CSiatala NIPA

(Lesson 7) Updated Sunday, April 20, 2008

INFORMATION IN ORGANISATIONS

MANAGEMENT STRUCTURE

Management structure consists of the following categories

1. Strategic management (Senior Management)

Responsible for defining the organization’s objectives, making policies and

strategic planning.

2. Tactical management (Middle Management)

Takes strategic plans and policies and develop tactics to make them work.
Responsible for Tactical and Operational planning and Management Control

3. Operational management (Junior Management)

Responsible for routine control and planning.

TYPES OF INFORMATION

Information may be categorized according to the kind of use that is made it.

1. Planning Information - is needed in the formulation of plans and the

consideration of alternative courses of action. It is usually forward looking and
subject to some degree of uncertainty. It includes forecasts, summaries of past
data and may include quality as well as quantitative information.

Planning requires a knowledge of the available resources, possible time-scales

and the Likely outcome under alternative scenarios. Information is required that
helps decision making, and how to implement decisions taken. A plan is therefore
a design of the future and effective ways of attaining it.

2. Controlling information – provides a comparison between actual results

and the objectives that have been previously set. Used to identify the when
problems occur so that they can be controlled.

Once a plan is implemented its actual performance must be controlled.

Information is required to assess whether it is proceeding as planned or whether
There is some, unexpected deviation from plan. It may consequently be necessary
to take some form of corrective action.
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3. Performance measurement
;
Information is required for performance measurement. Just as individual
operations need to be monitored, so overall performance of and activity
must be measured. Comparisons against budget or plan are able to be
made. This may involve the Collection of information on, for example,
costs, revenues, volumes, time-scale and Profitability.

4. Decision making

“A selection of the most appropriate option from a range of many options"

Information therefore is required which permits decision making.

.
Strategic planning, management control and operational control may be seen as a
Hierarchy of planning and control decisions.

Strategic
Information

Management
Information

Operational
Information

Strategic information
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Strategic information is used to plan the objectives of the organization, and
to assess whether the objectives are being met in practice. Such information
includes overall profitability, the profitability of different segments of the
business, future market prospects, the availability and cost of raising new
funds, total cash needs, total manning levels and capital equipment needs.

Strategic information is:

• Derived from both internal and external sources
• Summarized at a high level
• Relevant to the long term
• Concerned with the whole organization
• Often prepared on an 'ad hoc' basis
• Both quantitative and qualitative.
• Uncertain, as strategic information often requires assumptions to be made
regarding
the future

Tactical information
Tactical information is used to decide how the resources of the business Should be
employed, and to monitor how they are being and have been employed. Such
information includes productivity measurements (output per hour) budgetary control or
variance analysis reports, and cash flow forecasts, staffing levels and profit results
within a particular department of the organization, labor turnover statistics within a
department and short-term purchasing requirements.

Tactical information is:

• Primarily generated internally (but may have a limited external component)
• Summarized at a relatively low level
• Relevant to the short- and medium-terms
• Concerned with activities or departments
• Prepared routinely and regularly
• Based on quantitative measures
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Operational information
.

Operational information is used to ensure that specific' operational tasks are planned
And carried out as intended. In a payroll office, for example, Operational information
Would include the hours worked by' each employee and the rate of pay per hour.

Operational information is:

• Derived from internal sources.

• Detailed, being the processing of raw data
• Relevant to the immediate term
• Task-specific
• Prepared very frequently
• Largely quantitative

Qualities of good information (should also be appreciated by a student- self research)

Good' information is information that adds to the understanding of a situation. The t

qualities of good information are outlined in the following table.
Accurate : e.g. Figures should add up, the degree of accuracy should be
high
.
Complete : Information should include everything that is required
--I,
Cost-beneficial : It should not cost more to obtain the information. Providers of

information should be given efficient means of collecting and

analyzing it. Presentation should be such that users do not waste

time working out what it means.

User-targeted : The needs of the users should be borne in mind, for instance
Senior managers need summaries, junior ones need detail.
Relevant : Information that is not needed for a decision should be omitted,
No matter how 'interesting' it may be..
Authoritative : The source of the information should be a reliable one
Timely : The information should be available when it is needed.

