BCA-304 MANAGEMENT INFORMATION SYSTEM

Unit-I Foundation of Information System: Introduction to Information System in Business,

Fundamentals of Information System, Solving Business Problems with Information System, Types of
Information System, Effectiveness and Efficiency Criteria in Information System.

MIS Overview: Definition and Concept of a Management Information System, MIS versus Data
Processing, MIS & Decision Support System, MIS & Information Resources Management, End User
Computing, Structure of a Management Information system
 UNIT 1 INFORMATION AND SYSTEMCONCEPTS
INTRODUCTION
Information is defined as the processed form of data that is used for decision-making.
There are various types of information such as strategic and tactical. The quality of
information is determined on the basis of various factors such as completeness and
accuracy. A system is defined as a collection of elements integrated to achieve the
organisational goals. There are various types of systems such as physical and abstract
and open and closed.

INFORMATION

Information is the processed form of data that is used in the process of decision- making in an organisation.
The organisation collects raw data from various sources and processes them to form structured data known as information.
Figure 1.1 shows how processing of data generates information.

Se
 - Data is a by-product of transactions that occur during the processing of operations in
I an organisation. The data present in an organisation represents information in the raw
n
s form. On the other hand, information is the processed form of data that has very less
t uncertainty as compared to data and represents more accurate and precise information.
r
u
Davis & Olson have defined information in their own terms as “data that has been
c processed into a form that is meaningful to the recipient and is of rail or perceived value
t in current or prospective actions or decisions”.
i
o
n
a TYPES OF INFORMATION
l

Information obtained from processing of data is vital for an organisation in terms of

long term and short term planning. Based on the use and purpose of information, it is
broadly categorised into three main categories as follows:
• Strategic information
• Tactical information
• Operational information
Figure 1.2 shows the various types of information.

Figure 1.2: Various Types of Information

Strategic Information
Strategic information is used by higher-level management to devise strategies that need
to be implemented in an organisation. The strategic information is vital for decision-
making in an organisation and is generally used for long term planning.

4
 Information and
Consider an example, where an organisation needs to plan for adopting new System Concepts
technologies or launching a new plant as a whole for performing the operations in an
organisation. Planning for adopting new technologies involves long term planning that
requires strategic information. Management takes decision based on this strategic
information. NOTES

Tactical Information
Tactic information is used by middle-level management to devise strategies that need
to be implemented in an organisation. The tactic information is vital for making control
decisions in an organisation and is used for middle term planning.
Consider an example of an enterprise, where the regional sales manager needs to
forecast the sales of the products in future based on previous sales records of past three-
four years. Tactical information is generally obtained from the records of the day-to-
day activities in an organisation. The processing of the daily records maintained in an
organisation leads to tactical information. Information obtained from external sources
such as competitor records also has deep impact on the tactical information.

Operational Information
Operational information is used by lower-level management to devise strategies that
need to be implemented in an organisation. The operation information is vital for
making decisions required on day-to-day basis and is used for short term planning. This
information is used at operational level to make immediate actions in daily operations.
Operational information is generally used to represent information such as work status,
customer orders and stocks in hands.

QUALITY OF INFORMATION

Quality of information is measured in terms of its various attributes such as:

• Timeliness
• Accuracy
• Relevance
• Adequacy
• Completeness
• Explicitness
• Exception based

Timeliness
Timeliness is one of the major attributes of information. Timeliness determines that the
information reaches the required recipients within the pre-specified period of time.
Timeliness plays a vital role in the decision-making process of management in an
organisation as well. B.K. Chatterjee gave a statement in 1974 that information delayed
is information denied.
Consider an example, where the accounts officer requires financial report on 1st of
every month. Any delay in the information results in delay in the decision-making
process by the accounts officer. Timeliness ensures that the information intended for
5
Management Information Systems a recipient should
be accurate and
contemporary to
the most current
NOTES readings and
reaches the
recipient on time.

John G. Burch and

Gary Grudnitski
gave a statement in
1986 for
accuracy.
According to
them, “The
information that is
free from mistakes
and errors is clear,
and accurately
reflects the
meaning of data on
which it is based”.
The accurate
information should
be able to deliver
clear picture of the
information to the
intended recipient
be it in tabular
form or graphical
form. Accurate
information is also
free from any kind
of biasing.
H.C. Advani in
1975 determined
the importance of
accuracy by
stating that wrong
information given
to management
would result in
wrong decisions.
6 At the same time,
he advocated that
accuracy should be
within limits or as
desired and should
not be achieved by
sacrificing
promptitude. Information and
System Concepts
Delivery of accurate information also helps the management to gain the confidence of
theemployees. Representation of accurate information aids the management to take right
decisions on right time leading to the success of an organisation.
NOTES
Relevance
Relevance is another key attribute of management information systems that
determines the need and requirement of the information. A piece of information is
said to be relevant if it is able to solve problems of what, when and why for the
intended recipient.
Relevance of information depends on the intended recipient of the information. For
example, the sales report information is relevant only to the sales engineer. The work
status of the employees is vital to the production manager. The financial reports of
the company are relevant only to the accounts officer in an organisation.

Adequacy
Adequacy of information is used to determine that the information presented to the
Management Information System (MIS) is adequate as per the information required
by an organisation. Lack of information leads to the crisis of information and
overload of information create chaos in the Information System. Adequacy of
information also ensures that a report generated in an organisation represents
complete picture of the operational processes in execution.

