Definition of Information System- Part2

PDI (Processing Data into Information) is only one component of Information systems. Without Input PDI would have nothing to process. Without output data to consumers, system would be without functionality. Due to named reasons it is important to mention that each component vital part (without it system would be without functionalities and purpose).

Information Systems are conisted of two basic components (Figure….  )

• Operational Information Systems, supporting daily activities
• Management Information System, supporting Managerial Decision Making

 Source: O’Brien,J.: Management Information System, A Managerial End User Perspective, 2nd edition, IRWIN, 1993, page 38.

Role and necessity of information for management decision making and role of controlling

First of all following question should be raised, what is the reason why managers need information?

Today in world of everlasting changes, on time and precise information is key of success for all and especially for managers. Without information manager would be faced with risk of not fulfilling tasks and roles. Information are basis for each decision.

For example, in staffing process historical data are being used to determine levels of skills of employee had on certain job position for asking same skills of new candidate that applies for the same job. Based on this information managers can conclude also which skills former employee did not had and to ask them from new candidate. In addition they use data from external  sources to determine do candidates exist and which candidates best fit into required criteria.

Examples are many for such information and of raised demand for certain skills can be seen daily. 

Volume and type of information depands on management level and to type of decisions. For example top management that basically generates strategic decisions demands aggregated, non-planed and fast projections. Based on such information they can scan company status and to direct company. Top management needs short reports that will not consume too much time for analysis and understanding.

On a contrary to top management, low management has a strong need for pre defined and detailed (even daily) reports in order to compare with past data to make short-term plan for daily and monthly business. Tactical and operative (low) management is focused on middle and short-term plans and for this reason need detailed reports for right on time corrective actions on spoted deviations. In all phases information have crucial role and that is the reason of deployment and implementation of Management Information systems.

Management Information systems

As already stated, information are basis for any management decision and strong need for information is main cause of development of Management Information Systems, system with task to provide right on time of adequate information for management decision making.

Starts of Management Information Systems are in 60s years of 20-th century. Information provided by those information systems were not adequate for management decision making purposes. Systems developed till 1960 were based on electronic processing of data from accounting, sales and other services. This data were gathered and stored on media. Unfortunately, this data were not adequate for management as final data customer in time when changes on market were more and more frequent. Information was not adequate and of high quality.

Changes in environment and raising demand for information pushed management to demand information system for its own needs. This was the trigger for development of Management Information System (MIS). In scope of this system special reports were generated whose prime reason was to provide needed information to management. In this phase MIS functions as Information Reporting System (IRS) from where reports for management decision making are being made of data from different departments.   

This system was sufficient only in cases were projections, information about future, were not required. Reason is this system only process data about historic events and delivers it to management. Oil crisis in 70s caused further development of MIS. IRS is used at lower levels of management (operative management), for daily decisions and for tracking of short term plans.

Decision Support System (DSS)

Environment development in 1970s and faster market changes stimulated management to demand further development of management information system form information reporting system toward Decision Support System. Unlike IRP, Decision Support System is a system that allows management interactive modeling to support decision making. This system uses data from internal and external company environment to show management possible impact on company performance. Analytic models, specialized data bases, thoughts and opinions of decision makers and interactive models based on information are support for making structured and half structured management decisions.

In DSS there is a possibility to use different analytic models serving to support tactical and strategy decision making process. For example what-if analysis in which managers can change variables (production rate, material consumption, tax rate and similar) and relations between them and track impact of change on company. Another example is sensitivity analysis that uses repetitive influences on one variable or reaching analysis that uses changes of variables set until goal is reached.  Last is optimisation analysis that calculates best combiantion of variables for company business performance.

As stated, changes on market lead from statical information analysis to dynamic where models try to find best company performance direction.

Further technology development and growing inforatization lead  to new systems, systems that support business decision making.

Other Information systems

Late 80′s of the 20th century with raised information and environment complexity management urged for new systems to support management. One of them is Executive Information system that was product of need to develop further DSS. EIS goal is to provide strategic information to top management about critical performance indicators as information that show fulfillment of strategic company goals. While in old information systems, information processing and analysis were made within group for data processing…

Read more in Definition of Information System article.