Unit-4

What is MIS (Management Information

System)?
A management information system (MIS) is a computer system of hardware
and software that acts as the foundation for an organization's operations.
An MIS collects data from various online systems to support management
decision-making, analyses the information, and reports data.

In an organization, it is utilized for information coordination, control,

analysis, and visualization. People, procedures, and technology are all
involved in studying management information systems in an organizational
setting. It provides businesses and organizations with technology that
facilitates communication and information flow, assisting in issue-solving
and giving an organization a competitive edge.

Evolution of MIS
It's useful to divide the history of management information systems into
four or five periods to make sense of its evolution.

Mid-1960s to mid-1970s:

Information systems were centralized during the early years of

computerized MIS and were only focused on management and governance
requirements. Accounting departments were in charge of most information
systems and their reports.

Mid-1970s to mid-1980s:

Even though MIS was still primarily focused on management and oversight,
additional departments were starting to take advantage of the technology.
The form and scope of additional Information Systems steering groups and
user-led initiatives often established projects.
Mid-1980s to late 1990s:

This period saw the growth of centralized information systems and the
decentralization of information. Every division has its computer network.
Information management was frequently referred to as "herding cats." A
new job to handle the acquisition and operation of various information
systems evolved in many businesses during this time.

The late 1990s to today:

Information systems are still closely related to governance and

management in the modern period, but they are extensively dispersed and
accessible to almost every employee across several platforms. So that a
client firm can easily access supplier information and their consumers, in
turn, may access that information, many information systems are integrated
amongst various companies.

Today forward:

The rapid growth in internet bandwidth has resulted in a significant reliance

on cloud computing. Some claim that this heralds a new era in the rise of
the worker and that this is the era of management information systems.
Nowadays, almost any employee can make educated judgments because of
the tools that are easily accessible across several platforms. The distinction
between those who create and those who use MIS information is becoming
increasingly hazy.

Components of MIS
Five components comprise a management information system: people,
business processes, data, hardware, and software. To accomplish corporate
goals, each of these components must cooperate.

1. People: These are the system users who utilize it to keep track of
daily business transactions. The users have typically educated
professionals, such as human resource managers and accountants.
2. Business procedures: These are generally accepted best practices
that instruct users and every other component on how to operate
 effectively. Users, consultants, and other people create business
procedures.
3. Data: The daily business transactions that were documented. Data is
gathered for banks via transactions like deposits and withdrawals.
4. Hardware: Computers, printers, networking equipment, and other
items make up hardware. The hardware provides the ability to
process data. Additionally, networking and printing capabilities are
provided.
5. Software: These are applications that use hardware to function.
System software and applications software are the two main divisions
of the software. The operating system is referred to as system
software. Applications software describes specialized software used
to carry out business operations.

Characteristics of MIS
o System approach: MIS adheres to the system approach, which
denotes a step-by-step procedure for examining a system's operation
in the context of the goal for which it was created. It entails having a
comprehensive perspective on how organizational subsystems
function.
o Management-oriented: The management-oriented nature of MIS
suggests that a top-down MIS design methodology must be used.
According to a top-down approach, management needs and business
objectives are decided upon at the start of system development. MIS
suggests management that works dynamically with system
development to reach management decision completeness.
o According to requirements: The MIS should be designed and
developed based on the data that managers need. Strategic planning,
management control, and operational control are three separate
levels at which the necessary design and development information is
found. Accordingly, MIS should address the unique requirements of
managers at various levels of an organization's hierarchy.
 o Future-focused: MIS should be designed and developed with the
future in mind so that it is not limited to providing only historical
data.
o Integrated: A full MIS combines all its sub-components to deliver the
pertinent data to make a wise decision. An essential element of MIS is
an integrated system that combines data from several operating
domains.
o Common data flows: This idea underpins several fundamental
perspectives on system analysis, including reducing duplication,
merging related tasks, and streamlining processes. The increase of
common data flow is a sensible and cost-effective idea.
o Long-term planning: Since MIS entails logical planning for an
organization's success, it should always be developed as a long-term
plan. The analyst should consider the demands of the business and
future-focused analyses when creating MIS.
o Relevant relationship between subsystem planning: The
development of the MIS should be broken down into its associated
subsystems. These supporting systems must be useful with careful
planning.
o Central database: Data are presented in tabular form in the central
database. This database contains data related to inventories,
employees, clients, and other sources of information. The database is
responsible for record insertion, deletion, and updating processes.

