38 Management Information System

Pooja Malhotra

1. Learning Outcome:

After completing this module the students will be able to:

  • Understand the concept and meaning of MIS
  • Understand the features of MIS
  • Understand the essentials of a good MIS
  • Describe the process of installation and development of an effective MIS
  • Discuss the importance of MIS
  • Understand the importance of MIS and reporting
  • Understand the limitations of MIS

 

2. Introduction

In present age of information technology, Management Information System or MIS is an important technique for providing quick information to the management. MIS is a reporting system and its purpose is to provide all necessary information to the managers and superiors at different levels to help them to discharge their functions like planning, organising, decision making and controlling properly. MIS is a scientific way of collecting, organising, processing, and storing and communicating information regarding almost all the activities of different departments to various managerial levels so that decisions can be taken by the managers in time for the improvement and advancement of the organisation. MIS helps in increasing effectiveness of the organisation by providing timely, accurate and relevant information for doing various operations of the organisation.
The importance of having an effective MIS also lies in the presence of changing economic, social, legal and technological conditions. Present is the age of information. For surviving in the market, timely information regarding business environment both internally and externally is very much required. This information helps the organisations to take advantages of various opportunities available outside and to overcome threats by taking proper actions in time. MIS also provides internal information relating to various activities and also shows the manner of utilisation of resources in the organisation. It shows the performance of various resources. The information relating to idle time, labour turnover, wastages etc. can also help the managers to control various costs. The old techniques relying on estimates, guess work etc. doesn’t work in present fast changing scenario. The organisations need fast and quick information system which can bring the information just at a click of mouse. Due to complexities in operations of present large sized organisations which are employing hundreds or thousands of employees and are operating at different areas may be national or international, they need more qualitative as well as quantitative information relating to every aspect, which necessitates the presence or adoption of an effective management information system in the organisation. It will be very difficult to manage and control the operations without an effective MIS. Definition of Management Information System :

In the words of Walter I. Kennevan,

“A formal method of collecting timely information in a presentable form in order to facilitate effective decision making and implementation, in order to carryout organisational operations for the purpose of achieving the organisational goals.”

Thus, from the above definition, it can be said that MIS is a system that provides relevant information to the managers to take decisions effectively and implement the operations accordingly. MIS is a systematic function which provides relevant and useful information in the form of reports for carrying the operations of the organisation effectively.

 

3. Characteristics of Management Information System

As stated earlier, Management Information System is a system of providing timely information to all the managerial levels for performing their operations effectively and efficiently. For this purpose, a Management Information System of an organisation should possess the following features:

3.1  Management orientation:

MIS is management oriented. MIS is planned according to the information needs of the management. For designing the MIS, the information needs of all the management levels from top to bottom, are assessed, because the purpose of MIS is to provide information to all levels of management. Hence, it should be designed in such a way so that it can cater to the information needs of all levels.

3.2  Management directed:

As MIS is management oriented, hence, management directs the establishment and implementation of MIS in the organisation. Hence, managers have to actively participate in the establishment of the system. It is not a onetime involvement, managers will have to participate on a regular basis because the system needs to be continuously reviewed and revised as per the changing information needs of the organisation.

3.3  Integrated System

MIS is an integrated system which coordinates the information from different areas to cater to the information needs of the managers efficiently. It includes the interconnected sub-systems which operate within the organisation and provide information from all areas. For example, if management wants to take a decision regarding production programme, it will require information regarding production capacity, labour force, inventory levels, nature and demand pattern of the product, capital requirement etc. MIS cannot ignore one or the other factors to supply information. It will have to provide all required information relating to all aspects of the phenomenon.

3.4  Common data flows

MIS should avoid duplication and redundancy in collection, storage and transmission of data. Only a few key documents serve the information needs of most of levels of management. The common data flows require creating and using master files for reporting purpose.

3.5  Future Oriented

MIS is designed to serve the needs and objectives of the business in an efficient manner. The MIS system seeks to cater to information needs for various levels for helping them taking decisions regarding future. MIS should be designed in such a way so as to avoid any obsolescence; it should be designed by keeping in view the future information needs of the organisation.

3.6  Composed of Sub-systems

MIS is system integrating various sub-systems. Working in meaningful sub-systems helps in its proper implementation. It helps the designer to focus on manageable entities that can be assigned and computerised by selected systems and programming teams.

3.7  Flexible

MIS system should be flexible enough to incorporate appropriate changes in future. If it doesn’t allow any changes, its chances of becoming obsolete are very high. MIS is designed to fulfil information needs of managers for taking decisions for future. It is not possible to provide accurately all information relating to future periods. Hence, MIS should be such as it can do modifications in the system whenever required.

