Topic 2: Management Information System

Learning Objectives
 Identify various types of information systems
 Align different systems with organizational levels
 Explain the role of the MIS in an organization
 Describe the decision making process
 Discuss the impact of MIS in an organization

Introduction
Organizations and individuals use different types of systems for different purposes. Here are some
of the main types of information systems and their uses. The main types of information systems
are Office Automation System (OAS), Transaction Processing System (TPS), Management
Information System (MIS), Decision Support Systems (DSS), Strategic Information System (SIS)
and Expert Systems.
Office Automation
Types of Information Systems
1. Office Automation System (OAS)
Office automation refers to the application of computer and communication Technology to
office functions. Office automation systems are meant to improve the productivity of managers
at various levels of management by providing of hardware, software and people in information
system, that process offices transactions and support office activities at all levels of the
organization. These systems include a wide range of support facilities, which include word
processing, electronic filing, electronic mail message switching, data storage, data and voice
communication, etc.
2. Transaction Processing System (TPS)
Transaction processing system (TPS) records and process data and produces reports. It
represents the automation of the fundamental, routine processing used to support business
operations. For example: point-of-sale (POS) systems at many retail stores use electronic case
register terminals to electronically capture and transmit sales data over telecommunications
 links to head office computer center for immediate (real-time) or weekly (batch) processing.
Characteristics of transaction processing systems and the role they play in a business:
 TPS are computerized systems that perform and record daily routine transactions
necessary in conducting business
 They serve the organizations operational level
 Principal purpose of the system is to answer routine questions and to track the flow
of the transactions through the organization.
 At the operational level, tasks, resources and goals are predefined and highly
structured
 Manager needs TPS to monitor the status of the internal operations and the firm’s
relationship with the external environment.
 TPS are the major producers of the information for other types of systems.
 TPS are often so central to a business that a TPS failure for a few hours can lead to
a firm’s downfall and perhaps that of other firms linked to it
3. Management Information System (MIS)
Management Information System (MIS) is an information system which processes data and
converts it into information. A management information system uses TPS for its data inputs.
The information generated by the information system may be used for control of operations,
strategic and long-range planning, short-range planning, management control and other
managerial problem solving.
The output of an MIS takes the form of summary reports and exception reports. A summary
report accumulates data from several transactions and presents the results in condensed form.
For example, a bank manager may get a summary report listing the total amount of deposits
and withdrawals made the previous day. An exception report outlines any deviations from
expected output. Its main purpose is to draw the attention of middle managers to any significant
differences between actual performance and expected performance. For example, a sales
manager may study an exception report that lists all sales personnel who sold less then Kshs.
10000 or more than Ksh. 50000 in the preceding month.
4. Decision Support Systems (DSS)
Decision support systems are interactive, well integrated systems that provide managers with
data, tools and models to facilitate semi-structured decisions or tactical decisions. It automates
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 the routine and repetitive elements in a problem while simultaneously supporting the use of
intuition and judgement. DSS are ideally suited for problem like location selection, identifying
new products to be marketed, scheduling personnel, and analyzing the effect that price
increases for resources have on profits.
DSS can be differentiated from MIS in terms of its processing capabilities. Whereas MIS
processes data to convert it into information; DSS processes information to support the
decision-making process of a manager.
A DSS allows managers to perform goal seeking, which specifies the action a manager should
take in order to accomplish a certain goal. Another important feature of DSS is that an
individual or a group of individuals can use them. DSS that support group decision making are
called Group Decision Support Systems (GDSS). In most organizations, decision of any
significance are made collectively by a group, not by a single person. GDSS are a set of
interactive, well integrated systems that facilitate and support group decision making.
5. Strategic Information System (SIS)
Strategic Information Systems apply information technology to the products, services or
business processes of an organization to help the organization gain a strategic advantage over
its competitor. Thus strategic information system can be any kind of information system (TPS,
MIS, DSS etc.) that uses IT to help an organization gain a competitive advantage, reduce a
competitive disadvantage, or meet other strategic enterprise objectives.
6. Expert Systems.
AI is a branch of computer science whose goals is to design and develop machines that emulate
human intelligence. It attempts to provide machines with capabilities and characteristics that
would indicate intelligence in human being.
Expert systems (ES) also known as knowledge based system is a software designed to capture
the knowledge and problem solving skills of human expert. It has three main components: a
knowledge base, an inference engine, and a user interface.
Main characteristics of expert systems are:
 An expert system is a program designed to capture the knowledge and problem solving of
human expert. Expert system is a branch of artificial intelligence.
 Expert systems handle problem that require knowledge, intuition, and judgment.
 Expert systems, unlike DSS and EIS, can replace decision makers.

