Defination of MIS

MIS - Management Information System can be defined as "a system providing

management with accurate and timely information necessary to facilitate the
decision-making process and enable the organization's planning, control, and
operational functions to be carried out effectively".
Subsystem of MIS
Systems may consist of numerous sub-systems, each of which has elements,
interactions, and objectives. Subsystems perform specialized tasks related to the
overall objectives of the total system.
A system exists on more than one level and can be composed of subsystems or
element parts.
Following are the subsystems of the Management Information System:

1. Transaction Processing System

2. Management Reporting System
3. Decision Support System
4. Office Information System
5. Business Expert System

Transaction Processing System - A transaction is defined as an exchange

between two or more business entities. Overall transaction processing, also known
as data processing, reflects the principal business activities of a firm like - sales,
production, inventory, shipping, receiving, billing, accounts payable, accounts
receivables, payroll, general ledger, etc. Transactions are important events for an
organization, and collecting data about them is called transaction processing.
Transaction Processing System's primary purpose is to record, process, validate,
and store transactions that take place in the various functional areas of a business
for future retrieval and use. Transaction processing systems are cross-functional
information systems that process data resulting from the occurrence of business
transactions.

 A TPS records internal and external transactions for a company.

 A TPS performs routine and repetitive tasks. It is mostly used by lower-level
managers to make operational decisions.
  Transactions can be recorded in batch mode or online. In batch mode files
are updated periodically; and in online mode, each transaction is recorded as
it occurs.
 TPS is a six-step process - Data entry, Data capture, Data validation,
Processing and re-validation, Storage, Output generation, and Query
support.

Management Reporting System - Management Reporting Systems are the most

elaborate of management-oriented MIS components. Its main objective is to
provide lower and middle management with printed reports and inquiry
capabilities to help maintain operational and management control of the enterprise.

 MRSs are usually developed by information system professionals, rather

than by end-users.
 MRSs are oriented towards reporting on the past and the present, rather than
projecting the future.
 MRSs largely report on internal company operations.
 MRSs generally have limited analytical capabilities.
 MRSs do not directly support the decision-making process
 MRSs provide Scheduled or Periodic Reports, Exception Reports, and
Demand or Ad-hoc Report.

Decision Support System - Decision Support Systems are a class of computerized

information systems that support decision-making activities. DSS are interactive
computer-based systems and subsystems intended to help decision-makers. A DSS
may present information graphically and may include an expert system or artificial
intelligence. DSS tends to be designed primarily to serve management control level
and strategic planning level managers.

 DSSs support for decision-makers in semi-structured and unstructured

problems.
 DSSs are more focused on specific decisions rather than routine flows of
information.
 DSS present information graphically and may include an expert system or
artificial intelligence.
 DSSs are adaptive over time.
Office Information System - Office Information System is an information system
that uses hardware, software, and networks to enhance workflow and better
communication between employees. 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 secretarial assistance and better communication
facilities. Office automation systems are the combination of hardware, software,
and people in information systems, that process office 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.
Business Expert System - The business expert system is a knowledge-based
information system that uses its knowledge about a specific, complex application
area to act as an expert. This system is one of the knowledge-based information
systems. The expert system provides decision support to managers in the form of
advice from an expert in a specific problem area. Expert systems find application
in diverse areas, ranging from medical, engineering, and business.
Role of MIS
A management information system (MIS) plays an important role in business
organizations.
What is MIS role: There are many roles of MIS and some of the important MIS
role are discussed below:
1. Decision making
2. Coordination among the department
3. Finding out Problems
4. Comparison of Business Performance
5. Strategies for an Organization

Decision making
Management Information System (MIS) plays a significant role in the decision-
making process of any organization. In any organization, a decision is made on the
basis of relevant information which can be retrieved from the MIS.
Coordination among the department
Management Information System satisfy multiple need of an organization across
the different functional department.

Finding out Problems

As we know that 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.

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.

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.