Easy to use :Information should be clearly presented, not excessively long,

and should be sent Using the right medium and communication

channel (e-mail, telephone, Hard-copy report etc).

Improvements to information
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The table on the following page contains suggestions as to how poor information can be
improved.

Feature Example of possible information improvements

Accurate :Use computerized systems with automatic input checks rather than manual
systems. Allow sufficient time for collection and analysis of data if
pinpoint accuracy Is crucial Incorporate elements of probability within
projections so that the required response to different future scenarios can be
assessed.

Cost- beneficial: Always bear in mind whether the benefit of having the information is
greater than the Cost of obtaining it.

Relevant :The purp6se of the report should be defined. It may be trying to fulfill too ,
.
Timely Information collection and analysis by production managers needs
to be speeded up considerably, probably by the introduction of
better information systems.

Etc.

Lesson 8 updated Sunday, April 20, 2008

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INFORMATION SYSTEMS

What is an information system?

An information system - can be defined technically as a set of interrelated

components that collect, retrieve process, store and distribute information to support
decision making and control in an organization.

An information system can also be known as Management Information Systems if it is

meant to specifically to supply information to Management for their decision making.

A Management Information System - may therefore be defined as an organized and

systematic way of recording, processing, extrapolation and transmission of data within
the enterprise to create management information that can be used in decision making.

In other words a MIS is a set of formalized procedures designed to provide managers

at all levels with appropriate information from external and internal sources in order
to enable them to make timely and effective decisions for planning, controlling the
activities for which they are responsible.

Note: A formal MIS may be Computer Based or may be Not.

This means that some formal Management information systems use manual systems.
These systems use paper and pencil technology to serve different needs.

Computer based information systems in contrast rely on computer hardware and

software technology to process and disseminate information. Our concentration is on
Computer base Information system (CIBS)

DIFFERENT TYPES OF SYSTEMS AT DIFFERENT LEVELS

Because there are different specialties and levels in an organization, there are different
kinds of systems. No single system can provide all the information an organization needs.

It is divided into Strategic, Knowledge and Management and Operational levels and
then further divided into Functional areas such as Sales, Marketing, Manufacturing,
Finance, Accounting and Human resources. Systems are built to serve these different
organizational interests.
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IS at the Organisational Level

KIND OF SYSTEM GROUPS SERVED
STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &

DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL MANAGERS
SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN
MARKETING RESOURCES

Different Kinds Of Systems

There are six main types of information systems serving different organizational levels;
Operational level systems, knowledge level systems, management level system and
strategic level system.

• Transaction Processing Systems (TPS)

• Knowledge Work Systems (KWS)
• Office Automation Systems (OAS)
• Management Information Systems (MIS)
• Decision-Support Systems (DSS)
• Executive Support Systems (ESS)
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(a) Operational level system-

Support Operational Management by keeping track of the electuary activities and

transactions of the organization, such as sales, receipts, cash deposits, payroll, credit
decisions and flow and the flow of materials in a factory.

The principle purpose of systems at this level to answer routine questions and to track the
flow of transactions through the organization eg how many parts are in inventory. What
happened to Mr. Williams payments what is the size of payroll this month?
To answer these kinds of questions information generally must be available, current and
accurate.

Transaction processing systems (TPS)

TPS are the basic business systems that serve the Operational Level of the organization.
Transaction processing system is a computerized system that performs and records the
daily routine transactions necessary to the conduct of the business. Examples are sales
entry hotel reservation systems, payroll, employee record keeping and shipping.

At the operational level, tasks resources and goals are predefined and highly structured.
The decisions are grant credit to a customer for instance is made by level supervisor
according to predefined criteria. The decision in that sense has been programmed.