Completeness
Completeness and accuracy go hand in hand with each other. The information that is
adequate may or may not be complete in all respects. The completeness of the
information ensures that the information report covers all the details required by the
management of an organisation. In case, where the complete information cannot be
delivered to the management, the concerned authority must be reported immediately
for the lack of information.

Explicitness
This attribute ensures that the information presented to the management does not
require further analysis of the information on the part of management. The explicit
information is able to depict the meaning and purpose of the report clearly without
any further scrutiny of the information.
Exception-based
The most contemporary concept of representing the information is the one that is based
on exception. Exception-based information ensures that only the information that is
required by the management is delivered to the client. Exception-based information
helps the management in saving time, cost and efforts required to evaluate the
information. Whenever an exception-based report is send to the management, it
directly focuses on the target piece of information.

DIMENSIONS OF INFORMATION

Information presented to the management is estimated to have its dimension in terms

of cost, business and technical issues involved. Various dimensions of information
systems are.
• Economic
• Business
• Technical
 Economic Dimension
Economic dimension of information determines the cost involved in obtaining the
information and the benefits that are derived from the information. Based on the cost
and benefits analysis and economic dimensions are evaluated as.

Cost of information
Cost of information determines the cost involved in obtaining the information, which
includes.
• Cost of acquiring the data
• Cost of maintaining the data
• Cost of generating the information
• Cost of communicating the information
The cost is estimated from the point the information is generated to the point the
information is retrieved by MIS. The cost of obtaining the accurate and complete
information is more as compared to the cost generally retrieved from the system.

Value of information
Value of information is determined on the basis of benefits that are derived from the
information. Consider an example where two products A and B are developed. The
benefits derived from product A evaluates to 20 and the benefits derived from product
B evaluates to 30. The difference between the benefits of the two products is 10 units.
If you add some information, the benefits derived from product A increases by 20
points from 20 to 40. The actual value of information needs to be calculated from
simple mathematics. The cost of information increases by 20 units. You need to
subtract the cost involved in obtaining the information to determine the actual value
of the information.
Management Information Systems Business Dimension
The business dimension of the information is used to determine the relevance of
information at various levels of management. The business dimension of information
at top-level management is totally different from the business dimension of
NOTES information at lower level management. The difference in business dimension arises
from the difference in the level and nature of work performed at various levels of
management.

Technical Dimension
The technical dimension of information covers the technical aspects of information
such as the volume of information to be stored in the database. It also undertakes the
type of database that is used to store information in the database. The technical
dimension covers the capacity of the database and the time required to retrieve
information from the database.

SUB-SYSTEM OF INFORMATION
Information plays a vital role in the transaction processing and decision-making
process of organisations. Without proper and accurate information, it is not possible
to make any decision or process any transactions. Earlier information processing
system used to be a very hectic task, as everything involved in information processing
Check Your Progress was a manual task. To collect a small piece of information, a lot of time was consumed
1. Match the following: and hence the work of decision-making and transaction processing used to get delayed.
Following are the sub-systems of information:
Type of Management
information Electronic data processing: In 1960s, a new system was introduced that was fast in
information processing called the electronic data processing (EDP). EDP is an
Strategic Middle
automated system that is used for processing data and information. The EDP systems
information Management
were used for transaction processing and accounting in an organisation. Today, instead
Tactical High level of EDP the term MIS is more commonly used for information processing system.
information Management
Decision support system: Decision support system (DSS) is evolved from MIS. MIS
Operational Low level
has not proved to be efficient in providing relevant information to the top management
information Management for making long-term decisions. DSS enhances the capabilities of MIS by providing
assistance to the top management in decision-making. DSS is an ongoing evolutionary
Determine whether the system based on operations research.
following statement is true or
false: The term Decision Support System was first introduced by Gorry and Morton. The
Completeness of information term Decision Support System is a combination of three words, which are as follows:
also determines that the
information is adequate. • Decision, which concentrates on the decision making to solve a particular
True problem rather than emphasising on information processing, retrieval, and
reporting.
False
3 The economic dimension of • Support, which means computer support is required for making decisions.
the information system • System, which signifies the integrated nature of problem solving. This means
includes:
that for solving a particular business problem, man, machine and decision
Cost of acquiring the data
environment are required.
Cost of maintaining the
data Concisely, you can say that DSS is a computer-based system that helps end users to
Cost of generating the data use data and models for solving unstructured problems in an organisation.
All of these

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 Information and
Management information system: The computers have played an important role in System Concepts
making the management tasks faster as compared to the manual system. To perform a
particular task, the managers also require relevant information. The type of information
required by a manger to perform a particular task depends upon the level of the
manager. The low-level managers need to perform daily routine tasks so they require NOTES
detailed information about the related activity. However, a high-level manager has to
obtain long-range objectives and take structured control decisions so they require
summarised information from different reliable sources to take long- term decisions.
In both the cases, the management requires accurate, concise, timely, and relevant
information for proper functioning of the organisation. For this, the organisations use
management information system (MIS).
MIS is a person-machine system, which involves highly integrated combination of
information processing functions. Effective management information system is that
which provides relevant information to the right person at right time. MIS also include
proper file definition, maintenance and updating of information to maintain
consistency in the information used by different levels of managers for taking business
decisions. MIS should also ensure that information stored in the information system is
not redundant. This helps in making efficient utilisation of available memory space.

SYSTEM

A system is defined as the collection of elements that are integrated to achieve the
required goals. Consider an example of an organisation where various departments
such as Production, Sales, Marketing and Finance are integrated to achieve thecommon
objectives of an organisation. In general, the word system has different meanings in
different situations.

