CHAPTER-1|Management Information Systems: An Overview

CHAPTER-1
MANAGEMENT INFORMATION SYSTEMS: AN
OVERVIEW

1.1. INTRODUCTION
 Today the need for updated information has become inevitable to arrive at an effective
decision in all walks of life. Whether it is industry, commerce, defence, banking, education,
economics or politics, information is needed everywhere.
 Information is live as it is required to be updated all the time and is renewable.
 The exponential growth of information makes it necessary that information is collected,
stored and retrieved in various fields when needed.
 For example
(a) In setting of a new industry, information regarding the choice of technology, skill, money
and material becomes an important requirement for its growth and smooth functioning.
(b) In a competitive market, before deciding about the price of an item, the producer needs
information about the pricing police of the competitors, specially of competitive products,
sales techniques etc.

1.2. MANAGEMENT INFORMATION SYSYEM

The MIS is an integrated man machine system that provides information to support the
planning and control functions of managers in an organisation.

MIS

Management Information System

1.2.1. Management
 Management has been viewed as be function, a process, a profession and a class of people. It
refers to the kind of task and activities that are perform by managers. The specific nature of
the activities is determined by such managerial functions as planning, organising, directing,
leadership and controlling.
1. Planning: It is the process of deciding in advance the courses of action to be followed
and when and how to undertake these. Its objectives in the best possible manner and for
anticipating future opportunities and problems.

Copy Right DTE&T, Odisha Page 7

 CHAPTER-1|Management Information Systems: An Overview

2. Organising: It is formal grouping of people and activities to facilitate achievement of the

farm’s objectives. It is need for assigning responsibilities, jobs and hierarchy among
personnel.
3. Controlling: It is the checking the progress of plans and correcting any deviations that
may occur along the way.
4. Directing: It is the process of activating the plans, structure and group efforts desired
direction. It is needed for implementation of plans by providing desired leadership
motivation and proper communication.
 The management can be group into 3 hierarchical levels –
• Top or Strategic management
• Middle or Tactical management
• Junior or Operational management
Top Management: - It is establishes the policies, plans, objectives and budget framework
under which various departments will operate of the organisation.
Middle Management: - It has the responsibility of implementing the policies and overall
plans of the top management.
Junior Management:-It has the responsibility of implementing day to day operations and
decisions of the middle management to produce goods and services to meet the revenue,
profit and other goals.

1.2.2. Information
 Information is the result or product of processing data. Information can be defined as the data
which is organised and presented at a time and place so that the decision-maker may take
necessary act.

Data Process Information Decision

Action

Fig: Conversion of Data into Decision

 Information consists of data that has been retrieved, processed or otherwise used, for
informative or inferential purposes, arguments or as a basis for forecasting.
 For example, some supporting documents, ledgers and so on, which comprise source material
for profit and loss statements may be used by the decision maker for profit planning and
control.

Copy Right DTE&T, Odisha Page 8

 CHAPTER-1|Management Information Systems: An Overview

1.2.3. System
 A system is a group of elements or components joined together to fulfil certain functions.
 A system is made up of sub-system. The systems are either natural or man-made.
 A sub-system which may be composed of further sub-systems. A subsystem itself is part of a
super system.
 The given example is that of an industrial (or factory) system. It has various subsystems such
as production subsystem, marketing sub-system, personnel sub-system and financial sub-
system.
 These sub systems in turn are composed of further subsystem.
 For example a production subsystem could consist of sub-sub-system of production control,
material control, quality control etc.
 The material sub-sub-system can be further broken down into ‘black boxes’ such as
purchasing, stores, transportation, inspection etc.
 This industrial system is a part of the large economic system of the country which may be
called as the super system.
 This relationship is shown in fig

Super system

The system under Other system

consideration

Sub system-1 Sub system-2 Sub-system-N

Sub-sub system-1 Sub-Sub system-2 Sub-sub system-M

Black Box-1 Black Box-2 Black Box-J

Fig: System and its Components

1.3. DEFINITIONS OF MIS.

1. According to Schwartz, ‘MIS is a system of people, equipment, procedure, documents and
communication that collects, validates, operates on transformers, stores, retrieves and present
data for use in planning, budgeting, accounting, controlling and other management process’.
2. According to Jerome Kanter, ‘MIS is a system that aids management in making, carrying out
and controlling decisions’.

