Management information

systems
Chapter one
Introduction

By shibiru Ayalew
2009
1
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 to
become much more aware of what we are going to do
with it.
As the organisation grows, the management function is
performed by people who are more specialised and may
be 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 on
routine clerical and accounting operations such as
payroll and billing.
These were mainly transaction applications,
named simply because they involved processing
accounting 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 access
data 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 to

disparate 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 is

to 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 advantage
with the provision of new ways to outperform rivals
•spawn new businesses and opportunities, often
from within an organisation's existing operations. 7
Definitions of MIS
Deconstructing the term MIS enables us to define
each word in a business context:
Management - being managed or people
managing a business. Over recent years
management has become more scientific and
system-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 a

slightly different emphasis or focus. Lucey (1995)
emphasises the decision focus of his definition:

'a system to convert data from internal and external

sources 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, directing
and 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 the
emphasis 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 people
in 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
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 are
used 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 past
many were forced to rely upon haphazard
sources.
A modern management information system raises
the process of managing from the level of
guesswork and piecemeal information to the
development of a system of information with
sophisticated data process which enables
managers to solve complex problems and make
informed 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 a
variety 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 and
used 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? Most
of 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
Definitions of MIS

As so many parts of an organisation's

operations and information processes
depend upon information, it is considered to
be a key resource within every organisation.
Skilfully handling information has become an
important 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 become

filtered and disseminated, they take on
meaning, and so become information

• data are inactive and just exist, whereas

information is active and relevant and provides
a basis for things to be done

• data are technology-based, whereas

information 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 to
ascertain their quality. Information must be pertinent.
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 timely and 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. Information
sources 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. For
example, 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 an
industry. 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
Definitions of MIS

Examples of formal data might include:

Internal External
Management reports Information services
Management audits Trade publications
Meetings Industry consultants
Forecasts 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 is
that 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 structuring
in 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 information
requirements, both for the division and the
organisation as a whole.

By geography - where organisations are physically

dispersed, the local operation will require an
information system which not only integrates it into
head office but also provides it with the flexibility it
requires to be competitive.
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 USE OF INFORMATION

Within large organizations, a combination of

structural 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's
information system evolves.

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 USE OF INFORMATION
Traditional systems were centred upon different
departmental functions and processes. As a
result, data were treated as a separate
component of functional analysis and process
design. Traditional systems therefore replicated
existing processes and applications to produce
uncoordinated 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 involves
rearranging systems development
through organization-wide planning of
information requirements.
The focus then shifts from a process or
departmental application through to a
data orientation.
This new data-centred approach is often
termed information engineering as it
views 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 processes
and users.
The focus point
of the stable data model is
integrated information
available across the
organisation, with individual
applications seen
as peripheral.

An example of
an integrated data-centred
approach is shown in the
figure 31
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 relationships
between 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.
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USE OF INFORMATION

According to Lucey (1995),

'Organisations choose structures which are thought
to 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, product
and geographical organisational structures.
Such organisations are often viewed as organic
because they adapt to changing conditions and
develop features such as network control
structures, 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
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 structures
which 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 aims
at the same time, while also providing the
flexibility to respond to new markets and
opportunities as and when they arise.
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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 which
decisions 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 those
further down.
By contrast, within decentralised organisations
decision-making is distributed as far down the
management hierarchy as possible. This
provides lower-level managers with
considerable practice in making decisions and
prepares them for moving up the hierarchy.
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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 to
unauthorised 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
USE OF INFORMATION
Confidentiality refers to the limits on the use of
information collected from individuals. This means
that 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 alteration
to record systems. It can be promoted with a range
of tools designed to protect access to software,
hardware and communications networks.
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USE OF INFORMATION

Privacy is a broader term often used to

encompass 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 services in
respect of such information'.
The Act covers only the holding of computer
records and not manual records.
The Act requires those using personal data to
register with the Data Protection Register.
Registered data users must then follow the
eight principles of the Act. 41
USE OF INFORMATION
1. Data must be obtained and processed fairly and
lawfully.
2. Data must be held only for specific lawful purposes
which 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 excessive
for
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 42
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 Practice
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