Need and Components of Management Information System (MIS 09.04.2021)

Need and Components of Management Information System

 

The need for MIS

A manager has to take decisions with two main challenges:

First, a manager has to take quick decisions, or else there’s a chance of the business being taken over by his competitors. The liberalization and globalization, in which organizations are required to compete globally, has further enhanced the necessity for such a system.

Second, information is doubling up every two or three years, a manager has to process a large voluminous data; failing which he may end up taking a strong decision that may prove to be very costly to the company.

Hence, Management Information System has proved to be the one of the most important in today’s business environment.

 

The following are some of the justifications for having an MIS system

 

1. Decision makers need information to make effective decisions. Management Information Systems (MIS) make this possible.

 

2. MIS systems facilitate communication within and outside the organization – employees within the organization are able to easily access the required information for the day-to-day operations. Facilitates such as Short Message Service (SMS) & Email make it possible to communicate with customers and suppliers from within the MIS system that an organization is using.

 

3. Record keeping – management information systems record all business transactions of an organization and provide a reference point for the transactions.

 

Information processing beyond doubt is the dominant industry of the present century. Following factors states few common factors that reflect on the needs and objectives of the information processing −

1. Increasing impact of information processing for organizational decision making.

2. Dependency of services sector including banking, financial organization, health care, entertainment, tourism and travel, education and numerous others on information.

3. Changing employment scene world over, shifting base from manual agricultural to machine-based manufacturing and other industry related jobs.

4. Information revolution and the overall development scenario.

5. Growth of IT industry and its strategic importance.

6. Strong growth of information services fuelled by increasing competition and reduced product life cycle.

7. Need for sustainable development and quality life.

8. Improvement in communication and transportation brought in by use of information processing.

9. Use of information processing in reduction of energy consumption, reduction in pollution and a better ecological balance in future.

10. Use of information processing in land record managements, legal delivery system, educational institutions, natural resource planning, customer relation management and so on.

In a nutshell −

·                  Information is needed to survive in the modern competitive world.

·                  Information is needed to create strong information systems and keep these systems up to date.

Implications of Information in Business

Information processing has transformed our society in numerous ways. From a business perspective, there has been a huge shift towards increasingly automated business processes and communication. Access to information and capability of information processing has helped in achieving greater efficiency in accounting and other business processes.

A complete business information system, accomplishes the following functionalities:

1. Collection and storage of data.

2. Transform these data into business information useful for decision making.

3. Provide controls to safeguard data.

4. Automate and streamline reporting.

 

The following list summarizes the five main uses of information by businesses and other organizations −

1. Planning − At the planning stage, information is the most important ingredient in decision making. Information at planning stage includes that of business resources, assets, liabilities, plants and machineries, properties, suppliers, customers, competitors, market and market dynamics, fiscal policy changes of the Government, emerging technologies, etc.

2. Recording − Business processing these days involves recording information about each transaction or event. This information collected, stored and updated regularly at the operational level.

3. Controlling − A business need to set up an information filter, so that only filtered data is presented to the middle and top management. This ensures efficiency at the operational level and effectiveness at the tactical and strategic level.

4. Measuring − A business measures its performance metrics by collecting and analyzing sales data, cost of manufacturing, and profit earned.

5. Decision-making − MIS is primarily concerned with managerial decision-making, theory of organizational behavior, and underlying human behavior in organizational context. Decision-making information includes the socio-economic impact of competition, globalization, democratization, and the effects of all these factors on an organizational structure.

 

In short, this multi-dimensional information evolves from the following logical foundations −

·                  Operations research and management science

·                  Theory of organizational behavior

·                  Computer science −

o                Data and file structure

o                Data theory design and implementation

o                Computer networking

o                Expert systems and artificial intelligence

·                  Information theory

Following factors arising as an outcome of information processing help speed up of business events and achieves greater efficiency −

·                  Directly and immediate linkage to the system

·                  Faster communication of an order

·                  Electronic transfer of funds for faster payment

·                  Electronically solicited pricing (helps in determining the best price)

 

MIS Need for Information Systems

Managers make decisions. Decision-making generally takes a four-fold path −

·                  Understanding the need for decision or the opportunity,

·                  Preparing alternative course of actions,

·                  Evaluating all alternative course of actions,

·                  Deciding the right path for implementation.

MIS is an information system that provides information in the form of standardized reports and displays for the managers. MIS is a broad class of information systems designed to provide information needed for effective decision making.

Data and information created from an accounting information system and the reports generated thereon are used to provide accurate, timely and relevant information needed for effective decision making by managers.

Management information systems provide information to support management decision making, with the following goals −

·                  Pre-specified and preplanned reporting to managers.

·                  Interactive and ad-hoc support for decision making.

·                  Critical information for top management.

MIS is of vital importance to any organization, because −

·                  It emphasizes on the management decision making, not only processing of data generated by business operations.

·                  It emphasizes on the systems framework that should be used for organizing information systems applications.

 

 

Components of MIS

The major components of a typical MIS long-form (Management Information System) are:

 

1. People – people who use the information system. People are required for the operation of all information system.

These are the users who use the information system to record the day to day business transactions. The users are usually qualified professionals such as accountants, human resource managers, etc. The ICT department usually has the support staff who ensure that the system is running properly.

 

2. Data – the data that the information system records. Database holds processed and organized data.

The recorded day to day business transactions. For a bank, data is collected from activities such as deposits, withdrawals, etc.

 

3. Business Procedures – procedures put in place on how to record, store and analyze data. It is a step undertaken to achieve a goal.

These are agreed upon best practices that guide the users and all other components on how to work efficiently. Business procedures are developed by the people i.e. users, consultants, etc.

 

4. Hardware – these include servers, workstations, networking equipment, printers, etc. Include all physical devices and materials used in information processing.

Hardware is made up of the computers, printers, networking devices, etc. The hardware provides the computing power for processing data. It also provides networking and printing capabilities. The hardware speeds up the processing of data into information.

 

5. Software – these are programs used to handle the data. These include programs such as spreadsheet programs, database software, etc. It includes all sets of information processing instruction.

These are programs that run on the hardware. The software is broken down into two major categories namely system software and applications software. System software refers to the operating system i.e. Windows, Mac OS, and Ubuntu, etc. Applications software refers to specialized software for accomplishing business tasks such as a Payroll program, banking system, point of sale system, etc.