Chapter # 1 Introduction to Management Information System

Definition: “MIS is a planned system of collecting, storing and disseminating data in the form of
information needed to carry out the functions of management and make informed and effective decision.”
 A management information system (MIS) is a system that collects a company's data from various
sources (employees, processes, inventory, and more). It then analyzes the data to provide accurate
and timely information to managers. The managers then use this information to make more informed
and impactful business decisions.
 An MIS is present in every organization to collect, record, and track information.
 The biggest hurdle with an information system is employee training. In addition, the system needs
maintenance.
 Despite the benefits, not all firms can afford an advanced information system. Sometimes, due to
MIS, work becomes too easy for the employees.

Components of MIS

MIS is an organized integration of hardware and software

technologies, data, processes, and human elements. It is a software
system that focuses on the management of information technology
to provide efficient and effective strategic decision making. For a
management information system to be effective, business
processes must be carefully mapped out, data must be accurate and
timely, and hardware and software must be able to store and
manipulate it. A good MIS depends on the people who design,
implement, and use it.
1. Data: Data is crucial for every business. Unfortunately, in the internet era, firms are bombarded
with too much data, not just relevant data. Firms collect data in files, documents, cloud storage, hard
copies, and soft copy formats. Primarily the MIS stores data in a secure manner. For example, a bank
maintains records of account deposits, withdrawals, and customer details.
2. People: An MIS is designed to be used by firm employees. Managers, accountants, executives, and
staff for day-to-day operations. Ideally, the MIS should be customized based on the firm needs. The
MIS features should suit common usage.
3. Business Processes: Information systems simplify complex processes—the centralization of
operations achieves this.
4. Hardware: Hardware is an indispensable component of MIS. Every system runs on a device, but the
processing capabilities vary.
5. Software: MIS software is categorized into two—system software and application software. The
term system software refers to operating systems like windows and iOS. Application software is
more specific—banking systems, accounting applications, payroll applications, etc.
 Objectives of MIS

MIS has five major objectives which include:

1. Data Capturing
2. Processing of Data
3. Storage
4. Retrieval
5. Dissemination

1. Data Capturing: MIS capture data from various

internal and external sources of the organization.
Data capturing may be manual or through computer
terminals.

2. Processing of Data: The captured data is processed

to convert into the required information. Processing
of data is done by such activities as calculating,
sorting, classifying, and summarizing.

3. Storage of Information: MIS stores the processed or

unprocessed data for future use. If any information is
not immediately required, it is saved as an organization record, for later use.

4. Retrieval of Information: MIS retrieves information from its stores as and when required by
various users.

5. Dissemination of Information: Information, which is a finished product of MIS, is disseminated to

the users in the organization. It is periodic or online through a computer terminal.

Functions of MIS

The broad functions of MIS are as follows:

 To Improve Decision-Making
 To Improve Efficiency
 To Provide Connectivity
 Data Processing
 Prediction
 Planning
 Control
 Assistance
 Strategies for an organization

To Improve Decision-Making: The Management Information System (MIS) furnishes relevant

information on diverse matters, thereby enhancing the decision-making process of the management. By
utilizing the speedy and precise data provided by the MIS, managers can make prompt and informed
decisions, which ultimately enhances the quality of decision-making and contributes to the company’s
value.
To Improve Efficiency: The Management Information System (MIS) facilitates managers in executing
their duties with enhanced ease and efficiency, resulting in improved productivity.
To Provide Connectivity: The MIS provides managers with better connectivity with the rest of the
organization.

Data Processing: Data processing involves collecting, transmitting, storing, and processing data to
generate an output. Prediction involves analyzing data using modern mathematics, statistics, or
simulation to anticipate future scenarios.

Prediction: By utilizing methods of modern mathematics, statistics, or simulation, data analysis is

conducted to predict potential future scenarios.

Planning: The analysis of data of a regular nature may give many indications on likely future events or
situations and this can be utilized in planning or reviewing the plan already made earlier.

Control: By examining records of daily, monthly, quarterly, or annual activities, certain factors that
require management and control can be identified. If these factors are identified in a timely manner, they
can be managed relatively easily. However, some factors may require the attention of senior management
to remain under control. It is essential to note that ignoring smaller factors at the beginning may have the
potential to disrupt other factors as well.

Assistance: One of the principal functions of MIS is to support senior management by analyzing regular
records and drawing inferences about various factors related to the company’s operational performance,
such as human resources, financial resources, material resources, and more.

Strategies for an Organization: Today each business is running in a competitive market. An MIS
supports the organization to evolve appropriate strategies for the business to assent in a competitive
environment.

Challenges and Limitations of MIS

There are three major challenges of MIS

1. High Cost
2. Training of Employee
3. Maintenance Cost

High Cost: Development of new computerized based information system is a problem for the
organization due to the cost factor and it creates problems because with the change of time there is need
of up-to-date of the information system.

Training of Employee: Employees should have the capacity of learning of the information system with
the changing competitive and business environment; otherwise it will be difficult for the organization to
stay in the market.

Maintenance Cost: Sometimes a problem arises due to server crash and website crash. Sometimes it
leads to the loss of information. So, maintenance cost is needed to tackle the above problem.
Limitations of MIS
Even though MIS has many benefits but it also has its limitations.

1. In decision-making, MIS cannot take the place of managerial decisions. It is merely a valuable
method for top-level executives in making decisions and solving problems.
2. MIS can be considered mainly for quantitative factors.
3. Qualitative decisions about the business activities can be made using MIS. An MIS does have
limitations, like its developing cost, employee training time, lack of versatility, and the storage of
incorrect or incomplete data.
4. For businesses looking to improve their operations management, MIS implementation may be
prohibitively costly.
5. The output quality of MIS is directly proportional to the input and process quality.
6. Only those employees who have been educated and well trained are able to work on MIS, hence the
employees who are not educated cannot work with MIS.
7. Non-programmed decisions are less useful for MIS.
8. Depending on the MIS style and functionality, making improvements quickly to represent changing
business operations can be impossible.
9. The most serious fault in an MIS is when sometimes in few instances, it provides inaccurate or
incomplete information to the management executives. This issue causes heavy costs to the
company and sometimes wrong decisions can be carried out due to this MIS treated as knowledge
flaws.
10. MIS is less effective to those organizations, where information is not important and not sharing with
others.

Subsystems of MIS

Subsystems perform specialized tasks related to the overall objectives of the total system. Following are
the subsystems of the Management Information System:

1. Transaction Processing System

2. Management Reporting System
3. Decision Support System
4. Executive Support System
5. Knowledge Based System
6. Business Expert System
7. Office Information System