There are fives types of TPS;

Sales, Marketing, Manufacturing, Production, Finance, Accounting, Human resources

and other types of TPS that are unique to particular in industry. A all organizations here
fine kinds of TPS (even if they are manual) these system are control to a business

Operational-level Systems

Transaction Processing Systems (TPS)

Systems that perform and record daily routine transactions necessary for business

Compensation
Order tracking Machine control Securities Payroll
trading
Cash Training and
Order processing Plant scheduling management Accounts payable development

Material Accounts Employee records

movement and receivable
control

Sales and Manufacturing Finance Accounting Human Resources

Marketing
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(b) Knowledge Work level systems

Supports knowledge and data workers in organization. The purpose of knowledge level
systems is to help Business firm integrate new technology into the business and help the
organization. Control the flow of paper work. Knowledge work systems especially in the
form of work stations and office systems are the fastest growing applications in Business
today.

Knowledge work and office Automation systems

Knowledge work system (KWS) and office automation system (OAS) serve the
information needs at knowledge work level of the organization. Knowledge work systems
aid knowledge workers, where as office automation systems primarily aid data workers
(although they are also used extensively by knowledge workers)

Knowledge workers are people who hold formal university degrees and who are often
members of a recognised profession, like engineers, doctors, layers and scientists.

Their job consists primarily of creating new information and knowledge. Knowledge
work system such as scientific or engineering design work stations promote the creation
of new knowledge and ensure that new knowledge and technical expertise are properly
integrated into the business.

Data workers have typically less formal advanced educational degrees and tend to
process rather then create information. They consist of primarily secretaries, accountants,
or managers whose jobs are to manipulate or disseminate information.

Office automation systems are information technology applications designed to increase

productivity of data workers in the office by coordinating and concerting activities of
typical office.

Typical office automation systems handle and manage documents through Word
processing, Desktop publishing ets.

Knowledge-level Systems

Knowledge work systems (KWS)

Systems that aid the creation and integration of new knowledge into an Organisation.

Engineering workstations Graphics workstations Managerial workstations

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Knowledge-level Systems

Office Automation System (OAS)

Systems that perform and record daily routine transactions necessary for business

Word processing Document E-mail / electronic calendars

imaging

(c) MANAGEMENT LEVEL SYSTEMS

Are designed to serve the monitoring, controlling, Decision making and Administrative
activates of middle management. These systems compare the current days output with
that of a month or a year ago. The principle question addressed by such systems is; are
things working well. Management level systems typically provide periodic reports rather
than instant information on operation.

Management information systems (MIS)

Serves management level of the organization providing mangers with reports and in some
cases with online access to the organizations current performance and historical records.
They are oriented almost exclusively to internal, not environmental or external; events.
is-primarily serve the functions of planning, controlling and Decision making at the
management level.

Management-level Systems

MIS

Systems that serve planning, control and decision-making through routine summary and reports

Sales Inventory control Annual budgeting Capital Relocation analysis

management investment

Sales and Manufacturing Finance Accounting Human Resources

Marketing

MIS -Are dependent on the underlying Transaction processing data.

MIS- Summarize and report on the basic operations of the company.

MIS-Usually serve managers interested in weekly, monthly and yearly results-not day
today.

MIS-Address structured questions that are known well in advance.

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Characteristics of MIS

MIS support structured and semi-structured decisions at the operational and management
control levels. They are also useful for planning.

MIS are generally reporting and control oriented. They are designed to report on existing
operations and therefore help provide day to day control operations.

MIS rely on existing cooperate data and data flows.

MIS have little analytical capability

MIS Aid decision making using past and present data.

MIS are relatively inflexible.

MIS have internal rather than external

Decision Support Systems (DSS)

These are computer systems that are used by management as an aid in making decisions
when presented with semi-structured or unstructured problems.

Definition:

Decision Support Systems are computer based systems that help decision makers to
confront ill-structured problems through direct interaction with data and analysts
models of the DSS system.

The DSS does not make decisions for managers. It enables them to move through the
phases of decision making;

 Intelligence(gathering information and identification of situations requiring

decision)
 Design of possible solutions
 Choice of solution

Various solutions are presented by setting up possible scenarios are asking the computer
to predict the consequences. The manager must then use his judgment when making the
final decisions.

