Origins, Definition, Components, Influence, Reasons, Benefits, and Challenges of Management Information Systems In Businesses

Introduction

A management information system (MIS) is a computerized database of financial information organized and programmed in such a way that it produces regular reports on operations for every level of management in a company. It is usually also possible to obtain special reports from the system easily. The main purpose of the MIS is to give managers feedback about their own performance; top management can monitor the company as a whole. Information displayed by the MIS typically shows "actual" data over against "planned" results and results from a year before; thus it measures progress against goals. The MIS receives data from company units and functions. Some of the data are collected automatically from computer-linked check-out counters; others are keyed in at periodic intervals. Routine reports are preprogrammed and run at intervals or on demand while others are obtained using built-in query languages; display functions built into the system are used by managers to check on status at desk-side computers connected to the MIS by networks. Many sophisticated systems also monitor and display the performance of the company's stock.

All businesses share one common asset, regardless of the type of business. It does not matter if they manufacture goods or provide services. It is a vital part of any business entity, whether a sole proprietorship or a multinational corporation. That common asset is information.

Information enables us to determine the need to create new products and services. Information tells us to move into new markets or to withdraw from other markets. Without information, the goods do not get made, the orders are not placed, the materials are not procured, the shipments are not delivered, the customers are not billed, and the business cannot survive.

But information has far lesser impact when presented as raw data. In order to maximize the value of information, it must be captured, analyzed, quantified, compiled, manipulated, made accessible, and shared. In order to accomplish those tasks, an information system (IS) must be designed, developed, administered, and maintained.

Origins And Evolution

The MIS represents the electronic automation of several different kinds of counting, tallying, record-keeping, and accounting techniques of which the by far oldest, of course, was the ledger on which the business owner kept track of his or her business. Automation emerged in the 1880s in the form of tabulating cards which could be sorted and counted. These were the punch-cards still remembered by many: they captured elements of information keyed in on punch-card machines; the cards were then processed by other machines some of which could print out results of tallies. Each card was the equivalent of what today would be called a database record, with different areas on the card treated as fields. World-famous IBM had its start in 1911; it was then called Computing-Tabulating-Recording Company. Before IBM there was C-T-R. Punch cards were used to keep time records and to record weights at scales. The U.S. Census used such cards to record and to manipulate its data as well. When the first computers emerged after World War II punch-card systems were used both as their front end (feeding them data and programs) and as their output (computers cut cards and other machines printed from these). Card systems did not entirely disappear until the 1970s. They were ultimately replaced by magnetic storage media (tape and disks). Computers using such storage media speeded up tallying; the computer introduced calculating functions. MIS developed as the most crucial accounting functions became computerized.

Waves of innovation spread the fundamental virtues of coherent information systems across all corporate functions and to all sizes of businesses in the 1970s, 80s, and 90s. Within companies major functional areas developed their own MIS capabilities; often these were not yet connected: engineering, manufacturing, and inventory systems developed side by side sometimes running on specialized hardware. Personal computers ("micros," PCs) appeared in the 70s and spread widely in the 80s. Some of these were used as free-standing "seeds" of MIS systems serving sales, marketing, and personnel systems, with summarized data from them transferred to the "mainframe." In the 1980s networked PCs appeared and developed into powerful systems in their own right in the 1990s in many companies displacing midsized and small computers. Equipped with powerful database engines, such networks were in turn organized for MIS purposes. Simultaneously, in the 90s, the World Wide Web came of age, morphed into the Internet with a visual interface, connecting all sorts of systems to one another.

Midway through the first decade of the 21st century the narrowly conceived idea of the MIS has become somewhat fuzzy. Management information systems, of course, are still doing their jobs, but their function is now one among many others that feed information to people in business to help them manage. Systems are available for computer assisted design and manufacturing (CAD-CAM); computers supervise industrial processes in power, chemicals, petrochemicals, pipelines, transport systems, etc. Systems manage and transfer money worldwide and communicate worldwide. Virtually all major administrative functions are supported by automated system. Many people now file their taxes over the Internet and have their refunds credited (or money owning deducted) from bank accounts automatically. MIS was thus the first major system of the Information Age. At present the initials IT are coming into universal use. "Information Technology" is now the category to designate any and all software-hardware-communications structures that today work like a virtual nervous system of society at all levels.

