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Home » Management » Management Information System

BCG Matrix

By Dinesh Thakur

BCG Matrix is a simple tool. This tool is mostly used to understand and analyze business units and product lines. It was developed by Brucy Henderson of Boston Consulting Group. It is a powerful tool which can be used for resource allocation decisions in strategic management. Given below is a figure that represents the basic contours of a BCG matrix. This tool places business units/products/brands within four quadrants, based on their relative market share and market growth.

   BCG Matrix

The names of the quadrants are ‘Star’, ‘Question Mark’, ‘Cash Cow’ and ‘Dog’. Each quadrant represents some unique characteristics. These are given below:

  1. Star-these are units in fast growing industries and have large market share. They require cash for growth as they are net balanced in cash flows. It is hoped that they would become cash cows.
  2. Cash cows-these are units in a slow growing industry but have large market share. They are cash flow positive and are considered to be great assets. Investment required in such units is low but output of these units in terms of profits and cash flow is high.
  3. Dogs-these are the units in a slow growing industry that also have low market share. They break-even and are ideal candidates for being sold off. They are considered to be poor assets.
  4. Question mark-these are units which though in growing markets have low market share. They consume a large amount of cash for expansion and are typically not in a position to generate large cash flows. Hence, they are cash negative. They can become dogs and hence the companies should either invest heavily in such units or sell them off.




Type of Management Reports

By Dinesh Thakur

The means by which this data driven manager achieves his tasks on reports. Reports convey to the manager the following:

  1. It gives an idea of whether activities under his sphere of influence are happening as per expectations. For example, when a production manager checks the production schedule and compares it with actual production in the factory. This is done by comparing it with the actual production report. In this case, the manager is trying to compare and see whether the production process is within control and that the production is as per expectations. Any deviations in the actual will indicate that the process is not within control and hence, corrective action is required.
  2. It gives a clue or an insight into some bigger problem that might be happening within the organization. For example, if a manager notices that the attrition rate is going up sharply it might give him the insight that either the market for skills of his employees has become more competitive or that more players may have entered the market with the same skill set or that the salary levels of the present organization are way below prevailing market rates for such skills. This might lead the manager to delve deeper into the problem of attrition which is only a symptom of a much larger phenomenon. Such behavioral changes of his own workforce are prompting them to have lesser loyalty and focus more on monetary compensation.

Hence, we can see that a modern manager relies heavily on data to take decisions and the means by which he gets the information is through report. Reports are of many types.

Scheduled reports

These are reports that are generated regularly with respect to time. They are in the nature of daily report, weekly report or monthly report. They contain information that is of recent origin and help the manager to understand and analyze the information from the context of the recent past. These reports are the first line of reports which normally show the first signs of problems or opportunities that can be understood through the data.

On-demand reports

These types of reports are unscheduled in nature and are created based on the need of the managers for such reports. They help in analyzing a particular issue in greater degree of granularity. These reports are generally the result of a reaction to any event.

Exception reports

In management, exceptions warrant greater attention than any normal event. Exception reports are special reports that indicate to the manager that some control needs to be exercised to bring an issue under control. For example, if in a company the average absenteeism is two per cent and in the last week, the average absenteeism is twenty percent then an exception report is generated to make the concerned manager aware that something is amiss and needs attention.

Predictive reports

These are special reports that give the manager a sneak preview of the future. These reports give a scenario of the future and are very useful for planning.

Summary reports

These are general reports that aggregates data and provides summarized information to the manager so that he may get a macro view of an issue.

Regulatory and statutory report

These are reports created under the obligations to follow rules and statues. They are primarily meant for external consumption for the information needs of regulatory bodies. Thus, we see that the reports tell the manager the issue behind a problem and give him all the information he needs to take decisions. However, information can be of various degrees of value to a manager. A set of information that he already knows is’ of little value to him incorrect information has a negative value. So we must understand the meaning of valuable information.




Problems in Implementing MIS

By Dinesh Thakur

Resistance to change is a normal human tendency. MIS when implemented, changes a lot of things within the organization. It ushers in a new way of working in the organization. It changes power structures, the way people view their work, changes skill requirements of employees, processes and also the entire organizational culture.

This change can cause problems in the implementation process, as there may be resistance to this change from employees. Moreover, the implementation of MIS involves migration of an information system from a controlled environment of design and development to a ‘real’ environment of an organization. Sometimes, information systems that work fine in a controlled environment fail to deliver in the ‘real’ environment. This may require some tailoring and customization of the system. The management should ensure that such minor glitches should not be used as an excuse by rumormongers to malign the new system.

Management should have a mature view that such problems are not expected in the implementation process, ensuring such technical issue remains a technical issue only and are not blown up into an organizational issue. A strong message from the top management favoring the new system thwarts such attempts at maligning the new system and hence is advocated. However, in spite of the best efforts some factors cause problems in the implementation process. The major factors that determine the degree of resistance that organizations face in implementing MIS are,

  1. The degree of MIS driven change in departmental boundaries-any major change that changes the functioning of departments drastically is likely to be challenged or resisted by the department functionaries as it changes their way of working. This resistance should be anticipated at the design stage. Typically, if a BPR exercise is conducted along with the requirement analysis of the system then such exercises result in recommendations of change in business processes which result in changes in the organization structure or functioning of departments. Thus, the fact that such a change is on its way is known to the management well in advance. Hence, they should prepare the workforce for it.
  2. Lack of organization culture supporting MIS-some organizations does not have a culture of information based decision-making. Implementation of MIS is such organizations are always a challenge, as the employees have to be trained to appreciate the importance of information. They become so used to judgment based decision-making that such training has very little impact. In some cases, it has been noted that even after implementation of MIS the organization culture has not changed and that managers continue to resist changes brought on by installation of MIS.
  3. The degree of employee involvement in the MIS creation-this is a major issue in implementation of MIS. If employee participation is good then resistance to MIS is less.
  4. The degree of employee involvement in the implementation of change along with MIS is a major issue. If the management uses a participatory approach towards MIS implementation then resistance to MIS is less.

The degree of MIS driven change in the informal system-if MIS changes the informal communication system completely then resistance is more. This informal communication channel is a source of power for some individuals. They resent their loss of power due to emergence of MIS as the sole authority for communication




Limitations of MIS

By Dinesh Thakur

Even though MIS has many benefits it has its limitations. MIS is sometimes considered a solution for every bane within an organization. While MIS may solve some critical problems but it is not a solution to all problems of an organization. The limitations of MIS may be stated as,

  1. The MIS is as good as its design-MIS if designed in an improper manner does not serve the management and hence is of little relevance.
  2. The MIS is as good as its users-if the users do not know how to leverage the information available from MIS then MIS is of little use.
  3. The MIS is no good if the basic data is obsolete and outdated (for example, MIS will only facilitate garbage with information and in about garbage-out-process).




Benefits of MIS

By Dinesh Thakur

MIS when properly developed and used in an organization brings in a lot of benefits for the organization. A list of the benefits of MIS for a organization are:

MIS increases productivity

  1. MIS reduces time, errors and costs associated with processing information.
  2. To increase productivity, MIS follows Online Transaction Processing (OL TP). OLTP is the gathering of data as input, processing that input data and updating the data to create valuable information from this processed data.
  3. Another area in which modern MIS improves productivity is by allowing customers to process their own transactions through the use of a Customer-Integrated System (CIS).

MIS enhances the quality of decision-making

  1. MIS helps top management to do business in a better way, find solutions to problems/opportunities, or help them in decision-making by providing the relevant information.
  2. MIS support for decision-making falls in two categories:
      1. When MIS helps you analyze a situation by providing all the relevant information about the situation and then expecting you to make the decision.
      2. When MIS actually makes some sort of recommendation or giving some insight into what decision to take.

MIS improves communication and helps develop team work

  1. MIS helps to manage information and facilitates communication between diverse teams.
  2. A collaborative management information system is a specific system to improve team work.
  3. One aspect of EDI is Electronic Funds Transfer (EFT) which allows for payment without physically sending money.

MIS can facilitate organizational transformation

  1. MIS helps organizations to remain competitive or enter new markets and transform the way business is done.




What is MIS? Define the Function and characteristics of MIS?

By Dinesh Thakur

Management information system is a set of systems which helps management at different levels to take better decisions by providing the necessary information to managers. Management information system is not a monolithic entity but a collection of systems which provide the user with a monolithic feel as far as information delivery, transmission and storage is concerned.

The different subsystems working at the background have different objectives but work in concert with each other to satisfy the overall requirement of managers for good quality information. Management information systems can be installed by either procuring off the self systems or by commissioning a completely customized solution. Sometimes, management information systems can be a mix of both, i.e., an ‘off the self system but customized as per the need of the organization.

However, before we precede any further we must have a clear understanding of what managers do in an organization and why they need management information systems. The former issue has already been dealt with at length in the previous sections. Only a brief overview is given here.

Managers are the key people in an organization who ultimately determine the destiny of the organization. They set the agenda and goals of the organization, plan for achieving the goals, implement those plans and monitor the situation regularly to ensure that deviations from the laid down plan is controlled. This set of activity ensures the smooth functioning of the organization and helps it attain its objectives. Hence, these managers are vital for a successful organization. The managers in turn conduct these activities collectively management functions. They decide on all such issues that have relevance to the goals and objectives of the organization. The decisions range from routine decisions taken regularly to strategic decisions, which are sometimes taken once in the lifetime of an organization. The decisions differ in the following degrees,

  1. Complexity
  2. Information requirement for taking the decision
  3. Relevance
  4. Effect on the organization
  5. Degree of structured behavior of the decision-making process.

The different types of decisions require different type of information as without information one cannot decide.

They have common characteristics and even though their actual implementation in an organization may differ according to the needs of the organization, their basic characteristics remain the same. The information technology platform on which management information system is based may also vary in terms of complexity and scale but the technology component does not change the broad characteristics of management information system. Technology is only the medium through which the solution is delivered. Management information systems may consist of a set of information systems working towards the common goal of achieving greater efficiency in management decision-making for each level of management. Typically, management information systems deal with information that is generated internally. The in-house data is processed (summarized/aggregated) to create reports, which helps the management at different levels in taking decisions. Today’s management information systems have a data repository at the core, which is mostly in the form of a relational database management system. All in-house data (mostly transaction related) are saved in this database, which is itself designed on the basis of set rules. Over this data repository lies several tiers of logic and/or business rules which helps in creating an interface and the various reports for use of managers at different levels. The management information system is normally designed in order to achieve an information flow that is based on a ‘need to know’ principle. This means that any manager would be given only that type and kind of information for which he is entitled and for which he has any use. This means, that a shop floor supervisor may get the personal details of all people working under him but will not get to view the salary details of the CEO as he/she is not entitled to know such information. The floor supervisor will not get to see the personnel details of all employees working in the human resource department as he has no use for such information. This hierarchical rule-based information delivery to the different levels of management is put in place to avoid both information overload and to enable information security.

Many modern systems have come up in recent times to help the manager in their tasks, like enterprise-wide resource planning systems that is, basically, transaction processing/ support systems but comes inbuilt with a lot of best practices of the industry and helps in generating integrated scenarios for the managers at different levels. Customer relationship management systems help in the management of customers by creating profiles and making available complex analytical tools for processing customer data to the managers. Similarly, there are systems to help managers deal with supply chain data called supply chain management systems. All these modern systems help in achieving greater efficiency by making the job of management decision-making better and therefore, fall under the category of management information system.

Conceptually, management information systems and information technology are two very different things. Management information system is an information management concept. Indeed technologies will change and have changed in the past but management information system and its requirement and characteristics will broadly remain the same. Only MIS with changing time and technology regimes will have different technology platforms. In the early seventies MIS was mostly run on mainframe computers with COBOL programs. In the eighties and nineties that changed to a personal computer based solution using networking and with databases and 4GL tools. Today MIS runs on advanced computer networks with wireless connectivity with hugely advanced software tools but the broad characteristics of MIS have remained the same. In the sixties and seventies it was instrumental in providing information which helped in management decision-making just like it provides today. Only the degree and quality of information has improved. However, the character of MIS has not changed with changing technology. Technology has always been and will be a platform for MIS, However, the technology intervention to provide the platform for MIS has increasingly grown over time and some confuse MIS with the technology on which it runs. Technology has become an integral part of MIS but one must appreciate that MIS is a much larger concept, critical to management decision-making.

