The Role of Management Information Systems in Decision Making
Solid businesses are built and grown through a series of well informed and solid decisions. Proper decision making relies on accurate data, information and an awareness of all the options available, which management information systems help to provide.
The role of management information systems (MIS) in decision making is to generate data that is useful to management as they consider strategy, staffing, teams, marketing and more. Choosing what data MIS tracks as well as how management uses this data in decision making can make or break the direction of a company in the competitive marketplace.
Management information systems are computer-based databases comprised of information regarding company operations. Management and top executives can use MIS to track management performance as well as to run reports about things like productivity, efficiency, revenue, product performance, team sales and more. Many MIS systems show current performance contrasted with projected performance so that managers can tell whether they are falling behind, meeting goals or exceeding them.
The importance of MIS in decision making lies in its ability to change the direction of management teams and entire organizations. For instance, if the MIS reports show that all but one management team is exceeding the quarterly performance projections, extra help can be brought in to help the struggling team, or executives might choose to terminate and then replace the poorly performing team.
Management information systems are used by management for decision making but should not be confused with other information systems used by a variety of employees. Some other information systems include the following:
- Decision-Support Systems: Decision-support systems (DSS) are used by management to make organizational decisions versus the management decisions for which MIS is used. For instance, while MIS could be used to make decisions about assisting a poorly performing employee, DSS could be used by executives to create an overall shift in direction based on company and market trends.
- Knowledge-Worker Systems: Knowledge-worker systems (KWS) are used by employees who rely on knowledge for performing their basic job tasks, like company engineers, finance experts and human resources personnel. KWS systems include things like computer-animated drawing systems, human resources systems, financial workstations and virtual reality systems.
- Office-Automation Systems: Office-automation systems help facilitate the daily operations of an office setting and include things like the voicemail system, word processing programs and email. These are basic systems that are used by most employees at every level of an organization.
- Executive-Support Systems: Executive-support systems merge together MIS and DSS in order to provide top executives with the data they need to make vital decisions about the direction of the company as well as employee performance strategies.
- Transactional-Processing Systems: Transactional-processing systems (TPS) are used by companies to fulfill purchases, place orders, bill clients, track received orders and more. When a TPS works well, and people use it as intended, it provides accurate information on inventory, sales rates, cost for materials, order fulfillment and many other details of daily operations. This information is useful to everyone, from a sales employee to middle management and top executives.
Management information systems generate reports about all kinds of data that are useful to management in decision making. This includes reports on things like employee performance, employee efficiency, the effectiveness of training, completed work and work that still needs to be completed. MIS can compare employee performance, rank employee performance and compare performance to projections and expectations.
For instance, an engineering department at a major telecommunications company could have a MIS that tracks each employee's workload, jobs, job due dates and accuracy percentages. When a manager runs the MIS report for the week, month or quarter, the report will highlight late jobs, employees performing below company standards and employees with an overburdened workload. This report is then discussed at management and team meetings in order to address issues before they become crises.
While the objective of a transactional-processing system is to provide accurate transaction data, and the objective of office-automation systems is to increase office communication, management information systems have specific objectives too. While they vary from company to company based on the data tracked, the following are common objectives:
- Compare actual performance to expected performance.
- Facilitate efficient and timely managerial planning.
Reduce costs by highlighting time waste in the organization.
- Provide data about the performance of employees, management, products, services, money, materials and equipment.
- Highlight organizational strengths and weaknesses.
- Illuminate product- or material-quality problems in order to reduce material waste.
The role of management information systems in an organization is to provide the most accurate data possible so that management can make wise and timely decisions in order to increase the bottom line.
The application of MIS in an organization requires involvement of many key team players, including systems analysts, information technology specialists, computer programmers, management, executives, quality-control personnel, help-desk specialists, information security and more. Proper application of MIS should result in the following advantages:
- Increased Profits: MIS application can result in new product development, changed marketing, changed packaging, improved customer service, a growing product line, better communication with different levels of customers, competitive pricing and higher customer retention rates.
- Increased Quality: MIS application contributes to increased quality through reducing waste, helping in the selection of quality materials and implementing warranties/guarantees that match material quality.