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  It has three main components: the knowledge base which stores the knowledge, the inference
engine, which stores the reasoning principles used by the expert, and the user interface,
which allows the user to interact with the system.
 Expert systems are not designed for any one level of management; their primary function is
to disseminate expertise throughout the organization
Information Systems and organization Levels
Generally, an organization is perceived to have four main hierarchical layers that can be mapped
with respective information systems that will support both transaction and decision making of each
level. The information used in the various levels can be categorized in relation to the managerial
levels for the respective decision making processes as follows:
 Strategic Information: Needed for long range planning and directions that are of direct
interest to the top management.
 Managerial Information: Needed for implementation and control e.g. sales analysis, cash
flow projections, annual finance statement etc.
 Operational Information: Needed for day to day operations of the organization. Eg: Daily
Sales, Billing.
1. Strategic Level
The characteristics of the information at strategic level is as follows:
 Unstructured: Concerned with long term goals of an organization and that decisions will
provide guidelines on which the firm will run.
 Source: The information is obtained from both external and internal sources and help in
the policy formulation.
 Complex: High uncertainty requiring experience and good sense of judgement of the
strategic planning and the allocation of the resources.
 Summarized: Information is usually in form of records and less qualitative and quantitative.
2. Managerial Level
The characteristics of the information at managerial level is as follows:
 Semi structured: Concerned with medium range goals of the organization
 Source: Usually of medium quality and obtained from restricted range of sources
 Largely quantitative: Based on routine operations and procedural decisions.

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  Less summarized: Information is obtained from both internally and less externally and
helps in resource applications.
3. Operational Level
The characteristics of the information at operational level is as follows:
 Structured: Decisions associated with activities that are routine and cover short time frame.
 Source: Information is derived internally and relevant in short term.
 Highly quantitative: Information obtained from quantitative data, highly detailed and help
in the daily routines and the procedures.
Information system stakeholders
 System Owners: Sponsors and advocates responsible for funding into develop, operate
and maintain an IS i.e. pay for the system to be built and maintain
 System Users: Use the system to perform or support the work to completion by capture,
validate, enter, store and exchange data and info.
 System Designers: Designs a system to meet user’s requirements.
 System Builders: Construct, test and deliver the new system into operation.
 System Analysts: Facilitator to the development of IS and computer applications by
bridging the communication gap that exists between non-technical system owners and
users as well as the technical system designers and builders.
These can all be generally classified as information workers. information worker is any person
whose job involves creating, collecting, processing, distributing, and using information.
Role of Management Information System
A management information system (MIS) plays an important role in business organizations.
These are some of the important roles of MIS:
1) Decision making: In any organization, a decision is made on the basis of relevant
information which can be retrieved from the MIS
2) Coordination among the department: Management Information System satisfy
multiple need of an organization across the different functional department.
3) Finding out Problems: MIS provides relevant information about every aspect of
activities. Hence, if any mistake is made by the management then MIS, information will
help in finding out the solution to that problem.

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 4) Comparison of Business Performance: MIS store all past data and information in its
Database. That why the management information system is very useful to compare
business organization performance.
5) Strategies for an Organization: Today each business is running in a competitive
market. An MIS supports the organization to evolve appropriate strategies for the
business to assent in a competitive environment.
Objectives 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 the 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 and 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.
Characteristics of MIS
1) System Approach: The information system follows a System’s approach. The system’s
approach implies a holistic approach to the study of system and its performance in the light
for the objective for which it has been constituted.
2) Management Oriented: The top-down approach must be followed while designing the
MIS. The top-down approach suggests that the system development starts from the
determination of management needs and overall business objectives. The MIS
development plan should be derived from the overall business plan. Management oriented
characteristic of MIS also implies that the management actively directs the system
development efforts.

