Why Management Information Systems is Significant for an Organisation? Aware with Importance, Types, Characteristics and Advantages+ Much More...

Abstract:

Management Information Systems (MIS) refer to the use of technology, people, and processes to support organizational activities, decision-making, and problem-solving. 

To the managers, Management Information System is an implementation of the organizational systems and procedures. To a programmer it is nothing but file structures and file processing. However, it involves much more complexity.

The three components of MIS provide a more complete and focused definition, where System suggests integration and holistic view, Information stands for processed data, and Management is the ultimate user, the decision makers.

Management information system can thus be analyzed as follows −

Management

Management covers the planning, control, and administration of the operations of a concern. The top management handles planning; the middle management concentrates on controlling; and the lower management is concerned with actual administration.

Information

Information, in MIS, means the processed data that helps the management in planning, controlling and operations. Data means all the facts arising out of the operations of the concern. Data is processed i.e. recorded, summarized, compared and finally presented to the management in the form of MIS report.

System

Data is processed into information with the help of a system. A system is made up of inputs, processing, output and feedback or control.

Thus MIS means a system for processing data in order to give proper information to the management for performing its functions.

There are many management information systems, including:

• Process control. ...
• Management reporting system.
• Inventory control. ...
• Sales and marketing systems.
• Human resource systems. 
• Accounting and finance systems. 
• Decision support systems. 
• Expert systems.

Functions of MIS

• Collecting data.
• Processing data.
• Storing information.
• Retrieving information.
• Disseminating information.

Keywords:

MIS, Management, Information, Systems, Information System, Collecting data, Processing data, Storing information, Retrieving information, Disseminating information, Inventory, Accounting, Analysis

Learning Outcomes 

After undergoing this article you will be able to understand the following

1. What do you mean by management information system?

2. What are the components of MIS?

3. What are the Objective of MIS?

4. What are the Characteristics of MIS?

5. What are the Types of management information system (MIS)?

6. What are the Advantages of MIS?

7. What are the disadvantages of MIS?

8. Conclusions

9. FAQs

10. References 

1. What is MIS (Management Information System)?

Management: Art of accomplishing goals via and in collaboration with members of formally established groups. The following are managerial responsibilities:

Planning

Organizing

Staffing

Directing

Controlling

Information: Data with a context and a meaning, where data is unprocessed information about an entity (entity is the object of interest)

System: A group of interconnected elements with a distinct boundary cooperating to accomplish a single objective.

2. What's the 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.

3. What's the Objectives of MIS?

The major objectives of an MIS are to assist executives in decisions that further the business's strategy and to implement the organizational structure and dynamics of the firm to manage the organization more effectively and gain a competitive advantage.

Some MIS objectives are as follows:

• Data Capturing: Data is collected by MIS from various organizational internal and external sources. Data might be captured manually or via computer terminals.
• Processing of Data: The recorded data is processed to create the necessary information. Data processing includes tasks including calculating, sorting, categorizing, and summarizing.
• Storage of Information: The processed or unprocessed data is kept in the MIS for further use. Any information that is not immediately needed is preserved as a record for the organization to use later.
• Retrieval of Information: As and when needed, the management information system gets data from its databases for various users.
• Dissemination of Information: The organization's users receive information, a finished product of the management information system. It occurs regularly or online via a computer terminal.

4. What's the Characteristics of MIS?

• 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.
• 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.
• 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.
• Future-focused: MIS should be designed and developed with the future in mind so that it is not limited to providing only historical data.
• 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.
• 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.
• 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.
• 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.
• 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.

5. What's the Types of management information system (MIS)?

Information systems come in various forms to gather data, provide reports, and aid operational and middle-level managers in making decisions. Depending on the situation, several management information systems are used. Thus, choosing the appropriate MIS type is crucial. Here are some of the often-used MIS kinds explained:

1. Management Reporting System

It is a database that tracks all the finances and business activities at various management levels. Middle-level managers typically utilize a management reporting system to produce frequent reports by comparing past and present financial performance to assess financial growth. The intermediate-level managers can also use it to analyze their performance. The senior-level managers compare the company's present financial situation and operational effectiveness against the company's established goals using data supplied by the reporting system.

2. Process Control Systems

This system focuses on physical or industrial business activities, such as car assembly, oil refining, or metal manufacturing. The process control system continuously collects data and produces a report on the system's performance. The report helps the management assess how well the process is working and provides information on when a specific event occurred. Additionally, it reveals how frequently the production system deviates from a cyclical production process. This kind of data is useful for assessing the production system's effectiveness and maintaining control over worker and equipment safety.

3. Sales and marketing system

Managers can monitor a company's sales and advertising effectiveness through sales and marketing systems. Through client reviews and comments, marketing systems can generate reports that assist managers in raising the caliber of their products. Marketing managers that utilize sales systems can use reports to learn more about expected sales and assess how they compare to present earnings. They can use this to recognize patterns and develop solutions for future development. These systems can keep track of price discrepancies between products and the current promotions and advertising campaigns that specific retailers use. Managers may use this information to track a product's sales and target additional promotions or discounts.