Multiple Meaning of System

The word system implies different meaning for different people. For example, the word
system in terms of sports has a different meaning from the word system in terms of
organisation. The use of word system in context of computer relates to monitor,
processor and printer that are integrated to perform various operations. The use of word
system in MIS relates to the input, processing and output of data. Depending on the
requirements, MIS may involve single or multiple processes.

Single process MIS

In a single process MIS, the system receives input from a single source, processes the
input and produces an output. The output obtained during the single process MIS is
sent to a single system.
Figure 1.3 shows the single process MIS.
Management Information Systems

NOTES

Figure 1.3: The Single Input-Output Process

Multiple processes MIS

In the multiple processes MIS, the system obtains input from a multiple source,
processes the input and produces an output. The output obtained during multiple
processes MIS is sent to multiple systems.
Figure 1.4 shows the multiple processes MIS.

Figure 1.4: Multiple Input-Output Processes

TYPES OF SYSTEMS
To avoid any ambiguity of the use of the word ‘system’ in various circumstances, a
system has been categorised into various types. Consider an example, where one person
talks about system as collection of concepts and ideas. The listener perceives the
system as an integrated operational unit of person, machines and equipment. The
various types of systems in MIS are:
• Abstract and physical
• Deterministic and probabilistic
• Open and closed
• User machine
• Formal and informal

Abstract and Physical Systems

An abstract system is the collection of interdependent ideas, which may or may not be
present physically in the world. Consider an example of a system, which illustrates
ideas about the Indian history. This abstract system has no physical presence in the
world.

10
On the contrary, physical systems are defined as a collection of concrete operational
systems that are physically present in the world. The concrete operational systems
consist of people, materials, machines, energy and other physical things. Physical
systems display some activity or behaviour in contrast to the abstract system in the
world. Consider an example of the computer system that includes monitor, processor,
printer and UPS. These elements constitute together to achieve the common objective.

Deterministic and Probabilistic Systems

A deterministic system is defined as a system in which the output of a system can be
predicted with great certainty for a given set of input instructions. Consider anexample
of a computer program, which is defined in terms of certain machine instructions. For
a particular set of input conditions and given program instructions, programmer can
easily determine the output of the computer program. Any deviations from the standard
output will be reported as error in MIS.
A probabilistic system is defined as a system in which the output of a system is
influenced by the behaviour of the system. Under ideal conditions, the probabilistic
system generates the same output as the deterministic system. The introduction of
behavioural influence leads to the probability of errors in the system.
Consider an example where a job has been assigned to an employee. Under ideal
conditions, the employee is expected to complete the job within 10 days. If the human
factors such as behaviour and emotions are taken into due consideration, the number
of days required to complete the job may be extended. Moreover, there is probability
of error as well.

Open and Closed Systems

An open system is defined as the system that depends on its surrounding environment
for inputs. The exchange of information with the surrounding environment may take
place in the form of information, material or energy. Open systems are flexible in
nature and tend to adopt themselves to any change in the environmental conditions.
For example, humans are open systems. Human systems perform homeostasis to
maintain equilibrium with the surrounding environment. Human beings also react to
the change in the surrounding climatic conditions such as summer, winter or spring.
Any MIS that is influenced by customer tastes and preferences is said to be an open
system.
A closed system is defined as the one, which is not influenced by any change in the
surrounding environment. Ideally, closed information system is rare in nature. The
systems that are not ideally closed and are less influenced by the surrounding
environment are called relatively closed systems. Computer programs that produce
outputs as per the given set of instructions best exemplify relatively closed systems.

User-Machine Systems
User-machine systems are defined as the systems where people work in close
proximity with machines. In the present era of advanced technology, you will hardly
find any system that works without the use of machines. In these kinds of systems, both
man and machines work hand in hand to achieve the common objectives of an
organization. The machine systems produce deterministic results and the systems
where people are involved produce probabilistic results. Computer and the operator
that perform the required operations on the computers can best exemplify the User-
machine system. The computer system produces the deterministic results and the
Management Information Systems operators simply monitor the functioning of the computer systems to produce
probabilistic results.

Formal and Informal Systems

NOTES A formal system is the one, which is based on the organisation represented by the
organisation chart. The organisation chart represents relationships among the various
levels of managements where the levels are mentioned in boxes and the relationships
shown by boxes connected by straight lines. It is concerned with the pattern of
authority, communication and workflow.
Informal system is an employee-based system that is designed to meet the personal and
vocational needs of employees. It also helps in identifying the work related problems
of employees and helping them to solve those problems.

CONCEPTS RELATED TO SYSTEMS

There are various concepts related to a system that helps perform the operations of a
system at a great comfort. These concepts also help in demarcating one system from
another. Various types of system concepts are:
• Boundary
• Interface
• Black box
• Decomposition
• Integration

Boundary
Each system whether open or closed, probabilistic or deterministic needs to be defined
within the constraints of a boundary. The boundary is used to identify and isolate
similar types of systems in an organisation. The boundary represents a hypothetical
concept, which may or may not exist physically. The concept of boundary varies from
one system to another. Consider an example of a production system where the
boundary excludes raw materials and finished goods from the system. The other system
in the same organisation may define its boundary that includes raw materials and
finished goods in the system. The surroundings outside the boundary of a system are
defined as its environment. Figure 1.5 shows the System and its boundary.