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3) Need-Based: MIS design and development should be as per the information needs of
managers at different levels, strategic planning level, management control level and
operational control level. In other words, MIS should cater to the specific needs of
managers in an organization’s hierarchy.
4) Exception Based: MIS should be developed on the exception-based reporting principle,
which means an abnormal situation, i.e. the maximum; minimum or expected values vary
beyond tolerance limits. In such situations, there should BE exception reporting to the
decision-maker at the required level.
5) Future Oriented: Besides exception-based reporting, MIS should also look at the future.
In other words, MIS should not merely provide past or historical information; rather it
should provide information, on the basis of projections based on which actions may be
initiated.
6) Integrated: Integration is a necessary characteristic of a management information system.
Integration is significant because of its ability to produce more meaningful information.
For example, in order to develop an effective production scheduling system, it is necessary
to balance such factors as setup costs, Workforce, Overtime rates, Production capacity,
Inventory level, Capital requirements and Customer services.
7) Long Term Planning: MIS is developed over relatively long periods. Such a system does
not develop overnight. A heavy element of planning is involved. The MIS designer must
have the future objectives and needs of the company in mind.
8) Sub-System Concept: The process of MIS development is quite complex and one is likely
to lose insight frequently. Thus, the system, though viewed as a single entity, must be
broken down into digestible sub-systems which are more meaningful at the planning stage.
9) Central Database: A central database is a mortar that holds the functional systems
together. Each system requires access to the master file of data covering inventory,
personnel, vendors, customers, etc. It seems logical to gather data once, validate it properly
and place it on a central storage medium, which can be accessed by any other subsystem.
10) 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.

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Limitations of MIS
The limitations of MIS may be stated as:
 The MIS is as good as its design-MIS if designed in an improper manner does not serve
the management and hence is of little relevance.
 The MIS is as good as its users-if the users do not know how to leverage the information
available from MIS then MIS is of little use.
 The MIS is no good if the basic data is obsolete and outdated (for example, MIS will only
facilitate garbage with information and in about garbage-out-process).
Success of MIS
Factors contributing to success of MIS:
1) MIS is integrated into the management function. It sets clear objectives to ensure that MIS
focuses on the major issues of the business. Also adequate development resources are
provided and human & organizational barriers to progress are removed.
2) An appropriate information processing technology required to meet the data processing
and analysis needs of the users of MIS is selected.
3) MIS is oriented, defined and designed in terms of the user's requirements and its operational
viability is ensured.
4) MIS is kept under continuous surveillance, sot that its open system is modified according
to the changing information needs
5) MIS focuses on results and goals, and highlights the factors and reasons for non-
achievements.
6) MIS is not allowed to end up into and information generation mill avoiding the noise in the
information and the communication system.
7) MIS recognizes that a manager is a human being and therefore, the systems must consider
all the human behavioral aspects in the process of management.
8) MIS is easy to operate and therefore, the design of MIS has such good features which make
up a user friendly design.
9) MIS recognizes that the information needs become obsolete and new needs emerge. The
MIS design, therefore, has a potential capability to quickly meet newer and newer needs of
information.

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 10) MIS concentrates on developing the information support to manage critical

success factors. It concentrates on the mission critical applications serving the

needs of the top management.
Failure of MIS
Factors contributing to failures of MIS:
1) MIS is conceived as a data processing and not as an information system.
2) MIS does not provide that information which in needed by managers but it tends to provide
the information generally the function calls for. MIS then becomes an impersonal function.
3) Understanding the complexity in the business systems and not recognizing it in the MIS
design leads to problems in the successful implementation.
4) Adequate attention is not given to the quality control aspects of the inputs, the process and
the outputs leading to insufficient checks and controls in MIS.
5) MIS is developed without streamlining the transaction processing systems in the
organizations.
6) Lack of training and appreciation that the users of the information and the generators of the
data are different, and they have to play an important role in the MIS.
7) MIS does not meet certain critical and key factors of its users, such as a response to the
query on the database, an inability to get the processing done in a particular manner, lack
of user friendly system and the dependence on the system personnel.
8) A belief that the computerized MIS can solve all the management problems of planning
and control of the business.
9) Lack of administrative discipline in following the standardized systems and procedures,
wrong coding and deviating from the system specifications result in incomplete and
incorrect information.
10) MIS does not give perfect information to all users in the organization. Any attempt toward
such a goal will be unsuccessful because every user has a human ingenuity, bias and
certain assumptions not known to the designer. MIS cannot make up these by providing
perfect information

