Instructor: Trevor Nadeau

Management Information Systems

Frameworks
Lecture Outline 3
Learning Objectives
 Describe the characteristics that differentiate the operational,
managerial, and executive levels of an organization

 Explain the characteristics of the three information systems designed to

support each unique level of an organization: Transaction Processing
Systems (TPS), Management Information Systems (MIS), and Executive
Information Systems (EIS)

 Understand the nature of Functional Area systems as a system that

spans organizational boundaries
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The Nature of Managerial Work
 Management
 the process of directing tasks and directing resources to achieve organizational
goals
 management functions: planning, organizing, directing, motivating, controlling...
 Planning: done at different Levels
 Long-term mission and vision
 Strategic goals
 Tactical objectives
 Most important planning activities
 Scheduling
 Budgeting
 Resource allocation

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The Nature of Managerial Work

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The Nature of Managerial Work
 Control
 Managers control activities by comparing plans to results.

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The Nature of Managerial Work
 Decision Making
 Both planning and control call for decision making

 The higher the level of management:

 The less routine the manager’s activities
 The more open the options
 The more decision-making involved

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The Nature of Managerial Work
 Managers need to make decisions, often under uncertainty; each level
of management has different information needs.

 There is often a need for efficiency and effectiveness

 efficiency:
 doing things right: with minimum input
 effectiveness:
 doing right things, to satisfy main org. goal

 Example: Killing mosquito with sledge hammer –effective, but not efficient

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Reporting Activity: Management by
Exception
 Management focuses on acting on situations in which actual results differ
significantly from planned results

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Decision-Making Levels
 Three main levels of decision-making in an organization:
 Operational
 Tactical
 Executive (strategic)

 Each level processes information differently

 Different types of decisions are made
 Different information needs
 Format, presentation, medium, frequency, amount, output

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The Organizational Pyramid

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The Organizational Pyramid
 Senior (Executive) Managers:
 Strategic/ Executive Information Systems
 Make long-term decisions about products / services to produce [control
direction]
 Middle (Tactical) Managers:
 Tactical/ Management Information Systems
 Carry out programs and plans of senior managers [control activity]
 Budgeting, monthly scheduling, personnel plans
 Operational (Transaction Processing) Managers:
 Operational/ Transaction Processing Systems (TPS)
 Monitor firm's daily activities [control resources]
 Daily scheduling, inventory handling.

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Decisions at different levels
 Strategic Decisions: Decisions that consider the entire organization and
represent major changes for it. The goal of making strategic decisions is
to implement policy that aims to move the organization toward its
long-term goals.
 Tactical Decisions: They relate to the implementation of strategic
decisions. Risk level of these decisions is still low but larger than
operational decisions. They are directed towards developing divisional
plans, structuring workflows, establishing distribution channels,
acquisition of resources.
 Operational Decisions: Occur on a daily basis. Often these decisions
are repetitive in nature and can be implemented quickly and tend to
cary little risk.

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Considerations about managerial work
 To make decisions, each level of management has different information
needs.

 How much information detail does a Senior/Middle/Operational manager

Need?
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New Realities in Business
 More organizations are becoming information-based
 More network-based, rather than hierarchical organizations
 People drawn into process teams to accomplish projects
 Companies are beginning to pay more attention to customers and their
preferences
 Instead of mass production, we have more customization
 Information technology (hardware and application software) makes
customization possible on a larger scale

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New Realities in Business
 Customer service is more critical
 Innovative approaches to competition based on increasing IT capability
 World-wide communication enable businesses to operate in global
markets [programmers in India work with project leaders in USA on
large software development projects]
 Business process re-engineering
 Radical redesign of how businesses carry out certain activities
 IT is a critical factor in changing business processes

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A View of the Future
 More organizations will function as networks of specialists
 What constitutes "work" will require more high-ordered thinking and
constant learning, and less of a "9 to 5“ mentality
 Critical thinking and innovation will be essential [will produce critical
and innovative information systems]
 More and more organizations are becoming information-based
 e.g., insurance, banking, IT Services, not as much factory work
 Information technology continues to play an influential (central) role in
business

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Levels of the Organization

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Basic Systems Architecture Model

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Three Organizational Systems

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Transaction Processing Systems
Systems at the Operational level

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Who, What, Why: Organizational Level

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Transaction Processing Systems
 Transaction processing systems (TPSs):
 Capture and process detailed data necessary to update the organization’s
records about fundamental business operations
 Include order entry, inventory control, payroll, accounts payable, accounts
receivable, general ledger, etc.

