MODULE II
Management Information System: MIS is acronym for Management Information Systems, and
pronounced as separate letters, MIS refers broadly to a computer-based system that provides
managers with tools for organizing, evaluating and efficiently running their departments.
A Management Information System (MIS) is a subset of the overall internal controls of a business
covering the application of people, documents, technologies, and procedures by management
accountants to solve business problems such as costing a product, service or a business-wide
strategy. Management information systems are distinct from regular information systems in that
they are used to analyze other information systems applied in operational activities in the
organization. Academically, the term is commonly used to refer to the group of information
management methods tied to the automation or support of human decision making, e.g. Decision
Support Systems, Expert systems, and Executive information systems. An ‘MIS’ is a planned
system of collecting, processing, storing and disseminating data in the form of information needed
to carry out the functions of management. In a way it is a documented report of the activities that
were planned and executed.
MIS is an analytical tool that enables the integration of data from different business applications,
Internet, different modules and business functions. It converts data from internal and external
sources into information. This information is communicated in an appropriate form to managers
at different levels in a business to enable them to make effective decisions. A management
information system (MIS) is a process that provides information needed to manage organizations
effectively. It is regarded as a subset of the overall internal procedures in a business, which cover
the application of people, documents, technologies, and procedures used by management
personnel to solve business problems such as costing a product, service or a business-wide strategy.
Management information systems are distinct from regular information systems in that they are
used to analyze other information systems applied in operational activities in the organization.
Management Information System (M.I.S.) is basically concerned with processing data into
information which is then communicated to the various Departments in an organization for
appropriate decision-making.
Data collection involves the use of Information Technology (IT) comprising computers and
telecommunications networks (E-Mail, Voice Mail, Internet, telephone, etc.). Computers are
important for more quantitative than qualitative, data collection, storage and retrieval; Special
features are speed and accuracy, and storage of large amounts of data.
Telecommunications provide the means for one-way or two-way communication and for the
transmission of messages. A combination of IT is used: telephone, computer, processor, printer,
etc. A lot of time and money are saved, and the security of data and messages is ensured.
MIS provides several benefits to the business organization: the means of effective and efficient
coordination between Departments; quick and reliable referencing; access to relevant data and
documents; use of less labour; improvement in organizational and departmental techniques;
management of day-to-day activities (as accounts, stock control, payroll, etc.); day-to-day
assistance in a department and closer contact with the rest of the world
The overall goal of Management Information System is to help in decision making process, which
can be applied in areas like planning, directing, forecasting, coordinating, and controlling.
Components of MIS
The major components of a typical management information system are:
1. People- people who use the information system.
2. Data- the data that the information system records.
3. Business Procedures- procedures put in place on how to record, store and analyze data.
4. Hardware- these include servers, workstations, networking equipment, printers, etc.
5. Software- these are programs used to handle the data. These include programs such as
spreadsheet programs, database software, etc.
Value of MIS: The value of MIS depends greatly on the user of the information not even on the
producer of such information. Information has a great impact on decision making, and hence its
value is closely tied to the decisions that result from its use. Information does not have an absolute
universal value. Its value is related to those who use it, when it is used, and in what situation it is
used. In this sense, information is similar to other commodities. For example, the value of a glass
of water is different for someone who has lost his way in Arctic glaciers than it is to a wanderer in
the Sahara Desert. Information supports decisions, decisions trigger actions, and actions affect the
achievements or performance of the organization. If we can measure the differences in
performance, we can trace the impact of information, provided that the measurements are carefully
performed, the relationships among variables are well defined, and possible effects of irrelevant
factors are isolated. The measured difference in performance due to informational factors is called
the realistic value or revealed value of information.
Characteristics of MIS:
1. Systems Approach: The information system follows a systems approach. Systems approach
means taking a comprehensive view or a complete look at the interlocking sub-systems that operate
within an organization.
2. Management Oriented: Management oriented characteristic of MIS implies that the
management actively directs the system development efforts. For planning for MIS, top-down
approach should be followed. Top-down approach suggests that system development starts from
the determination of management’s needs and overall business objective. To ensure that the
implementation of system’s polices meet the specifications of the system, continued review and
participation of the manager is necessary.
3. Need Based: MIS design should be as per the information needs of managers at different levels.
4. Exception Based: MIS should be developed on the exception based also, which means that in
an abnormal situation, there should be immediate reporting about the exceptional situation to the
decision –makers at the required level.