3.8  Distributed data processing

In case of organisations having widespread operations like its sales offices, distribution points, manufacturing plants etc. are geographically distributed, in MIS also, some form of distributed data processing is required. Distributed data processing ensures the timely placement of information in the hands of those who need it. Some of these units may also be operated independently giving more freedom though they should be an integral part of the MIS of the organisation.

3.9  Computerised

All activities of MIS, i.e. collection, processing and dissemination of data are done through electronic media. Present is the age of information technology. With the help of internet, intranets, mobile technology etc. the information is speedily transferred to all areas of organisation.

 

4. Essentials of a good Management Information System

The purpose of a Management information system is to provide all necessary information to all level of management to take accurate and timely decisions and to undertake all the activities of the organisation in an effective manner. To fulfil this purpose, MIS of a company must have following essential elements:

a. MIS should provide information which can help in evaluation of the performance of various managers in relation to the organisational objectives.

b. MIS should have a systematic procedure for collecting, processing, storing and disseminating information.

c. MIS should provide only relevant and necessary information and data.

d. MIS should provide right information at the right time.

e. MIS should present data in a suitable manner to help decision making

f. MIS should be flexible enough to incorporate appropriate changes when needed.

g. MIS should employ cost benefit analysis. Benefits of the system should be more than its costs.

h. MIS should integrate all functional departments in the organisation.

 

5. Installation of an Effective Management Information System

MIS is designed to provide relevant information to various managerial levels as per their information needs. The level and types of information required by different levels of management is different. Hence, MIS should analyse first the information needs in terms of types of decisions and types of situations handled by the managerial levels. Following are the steps involved in development and installation of an appropriate MIS in a business organisation:

5.1  Analysing types of decisions made in organisation

While designing MIS, the decision making system of the organisation should be analysed thoroughly. For this purpose, a study of different levels of decision makers and their priorities of decision making should be conducted. This analysis is done to ensure timely and correct information to mangers for taking various decisions.

5.2  Cost-Benefit Analysis

A cost-benefit analysis of MIS should be done regularly. It should be developed in such a way that benefits are more than the costs of the system. The cost of collecting, processing, storing and disseminating information should be less than the benefits of these operations. An effective MIS besides evaluating data also eliminates unnecessary data. It should store information in condensed form so that it can be easily absorbed and used by decision makers.

5.3  Pre-testing and training

Before finally put to use, MIS should be pre-tested first. Pre-testing helps in knowing the problems of the system in the initial stage and these problems can be removed before finally using the system. If the system is not pretested, the changes in system at later stage may prove to be expensive. Proper training should also be given to the managers to understand and use the system.

5.4  Planning for storage of information

While designing system, proper planning should be made for storage of information. Proper files should be maintained and stored in groups according to common factors. It will avoid duplication and wastage of data. Different decision makers with similar information may be identified and grouped together for dissemination of information.

5.5  Mechanism for gathering and processing data

Methods for gathering and processing information should be selected. Proper steps should be identified for collection, storage, evaluation, transmission and retrieval of information. Proper control systems should also be devised for identifying and correcting any deviations that might occur in the system.

5.6  Proper arrangement of dissemination of information

Proper arrangement should be made for the dissemination of information at the right time to the decision makers, because delayed information is obsolete information and is of no use. Proper planning should be done for this purpose. Different formats should be prepared for disseminating information to various decision makers. Information can be presented in the form of graphs, charts, figures, reports etc.

5.7  Review of MIS at regular intervals

MIS should be reviewed at regular intervals. Its operations should be reviewed and revised from time to time. It will help in finding any deviations or discrepancies in the working of existing MIS and appropriate changes can be done timely to overcome these deviations.

 

6. Importance of MIS

MIS provides information to various levels of management in order to take decisions and perform their operations efficiently and effectively. In case of a small sized organisation, there may not be a need for management information system as the owner is in close contact with his employees and has the information regarding all his departments. But in case of big organisations, where owners and management are not in direct contact of all operations in the organisation, need a system to provide information for taking decisions at all levels.

The following are the main points of importance of MIS:

a. MIS is useful for efficient and effective planning and control functions of the management.

b. MIS provides report giving information about the performance of different resources like men, materials, machinery etc.

c. MIS helps in controlling costs by giving information about idle time, wastages, losses, surplus capacity etc.

d. MIS also gives information about deviations or deficiencies of actual performance from the standards. Management can take timely action regarding this.

e. MIS also gives information regarding the strengths of the organisation so that it can take advantage of its strengths.

f. MIS helps in coordinating the activities of different departments by interlinking them through information networks.

g. With strong MIS system, chances of misunderstandings in different departments are least.