 A TPS provides valuable input to:

 Management information systems
 Decision support systems
 Knowledge management systems

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A framework for information Systems

 Operational systems are often used by clerical workers and low level
management
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Transactions
 An economic event that initiates the accounting process of recording it
in a company’s accounting system.
 Financial transactions: an agreement, communication, or movement
carried out between a buyer and a seller to exchange a payment
 Computer Transaction: a sequence of information exchange and related
work (such as database updating)
 Accounting: Event that effects a change in the asset, liability, or net
worth account. Transactions are recorded first in a journal and posted
to a ledger.
 Generic Definition: A single event that Changes something

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Transactions
 Transactions include:
 Customer Orders
 Receipts
 Invoices
 Payments
 Transaction Processing Activities include:
 Collection
 Editing
 Manipulation
 Storage

 Consider: Many transaction that can occur in retail business setting.

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System Architecture: Transaction Processing
System

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Traditional Transaction Processing Methods

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Transaction Processing

 TPS
 Capture and process the detailed data necessary to update current records
about operations
 E.g. Order Entry, inventory Control, payroll, accounts payable, accounts
receivable, etc…

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Transaction Processing Methods and
Objectives
 Organizations expect their TPSs to:
 Capture, process, and update databases
 Ensure that the data is processed accurately and completely
 Avoid processing fraudulent transactions
 Produce timely user responses and reports
 Reduce clerical and other labor requirements
 Help improve customer service
 Achieve competitive advantage

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Transaction Processing Methods and
Objectives
 A TPS includes:
 Order processing systems
 Processing flow begins with receipt of customer order, then finished product
inventory is checked to see if sufficient inventory is on hand to fill the order
 Product pick list is printed at the warehouse and inventory is adjusted
 Customer invoice is create and copy included in the customer shipment
 Accounting systems
 Must track the flow of data related to all the cash flows that affect the organization

 Purchasing systems
 Systems that support the purchasing business function
 Inventory control, purchase order processing, receiving, and accounts payable

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Transaction Processing Activities
 The transaction processing cycle
 Data collection
 Data editing
 Data correction
 Data manipulation
 Data storage
 Document production

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Data Collection
 Capturing and gathering all data necessary to complete the processing
of transactions
 Data collection can be:
 Manual: typed-in by hand
 Semi-automated: Use of special Data entry devices
 Fully-automated: computer of the buyer “talks” directly to computer of
the seller involves capturing data at its source and recording its accurately
in a timely fashion with minimal manual effort and in an electronic or
digital form so that it is directly entered into the computer

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Data Editing
 Data editing
 Checking data for validity and completeness to detect any problems
 Examples
 Quantity and cost data must be numeric
 Names must be alphabetic
 Code associated with an individual transaction are edited against a
database containing valid codes

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Data Correction
 Systems should provide error messages that alert those responsible for
editing the data
 Error messages should specify the problems so proper corrections can be
made
 Data correction involves re-entering data that was not typed or scanned
properly

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Data Processing
 Performing calculations and other data transformations related to
business transactions including:
 Classifying data
 Sorting data into categories
 Performing calculations
 Summarizing results
 Storing data in the organization’s database for further processing

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Data Storage
 Data Storage
 Involves updating one or more databases with new transitions
 After being updated, this data can be further processed and manipulated
by other systems

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Document Production
 Document Production involves generating output records, documents
and reports
 Hard-copy paper reports
 Displays on computer screens (soft copy)
 Results from one TPS can be input to another system
 Most TPSs provide other useful management information, such as:
 Printed or on-screen reports that help managers and employees perform
various activities
 Reports showing current inventory
 Reports required by local, state, and federal agencies

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TPS Example: Payroll System

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TPS Example: Point-of-Sale Systems

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Operational/ TPS Report Example (1)

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Operational/ TPS Report Example (2)
Focus on results by:
 Product
 Department
 Sales ($)
For a specific time:
 Real time
 Hourly/ daily
 Monthly

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Operational/ TPS Report Example (3)

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Operational/ TPS Report Example (4)

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Management Information Systems
Systems at the Tactical/Managerial level

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Who, What, Why: Managerial Level

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Management Information Systems (MIS)
 Computerized database of information organized and programmed in
such a way that it produces regular reports on operations for
management in a company.
 The main purpose is to give managers feedback about performance
 Information displayed by the MIS typically shows “actual” data, and it
allows comparison against “planned” results thus it measures progress
against goals.
 The MIS receives data from company units and functions.