- Decreased Costs: MIS application helps management become more strategic about material sourcing, staffing, scheduling, increasing efficiency, improving processes, managing inventory appropriately and manufacturing goods at the right time.
The role of management information systems in organization decision-making processes is key to helping businesses reduce waste and increase profits. MIS reports can be used by individual managers and groups of managers and can be shown to employees to highlight where they are performing well and where they need to grow.
When management has an accurate report, they do not have to guess about who is doing well or what needs to be improved or wonder where their blind spots are. The data help them see a clearer, less-biased picture than they could come up with on their own.
Once management information systems are in place, implementing them into management workflow is vital to their effectiveness. Management needs to be aware of how to access the data, run regular reports and find help when they need it. Visual presentations and opportunities for hands-on exploration of the systems help managers to get used to accessing data before they need to.
Help-desk personnel could choose to host a class or webinar that walks management through every step needed to navigate through your company's MIS. Due to the importance of MIS data in decision making, it is imperative that management has a thorough understanding of how and when to best use the system.
Managers regularly make decisions that impact the daily lives of their employees, so having accurate data is important. Changes introduced by management have the power to alter someone's life by:
- Increasing or decreasing stress levels.
- Increasing or decreasing workload.
- Increasing or decreasing ease of job performance.
- Increasing or decreasing job task understanding.
- Giving or taking away livelihood.
The large impact of managerial decisions on the everyday lives of people as well as on the company's bottom line means that decisions cannot be made lightly or without adequate information.
Many companies train their managers to make decisions using a structured decision-making process. While these processes vary slightly from organization to organization, a basic seven-step process is common:
- Identify the problem.
- Gather data related to the problem.
- Identify possible solutions to the problem.
- Consider pros and cons of each solution.
- Choose the solution that minimizes risks while increasing benefits.
- Execute your plan, adjusting as needed.
- Review the effectiveness of your plan to help inform future decisions.
The importance of MIS in decision making can be seen throughout the typical corporate decision-making process. MIS reports typically alert management about problems by highlighting poor performance, lower than expected sales, problems in efficiency and so forth.
These same reports allow managers to gather data related to the problem by looking at trends over a certain period of time and seeing where improvements can be made. This information empowers managers to brainstorm a wide variety of possible solutions to the given problem so that they can consider the pros and cons of each one. This makes it possible for management to choose and execute a plan to solve the problem.
Future MIS reports should show improvement in the problem areas so that managers can accurately evaluate the success of their given plan and make adjustments going forward.
The importance of MIS in decision making lies in its ability to help managers become proactive versus reactive decision makers. Without proper data, crises can build in the background and then explode, causing managers to go into survival mode and make reactive decisions that Band-Aid the problem rather than prevent it in the first place.
The role of management information systems in organization leadership is to give a heads up about growth areas before major crises emerge so that they can make proactive decisions. This results in crisis prevention so that the company can focus on growth.
Because MIS provides a plethora of information that helps with proactive decision making, it is also helpful for goal setting and review. When your management team sets goals for the week, month, quarter or year, those can be programmed into your management information system. Then, it is easy to track actual performance against your goals and then either increase or decrease your goals in the future to make them more probable and make profit margins more accurate.
For instance, if your sales team sets a goal to do $25,000 in sales this month but is only able to come up with $15,000 in sales when working efficiently, you can try setting a different goal next month. Maybe you set a goal for $20,000 and then run a customer special to make that more achievable and find that your team does $19,000.
You know that the following month is busy for sales, and so that month your team does $21,000 in sales and can be reasonably certain that $20,000 is a pretty accurate prediction of team sales going forward. The information used to set these numbers and adjust them all comes from your MIS report showing total sales and employee-performance trends.
While the role of MIS in decision making is vital to the health of most businesses, it's not without limitations. Management information systems measure data but cannot always accurately collect information on things like team morale, job satisfaction and other abstract dynamics at play in the workplace. Human resources specialists, corporate psychologists and good old-fashioned relationship building can help make up for the blind spots of MIS.