Definition of MIS

Management Information System, commonly referred to as MIS is a phrase consisting of three words: management, information and systems. Looking at these three words, it’s easy to define Management Information Systems as systems that provide information to management.

That is the simple definition of MIS that generally sums up what a Management Information System is, and what it should do. However, its role and impact on the smooth operation of a company can never be overemphasized. That is the reason why every successful company makes use of these systems in one way or another.

The reason why Management Information Systems are very important in the day to day operation of companies is because these systems work with people, organizations, technology and relationships among the people and organizations affecting the company.

This means that when properly implemented, Management Information Systems will help achieve a high level of efficiency in a company’s management operations.

Components Of Management Information Systems

To effectively deliver the information needed to decision makers, Management Information Systems need to have the necessary components to collect, process, store and retrieve the information whenever it is needed. To achieve this, these systems use the following four components:

Information System. This is a combination of software, hardware, personnel and infrastructure. This component helps in the collection of data that is stored in the MIS. The hardware includes computers, scanners, printers and network devices. The software elements include the company’s enterprise software and any other software that is used in the running of the company’s network. This component makes it possible for employees to interact with the system and thus information can be collected.

Database Management System. This component is primarily made up of computer programs that help in the storage and retrieval of data. Of course, it also includes the actual physical databases where the information is stored after it has been captured. There are several different database management systems that can be used in Management Information Systems. The suitability of the systems will depend on the amount of data that will need to be processed and stored in the system. There are small database management systems that can comfortably work on personal computers and there are huge ones that will need larger and more complex machines like mainframe computers. Learn more about database technologies.

Intelligence System. This component is concerned with processing of the data collected and presenting it in a manner that is easy to comprehend. Everything from the processing of the data to the displaying of the data is designed to give top executives an easy time as they try to make decisions concerning the business. It is sometimes referred to as business intelligence which stores human knowledge and uses the logic to formulate quick solutions for future problems where patterns match.

Research System. This component is concerned with identifying the main management problems in the organization and coming up with alternative decisions that could have sufficed in a particular situation. This helps ensure that all the possible options are analyzed and the best decision made. The best decision is not always the most obvious one. This component of Management Information systems ensures that the best decision is reached even in those instances.

How do Information Systems Influence Modern Business?

In today’s continuously changing and fast moving world, where customers’ requirements and preferences are always evolving, the only businesses that can hope to remain competitive and continue to function at the performance levels that can match their customers’ expectations are those that are going to embrace innovation. In the recent past, any business success has been pegged on the information technology quality that the business has employed and the capability to correctly use such information.

Information systems (IS) importance has increased dramatically, and most businesses have been prompted to introduce it to keep their competitive edge. Today, nobody can envisage a business without an effective information system. Introduction of an information system to a business can bring numerous benefits and assist in the way the business handles its external and internal processes that a business encounters daily and decision making for the future.

Reasons for initiating a Management Information System (MIS) in an organization

1. To control the creation and growth of records

Despite decades of using various non-paper storage media, the amount of paper in our offices continues to escalate. An effective records information system addresses both creation control (limits the generation of records or copies not required to operate the business) and records retention (a system for destroying useless records or retiring inactive records), thus stabilizing the growth of records in all formats.

2. To reduce operating costs

Recordkeeping requires administrative dollars for filing equipment, space in offices, and staffing to maintain an organized filing system (or to search for lost records when there is no organized system).

It costs considerably less per linear foot of records to store inactive records in a Data Records Center versus in the office. [Multiply that by 30% to 50% of the records in an office that doesn't have a records management program in place], and there is an opportunity to effect some cost savings in space and equipment, and an opportunity to utilize staff more productively - just by implementing a records management program.

3. To improve efficiency and productivity

Time spent searching for missing or misfiled records is non-productive. A good records management program (e.g. a document system) can help any organization upgrade its recordkeeping systems so that information retrieval is enhanced, with corresponding improvements in office efficiency and productivity. A well designed and operated filing system with an effective index can facilitate retrieval and deliver information to users as quickly as they need it.