Copy Right DTE&T, Odisha Page 9

 CHAPTER-1|Management Information Systems: An Overview

3. According to Davis and Olson, ’MIS is an integrated user machine system designed for
providing information to support operational control, management control and decision making
functions in an organisation. The information systems make use of resources such as hardware,
software, man, procedures as well as suppliers’.

1.4. FRAMEWORK FOR MIS ORGANISATION AND MANAGEMENT

TRIANGLE
Robert Anthony in 1965 suggested that the area of management planning and control can be
divided into 3 categories. These are:
1. Strategic planning.
2. Operational control.
3. Management control.
 Strategic planning: It develops the strategy for deciding objectives of the organisation and
introducing changes in those objectives, formulating policies to govern procurement, use and
disposition of those resources.
 Management control: It is needed by managers of a various departments to measure the
performance, decide on control action, formulate new decision rules and allocate resources.
 Operational control: It is the processes of operational activities are carried out to achieve
optimum use of resources. It makes use of pre-established procedures and decision rules.

1.4.1. Levels of Management

Each organisation is made up of several levels. These could be classified into three categories:
top, middle and junior (TMJ) levels.
 The top management performs strategic planning and the other two levels provide support in
the form of processed information.
 The middle management level performs tactical planning and control, and needs information
to discharge these managerial functions.
 The junior level is involved in day to day operational control and needs information for its
working.

1.5. INFORMATION NEEDS AND ITS ECONOMICS

The availability of information to management at various levels has improved due to three
reasons. These are
1. Development of telecommunications: The information flow has been accelerated with
developments in communication technology like radio telephony, microwave communication,
laser communication and satellite communication.
2. Processing of data with computer: The accessibility of information has been considerably
improved as a computer can readily scan the available stored data to provide the required
information.
3. Video technology: Video technology permits the recording of activities on video cassettes and
video discs.

Copy Right DTE&T, Odisha Page 10

 CHAPTER-1|Management Information Systems: An Overview

1.5.1. Information Classification

The information obtained and used in the organisations can be classified into five categories:
1. Action vs. non-action information: The information lying unnoticed is called non action
information but the same information when processed and used in some context by the
recipient is called action information.
2. Recurring vs. non recurring information: Information which is generated at regular
intervals of time is called recurring information. A particular type of information which is
arrived at through some special kind of study and which helps in management decision is
called non recurring information.
3. Documentary vs. non documentary information: Information which is available in some
document form that is either in some written form or on microfilms, magnetic tapes, floppy
discs etc is called documentary information. All other information is categorised as non
documentary
4. Internal vs. external information: The distinction is obvious. Managers at different
hierarchies in the organisation require different combinations of internal and external
information.
5. Historical information vs. future projections: Here again the distinction is obvious because
historical information would be futile unless it can be used for future projection.

1.6. SYSTEMS APPROACH

 The system approach to a business organization implies a wholistic approach to the study of
inter-relationships of sub-systems of an organization in view of the objectives set by the
organisation.
 Thus, this requires an integrated approach which could reduce the conflict among different
sub-systems and modify the objectives of these sub-systems in order to arrive at an optimum
solution to the problems which may arise in the achievement of the main objectives or in the
working of the whole system.
 A systems view of business in shown fig.