DSS attempt to combine the interactive use of models or analytical techniques with
traditional data access but also requires the professional judgment of the manager.
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DSS
Systems that combine data, models and analysis tools for non-routine decision-making

Sales region Production Cost analysis Pricing / Contract cost analysis

analysis scheduling profitability
analysis
Sales and Manufacturing Finance Accounting Human Resources
Marketing

Management-level Systems

CHARACTERISTICS OF DSS

(1) Provide support for decision-making and in particular for semi-or unstructured
decision- making
(2) Provide support for decision making at all management levels, and provide
systems to integrate between levels.
(3) Provide support for decisions that are interdependent as well as those that are
independent.
(4) Provide support for all stages within the decision making process.
(5) Support a variety of decision-making processes
(6) Be user friendly.

COMPONENTS OR SUBSYSTEMS OF DSS

(a) Language subsystem which is likely to be non procedural, whereby the user can
interact with the system.
(b) A problem processing subsystem which would include facilities such as
 Spreadsheets
 Graphics
 Statistical analysis
(c) A knowledge subsystem which would include:
 Database applications
 Expert systems applications

Applications served by DSS are:

i) Long range strategic planning
ii) Complex integrated problem areas.
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(d) STRATEGIC LEVEL SYSTEMS

Executive Information Systems (EIS)

Executive Information Systems are purpose build systems which enable senior executives
to monitor reality and facilitate actions that improve business result.

An EIS is a system for total business Modelling. It has been specifically developed for
the non IT executives.

The key element of the EIS is that Information is provided in a very summarized way but
also that it is able to drill- down to more detailed level.
Strategic-level Systems

EIS

Systems that support non-routine decision-making through advanced graphics

and communications

5-year sales 5-year operating 5-year budget Profit Personnel

trend plan forecasting planning planning
forecasting
Sales and Manufacturing Finance Accounting Human
Marketing Resources

Characteristics or features

a) Ability to call up summery data form the organizations main systems eg a summery of
Profit statement for the month and related balance sheet.

b) The ability to manipulate the summery data eg rearranges its format, make comparison
With similar data etc

c) Built in graphics charts and other presentation aids.

d) The ability to set up templates so that information from different areas is always
summarized in the same format.

e) the provision of analysis tools similar to those found in spreadsheets to enable

computation of ratios and identification of trends and “What IF ? ” Analysis.

The EIS is therefore the ultimate in information systems, but the cost of developing and
running such a system is extremely high.
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(d) EXPERT SYSTEMS (ES)

These hold expert (ie specialist) knowledge and allow non experts to interrogate a
computer for information, advice, recommendations and decisions.

• Expert (knowledge-based) system – Are an artificial intelligence system that

applies reasoning capabilities to reach a conclusion
• Used for
– Diagnostic problems (what’s wrong?)
– Prescriptive problems (what to do?)
• Computer program that codes the knowledge of human experts in the form of
heuristics
• Two distinctions from DSS
– 1. Has potential to extend manager’s problem-solving ability
– 2. Ability to explain how solution was reached

Components of ES

1. User interface - Allows user to interact with the system

2. The knowledge base – This contains the knowledge, facts and rules
- Houses accumulated knowledge

3. The inference engine - This is the processing software which applies the
knowledge base of the user’s problem and produces the solution.
a. Provides reasoning
b. Interprets knowledge base
c. applies the logic

4. Working memory – This stores the relevant facts and inferences during
processing.

5. The explanation program - This provides an explanation of the reasoning

leading to a particular recommendation or decision made by the system.
- Where explanations are kept

6. The knowledge acquisition program – This allows for knowledge base to be

updated, corrected or expanded by an expert-+.
– Creates expert system
– used to enter rules
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ARTIFICIAL INTELLIGENCE (AI)

The activity of providing such machines as computers with the ability to display
behavior that would be regarded as intelligent if it was observed in humans.

• Artificial intelligence (AI) – Is a branch of science of making machines imitate

human thinking and behavior.
• Robot – a mechanical device equipped with simulated human senses and the
ability to take action on its own
• Types of AI systems used in business
• Expert systems
• Neural networks
• Genetic algorithms
• Intelligent agents
• AI systems deliver the conclusion (rather than helping you analyze the options)