Figure 1.5: System and Boundary

12
 Information and
The boundary of a system demarcates the system from its environment. The input is System Concepts
provided to the system from the outside environment. The system then processes the
input and passes the output to the outside environment. Figure 1.5 shows the system
and its environment.
NOTES
Interface
Interface helps the users to interact with the system. Consider an example, where
multiple sub systems integrate with each other to form a perfect system. In systems
where multiple systems are involved, it is essential to determine the sub system that
accepts the input from the environment. At the same time, it is essential to determine
the sub system that produces the output and returns it to the outside environment.
Figure 1.6 shows the integration of sub systems demarcated with an interface.

Figure 1.6: Integration of Sub Systems

Black Box
Black box is the term that is used in information systems to define the system whose
transformations at the processing level are not defined by the system. In black box
systems, the system is initialised with a predefined set of inputs and a certain output
is determined on the basis of ideal behaviour of the system. Any transformation that
takes place at the sub system level is not defined by the black box system. Figure 1.7
shows the black box system.

Figure 1.7: Black Box System

Decomposition
Decomposition of system defines the division of system into its various sub systems.
The decomposition of system into its various sub systems allows you to perform
complex tasks with greater ease. Moreover, the division of system into various sub
systems lead to the hierarchical arrangement of the operation processed at the system
level. A system is divided into smaller units until the smallest unit of the system
becomes manageable at the system level. It is easier to construct a system from its
smaller units rather than creating a complex system as a whole. Figure 1.8 shows the
decomposition of a system.
Management Information Systems

NOTES

Figure 1.8: Decomposition of a System

The decomposition of a system can be best exemplified by hierarchical arrangement of

various departments in an organisation. Consider the example of an organisation where
multiple units integrate with each other to achieve a common objective. In such
organisations, the system is decomposed into various departments such as Production,
Sales, Marketing and Finance. The Production department is further categorised into
various departments such as Production Manager, Team Leader and Workers.

Integration
A system is decomposed into smaller systems for better management at the operational
level. However, to achieve the common objective of an organisation, there is a need
to integrate all the sub systems of an organisation. The collation of output from all the
sub systems to produce the desired output is called integration of sub systems. The
integration of various sub systems allows you to treat the whole organisation as a single
unit dedicated to perform an operation. Figure 1.9 shows the integration.

Figure 1.9: Integration of a System

14
 Information and
System Concepts

ELEMENTS OF A SYSTEM
Elements of a system define the components that are vital for the functioning of an NOTES
information system. Various elements of a system are:

Input
Input is defined as the component on which the system operates to produce the desired
output. The input component may be presented in the form of data, which is processed
to produce the desired output. The data may be present in the form of raw facts and
figures on which the system operates.

Process
Process is defined as the component that performs the necessary transformation on
input to produce the desired output. Processing involves one or multiple activities
depending on the processing requirement of the input operations. Processing of an
activity may involve various machines, tools and equipments. If the transformations
performed by various sub systems to process the input are not transparent to the user
then the processing is called black box processing. The processing of input can be
performed with ease when the system boundary and interfaces have been defined
clearly. The processing of input involve various operations such as:
• Classification
• Sorting
• Calculation
• Summarising
Figure 1.10 shows the processing of input to perform operations.

Figure 1.10: Processing of Input

Classification of input data allows the processor to perform complex operations easily.
It helps in proper arrangement of data in the memory according to their data types.
Sorting of data allows the processor to arrange data in the order of operations to be
performed on the data. It helps in faster processing of the input as per the operations
required.
Calculations are performed on the data to produce the desired results. The calculations
to be performed on the data may be simple or complex depending on the output
requirements.
Summarising of data allows the processor to make the data available to the user. The
output of the processing can either be displayed or delivered in the form of print out
to the user.

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Management Information Systems Output
Output is defined as a component, which is produced as a result of processing on data.
Consider an example where raw data is processed to produce the information. The
information obtained after processing the data is termed as output of the system. The
NOTES output of a system helps in decision-making of a system.

Feedback
The feedback from output to input of a system ensures that the system remains in the
state of equilibrium. Adequate feedback helps the user to control the system. The output
generated by the system is compared with the standard output under ideal conditions.
Any deviation from the standard output is sent as feedback to the input of the system.
The feedback to the system initiates the control mechanism that takes appropriate
actions to correct the deviations found in a system. Figure 1.11 shows the feedback and
control mechanism for a system.

Figure 1.11: Feedback and Control Mechanism

HUMAN AS AN INFORMATION PROCESSING

SYSTEM
Human body is also a perfect example of information processing system. Human being
as information processing system consists of the following components:
• Sensory receptors
• Brain processing
• Response
Human body includes various sensory receptors such as eyes, ears and skin. These
sensory receptors accept input from the surrounding environment and transmit data to
the human body processor known as brain.
The brain accepts input signal from the sensors, processes them and respond to the
input stimuli by performing actions or tasks. The brain processes the input based on
the data provided by the input signals and the information stored in the memory. Figure
1.12 shows the brain processing inside the human body.

16
 Information and
System Concepts

NOTES

Figure 1.12: The Human Brain as Information System

The human brain consists of two types of memory to perform the processing of
information:
• Short-term memory (STM): This memory is comparatively small and stores
information that needs to be retrieved in shorter span of time. It can store up to
five to seven chunks of information at a time.
• Long-term memory (LTM): It is very large and used to store large amount
of information in the human brain. It stores information in the compressed
form that can easily be retrieved from the human brain. It can store up to
hundred chunks of information in the memory at a time and have unlimited
storage capacity.

Note: Chunks is the basic unit to store the information in the human brain.