Components of MIS
Five components comprise a management information system: people,
business processes, data, hardware, and software. To accomplish corporate
goals, each of these components must cooperate.

1. People: These are the system users who utilize it to keep track of
daily business transactions. The users have typically educated
professionals, such as human resource managers and accountants.
 2. Business procedures: These are generally accepted best practices
that instruct users and every other component on how to operate
effectively. Users, consultants, and other people create business
procedures.
3. Data: The daily business transactions that were documented. Data is
gathered for banks via transactions like deposits and withdrawals.
4. Hardware: Computers, printers, networking equipment, and other
items make up hardware. The hardware provides the ability to
process data. Additionally, networking and printing capabilities are
provided.
5. Software: These are applications that use hardware to function.
System software and applications software are the two main divisions
of the software. The operating system is referred to as system
software. Applications software describes specialized software used
to carry out business operations.

Advantages of MIS
o Facilitates planning: With the size and complexity of organizations
growing, managers now work remotely rather than from the place of
operations, thanks to the useful information that MIS gives for
effective decision-making.
o Minimizes Information Overload: MIS aid in segmenting data into
more manageable, pertinent components for decision-making. As a
result, enormous amounts of organized data are less confusing.
o MIS Encourages Decentralization: Decentralization of power is
made possible via MIS. This aids in updating organizational policies
and practices. As there are minority systems at lower levels of
performance measurement, this is plausible.
o Brings Coordination: All organizational decision-making nodes are
connected through MIS. This guarantees an organization's efficient
operation. It helps with the absorption of specialized activity so that
each area can understand the needs and difficulties of others.
 o Makes Control Easier: MIS is a crucial instrument connecting
managerial planning and control. MIS uses computers to expand data
processing and storage capacity while decreasing costs. It improves
management's capacity to assess and raise performance.

Disadvantages of MIS
o Quite expensive to set up and configure: The main drawback of
MIS is that it is extremely expensive to deploy for a business.
Numerous hardware and software components are needed for this
information system to function.
o Lack of Flexibility to Update Itself: MIS can't automatically update
itself like many other applications. The system must be manually
updated by collecting raw data and putting it into it for processing
and updating previously stored data.
o Risk of fraud: At every transaction stage, appropriate controls and
checks must be made. Any breach could lead to potentially
dangerous situations, such as an intruder posting unlawful
transactions.
o Takes into Account only Qualitative Factors: MIS ignores non-
qualitative aspects, including employee morale, attitude, and
motivation, in favor of just considering qualitative factors.
o Heavy reliance on technology: In computerized information
systems, technology is heavily reliant. Information cannot be
accessible during any device or software failure until the necessary
software or hardware has been replaced.

Database as Future of MIS

The "Database as the Future of Management Information Systems (MIS)"
suggests that databases play a crucial role in the evolution and advancement
of Management Information Systems. Management Information Systems are
systems designed to provide organizations with the information and tools
necessary to manage their operations effectively. Databases serve as the
backbone of MIS by efficiently storing, managing, and retrieving vast amounts
of structured data.

Here are several key aspects to consider when discussing the role of databases
in the future of MIS:

Data Storage and Organization:

Databases are designed to store data in a structured manner, allowing for

efficient organization and retrieval. This is essential for MIS, as organizations
deal with large volumes of data related to their operations, customers,
finances, and more.

Data Integration:

As organizations generate data from various sources, databases facilitate data

integration by providing a centralized repository. This integration is crucial for
MIS as it enables a comprehensive and unified view of the organization's
information.

