Today, we are looking at the concept of management information systems (MIS) in organisations and the benefits and challenges in using these systems.
At this point, it would be good for us to examine the terms, data and information. Data refers to raw facts, while information refers to processed data. For example, 2, 4, 6 and 8 may be considered as data or raw facts and, as such, have very little, if any, meaning. However, if we process these figures by, say, averaging them, we will arrive at 5. The average has much more meaning and is, therefore, more useful to us.
In the past, managers spent days, even months, waiting for data to be processed into information in order to make important decisions. This has changed in recent times because of the availability of information systems.
MIS refers to any computer-based system that provides timely and accurate information for managers to use in the decision making and management of an organisation.
Benefits of MIS
1. Time, money and labour are saved. Since the computer is used, the time spent in overall decision making to the actual project completion is normally reduced. It is often said that time is money, so, if time is saved, money is also saved.
Additionally, labour costs are saved because routine tasks which would, in the past, be done manually are now done by the computer. Less labour is, therefore, employed, reducing wages to labour.
2. Improvement in production and marketing techniques and profit margins. MIS provides information that will ultimately lead to qualitative and quantitative improvements in production, as well as provide informa-tion which will allow for improvements in marketing techniques, such as advertising and sales promotions. Production and marketing improvements will, most likely, transfer into increased profits margins.
3. Increased competitiveness. MIS enables managers to access information on their competitors. They can study their competitor’s techniques with the aim of doing better than they do.
4. Less likelihood of errors being made. The reason is that it is a computer-based system which tends to be accurate.
5. It allows for decisions to be made at all levels in the business. Decisions can be made by top, level and lower-level managers. It is also useful for other employees in the organisation.
6. Communication within the organisation is improved. This is so since the information is, most of the time, clear and accurate – two elements of good communication.
7. Managers are assisted in carrying out their management functions, for example, planning, controlling and directing. It also improves the efficiency of the functional managers within the organisation.
Challenges of MIS
1. The cost of setting up and maintaining MIS. Since the system involves the purchasing of costly computers, the maintaining of these computers and the cost of security systems, the capital outlay is very high and could initially be a hindrance to its use in organisations.
2. The high cost of training. Managers must be trained to use the systems. Therefore, the overall cost of human resource development increases.
3. Human error. Human error can affect the efficiency of the system. This means that human error can result in problems which can cause time to be lost and, even-tually, cause profits to fall.
4. Often, too much information is supplied. Too much information can be just as harmful as too little.
5. Sometimes, information is not timely. This means that it is not always on hand when it is needed and information that is provided too late cannot be utilised effectively.
Now you can work on this essay-type question.
(a) What is a management information system? (2 marks)
(b) List two groups in an organisation that benefit from MIS. (2 marks)
(c) Explain four reasons why MIS is valuable in an organisation. (8 marks)
(d) Discuss four challenges of a MIS. (8 marks)