The human brain after processing the information summarises the information and
produces output either in the form of action or tasks. The action generated by the human
is returned as action to the environment.

Information filtering
Information filtering refers to the filtering of data as per the brain capacity to accept
input from the environment. The sensory receptors accept input from the environment
but they can only store a limited amount of information. Thus in order to store and
process the relevant piece of information, the human brain performs the filtering of
information. The information filtering helps human brain to neglect irrelevant piece of
information. The information filtering is performed based on the number of factors that
may be inherited. Figure 1.13 shows the information filtering performed prior to the
processing of information.

Figure 1.13: Information Filtering

17
Management Information Systems Selective frameworks
Human beings use selective frameworks to identify a process among various processes.
To perform information filtering, humans develop frames of reference or intuitive
patterns of information. Selective frameworks allow humans to store relevant piece of
NOTES information by comparing it with the existing or previous information in memory. The
selection of various frameworks is also influenced by decision rules.

Cognitive biases and limitations

Information filtering is also influenced by cognitive biases and limitations of humans.
For example, Miller (1956) has suggested that short-term memory in humans cannot
effectively process more than nine units of information (seven plus or minus two 7 ±
2). Humans tend to be more biased towards the input that likely influences their output.

Human Differences in Information Processing

The processing of information is also influenced by differences in human behaviour.
Different people in the world may have different perception for the same matter of
tasks. The differences in information processing due to differences in their attributes
are referred to as cognitive style. McKenney and Keen (1974) have suggested a model
of cognitive style, which categorises human styles along two continuums.
Figure 1.14 shows the cognitive style of a person.

Check Your Progress Figure 1.14: Cognitive Style

4. List down various kind of
systems. In the above figure, the horizontal dimension (x-axis), represents the scale how humans
5. The systems whose evaluate information. On the basis of information evaluated by people, they are
transactions are not
determined at the processing
categorized as:
level are called ………….. • Systematic humans: They try to deal with a problem by structuring all the
6. Determine the element of a relevant information and facts about the problem.
system that is used to control
the Information systems • Intuitive humans: They try to deal with a problem by trial and error methods.
A. Input
They are able to solve the ill-structured problems more efficiently and act
spontaneously to the problems.
B. Processing
C. Output The vertical dimension (y-axis) represents the scale how humans perceive a problem
D. Feedback in different circumstances. On the basis of information gathered by people, they are
categorized as:
 Information and
• Perceptive humans: These humans focus on relationships between various System Concepts
pieces of information that are gathered during the analysis of a problem.
• Receptive humans: These humans get deeply immersed in the problems and
try to find out solutions by scrutinizing all the relevant details of the problem.
NOTES
Another explanation of human differences in information processing is due to
biological processing of information. This theory explains that brain has two parts,
which processes information differently. Humans that use their left part for information
processing are more planned, logical, analytical and realistic in their nature. Humans
that use their right part for information processing are more impulsive, insight, intuitive
and imaginative in their decisions.

Implications for Information Systems

Better understanding of the human processing system helps designers for better
designing of the information systems. Human decisions are influenced because of
selective frameworks, cognitive limitations and other biases in humans. A brief
description of the impact of human biases can be explained as:

Information filtering
This is one of the most significant factors that contribute to the processing of
information systems. Information filtering must ensure that brain should be able to
store only the relevant piece of information out of vivid types of information provided
to the humans by the environment. Information system should also be able to neglect
all irrelevant piece of information.

Human differences in information processing

The information system should be designed in such a manner that it helps the people
in better understanding and analysis of the problem. The information system should
provide the humans with the most accurate and precise amount of information. The
information system should take into due consideration the nature of the humans. For
example, the intuitive people require significantly less amount of information to take
decisions while people that follow systematic approach to solve a problem require
more information.

SUMMARY

Information and systems help management in decision-making and planning.

Information can be determined in its constraints of economic dimension and business
dimension. There are various kinds of systems such as deterministic and probabilistic
systems and open and closed systems. Systems are defined using various concepts such
as boundary and interface.

ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Match the following:

Type of information Management

Strategic information High level Management
Tactical information Middle Management
Operational information Low level Management
Management Information Systems 2. False
3. All of these
4. Various kind of systems are:
NOTES A. Abstract and physical systems
B. Deterministic and probabilistic systems
C. Open and closed systems
D. User machine systems
5. Black box
6. Feedback

EXERCISES AND QUESTIONS

Short-Answer Questions
1. Describe various factors that are used to describe the quality of information.
2. Describe single process and multiple process management information
systems.
3. Explain the difference between probabilistic and deterministic systems.
4. Explain the black box system.

Long-Answer Questions
1. Explain EDP and DSS in detail.
2. Describe how humans act as an Information Processing system.
3. Explain how information plays a vital role in decision-making process.
4. Explain the role of system in MIS in detail.

FURTHER READING
Davis, Gordon B., and Margrethe H. Olson, Management Information Systems.
 MANAGEMENT INFORMATION
SYSTEMS

INTRODUCTION
Management Information System (MIS) is a combination of principles, theories and
practices of management, which play an important role in business organisation in the
planning and decision-making process. It provides information for the personnel at
various levels of management for performing their respective jobs. The management
information system can be compared with information technology (IT). IT can be
considered as a sub-system of MIS.