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Management Information Systems (MIS)
 MISs perform the following functions:
 Provide reports with fixed and standard formats
 Produce hard-copy and soft-copy reports
 Allow users to develop custom reports
 Require user requests for reports developed by systems personnel

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Management Information Systems (MIS)
 Purpose of an MIS:
 To help an organization achieve its goals by providing managers with
insight into the regular operations of the organization
 Provide the right information to the right person in the right format at the
right time
 Tactical information systems differ from operational – not to support
the execution of operational tasks, but help the manager control
operations

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Tactical Systems(MIS)

 In operational systems, transaction data are captured and stored (in a

database);
 In Tactical/ Management Information Systems, transaction data are
summarized, aggregated, and analyzed for additional insight for
middle managers
 (remember the characteristics of information at the Tactical level)
 Generate a variety of reports:
 Summary reports: totals, averages, key data
 Total regular and overtime hours worked for each plant for the week, by
job classification {what resource will this info. help to control?}
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Transaction Processing vs. Management
Information Systems
 TPS
 Capture and process the detailed data necessary to update current records
about operations
 E.g. Order Entry, inventory Control, payroll, accounts payable, accounts
receivable, etc…
 MIS
 Provide insight for managers into regular operations of the organization so
they can control, organize, and plan more effectively.
 Right info to the right person at the right time
 Information typically provided in reports

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Tactical vs Operational Info. System
 Tactical information systems differ from operational information
systems in the:
 The amount of detail produced as output
 The comparative nature of the information
 The rigidity of the structure of the information
 Regularity with which information is produced (e.g. ad hoc)

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MIS Output

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System Description: Tactical/
Management Information Systems
 Tactical Information Systems or Management Information Systems (MISs)
are used by managerial employees to support recurring decision making in
managing a function or the entire business

 Supported Activities
 Scheduled Reporting - the system produces automatically based on a
predetermined schedule. Some include:
 Key Indicator – High-level summaries to monitor performance (e.g. Monthly Sales Report)
 Exception – Highlights situations where data is out of normal range (e.g. Monthly Late
Shipments)
 Drill Down – Provides lower-level detail aggregated in a summary report (printed only if
needed)
 Ad Hoc Reporting – unscheduled reports that are usually custom built to answer
a specific question (e.g. sales data by person report to identify issues)
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Reporting Activity: Drill-down (MIS)

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System Architecture: Management
Information System

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Framework for Tactical / Management
Information Systems (MIS)

 Tactical MIS
 Provide insight for managers into regular operations of the organization so
they can control, organize, and plan more effectively.
 Right info to the right person at the right time
 Information typically provided in reports

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Tactical / Management Information
Systems (MIS)
 One important Characteristic of Tactical Information Systems is that
some of the information produced by such systems comes not from
internal, but external sources (on-line subscriptions?)

 Compare overdue account information of our company with that of the

entire industry

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Tactical / MIS Report Examples
 Key Indicator Reports: High-level summaries to monitor performance
 Example: list of weekly sales $, by salesperson, by product and by sales
region {such information would be difficult to produce without a computer}
 Exception reports: warn managers when results from a particular
operation exceed or do not meet an organizational standard
 Example: List of all plants that have logged more overtime hours than
expected for the week
 Example: List of all sales personnel whose sales fall in the top and bottom
10% of the organization

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Tactical/ MIS Report Examples
 ad hoc reports: "spur-of-the-moment"; unplanned
 needed by manager to solve a unique problem
 E.g. a list of the total number of employees absent during the week,
arranged by plant and by job title, along with the hours or days missed

 If an exception report has shown high overtime earnings at some

plants, then a manager might ask for a report showing the production
record of each plant for the week; to help investigate why there was an
overtime problem.

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Tactical/ MIS Report Example (1)

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Tactical/ MIS Report Example (2)

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Tactical/ MIS Report Example (3)

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Executive Support Systems
Systems at the Strategic level

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Who, What, Why: Executive Level

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Framework for Strategic/ Executive
Information Systems (EIS)
 Strategic Systems/ Executive Information Systems
 Provide top managers with information that assists them in making
long-range planning decisions for the organization
 Used to set long-term organizational goals
 Middle managers then need to allocate resources to meet these
organizational goals
 Produced regularly, but more often on ad hoc basis
 Executive-level reports provide Summarized data

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Executive Support Systems
 Executive support system (ESS):
 Includes hardware, software, data, procedures, and people used to assist
senior-level executives
 Also called an executive information system (EIS)
 ESS provide and overview of an entire organization’s performance
 Or any aspects of the organization that executives consider important
 ESS provides support for:
 Defining overall vision
 Strategic planning
 Strategic organizing and staffing
 Strategic control
 Crisis management

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Framework for Strategic/ Executive
Information Systems (EIS)
 One important characteristic of Strategic. Executive Information
Systems is that a significant portion of the information produced by
such systems comes not from internal, but external sources (market
intelligence)
 Compare key performance information of our company with that of the
entire industry

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System Description: Strategic/
Executive Information Systems
 Strategic Systems, also called Executive Information Systems (EIS) or
Executive Support Systems (ESS) or, are special purpose information
systems to support executive decision-making
 System Details These systems use graphical user interfaces to display
consolidated information and can deliver both:
 Soft Data - textual news stories or non-analytical data (unstructured)
 Hard Data – facts, numbers, calculations, etc. (structured)
 Supported Activities
 The activities supported by these kinds of systems include:
 Executive Decision Making
 Long-range Strategic Planning
 Monitoring of Internal and External Events
 Crisis Management
 Staffing and Labour Relations
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Executive Information Systems (EIS)
 Questions:

 What kind of tactical information would be useful to a branch manager of

Coca-Cola or Pepsi distributorship?