Executive Information System (EIS)

An Executive Information System (EIS) is a kind of decision support system
(DSS) used in organizations to help executives in decision making. It does so by
providing easy access to important data needed in an organization to achieve
strategic goals. An EIS usually has graphical displays on a user-friendly interface.

Executive information systems can be used for monitoring company performance

in many different types of organizations as well as for identifying opportunities
and problems.

Early executive information systems were developed on mainframe computers as

computer-based programs to provide the description, sales performance and/or
market research data for senior executives of a company. Executives, however,
were not all literate or confident about the computers. Also, EIS data endorsed
only executive-level decisions that did not necessarily support the entire company
or enterprise.
 Current EIS data is available on local area networks (LANs) throughout the
company or enterprise, facilitated by personal computers and workstations.
Employees can access company data to help make decisions in their workplaces,
departments, divisions, etc. This enables employees to provide relevant
information and ideas above and below the level of their company.

Executive support systems are intended to be used directly by senior managers to

support unscheduled strategic management decisions. Often such information is
external, unstructured and even uncertain. Often, the exact scope and context of
such information are not known in advance.

This information is based on data,

 Business intelligence
 Financial intelligence
 Data with technology support to analyze
Executive Information System-Key Characteristics
The below mentioned figure describes about key characteristics of EIS,

 Detailed data – EIS provides absolute data from its existing database.
 Integrate external and internal data – EIS integrates integrate external and
internal data. The external data collected from various sources.
 Presenting information – EIS represents available data in graphical form which
helps to analyze it easily.
 Trend analysis – EIS helps executives of the organizations to data prediction
based on trend data.
 Easy to use – It is a very simplest system to use.
Advantages of EIS
 Trend Analysis
 Improvement of corporate performance in the marketplace
 Development of managerial leadership skills
 Improves decision-making
 Simple to use by senior executives
 Better reporting method
 Improved office efficiency
Disadvantage of EIS
 Due to technical functions, not too easy to use by everyone
 Executives may encounter overload of information
 Difficult to manage database due to the large size of data
 Excessive costs for small business organizations

Transaction Processing System

It is an information processing system that captures and processes every single
transaction that takes place within the organization. These transactions include
activities involving collection, retrieval, modification, and all other sets of
activities that trigger the retrieval of all transactions. A transaction processing
system is highly reliable, consistent, and efficient. Transaction processing systems
may also be referred to as real-time processing systems. Transaction processing is
often compared with batch processing. These two are fundamentally different
processing systems that vary in their speed, processing manner, and accuracy of
the events. Since a TPS is a real-time processing system, all the events and
transactions that occur in the organization or over the system are processed
immediately causing no delay. It is one of the most used technologies in all online
transactions and is called an Online Transaction Processing System (OLTP).
Importance of Transaction Processing System

An ideal TPS is crucial in taking care of the following two aspects:

1 Handling and Managing Operations

TPS is an excellent technology in handling and managing the everyday operations
of any given organization. It allows multitasking at a wider level with an
unmatched ability to process thousands of transactions at the same time without
any delay or break-down.
2 Tapping the Raw Markets
TPS is a carrier tool for any business since it gives businesses the freedom to
operate in different segments of society by working remotely. This operability
gives the businesses an opportunity to tap, exist and grow in newer markets that are
raw and full of opportunities.

There are basically two types of transaction processing:

1 Batch Processing
As the name suggests, the processing of transactions takes place over batches.
These batches can be customized as per organization requirements. For example, a
company may want to process the payroll of its employees in a weekly or bi-
weekly manner, thus the batches of employee salaries will be processed over a
span of one and two weeks respectively. There is generally a time delay in this
type of processing.

2 Real-time Processing
Under real-time processing, every single transaction is processed with immediate
effect. There is no time delay in the real-time processing system.

The Main Features of a Transaction Processing System are:-

A transaction processing system has the following features:

1 Reliability
One of the biggest advantages of using a transaction processing system is that it is
a highly reliable system that manages and handles the important transactions of an
organization. Since the revenue system is completely dependent on the TPS, it is
crucial to the seamless working of any organization.