SIGNIFICANCE OF MIS
MIS is defined as the field of management where timely and reliable information plays
a very important role. This information is obtained through a logical and well-
structured method of collecting information and processing of the collected
information, which helps the decision-makers in carrying out the decisions. MIS is very
significant these days because the term information is considered equally important to
the three M’s related to the business industry namely money, materials, men and
machines.
The significance of a planned, analysed, designed and maintained MIS is as follows:
• Helps in progress and growth of the business and management infrastructure
in increasing business complexities by providing timely, useful and reliable
information. This information is provided to the management for takingquick,
rational and speedy decisions.
Management Information Systems • Helps in globalisation and liberalisation of the organisations that need to
compete not only locally but globally too.
MIS assists decision-makers in organisations by providing Management Information
(MI) at various stages of decision-making. Whereas MIS if in case is not maintained
NOTES properly may provide inaccurate or irrelevant information that may prove costly to the
organisation.

UNDERSTANDING MIS
To understand MIS in detail, you need to understand the following three words in
detail:

Management
The term management is defined as the art of getting things done through people by
dividing the people into organized groups and assigning each group a different activity.
Later, the results or outcome of all the activities performed by each group are appended
together to accomplish the final goal. A manager in an organisation is responsible for
carrying out the functions in a systematic way. The manager plans about the project by
settings goals and objectives and implement, procedures, rules, programmes, budgets,
strategies and schedules to achieve the plan. The various functions performed by a
manger are as follows:
• Planning is defined as the process of preparing for the future in advance.
Planning of anything before hand helps bridge the gap between the current and
the final position of the project. While planning for a project, you need to
answer the following questions:
▪ What to do?
▪ When to do?
▪ Who is to do?
▪ How is it to be done?
▪ Why is it to be done?
▪ Where is it to be done?
• Organising is defined as a process of identifying the entire job that is needed
to complete a particular project and then dividing the job into the following
steps to carry out the job as planned:
▪ Dividing the job into convenient subjects or tasks
▪ Allocating subjobs to persons or groups
▪ Allotting authority to each group or each person
• Staffing is defined as the process of assigning the right person for the right
job. It means allocating a job to a person as per his/her skills or defining the
requirements for the job according to the people that are appointed to
accomplish the job.
• Directing is important to achieve the pre-determined goals and objectives. It
means that people who are involved in the project need to be guided and
motivated by the manager of the organisation. The directing process includes:
▪ Communication
▪ Motivation
▪ Leadership
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 Management Information
• Controlling ensures that the organisational activities are performed as Systems: A Framework
planned. Controlling a process involves the following actions:
▪ Setting standards for measuring work experience.
▪ Measuring the actual performance of the employees.
NOTES
▪ Comparing the actual project with the standards and finding
deviations, if any.
▪ Taking corrective actions.
The work performance is controlled by the manager by setting the performance
standards and avoiding deviations from the standards. The manager performs all these
functions through decision-making that is a fundamental pre-requisite for each of the
preceding processes.

Information
Information is a very valuable resource that is required by the management of an
organization to run the business. Information is the processed data that is presented to
the decision-makers to aid them in their project. Figure 3.1 shows the relation of data
with the information.

Figure 3.1: Relation of Data with Information

It should be noted here that the concept of data and information is a relative one. The
information for one person may be data for another person and vice-versa. The type
of information utilized by each level of management is according to the nature of job
performed by the managers at their respective levels. The information is of four types:
• Structured: This information is well defined and thus the processing of the
structured information is not difficult. For example, the proper monthly
production schedule for a particular product.
• Unstructured: This information is not well defined and thus processing the
information becomes difficult. For example, determining the share of the
company’s product into the market.
• External: This is the information whose source is outside the operations of the
company. The top management of the organization requires the external
information to carry out their future plans and policies.
• Internal: This is the information that is the resultant or the left over product
of the normal operations of a business. The operation management of the
organization required the internal information to carry out their plans.

System
The system in MIS is defined as a set of elements that are joined together to achieve a
common objective. These elements are inter-related and interdependent. A system is
made up of various sub-systems, which in turn are composed of other sub-systems.
Figure 3.2 shows the various elements of a system.
Management Information Systems

NOTES
Figure 3.2: Elements of a System

A system may consist of multiple inputs, which are processed through a transformation
process to convert these inputs into outputs.
A cybernetic system is the one in which the feedback and control elements are attached
to make it self-monitoring and self-regulating. For example, a thermostat controlled
heating device that automatically controls and regulates itself to maintain the desired
temperature.
Various types of systems are:
• Open system: Interacts with its environment and exchanges input and output
with the external environment.
• Closed system: Does not interact and exchange input and output with its
environment.

DEFINITION OF MIS
After studying the concept of management, information and system in detail, now you
need to define and understand the term MIS as a whole. So, MIS is defined as a system
that consists of people, machines, procedures, data models and databases as the
elements of the system. The system performs the following actions:
1. Gathers data from the internal and external sources of an organisation
2. Processes the data
3. Supplies the processed data or management information to the managers to
assist them in the procedure of decision-making.

3.4.1 Comparing IT and MIS

IT is referred to as that part of MIS that deals with the technology aspect of MIOS.
MIS is supposed to include hardware, software, networks and other devices. In other
words, we can say that MIS contains IT as its sub-system. But in broad sense, the term
IT can be used interchangeably with MIS taking into consideration all or many
information systems, users and management of the entire organisation.

NATURE AND SCOPE OF MIS

Check Your Progress
MIS is supposed to have borrowed the management concepts from various disciplines
1. What is the abbreviated form
of MIS? such as accounting, computing, organizations, management and operations. Because
2. List various functions of this interdisciplinary nature of MIS, it is considered both as anart and a science.
performed by a manager. Figure 3.3 shows the interdisciplinary nature of MIS.
3. Define the term management.
4. What do you mean by
information?