5. Future Oriented: MIS should not merely provide past of historical information; rather it should
provide information, on the basis of future projections, on the actions to be initiated.
6. Integrated: Integration is significant because of its ability to produce more meaningful
information. Integration means taking a comprehensive view or looking at the complete picture of
the interlocking subsystems that operate within the company.
7. Common Data Flow: Common data flow includes avoiding duplication, combining similar
functions and simplifying operations wherever possible. The development of common data flow
is an economically sound and logical concept, but it must be viewed from a practical angle.
8. Long Term Planning: MIS is developed over relatively long periods. A heavy element of
planning should be involved.
9. Sub System Concept: The MIS should be viewed as a single entity, but it must be broken down
into digestible sub-systems which are more meaningful.
10. Central database: In the MIS there should be common database for whole system
Steps of MIS
1. Data Capturing: MIS capture data from various internal and external sources of
organization. Data capturing may be manual or through computer terminals.
2. Processing of Data: The captured data is processed to convert into required information.
Processing of data is done by such activities as calculating, sorting, classifying, and
summarizing.
3. Storage of Information: MIS stores processed or unprocessed data for future use. If any
information is not immediately required, it is saved as an organization record, for later use.
4. Retrieval of Information: MIS retrieves information from its stores as when required by
various users.
5. Dissemination of Information: Information, which is a finished product of MIS, is
disseminated to the users in the organization. It is periodic or online through computer
terminal.
Categories of MIS
Management Information System can be classified according to goal or methodology invoke in
particular organization.
Databank Management Information System: This type of information system is used to store
any item of data which might be useful to the decision maker. A databank is a collection of files
used by an organization, stored such that one file may have record/fields duplicated in other files.
Examples of the kind of data that might be recorded in such a database for a given state with
respect to secondary school as follows:
Number of schools in the state.
Total number of secondary school tutors in the state.
Average number of tutors per school.
Total number of students in the state.
Average number of students per school.
Each of these databases can be summarized and converted to single tabular presentations of
information of interest to management. When information from two or more time periods is
compared, trends can be observed.
Predictive Management Information: System Predictive information systems help in drawing
of inferences and predictions that are relevant to decision making. It is possible to obtain
information useful for making predictions or for drawing inferences based on the facts gathered
like in the case Databank MIS. Information obtained from these kinds of analysis is normally
summarized in a two-way tabular format. And likewise, the information often is compared over
time. Managers can then use such information to make predictions, for example to forecast costs
of particular undertakings for budgeting purposes or as a basis for predicting results if a given
change is made, such as change in the number of demonstrations with a given change in staffing.
Decision Making Management Information System: This system incorporates the system value
of the organization or its criteria for choosing among alternatives. An organization's values are
many and varied. Considering the case of agricultural sector, there are numerous points of
discourse where meaningful decisions have to be taken for the uplifting of the sector. They include
concerns about resolving farmer problems, increasing and providing for stability of farmer
incomes, and improving the quality of farm life. But they also include an intent to provide well for
staff members (training, adequate salaries, etc.) and to aid in the process of bringing about rural
economic development.
Decision-making information systems provide expert advice to the decision-maker either in the
form of a single recommended course of action or as criteria for choice, given the value system
prevailing in the organization. The decision-maker has just to approve, disapprove or modify the
recommendation. Decision-making information systems are suitable for structured decisions.
Operations research and cost-effectiveness studies are examples of decision-making information
systems.
Decision Taking Management Information System: Decision-taking information systems
integrate predictive information and decision-making systems. This is a decision system in which
the information system and the decision maker are one and the same. Management is so confident
in the assumptions incorporated in the system that it basically relegates its power to initiate action
to the system itself. Airplanes carry automatic pilot systems, which are an example of a decision-
taking system. Once activated, the system itself keeps the plane on course and at the proper speed
and altitude (according to parameters determined by the pilot). Another example of decision-taking
information systems is found in modem factory production. In automobile production, continuous
inventories of parts are maintained by computers as cars move down an assembly line. Orders are
placed automatically by the computer when additional parts are needed. This is done without the
intervention of a manager.
Summarily, the choice of an appropriate management information system (MIS) category
primarily depends on the nature of the decisions it supports.