The nature of MIS is passive it only supplies information to managers. It does not actively lead the managers to a decision. The managers take decisions with the support of the management information system. The system only supplies the background information on which such decisions are based. The system does not provide active decision support. It does not have models to mimic the real life scenarios as a proactive system like the one the decision support system has. Even though this role of providing information is very important it is only an enabler for better decisions.

Managers take decisions based on several triggers and in several ways. Some managers are optimists and take an optimistic view of any situation, be it a problem or an opportunity. While others take a completely different view in the sense that they are pessimists at all times. They look at only the negative side of decisions. Some managers take decisions based on instinctive reaction. Some take decisions based on analysis of data. These data driven managers rely wholly on information systems to provide them with the necessary data and information in the form of reports. Nowadays, the prevailing view is that the data driven, analytics driven way of taking decisions delivers greater value to the organization than the instinctive feeling based decisions. In the instinctive feeling based decision-making approach, the judgment and experience of the manager plays the most important role in his choosing an alternative. This factis often misunderstood by the proponents of ‘gut feeling’ based decision-making supporters and has been beautifully described in a book written by Malcolm Gladwell titled ‘Blink’.

Hence, the contemporary wisdom suggests that managerial decisions must be taken on the basis of solid rationale and information. If the manager has complete information about a problem or opportunity, then he can take an appropriate decision. On the other hand, his decision will be based on gut feeling or judgment which is prone to personal bias and hence, is likely to be inaccurate. Therefore, managers in today’s world are more and more data driven rather than instinct driven.

MIS Functions

The broad functions of MIS are as given below:

  1. To improve decision-making: MIS helps management by providing background information on a variety of issues and helps to improve the decision-making quality of management. The fast and accurate information supplied by MIS is leveraged by the managers to take quicker and better decisions thereby improving the decision-making quality and adding to the bottom line of the company.
  2. To improve efficiency: MIS helps managers to conduct their tasks with greater ease and with better efficiency. This reflects in better productivity for the company.
  3. To provide connectivity: MIS provides managers with better connectivity with the rest of the organization.

                                      Functions of MIS

Characteristics of MIS

Management information being a specialized information system conforms to certain characteristics. These characteristics are generic in nature. These characteristics remain more or less the same even when the technology around such management information system changes:

Management oriented

One important feature of MIS is that MIS is designed top-down. This means that the system is designed around the need felt by the management at different levels for information. The focus of the system is to satisfy the information needs of management.

Management directed

Since MIS is ‘for the’ management it is imperative that it also should have a very strong ‘by the’ management initiative. Management is involved in the designing process of MIS and also in its continuous review and up gradation to develop a good qualitative system. The system is structured as per directions factored by management. This helps in minimizing the gap between expectations of management form the system and the actual system.

Integrated

MIS is an integrated system. It is integrated with all operational and functional activities of management. This is an important characteristic and- requirement for a system to qualify as MIS. The reason for having an integrated system is that information in the managerial context for decision-making may be required from different areas from within the organization. If MIS remains a collection of isolated systems and each satisfying a small objective, then the integrated information need of managers will not be fulfiller. In order to provide a complete picture of the scenario, complete information is needed which only an integrated system can provide.

Common data flows

Through MIS the data being stored into the system, retrieved from the system, disseminated within the system or processed by the system can be handled in an integrated manner. The integrated approach towards data management will result in avoiding duplication of data, data redundancy and will help to simplify operations.

Strategic planning

MIS cannot be designed overnight. It requires very high degree of planning which goes into creating an effective organization. The reason for this kind of planning is to ensure that the MIS being built not only satisfies the information need of the managers today but can also serve the organization for the next five to ten years with modifications. Sometimes when the planning part is done away with, systems tend to perform well in the present but they tend to become obsolete with time. Planning helps to avoid this problem.

Bias towards centralization

MIS is required to give ‘one version of the truth’, i.e., it must supply the correct version of the latest information. There is a requirement for the data repository to be centralized. Centralized data management helps MIS to exercise version control as well as provide an integrated common view of data to the managers. In a non-centralized system, data will get entered, updated and deleted from the system from different locations. In such a case it becomes difficult to provide correct information to managers. For example, in a decentralized System if a person superannuates from an organization and his superannuating is only recorded in the human resource system but not communicated to the finance department system, then it is quite likely that his salary may be generated by the finance system for the next month. A centralized system where data in entered, updated and deleted from only one location does not suffer from such problems. In a centralized system, the superannuating employee’s details are deleted from the master file from which all departments’ access data, thereby eliminating the risk of generating his salary for the next month.




What is Information Technology?

By Dinesh Thakur

The subject of information management is however distinct from information technology, even though there is a lot of dependence on information technology to manage information.

When the realization dawned on management thinkers that information can also be regarded as a key resource, they were faced with the issue of managing it because information can only be a resource if it lends itself to processing that includes one or more of the following operations,

  1. Recording-transaction level data is saved in a proper format for retrieval later.
  2. Sorting, merging and sequencing-ordering and sequencing the data in records.
  3. Analyzing-analyzing the data using any analysis methodology like summarization, or clustering.
  4. Retrieving-cutting out information from huge data repositories.
  5. Reproducing-generating information again and again.
  6. Visualizing-providing information in a visually stimulating manner.

Moreover, gathering information is another complex task involving the capture and storage of transactions in databases which have to be designed suitably and then accessing this data repository using networks. The visualization aspect or the output of the data is in itself another complex operation involving query optimization, graphics, analysis and modeling of information.

Information technology is a term used to refer to the basket of technologies, like networking, communication, database management, application software, computer hardware and system software, graphical display and internet enabled technologies. The scope of IT in organizations may be termed as:

  1. IT platform which is the hardware and software infrastructure of the organization.
  2. Information reaches which is the ability of the organization’s IT platform to reach out and capture information both within and outside the organization.
  3. Information range which is the diverse type of information and related services that the IT platform allows the managers to access in the organization.




What Types of Information Systems Do Organizations Use?

By Dinesh Thakur

Organizations use several types of information systems to suit their needs. The various types of information systems that an organization uses may be classified into the following categories:

  1. Office automation systems
  2. Transaction processing system
  3. Decision support systems
  4. Executive information systems
  5. Business expert system

Apart from these broad classes of information systems, organizations also use specific information systems for some special tasks like executive information system, enterprise (wide) resource planning systems, customer relationship management systems and supply chain management system. These systems also fall under the above broad classification.

Office Automation Systems

This type of information system aids in automating office tasks. They have a limited role in decision-making and are more useful for operational level people. The information coming out of this kind of system can be used for rule-based decision-making for managers at the operational level. These systems however play an important role in automating several functions of an office and thus help in creating paperless offices. These kinds of systems help in increasing the productivity and efficiency of the office workforce by automating simple tasks. These systems mostly deal with operational data. More and more modern businesses are opting for this paperless office environment as this brings in the following unique advantages for the business:

  1. Office work becomes faster and process driven.
  2. All basic level data is digitized and stored for future action.

An example of office automation system is the office suite of software that helps in automating simple office tasks like presentations and documentation. Sometimes we also come across a class of systems called the operations support system (OSS). OSS also work with the lowest levl31of management is ensuring that the operations of the firm are performed smoothly. OSS can be very different from Office Automation System even though they both help bottom level managers, in term of the information complexity involved.

Transaction Processing System

This type of system is critical to the smooth functioning of an organization. The objective of this kind of system is to capture all transaction related data between the organization and its external and internal customers. Typically, these transaction level data are stored in a pre-formatted manner in a relational database for further action in future. TPS is the most widely used form of information systems as they provide the management with the flexibility of storing data in a structured manner and retrieving it at a later date using a query facility. The system also helps in aggregating and summarizing the data for creating of management reports. These reports are further improved by using visualization tools that help the management in understanding situations and scenarios better. These systems deal with tactical data from within the organization.

An example of TPS would be the sales management system with a relational database management system at the server side back end and a customized front end to interact with the users.

Decision Support Systems

Decision support systems help senior management to take strategic decisions. Contrary to the other systems, decision support systems are developed with the objective of providing the users (top management personnel) with unstructured information. These systems help the management to develop ‘what if analysis’ so that different scenarios can be developed for decision-making. Decision support systems deal with both internal and external data. Such systems are custom built with features like business dashboard and scenario panel.

Such systems are complex with working models (internal) on the data to provide the senior managers with decision support. Unlike transaction processing systems, these systems are not query dependent only. Their main role is to access data from a data repository and then pass that data through a model (mathematical, heuristic, statistical, econometric, operations research and combinatorial), so that the senior management can take better decisions by doing either ‘what if analysis’ and scenario building or by doing ‘predictive analysis’ to get some insight into a business issue. Such systems are very costly to build and require advanced analytics tools.

Executive Support System

Executive support system is also known as the executive information (support) system. It began to gain acceptance in the mid-eighties in large corporations and is now used even is smaller corporations. In functionality, it is nearer to decision support systems than management information systems. Its main objectives are to provide a macro-organization wide view for senior executives, by providing a very user-friendly user-interface so that proactive steps may be taken to beat competition. It provides timely and proactive organization tracking and control. It is able to perform these tasks by providing fast access to all type of data and by filtering and tracking critical data and information. It helps to identify problems and opportunities and thus, helps senior executives to troubleshoot problems and take advantage of opportunities.

Business Expert System

Some business scenarios are so complex that they require the help of advanced systems that can provide expert solutions. These systems use artificial intelligence and neutral networks to reach the performance level of a human expert thereby helping the organization. These systems are different from any other information system as they are capable of decision-making by themselves without human intervention. Actually, these systems are loaded with the knowledge of experts and these systems simply simulate the expert knowledge to arrive at decisions.

                    information management system




Why A Manager Needs MIS (Management information system)

By Dinesh Thakur

A modern manager is a person who does the most important task within an organization taking decisions. However, we can categorize his tasks among the categories of staffing, planning, controlling, organizing and leading. We would have to say that different managers at different levels spend different amounts of time and effort in each of these categories of activities.

Even though, most managers would be required to perform all the activities in their own domain of influence. For performing his tasks in each of the activities that have been mentioned above the manager needs information. Without information he cannot perform his work in any of the activities of planning, organizing, directing or controlling.

For example, a manager when performing the task of planning would need to know many things. Some of the issues in a generic manner that he needs to be aware of are the following:

  1. What is the objective for the plan?
  2. What are the parameters that need special attention while planning?
  3. What are the independent variables and what are the dependencies?
  4. What are the things one must be careful of to ensure that the plan is realistic?
  5. What is the context under which the planning is done?
  6. What are the key issues related to the plan.
  7. Who are the key people involved and affected by the plan?

The answer to all these questions will be required for the manager to come up with a suitable plan. However, each question even when considering from a generic sense would have several questions/issues embedded in it. As we can see a vast amount of information is required to even set the process of planning into motion. A manager in today’s modern competitive business environment may not be fully aware of all the issues and might not be personally aware of the information against each issue. This is the reason that makes the manager to rely on some system to provide him with this necessary information, Management information system bridges this gap by providing the manager with all the necessary information from different angles thereby making the task of the manager easier. The same is the case when the manager is performing tasks in organizing, directing or controlling. In each sphere of activity, the manager needs information such as in the case of planning. Normally, the means to get the information is through reports. Reports are formatted documents which arrange information in such a manner that the manager understands the meaning of the information being provided in the document easily and without any further analysis. Visualization of data and information is a common tool used to make the report easily understandable and to provide mangers with the insight on a particular issue. Visualization can be done in several ways. The easiest way to attain visualization is to use graphs in reports. A pictorial representation of data in the form of a graph conveys greater meaning to the manager than data being presented in plain text. Hence, reports have a bias towards graphical representation. Moreover, the pre-formatted nature of the report called the report structure helps the manager to access the information that he is looking for faster. He knows what information is available in which part of the report and can save time by accessing the particular portion of the report that he needs. This is another feature of report.

Role of CIO

Chief Information Officer is the head of the MIS department. He is responsible for the entire department. The CIO’s job is to ensure that the managers get the information they are looking for.