2 Fast Response
The biggest differentiating factor between a real-time processing system and a
batch processing system is its speed and accuracy. Rapid response time ensures
that your customers do not have to wait for their transactions to be processed.

3 Similar Structure and Integrity

There are certain features of the TPS that need to stay intact to work the way it is
supposed to. In order to ensure that the processing system works exactly the same
way for every organization every single time, the structure must stay intact.
4 Authorized Control
A good and ideal TPS allows only the authorized personnel to conduct the
processing activities anytime. With the recent advancements, the newer versions
even allow authorized personnel to gain access from a remote location as well but
with high and stringent security checks.

5 User-friendliness
A good TPS must be easy to use and user-friendly in order to promote increased
usage of it. An easily operable TPS would also ensure there are minimal errors in
the inputting data and conducting the processing activities.

The main functions of a TPS are conducted by the above-mentioned primary

components. These include:

1. Input functions: Securing and inputting the data of the transactions that
have taken place
2. Output functions: Producing the report and record of the input data to be
used for future references and validating the transaction
3. Storage functions: Storing the data from both input and output operations
and ensuring the availability of data for operations like information access,
retrieval, sorting, and updating.
4. Processing functions: Computing, calculating, sorting, and defining the
input data to get the desired results.
Advantages of using TPS

1. It is a highly cost-effective and fast solution to all the revenue-related

operations of any given organization.
2. It works through a highly stable and reliable database that stores and reflects
the information as and when desired without any risk of information loss.
3. It allows for a quick recovery from any operational failure causing a very
little delay in the transaction processing.
4. It allows remote functioning giving the freedom of free operation to
businesses who want to grow across the globe.
5. It can be used both in a real-time manner and batch-processing manner.

Disadvantages of using TPS

1. Every business has different needs that must be dealt with exclusively. This
calls for designing a customized solution for every single business that has
some specific requirements.
2. Though it is a cost-effective solution, the initial cost of setting up and
installation can be on the higher side.
3. Even with a highly sophisticated setup, you may need to deploy a large
number of workforces for data input, managing and recording inventory, etc.
4. Though TPS is designed for handling a lot of data and work, overloading
may lead to a system crash.
5. You need to have a certain specification of the hardware for TPS software to
work smoothly.

Structure of MIS
Structure of MIS may be understood by looking at the physical components of
the information system in an organization. The physical components of an
organizational information system may be hardware, software, database, manual
procedures and operating persons. A brief description of these components has
been outlined in the following paragraphs:

Input: - Employees working with the fundamental information for your business
such as orders received, sales, invoices and payments input the data into desktop
computers. Marketing and production often add additional operating information
through computers in their departments. The computers each link to routers and
central servers via the special cables of an ethernet network. While wireless
networks are more convenient because you don't need cables, many companies
prefer wired networks because of their higher level of security. When evaluating a
management information system, make sure the input data include the information
you need and that they are transmitted securely to the servers.

Hardware:-
Hardware refers to the physical data processing equipment and peripheral devices,
For example, CPU, monitor, keyboard, printer, drives, tapes, communication
devices, etc.
Software:-

Software is a broad term given to the instructions or programs that direct the
operating of the hardware. Software could be of two types, i.e. system software
and application software.
Database:-
The database consists of all data utilized by application software. Data is stored in
files.
Procedures:-
A central server in your facilities handles processing. It runs the core program that
calls up data from the database and performs the necessary calculations. When
you want a report on sales and profit totals each year over the last five years, the
raw data are in the database but the totals may not be. The server takes your
request, finds the individual sales and profit figures, adds them and displays the
results. If you now decide a percentage change for each year would be more
useful, the server calculates that.
Formal operating procedures, which are required to operate a system, such as
manuals, are also regarded as physical elements.
Operating Personnel:-
Personnel like Computer Operators, Computer Programmers, System Analysts,
System Managers, etc., are the operating people of the information systems.
Output:-
The server processing your request completes the calculations and outputs the
results through the ethernet network to your computer. As a first step, it usually
displays the results on your screen. Often you can configure the output report to
display the data in tables or graphs and request a format that lets you distribute a
paper report or email a digital file. The server processes your request and provides
you with the corresponding output file for printing out or emailing.
Decision Making Tool
A decision is a course of action which is consciously chosen from among a set
of alternatives to achieve a desired result. It means decision comes in picture
when various alternatives are present. Hence, in organization an execute forms
a conclusion by developing various course of actions in a given situation. It is a
made to achieve goals in the organization. To decide means to cut off on to
come to a conclusion.

