this approach is that, it may take more time to interpret the data/information flow and data-
integration part.

6.11.3 Integrated approach

The Integrated approach is a combination of Top-down and Bottom-up approaches, where all levels of managers
influences the design of the system.
Top management identifies the structure and design. This presented to the lower level management for making
observations and suggesting alterative views and modifications. The revised design is drawn and evaluated by the
top level and sent down again in a modified form for further consideration, if required. This is an iterative process,
which is continued until a final design is achieved, that satisfies the requirements at all levels of the organisation.
Then this design is transformed into operation and implemented into reality.
This approach aims to eradicate the disadvantages of the other two systems and simultaneously amalgamate the
advantages of the other two approaches. If used impartially, the integrated approach, can neutrally overcome the
limitations of the above top-down and bottom-up approaches.

6.12 Misconceptions about MIS

Certain misconceptions about MIS cause inconvenience in installing and operating MIS. These are as follows:
1. Study of MIS is about computers. This is a false statement. MIS can be computerised as well as used
manually. Computer is just a tool which ensures complex activities at high speed, assured accuracy and
consistency. The installation of computer depends on several factors such as: size of the organisation,
complex needs of information processing, etc.
2. More data means more Information. In a report, it is the information which is relevant. Along with
information, data might also be there to support the information. Irrelevant data or irrelevant information,
both are unwanted and are to be avoided. It may be worth mentioning, that in advertising, white (i.e. blank
space) is also significantly important. Presentation of extra data/information, or mentioning irrelevant or
avoidable facts/data/information, is termed as ‘information overload’. Such an information overload not
only reduces the importance of report, but also destroys the purpose of its preparation.
3. Accuracy in reporting is action of vital importance. Accuracy in reporting depends on the type of usage
it is put into. For example, in Financial Accounting, when we are recording transactions in the financial
books (e.g. ledger posting), we need to put the exact amount, rounded to the nearest rupee; but, when the
Balance Sheet is presented, the amount is rounded to the nearest hundred, or what-ever may be the
requirement. Similarly, in MIS, accuracy of quantitative values is not of prime importance, but that of
content of information is importance. Whereas in case of operational level, the scenario is just the reverse.

6.13 Examples of MIS

MIS can be found in almost any organisation. A few examples are given below:
• Car manufacturing.
Systems to summarise sales of motor vehicles to assist in trend analysis and hiring of new workers
• Accountants
Summarising work performed on different audit engagements to assist in fee negotiation, etc.
• Training company
Provision of details of students booked onto different courses to indicate the size of lecture rooms
required and number of lectures for each subject
• Manufacturing company
Provision of stock ageing analysis to determine the amount of stock provision in the financial
statements.
Chapter 2 2.13

7.0 Computer and its effect on MIS

The Department of Inland Security of any Country/State has Detective or Spy or Informer — by whatever name —
to gather information, which is reported to higher authority and then to highest authority, as per requirement.
Decision and subsequent actions follows. This procedure, or similar procedure, had been in operation all over
World, since human civilisation. Computers are used now-a-days to assist searching (e.g. photo matching of
criminals/wanted; quicken signature or other verification(s), etc.). Thus we see that computer is used just as an aid
or assistant.
Gone are the days of Rajas and Maharajas. However, in that era, businessmen used to appoint special persons to
‘hear’ the incomes and expenses from the accountant and accordingly report them. The word “audit” came from
‘audire’ – which means ‘to hear’. This concept has been still in operation, under the name “Auditing”. There are
professionals (the Chartered Accountants), who does the job of this ‘listening’. Presently, Computers are used in
auditing: Computer Assisted Audit Techniques. Furthermore, Computers are still used in Accounting-procedure,
which was discovered for manual operation. This does not mean that Accounting and/or Auditing can not be
performed without computers.
Conceptually, Management Information System can exist without Computer; but it is the power if computer which
makes MIS feasible. MIS are characterised mainly by their ability to produce periodic reports (e.g. quarterly sales
forecast, etc.), compared with set target (e.g. budget) and providing required representation of analysis to be made
thereof — all done in minimum time with minimum human involvement.
Following are the advantages of using computer for MIS:–
1. Data access from several (remote) locations. It is possible to assimilate data from multiple (remotely
situated) business locations, where these data are inputted and validated. After data processing/analysis,
reports can be sent back to the remote locations, if required.
2. Data security.
3. Data confidentiality. The confidential nature of data and information can be maintained in a computer
system. With this application, the MIS becomes a safe application in the organisation.
4. Data storage.
5. Faster computation.
6. Integrates working of different information sub-system.
7. Widened scope of analysis.
8. Better decision making.
9. Increased effectiveness of information system.
10. User-friendly.
11. More comprehensive information. The use of computer for MIS enables system experts to provide more
complete and wide-ranging information to executives on business matters, so as to assist better decision
making.
12. Easy access using non-procedural languages (4GLs). The software, an integral part of a computer
system, further enhances the capability of hardware. The software is available to handle the procedural and
non-procedural data processing. For example, if one wants to use a formula to calculate a certain result, an
efficient language is available to handle the situation. Whereas, if one is not required to use a formula but
have to resort every time to a new procedure, the non-procedural languages are available.
2.14 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS

7.1 Impact of computers and MIS on different levels of corporate

management
Problems may be structured (i.e. having cause-effect relationship). Here there is an established relationship between
the problem, the cause and the outcome. Computers are best suitable for this type of situation, because they have
high processing power but least imagination or intelligence.
Problems may be unstructured (i.e. a very complex situation, where — the cause of the problem cannot be
distinctly identified, but it is to be resolved; and/or the cause, although identified, has multifaceted/versatile
relationship with the outcome; and/or the outcome can not be ascertained; and/or the outcome, which may be
ascertained/identified, is uncertain). Such type of problems needs high human involvement, which may be
supported or assisted by application of computer (e.g. artificial intelligence, etc.).
Semi-structured problems are those problems which are structured as well as unstructured (i.e. partly structured and
partly unstructured). Computers are very effective and efficient in solving the structured part of the problem. The
unstructured part of the problem was required to be solved by Humans only. However, with the correct application
of DSS, Artificial Intelligence Applications, Fuzzy Logic, Neural Networks, Case based reasoning, etc., assistance
is provided to humans even in framing their conclusion and taking their decisions in the unstructured area. The
computers cannot independently (i.e. without human involvement) take decisions in unstructured areas.

7.2 Indian Scenario

In later chapters, we will see how technological advancement and modernisation is required for the advancement,
implementation and function of MIS. The rapid advancement of technology and the consequent advent of
computers have mainly contributed for the success of MIS in those developed countries. Whereas, in developing
countries, where huge financial investment in building and maintaining technological infrastructure and
computerised systems, implementation of computerised MIS will follow at a slower rate. However, there is not
hindrance in manual MIS. Even after three decades of computer advent in India and operations of MIS in certain
big organisations, it still has remained a doubtful point whether it would serve any useful purpose and its
installation justified.
In the Indian context, the major hurdle is the reluctance on the part of industrialists to convince themselves of the
usefulness of MIS. The conventional approach to business operation a wholehearted cooperation and support to the
implementation of MIS is not extended. As a result, where MIS has been introduced, it has received only a
lukewarm support and has not passed the take off stage. Another important reason for the unsatisfactory functioning
of MIS in many Indian organisations is the lack of proper training on the part of the personnel dealing with it.
Ineffective handling of the system by these inexperienced people has been mainly responsible for the tardy
development of MIS in India.
Recent Developments in Information Technology
The explosive growth of the internet and use of its enabling technologies is the resolution any technology
phenomenon of the 1990s.
Data warehouse and data mining, electronic data interchange, electronic commerce, smart card, biometric device
based computing, mobile commerce are the technologies of the new millennium.
The internet has become the key platform for a rapidly expanding list of information and entertainment services and
business applications, including enterprise collaboration and electronic commerce systems. Open systems with
unrestricted connectivity, using internet technologies are the primary telecommunications technology drivers.
Chapter 2 2.15

8.0 Other Information Systems

8.1 MIS vs. Data Processing System

Data captured by Transaction Processing System is transferred to Data processing system (DPS). DPS is meant to
process these inputs, to produce outputs (i.e. information), which are transferred to MIS for further analysis. MIS is
a concept and an orientation towards which an information system design moves rather than an absolute state.
Thus, Data Processing System is just one of the several modules/sub-systems required for executing MIS.

8.2 MIS vs. DSS

Decision Support Systems are computer-based systems that help decision makers confront ill-structured problems
through direct interaction with data and analysis models.
Whereas, Management Information System is an organized collection of people, procedures and devices used to
provide the right information to the right person at the right time for proper decision-making.
DSS are more targeted (i.e. focused on specific decision) than MIS. MIS involves routine flow of data and assist in
the general control of the organisation by aiding reporting of relevant information in appropriate format at proper
timing to the proper authority, and etc.