The key tasks that the CIO performs are:

  1. Ensuring that the MIS is managed properly. He creates and manages a team of people who are entrusted with the task on managing the system.
  2. Create security policy. He creates the security policy in consultation with the top management and decides on the type of information to give to different classes of employees.
  3. Limits the access of employees. In a centralized MIS environment all data is located in one place. If everyone accesses all kinds of information it will lead to chaos and confusion. The CIO in consultation with department heads decides on the type of access to be given to each class of employees in the organization.

The key skills required for a CIO are:

  1. Interpersonal skills. The CIO needs to interact with managers who are not fully aware of the complexities and possibilities on information systems. This leads to complications and conflicts. The CIO needs all the interpersonal skills to remain effective. He needs to be a good communicator to be able to connect to people to make them understand the limits of the system and understand their needs. He needs to be a good negotiator to negotiate conflict issues and resolve them. He needs to be a good manager to manage the diverse set of activities under his domain.
  2. Technical skills. The CIO needs to have technical skills as well as the ability perform particularly with respect to database management and system administration. The CIO needs to be technically competent to retain control over his team and to suggest solutions to his team in times of crisis.




Levels of Management and Their Information Requirements

By Dinesh Thakur

The common thread of activity in all the management functions is information management. Every manager today has to manage loads of information some for the purpose of reporting and some for taking actionable decisions. A marketing manager trying to fine-tune a sales strategy would be doing it only after analyzing a lot of relevant information about the market, the customer profile, the product profile and competitor’s pricing strategy.

Similarly, a human resource manager trying to recruit someone for the organization would do a lot of information analysis regarding the job profile, suitability of the candidate for the job, the job market dynamics, etc. The competitive environment that exists in today’s time makes this task of management even more challenging. Decisions have to be taken very fast and after analyzing a lot of data.

It is precisely due to these reasons8 that more and more information technology (IT) intervention is being used in modern management functions. However, Information managementusing technology has itself transformed dramatically over the years. From being just a support function it has become a key resource for gaining competitive advantage.

More and more corporations are investing in acquiring the latest management information system tools like enterprise (wide) resource planning (ERP), customer relationship management (CRM), knowledge management (KM), decision support system (055), business intelligence (81) suites data warehouse (OW) facility as they are convinced of the benefits of such huge investments.

Information Needs for the Different Levels of Management

Even though the broad objectives of management as an entity may be same, like increasing shareholder value, it is by no means a monolithic entity. As has already been discussed, there are different levels of management and each performs its specific purpose. The top level deals with strategy, the middle level with tactical issues and the bottom level with operational issues. The top level that deals with strategy will be taking strategic decisions, middle level will take tactical decisions and entry level will take operational decisions. Now in order to take such decisions, contextual information will need to be provided.

                            Information Needs of Different Levels of Management

Levels of Management

Problems handled/ decisions made

Type of information required

Top level

Middle level

 

 

 

 

 

Operational level

 

Unstructured problems.

Decisions are based on situations not/rarely handled in the past.

Decision-making variable not clearly defined.

Semi structured/structured problems.

Decisions on regular issues.

Decisions on tactical issues.

Structured problems

Structured decision-making

Decision-making on the basis of set rules

Strategic information from within the organization and outside.

Information about likely scenarios. Information that can be analyzed in different ways.

Exception reports

Regular summarized reports.

Information that can be drilled deeper for insight.

Information to help find out exceptions so that they can be reported to top management

Operational information

Rule based information, guidelines, handbook level information

A manager at the top level who is deciding on the location of a new factory of the organization has strategic consideration like the labor costs of the location, proximity of the location to the market and long-term growth prospects in mind. He/she is not bothered about the shop floor level operational details like the reason for absence of a worker. He/she will have a strategic view and would need only such information that helps him to take correct decisions. Information is only a resource to him if it can help him to improve the quality of his strategic decision-making. Similarly for other tiers, information is only a resource if one can derive value from it.

Information Management

The business of information which is today a multibillion dollar industry first started when a firm called Bloomberg started compiling important information about US companies and their balance sheets and selling them to stock brokers. This was the first open trade in information as a resource in modern times. From then on, information (external) has been regarded as a resource that is traded10 sometimes freely and openly as in published literature and sometimes clandestinely in the form of corporate intelligence reports. Also, internal information is seen as equally valuable and every effort is made to derive more value from it and to ensure that this internal information does not find its way outside the organization.

The idea of information management is based on the fundamental premise that information is a resource that is valuable for an organization. The entire subject of information management is about how to derive more and more value from this precious resource. However, unlike most other resources that have to be procured from the outside environment, most information resource is available within the organization if an effort has been made for its safekeeping. Detailed logs of transactions of an organization with its external and internal customers over a period mostly form the basic ingredient of a good quality information resource. This basic information repository is then drilled and analyzed for actionable information, this is one aspect of information management in which strategies are used to derive greater value from the internal repository of data and information. The other aspect of information management is to ensure that this internal information is not ‘leaked’ to the outside world of competitors.




Anthony’s Framework for Understanding MIS

By Dinesh Thakur

In order to understand the importance of MIS one must understand and appreciate the role that MIS plays in an organization. An organization may be conceived in a lot of ways. One can visualize an organization as a balance sheet or a function of financial statements, i.e., as a financial entity or as an organization chart delineating the decision-making hierarchy levels and formal communication channels. While both views are correct, the latter view is more appropriate for understanding an organization’s MIS.

Anthony in his seminal work elaborated (R.A. Anthony 1965) on this view of an organization as its hierarchy of decision-making. He focused on the managerial aspects of an organization and classified the management process into three distinct levels.

Strategic Planning

This requires focusing on the objectives and goals of the organization, on changes in the objectives, on the resource requirements to fulfill the objectives and on the guiding principles and policies that will govern the acquisition, use and disposal of resources to attain the objectives. In short, this role is the most important role in the management hierarchy and the decisions taken by managers in this role have a far-reaching impact on the organization. Managers in this role set the direction in which the organization will travel. In terms of hierarchy, this lies at the top.

Managerial Control

This requires that resources are acquired and used effectively and efficiently to attain the objectives of the organization. This is a middle management role. Managers in this role take guidance from the strategic planning hierarchy and control the activities of the organization such that the goals set by the higher level are attained in an efficient and effective manner. The impact of the decisions of the managers in this role is medium term and degree.

Operational Control

This requires that directives as set by the immediate higher hierarchy is followed and that specific task/s are carried out effectively and efficiently. The decisions at this level have very little impact on the organization. The organization behaves in a routine nature where the parameters of the decision-making process are well laid and certain.

Anthony’s idea of an organization’s hierarchy from the perspective of managerial activities. As is clear, it is a three-level pyramid with very distinct levels. Each level has its own set of tasks and decisions to take which have a varying impact on the organization as a whole.

                                     Management Levels in Organizations

                                                Management Levels in Organizations

Management Function

Strategic Planning

Management Control

Operational Control

Planning

Long-range, high impact

Medium range, medium

impact

Short range, low impact

Organizing

General framework

Departmental level

Small unit level

Staffing

Key senior people

Medium level, tactical level

Operational level

Directing

General and long range

directives

Tactics

Routine activities

Controlling

Aggregate level

Periodic control and

controlling exceptions

Regular and continuous

supervision

For example, if we want to classify the decisions of a manufacturing firm, the strategic planning will encompass the annual production planning, annual budgeting, setting up of new plants and/or installation of new machinery to upgrade the production process and other such activities. Management control activities would include monthly production planning, maintenance planning and scheduling. Operational control on the other will deal with routine daily tasks of managing and supervising shifts to exercise control over the process so that the monthly plans and schedules as made by the management control level managers are met.




Nolan’s Six-stage Model

By Dinesh Thakur

Information systems cannot deliver value from the first day in an organization. The organization needs time and maturity to be able to leverage the information system. Various organizations are at different levels of maturity in dealing with information systems. Nolan has provided a model for such information systems using maturity in organizations. However, empirical evidence is not available in favor of such models but intuitively, it seems correct. To leverage the benefits of information, an organization has to first appreciate the usefulness of information. This requires a change in the mindset and way of working. Organization culture needs to change to accommodate this kind of information-based working. Changing organizations takes time and hence, organizations pass through stages of maturity in dealing with information systems.

Nolan’s Six-stage Model

One of the stages of growth model, helping in the understanding of the role of information systems, in an organization’s strategy and its maturity. Earlier, in a similar model called the four-stage growth model the maturity of an organization was captured in terms of use of information systems. The stages are,

  1. Initiation-in which the primary focus is cost reduction and only specialized applications are run with a specialized staff. Management in not very keen on monitoring the information system.
  2. Expansion-in which application increase rapidly. Specialization of staff and applications is the order of the day. Management begins to take note of the new way of doing things.
  3. Formalization-in which emphasis is laid on control and specialization, is built around control. Management controls information systems.
  4. Maturity-in which database oriented applications proliferate. Information is used as a resource.

                                                                            Nolan’s Stages of Growth Model

  

I

II

III

IV

V

VI

INITIATIONS

• Users are “hands off” in approach

• Extensive IT/IS planning

• Cost reduction primary focus

• Functional application is in focus

• MIS dept/IS dept is not under strict management control

CONTAGION

• Proliferation of applications

• Little management control

• Huge allocation of financial resources

• Rapid growth of fundamental use of IT

• IS/IT performance below importation and several crisis occur

CONTROL

• IT/IS is considered as an important function

• Centralized controls are applied for IT/IS

• No reduction in IT/IS use

• Applications are often incompatible

• Unhappy users

• Use of database but with unsatisfactory outcome

INTEGRATION

• Greater use of database

• Greater IT/IS budget

• IT/IS dept now works on a professional utility model

• Formal planning and control within IT/IS dept

• Steering committees are widely used for application development.

DATA ADMIN

• Data in administration

• Applications are in sync with the organization

• Shift from IT/IS booking after DP to holistic information management

MATURITY

• IT/IS dept becomes partners of users in data management

• Applications reflect real information needs

• Strategic planning of IT/IS becomes important

• Managers of IT/IS dept considered at par with other dept

Nolan (1979) indicated that there are six stages in the information system evolutionary process. It is an improvement over the four-stage model. The stages are:

  1. Initiation- in which the organization has an operational focus and tries to get operational efficiency and thereby limited value from the information systems.
  2. Contagion-in which the organization moves towards online systems after having tasted success in the initiation stage. More users are added.
  3. Control-in which the management exercises control and makes a cost-benefit type of assessment.
  4. Integration-in which the organization moves away from an ad hoc isolated solutions based on information system to a service based information system. This is the stage when the organization transitions from a data processing outlook about information systems to more holistic information-based decision-making approach towards information systems. A more comprehensive approach towards information systems results in changes in the organization’s behavior towards information systems and initiates a new appreciation for data and information.
  5. Data administration-in which the organization begins to appreciate the value of information and makes efforts to centralize the data management to take advantage of the benefits of information based decision-making.
  6. Maturity-in which the organization creates synergies in its corporate objectives and information systems planning so that the two can work in a synchronized manner.

These are the stages as Nolan has described in this research. However, no empirical proof exists of this stage growth model of information system maturity.

                         Nolan's 6 Stage Model of Information System Growth




Subsystems of an Information System

By Dinesh Thakur

Information system is a special type of system that allows storage, retrieval and processing of data in a secure environment. Logically the major sub systems of information systems are:

Data Repository

This is a subsystem which is at the core of any information system. Mostly this is a relational database management system that has pre-formatted and structured tables for storage of data. These structures are arranged in a way that helps in faster storage and retrieval of such data with adequate security.

User Interface

This subsystem handles the interaction of the system with the user (human) and hence it has to take care of issues related to the display of data on an output medium. This can be either graphical or character-based depending on the level of ease offered to the user.

Network

This subsystem ensures communication between the different entities of an information system. It is crucial for functioning of an information system.

Computer Hardware

One needs IT infrastructure to use information systems in an effective manner. Almost all the components of an information system are housed in some kind of computer hardware enabling it to perform the tasks better. For example, an algorithm to find the lowest of three numbers can also be calculated manually but under a computerized system, it will be much faster and efficient.

System Software

Some basic software is required just like computer hardware for efficient functioning of information systems. The system software does not directly aid in the functionality of information systems but work as enablers. Examples would include operating systems.

