The Purpose and Scope of MIS - Management information systems.

1.1 The Purpose and Scope of MIS

Management Information Systems can be defined as ‘The combination of human and computer based resources that results in the collection, storage, retrieval, communication and use of data for the purpose of efficient management of operations and for business planning’. Source: Kelly

Management Information Systems are primarily concerned with the delivery of information (both internal and external) to organisational members from the shop floor workers to the management. The purpose of MIS is to help the smooth running of the business by providing information on the firms data (such as accounting figures) employees from different levels will then evaluate this information so that decisions can be made to ensure that the business remains competitive and successful.

MIS have been created to support the whole range of business’s administration and regulatory activities and can be seen in all parts of the world and in all types of industries both public and private sector. In the US, for example, the National Drivers Register has MIS facilities to report on driver licence details, such as all those within a given state whose licence has been revoked or suspended (Danziger, 1991). Similarly, the Environmental Protection Agency is pushing forward in use of MIS to help monitor and control environmental risks.

Data Information

DECISIONS

Flows Flows

Figure 1 – How an MIS Works

The processing of data into information and communicating that information to the user is the basis of MIS. Form the figure above it is clear to see how this process helps to make decisions. Data is the term for collections of facts and figures; hours worked, part numbers, profit etc. These basic facts are then stored and analysed and generally worked on to produce information in the form required by the user, i.e. the manager. MIS exist in organisations in order to help them achieve objectives, to plan and control their processes and to help deal with uncertainty. It is therefore important that the information that is produced is correct.

There are different types of information such as

Strategic information which is usually used to set goals for the organisations and objectives. By doing this it also looks at whether the current objectives are being met. This would usually include financial data such as profitability.
Tactical Information which looks at the resources of the business and how they should and are being utilised this will include productivity reports.
Operational Information which is concerned that operations are planned and conducted correctly. This is likely to include reports on employee hours and absenteeism, output per employee etc.

Good information is vital in order for the correct decisions to be made. Characteristics of good information are:

Relevant for its purpose
Accurate
Complete
Communicated by a correct channel of communication
Communicated to the right person
Cost Beneficial
Easy to use
Up to Date

All of these aspects combined should insure that the information reaching the different levels of the organisation would allow them to make correct and successful decisions for the business.

A primary task of management for any firm is coping with change. Management, and the information systems that support them, have to learn to deal with change and to adapt their operations accordingly in order to survive. Competition is a typical change that is taking place in every industry, managers need to be able to view data such as performance related data in order to constantly evaluate their position in the market place. This is important in making sure that they do not begin to lose their market share to their competitors. There is also increased globalisation with lower trade barriers etc. Another change is the faster pace at which business is moving. MIS systems need to be able to cope with these changes and the managers need to ensure that they are receiving the correct information, which will allow them to deal with these changes and make decisions accordingly.

Information Technology is one area, which has seen a lot of change and businesses have adapted to this change and are constantly using new technology. Computers play a big part in information flow in organisations. They are used in order to facilitate the various systems in place by acquiring, monitoring and communicating information. There are many functions of IT, which can produce data of company facts and figures, which is then processed into the information that the different levels in the organisation receive according to their needs. Although computers are not necessarily essential for MIS, they are an important means of producing information.

1.2 The Need for and Use of Internal and External Business Information In Organisations

As we have seen planning requires a lot of information. The types of information and their sources will vary from organisation to organisation but there is a general principle that for long term planning, external information is critical. At lower levels and on a short term basis internal information is important but for long-term goals and ensuring the survival of the company external information is vital.

Types of External Information:

Social Factors – this includes changing views on consumption and savings, what would be the effect of the changing family pattern?

Demographic Trends – This includes how the population structure is changing, is it an ageing population? Economic conditions such as what are the forecasts for growth, inflation and G.D.P. What will be the effect of the European single market?

Political Factors – How will political decisions affect businesses, will it effect trading in overseas markets?

Markets and Competition – How will the market be segmented, what would be the effect of growth in the market, what will competitors be doing?

Technological Change – Will the business be able to change and adapt to new technology, if so how will the changes affect the organisation.

