Management Information System

Unit: 02

Information And System Concept

2.1 Introduction, Meaning and Types of Information

All individuals, companies and, in general, all organisations are continuously capturing data, many of which are of no
significance to them at all. However,other data are available that would afford them a better understanding of their
own environment and of themselves. These data – what we know as information – enable them to make more accurate
decisions. For this reason, the right amount of information at the right time is a key factor for every organisation.

Company managers take decisions, prepare plans and control their company’s activities using information that they
can obtain either from formal sources or through informal channels such as face-to-face conversations, telephone calls,
social contacts, etc. Managers are challenged by an increasingly complex and uncertain environment. In these
circumstances, managers should theoretically be able to define and obtain the type of information they require.
However, this is not what happens in practice; rather, the way managers perform their work depends on the available
information that they have access to. Most decisions are therefore made in the absence of absolute knowledge, either
because the information is not available or because access to it would be very costly. Despite the difficulties in obtaining
information, managers need relevant information on which to base their planning, control and decision-making
functions.
Although the terms data and information are sometimes used indiscriminately, they do have different meanings.
Data are non-random symbols that represent the values of attributes or events. Hence, data are facts, events and
transactions stored according to an agreed code. Data are facts obtained through reading, observation, calculation,
measurement, etc. The amounts and other details on an organisation’s invoices, cheques or pay slips, etc, are referred
to as data, for example. Data are obtained automatically, the result of a routine procedure such as invoicing or
measurement processes.

Information is a set of data transformed in such a way that it helps to reduce future uncertainty and, therefore,
contributes to the decision-making process. Information is data transformed in a way that makes sense to the person
who receives it; in other words, it has a real or perceived value for that person when he or she acts or takes decisions.
Information, moreover, is data that have been interpreted and understood by the recipient of the message. The
relationship between data and information is similar to that of raw materials and the finished product. Information will
be meaningful insofar as it provides useful raw material for taking a specific decision.

The process of reflecting on and understanding information is what allows the message to have different meanings for
different people. This process also implies that the data analysed, summarised or processed to produce messages will
only become information if its recipient understands its meaning. For data to be transformed into information, there
must be an awareness of what the person receiving the message will use it for, his or her training, position in the
organisation and familiarity with the language and calculations used in the message.

Information is a collection of data that has been processed, organized, or structured in a meaningful way to convey
knowledge, ideas, or instructions. It can be communicated through various mediums, such as text, images, audio, or
video, and can be accessed and shared through multiple channels, such as books, websites, and social media.
At its core, information is a representation of reality, and it is used to convey knowledge about the world around us.
It can be factual, subjective, or even fictional and can take many different forms depending on its purpose and
audience
Information - Information is described as that form of data which is processed, organised, specific and structured,
which is presented in the given setting/ format. It assigns meaning and improves the reliability of the data, thus
ensuring understandability and reduces uncertainty. When the data is transformed into information, it is free from
unnecessary details or immaterial things, which has some value to the user

Characteristics of information
Good information provides value. Experience shows that good information should present the following qualities:
1 Relevance: Relevance is a decisive quality. Relevant information is what increases knowledge and reduces
uncertainty surrounding the problem under consideration. Reports and messages frequently contain irrelevant
sections that lead to difficulties and cause frustration. Many erroneous managerial decisions are a result of data
overload. The right information is not taken from an excessive accumulation of data, which tends to cause a general
feeling of impotence vis-à-vis the problem, but rather it depends on getting hold of the relevant data. This
characteristic is heavily influenced by the qualities explained below.
2. Accuracy: Information must be sufficiently accurate for managers’ purposes. No information is totally accurate,
and spending more on information in pursuit of greater accuracy does not always result in more valuable
information. The degree of accuracy should be coherent with the importance of the decision to be taken and will
vary according to the decision-maker’s level in the hierarchy. The degree of information accuracy required will
depend on the hierarchical level in question.
3. Completeness: In an ideal world, all the information required to take a decision would be available; however in
reality this is not possible. Information is considered to be completed if it informs us on the key points of the problem
we are analyzing.
4. Source trustworthiness: Trust in the information source increases when it has a proven track record. To increase
the trustworthiness of the message, managers use reports from various sources, particularly where strategic
decisions are concerned.
5. Communication with the right person: Each manager in the company is assigned a specific area of activity and
responsibility and must receive information to undertake the tasks he or she is responsible for. However, this process
does not always function as well as it should, and information may not reach the right level in the organisation. For
instance, a superior might not provide all the information to the person who needs it, and vice versa; a subordinate
may hold back information in an attempt to make him or herself indispensable. Information providers must be aware
of information needs in order to ensure it goes straight to where it is required.
6. Punctuality: Good information is that which is delivered just when it is needed. To a certain extent, the need to
obtain information quickly can jeopardise its accuracy, although today’s data processing methods can produce
accurate information very rapidly. Vital information for the company may become worthless if it takes too long to
obtain, or delays occur in processing and communicating the information. Although the punctuality of regularly
produced information is important, how often information is produced should be related to the type of decision or
activity it is required for. Often, companies routinely produce reports at fairly arbitrary intervals (daily, weekly or
monthly) following traditions or calendar conventions without taking into account the time cycle of the activity
involved.
7. Detail: Information should contain the minimum number of details for effective decision making. Every
superfluous character or data entails extra storage efforts, more processing, more assimilation of difficulties and
probably inferior decisions. The level of detail should vary with the level in the organisation: the higher the level
in an organisation, the greater the degree of aggregation and synthesis. At times, particularly as lower levels,
information must necessarily contain a lot of detail if it is to be useful, although the general rule of minimum possible
detail for coherence with efficient information use should be followed. Given the need to be concise and to direct
attention to where it is required, reports often purposely highlight items whose performance deviates significantly
from a fixed standard or budget.
An example of this type of report is seen in the accounting technique of budgetary control in which
actual expenditure, measured item by item, is compared with the budgeted or desired expenditure. Small variations
in these reports may be accepted, but differences exceeding tolerance levels are highlighted. These exceptions are
presented to managers, thus enabling them to carry out their control function more quickly.
8. Comprehension: Comprehension is what transforms data into information. If the information is not understood it
cannot be used and therefore it cannot add value. Many factors intervene in understanding information:
– User preferences: Some people prefer information in graphs or charts, while others prefer a narrative description.
Some prefer presentations with statistics and figures, while others do not understand them. Research has shown that
some people assimilate specific facts in detail, whereas others evaluate the overall picture without paying attention
to the finer points. Inevitably, these variations mean that the same message can be interpreted in different ways.
– Previous knowledge: Comprehension is the result of memory in association with the received message.
– Environmental factors: Group pressure, available time and trust in the information system all influence
comprehension.
– Language: Information is codified in signs or messages.