Input/Output

Sometimes this is clubbed with the user interface to suggest that I/O functions are handled by UI alone. However, in some systems I/O may be user independent like when an alert is activated, the input for the alert comes from some other system input rather than a user.

Business Rule (Process)

This is a set of rules that governs how a system should function to mimic the real business process.

Algorithm/Program/ Application Software

This is the actual invisible component that integrates all the components. The logic (business rule), is defined in the program (embedded in it) which enables the functioning of the information system for some specific purpose.

All the above components work in concert to make a functional information system.




Information Systems: Definition and Characteristics

By Dinesh Thakur

Management is the often unseen force that helps bind an entire organization and helps it to achieve its objectives by conducting the activities of planning, directing, organizing and controlling. In an organization the structure of management conforms to the pattern of a pyramidal structure (in most cases) with a well-defined hierarchy.

This hierarchy in the management with an increasing authority and responsibility as one rises up the pyramid has to be understood before a suitable MIS is designed for the organization. Management deals with organizational functions. Managers are the people who drive an organization by planning for its future, organizing and controlling its present and directing others in the organization to work towards a common objective. However, strictly speaking, in functional terms, management is all about taking decisions. In fact, the only attribute, which distinguishes a manager from the rest of people in the organization, is the manager’s ability to take decisions.

However, decision cannot be taken in isolation. Even simple decisions require information as an input.These decision requirements fuel an insatiable need for information within the organization. This information need is met by a set of information systems working in a synchronized manner, which is collectively called management information system (MIS). The competitive environment of today’s business necessitates that the MIS of any modern organization works on an information technology platform and that suitable information is delivered to the right person at the right time. Information systemscan be theoretically even manual systems but for all practical purposes3, information systems in today’s organizations are based on information technology platforms. Therefore, such information systems are expensive to acquire and maintain. The cost of their failure is even more expensive for the organization as lack of information may cause havoc within the organization. Thus, almost all business organizations have an information technology enabled information system.

Information systems are of different types catering to different user classes. Information systems that cater to the needs of management are the focus in this chapter. These systems are broadly called management information systems if they conform to some specifications. These management information systems can be created from scratch or can be acquired off the shelf and then customized to fit the needs of the organization. Contribution to MIS literature (Anthony 1965) by developing a framework for management information systems in organizations, that remains largely valid. The framework under which management works is also important from the point of view of MIS as MIS is a support function. MIS in an organization is also dependent on the role played by some key personnel like CIOand the system analyst. We shall look into these aspects in detail in this chapter.

Information Systems: Definition and Characteristics

The role of information in enhancing the competitiveness of an organization has been known in management circles for quite some time now. A former Chairman and CEO of Citicorp, Walter B Wristoncommented on information systems and their value to organizations more than two decades back saying,

‘Timely information has always conferred power, both in the commercial and in the political marketplace. But as the availability and timeliness of information continues to increase, some of the more traditional sources of power (e.g., natural resources), are declining. Today, management structures are being flattened and sharply reduced by those who really understand the impact of technology on business. The need for layers of management is being reduced everywhere, when information becomes available to more and more people at all levels at a faster rate; One of our leadership tasks is to design … databases which are important for our own business Anything that enhances the value of a company’s data and makes it more available to executives who lack computer skills in general, cannot help but improve the performance of our companies. Corporations may have to develop a formal information strategy, or a formal financial strategy. As all successful companies are market driven, timely access to market information must not only be out in place, but it has to be linked to the internal MIS system.’

According to (Orlikowski 1992), ‘Nothing is more central to an organization’s effectiveness than its ability to transmit accurate, relevant and understandable information amongst its employees. All of the advantages of an organization’s economy of scale, financial and technical resources, diverse talents and contacts are of no practical value if the organization’s employees are unaware of what other employees require of them’.

Information systems come a long way. Over the years, their role in the organization has increased and their importance understood and valued by all. They have become sophisticated and now offer a variety of benefits to organizations. They deliver value by enhancing the organization’s internal communication channels, extending suitable information to managers to help them take decisions, help in decision-making of top level management by simulating different scenarios, assisting in routine office tasks by automating them, capturing, stores and mapping all transactions between the organization and its internal and external customers. In short, in an organization they are all pervasive and offer tremendous value. This is evident from the enormous investments in information systems by most business organizations. Let us now formally define information systems and its related concepts.

Information System

Information systems are a special class of systems whose main objective is to store, retrieve and process, communicate and secure data. Information systems which help management at different levels to take suitable decisions are called management information systems. Typically information systems are housed in a computerized environment/platform to enable users to get faster and accurate information.

Information Systems over the Years

Information systems have themselves had a remarkable transformation in the last forty years of their existence. Initially information systems were designed to perform a specific task. The objective here in this type of system was to perform a task as quickly as possible with the minimum number of errors. The concept of using information systems for taking decisions had not been thought of yet. Organizations used information systems for data processing work only. Be it salary processing or bill processing, information systems of those times were focused on efficiency of operation. The people who worked on these systems had knowledge about the system and the user interface of the systems was very basic (character user interface). The output was in the form of output like salary slips, etc. Processing the data in the most efficient way was the prime focus of such systems. Most of these systems used file based data storage systems on which a computer programme would work, i.e., the computer programme would be able to access the data and organize it but it would store the data in a file. The problem with this type of system was that it led to replication of data and loss of consistency. Most of these system used COBOL computer programming language for such applications. The management of data and records in such files led to the development of important file management concepts like indexing.

Over the years, information systems have changed. Now more focus is on helping the management by providing information useful for decision-making. Data processing systems have become obsolete. Presently, focus is on delivering the right information to the right people at the right time. Information systems have become faster, more accurate and user friendly so that anyone can use it. The people who work on information systems nowadays are not knowledgeable about systems per se. They are normal users. The systems have become so friendly that they do not require users to be specialists in information systems to use them. Newer concepts have emerged in the information systems space to help organizations get better value for their money. Concepts like client server architecture, networking, distributed computing, centralized database, graphical user interface, and Internet have completely changed the information system space. Gone are the bulky mainframe systems requiring loads of money to procure and run. Now more money is required to procure the software than the hardware.




Systems Approach to Problem Solving

By Dinesh Thakur

Systems approach is widely used in problem solving in different contexts. Researchers in the field of science and technology have used it for quite some time now. Business problems can also be analyzed and solved using this approach. The following steps are required for this:

Defining the Problem

This is the step when the problem has to be defined. Sometimes one may confuse the symptoms or the exhibition of a behavior to be a problem but actually it may only be a symptom of a larger malaise. It may just exhibit the behavior of a larger phenomenon. It is vital to drill deep into an issue and clearly understand the problem rather than having a superficial understanding of the problem. One must appreciate that this in the initial stage of problem solving and if the problem itself is not correctly diagnosed then the solution will obviously be wrong. Systems approach is therefore used to understand the problem in granular detail to establish requirement and objectives in-depth. By using the systems approach the problem will be analyzed in its totality with inherent elements and their interrelationships and therefore this detailed analysis will bring out the actual problem and separate out the symptom from it.

Developing Alternative Solutions

This the logical next step in the systems approaches for problem solving. In this stage alternative solutions are generated. This requires creativity and innovation. In this stage-the analyst uses creativity to come up with possible solutions to the problem. Typically in this stage only the outline of solutions are generated rather than the actual solutions.

Selecting a Solution

In this step, the solution that suits the requirement and objectives in the most comprehensive manner is selected as the ‘best’ solution. This is done after evaluating all the possible solutions and then comparing the possible set of solutions to find the most suitable solution lot of mathematical, financial and technical models is used to select the most appropriate solution.

Designing the Solution

Once the most appropriate solution is chosen, it is then made into a design document to give it the shape of an actionable solution, as in the evaluation stage, only the outline of the solution is used. At this stage the details of the solution are worked out to create the blueprint for the solution. Several design diagrams are used to prepare the design document. At this stage the requirement specifications are again compared with the solution design to double check the suitability of the solution for the problem.

Implementing the Solution

It is the next step in the process. The solution that has been designed is implemented as per the specifications -laid down in the design document. During implementation care is taken to ensure that there are no deviations from the design.

Reviewing the Solution

This is the final step in the problem solving process where the review of the impact of the solution is noted. This is a stage for finding out if the desired result has been achieved that was set out.

A Systems Approach Example

Let us assume that A is the coach of the Indian cricket team. Let us also assume that the objective that A has been entrusted with is to secure a win over the touring Australian cricket team. The coach uses a systems approach to attain this objective. He starts by gathering information about his own team.

Through systems approach he views his own Indian team as a system whose environment would include the other team in the competition, umpires, regulators, crowd and media. His system, i.e., team itself maybe conceptualized as having two subsystems, i.e., players and supporting staff for players. Each subsystem would have its own set of components/entities like the player subsystem will have openers, middle order batsmen, fast bowlers, wicket keeper, etc. The supporting staff subsystem would include bowling coach, batting coach, physiotherapist, psychologist, etc. All these entities would indeed have a bearing on the actual outcome of the game. The coach adopts a systems approach to determine the playing strategy that he will adopt to ensure that the Indian side wins. He analyses the issue in a stepwise manner as given below:

Step 1: Defining the problem-In this stage the coach tries to understand the past performance of his team and that of the other team in the competition. His objective is to defeat the competing team. He realizes that the problem he faces is that of losing the game. This is his main problem.

Step 2: Collecting data-The coach employs his supporting staff to gather data on the skills and physical condition of the players in the competing team by analyzing past performance data, viewing television footage of previous games, making psychological profiles of each player. The support staff analyses the data and comes up with the following observations:

  1. Both teams use an aggressive strategy during the period of power play. The competing Australian team uses the opening players to spearhead this attack. However, recently the openers have had a personal fight and are facing interpersonal problems.
  2. The game is being played in Mumbai and the local crowd support is estimated to be of some value amounting to around fifty runs. Also the crowd has come to watch the Indian team win. A loss here would cost the team in terms of morale.
  3. The umpires are neutral and are not intimidated by large crowd support but are lenient towards sledging.

Step 3: Identifying alternatives-Based on the collected data the coach generates the following alternate strategies:

  1. Play upon the minds of the opening players of the competitors by highlighting their personal differences using sledging alone.
  2. Employ defensive tactics during power play when the openers are most aggressive and not using sledging.
  3. Keep close in fielders who would sledge and employ the best attacking bowlers of the Indian team during the power play.

Step 4: Evaluating alternatives-After having generated different alternatives, the coach has to select only one. The first alternative may lead to loss of concentration on the part of openers and result in breakthroughs. However, there is a chance that the interpersonal differences between the two openers may have already been resolved before they come to the field and in such a case this strategy will fail. The second strategy provides a safer option in the sense that it will neutralize the aggressive game of the openers but there is limited chance of getting breakthroughs. The third option of employing aggressive close in fielders to play upon the internal personal differences of the openers and at the same time employing the best bowlers may lead to breakthroughs and may also restrict the aggressive openers.

Step 5: Selecting the best alternative-The coach selects the third alternative as it provides him with the opportunity of neutralizing the aggressive playing strategy of the openers as well as increases the chances of getting breakthrough wickets.

Step 6: Implementing and monitoring-The coach communicates his strategy to his players and support staff, instructs support staff to organize mock sessions and tactics to be employed to make the strategy a success. The players and support staff performance is monitored by the coach on a regular basis to ensure that the strategy is employed perfectly.

Simplifying a System or Applying Systems Approach For Problem Solving

The easiest way to simplify a system for better understanding is to follow a two-stage approach.

Partitioning the System into Black Boxes

This is the first stage of the simplification process, in this stage the system is partitioned into black boxes. Black boxes need limited knowledge to be constructed. To construct a black box one needs to know the input that goes into it, the output that comes out of it and its function. The knowledge of how the functionality is achieved is not required for constructing a black box. Black box partitioning helps in the comprehension of the system, as the entire system gets broken down into granular functionalities of a set of black boxes.

Organizing the Black Boxes into Hierarchies

This is the second stage of the simplification process, in this stage the black boxes constructed in the earlier phase are organized into hierarchies so that the relationships among the black boxes is easily established. Once, a hierarchy of the black boxes is established, the system becomes easier to understand as the internal working of the system becomes clearer.