Internal information is just as important to a business, however it is likely to be more useful to lower management for the day to day running of the business and for the short term. The majority of internal information is performance based and so managers and lower levels will be looking at where improvements can be made and will make decisions and set targets based on this information. This is using the feedback process. Feedback is a means towards improvement. It will be part of the output of systems and become part of the input of the system.

Types of Internal Information:

Personal Information – this will include labour skills, and training, sickness and attendance records

Financial Information – this will include data on profit, costs, cash flows and investments

Marketing and Sales information – this will be information on performance, revenues, distribution, market share

Production and Operational Information – this will be on assets, quality standards, outputs, and lead times.

Research and Development Information – this will focus on new products and developments.

The sources of internal information will be outputs of the organisations MIS, whereas with the external information the sources are likely to be published reports, government statistics, company reports etc.

This is a preview of the whole essay

Production and Operational Information – this will be on assets, quality standards, outputs, and lead times.

Research and Development Information – this will focus on new products and developments.

The Banking Industry is one of the largest and most lucrative industries in the world. With new entrants constantly entering the market and the rapid speed of the changes in the market, these businesses have to keep up with the changing times and constantly analyse internal and external information generated by MIS. MIS’s in this industry are vital to each business and they rely heavily on the information produced from it and also form external information to ensure their survival in a rapidly changing market.

Barclays Bank is one of the world’s largest banks with over 78,000 employees worldwide. They are a UK based financial services group engaged primarily in banking, investment banking and investment management. They set their objectives based on the information that they receive at each level from their MIS. They then make decisions on this information constantly keeping aware of their changing environment. I will look further into this industry and the changes it has undergone in the last decade later in the assignment.

2.1 MIS as a Business Management Function

Management takes place at all levels and management functions can be grouped into: Planning, Motivating, Control with decision-making taking place within each function

Information is vital to any organisation and everything an organisation does involves using information in some way. Information both supports and is involved in the total business process. Given the crucial role that information plays in and around organisations it is important that this information is managed effectively. Managers must understand the value of information.

For many management information systems, the focus is on the measure being monitored and reported upon. In organisational terms these are not always outputs, but can be divided into three categories:

Inputs: - The resources that are used by the organisation

Processes: - Involving tasks performed by employees, computers etc.

Outputs: - The direct services (or products) produced by the organisation

In managing information systems the environment should always be taken into account there are limited systems which are closed (isolated from its environment) and the majority are open which means that there is some kind of interaction with the environment. Feedback is also important part of managing information. It is part of the output of a system, which can then become the input of a system. The purpose of feedback is to help management and other employees to make decisions.

An example of this process in the banking industry would be that its inputs would include financial expenditure and hours of staff time worked. Its processes could include the number of customers served, or number and size of loans and other services provided. The outputs could be number of new accounts created, and average income per employee.

There are several information systems that a business can use to help its management of information, as it is unlikely that a business will use one system for several functions and levels.

Decision Support Systems (DSS) – A DSS helps to gather external, future orientated data and collate it with internal sourced data to help make decisions in semi structured and unstructured situations. A DSS need not be solely organisational wide; each function can have its own DSS. For example the marketing DSS can be used for such things as making various and vital forecasts, planning more effective advertising and evaluating market plans against other things. DSS are good in that they allow managers to analyse and condense a large amount of data into manageable amounts so that decisions can be made.

Executive Support System (ESS) – This collects data from both internal and external sources and is more user friendly. ESS is said to have taken over where other systems fall short in that it is more flexible and more interactive. ESS assist top management by providing information on critical areas of the organisations activities drawn from both internal and external databases. An example of an industry that uses this would be the banking industry. Barclays is an organisation that found this system particularly useful, as they were able to use it to deal with information relating to product sales and market share.

Transaction Processing Systems (TPS) – These deal with information concerning routine, operational level activities. These support most business functions and are used by most organisations including banking.

The information systems discussed are only a few of many types, and no matter what type of information system is used the function will usually be the same – to facilitate the running of the organisation by acquiring and communicating useful information. So as you can see using management information systems as a management function is vital to a business however there are problems that can occur from MIS.