Moreover, a well managed information system acting as a corporate asset enables organizations to objectively evaluate their use of information and accurately lay out a roadmap for improvements that optimize business returns.

4. To assimilate new records management technologies

A good records management program provides an organization with the capability to assimilate new technologies and take advantage of their many benefits. Investments in new computer systems whether this is financial, business or otherwise, don't solve filing problems unless current manual recordkeeping or bookkeeping systems are analyzed (and occasionally, overhauled) before automation is applied.

5. To ensure regulatory compliance

In terms of recordkeeping requirements, China is a heavily regulated country. These laws can create major compliance problems for businesses and government agencies since they can be difficult to locate, interpret and apply. The only way an organization can be reasonably sure that it is in full compliance with laws and regulations is by operating a good management information system which takes responsibility for regulatory compliance, while working closely with the local authorities. Failure to comply with laws and regulations could result in severe fines, penalties or other legal consequences.

6. To minimize litigation risks

Business organizations implement management information systems and programs in order to reduce the risks associated with litigation and potential penalties. This can be equally true in Government agencies. For example, a consistently applied records management program can reduce the liabilities associated with document disposal by providing for their systematic, routine disposal in the normal course of business.

7. To safeguard vital information

Every organization, public or private, needs a comprehensive program for protecting its vital records and information from catastrophe or disaster, because every organization is vulnerable to loss. Operated as part of a good management information system, vital records programs preserve the integrity and confidentiality of the most important records and safeguard the vital information assets according to a "Plan" to protect the records. This is especially the case for financial information whereby ERP (Enterprise Resource Planning) systems are being deployed in large companies.

8. To support better management decision making

In today's business environment, the manager that has the relevant data first often wins, either by making the decision ahead of the competition, or by making a better, more informed decision. A good management information system can help ensure that managers and executives have the information they need when they need it.

By implementing an enterprise-wide file organization, including indexing and retrieval capability, managers can obtain and assemble pertinent information quickly for current decisions and future business planning purposes. Likewise, implementing a good ERP system to take account of all the business’ processes both financial and operational will give an organization more advantages than one who was operating a manual based system.

9. To preserve the corporate memory

An organization's files, records and financial data contain its institutional memory, an irreplaceable asset that is often overlooked. Every business day, you create the records, which could become background data for future management decisions and planning.

10. To foster professionalism in running the business

A business office with files, documents and financial data askew, stacked on top of file cabinets and in boxes everywhere, creates a poor working environment. The perceptions of customers and the public, and "image" and "morale" of the staff, though hard to quantify in cost-benefit terms, may be among the best reasons to establish a good management information system.

Advantages Of Management Information Systems

There are many benefits that come with applying Management Information Systems. Some of these benefits help make work easier for management while the rest of them help the organization as a whole.

Let’s take a closer look and see what you stand to gain from having a MIS.

All stakeholders in the company have access to one single database that holds all the data that will be needed in day to day operations. If the MIS is used for project management, the contractor, client and consultant will be able to achieve a high level of transparency hence it will be easy to develop trust. Operations will also be smoother because information will always be readily available and data collection methods like forms or questionnaires will be standardized.

Employees and other stakeholders in the organization will be able to spend more time doing productive tasks. This is because a big chunk of their time is saved thanks to the more efficient information system. This time would have otherwise been spent setting up or retrieving traditional information recording systems such as forms and files. As a result, the company is able to save on manpower costs, while at the same time producing more output in a fixed time span will now be spent productively.

Another benefit of Management Information Systems is that they bring the power of data processing tools that help significantly improve the quality of decisions made in the company. A majority of Management Information Systems have built-in data processing tools that are able to draw conclusions based on the inputs received from the different sources. This helps make better plans for material management, manpower allocation and even the overall execution of the project.

Owing to the flexibility that is brought by the use of mobile devices such as tablet computers and smartphones, Management Information Systems ensure that employees have easier and closer interaction with information about the progress of any process within the organization. This also ensures a higher degree of accuracy in data collection since it will be possible to record the progress in smaller milestones throughout the day on mobile devices as opposed to recording once at the end of the day. As a result, management is able to get a better idea of the progress due to the availability of the latest information.