Types of Systems

By Dinesh Thakur

Different types of systems exist. Some are abstract concepts while others are operational ones. Given below are different types and classes of systems:

Closed and Open Systems

A system is said to be closed if it does not interact with the environment in which it exists. It is in a state of isolation. It is completely self-contained. This is only of theoretical interest as in reality systems exhibit different degrees of openness.

A system is said to be open when it interacts with the environment in which it exists. It exchanges inputs and outputs with the environment. Such regular interaction with the environment makes the study of open systems difficult (Checkland 1981). A system might be said to be ‘open’ with regard to some entities and processes but might exhibit ‘closed’ behavior with respect to other entities and processes.

Deterministic, Probabilistic and Random Systems

A system is deterministic if its outputs are certain. This means that the relationships between its components are fully known and certain. Hence, when an input is given the output is fully predictable. An example of a deterministic system is the common entrance examination for entry into IIM. All the entities in the system and their interrelationships are well known and given an input the output can be determined with certainty.

A probabilistic system is one where the output from the system behaves probabilistically, i.e., the output is predictable according to probability values. The portfolio investment systems of an asset management company that invests in the stock market will have a probabilistic output for a given input as the system and its entities behave probabilistically.

Random systems are completely unpredictable systems. One is completely unaware of the components and their relationships with each other and hence, the output is random. An example of random system is the transport system. Given an input one is not sure about the output.

Human, Machine and Human-machine System

A human system consists of humans as components. It is an open system exhibiting probabilistic behavior. An example of this kind of system is a department within an organization.

A machine system is composed entirely of machines and machine subsystems. It is deterministic and relatively closed. An example of this type of system would be a fire alarm system. A system which consists of humans and machines is called a human-machine system. Information systems are examples of human-machine systems. These systems are deterministic in delivery but probabilistic in interpretation.

Abstract and Concrete Systems

An abstract system is an ordered arrangement of concepts. Abstract systems can be procedural or conceptual.

Concrete systems are systems in which at least two components are objects. Concrete systems can be physical or social systems.

Adaptive and Non-adaptive Systems

A system is said to be adaptive if it modifies itself with the changes in its environment.

A democratic system of government is an example of adaptive system as it changes to accommodate the changes in the environment.

A non-adaptive system does not react to changes in its environment.

An autocratic system of governance is an example of non adaptive system. It does not change or adapt to changes in the environment.

Simple and Complex Systems

A simple system is one in which there are a few interrelated entities whereas a complex system is one in which there a lot of components with a lot of interrelations amongst them.

A bicycle may be considered as an example of a simple system whereas a motorcycle may be considered a complex system. In the bicycle, the number of entities and subsystems are very few, whereas in a motorcycle the number of entities, subsystems and their interrelations are many. Each subsystem in a motorcycle may itself be considered as a simple system.




Different Types of Control Systems in Management

By Dinesh Thakur

Control is essential for monitoring the output of systems and is exercised by means of control loops. It is necessary for monitoring the desired output of a system with the actual output so that the performance of the system can be measured and corrective action taken if required. Schoderbek, 1985 mentions four elements required for effective control:

  1. A control variable is the variable whose value would determine the degree of performance of the system.
  2. A detector is to monitor the output of the system by measuring the control variable parameters.
  3. A comparator is to compare the actual and planned output of the system.
  4. An effecter is to make suitable changes.

To illustrate these in greater detail, let us visualize the cooling system of a refrigerator. The cooling coils cool the refrigerator to bring the temperature to a certain level and then the effecter is relied upon to change the system inputs so that the cooling process is stopped once the desired temperature is reached. The detector measures the temperature and compares it with the desired temperature and the effecter stops the cooling process once the desired temperature is reached. Again, if the temperature rises above the desired temperature, the effecter comes into play again by putting on the cooling system. This is called control and the process in which this was done in this case is called a control loop. In this case a closed loop. The open loop control systems have a structure in which the output of the system is not coupled with the input of the system.

Types of Control

Control mechanisms can be of two types: feedback control and feed forward control.

Feedback Control

When we have a control structure in which the output is used to directly alter the inputs we call that as a feedback control mechanism. Feedback control can itself be of two types, i.e. positive feedback and negative feedback. Positive feedback is when the output of a system is positively correlated with the input, i.e., more output prompts more input or less output prompts less input. For example, stock market sometimes exhibit positive feedback. Positive feedback generally indicates an instable system unless there is an outside mechanism to stop the process beyond a point. Negative feedback on the other hand is the opposite of positive feedback in the sense that in negative feedback the relationship between output and input is negative. The refrigerator example given earlier is an example of negative feedback.

Feedback control systems particularly the ones with negative feedback have a tendency to oscillate around the desired values of control variables. For example, take the example of a driver driving a vehicle and wanting to keep a speed of around sixty km per hour. He will apply brakes when he is beyond sixty km per hour and as a result the vehicle speed will come back, to let us say, fifty-five km per hour at which time he will again press the accelerator and push the speed to near sixty km per hour and this will again result in the speed crossing sixty km per hour alerting him to press brakes and slow down. Thus vehicle speed will oscillate around sixty km per hour, which happens as control mechanisms are not designed to work in a step wise manner, instead they have a steady effect on the system. This means that system oscillation happens when control mechanisms might take some time to react to an alert or may also take a finite time to take effect or both. This can also happen if the control mechanism overcompensates for the deviation from a stable state.

Feed Forward Control

This is a type of control mechanism to address the problem of system oscillation. In this type of control mechanism, the control is exercised after predicting the output and if the prediction about the output is that it will cross the stable limit or the target then control mechanisms are applied even before the target value or control value of the control variable is attained bringing down the system automatically below the danger limit. For example, if in our driver example, if the vehicle had an intelligent braking system controlled by computer aided automatic brake controls then whenever the vehicle would go over fifty-eight km per hour, automatic brakes would be applied irrespective of whether the driver applies brakes or not bringing down the speed to the desired level. This is called feed forward system and it works on a proactive philosophy rather that the reactive philosophies of a feed back control mechanism. However, to apply feed forward control mechanism we need to have complete understanding of the system.




Characteristics of a System

By Dinesh Thakur

Systems have very specific common characteristics which help in its identification. They are:

  1. Systems have a specific structure which is defined by its components (entities/subsystems) and processes (interrelationships between its components). A system is a collection of interrelated entities and/or subsystems which can be analyzed. It is possible to understand the specific structure of a system. However, in some systems complete knowledge may not be available but in most cases the fundamental entities and their interrelations are known.
  2. Systems are a model of reality-a system is an abstraction of reality. It is created to comprehend the nuances of a real-world condition and understand the interrelationships of subsystems in such real-world conditions in greater clarity.
  3. A system has a purpose-a system performs a function. It has a reason for its existence. The purpose in most cases is the output of the system and in a way the output defines the purpose of the system.
  4. Systems have inputs and outputs. Outputs are produced by processing the inputs-a system (unless of theoretical interest and fully closed), interacts with the environment by taking in input and then after processing the input produces the output.
  5. Systems have performance that can be measured in terms of its output-a system will have measures of performance. In most cases, the performance of the system is a function of its input and output.
  6. A system serves a client-the system will have a utility and hence, a client for it. The client can also be another system.
  7. The components that make up a system have functional as well as structural interrelationships with each other.
  8. A system has an environment-a system cannot exist in isolation. It exists in an environment. The environment reacts with it.
  9. Each subsystem also has a purpose and a measure of purpose.




Basic Concepts of the Systems Approach

By Dinesh Thakur

A special class of systems dealing with the storage, processing and delivery of information is of special significance to business and is called information systems. When these information systems aid the management in taking decisions, they are then broadly classified as management information systems. These are special systems with unique characteristics.

Even though we are focusing here on business systems and information systems, the concept of system lies at the core of many scientific management theories and techniques. In fact, the idea of the system originated from the field of physical and biological sciences. After a lot of deliberations, scientists in these fields of science could define a system with clarity. Management has borrowed the concept from these disciplines and has used it extensively in its theory. Some modern management techniques have evolved from the concept of systems. In fact, the entire study of management decision-making using information is in a way derived from the study of the structured systems based approach and systems concept.

What is a System?

System can be defined as a set of interacting entities with interrelationships/interconnections amongst each other forming an integrated whole. Here in the context of systems concept an entity may be conceptualized as something, which has a distinct existence. The entity may just be abstract without any material or animate existence but it must be distinct. The entities can themselves be systems, in which case they are called subsystems, as they work like components which make up the bigger system. Churchman (1971) has laid down nine conditions for entities to be considered as systems (human-designed systems).

Also, most systems would have with at least one input and one output through which the system would interact with the environment. However, there are systems (theoretical cases), which do not need to interact with the environment.

A system can be conceived of as a ‘White Box’ where clear understanding of the internal workings of the system is known, i.e., the interrelationships between its constituent elements are understood or as a ‘Black Box’ where there is no clear understanding of the internal workings of the system.

                        Conceptual White Box and Black Box Model ora System with Subsystems in it

Typically, we conceptualize systems as black boxes when we do not fully understand the inner working of the system and its interrelations within or choose to ignore it for the sake of simplicity.

The boundary of a system is the imaginary line separating the domain of the system from that of the environment. It is more of an abstract concept rather than a physical one. However, in some cases the boundary of a system may indeed be also its physical boundary. A good way of identifying a system boundary is to find out if the boundary encloses a self contained entity and if there is adequate control of the system within the boundary. The environment of a system is the set of variables which interact with the system.

Systems exhibit behavior which helps in their classification. Some of the important dimensions used for such classification are the degree of openness of the system to environmental exchanges, degree of determinism or predictability of the system in terms of given inputs and expected output, degree of dynamism or churn in the system (mostly to adapt to changing environments) and the degree of self-regulation or control of the system. These dimensions help in classification of systems.

Some Basic System Ideas

Let us now discuss some basic ideas about systems, which are generic in nature and are present irrespective of the type or characteristic of a system.

Emergent properties: This is one of the fundamental ideas of systems. It means that the system exhibits a set of properties when working collectively as a whole system, which are not present in any of the entities that make up the system. The manner in which the system will behave cannot be understood by looking only at its constituent elements. An example of this ’emergent property’ is a living organism. The organism as a whole system exhibits properties that are quite different from the properties of its constituent element, i.e., cells. By examining cells alone, the behavior of the living organism cannot be determined.

Hierarchy: In most systems the interrelated and interacting entities that make the holistic integrated whole of a system may itself have some entities which are systems in themselves. They have their own input, output, their own set of interrelated entities and their own emergent properties. These are called subsystems. Indeed, the system under study may itself be a subsystem of a larger system called supra system. Like when analyzing organizations as systems we find that there are subsystems of production, HR, etc., which makes up the entire organization as a system but then this organization is itself a subsystem of the larger society and civilization at large. Thus, in most cases we will find that systems are themselves subsystems of some larger system and have in themselves subsystems that come together with other entities to make the system in the first place. Therefore, there is a hierarchy of systems. Each level of hierarchy will present its own set of complexity. We have to understand the level of granularity we wish to approach in understanding a system. At one level we may just wish to know the interrelationships of a system’s entities, some of which may be subsystems. At another level we might not restrict ourselves to this kind of macro view and may go into the analysis of the interrelationships of entities of not only the system under review but also the interrelationships of all entities of subsystems of the system under review. This hierarchy helps in the understanding of the abstractions of systems.

Communication: This is an issue that affects all systems and indeed, is the single most important reason for system failures. B communication, in the context of systems, we mean the ability of the interrelated subsystems and entities that make up the system to interact with each other. Sometime s the output of a subsystem may be the input of another subsystem and if this communication between these two subsystems is not good the system will face problems. For example, if in an organization system, the output from the marketing subsystem on the demand scenario in the market is not clearly communicated to the production subsystem then the organization system will face problems. In fact, this issue leads to another important concept in system literature, i.e., the issue of coupling. The degree of closeness of subsystems is known as coupling.

Control: This is the mechanism to regulate the system. It is the internal mechanism to create a stable system so that the output remains within the desired limits. This is one of the most important concepts in systems as without control a system will behave in a chaotic manner.