-Problems with MIS

There is evidence to show that some existing MIS, often using advanced computer equipment, have had relatively little success in providing management with the information it needs. Some of the reasons for this include:

Lack of management involvement with the design of the MIS
Lack of management knowledge of computers
Not enough support from top management

- Often there can be a lack of understanding of technical terms and accounting statistics

To be successful a MIS must be designed and operated with the organisation in mind this includes technical factors and goals and objectives. Management should be informed enough to make an effective contribution to the design of the system, and information specialists should become more aware of managerial functions so that together the MIS can be more successful. To avoid problems there should be effective communication between these two groups. What is required is an awareness and understanding of key principles and functions so that the design is correct.

MIS as a business management function are very effective, when designed correctly with the organisation in mind.

2.2 Training Requirements when supporting MIS Implementation.

Computers are becoming more widely used and are now more likely to be used for the organisations MIS. In order for the MIS to be successful it is vital that all level of management are computer literate. This may mean that the company will have to train employees. Among the many benefits of computer based training the major benefit to an employer is the reduced cost. As they do not have to send people away on courses. An investment in a suitable training scheme often pays for itself, and staff can train when they like. Employees can get immediate feedback on progress and the only real disadvantage is the impersonal touch of being taught by a computer. However if all staff are train correctly then they should be able to manage information effectively.

Businesses should make all employees aware of the MIS in place at all levels. They are likely to be providing a lot of the inputs and outputs of the business and so management and other levels should all be knowledgeable of the organisations goals and the information needed to monitor these. Meetings and reviews are likely to be the best way of flowing information through an organisation. Barclays’ bank has regular team meetings in which the goals and objectives are assessed and new targets are set. Barclays believe that by doing this they are able to ensure that all employees are aware of the information produced by the MIS and how to use it.

Training is vital in an organisation to keep all levels of staff up to date with goals and performance of the business. There is the added benefit of motivating staff by doing so as they feel valued as an employee as they feel they have a valued input into the running of the business and so are interested in the success of the company.

3.1 Different Systems Applications that Store, Retrieve and Analyse Data

Businesses will use many different systems to store their data. There are some systems that will not require IT, however computers are an important way of producing information and so often the majority of systems an organisation will use will be through the use of IT.

Office Automation Systems support the larger activities that are carried out in an office. Examples of these would be word processing, desktop databases, E-mail. These systems are used regularly in organisations and are likely to be their main source of data.

Spreadsheets – much of the output of an organisations MIS is in the form of numerical data, for example sales forecasts, accounting statements and statistics. This method is usually very effective assuming that managers know what the data produced means and how to analyse it correctly. This may involve training, as if there is a lack of knowledge in this area then the value of the data produced by these systems will be greatly reduced, as it will not be used appropriately. The banking industry has many spreadsheet applications for the storage, retrieval and analysing of data. These include data such as customer accounts, accounting summary i.e. profit, accounts created, loans and debt spreadsheets and many more.

Graphs, Charts and Diagrams – these desktop applications are fairly simple to use and can be very effective as a means of storing and analysing data. They are very useful in highlighting trends, summarising information and showing comparisons. They are based on numeric data and are usually a supplement to more detailed reports. They are used often in the banking industry and Barclays Bank use them to highlight simple calculations, analysing relationships between variables such as their advertising and their sales (new accounts). Also they use them for comparing changes over time which they often use to monitor interest rates, and they it is also important to them in highlighting subtle changes such as a rise or fall in new accounts, and cost fluctuations. This means that often they can quickly spot problems that arise and can prevent them from becoming damaging.

Document Image Processing – This is a form of electronic filing. A document can be passed through a scanner, translated into digital form and stored. Barclays Bank use an optical disk to store their files, they find this system very valuable because of the amount of customer letters that they receive and send out. It is important that they keep all of these letters and so this system is used to do so. An optical disk can store up to 60,000 pages of A4. This also provides greater security, which is important in this industry.

Group Collaborative Systems – these include systems such as GroupWare, Intranet and extranet. It involves the company or a department as a whole rather than one individual.