It is also a mental process. Whether the problem is large or small in the

organization, it is usually the manager who has to comfort it and decide what
action to take. So, the quality of managers’ decisions is the Yardstick of their
effectiveness and value to the organization. This indicates that managers must
necessarily develop decision making skills.

Voting or the majority method

The first and the simplest method of group decision making is based on the
principle of voting.

The majority method also known as voting, means that a decision is made on the
basis of voting for a solution to a problem in question.

Undoubtedly, this method is the easiest to apply. It is useful in group decision-

making processes, where decisions are made by individuals, colleagues or team
members, and enables everyone to express their opinion, while the final decision is
taken by the majority, i.e., when more than 50% of decision makers favour a
particular solution. Sometimes the 2/3 principle is applied: an option is chosen only
when 2/3 of voters approve of it.

Although this method allows making effective decisions, it does not take
individual opinions into account. Today, this system is used for political elections.

Consensus method

This decision-making method consists of a process that allows participants to find

a solution based on the opinion of the majority still considering contrasting views.

This method is extremely democratic, it fosters equality, collaboration and careful

analysis of data that can lead a group to a common decision. The consensus
method dates back thousands of years and was widely used by Native Americans
that used to hold meetings around a fire passing a stick to each other that enabled
every member to express their opinion. It was adopted by the Quakers who adapted
and developed it even further: modern literature provides us with lot of evidence of
how they used the consensus method. It was particularly popular during the student
protests of the 70-s and is still widely used in various public events, brainstorming
sessions, strategy meetings, etc.

This method consists of several phases, the first being the phase of discussion,
which helps to analyse the problem and suggest potential solutions.

It is followed by the phase of voting to establish the level of approval.

All the members who disagree are asked to motivate their opinion, and it is during
the phase of debate that participants can compare and contrast their views and find
new solutions to the problem.

The process can be repeated until a unanimous decision is reached.

The strength of the consensus method lies, precisely, in strongly considering

disagreeing views, which makes it one of the most egalitarian and inclusive
methods.

The consensus method is an inclusive, egalitarian, and cooperative decision-

making system.

Delphi method

It was in the 40-s that the Rand Corporation first used the Delphi method. This
method was developed during the Cold War to prevent, analyse and screen
possible enemy attacks.
The Delphi method is based on a multi-phase decision-making process and has an
interactive structure. The main goal is to come to a common decision by engaging
a heterogeneous panel of related experts.

MIS and Decision Making

A decision is a choice out of several alternatives (options) made by the decision
maker to achieve some objective s in a given situation. Business decisions are
those, which are made in the process of conducting business to achieve its
objective in a given environment. Managerial decision-making is a control point
for every managerial activity may be planning, organizing, staffing, directing,
 controlling and communicating. Decision-making is the art of reasoned and
judicious choice out of many alternatives. Once the decision is taken, it implies the
commitment of resources.
The business managers have to take a variety of decision. Some are routine and
others are long-term implementation decision. Thus managerial decisions are
grouped as:
(a) Strategic decision
(b) Tactical decision
(c) Operation decision
1. Strategic Decision: these are known as the major decision to influence the
whole or major part of the organization. Such decisions contribute directly to the
achievement of common goals of the organization; have a long-range effect upon
the organization.
Generally, strategic decision is unstructured and thus, a manager has to apply his
business judgment, evaluation and intuition into the definition of the problem.
These decisions are based on partial knowledge of the environmental factors which
are uncertain and dynamic, therefore such decision is taken at the higher level of
management.
2. Tactical Decision: tactical decision relates to the implementation of strategic
decisions, directed towards developing divisional plans, structuring workflows,
establishing distribution channels, acquisition of resources such as men, materials,
and money. These decisions are taken at the middle level of management.
3. Operational Decision: operational decisions relate to day-to-day operations of
the enterprise having a short-term horizon and are always repeated. These
decisions are based on facts regarding the events and do not require much of
business judgments. Operational decisions are taken at a lower level of
management.