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 Management Information
Systems: A Framework

NOTES

Figure 3.3: Interdisciplinary Nature of MIS

Characteristics of MIS
Following are the characteristics of MIS:
• System approach: MIS follows the system approach, which implies a step
by step approach to the study of system and its performance in the light of the
objective for which it has been constituted. It means taking a comprehensive
view or a complete look at the interlocking sub-systems that operate within an
organisation.
• Management-oriented: The management-oriented characteristic of MIS
implies that top-down approach needs to be followed for designing MIS. The
top-down approach suggests that the system development starts with
determining management requirements and overall business objectives. In
addition, the development plan of MIS should be derived from the overall
business plan. This MIS characteristic also implies that the management
actively directs the system development efforts towards the completion of the
project.
• Need-based: The design and development of MIS should be as per the
information required by the managers. The required design and development
information is at different levels, viz., strategic planning, management control
and operational control. It means MIS should cater to the specific needs of
managers in the hierarchy of an organisation.
• Exception-based: The development of MIS needs to be on the exception-
based reporting principle. This exception-based reporting principle means an
abnormal situation such as the situation in which maximum, minimum or
expected values vary beyond tolerance limits. In these abnormal situations, the
system needs to have exception reporting to the decision-maker at the required
level.
• Future-oriented: The design and development of MIS should also be future-
oriented so that the system is not restricted to provide only the past
information. It means that the system should provide such useful information
on the basis of the projections based on which actions may be initiated.

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Management Information Systems • Integrated: MIS has ability to produce meaningful information because of the
integration concept. It means taking a comprehensive view or looking at the
complete picture of the interlocking sub-systems that operate within the
company. For example, to develop an effective production scheduling system,
NOTES it is necessary to balance the following factors:
A. Set-up costs
B. Work force
C. Overtime rates
D. Production capacity
E. Inventory level
F. Capital requirements
G. Customer services
You can start developing an MIS by using a specific sub-system, but serious
shortcomings may result unless the identity of MIS is realized and properly
reflected in the total system. Thus, an integrated system, which blends
information from several operational areas, is a necessary characteristic of
MIS.
• Common data flows: Duplication and redundancy in data collection, storage
and dissemination could be avoided by using the integration concept of MIS.
The common data flow concept supports numerous basic views of system
analysis such as avoiding duplication, combining similar functions and
simplifying operations. The development of these common data flow concepts
is an economically sound and logical concept.
• Long-term planning: MIS cannot be developed in a short interval of time
because it involves heavy planning that could be done in relatively long
periods. While developing MIS, the designer has the future objectives and
needs of the company in mind. The designer should avoid the possibility of the
system going outdated before its time.
• Sub-system planning: The MIS development process is quite complex and
thus the system needs to be broken down into digestible sub-systems. These
digestible sub-systems of a single system are more meaningful at the planning
stage.
• Central database: A central database is the vessel that holds various different
functional systems together with each system requiring access to the master file
of data. This database covers information related to inventory, personnel,
vendors, customers, etc. If the data stored in the database is stored efficiently
and with common usage in mind, one master file can provide the data needed
by any of the functional systems. It is logical to gather data once, to properly
validate it and to place it on a central storage medium, which can be accessed
by any other sub-system.

Functions of MIS
The prime objective to set up MIS in an organisation is to use the management
information by its managers for decision-making. Thus, MIS needs to perform the
following functions to meet its objectives:
• Capturing data: MIS performs usage of data whether manual or through
computer terminals by using various internal and external sources of an
organisation. The data related to transactions that take place in the

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 Management Information
organisation is stored in some physical medium such as a paper form or Systems: A Framework
entering it directly into a computer system by the end users.
• Processing data: Processing data includes converting the captured data into
the required management information. To process the data, you need to
perform various activities such as calculating, comparing, sorting, classifying NOTES
and summarising the data. These data processing activities organise, analyse
and manipulate captured data by using various statistical, mathematical,
operations research and other business models.
• Information storage: MIS saves the less frequently used information as an
organisational record and thus stores the processed or unprocessed data for
future use. While performing this storage activity, data and information are
reserved and organised in the form of fields, records, files and databases for
future use.
• Information retrieval: Information retrieval includes retrieving the stored
information as per the requirements of the management users. In such cases,
the retrieved information is used as such or is processed again to meet the exact
Management Information (MI) demands.
• Disseminating management information: Disseminating Management
Information, which is a finished product of MIS is divided and distributed to
the users in an organisation. This information could be periodic, through
reports or online through computer terminals. Figure 3.4 shows various
functions performed by MIS.