What is Systems Approach? Definition and Meaning

By Dinesh Thakur

The systems approach is an old concept. The approach stands on the assumption that breaking down of a complex concept into simple easy to understand units helps in better understanding of the complexity. Ludwig von Bertalanffy first proposed the systems approach under the name of ‘General System Theory’.

Even though he had orally created the notion of the general systems theory in the 1940’s he formally published it in 1968 (Ludwig von Bertalanffy 1968). He introduced system as a new scientific philosophy and defined it in a formal manner. He noted that most systems (biological or physical) of any practical relevance are open as they interact with the environment. Therefore, to understand the system it has to be differentiated from the environment, i.e., the boundary of the system has to be clearly defined along with its interaction with the environment from within this boundary.

The approach concentrates on the holistic entity of the system without neglecting the components. It attempts to understand the role each component plays in the system while simultaneously understanding the activity of the whole system. Major concepts of the systems approach are:

  1. Holism: A change in any part/component of a system affects the whole system directly or indirectly (Boulding 1985, Litterer 1973, von Bertalanffy 1968).
  2. Specialization: A whole system can be divided into granular (smaller easy to understand), components so that the specialized role of each component is appreciated.
  3. Non-summational: Every component (subsystem/partial system) is of importance to the whole. It is therefore essential to understand the actions of each component to get the holistic perspective (Boulding 1985, Litterer 1973).
  4. Grouping: The process of specialization can create its own complexity by proliferating components with increasing specialization. To avoid this it becomes essential to group related disciplines or sub-disciplines.
  5. Coordination: The grouped components and sub components need coordination. Without coordination the components will not be able to work in a concerted manner and will lead to chaos. Coordination and control is a very important concept in the study of systems as without this we will not be a unified holistic concept.
  6. Emergent properties: This is an important concept of systems approach. It means that the group of interrelated entities (components) has properties as a group that is not present in any individual component. This is the holistic view of a system. For example, multicellular organisms exhibit characteristics as a whole which are not present in individual constituent parts like cells.




Decision Making Tools and Techniques

By Dinesh Thakur

Decision-making techniques can be classified in terms of decision-making in situations of certainty, uncertainty and risk. In certainty where the outcomes are certain, no decision-making tool is required as the outcomes are certain to occur and hence anyone can take the correct decision (the obvious one). However, decision-making under risk means that the probability values associated with the success and failure of outcomes is known but the outcomes are by no means certain. In these kinds of situations, one can use the decision tree method to take decisions.

Decision-making under Risk

Decision tree

The decision tree method uses an oriented tree or the direction associated tree to represent the decision-making process. The nodes represent points in time, where the decision-maker takes one or the other decision and takes a path or is faced with a state of nature or the decision process terminates. Directed paths emanate out of nodes. These are called branches. They represent the decision branches for possible decisions under a state of nature. Under each branch the probability associated with the success and failure of the event is noted. Decision trees are helpful when probabilities are available for each event and are used to determine optimal decisions. The decision-maker has to first prepare the decision tree and then from the terminal nodes calculate the expected payoff for each path of decision-making by back calculating. The path that gives the maximum payoff is the optimal decision path.

A is the starting node from where the decision-making starts and T are the terminal nodes that represent the possible terminal stages of decision-making. The lines connecting nodes are called branches. As is evident, the branches represent decision paths and probability of success and failure are associated with each branch.

                                               Decision Tree

Decision-making under uncertainty means that decision-making is done when the probability about the success or failure of events is not known, unlike in decision-making under risk, where the probability values of success or failure is known. In such circumstances when the probability of occurrence of the states of nature are not known we use.

Decision-making under Uncertainty

Laplace criteria

In this technique equal probabilities are assigned to the possible payoffs and then selection is based on the maximum expected payoff.

For example, if a farmer does not know the probability of high or low rainfall but wants to plant a crop of wheat, rice or bajra for which the expected payoffs are as given below, then Laplace criteria is used in this case as,

          

Crop

Heavy rainfall

H

Low rainfall

L

Expected payoff

(0.5 x H+0.5 x L)/2

Wheat

Rice

Bajra

50

60

20

30

10

30

40

35

25

Since wheat gives maximum expected payoff the farmer selects wheat.

This method has been modified by using regret matrix and more refined methods are available like Hurwicz criteria and savage method.

Qualitative tools of decision-making

Some of the qualitative tools of decision-making are:

  1. Pareto analysis
  2. Force field analysis
  3. Six thinking hats technique
  4. Paired Comparison Analysis
  5. Plus minus implication




Bounded Rationality Model of Decision Making

By Dinesh Thakur

Bounded rationality is a term first coined by Herbert Simon. Simon challenged the concept of a rational man in classical and neoclassical economic theories and argued that the rationality of man is bounded by certain limitations. He opined that even though rational thinking, deductive reasoning and logic are good for solving theoretical problems.

They are not so good for practical problem solving where the behavior of the decision-maker and his intellect, information about the problem at hand and the time to solve such a problem may create a scenario where the decision-making may happen under a rationality that is bounded by certain conditions. He argued that in real situations people take decisions on the basis of heuristics rather than rule based optimization methods. He argued that decision-making is bounded by the following limitations.

Information

Lack of information or incomplete information leads to sub optimal decisions as the decision-maker is not fully aware of the pros and cons of a decision due to lack of information. Hence, lack of information creates a boundary and hinders the rational choice of the decision-maker.

Intellectual Ability/Cognitive Ability

The problem at hand may be so complex that the decision-maker may not be able to comprehend the true nature and complexity of the problem, leading to a sub optimal decision. If the problem would have been comprehensible, the decision-maker would have made a rational choice. This creates a boundary on the otherwise rational choice of the decision-maker.

Lack of Time to take Decisions

The lack of time may also lead to suboptimal decisions as in this case the decision-maker does not have time to evaluate all the choices and come to a rational choice. On the contrary, lack of time leads to improper and sub optimal decisions, as one does not have the required time to process the information available.




Decision-Making: Structured Versus Unstructured Decisions in MIS

By Dinesh Thakur

Decisions are of varying complexity. Some decisions are routine, simple and easy to take Knowledge about such decisions is very well known. The outcomes of each alternative of such decisions are well known and certain.

No surprises, for example, let us assume that an operator at the quality checking department checks a product based on fixed specifications. If the product fails to meet any of the specifications, it is rejected, else accepted. In such a situation, the role of the operator is clearly laid out, the decision rules are well laid out and the best choices to take are known in advance. The information on which the decision-making is based comes from within the organization. This is an example of simple operational decision-making. Not all decisions however, are so simple and structured. In unstructured decisions, the process outcomes of each stage of the decision-making process are not well known. Information about the decision-making process is not known. These decisions are complex. Normally, strategic decisions are of this type.




Decision-Making and the Human Brain

By Dinesh Thakur

The central nervous system (CNS) of our body consists of the brain and the spinal cord. Together they control most our basic functions like movements, speech, cognition, vision, etc. The human brain is a very complex system. It is made up of nerve cells called neurons. There are an estimated 50-100 billion neurons are present in an average human brain which weighs approximately about 1.5 kg. The brain is considered to consist of three main constituents:

  1. The forebrain,
  2. The hindbrain; and
  3. The limbic system.

The Forebrain

The cerebrum or cortex is the largest part of the brain and is considered to be responsible for functions like thought and action. The cerebral cortex is divided into four sections or lobes.

  1. The frontal lobe-responsible for logical reasoning, emotions, planning, some types of movement, part of speech, empathy and altruism, problem solving judgment and impulse control. It is fully developed when we are young adults. It also manages our higher emotions.
  2. Parietal lobe-responsible for some types of movement, recognition, orientation, perception of stimuli like pain, touch, speech and cognition.
  3. Occipital lobe-responsible for vision.
  4. Temporal lobe-responsible for perception and recognition of auditory stimuli, memory and speech.

The cerebral cortex is symmetric with two parts called the left and right hemispheres. Both the hemispheres are connected by a bundle of cells called the corpus callosum. The cerebral cortex is folded such that it allows a large surface area to fit within the skull. In terms of size, it is about two-thirds of the human brain. This is the most advanced region of the brain only found in advanced mammals and it gives us the intellectual superiority. The right hemisphere is considered to be responsible for artistic, spatial and musical qualities and the left hemisphere is responsible for rational and verbal qualities.

The Hindbrain

This is the primitive part of the brain and is responsible for basic instincts of survival, mating, dominance, etc. The hindbrain consists of:

  1. The spinal cord-is a set of nerve cells which runs vertically through our vertebral column. It is responsible for transmitting the instructions of the brain to other body parts.
  2. The medulla oblongata-is responsible for involuntary actions like respiration, digestion and heart rate. It also acts as a relay station.
  3. The pons-It is responsible for arousal and sleep.
  4. The cerebellum-It is responsible for regulation and coordination of movement, posture and balance.

The Limbic System

The limbic system is buried deep within the cerebrum. It is also called the emotional brain as emotions and memory are associated with this structure. It is also associated with unconscious value judgments, creativity and spontaneity.

It consists of:

  1. The amygdale-it is responsible for classifying emotionally charged memories. It is responsible for the emotion fear and is considered to trigger responses such as sweaty palms; increased heartbeat and stress hormone release.
  2. The hippocampus-this structure is primarily responsible for memory.
  3. The hypothalamus-it is responsible for some of the involuntary actions of our body.
  4. The thalamus-it is responsible for relay of nerve signals.

As is clear from the structure of the brain, that some decisions mostly falling under the category of rational, logical and analytical nature are processed in the forebrain frontal lobe, whereas some decisions based on emotional considerations may use the limbic system. Thus, clearly, different areas of the brain are activated for different types of decision-making.




What are the Roles and Function of Management?

By Dinesh Thakur

Management performs several roles within an organization. Even though almost all managers perform multiple roles within an organization, some roles are performed by specific set of managers at certain levels. Before understanding the roles played by the management in an organization we must appreciate that management is the life blood of an organization. Managers get things done efficiently and effectively (mostly by others) thereby adding value to the organization. An organization without managers would have no cohesion, no purpose and no direction. It will simply collapse. Management helps in not only getting things done but also ensures that the organization works towards a common purpose and remains organized in this endeavor. Several management thinkers have dealt with this subject of role of management.

Roles of Management

A study (Minztberg 1980) and other studies have shown that the roles of management can be divided into three major categories; interpersonal, informational and decisional. In fact, ten roles of management have been pointed out in the three categories but the most important has always been decision-making. The roles of management under different categories are:

  1. As a titular figurehead whose role is only symbolic-the person who performs this role is normally widely respected within the organization and is known for some special quality or contribution to the organization or society at large. Even though the person is a figurehead and does not enjoy a lot of actual authority and power, he/she helps to galvanize the employees to work for a greater goal. For example, Narayan Murthy, the celebrated CEO of Infosys was primarily responsible for changing Infosys from being a small IT firm to a global enterprise. When he expressed his desire to retire as CEO, the board of Infosys impressed upon him to work as their Chief Mentor. Even though this was just a titular figurehead position, a vast majority of employees continued to get inspired by his actions and word. This kind of role is often very important for continued success of an organization. Management performs this role.
  2. As a leader who takes responsibility of getting things done by inspiring and motivation his people-in this role, a manager works like an inspirational guru to people in his domain of influence. Normally top executives or very successful companies have played this role with elan. CEOs like Andy Grove have not only led from the front but have inspired and motivated others to give the extra bit for the company to create global enterprises. This role is sometimes performed by the management at a much junior level when managers lead by example rather than by the power and authority vested upon them. Several managers who have worked in shop floors have been known to inspire workmen and get things done by inspiring and motivating people.
  3. As a liaison agent who interacts with social networks for business development and other related activities-in this role the manager works like a salesperson and representative of the company, interacting with and networking with people to get more business and other related goals.
  4. As a control monitor who controls the organizational activities-in this role, the manager is a control master, who keeps a close tab on activities within the organization and corrects any deviations from the planned result. A manager plays this role when he is in a middle level position. He exercises his power to control the organizational system and regularly acts on feedback.
  5. As an information disseminator who relays information from top down and sometimes also from bottom up-the manager needs to be a good communicator to be able to achieve this. In this case the role of the manager is not only to act as post office but to ensure that the information that is being disseminated in being understood the all concerned.
  6. As a communicator/spokesperson who communicates with the environment-in this role the manager works like a public relations specialist for the organization and communicates to the market, buyers, sellers, regulators, etc., key issues about the organization.
  7. As an entrepreneur who hunts for opportunities and initiates changes-in this role the manager is the most effective. In this role the manager works by driving a particular issue and by taking up opportunities that might crop up.
  8. As a trouble-shooter who solves organizational problems and does mid course corrections-in this role the manager works as a control agent, who ensures that corrective action are taken at appropriate time to thwart any problems.
  9. As allocator of resource who decides on the quantum of resource for activities-in this role the manager decides on the quantum of resources required for completing activities under his domain.
  10. As a negotiator who makes deals happen for the organization-in this role the manager works as the sole representative of the organization and works with the best interests of the organization in mind.