The need for information system in an organization is to support the decision-

making process. The managers must be aware of problems before a decision can be
made. A problem exists when the real situation is different than the expected one.
After the problem has been identified, the cause of the existence of the problem
must be identified and then the solution to the problem has to be found. The
decision-making process can be divided into three main phases:
(a) Intelligence: searching the environment for condition calling for decisions. The
phase consists of determining that a problem exists.
(b) Design: during this phase, a set of alternative solution is generated and tested for
feasibility.
(c) Choice: in this phase, the decision-maker select one of the solution identified in
the design phase.
Thus, the decision process follows the sequence from intelligence to design and
from design to choose. It is possible to get back from one phase to another and the
whole process may be repeated. It is very important to distinguish between
programmed and non-programmed decision.
If a decision can be based on a rule, method or even guidelines, it is said to be a
programmed decision. The effectiveness of rule can be analyzed and then the rule
can be reviewed and modified from time to time for improvement. The
programmed decision-making can be delegated to the lower level in management.
A good MIS tries to convert a decision-making situation under uncertainty to the
situation under risk and further to certainty. Decision-making in operational
management is a situation of certainty. This is mainly because the manager in this
field has full knowledge of the environment, and has a predetermined decision
alternative for choice or for selection.

Information
An Information System is a system that gathers data and disseminates
information with the sole purpose of providing information to its users.
The main object of an information system is to provide information to its users.
Information systems vary according to the type of users who use the system.
A Management Information System is an information system that evaluates,
analyzes, and processes an organization's data to produce meaningful and useful
information based on which the management can take right decisions to ensure
future growth of the organization.
"Information can be recorded as signs, or transmitted as signals. Information is any
kind of event that affects the state of a dynamic system that can interpret the
information.
Information Vs Data
Data can be described as unprocessed facts and figures. Plain collected data as raw
facts cannot help in decision-making. However, data is the raw material that is
organized, structured, and interpreted to create useful information systems.
Data is defined as 'groups of non-random symbols in the form of text, images,
voice representing quantities, action and objects'.
Information is interpreted data; created from organized, structured, and processed
data in a particular context.

The most popular data collection techniques include −

 Surveys − A questionnaires is prepared to collect the data from the field.
 Secondary data sources or archival data: Data is collected through old
records, magazines, company website etc.
 Objective measures or tests − An experimental test is conducted on the
subject and the data is collected.
 Interviews − Data is collected by the system analyst by following a rigid
procedure and collecting the answers to a set of pre-conceived questions
through personal interviews.
Information Classification