Copy Right DTE&T, Odisha Page 11

 CHAPTER-1|Management Information Systems: An Overview

1.6.1. Classification of systems

The various types of systems are:
Conceptual and empirical systems:
 The conceptual system is concerned with theoretical structures which may or may not
have any counterpart in the real world. Examples of such systems are economic theory,
organization theory, general system of relativity etc.
 Empirical systems are concrete operational systems made up of people, materials,
machines, energy, and other physical things. Other systems such as electrical, thermal and
chemical are also fall into this category.
1. Natural and man-made systems:
The examples of natural systems are: human body, solar system, etc.
Examples of man-made systems are: Transportation system, communication system,
education system, business organisation etc.
2. Social system:
A system made up of people may be taken as a social system, such as business organisations,
government agencies, political parties, social clubs, professional societies etc.
3. Man-machine system:

Copy Right DTE&T, Odisha Page 12

 CHAPTER-1|Management Information Systems: An Overview

Most empirical systems fall into the category of man-machine systems. One of the examples
of this system is aeroplane.
4. Open and closed systems:
 An open system continually interacts with its environment. This type of system can adapt
to changing internal and environmental conditions. Every social and business
organization is open because it reacts with its unpredictable environment
 A closed systems one of that does not interact with its environment. This system does not
change or if it does then a barrier exists between the system and the environment to
prevent the system from being affected.

1.6.2. System life cycle

A management information system business has the following four phases in its life cycle:
1. Study phase:
This phase is concerned with
1. Identification of the problems
2. Study of the present system and its effectiveness
3. Identification and evaluation of various alternative courses of action
4. Selection of the most appropriate course of action as per the objective.
2. Design phase:
This phase is concerned with
1. Identification of the function to be performed
2. Study of the input/output and life cycle design
3. Defining basic parameters of system design.
3. Development phase:
At this stage, the decision about the selection and use of hardware and software is taken.
4. Implementation phase
The system designed is given practical shape and is adopted for use.

1.7. MEANING AND OBJECTIVES OF MIS

 Meaning
 MIS is an integrated man-machine system which collects, maintains, correlates and
selectively displays information in the proper time frame consistently, to meet the specific
needs of various levels of management in order that decisions could be made and action taken
for fulfilling the objectives of an organisation.
 In other words it is a system which:
i. Provides information to support managerial function. (Planning, control, organising,
operating)
ii. Collects information systematically and routinely in accordance with a well defined
set of rules.
iii. Includes files, hardware, software and operations research models of processing,
storing, retrieving and transmitting information to the users.
 Objectives

Copy Right DTE&T, Odisha Page 13

 CHAPTER-1|Management Information Systems: An Overview

1. Facilitate: The decision making process by furnishing information in the proper time frame.
2. Provide: It requisite information at each level of management to carry out their functions.
3. Help: In highlighting the critical factors to the closely monitored for success
4. Support: Support decision making in both structured and unstructured problem
environments.
5. Provide: Provide a system of people, computers, and procedures, interactive query facilities
documents for collecting, storing, retrieving and transmitting information to the users.

1.7.1. Categories of MIS:

The MIS can be subdivided into following four categories:
1. Transaction processing system (TSP):
The system designed for processing day to day transaction in an organisation is called TPS.
This system deals with collecting and processing a large volume of data which mainly helps
junior level management in discharging their responsibilities.
2. Information providing system (IPS):
This system is meant for processing information, making a summary of information, and
providing exception reports. The summary reports help in giving at a glance the information
available, while exception reports indicate deviations and the reasons for shortfalls in
performance.
3. Decision support system (DSS):
It is sometimes described as the next evolutionary step after MIS.
It helps in improving the analytical capability of the decision maker by creating interactive
model of the real life situation.
4. Programmed decision-making system:
It is defined as a plan for the automatic solution of a problem. Programs are simply a string of
instruction as to accomplish a job or a task. In this information age the systems for
programmed decisions are created so that decisions are made by the system rather than a
person.

1.7.2. MIS and Organisation Structure:

 Organisation structure and information needs are inseparably linked like the human anatomy
and the nervous system.
 The knowledge of organisation structure and proper record of delegating of authority within
the organisation are prerequisites of MIS.
 This actually helps in defining authority and responsibility, demarcating decision making and
measuring objectives of each sub system.
 The outline of MIS for any organisation is shown in fig

Copy Right DTE&T, Odisha Page 14

 CHAPTER-1|Management Information Systems: An Overview

1.7.3. Classification of MIS

The MIS can be divided into four categories:
1.Data bank information system:
In this system, the link between the information system and the user is assumed to be weak.
This type system is more useful for unstructured decisions. The information system collects,
classifies and stores data which may be useful to the user. The user maker request for data as
per his need and determines the cause and effect in view of the actions and make s judgement
as to which outcome is suitable. The data doesn’t help the user in making predictions or
decisions, however, the nature and availability of data itself tend suggest certain desirable
certain desirable alternatives to the user. The data bank information system is shown in fig.