 

 

7. MIS and Reporting

Under Management Information System, information is provided in the form of reports. Reporting system should be such that the information contained in the reports should confirm to the requirements of the decision makers. Reports are prepared for every level of management from top to bottom. So that mangers can get timely information about the performance of their subordinates. There are three levels of management in every organisation – top level, middle level and lower level. At top level of management, the executives and managers need information relating to external environment which depicts the opportunities available in the market, the probable threats coming from external environment in the form of changing govt policies or competitors strategies. They also need internal information relating to strengths and weaknesses of the company so that the strengths can be utilised properly and more opportunities can be created and weaknesses can be converted into strengths. Middle level managers need information relating to execution and implementation of various policies and plans of the organisation. Lower level managers are in direct contact with employees they need to know performance of employees. They also get directions from the superiors and executives in the form of news, circulars, notices, etc. and need to send reports of performance of various resources to the top level. The information to be presented and the method of reporting should be in accordance with specific requirements of these levels of management. Following are some guiding principles regarding reporting:

a. More detailed report should be prepared for lower level of management while more summarised report should be prepared for top level management. First line management which includes supervisors, foremen, etc. they need more detailed reports because they required details of operations. While, top management which includes board of directors etc. has limited time and they need information in a very summarised form including only important and relevant information.

b. More frequently reports are required for lower level of management while less frequent should be the period of reporting for top level management. Middle and lower level management require more detailed reports frequently as compared to top level management. Middle and lower level management is concerned with day to day operations of the concern which requires timely decision making and action on their part.

c. Lesser number of reports is required for lower level of management, while large number of reports is required for top level of management. The top management requires a large number of reports in order to control every operation of the organisation on the other hand; middle level and lower level management will require reports only related to their respective departments.

7.1  General Principles of Report Presentation

The essence of reporting is that it should be presented in a very interesting and understandable manner. A food report will help the organisation to take timely actions to improve the performance of the concern. While preparing and submitting reports, following basic principles should be taken into consideration:

a. There should be a proper title of the report to depict the subject matter of the report. The form of report should be proper with proper sub-headings and paragraphs. The name of person receiving the report should be written on the top of the report.

b. The report should contain certain facts. There should not be inclusion of opinions, ideas etc.

c. The report should be prepared relating to a particular time period and period should be mentioned on the top of the report.

d. The report should be clear, concise and brief. In order to keep it brief, the clarity should not be sacrificed.

e. Reports should be prepared timely and submitted at the time when it is required. And on the basis of which quick actions can be taken. The gap between happening of event and its reporting should not be too much, otherwise quick action cannot be taken.

f. A report should report controllable and non-controllable factors separately. So that suitable action can be taken by the management regarding controllable factors easily.

g. Report should contain appropriate remarks. The remarks will save the time of the managers and prompt actions can be taken.

h. The reports should highlight the deviations of actual performance from standards to draw attention of managers.

i. Reports should contain information in the form of visuals like graphs, charts, diagrams to have long lasting impression on the mind.

j. Comparisons should be made clearly between items in the reports. Comparisons should be made between comparable items only.

k. Reports should be reviewed also from time to time and kept properly for future references and records

l. The format of records should not be changed frequently. Any changes should be justified accordingly.

 

 

8. Limitations of MIS

MIS has many benefits but along with benefits, it has certain limitations also. Though MIS is used as a tool to provide information to all levels of management for taking decisions quickly it has certain limitations also. Following are the limitations of MIS:

a. If the MIS is not designed properly according to the information needs of different levels of management, it will be of little or no use.

b. If the proper training is not given to the users of the system, and they are not aware of its use properly, MIS will be a failure.

c. The essence of MIS is providing information. If the data and information is obsolete it will be of no use at all.

d. Mostly information provided by MIS is in quantitative form. Hence it ignores qualitative information like attitude of employees etc.

e. Usefulness of MIS is reduced in the companies where information is not shared.

f. In such a complex business environment, it may not be possible for existing MIS to adapt frequently to changing conditions

g. The quality of MIS output depends upon the quality of inputs and programmes.

 

 

9. Summary

Every organisation has to take certain decisions relating to various operations. It has to check the performance of various resources like men, money, machinery etc. from time to time, so that if there is any deficiency that can be removed instantly by taking proper actions. For all these purposes, management needs information. If certain activity is going wrong, its information must reach management so that timely action can be taken. Hence, every organisation develops an information system which fulfils the informational needs of every level of management, whether it is top level, middle level or lower level. At all levels of management, the managers or superiors have to take certain decisions, the basis of which is information. This information is collected, processed and disseminated by the Management information system. However, while designing MIS, care should be taken to analyse the informational needs of all decision makers. It should also provide only relevant information at the time when it is required. Obsolete information is no information. Hence, MIS is an important controlling tool in the hands of management to have a watch on all operations of the concern.

 

 

References:

 

  • Nolakha, R. L. (2008), Principles of Management, 2nd Edition, Ramesh Book Depot, Jaipur.

  • Robbins, S., Bergman, R., Stagg, I. and Coulter, M. (2014), Management, 7th Edition, Pearson Education.

  • Shajahan, S. (2007), Management information System, New Age publication.