Information can be classified in a number of ways and in this chapter, you will
learn two of the most important ways to classify information.
Classification by Characteristic
Based on Anthony's classification of Management, information used in business
for decision-making is generally categorized into three types −
 Strategic Information − Strategic information is concerned with long term
policy decisions that defines the objectives of a business and checks how
well these objectives are met. For example, acquiring a new plant, a new
product, diversification of business etc, comes under strategic information.
 Tactical Information − Tactical information is concerned with the
information needed for exercising control over business resources, like
budgeting, quality control, service level, inventory level, productivity level
etc.
 Operational Information − Operational information is concerned with
plant/business level information and is used to ensure proper conduction of
specific operational tasks as planned/intended. Various operator specific,
machine specific and shift specific jobs for quality control checks comes
under this category.
Classification by Application
In terms of applications, information can be categorized as −
 Planning Information − These are the information needed for establishing
standard norms and specifications in an organization. This information is
used in strategic, tactical, and operation planning of any activity. Examples
of such information are time standards, design standards.
 Control Information − This information is needed for establishing control
over all business activities through feedback mechanism. This information is
used for controlling attainment, nature and utilization of important processes
in a system. When such information reflects a deviation from the established
standards, the system should induce a decision or an action leading to
control.
 Knowledge Information − Knowledge is defined as "information about
information". Knowledge information is acquired through experience and
learning, and collected from archival data and research studies.
 Organizational Information − Organizational information deals with an
organization's environment, culture in the light of its objectives. Karl
Weick's Organizational Information Theory emphasizes that an organization
reduces its equivocality or uncertainty by collecting, managing and using
these information prudently. This information is used by everybody in the
organization; examples of such information are employee and payroll
information.
 Functional/Operational Information − This is operation specific
information. For example, daily schedules in a manufacturing plant that
refers to the detailed assignment of jobs to machines or machines to
operators. In a service oriented business, it would be the duty roster of
various personnel. This information is mostly internal to the organization.
 Database Information − Database information construes large quantities of
information that has multiple usage and application. Such information is
stored, retrieved and managed to create databases. For example, material
specification or supplier information is stored for multiple users.
Method of Collection of Information
In Statistics, data collection is a process of gathering information from all the
relevant sources to find a solution to the research problem. It helps to evaluate the
outcome of the problem. The data collection methods allow a person to conclude
an answer to the relevant question. Most of the organizations use data collection
methods to make assumptions about future probabilities and trends. Once the data
is collected, it is necessary to undergo the data organization process.
The main sources of the data collections methods are “Data”. Data can be
classified into two types, namely primary data and secondary data.

Primary Data Collection Methods

Primary data or raw data is a type of information that is obtained directly from the
first-hand source through experiments, surveys or observations. The primary data
collection method is further classified into two types. They are

 Quantitative Data Collection Methods

 Qualitative Data Collection Methods

Quantitative Data Collection Methods

It is based on mathematical calculations using various formats like close-ended
questions, correlation and regression methods, mean, median or mode measures.
This method is cheaper than qualitative data collection methods and it can be
applied in a short duration of time.

Qualitative Data Collection Methods

It does not involve any mathematical calculations. This method is closely
associated with elements that are not quantifiable. This qualitative data collection
method includes interviews, questionnaires, observations, case studies, etc. There
are several methods to collect this type of data. They are
Observation Method
Observation method is used when the study relates to behavioural science. This
method is planned systematically. It is subject to many controls and checks. The
different types of observations are:

 Structured and unstructured observation

 Controlled and uncontrolled observation
 Participant, non-participant and disguised observation

Interview Method
The method of collecting data in terms of verbal responses. It is achieved in two
ways, such as

 Personal Interview – In this method, a person known as an interviewer is

required to ask questions face to face to the other person. The personal
 interview can be structured or unstructured, direct investigation, focused
conversation, etc.
 Telephonic Interview – In this method, an interviewer obtains information
by contacting people on the telephone to ask the questions or views,
verbally.
Questionnaire Method
In this method, the set of questions are mailed to the respondent. They should read,
reply and subsequently return the questionnaire. The questions are printed in the
definite order on the form. A good survey should have the following features:

 Short and simple

 Should follow a logical sequence
 Provide adequate space for answers
 Avoid technical terms

 Should have good physical appearance such as colour, quality of the paper to
attract the attention of the respondent
Schedules
This method is similar to the questionnaire method with a slight difference. The
enumerations are specially appointed for the purpose of filling the schedules. It
explains the aims and objects of the investigation and may remove
misunderstandings, if any have come up. Enumerators should be trained to perform
their job with hard work and patience.

Secondary Data Collection Methods

Secondary data is data collected by someone other than the actual user. It means
that the information is already available, and someone analyses it. The secondary
data includes magazines, newspapers, books, journals, etc. It may be either
published data or unpublished data.
Published data are available in various resources including

 Government publications
 Public records
 Historical and statistical documents
 Business documents
 Technical and trade journals