Copy Right DTE&T, Odisha Page 15

 CHAPTER-1|Management Information Systems: An Overview

2. Predictive information system

This class of system is an extension of the databank information system. In this system
prediction and inference making occurs when processing by the information system passes
from basis data to conclusion about the source.

3. Decision making information system

In this system an organizations value system and criteria for choice are incorporated. This
level of MIS is useful for structured decisions.
4. Decision taking information system
In this system the information system the user are assumed to be one For example a purchase
order is released automatically when an inventory level reaches or goes below the reorder or
send s remainders to vendors to supply goods when supply is overdue.

1.7.4. Implementation of MIS

The implementation plan involves the following steps:
1. Preparing organisational plans.
2. Planning of work flow.
3. Training of personnel.
4. Development of software.
5. Acquiring computer hardware.
6. Designing the format for data collection.
7. Construction of data files.

Copy Right DTE&T, Odisha Page 16

 CHAPTER-1|Management Information Systems: An Overview

8. Operation of old and new systems in parallel.

9. Phasing out the old and inducting the new system.
10. Evaluation, maintenance and control of the new system.

1.8. DISADVANTAGES OF INFORMATION SYSTEM

Following disadvantages are likely to be there from information systems:
1. ‘Deskilling’ of workers:-Introduction of new technologies, especially for automation,
sometimes render obsolete the existing skill of some workers. Many industries such as the
automobile, steel, insurance industries, banks, have gone through periods of massive layoffs
because of intense automation efforts. Therefore, while computerisation can increase
operational efficiency and improve profits, sometimes it is also the root cause of workforce
reduction.
2. Information overload: Generation of excessive amounts of information can overwhelm
managers who must digit it and used it to make decisions. At times, this improvement also
has its downside.
3. Employee mistrust: Employees sometimes fear that computers eventually replace them.
They may view information system with scepticism; unless they are assured that their jobs
are not in danger.
4. Increased competitive pressure: There is increased pressure on small and medium-scale
industries, failing which they are steadily being pushed out of the marketplace by larger
companies.
5. Disenchantment with IS: Many organisations are unable to value the information systems
and technologies to their organisations vis-à-vis the return on investment. In coming years,
the MIS will experience close scrutiny of its abilities to the delivery on its promises.
6. Security breaches: when organisation introduce new and sophisticated technologies, they
most also find new ways to protected these assets from theft, pilferage, and security breaches.
Therefore computers and information system actually increase the operating costs of an
organisation.

1.9. APPROACHES OF MIS DEVELOPMENT

There are seven types of approaches used for developing MIS
1. Top down approaches:
This approach developed a corporate plan as a guide for designing the information system.
Here top management takes the lead in formulating objectives, policies and plans and
communicates them down the line to middle and supervisory management for translating
them into reality.
2. Bottom up approaches:
It consists of following five steps:
a. Individual functional applications are planned separately consisting of transition
processing, updating of files and simple reports.
b. Files of various functional applications are integrated by means of indexing and
changing into a database.
c. Various functions are added to operate on the database and management control level.