All managers perform these roles in their regular course of work but some managers are biased towards certain roles that they perform with great elan.

Functions of Management

Management professionals and management as a profession is highly specialized: In an organization managers are required to play different roles of a leader, mentor, follower, etc. they do so under a particular domain. These functional domains are required as the tasks that management professionals execute require specialized skills that can only be honed after years of experience. MIS requires the understanding of this functional classification of management to provide meaningful information to managers. Functionally, management can be segregated into the activities that an organization needs to perform to stay afloat in business namely, finance management, marketing management, operations management and human resource management. These are the functions of management that can again be sub-classified into more specialized activities.

                            Functions of Management

Functionally, management can be segregated into several compartments each with specific specializations. Normally, management is a term loosely used to identify people within an organization who have the authority and capability to take· decisions (mostly functional for middle and junior level but strategic for top level). The various functions are given briefly below. It may be worthwhile to point out that managers play their required roles under each function.

Marketing management

Marketing is the activity of reaching out to customers, communicating the offerings of the organization to them, selling the product or service and ensuring their satisfaction. It is the activity through which an organization can keep its ears close to the pulse of the market.

It generally encompasses the following sub-activities:

  1. Sale is the activity of selling products or services of a firm. It is one of the most important activities of marketing and most organizations employ the maximum number of employees within the marketing department. Normally sales function deals with the management of the channels of sales, i.e. managing wholesalers, retailers and stockiest, etc., to ensure that the product or service reaches the consumer. Some authors argue that selling is a push activity for marketing in the sense that selling normally involves a top down approach. Sales department is the department that lies at the interface between the customer and the organization. We can conceptualize the sales department as lying at the boundary between the organization system and the environment of the customers.
  2. Advertising is the activity of showcasing the positive aspects of a product, service, brand or company in a medium of communication like electronic or print medium to create a need among consumers. Advertising is essentially a pull activity. It creates a need among consumers and thereby increases the revenue of the organization. Sometimes advertising can also be associated with creating an image for the organization or to send a message to the consumers. It is a tool at the hands of marketers to promote their product or service. However, advertising is not targeted in the sense that the communication from the company to its consumers is not targeted to the target consumer but is sent to all consumers in general. This ‘carpet bombing’ kind of strategy is a drawback of advertising.
  3. Publicity is that activity that also results in greater revenue for the company. It is to ensure that positive articles get published or broadcast so that consumers are convinced of the efficacy of a product or service. Normally it is done in a way that the article or broadcast does not have any direct association with the company or brand. Like when a prominent nutrition specialist writes a positive article about a health drink by writing that it reduces cholesterol, then people reading the article may rightly infer that this is the honest opinion of the nutritionist or the publication but it may instead be promotion by the health drink company. These kinds of tools are used to create awareness and build customer base.
  4. Product management is the activity of managing the entire life cycle of a product. It involves managing all activities associated with the product and it assumes that the organizational structure would enable such activity.
  5. Customer Relationship Management (CRM) is the activity of fostering loyalty of the customer towards a brand or product or a company. It encompasses activities that result in a greater understanding and knowledge of the customer. It is the activity that enables a company to have a longer term view of customers rather than having a short-term view. The activity of CRM is based on the understanding of the customer as a person who has a long-term relationship with the organization rather than only at the time of sale.
  6. Market research is the activity of conducting research on the market to find out whether the strategies of the company are bearing results or for planning strategies. It involves a lot of sampling survey and is applied to all aspects of marketing activity such as to find out if an advertisement campaign has been successful or whether a class of product will have a market, etc. This activity is more prone to mathematical and statistical treatment and involves a lot of customer interaction.
  7. Pricing is the activity of setting the price of a product or service. It is normally a strategic decision as it is done with a view of beating competition.
  8. Packaging is the activity of creating suitable packages for consumers so that the consumer is able to but the product or service such that the profit of the organization is optimized.

Finance management

No organization can survive without management of its finances. Finance is the function that manages the financial resource of the organization. It is responsible for management of receivables and payables, management of capital expenditure, costing and budgeting, accounting for all activities of the organization, management of taxes, etc. In short, finance is the function that helps us measure the value of the organization in monetary terms using several accounting, costing and mathematical tools. Financial management includes:

  1. Working capital management is the activity of managing the working capital finances of the organization. Working capital is the capital required to run the organization on a regular basis. It is used to pay for salaries and materials. It normally is in the form of a short-term debt.
  2. Receivables and payables management is the activity in which the receivable and payables of a company are managed. It inevitably results in the management of creditors and debtors and helps the management to take suitable decisions about both sets of people. This is a very important activity of finance and is done with due diligence.
  3. Budgeting is a strategic action of finance. It is the activity by which the quantum of money spent on each activity of the organization is set. This is a complex exercise and one that requires a strategic view of the organization for the future.
  4. Capital expenditure management is an important activity to take care of the capital expenditures of the company and make a plan for such investments. These investments are inevitably linked with the cost of capital.
  5. Auditing is the process of controlling the financial systems. It gives us the variations between the planned and unplanned financial decisions. It also serves as a tool for taking care of malpractices in the firm by exposing frauds within the system. It also throws up any deviation from the general rules of finance as laid down by the company. These deviations if analyzed further and found serious enough warrant attention by top management who fix responsibilities on people for such deviations and corrective action follows.
  6. Managing external borrowings, etc., is also an important function these days as more and more companies are borrowing from outside the country. This is a specialized task involving managing foreign exchange etc.

Operations management

Every organization has an objective for existence, an offering in the form of a product or service. Management of other activities is meaningless without any offering. Operations management is the function that helps an organization to manage the various activities related to the creation of a product or service. The various activities associated with the operations management are:

  1. Production management is the activity of managing the production process of a firm. It involves the planning of production in different time periods, the planning of capacities, monitoring of the production process so that a control can be exercised over the production process.
  2. Maintenance management is the activity of managing maintenance of machines in a firm. Different companies have different maintenance policies.
  3. Quality management this activity is considered very important in most manufacturing and service organizations. It is the activity that measures the final output of the finished product or service against the standard. Any deviation from the standard is considered to be an aberration and corrective measures applied to rectify the same. Quality management itself has several dimensions. Statistical quality control is a form of quality management that takes a view of quality that is measurable. ‘Total Quality Management’ is the all encompassing improved view of quality management that considers duality as a comprehensive package of managerial initiatives that broadly aims at improving the quality culture of the organization.
  4. Project management is that activity that helps management to manage projects efficiently. It focuses on managing protect from the aspects of time and resource management. Precise mathematical techniques are used in this activity to manage projects.
  5. Inventory management is the activity to manage the raw materials and finished goods inventory of the company. This is an important activity as a lot of monetary resources are tied up in these areas. Also, any shortfall in the raw materials may trigger a cascading effect on production and hence, this activity is closely monitored. Vendors who supply the raw materials are carefully chosen and nurtured so that they perform their tasks with a high degree of reliability. Also, the lead times of the vendors are closely monitored and updated regularly to reflect the current status. A lot of mathematical models are used for managing this function.

Human resource management

The most precious asset of any organization are its people so, managing them well leads to growth and prosperity and mismanagement results in losses. In fact, most of management literature is about managing this precious resource. HRM consists of:

  1. Recruitment is the activity of selecting the right people for the right job. A selection process is used to select the right kind of people from a universe of interested people for the job/s in the organization. The recruitment activity is a regular activity in an organization as the organization, being a growing entity requires more and more people to run its business and also because people leave the organization for various reasons. This process of people leaving an organization is collectively called attrition. Recruitment is the process to neutralize the attrition effect and also to ensure that there are enough people to take care of the growth activities of the organization. It is an important activity and employs different techniques for attracting the right people for the job/s in the organization. The techniques employed are advertisement of jobs with enticing job description, salary details, etc., searching for the right people in online search engines, targeting potential employees through contacts and networks, employing consultants and agencies who have a database of the right kind of people for the job.
  2. Training and development is the activity that involves the development of employees in terms of skills, personality, behavior, etc., this activity is an ongoing activity within an organization as most organizations believe in continuous improvement and in order to improve constantly, one must be trained. This activity, even though a regular one is considered in some organizations as not being very important. However, most good companies take this activity very seriously as it holds the key to developing the human capital of their employees that in turn results in improved performance of the organization.
  3. Compensation and benefits management this activity is required to fit the compensation and benefits of employees so that the employee is satisfied in terms of salary and benefits. This is a very crucial activity as many things have to be taken into consideration in order to do justice to this kind of work. Issues like seniority, fairness, performance, etc., are very important in conducting this activity properly.
  4. Performance management is an activity that is a controlling activity. It is required to understand the level of performance of the employees in an organization. The lesser performing employees are normally put through a training process and the high performance employees are rewarded so that they feel good and continue to serve the organization in future with same performance.
  5. Separation Management is another sub function of HRM in which managers manage the separation of people from the organization. This function is exercised in cases of superannuating employees, for employees who have resigned from the services of the firm and for employees who have been for some reason terminated from their services.




What Is Management? Levels of Management

By Dinesh Thakur

For the better part of our productive life, most of us are a part of one organization or another. The organization that we are part of may be very structured, like the armed forces or corporate entities or it may be loosely structured like a neighborhood cricket team. Even though organizations may be of different types, they have some common characteristics like the existence of a common goal/mission towards which each member of the organization works for, a plan or an agenda to make the goal/mission a reality and the utilization of resources to achieve the goal.

Managementis the practice of shaping organizations and its people to achieve its goal/s and mission. Management generally involves the following activities or techniques,

  1. Planning: Making informed decisions about what to do in the future.
  2. Organizing: Making arrangements to fulfill the plan requirements.
  3. Staffing: Employing the right people for the right job.
  4. Leading: Influencing the members of the organization to move towards the common goal of the organization.
  5. Controlling: Making checks to find the deviations/hold ups and taking corrective action/s.

A manager in the course of his duties performs the above activities effectively to do justice to his profession. However, it will be worthwhile to mention here that management itself is an evolving concept. Some consider it as an exact science and others consider it as art. Actually, it is based on practice. The practice of management makes it what it is. The other important criterion for defining management is that management as a profession is associated with the most important activity of an organization and that is decision-making. The only distinguishing attribute of a manager in an organization is his authority and capability to take decisions. This quality makes the profession distinct.

Decisions however cannot be taken in isolation. To take a decision a manager needs information on the problem on which decision is required, information to help generate alternatives, information about the different alternatives and also information about the implications of choosing the alternative. At each phase of the decision-making process, a manager needs information and this is the vital link between management and information. Without information a manger’s ability to take decision is seriously impaired.

                          Constituents of Management

Levels of Management

Management however, is not a monolithic entity. Every manager has a distinct role and even though all managers take decisions, some managers take more important decisions than others, which have a greater impact on the entire organization. Management actually is itself divided into levels. Each level of hierarchy has got specific roles, a level of authority, responsibility, accountability and deliverables. Decision-making therefore is of different levels of complexity and impact at the different levels of management. Hence, information requirement is also different for each level.

Antony (1965) has suggested a framework that is widely accepted in which management is divided into three levels-top, middle and operational. Each level has a distinct role and responsibility and the structure is pyramidal. This means that in middle management there are less number of managers than at the operational level and in the top level there are still lesser number of managers than even the middle level. However, the responsibilities grow exponentially as one move up the ladder of the pyramid.

