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3: SYSTEMS APPROACH TO MANAGEMENT PROBLEM SOLVING

Before solving the problem, a manager is expected to weigh, how the overall system will respond to changes in its components part. The system approach to management is more of a thought process that helps manager solve a problem. To solve a problem, managers must view the organization as a dynamic integrated unit and should anticipate the intended as well as unintended impacts of their decisions. A System Approach to Problem Solving can be defined in six finite stepsDefining of problem or opportunity Gathering and analyzing data relating to problem or opportunity Identifying the solutions alternative Evaluation of the solution Evaluating various alternatives Selecting the best alternative Implementing the best solution Illustration: Problem: Long delays between receipts of orders and delivery. Solution: Applying six steps of systems approachStep 1: Defining the problem The problem here is inordinate delay between the receipt of orders and their delivery. The possible repercussions of this on the vendor could bea) A bad reputation b) Loss of customers c) Reduction in profitability d) Stoppage of payments due. Step 2: Gathering and analyzing data concerning the problem

Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only)

The following were the causes that perhaps affected the problem of delay in meeting ordersa) Excessive orders in the hand of vendors b) Shortage of power (resulting in reduction of production) Step 3: Identification of alternative solutions The possible course of action identified in this case area) Refusal of orders, in case total size of the orders exceeds the plantcapacity in one shift. b) To run the plant in double shift, to meets the requirement in time. The shortfall in the power-supply may be met with installation of generators. Step 4: Evaluation of alternative solutions Out of the possible course of actions, as suggested in step 3, the second solution seems to be more viable, as it accounts for the overall increase in the profitability after considering the additional cost for installation of generator. It would result in retaining customers and growth of the organization. Step 5: Selection of the best alternative Management closely scrutinizes the alternatives and gives approval for the best possible alternative. In this case, the management puts the stamp of approval on the second alternative. Step 6: Implementation of solution The implementation of the solution requires the necessary changes in policies and plans. Besides this, the necessary resources need to be arranged for running the plan in double shift and installation of the generator. Finally, appropriate procedures are developed to exercise smooth production and timely supply to customers, the concerned officers are accordingly instructed.

DECISION MAKING IN MIS


Every organization needs effective decision making to reach its objective and goals. Problem solving is the critical activity for any business organization. A well-known model developed by Herbert Simon divides decision making phase of the problem solving into three stages: intelligence, design and choice. George Huber later incorporated this model into the entire problem solving process. Intelligence Stage: is the first stage of decision-making, during which potential problems and opportunities are identified and defined. Design Stage: is the second stage of decision-making, during which alternative solutions to the problems are developed. Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only) 10

Choice Stage: is the third stage of decision-making, which requires selecting a course of action. Problem Solving: is a process that goes beyond decision making to include the implementation stage. Implementation Stage: is a stage of problem solving during which a solution is put into effect. Monitoring Stage: is the final stage of problem solving process, during which decision maker evaluate the implementation. Intelligence

Decision Making

Design Choice Problem Solving Implementation

Monitoring

CLASSIFICATION OF DECISIONS
Organizational decisions can be categorized into Programmed Decisions: Programmed decisions are the decisions that are well structured and based predetermined set of precedents, procedures, techniques and rules. They are time-tested for validity i.e., they tend to be consistent over situations and time. For example, ordering more inventories when inventory levels drops to specified levels is an example of a programmed decisions (source: Stone/Mitch Kezar). Similarly, most of the organization there is a set of procedure for receipt of materials, payment of bills, employment of clerical personnel, release of budgeted funds Non-Programmed Decisions: Non-Programmed decisions are the decisions that deal unusual or exceptional situation (situation about which not much information or knowledge is available). In most of the cases, it is difficult to quantify. Determining the appropriate training program for the new recruit, Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only) 11

deciding whether to start new type of product line, and weighing the benefits and disadvantages of installing a new pollution control are examples. Each of this decisions contain many unique characteristics for which the application of rules or procedures in not so obvious. A decision-maker is expected to be more experience, having enough exposure to the environment and adequate judgment of the situation. Semi-structured Decisions: Semi-structured decisions are more complex. The relationships among data are not always clear, the data may be in the variety of formats, and the data is often difficult to manipulate and obtain. In addition, the decision-maker may not know the information requirements of the decision in advance. Individual and Group Decisions: individual decisions are the decisions taken by the managers, who assume full responsibility for the consequences of such decisions. They may get information, factual analytical report, pros and cons of alternatives and suggested course of actions from sub-ordinates or at times from exclusive committees. However, the responsibility and the authority or the onus of making final decision rests with the concerned individual. S/he cannot delegate or abdicate this authority. On the other hand, in the case of group decisions, several of the managers jointly deliberate on the problem, information & alternatives and hammer out a decision for which they assume collective responsibility. The decision-making function and process get rich enrichment by pooling of the diverse expertise, knowledge authority and perspectives represented by the group. Elaborate group deliberation and consideration of alternative course of action with varied point of views tend to ensure that decisions are of high quality and also their implementation becomes easier. The disadvantages of group decisionmaking are delays in decision-making, lack of rationality and responsibility among group members, dilution of the quality of decisions due to compromise and conformity among members of the group.

STRUCTURE OF MIS
The conceptual structure of MIS is a collection of functional subsystems consisting of four major information processing components like transaction processing, operation control, management control and strategic planning support. Strategic Planning: involves setting of goals, laying down policies and providing general guidance to the organization. Management Control: or the tactical planning is concerned with acquisition of resources, evolving tactics to meet the objectives, optimal planning for Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only) 12

business unit in terms of its location and development of its product, establishing the budget and monitoring them. Operational Planning and Control: deal with efficient and effective use of resources and facility at hand to carry out activities within the prescribed policies and framework. Transaction Processing: involves recording each and every transaction and maintenance of file in order to provide database for generating and providing information to users at various management levels.

