Management Information Systems' Significance
MIS Provides Decision Support Information for Business Managers
Feb 2, 2009
Management information systems are part of an organization's internal control system. Control systems monitor how actual performance compares with targets, and analyze the factors that caused any deviations. With modern MIS such as ERP systems control can be exercised even over huge enterprises with globally widespread operations.
How MIS works
Decision support systems generally work as follows:
- Collect internal and external business data, such as transactions data and industry data
- Analyze the data to generate information such as underlying patterns and revealed meanings
- Respond to the information by taking remedial actions or exploiting opportunities
A simple example is a project management information system. The system stores the project targets for physical milestones and financial expenditures. It then accepts the day-to-day data about actual work progress and expenditures, under the same categories as used for setting targets. Periodical reports highlight any deviations from targets, e.g. slow progress or excess expenditures.
A more refined example is a cost variance analysis system. Standards are established for material consumption, machine and labor hours and other cost elements, per unit, for each product. Actual performance is then accumulated carefully. The system then generates reports showing variances, i.e. differences between actual material, machine or labor usage and predetermined standards.
MIS becomes meaningful when managers respond appropriately to the reported information. For example, if excess material consumption is occurring, they can investigate the causes. The investigation might reveal that wastage beyond allowed levels is occurring. Further investigation can pinpoint the specific reasons for the excessive wastage, thus helping managers to focus on a specific problem.
MIS Categories
The examples above are operational level MIS. MIS can also be:
- Business Intelligence and Executive Information Systems that summarize internal and external data in easily understood graphic formats. They work with enterprise level data, presenting a total picture. Drill-down facilities allow top managers to go deeper and look at underlying specifics. External information such as industry data help them keep an eye on emerging market trends.
- Expert Systems employ artificial intelligence algorithms to learn from past usage. For example, a patient diagnostic system learns from past patterns of symptoms, test results and diagnoses. It can then come up with diagnoses immediately on getting the symptoms and test results.
Information Systems Management
Managers will accept information system reports (as assumed in the discussion above) only if they find it meaningful and reliable. This kind of trust is not automatic. To develop really helpful and reliable systems, two things must happen:
- Business managers must become aware of the potential of IT to provide information of a kind they had not been able to get so far
- Technology department must become aware of business needs and imperatives, and focus on business processes instead of technology
Only collaborative working and regular communications between managers and IT department can make these things happen. Movements such as Six Sigma and CMMI are helping to develop such an environment.
Management information systems focus on providing decision support information, such as cost benefit analysis, to managers. With the arrival of computers and the Web, information that was previously not obtainable in time can now be made available. Technology developments such as virtualization is making powerful systems affordable even for smaller companies.
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