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Decision Making Process
Decision-making in organization is a process of choosing among alternative courses of action for
the purpose of attaining a goal or goals. Decision making comprises of four major phases, namely:
 Intelligence phase
 Design phase
 Choice phase
 Implementation phase

Intelligence Phase:
Intelligence phase of decision-making process involves searching the environment for conditions
calling or decisions. Intelligence consists of discovering, identifying, and understanding the
problems occurring in the organization—why is there a problem, where, and what effects is it

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having on the firm. Traditional MIS that deliver a wide variety of detailed information can help
identify problems, especially if the systems report exceptions.
Design Phase:
In this phase, the decision maker identifies alternative course of action to solve the problem.
During solution design, possible resolutions to the problems are developed. Smaller DSS systems
are ideal in this stage of decision making because they operate on simple models, can be developed
quickly, and can be operated with limited data.
Choice Phase: At this stage, one of the alternatives developed in design phase is selected and is
called a decision. For selecting an alternative, a detailed analysis of each and every alternative is
made. Here the decision maker might need a larger DSS system to develop more extensive data
on a variety of alternatives and complex models or data analysis tools to account for all of the
costs, consequences and opportunities.
Implementation Phase: Implementation involves making the chosen alternative work and
continuing to monitor how well the solution is working. Here, traditional MIS come back into play
by providing managers with routine reports on the progress of a specific solution. Support systems
can range from full-blown MIS to much smaller systems, as well as project-planning software
operating on personal computers.
Table 1 presents the summary of decision-making phases, Information requirement, and
supporting information systems.

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The stages of decision making do not necessarily follow a linear path. At any point in the decision
making process, you may have to loop back to a previous stage. One can be in the process of
implementing a decision, only to discover that your solution is not working. In such cases, you
will be forced to repeat the design, choice, or perhaps even the intelligence stage.
Impact of MIS on an organization
Since the MIS plays a very important role in the organization, it creates an impact on the
organization’s functions, performance and productivity. With good support, the management of
marketing, finance, production and personnel become more efficient. The tracking and monitoring
of the functional targets becomes easy. The functional, managers are informed about the progress,
achievements and shortfalls in the probable trends in the various aspects of business. This helps in
forecasting and long-term perspective planning.
The manager’s attention is brought to a situation which is exceptional in nature, inducing him to
take an action or a decision in the matter. A disciplined information reporting system creates a
structured data and a knowledge base for all the people in the organization. The information is
available in such a form that it can be used straight away or by blending analysis, saving the
manager’s valuable time.
MIS creates another impact in the organization which relates to the understanding of the business
itself. MIS begins with the definition of a data entity and its attributes. It uses a dictionary of data,
entity and attributes, respectively, designed for information generation in the organization. Since
all the information system use the dictionary, there is common understanding of terms and
terminology in the organization bringing clarity in the communication and a similar understanding
throughout the organization. MIS calls for a systemization of the business operation for an
affective system design.
A well-designed system with focus on the manger makes an impact on the managerial efficiency.
The fund of information motivates an enlightened manger to use a variety of tools of management.
It helps him to resort to such exercises as experimentation and modelling. The use of computers
enables him to use the tools techniques which are impossible to use manually.
Since the MIS works on the basic systems such as transaction processing and databases, the work
of the clerical work is transferred to the computerized system, relieving the human mind for better
work. It is observed that a lot of manpower is engaged in this activity in the organization. The
study of the individual’s time utilization and its application has revealed that seventy per cent of

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the time is spent in recording, searching, processing and communication. This is a large overhead
in the organization.
MIS has a direct impact on this overhead. It creates an information based work culture in the
organization.

Reference
1) Laudon & Laudon (2011). Management Information Systems: managing the digital firm (12th
ed.). Pearson. ISBN 0132142856, 9780132142854.
2) Schultheis, R. A. & Summer, M. (1998). Management Information Systems: the manager’s
view (4th ed.). Irwin/McGraw Hill.
3) O’Brien & O’Brien (2011). Management Information Systems (10th ed.). McGraw-Hill. ISBN
0071221093, 9780071221092.
4) Brown, C. V., DeHayes, D. W., Slater, J., Martin, W. E., & Perkins, W. C. (2011). Managing
information technology: What managers need to know. Pearson Higher Ed.
5) Oz, E. (2004). Management information systems. Course Technology.

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