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APPROACHES OF MIS DEVELOPMENT


For developing MIS following three approaches are used: Top down approach: The top down approach assumes a high degree of top management involvement in the planning process and focuses on organizational goals, objectives and strategies. The top management develops a corporate plan as a guide for designing information system. The various stages in top down approach are a) Analyze the objectives and goals of the organization to formulate policies and plan and communicate them down the line to middle and supervisory management for translating them into reality. The analyses may be in the area of profits and growth, expansion of product lines and services, diversification, increased market share etc. It also determines the availability of resources in terms of capital, equipment and raw material. b) Identify the functions of the departments (Marketing, production, human resource, finance, research and development) and explain how they support the organization. c) Ascertain the major activities, decisions and functions of the managers at various levels of hierarchy. Determine what, who and when the decisions should be made. d) Identify and supply models that guide managerial decision processes. Provide with the information required for various activities and decisions. e) Prepare specific information processing modules and identify files and database for application. Bottoms up approach: The development of information system starts from identification of life stream systems. Life stream systems are those systems that are essential for the day-to-day business activities. The examples include payroll, sales order, inventory control, purchasing etc. The various stages in bottoms up approach area) Individual functional applications are planned separately consisting of transaction processing, updating and sample reports. b) Files of various functional applications are integrated and chained into database. c) Various functions are added to operate on the database at management control level. d) Integration of various models into model base having capability of providing wide range analyses, decisions and planning options. e) Strategic planning data and planning models are added to the information system.

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Top down approach Top management takes the main initiative in formulating major objective strategies and policies, for developing MIS. Middle and supervisory management have little role in the development of system.

Bottoms up approach Supervisory management identifies the life stream system for which MIS may be developed.

Top management refrains from guiding the development of the system developed by supervisory level. More consistent with the systems Developed through orderly process of approach and is also viewed as total transition, building upon transaction system which is fully integrated. processing system. This system may not be integrated. Integrative approach: This approach overcomes the limitation of the above two approaches. The managers at all levels influence the design of the system. Here, the top management after identifying the structure and design of MIS suitable to the organization passes it on to lower managers for their views and modifications. The managers at the lower level are permitted to suggest the changes, addition and/or deletion and return it to the top management for further approval/action. This evaluation, modification and approval process continues till a final designed is achieved to the satisfaction of all concerned.

Conclusions :- Types of Information Systems: A system, as we all know, is simply a set of components that interact to accomplish the desired purpose. A business is also a system. It comprises of marketing, manufacturing, sales, research, shipping, accounting, and personnel all working together towards achieving the business targets. Each of these can itself be classified as subsystem. The purposes of the business information system are to process, input, maintain files and produce information, reports and other outputs. Depending upon the mangers need the business information system can be classified into Transaction Processing System (TPS) Management Information System (MIS) Decision Support System (DSS) Office Automation System (OAS) Executive Information System (EIS) TRANSACTION PROCESSING SYSTEMS Addresses routine questions - How many inventory items are there in the inventory? - What is the total payroll? Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only) 15

Keeps track of flow of transaction operations oriented Spans the boundary between the organization and its environment Maintains upto date information about the organization Serves the operational control level Performs and records daily routine Major producer of information MANAGEMENT INFORMATION SYSTEMS Focuses on daily, weekly and monthly summaries of transactions that are useful for monitoring and controlling operational level activities - Are things working well? - How is one (monthly/weekly) report as compared with the other? Relies on existing corporate data and data flows Serves the management control level assists managers in decision-making and problem solving Produces condensed information obtained from TPS Provide managers with reports/ on line access to organization performance Addresses structured questions that are known well in advance Not very flexible Applies simple models on data DECISION SUPPORT SYSTEMS Supports non-routine decision-making Devoted to support management decisions that are semi structured, unique (nonrecurring) or rapidly changing Have advanced analytical capabilities which permit users to use different models to analyze information usually incorporate more sophisticated modeling using statistical techniques such as linear programming, regression analysis, time-series analysis etc.. Draw information from TPS & MIS, and also use information from external sources

OFFICE AUTOMATION SYSTEMS Supports clerical activities with facilities for Office Publishing - Word processing and DTP Electronic Communication - Electronic mail and fax Image processing - Scanning, document management EXECUTIVE SUPPORT SYSTEMS Helps match changes in the external environment with organizational activities Helps in addressing questions like - Employment requirements in five years down the line - Products changes to be made in future Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only) 16

Serves the strategic level of management Involves generalized computing and communication Dependent on external and internal information Makes less use of analytical models EXPERT SYSTEMS Designed to replace human experts particularly important where expertise is scarce and very expensive Arisen from academic research into Artificial Intelligence Software that expresses knowledge in terms of facts and rules Ability to change, learn or add new rules Greater use in strategic and tactical level decision-making Banking Expert System are developed to scrutinize the application for loans and its decision are accepted by the lower level staff

Review questions: 1. 2. 3. 4. How system approach can be used for problem solving? What is decision making? What are the various classifications of decisions? Describe the conceptual structure of MIS. What are the various approaches to development of MIS?

Readings:
Management Information Systems James OBrien Management Information Systems Jerome Kanter Introduction to Business Information System Rolf T Wigand and others chapter7

Analysis and Design of Information System V. Raja Raman Information Systems Hussain and Hussain

Prof Jha, Davendranath G Faculty: Information Systems (For Private Circulation only)

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