GroupWare is software that is used to provide functions for a group. This will usually include schedulers, address books, journals and to do lists. All this information is available instantly from the desktop. However when information is shared it generally is more valuable to the business and is just as accessible for example:

E-mail- this is a system in which messages are communicated by electronic means rather than paper based communication. This means that there is considerable time saving, and documents can be attached such as a letter or spreadsheet. This can be very effective for businesses when they need answers quickly or are awaiting a document or spreadsheet, which if posted would take a few days, instead it, can be sent immediately through e-mail. Group scheduling can also be used so that colleagues will know when meetings that they should attend (such as team briefs) are scheduled.

Tele-conferencing and Video-conferencing – these systems allow numerous people to be simultaneously connected so that discussion can take place without having to meet. This is important in the Banking industry as often large clients can be based overseas, and the bank will want to keep in constant contact with these so that they can keep their custom. Also it means that they can communicate with their branches overseas without having the expense of travelling there. This means that costs can be kept to a minimum. Barclays Bank have recently begun the installation of video conferencing equipment, and although expensive they believe they would have saved more by reducing the need for managers and employees to travel.

Public Folders – this ensures that information is available to all employees who have access to it. This is important when a person is absent, as the information can still be viewed whereas if it was on their computer and not in a public folder then this could cause problems as other people would be unable to access it.

Intranet

This is an internal system, which uses Internet technology but is available only to the company and so unauthorised users cannot enter. This usually has information such as company policies, newsletters, announcements, and details on pay, remuneration and holiday and other information that employees should be aware of. Barclays Bank find this important in providing all employees with up to date news on the market, which is constantly changing and also on their products and services as these are usually altered in line with legislation. There are many benefits of this such as it is very easy to update and messages can be available to all employees at the same time.

Extranet

This is the same as an Intranet except it is available to authorised external users. They are still secure but offer the added benefit of being able to exchange information with business partners.

3.2 Integrated Packages

Businesses often have a systems that is either designed especially for their business (bespoke system) or one which was purchased according to the needs of the business (off the shelf purchase used by more than one company). These systems are used to produce specific data which a business feel is important and relevant to their decision making. They often integrate text, spreadsheet and database information.

Bespoke systems are expensive and can take time however they are generally more suited to the business as they are made specifically for the businesses needs. Off the shelf purchases are less expensive and can be tailored to a business to a certain extent. These systems are not designed for one business but are used by many.

ERP (Enterprise Resource Planning)

ERP is a software package/solution most often used within the manufacturing environment. ERP is a business tool that management uses to operate the business day-in and day-out. There is only one database that is used by all departments, such as Sales, Production, Finance and Accounting, Maintenance, and Engineering, Purchasing etc. ERP contains several modules but they are totally integrated. It makes use of databases, spreadsheet and text information and often only requires some changes to fit the requirements of the business process. This systems is useful in that it provides detailed reports of the business with data from all departments included. It gives higher level management information on the overall running of the business.

PIMS (Profit Impact of Marketing Strategies)

This is a large database system which holds useful information and experiences of some 3,000 businesses, for example figures relating to market shares, research and development spending, advertising costs etc. Other businesses use this database for such things as testing and planning strategies, solving various problems and generally getting a better understanding of their environment. It can help organisations to understand how customers make buying decisions, obtain an up to date picture of their markets, and monitor trends and new market segments. In addition PIMS can aid decisions relating to product lines sold, customer segments to target, channels of distribution, product and pricing strategies and overall effective marketing plans. As mentioned before external information is just as vital if not more to the businesses survival as internal information. A business should constantly be aware of the environment they operate in.

The banking industry, as any other will make use of these packages to assist in the running of their businesses. Depending on size each bank will usually have its own system whether unique or adjusted to suit them. RPM (Relationship Profitability Model) is a tool designed to help banks identify and manage profitability of their customers. This is used by a number of banks, Barclays have a systems which they use which I will discuss later.

4.1 Information Technology and The Banking Industry

In our society computers are being used more and more. They can be used to process information on which to base decisions as well as storage systems making information readily available. It is reasonable to say that without the power of computer systems, today’s modern business world could not function. If profiles of working populations in the developed world are examined, they show that the largest proportion of workers are now engaged in some form of information handling work.