Data Security:

Security is a paramount concern for MIS. Databases implement robust security

measures to ensure the confidentiality, integrity, and availability of the stored
data. Advanced encryption, access controls, and authentication mechanisms
are crucial to protect sensitive information.

Data Analytics and Reporting:

Databases support the analytical needs of MIS by providing tools and

interfaces for data analysis. Advanced query languages, reporting tools, and
business intelligence functionalities enable organizations to derive valuable
insights from their data, aiding in decision-making processes.

Scalability and Performance:

With the growing volume of data, databases must be scalable to handle

increased data loads. Additionally, databases must offer high-performance
capabilities to ensure that MIS applications can process and retrieve data
quickly and efficiently.
Cloud Integration:

The future of MIS is likely to involve increased reliance on cloud computing.

Databases play a vital role in this shift by providing cloud-native solutions,
allowing organizations to leverage the benefits of scalability, flexibility, and
accessibility associated with cloud platforms.

Real-time Data Processing:

The demand for real-time information is increasing. Databases that support

real-time data processing enable MIS to provide up-to-the-minute insights,
which is critical for decision-makers to respond promptly to changing business
conditions.

Data Governance and Compliance:

As organizations deal with sensitive data, databases play a key role in enforcing
data governance policies and ensuring compliance with regulatory
requirements. This is especially important in industries with strict data privacy
regulations.

User-Friendly Interfaces:

MIS applications often rely on user-friendly interfaces to interact with the

underlying database. Improvements in database technology include the
development of intuitive interfaces that allow non-technical users to access
and analyze data effectively.

Concept of Decision-Making

Decision-making is a cognitive process that results in the

selection of a course of action among several alternative
scenarios.

Decision-making is a daily activity for any human being. There is

no exception about that. When it comes to business
organizations, decision-making is a habit and a process as well.

Effective and successful decisions result in profits, while

unsuccessful ones cause losses. Therefore, corporate decision-
making is the most critical process in any organization.
In a decision-making process, we choose one course of action
from a few possible alternatives. In the process of decision-
making, we may use many tools, techniques, and perceptions.

In addition, we may make our own private decisions or may

prefer a collective decision.

Usually, decision-making is hard. Majority of corporate decisions

involve some level of dissatisfaction or conflict with another
party.

Let's have a look at the decision-making process in detail.

Decision-Making Process

Following are the important steps of the decision-making process.

Each step may be supported by different tools and techniques.
Step 1 − Identification of the Purpose of the
Decision

In this step, the problem is thoroughly analyzed. There are a

couple of questions one should ask when it comes to identifying
the purpose of the decision.

 What exactly is the problem?

 Why the problem should be solved?
  Who are the affected parties of the problem?
 Does the problem have a deadline or a specific time-line?

Step 2 − Information Gathering

A problem of an organization will have many stakeholders. In

addition, there can be dozens of factors involved and affected by
the problem.

In the process of solving the problem, you will have to gather as

much as information related to the factors and stakeholders
involved in the problem. For the process of information gathering,
tools such as 'Check Sheets' can be effectively used.

Step 3 − Principles for Judging the Alternatives

In this step, the baseline criteria for judging the alternatives

should be set up. When it comes to defining the criteria,
organizational goals as well as the corporate culture should be
taken into consideration.

As an example, profit is one of the main concerns in every

decision making process. Companies usually do not make
decisions that reduce profits, unless it is an exceptional case.
Likewise, baseline principles should be identified related to the
problem in hand.

Step 4 − Brainstorm and Analyze the Choices

For this step, brainstorming to list down all the ideas is the best
option. Before the idea generation step, it is vital to understand
the causes of the problem and prioritization of causes.

For this, you can make use of Cause-and-Effect diagrams and

Pareto Chart tool. Cause-and-Effect diagram helps you to identify
all possible causes of the problem and Pareto chart helps you to
prioritize and identify the causes with the highest effect.