 What kind of strategic information would be useful to the president of a

four-year liberal arts college?

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System Architecture: Executive
Information Systems (EIS)

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Inputs to MIS and ESS information Systems
 Internal data sources:
 TPS and related databases
 Data warehouses and data marts
 Specific functional areas throughout the firm

 External data sources:

 Customers, suppliers, competitors, and stockholders whose data is not
already captured by TPS and ERP systems
 Internet

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MIS/ESS Outputs
 Reports:
 Formatted result of database queries and contains useful data for decision-
making and analysis.
 Scheduled reports:
 Produced periodically, such as daily, weekly, or monthly
 Demand reports:
 Developed to provide certain information upon request

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MIS/ESS Outputs (cont.)
 Exception reports:
 Automatically produced when a situation is unusual or requires
management action
 Trigger points should be set carefully
 E.g. list of all plants that have logged more overtime hours then expected
for the week
 E.g. list of all sales personnel whose sales fall in the top and bottom 10% of
the organization

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MIS / ESS outputs – Ad-Hoc Reports
 Ad hoc report: “spur-of-the-moment”; unplanned
 Needed by manager to solve a unique problem
 E.g. a list of the total number of employees absent during the week,
arranged by plant and by job title, along with the hours or days missed.
 If an exception report has shown high overtime earnings at some
plants, then a manager might ask for a report showing the production
record of each plant for the week; to help investigate why there was an
overtime problem.

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Reporting Activity: Drill-down (EIS)

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Key Performance Indicators
 Metrics that track progress in executing strategies to attain organizational
objectives and goals
 These metrics are also called key performance indicators (KPIs) and consist of a
direction, measure, target, and time frame
 Examples of well-defined KPIs:
 For a university. Increase (direction) the five-year graduation rate for incoming
freshman (measure) to at least 80 percent (target) starting with the graduating
class of 2022 (time frame)
 For customer service department. Increase (direction) the number of customer
phone calls answered within the first four rings (measure) to at least 90 percent
(target) within the next three months (time frame)
 For an HR organization. Reduce (direction) the number of voluntary resignations
and terminations for performance (measure ) to 6 percent or less (target) for the
2018 fiscal year and subsequent years (time frame)

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Key Indicator Report
 Key Indicator: Also known as Performance indicator or key
performance indicator (KPI).
 A Type of performance measurement to evaluate the success of an
organization or of a particular activity in which it engages.

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Dashboards
 Dashboard – Mostly for ESS
 Presents a set of KPIs about the state of a process at a specific point in time
 Provide rapid access to information in an easy-to-interpret and concise
manner
 Provide users at every level of the organization the information they need
to make improved decisions
 Operational dashboards can be designed to draw data in real time from
various sources
 Including corporate databases and spreadsheets
 Widely used BI software comes from many different vendors,
including:
 Hewlett Packard, IBM, Information Builders, Microsoft, Oracle, and SAP

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Dashboard Reporting

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Dashboard Reporting
 Results are aggregated for the organization and presented in a
graphical format or “executive dashboard” for quick viewing and
timely decision making.

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Dashboard Reporting

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Strategic/ EIS Report Example

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Review Levels of the Organization

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Review 1: Categorize Each Decision as
Strategic, Tactical, or Operational
Rejecting credit for a company with an overdue account
(Operational)
Analyzing sales by product line within each geographic region, this year to date
vs. last year to date
(Tactical)
Using a simulation model to forecast profitability of a new product, using
projected sales data, competitive industry statistics, and economic trends
(Strategic)
Comparing planned vs. actual expenses for department staff
(Tactical)
Allocating salespeople's time to the highest potential market prospects
(Tactical)
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Review 2: Categorize Each Decision as
Strategic, Tactical, or Operational
 Closing down a business unit to stop production of a particular line of clothing after
analysing sales by product line within each geographic region, this year to date vs.
last year to date
(Tactical)
 Deciding to begin production of a new product after using simulation model to
forecast profitability of it, using projected sales data, competitive industry statistics,
and economic trends
(Strategic)
 Reduce the number of sales people after comparing planned vs. actual sales for
department staff
(Tactical)
 Opening a new plan in a new market with great potential.
(Strategic)

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The Organizational Pyramid - Summary

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 Management Information Systems
Frameworks

End of Lecture 3

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