The top level managers are responsible for planning and other strategic activities. Ideally this top management constitutes the CEO, the board and other heads. The top management decision would include strategic issues that will have a lasting impact on the whole organization like the decision to open a factory in say China or the decision to launch a new product, etc. The middle level works on tactical issues. They are responsible for the smooth functioning of the company and also to pass on critical information to the top management about markets and competitors, etc. The middle level managers take decisions regarding say, whether to have a preventive maintenance in the factory or have breakdown maintenance. As can be understood their impact even though important, is not a lasting impact. In different organizations this middle level function is handled by different designated people. In a large firm a Vice President may also perform the role of a middle level manager and in some cases the General Manager may perform a middle level role. The operational management takes decisions on operational issues like taking decisions on which worker will be deployed for what work, etc. They are basically implementers of broad decisions taken by the higher tiers of management. For example, if the top management has decided to make a new product using the same assembly line of the organization then the middle level managers have to completely reschedule the production planning and scheduling. This new production plan will then pass on to the supervisors at the operational level whose job will be to see to it that the broad objectives of the plan remain intact. They can however decide (like decisions on floor level action, decisions on manpower decision on overtime) on the best way to make the plan a reality.

                        Levels of Management

The tier-wise structure of management helps in maintaining order. Even though in modern organizations the levels have blurred a bit, the broad contours remain. However, in different cultures the levels of management take on new meaning like in Japanese companies. In Japanese companies the shop floor level managers have a much greater authority than in other American or Indian companies. This has got more to do with cultural issues than anything else.

The role of information is vital at each level. As is evident, each level takes decisions with varying degree of complexity and impact. However, all the decisions are vital for the smooth functioning of the company. Each level requires a very distinct type of information. At the shop floor level one needs operational information about people, processes, guidelines, etc. All such information is very structured. The manager who goes through the process of taking the decision at this operational level knows that the decision that he is going to take has been taken by him or someone before him several times. Uncertainty about the outcome is minimal. Even then to take the decision, he needs information in a structured format. Like say, at the shop floor level if a supervisor has to decide on shutting down a machine after observing deviations in the output and behavior of the machine he needs to know what the ideal characteristics of the machine are, what the deviation characteristics are and what needs to be done at the first onset of deviation. This information has to be made available to him on a real time basis for him to take that simple decision of shutting the machine. Similarly, for other levels, the same logic holds true. Without information, managerial decision-making quality is severely impaired. In fact, at the higher tiers of management the implications of a decision and wrong decisions at that are much more severe than at the operational level.

Characteristics of Different Levels of Management

The different levels of management have different roles and responsibilities. Each such level works within its own boundary but with the objective of attaining the overall corporate goal.

                          

Characteristics

Top Management

Middle Management

Operating Management

Planning activity

Heavy

Moderate

Low

Control activity

Low

Heavy

Heavy

Organizing activity

Low

Heavy

Heavy

Leading activity

Heavy

Moderate

Low

Decision-making Complexity

Heavy

Moderate

Low

Problems handled

Unstructured and semi

structured

Semi structured/

structured

structured

Type of information required for decision making

Strategic information,

unstructured/semi

structured from both

within the organization

and outside organization

environment

Tactical and

structured/semi

structured information

from within the

organization

Operational and

structured information

from within the

organization

Impacts and outcomes

Long-term and

organization wide

Medium term

Short-term

Understanding of the

line of business

High

Very high

Medium to low

Understanding on the business environment

High

High to medium

Low

Understanding on the Compition

High

High to medium

Low




What is organizational structure? Definition and Meaning

By Dinesh Thakur

Organizations are structured in several ways. In some cases the functional roles and specializations form the basis of the segregation of groups into homogenous entities like departments, etc., while in other cases, logical business of the organization becomes the basis for segregation like divisions based on product categories, geographies (particularly related to markets) and also customer types? Organizational activities arranged in the form of a hierarchy can be based on the following types:

  1. Functional structure is work based on specialization within the organization, such as finance, marketing, etc. This is a traditional way of structuring organizations based on specializations. Each group works like a sub-organization with policies and plans formulated at the top of the sub-organization after due inputs from the top management. Information normally flows vertically. Information management is comparatively easier in this kind of structure as roles are structured.
  2. Product or service categories based structure, such as X product division, Y product division, etc. In this type of organization, managers in charge of a product or product category work not only vertically but also coordinate amongst each other and work horizontally.
  3. Geography based structure, such as a structure based on segregation/grouping on geographical areas like North region or X province, Z zone, etc. This type of structure is suitable where markets are segmented in geographical areas.
  4. Customer category based structure, such as grouping people according to high paying customers, low paying customers, etc. This kind of structure is especially suitable for service industries, banks, financial and brokerage companies, etc.
  5. Matrix structure is a mix of different structures suitable for tackling important changes in the environment. Such structures are complex arid information flows in all directions. It is challenging for managers to manage such a structure. Information management in these structures is difficult as the decision-making process within the organization is sometimes non-linear.
  6. Virtual organizations are the organizations which exist only in cyberspace and draw all their resources from cyberspace.

Different information management techniques are required for the various organization structures given above. The role of the information manager is also different in each case. Let us now understand the relation between management and information.

 

What is An Organization?

By Dinesh Thakur

Organizations and management are concepts that are very important for the understanding of MIS. Organization is the crucible in which MIS operates and management is the reason for its existence. Any understanding of MIS is incomplete without a discussion on organization and management. Organization and its structure play an important role in MIS as different levels of employees have different levels of authority.

Organization is not a monolithic entity and is structured in a formal manner. This structure is called the organization structure and management follows the organization structure. The decision-making capability is different at different levels. Information and information systems can deliver valuable information only if the theory of information systems and information management is coupled with the organization and management theory. The roles played by different levels of management also need to be understood to provide an information systems based solutions1. The major tasks of management are planning, controlling, organizing, staffing and leading.

These activities of management are carried out at different levels. Typically, management is divided into three distinct levels. These levels are-strategic level or top management that looks after the strategic interests of the organization, tactical level that looks after the smooth functioning of the organization at the tactical level and the operational level that looks at the operational issues. These levels of management have different degrees of authority and responsibility. It is important to understand the functions of each level so that a proper MIS design could be done to supply each level of management² with the right kind of information.

What Is An Organization?

We are prone to use the term organization rather loosely. In the context of information, management organization means an entity (not necessarily only business entity) with a team of people working towards a common goal or objective. Resources are obviously used to attain the objective. A business organization is a special type of organization where the goal or objective of the organization is the attainment of a business outcome like increased profits, increased shareholder value, increased market share, etc. Moreover, business organizations have a way of attaining these objectives and are arranged in a distinct structure segregated into levels of hierarchy. Decision-makers at each level of hierarchy are called managers and the common way of working and management of a business organization is referred to as business management.

Organization Forms

Organizations have been conceptualized as having different forms3 like that of a machine, an organism, a coercive system and culture. Morgan (1986) has been the pioneer in identifying organizations using metaphors such as machines, brains, organisms, political systems, cultures, psychic prisons, coercive instruments of subjugation and as change and transformation. Each metaphor gives a different form and view to the organization. This is a simplistic way of viewing a complex system of an organization.

Forces at Work

Several forces are always at play within an organization. The goal of the management is to align all the forces to work together for the fulfillment of the broad objective of the organization. (Minztberg 1991) suggested that organizations are subjected to the forces of:

  1. Direction is the strategic pathway set by management.
  2. Innovation is the force to adapt to changes in the environment and come up with new products and services.
  3. Proficiency is the visible skill base and knowledge of the people who make the organization.
  4. Concentration is a force that is to be used to focus the energies of the people of the organization on a particular aspect, like developing core competencies and markets.
  5. Cooperation is the team work with which the objectives are achieved in the organization
  6. Competition is the conflict within the organization. This also propels people to perform better.
  7. Efficiency is the force of continuously looking at processes to reduce costs and translate the resources into a better value for everyone.

                 Forces that Shape an Organization 

Several formal definitions of organization have been popular over the years. A suitable way of formally defining an organization (Clancy 1989) is that it regularly performs three important tasks. It produces products and services, it makes a profit in the process and continues to grow and survive as an organization. An alternative definition (Galbraith 1977), (Gerloff 1985) suggests, that an organization is a set of people with the purpose of achieving some common shared objectives through the division of labor, planning, bonded by systems and structures and information-based logical decision-making throughout times.




How to Use Information for Competitive Advantage

By Dinesh Thakur

Information and its use has become the competitive advantage of today’s world. The efficiency with which a firm manages its information determines its success in the marketplace. This enormous power of information unleashed in today’s world has brought down reaction times for decision-making of managers, made customers more aware, competitors more efficient and regulators more alert.

Today, one can no longer hide behind excuses of ‘plausible deniability’. These changes have resulted in a change in mindset of managers and have transformed the way business is conducted. Management of information itself has become a key success factor for firms. However, information is not to be seen in isolation. Information in the current competitive business environment is available to business firms in a computerized environment. Computerization is required to make the information supplied to be timely and accurate, which are critical factors for success in these competitive times.

Hence, the study of information management entails an understanding of information and communication technology also. However, information management is a distinct subject not related (other than the practical considerations of providing the output information timely and accurately) to information and communication technology. Let us now delve deeper into the subject to get a clear understanding of the basic concepts that drive management information systems.

As is clear, the advantage that a modern corporate house enjoys can be traced to its management of information. If the business house cannot manage its information, then it is likely that it will not have any competitive advantage. Typically an organization can develop competitive advantage if it can, does or have what others can’t, do or have. In modern times, the advantages on account of raw materials, technological edge, etc., is being neutralized by the forces of modern business. The last frontier so to say is information management. Companies that have managed to do it successfully like Dell, Google, etc., have generated an unparalleled competitive advantage as their reaction time to changes in the market and/or competition is much less and hence, they can shift business gears faster than their competitors and hence the advantage. Competitive advantage through managing information can accrue to an organization if it:

  1. Manages information to reduce reaction time for change
  2. Managing information makes the organization efficient
  3. Information management leads to insights into the business that the competitors cannot have
  1. Information management is used for predictive analysis so that the organization is one step ahead of competition.

This competitive advantage gained by managing information also requires changes in organization cultures. Companies need to create a culture of information based management and decision-making to take advantage of the opportunities of information management. This is a challenge, as installing an organizational culture is not as straightforward as installing an information management system. It is a process that takes a lot of time.




what is the difference between information systems and information technology

By Dinesh Thakur

Information systems can be manual but the compulsions of competition in modern business makes information systems run on information technology platforms. Information technology is a term used to describe a set of technologies that includes technologies from the domain of computer science and engineering, networking, electronics and telecommunication and other such domains.

Information technology ensures that processing of data is faster and accurate so that the right information can be supplied to the right person at the right time with better efficiency. Information technology helps information systems to deliver greater value to the management by technology intervention not only in the procession arena but also in the delivery of information, visualization, communication and ease of access areas.

Management using information systems have greater options when such systems are technology enabled. Technology not only ensures the faster processing, storage and retrieval of data but also generates a lot of flexibility in the system by introducing different options making the task of the end user easier. For example, on a manual system the monthly sales information can be delivered to a marketing manager on a hard copy format only, i.e. on paper. This means that the individual cannot have the information on monthly sales when he is traveling, but if technology based information systems are used then the monthly sales related information can be made available through mobile communication technology to the mobile computing device of the marketing manager even when he is traveling, making his work much easier. These kinds of options are possible when technology is used. They make an impact on the information quality as well as the information delivery and provide the users (managers) with a host of options. The technological interventions most commonly used in information systems are:

Common interventions (this is apart from the standard hardware and system software like operating system, etc., interventions that constitute the physical computer infrastructure),

  1. Database management system
  2. Computer networking
  3. Application development tools (3GL or 4GL)
  4. Internet based tools
  5. Report generation utilities

Niche interventions (this is over and above the common interventions),

  1. Wireless communication
  2. Enterprise systems
  3. Enterprise resource planning
  4. Customer relationship management
  1. Knowledge management
  2. Mobile computing
  3. Multi tier architecture
  4. Business intelligence
  5. Data warehousing and data mining

These technological interventions make the job of a manager easier when dealing with information. The ease of use, ensured quality of information and a host of available options that provide flexibility in information delivery, capture, processing, retrieval and storage makes information technology an integral part of information management and information systems.




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