Some commonly used Management Information System Types
There are many types of information systems used to extract data, create reports and help
operational and middle level managers in decision making. Uses of management information
system differ based on requirement. Selecting the required type of MIS is thus important. Some of
the widely used MIS types are explained here:
Management Reporting System: It’s a database designed to report on all the finances and
operations of all management levels. A management reporting system is generally used by middle
level managers to generate regular reports by comparing past and present financial performance to
determine financial growth. It’s also a great tool for the middle level managers to analyze their
own performance. The upper-level managers use data that generated by the reporting system to
make a comparison between company’s current financial position and it’s efficiency of operations
against company’s predetermined goals.
Process Control Systems: This monitors physical and industrial processes of business-like
petroleum processing, metal fabrication or automobile assembly. The system constantly collects
data and programme’s it to generate reports on system performance. A manager by looking at the
reports can tell how often, over the course of defined time, an event occurs in the production
process. Or how often a company deviate from the repetitive production process. This information
helps to track the overall efficiency of production and safety of its employees and machinery.
Sales and marketing system: It supports Management to execute and track effectiveness of
Organizations sales and marketing functions. With the help of these reports, the Managers are able
to find out which products are selling, and which aren’t, also how well each product is selling at
each retail location. It includes:
a. Product Development
b. Sales forecast
c. Track and compile the advertisement outlets and schedule.
d. Manage distribution channel.
e. Pricing and promotion
f. To implement effective advertisement and sales promotion
Inventory control system: It tracks everything that has to do with inventory, including theft,
spoilage, and inventory in hand, thereby allowing management to determine which items are
selling out more and need to be re-stocked, either in individual retail outlets or in the company
warehouse. The inventory control system also keeps a record of movement of inventory into the
warehouse, from the warehouse to the stores, sales, and returns.
Accounting and Finance systems: It tracks organizations assets and investment and combines all
data related to financial reports as needed by law for functions such as payroll, local taxes, federal,
state and pension funds. Accounting and Finance system provides reports necessary for financial
audits and annual reports if the institution produces one. It also facilitates daily posting of routine
transactions like sales income, returns, and bank deposits. The monthly statements such as the
balance sheet or the Profit and loss statement are derived from this system. Apart from that these
statements help managers track current financial success against past performance and pre-
determined goals for the future growth of the company.
Human resources: Office automation and enterprise collaboration information system help
management in controlling the flow of information all throughout the organization. Any medium
or any electronic communication device used by managers in the organization to communicate
with other managers, or employees or for employees to communicate with one another falls under
the office automation information system. These devices may include any medium of transfer such
as landline phones to talk to each other or Cell phones, Intranet or Internet, voicemail, multimedia,
file sharing and conferencing.
Decision support system: These are used by middle-and higher-level management to help make
decisions and solve problems of the company.
Executive information system: It’s a reporting tool for providing easy and quick access to
company reports from all levels and departments such as human resources, accounting, and
operations, etc.
Marketing information systems: These are information systems to help with marketing aspects
of the business.
Office Automation system: This is used for supporting communication and productivity in an
enterprise by eliminating bottlenecks and even automating workflow in all levels of management.
School Information Management System: This is used in schools for helping in school
administration, this includes teaching and learning material.
Enterprise resource planning: This is used in facilitating the flow of information in between all
functions of business, inside the organization boundary and helps manage connections with
stakeholders outside.
In conclusion, whatever type of business you do or for whichever purpose you need a MIS, so
many MIS are available nowadays. Choose your most suited MIS and make your life easy.
Output of Management Information Systems (MIS)
i. Scheduled reports which are produced periodically, or on a Schedule (daily, weekly,
monthly).
ii. Key-indicator report which summarizes the previous day’s critical activities, and it is
typically available at the beginning of each day.
iii. Demand report which gives certain information at a manager’s request.
iv. Exception report which is automatically produced when a situation is unusual or
requires management action.
Benefits of MIS
i. It improves personal efficiency.
ii. It expedites problem solving (speed up the progress of problems solving in an
organization).
iii. It facilitates interpersonal communication.
iv. It promotes learning or training.
v. It increases organizational control.
vi. Allows company management access to a single database to manage all transactions
and planning processes.
vii. It saves time and increases work effectiveness considerably.
viii. Ensures improved data analysis and decision-making.
ix. Maintains an accurate record of the system’s inputs and outputs and tracks employee
performance.
x. Critically analyze a company’s and its employees’ strengths and weaknesses.
xi. The CEOs or executives can take greater company financial and operational control.
xii. It generates new evidence in support of a decision.
xiii. It creates a competitive advantage over competition.
xiv. It encourages exploration and discovery on the part of the decision maker.
xv. It reveals new approaches to thinking about the problem space.
xvi. It helps automate the Managerial processes.