Inputs and modifications in these systems are logged and the authors noted. The time when the change has been made is also recorded for future reference. This means that the company is able to achieve a higher degree of accountability since all the actions can always be tracked back to the particular individuals who initiated them. This also means that the best performing employees can also be easily identified since information such as production numbers per shift and sales reports are always available and well presented in the system.

Management Information Systems help reduce the amount of paperwork that departments have to deal with thanks to the central database that’s accessible from the company network. This means that in addition to making processes simpler and faster, the company is able to go paperless while at the same time reducing its carbon footprint. The bills also go down since the need for items like plain papers, ink and toner cartridges will be reduced significantly. Transportation costs are also reduced since there will be no need for shipping documents back and forth for approval and signatures. Shelf space will be saved and used for other tasks. Company wastes will also be reduced when the company goes paperless.

Reports make it easy for companies to easily identify their strengths and weaknesses in carrying out various tasks. Management Information Systems provide revenue reports, performance reports for employees, expenses tracking reports and many others. When companies use these reports, they are able to improve their operations.

From a top executive perspective, Management Information Systems help give an overall impression of where the company stands financially. These systems can also give overall status reports for specific projects within the organization. This enables top executives and managers to easily tell if the company is on track towards achieving its goals.

Most Management Information Systems provide a channel for customers to collect and store vital data and feedback from customers. With this data, companies can easily adjust their products and marketing campaigns to better suit the needs of the customers hence improving on sales.

With management information systems, a company gains competitive advantage. This is because operations are faster and smoother and thus results are achieved faster and more efficiently. Customers will be happy with the service delivery because they will be getting the answers that they seek faster and employees will be motivated because most of the tasks will become easier with better access to data.

MIS helps eliminate redundant roles. When information is stored efficiently, it’s possible to identify parts of a system that are unnecessary. This means that any efforts that were duplicated are eliminated hence the company is able to better use the available resources.

Challenges When Applying Management Information Systems In Business

Even with the numerous benefits, there are a number of challenges that companies are likely to face when applying Management Information Systems in their businesses.

The first challenge is in the cost of equipment. For a big company to successfully incorporate a Management Information system there is a need to purchase devices that the employees and management executives will be using to interact with the system. These devices include servers, tablets, laptops and desktop computers. In addition, the company needs to invest in a good network that will connect these devices in order for the system to work effectively.

Training of the workforce can also become a problem when applying Management Information Systems in a company. Without a proper understanding of how the system works, it can be hard to reap the full benefits of using it. This therefore makes it necessary for the company to ensure that employees and their managers are well trained on how to use the system. This can be an expensive and time consuming exercise.

The systems are expensive to purchase. Owing to the unique needs of each organization, Management Information Systems have to be customized for each company. This means that there has to be brainstorming sessions where the vendors sit with management officials seeking to understand the needs before they can develop the system. As a result, the cost of the system goes up, thus taking it out of reach for small and medium companies.

Many companies end up purchasing systems that lack the features they need most. As mentioned earlier, each company has its own unique needs when it comes to Management Information Systems. When you purchase a system that is not meant for your company, you will have better access to data that doesn’t help improve your operations. As a result, you will not be able to get the best return on investment.

There is also a need for trained personnel to keep the system in good working order at all times. Like any other system, management information systems need proper maintenance in order for them to produce the best results. This means that you will need to add specialized personnel for system maintenance in your company. Without these people, using the system will be a challenge since errors will go unresolved and this will result in inefficiencies in the operations.

Management Information Systems are heavily affected by large changes in the company. This means that before you make any change in the way you run the company, there will be a need to consider the impact of the changes on the information system. Sometimes, it becomes impossible to make some changes without changing the Management Information Systems hence having the system in place ends up being a limitation. However, most small changes should easily be incorporated in a good MIS.

Management Information Systems will result in the loss of employment for a number of employees in a company. People like office messengers and traditional registry clerks will need to be reduced or eliminated after the system has been incorporated since some of these tasks will be automatically done on the system. These employees will not be happy about the changes and this can easily result in lawsuits or other problems with trade unions when large numbers of employees are retrenched.