Then, you can move on generating all possible solutions

(alternatives) for the problem in hand.
Step 5 − Evaluation of Alternatives

Use your judgment principles and decision-making criteria to

evaluate each alternative. In this step, experience and
effectiveness of the judgment principles come into play. You need
to compare each alternative for their positives and negatives.

Step 6 − Select the Best Alternative

Once you go through from Step 1 to Step 5, this step is easy. In

addition, the selection of the best alternative is an informed
decision since you have already followed a methodology to derive
and select the best alternative.

Step 7 − Execute the decision

Convert your decision into a plan or a sequence of activities.

Execute your plan by yourself or with the help of subordinates.

Step 8 − Evaluate the Results

Evaluate the outcome of your decision. See whether there is

anything you should learn and then correct in future decision
making. This is one of the best practices that will improve your
decision-making skills.

Process and Modeling in Decision-Making

There are two basic models in decision-making −

 Rational models
 Normative model

The rational models are based on cognitive judgments and help in

selecting the most logical and sensible alternative. Examples of
such models include - decision matrix analysis, Pugh matrix,
SWOT analysis, Pareto analysis and decision trees, selection
matrix, etc.

A rational decision making model takes the following steps −

 Identifying the problem,

  Identifying the important criteria for the process and the
result,
 Considering all possible solutions,
 Calculating the consequences of all solutions and comparing
the probability of satisfying the criteria,
 Selecting the best option.

The normative model of decision-making considers constraints

that may arise in making decisions, such as time, complexity,
uncertainty, and inadequacy of resources.

According to this model, decision-making is characterized by −

 Limited information processing - A person can manage only

a limited amount of information.
 Judgmental heuristics - A person may use shortcuts to
simplify the decision making process.
 Satisfying - A person may choose a solution that is just
"good enough".
Dynamic Decision-Making

Dynamic decision-making (DDM) is synergetic decision-making

involving interdependent systems, in an environment that
changes over time either due to the previous actions of the
decision-maker or due to events that are outside of the control of
the decision-maker.

These decision-makings are more complex and real-time.

Dynamic decision-making involves observing how people used

their experience to control the system's dynamics and noting
down the best decisions taken thereon.

Sensitivity Analysis

Sensitivity analysis is a technique used for distributing the

uncertainty in the output of a mathematical model or a system to
different sources of uncertainty in its inputs.

From business decision perspective, the sensitivity analysis helps

an analyst to identify cost drivers as well as other quantities to
make an informed decision. If a particular quantity has no
bearing on a decision or prediction, then the conditions relating to
quantity could be eliminated, thus simplifying the decision making
process.

Sensitivity analysis also helps in some other situations, like −

 Resource optimization
 Future data collections
 Identifying critical assumptions
 To optimize the tolerance of manufactured parts
Static and Dynamic Models

Static models:
 Show the value of various attributes in a balanced system.
 Work best in static systems.
 Do not take into consideration the time-based variances.
 Do not work well in real-time systems however, it may work
in a dynamic system being in equilibrium
 Involve less data.
 Are easy to analyze.
 Produce faster results.

Dynamic models −

 Consider the change in data values over time.

 Consider effect of system behavior over time.
 Re-calculate equations as time changes.
 Can be applied only in dynamic systems.
Simulation Techniques

Simulation is a technique that imitates the operation of a real-

world process or system over time. Simulation techniques can be
used to assist management decision making, where analytical
methods are either not available or cannot be applied.

Some of the typical business problem areas where simulation

techniques are used are −

 Inventory control
 Queuing problem
 Production planning
Operations Research Techniques

Operational Research (OR) includes a wide range of problem-

solving techniques involving various advanced analytical models
and methods applied. It helps in efficient and improved decision-
making.

It encompasses techniques such as simulation, mathematical

optimization, queuing theory, stochastic-process models,
econometric methods, data envelopment analysis, neural
networks, expert systems, decision analysis, and the analytic
hierarchy process.