Limitations of MIS
i. While MIS may solve some acute problems, it is not a solution to all problems of an
organization.
ii. Involves maintenance and employee training costs.
iii. It cannot meet everyone's particular demands.
iv. If mis-designed, MIS does not serve the management and is irrelevant.
v. The MIS is only good if the primary data is updated.
vi. The MIS provides most information in quantitative form. Hence, it ignores qualitative
information, such as an employee's behaviour.
Levels of Management
There are three levels of management that could be identified in most organizations. They are: top
management cadre (strategic level), middle management cadre (tactical level), and operational
group cadre (operational level).
Top Strategic /Management Level: This level of management coordinates the activities of the
whole organization and has a strategic view of the organization. This level is concerned with
establishing (estimating) the overall objectives of the organization and in devising appropriate
policies so that the objectives may be achieved.
Typical of the functions of top management are:
(i) Long term planning
(ii) Capital investment decisions
(iii) Organizational restructuring
(iv) Middle management appointment
(v) Acquisitions and mergers
The top management level is the overall policy making section of the management and as such
will be actively involved in corporate planning process of an organization.
Middle Management Level: This may be termed the tactical level of management whose overall
function is to implement top management policy. This level of management does set objectives
but these objectives are more limited in scope and are subordinate to the objectives set by the top
management level.
Examples of the functions of the middle management are:
(i) Purchasing
(ii) Product planning
(iii) Sales promotion
(iv) Discount and credit policy
(v) Staff appointment
(vi) Implementation of marketing and advertising policies of the organization.
Operational Level of Management: This level of management is concerned with the day-to-day
process of supervision i.e. direction associated with the normal activities of the organization.
Functions of the operational level are:
(i) Production
(ii) Dispatching
(iii) Sales
(iv) Accounting.
Often this level of management may not be called managers, but they have titles, such as charges,
heads, supervisors, chief clerical foremen, etc. Even though the work this group does involves
management, it is of different categories.
Communication among Levels of Management
It is important that these groups of management levels will be able to communicate effectively for
the purpose of achieving effective goals of an organization. It has been observed that this group of
management levels has been able to pass all necessary information in the form of communication
within the different groups. It is important also that information from the top management level be
passed down through the usual procedure. Normally, information from top management levels will
not go to the operational level first before the middle management level for adequate flow of
information within an organization. It is a bad system of information flow, and it encourages
misinformation and confusion in an organization. Therefore, information has to be communicated
from the top management level to the operational level through the middle management level; and
vice versa.
Management Structure and MIS
A broad structure of information supplied by MIS is divided into planning and controlling. This
division is of great importance not only because of the intrinsic nature of these two types of
information management but also because of the destruction within the management structure.
Figure below illustrates the broad relationship between the proportion of planning and controlling
information received and management place in hierarchy.
Top management level deals with more planning of information than controlling of information.
This level has little control of information as fig. 2 shows but at the middle management level, the
planning and controlling of information are proportionate (about equal). The operational level has
very little to do with planning but controls what is going on and implements the plans of top and
middle management levels.
Development of Management Information System
All levels of management need information on which to base decisions, to plan, to organize and to
control. People organize information directly by observing and experiencing events. But as an
organization becomes larger and more complex, it becomes impossible for management,
particularly the middle and top management levels, to observe and experience all operations. In
some form of decentralized organizations, management virtually never saw the actual events and
has to rely almost entirely on information provided through the formal and informal channels.
Although much viable information is passed through decisions, meetings and casual conversations,
such methods do not generally give a complete picture, nor do they provide information in the
correct form of intended use.
So, as an organization grows, there is a shift from informal to more formal methods of
disseminating information. More formal information systems are observed through reports,
operating systems, special analysis, various returns, balance sheet returns, etc. These have the
advantages of comprehensiveness, consistency, and reasonable accuracy but may suffer from the
disadvantages of not meeting the exact requirements of the problem at hand, the lack of flexibility,
time lag of events or operations to reports and costs. In spite of these possible disadvantages, the
development of MIS is virtually necessary in most organizations today.