4. Inventory control system

It keeps track of every inventory-related event, such as theft, spoilage, and inventory on hand, enabling management to see which products are selling out more quickly and require restocking, either in specific retail locations or the business warehouse. The movement of inventory into the warehouse, from the warehouse to the stores, sales, and returns are all tracked by the inventory control system.

5. Accounting and Finance systems

It keeps track of an organization's assets and investments. It compiles all the information relevant to the financial reports required by law for federal, state, and local taxes, payroll, and pension funds. If the institution publishes yearly reports, the accounting and finance system delivers the reports required for such audits. It also makes it easier to post daily transactions, such as sales revenue, returns, and bank deposits. This method is the foundation for monthly statements like the profit and loss and balance sheets. In addition, these statements assist managers in comparing the company's current financial success to its historical results and setting targets for future expansion.

6. Human resources

With the use of this information management system, management may regulate how information is distributed throughout the company. The office automation information system includes electronic tools that managers use to communicate with other departmental managers, their staff, or even with other employees. Payroll, benefits, and retirement are all financial components of the accounting and financial systems that are tracked by this system. The human resource system also tracks numerous more things. Providing notices of statutory compliance required training sessions, and HR regulations facilitates communication between staff members, HR, and management.

7. Decision support system

A decision support system (DSS) is a computerized system that gathers and analyzes data, synthesizing it to produce comprehensive information reports. A decision support system differs from an ordinary operations application, whose function is just to collect data.

8. Executive information system

An executive information system (EIS), also known as an executive support system (ESS), is a type of management support system that facilitates and supports senior executive information and decision-making needs. It provides easy access to internal and external information relevant to organizational goals.

9. Marketing information systems

A marketing information system is a management information system designed to support marketing decision making. Jobber defines it as a "system in which marketing data is formally gathered, stored, analysed and distributed to managers in accordance with their informational needs on a regular basis." 

10. Transaction system

A Transaction Processing System (TPS) is an information system that collects, stores, modifies, and retrieves the data transactions of an enterprise. Transaction processing systems also attempt to provide predictable response times to requests, although this is not as critical as real-time systems.

11. School Information management system

SIMS is a student information system, i.e. a school management information system, currently developed by Education Software Solutions. It is the most widely used MIS in UK schools, claiming just over 50% market share across the primary and secondary sectors. 

12. Enterprise resource planning

Enterprise resource planning (ERP) is a software system that helps you run your entire business, supporting automation and processes in finance, human resources, manufacturing, supply chain, services, procurement, and more.

6. Advantages of MIS

• 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.
• 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.
• 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.
• 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.
• 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.

7. Disadvantages of MIS

• 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.
• 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.
• 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.
• Takes into Account only Qualitative Factors: MIS ignores non-qualitative aspects, including employee morale, attitude, and motivation, in favor of just considering qualitative factors.
• 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.

8. Conclusions:

MIS helps managers make effective decisions to support ongoing operations. An MIS produces several reports, including schedule, on-demand, exception, and detailed reports. The reports contain vital indicators so a manager can take corrective action when necessary.

9. FAQs 

What's the Changes Over the Past Century and Future Trends In Business Information Systems?

Ans. Business information system has been evolving from simple accounting operation to general business management systems. In early periods, the major application of information systems was electronic data processing (EDP) or transaction processing systems (TPS). Electronic data processing refers to the application of computers in data entry and storage. The main use of information systems coined around transaction processing, record keeping, and accounting (Hall 2010).

By 1960s, computers were further subjected to processing of organizational data, thus the emergence of management information system (MIS). MIS provided managers with vital and relevant information for their decision-making processes. However, the dynamics of business management demands more than just reports for efficient decision making.

As a result of unsatisfied managerial quest for decision-making process, the idea of decision support system (DSS) was created to make the decision-making process of business managers easier and effective. The system provided managers with interactive environment during decision-making process (Joia 2003).

In the next decade, there was the birth of microcomputers that greatly transformed information systems of organizations. This rapid development in technology led to the creation of executive information system (EIS), which relayed the information contained in the MIS, DSS, and other relevant sources that were important to the top management.

There was also the development of the expert systems (ES) and knowledge management systems (KMS). The ES provide guidelines and consultation services to the users, whereas KMS sustain the transmission of important business information within a business entity. In late 90s, there was the emergence of enterprise resource planning (ERP) information systems. This system encompasses all the functions of a business enterprise (Gómez, Serna & Badenes 2009).

Because of the rapid development in information technology, the scope of information system widened too. The Internet has become a common ground for executing business operations and business management functions. The basic principles of management, however, are still the same with advance technology but are now done with greater efficiency. Many businesses now utilize e-commerce applications to carry out their daily business routines. The Internet has increased connectivity in the business field (Monk & Wagner 2008).

References

Gómez, H. G., Serna, M. D. A., & Badenes, R. F. O. (2009). Evolution and Trends of Information Systems for Business Management: The M-Business. A Review, 163(77), 181-193. Web.

Hall, J. A. (2010). Accounting Information Systems. Cincinnati: South-Western college publishers.

Joia, L. A. (2003). It-Based Management: Challenges and Solutions. Hershey: Idea Group Publishing.

Monk, E. F., & Wagner, B. J. (2008). Concepts in Enterprise Resource Planning. Stanford: Cengage Learning.