The Banking industry is one which has undergone significant changes in the face of new technology over the last decade in order to stay competative.

As an example of changes taken place, the following is a timeline through the history of Barclays to show the changes it has undergone over the years and how technology has shaped its business:

Often because of the investment required and the mutual benefit competitors collaborate over technology. For example the banks exchange clearing information in compatible form which allows other bank’s customers to use their cashpoint machines.

There has been a significant change over the last 10 years in the way that people can make transactions and view their accounts, all without having to visit the branch. Customers are choosing to access banking services in alternative ways. Banks such as Barclays have responded to the technological advances in the last decade by developing telephone, internet and TV banking. Currently 15 million of the 94 million accounts held in the UK are accessible by phone. HSBC and Abbey National are introducing full interactive TV banking services via Sky’s Open Shopping channel. Also with the introduction of Automated Cash Machines (ATM’s) people are now able to access money from their accounts when the banks are closed.

Average transaction costs in the UK for telephone and internet are much lower than that of branch transaction costs and so with more customers using these services, the lower the costs are for banks.

Figure 2 – Cost Savings for Banks

According to these figures, the average cost per transaction conducted by a customer through traditional bank branch on the high street is just over £1. Moving that customer to the telephone cuts the cost by more than half, to 40 pence. Using an ATM cuts that cost again in half, and if the transaction is done via the internet it goes down to just 7p.

As a result of IT, Banks have seen the following effects in the last 10 years:

Greater Competition
Lower Prices
Lower Margins
Cost Savings
Productivity Gains

The rapid growth in technology has lead to many changes in banking in the last 10 years and these changes are not yet over and many experts believe that technology will continue to change the industry over the coming years.

4.2 Internet

The internet has become for the banking industry an excellent way of saving costs and providing their customers with an efficient way of banking. There is such a wide range of transactions that a customer can do that it means they do not have to visit the high street branch at all. Barclays introduced their online service in 1997, and they have seen a rise in the amount of cutomers onlin from 2.7m in 1999 to 3.5m in June 2002. The Internet has changed the way the industry conducts its business with less emphasis on customer contact in high street branches and more emphasis on providing a quick, and efficient banking service through the use of technology. An online system allows customers to plug into a range of banking services and so banking becomes easier for the average customer.

Figure 3 Internet Usage

This chart shows that it took 36 years to achieve 50 million users for radio, 13 years

for TV and 16 for PCs, but it has taken less than 5 years for the Internet.

The internet is constantly advancing with the Cooperative Bank recently announced Smile.co as the first full service internet bank, with current account, full overdraft facility, debit and credit cards and deposits via the post office.

Advantages of the Internet:

Consumers can access their bank accounts from home with a computer
Services are available 24 hrs a day , 7 days a week.
Transactions are quick and simple
Range of Transactions is Broad customers can do anything from simply checking an account to applying for a mortgage.

The only real disadvantage is that some people are not computer literate and not all consumers have access to the internet. There was a concern over Security with the Internet when the system was first set up however the banks have proved that their security is strict and carrying out transactions over the internet is safe.

Customers can now bank online and over the telephone without losing the expertise and assistance of specialist bankers, and so the Internet has changed the way in which banking is carried out and Banks are now enjoying the cost saving gains from the venture.

5.1 The importance of the role of information systems in conducting business and achieveing the goals of the business

Information is vital in conducting a business. Managers know what information that they need to oversee the running of their business, it is almost impossible for a business to continue successfully without the manager receievng any internal or external information. This can be important information such as profits related to employees etc or it could be more simple information such as information relating to stocks. No matter what system is in place every bit of information relating to the outputs and performance of the business will be important to take into account when planning. For example a manager may need to know when to re-order stocks and so a system which monitors sales is likey to be used, this will ensure that as stocks are sold they are replaced.