8.3 Artificial Intelligence and Expert Systems

The ‘knowledge’ in an expert system is obtained from human expert. Capturing knowledge involves entering
knowledge into a computer system and then using that knowledge in some useful way.
An Expert System is a computerised program that makes decisions based on the rules provided in the application.
Expert systems hold knowledge in ‘frames’ and rules in a ‘rule base’.
These programs are designed to perform limited (or confined) tasks, with an accuracy rate greater than of the
human. The primary applications of artificial intelligence research and applications today are robotics, computer
vision, speech recognition, natural language processing, neural networks, etc.
MIS needs data to convert to information to assist important tasks, which would be evaluated and decided upon
humans. MIS vests with the responsibility to provide timely, adequately accurate information but the precision of
the outcome (i.e. action taken based on information) does not depend on MIS. However, Expert Systems have
restricted application (not necessarily in the field of business; even in playing games/chess, etc.), but has a precision
higher than that of humans.
[For further reading, consult respective books, the following are explained in very brief – Fuzzy logic is a method
of introducing imprecision into computer programs; Case based reasoning uses a database of rules to guide
decision making in a specified area of knowledge; Neural networks are computers which try to duplicate the
reasoning processes that take place in the human brain.; tending to provide more effective advice than expert
systems because they can learn from previous inputs.]
2.16 MANAGEMENT INFORMATION SYSTEMS IN MODERN BUSINESS

Summary
• Executives are the key personnel in an organisation and they perform
dual role as commander and as protector.

• Information is a vital resource for day to day operation, for

preparation and presentation of internal and external reports, for
planning and decision making — for the present and future courses of
actions.

• Decision making is a course of action to bring a situation under

control. The structure (structured, un-structured, semi-structured)
of decisions depends on the problem. All levels of management (i.e.,
strategic, tactical and operational level) are involved in this
process of decision making. Importance and type of decision making
varies from situation to situation and the involved managerial level.

• MIS is an organised collection of people, procedures and devices used

to provide the right information to the right person at the right
time for proper decision-making. The three elements of MIS are:
Management, Information and Systems. MIS was in practice even before
the introduction of computers; but with the introduction of
computers, the scope of MIS has enlarged by adding systems for
supporting management and administrative activities involving
planning, scheduling, analysis and decision-making.

• MIS performs various roles in an organisation. An organisation may

use MIS to keep track of inventory level, evaluate sales trend of
different products, keep information about clients, etc.

• MIS plays vital role in the management, administration and operations

of an organisation as it helps in information generation,
communication and problem identification in the process of decision
making.

• The different mutually exclusive approaches towards MIS development

are: (i) Top-down, (ii) Bottom-up, (iii) Integrated.

• Technological advancement and modernisation is required for the

advancement, implementation and function of MIS. The explosive growth
of the internet and use of its enabling technologies are noteworthy.

Self-test Questions
1. It is an undisputed fact the ‘Information’ is an important resource. Discuss its special characteristics.
2. There are three types of decision-making: programmed, semi-programmed and non-programmed.
Illustrate where, by whom and how these are used.
3. What are the elements of MIS? How are they interrelated?
4. How an MIS can facilitate the general functions of management (plan, organise, control).
5. Define MIS and discuss its objectives.
6. Write a short note on the importance of MIS and its different levels of management.
7. Explain in detail, the approaches of MIS development.
Chapter 2 2.17

5.0 ‘Information Systems’ for Business System----------------------------------------------------------- 1

5.1 Importance of Information in Business activities 1
5.2 Nature of Decision Making 2
5.3 Information Systems to support decision making 3
6.0 Management Information System---------------------------------------------------- ------------------3
6.1 Evolution of MIS 3
6.2 MIS is an old management tool 4
6.3 Elements of MIS 5
6.3.1 Management 5
6.3.2 Information 6
6.3.3 Information Systems 7
6.4 An insight to the Management-levels of any Organisation 8
6.5 Role of MIS in an Organisation 8
6.6 Features of MIS 9
6.7 Limitations of Management Information System 10
6.8 Constraints in operating MIS 10
6.9 Types of MIS 10
6.10 Prerequisites of an MIS 11
6.11 Approaches to MIS development 11
6.11.1 Top Down approach 11
6.11.2 Bottom Up approach 11
6.11.3 Integrated approach 12
6.12 Misconceptions about MIS 12
6.13 Examples of MIS 12
7.0 Computer and its effect on MIS------------------------------------------------- ----------------------13
7.1 Impact of computers and MIS on different levels of corporate management 14
7.2 Indian Scenario 14
8.0 Other Information Systems---------------------------------------- ------------------------------------15
8.1 MIS vs. Data Processing System 15
8.2 MIS vs. DSS 15
8.3 Artificial Intelligence and Expert Systems 15