OR techniques describe a system by constructing its

mathematical models.

Heuristic Programming

Heuristic programming refers to a branch of artificial intelligence.

It consists of programs that are self-learning in nature.

However, these programs are not optimal in nature, as they are

experience-based techniques for problem solving.

Most basic heuristic programs would be based on pure 'trial-error'

methods.

Heuristics take a 'guess' approach to problem solving, yielding a

'good enough' answer, rather than finding a 'best possible'
solution.

Group Decision-Making

In group decision-making, various individuals in a group take part

in collaborative decision-making.

Group Decision Support System (GDSS) is a decision support

system that provides support in decision making by a group of
people. It facilitates the free flow and exchange of ideas and
information among the group members. Decisions are made with
a higher degree of consensus and agreement resulting in a
dramatically higher likelihood of implementation.

Following are the available types of computer based GDSSs −

  Decision Network − This type helps the participants to
communicate with each other through a network or through
a central database. Application software may use commonly
shared models to provide support.
 Decision Room − Participants are located at one place, i.e. the
decision room. The purpose of this is to enhance
participant's interactions and decision-making within a fixed
period of time using a facilitator.
 Teleconferencing − Groups are composed of members or sub
groups that are geographically dispersed; teleconferencing
provides interactive connection between two or more
decision rooms. This interaction will involve transmission of
computerized and audio visual information.

A management information system (MIS) is a set of systems and

procedures that gather data from a range of sources, compile it and
present it in a readable format. Managers use an MIS to create reports
that provide them with a comprehensive overview of all the information
they need to make decisions ranging from daily minutiae to top-level
strategy. Today's management information systems rely largely on
technology to compile and present data, but the concept is older than
modern computing technologies.

Making Business Decisions

The main purpose of a management information system is to make

managers' decision-making more efficient and productive. By pooling
information from a range of sources into a single database and presenting
the information in a logical format, an MIS can provide managers with
everything they need to make highly informed decisions and perform in-
depth analysis of operational issues.

Collecting Business Information

An MIS can be developed to collect nearly any type of information

managers require. They can view financial data such as daily revenues
and expenses at a glance and attribute them to specific departments or
groups. Performance indicators such as the timeliness of projects or the
quality of products coming off an assembly line can help managers
pinpoint areas of needed improvement. Staff can manage schedules for
work shifts, incoming deliveries and outgoing shipments from any place
linked to the MIS.

Facilitating Collaboration and Communication

A management information system can facilitate collaboration and

communication as well. Employees can edit and share documents and
communicate relevant information on anticipated developments and
warnings across the organization.

Compiling Business Reports

One of the most valuable features of a management information system is

its ability to pull in internal and external data from a variety of sources and
present it in an easy to analyze format. Internal reports present
information in a way that managers can understand, by including all
relevant data and grouping data in a logical manner. For example, a
report viewed by a corporate manager for a restaurant chain may show
revenue, expenses, labor-hours and volume of each outlet, allowing him
to see which store makes the most money per employee on the floor and
which stores have higher expenses compared to revenue and volume--an
indicator of waste or theft.

Generating Government Reports

Non-profit organizations can use an MIS to automatically generate reports

required by the federal government. This allows employees and
volunteers to focus their time on more productive activities and can
reduce errors and the costs associated with resubmitting federal reports.

Front-Line Benefts

Front-line employees can use an MIS to perform their jobs more

effectively as well. For example, employees at all levels can consult an
MIS to check on the status of inventory items, view stats related to their
specific department or group and request internal transfers of materials.

Training Employees to Use the System

A management information system can be a costly investment. In addition

to purchasing an MIS software package, customizing the system and
hiring extra IT personnel to oversee and maintain the system, a company
must train all employees to use the system. Front-line employees often
perform the first two steps in an MIS, data collection and input, leaving
them with less time to focus on productive activities; this can increase
overall salary expenses. Weigh the costs of an MIS against the potential
benefits before implementing this tool in your small business.