The primary purpose of any organisatin is to satisfy the needs of its clients or market. This applies whether it is profit orientated or not. Objectives express the direction and level of achievement expected from the organisation as a whole and at lower levels, from the individual parts, sections and departments which make up the organisation. Some organisations especially large ones, are complex and operate in uncertain and changing environments, have a number of objectives to cope with their various responsibilities. Reaching objectives and goals of the organisation, heavily relys on the information systems and the information that it produces. If it is a system that is not suited to the business and has flaws in the design then it is likely that the wrong information will be produced which will not indicate correctly if the objectives are being reached.

Barclays Bank sets its objectives and reviews them regularly. They strongly believe that the key to achieveing their objectives is ensuring that all employees are fully aware of the objectives and how they plan to reach them. The employees are also all briefed on the information that is used to plan and control objectives. They have small team talks every morning that runs through the days objectives and targets this will include sales, customer served, amount of credit card applications etc. this means that Barclays never go off track and are always concentrating on both long and short term objectives. Often a business can ignore the short term objectives and only set long term ones, however this means that a certain amount of control is lost in the running of the organiusation as there is no-oneoverseeing the day to day running. Braclays also have weekly meetings every Wednesday for an hour these are more detailed meetings where the long term objectives are discussed and any news for employees is given.

The banking industry is constantly involved in adapting their MIS’s to suit their needs and changing environment. This way they are able to conduct their business with the correct information available to them. A new system in the Banking Industry is one called CASHMASTER. This systems is already being used by a number of banks to help them conduct their business and reach objectives. It is a product of Global Management Technologies and is a leading edeg liqididty management software systems specifically designed to improves a bank’s profitability by more tightly managing and reducing cash levels in the branches, ATM’s, and vaults. It provides banks with the ablility to accurately forecast demand. The system is customised to the bank and provides a user with timely and expensicve reporting. There are constantly systems such as these being designed and so businesses that are in a fast moving industry such as banking can keep their systems up to date. This will ensure that they remain competitive.

6.1 User Needs

There are many different levels of employess in an organisation from the shop floor workers to the top level of management. Each of these groups will also have different needs and objectives. An MIS in an organisation will need to cover all the needs of all of these groups and provide them with the information each needs.

A manager in an organisation in terms of MIS, can effectively be any one who manages information that is produced. Reports and information provide a manager with a great deal of power. They can produce information that more exactly matches the managers particular needs at the time. Managers of different levels will each need information regarding their departments etc. For example a project manager may request the finances of a project.

Within Barclays the MIS is successfully providing all levels of management with the correct information. Forexample the top management is less concerned with the daily targets and so the they focus on the reports that are produced concerned with profits and new accounts and loans etc monthly. Barclays strongly believes that the key to success is regular meetings so that every employee in the organisation is aware of the MIS in place and is aware of what information each level needs.

The cashiers could be argued to be the main managers of information in Barclays Bank, each morning they have team briefs to continually review objectives and settargets for the day based on the information provided from reports on the previous days/weeks performance. They continually look for improvements and believe that if they keep their staff motivated by making them feel valued then the objectives are more likey to be met.

The lower level management are not as concerned with the daily targets and are looking more towards the monthly targets and ensureing that those objectives are met. The lower level management hold reviews every three weeks to look over each branches performance and sales. To keep up the motivation, prizes are awarded for the highest performing branch (see appendix). The MIS provides the managers with the vital performance related information they need based on monthly sales, profits etc. They need to be able to evaluate the firms posisiton at the end of the month and be able to spot problems before they become major ans threatening to the survival of the business.

Higher/top level management. At Barclays there is a three monthly review wihich involves all the top level managers. These managers are concerned with the long term success of the business and so the MIS is successful in providing them with both internal iformation on the profit accounts quarterly and also external information which is vital for planning. In this meeting the managers wil focus more on the end of year sale and profit figures rather than weekly or daily targets they need to ensure the smooth running of the business and Barclays MIS provides them with the correct information so that they can make informed decisions.

As discovered, MIS play a huge role in every organisation and is is reasonabl to say that without systems that provide infomratioin, busineses would not be able to function successfully. MIS form the foundations of every organisation and are found in every country. Although there are different types of MIS, they all sstrive to do the same thing provide managers with the information they need to conduct their business.

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Management Information Systems – MIS In Action