Figure 3.4: Functions of MIS

COMPONENTS OF MIS

MIS is a system that takes data as input, processes it to generate information that can
help the management of an organisation in decision-making and strategic planning. Check Your Progress
Today, most organisations implement the MIS so as to achieve the organisational 5. Describe the various actions
goals. The MIS has various components, which are as follows: performed by a system.
6. List various types of systems.
Hardware: The hardware components of MIS include various input and output
7. What do you mean by the
devices that helps in feeding data as well as displaying the information when required. cybernetic system?
The input devices include the keyboard, scanners and mouse. The output devices may
be the monitor, printer, network devices, and so on. The hardware
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Management Information Systems devices are the physical parts of MIS that helps in maintaining the data of an
organisation.
Software: The programs and applications that convert data into machine-readable
language are known as software. There are various types of software that are used for
NOTES processing the information of an organisation such as ERP and CRM. ERP is software
package that combines all data and processes of an organisation. It uses multiple
components of computer software and hardware to achieve the integration. The main
advantage of an ERP system is that it uses a single, unified database to store data for
the various systems. An ERP system helps in controlling all the functions of an
organisation. CRM is also a software package that includes the capabilities,
methodologies and technologies in order to support an organisation in managing the
customer relationships. The general purpose of CRM is to enable organisations to
manage their customers through the introduction of reliable systems, processes and
procedures.
Procedures: Procedures are sets of rules or guidelines that an organisation establishes
for the use of a computer-based information system. The procedures may vary from
one organisation to another. It may also vary from one department to another as per the
requirement. For example, the working of production department is different from the
working of sales department. The production department requires information
regarding the raw material or quantity of goods to be produced. So, the production
department sets its procedures in such a way that the MIS system helps in retrieving
the information required by the department. In the similar way, the sales department
requires information regarding the quantity of goods sold and the other expenses that
occurred during the sales of the product. Therefore, the sales department sets the
procedures in such a way that they get only that information which is required from the
MIS.
Personnel: Personnel of MIS are the computer experts, managers and users who utilise
the computer-based information system for achieving the organisational goals. The
various personnel of the organisation use the information stored in MIS for performing
different functions such as planning and decision-making.

ROBERT ANTHONY’S HIERARCHY OF

MANAGEMENT ACTIVITY
Robert N. Anthony has described three levels of management activities, which are
operational control, management control and strategic planning. Operational control
is the process of ensuring that specific tasks are carried out effectively and efficiently.
Management control is the process by which managers ensure that the resources are
obtained and used effectively and efficiently in order to achieve the organisational
goals. Strategic planning is the process of deciding the objectives of the organisation,
changes required in achieving these objectives, resources used to obtain these
objectives and the policies that are used in the acquisition, use and disposition of these
resources. These levels of management activities are described in detail as follows.
• Strategic Planning: Strategy consists of making choices among alternative
action programmes, commitment to specific product markets, competitive
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 Management Information
moves and business approaches, on the part of the managers to achieve Systems: A Framework
organisational goals. Strategic planning is necessary for the management at
all levels from top level to the bottom level. Strategic planning facilitates
smooth operational activities in the organisation. Top level needs strategic
NOTES
planning to define the objectives of the organisation. It helps the organisation
to forsee its future in the long run and thus helps the management to take steps
accordingly. It helps in policy formulation to clear the goals of organisation.
Middle level management is benefited from strategic planning through smooth
application of the policies formulated by the top management. It includes
setting of organisational goals, designing policies and plans so that the goals
set by the organisation can be easily achieved.
• Management Control: The management control activities are performed by
the people at middle management. Management control facilitates smooth
operational activities in the organisation. It is important for the management
to keep a check on the operations and people involved in operations to avoid
any wastage of resources and helps in utilising the resources efficiently and
effectively. It includes making plans that are required to control the various
activities required in the proper management of the organisation. It also
includes the management of various projects that the organisation is handling.
• Operational Control: The operational control activities are performed by the
people at the low-level management. Operational control helps in full
utilisation of the resources available without any wastage. It requires proper
handling of machines with reduced costs and depriciation. It also helps in
managing the workers involved in operations through proper supervision and
directions. It helps the organisation to produce quality products in desirable
time. It includes administration of routine operations such as updating data and
handling user inquiries that belongs to the operational control level. Figure 3.5
shows the hierarchy of management activities.

Figure 3.5: Robert Anthony’s Hierarchy of Management Activities

Management Information Systems
SUMMARY
MIS is an important part of an organisation as it helps in gathering information required
for planning and decision-making. It also helps in performing other functions of an
NOTES organisation such as staffing, directing and controlling. MIS performs various functions
in an organisation such as collection and processing data for information. It also helps
in storing information and retrieving it as and when required.

ANSWERS TO ‘CHECK YOUR PROGRESS’

1. Management information system.
2. Various functions performed by a manager are:
A. Planning
B. Organising
C. Staffing
D. Directing
E. Controlling
3. The term management is defined as the art of getting things done through
people by dividing the people into organized groups and assigning each group
a different activity.
4. Information is defined as a very valuable resource that is required by the
management of an organization to run the business. Information is the
processed data that is presented to the decision-makers to aid them in their
project.
5. The various actions performed by a system are as follows:
A. Gathering data from the internal and external sources of an
organisation
B. Processing the gathered data
C. Supplying the processed data or management information to the
managers to assist them in the procedure of decision-making
6. Various types of systems are:
A. Open system: interacts with its environment and exchanges inputs and
outputs with the environment.
B. Closed system: does not interact and exchange inputs and outputs
with its environment.
7. A cybernetic system is defined as the system in which the feedback and control
elements are attached to make it self-monitoring and self-regulating. For
example, a thermostat controlled heating device that automatically controls
and regulates itself to maintain the desired temperature.
 Management Information
EXERCISES AND QUESTIONS Systems: A Framework

Short-Answer Questions
1. Explain the significance of MIS. NOTES
2. Explain all the functions performed by a manager.
3. How can you compare information technology and MIS?

Long-Answer Questions
1. Describe the various types of information used in MIS.
2. Discuss the various characteristics of MIS in detail.
3. Discuss the various functions of MIS.

FURTHER READING
Davis, G.B and M.H. Olson, Management
Information Systems.
http://en.wikipedia.org/wiki/Management_info
rmation_systems