Copy Right DTE&T, Odisha Page 17

 CHAPTER-1|Management Information Systems: An Overview

d. Integration of models into a model base having a wide verity of analysis, decision and
planning models.
e. Strategic planning data planning models are added to the information system.
3. Integrative approaches:
This approach permits managers at all levels to influence the design of MIS. Here evaluation,
modification and approval of top management continue till a final design is acceptable to all
levels.
4. Traditional approaches:
In this case activities are performed in sequence. Each activity is undertaken only when the
previous activity is completed. Managers and users consider and review the work performed
the MIS professionals during each stage of processing, in order to ensure accuracy and
completeness.
5. Prototyping approaches:
In order to avoid any possible delay, prototyping approach is used. It is to developed a small
or pilot version is called a prototype, which is built quickly and at lesser cost with the
intention of modifying it when need arises.
6. End-user development approaches:
In this approach the increasing availability of low cost technology, end user development is
popular in many organisations. Here the end user is responsible for system development.
7. Systematic approach for development in small organisations:
Since fewer MIS professionals shall be working having with variety of responsibilities that
they have little time to develop new system for users. In a very small organisation, no MIS
professional will exit. This does not mean that they cannot develop management information
systems. They develop systems using the following steps:
 Identify requirements
 Locate, evaluate and secure software development.
 Locate, evaluate and secure hardware.
 Implement the systems.

1.10. CONSTRAINTS IN DEVELOPING AN MIS

Following are the constraints in developing an effective MIS:
1. No management system to build upon.
2. No clear definition of mission and purpose.
3. No objectives for the company.
4. Misorganisation.
5. Communication gap.
6. Lack of management participation.

1.11. MIS AND USE OF COMPUTER

Following are the main advantages of using computer technology in MIS:
1 .Expanding scope for using system
2. Enhancing speed of processing and retrieval of data
3. Widening the scope of analysis.
4. Increasing complexity of system design and operation.

Copy Right DTE&T, Odisha Page 18

 CHAPTER-1|Management Information Systems: An Overview

5. Integrating different information sub systems.

6. Increasing the effectiveness of information system.
7. Extending more comprehensive information to business managers.

1.12. LIMITATIONS OF MIS

The limitations of MIS
1. MIS cannot replace managerial judgment in decision making. It is merely effective tool for
the managers in decision making problem solving.
2. The quality of output of MIS is directly proportional to the quality of input and processes.
3. MIS cannot provide tailor made information packages. It is required to analyse the available
information before decision making.
4. In a fast changing and complex environments, MIS may not have enough flexibility to update
itself quickly.
5. MIS takes only quantitative factors into account.
6. MIS is less useful for making non programmed decisions.
7. MIS is less effective in organizations where information is not being shared with others.
8. MIS is less effective due to frequent changes in top management, organizational structure and
operational staff.

1.13. COMPUTER BASED INFORMATION SYSTEMS

 Mangers make decisions to solve problems and information is used in making the
decisions.
 Information is presented in both oral and written forms by an information processor.
 It contains each of the computer based application areas:-Accounting Information System
(AIS), Management Information System (MIS), Decision Support System (DSS), Office
Automation (OA) and Expert System (ES).
 The term computer based information system (CBIS) is used to describe the five
subsystems that utilize the computer.
 All of the CBIS sub-system provides information for problem solving.
 Each CBIS subsystem can support quality management. These are external customers that
exist outside the firm. Information services interfaces with these external customers by means
of the AIS. Much of the external customer’s perception of the firm is based on the
capabilities of the AIS to execute orders promptly and accurately. Hence, information system
has a direct influence on the firm’s product and service quality. IS also provides an indirect
influence by providing information to users inside the firm.
 These are internal customers and they exist on all organizational levels and in all functional
areas. The information enables these internal customers to do their jobs better, resulting in
better products and services. In addition, the standard financial reports produced by AIS, such
as the income statement and cost analyses, serve as a scorecard of the quality effort, reporting
cost of rework, scarp customer returns, warranty claims and so on. Fig. shows each of these
subsystems which provide information to be used in quality management.

Copy Right DTE&T, Odisha Page 19

 CHAPTER-1|Management Information Systems: An Overview

CBIS Financial
Quality Reports
Database AIS
Mathematical Model
Mathematical Outputs
MIS
Model Reports Special
Reports

Periodic DSS Periodic

Reports Reports

Communica- OA
tion

ES Consultations

Fig. CBIS sub-systems support-quality management

Copy Right DTE&T, Odisha Page 20