Classification of information
Classification by Characteristic
Based on Anthony's classification of Management, information used in business for decision-making is generally
categorized into three types:
▪ Strategic information: Strategic information is concerned with long term policy decisions that defines the objectives
of a business and checks how well these objectives are met. For example, acquiring a new plant, a new product,
diversification of business etc, comes under strategic information. it is required by the managers at the strategic level
of management for the formulation of organisational strategies.
▪ Tactical information: Tactical information is concerned with the information needed for exercising control over
business resources, like budgeting, quality control, service level, inventory level, productivity level etc. information in
this category is used in short term planning and is of use at management control level.
▪ Operational information: Operational information is concerned with plant/business level information and is used
to ensure proper conduction of specific operational tasks as planned/intended. Various operator specific, machine
specific and shift specific jobs for quality control checks comes under this category. it applies to short periods which
may vary from An hour to a few days.

Classification by Application
In terms of applications, information can be categorized as:
• Planning Information: These are the information needed for establishing standard norms and specifications in an
organization. This information is used in strategic, tactical, and operation planning of any activity. Examples of such
information are time standards, design standards.
• Control Information: This information is needed for establishing control over all business activities through
feedback mechanism. This information is used for controlling attainment, nature and utilization of important
processes in a system. When such information reflects a deviation from the established standards, the system should
induce a decision or an action
leading to control.
• Knowledge Information: Knowledge is defined as "information about information". Knowledge information is
acquired through experience and learning, and collected from archival data and research studies.
• Organizational Information: Organizational information deals with an organization's environment, culture in the
light of its objectives. Karl Weick's Organizational Information Theory emphasizes that an organization reduces its
equivocality or uncertainty by collecting, managing and using these information prudently. This information is used
by everybody in the organization; examples of such information are employee and payroll information.
• Functional/Operational Information: This is operation specific information. For example, daily schedules in a
manufacturing plant that refers to the detailed assignment of jobs to machines or machines to operators. In a service
oriented business, it would be the duty roster of various personnel. This information is mostly internal to the
organization.
• Database Information: Database information construes large quantities of information that has multiple usage and
application. Such information is stored, retrieved and managed to create databases. For example, material
specification or supplier information is stored for multiple users.

Sources of information
I. External sources of information.
1. Verbal information from customers
2. Business information 3. Industry information
4. Publications 5. Market research agencies
6. Own research
II. Internal information
1. Production information
2. Marketing information
3. Finance information
4. Human resource information.

2.2 Dimension of Information

1. Economic Dimension
This dimension of information refers to the cost of information and its value .
Cost of information: -
It may include
i) Cost of acquiring data,
ii) Cost of maintaining data,
iii) Cost of generating information, and
iv) Cost of communicating information.
The cost is related to the response time required to generate information and communicate it. For systems with low
response time, cost is high.
Value of information:
Before a particular piece of information is acquired, decision-makers must know its value. In decision theory, the
value of information is the value of the change in decision behaviour because of the information. The change in the
behaviour due to new information is measured to determine the benefits from its use. To arrive at the value of new
information, the cost incurred to get this information is deducted from the benefits.

2. Business Dimension
This dimension relates to the business angle of information. Its value to the organization, sustainability of getting the
information from a managerial standpoint, accuracy and reliability of the information, scope and appropriateness of
the information are the parameters for understanding the business dimension of the information. This dimension has
got more to do with the ‘what’ of the information rather than the ‘how’. Business dimension of information can have
the following parameters:
▪ Time dimension – information has to be timely to be of any value. The basic utility of information within an
organization is in decision-making. If the information is not timely then the decisions derived out of it will
have poor quality. Hence, time is an important dimension of information.
▪ Accuracy dimension – information has to be accurate to satisfy the user. Again this is an important dimension
as inaccurate information leads to bad decision-making.
▪ Reliability dimension – information has to be reliable so that users have confidence.
▪ Appropriateness dimension – information must be relevant to the receiver. It must be appropriate to his
needs.
▪ Scope dimension – information should be within the scope.
▪ Completeness of content dimension – information should be complete and not in bits and pieces.

3. Technical Dimension
The technical dimension relates to the information gathering, summarizing, storing and retrieval, analysis and cost
aspects of information. It can have the following parameters:
1. Information gathering – the means of capturing the data and storing it
2. Analysis methodology – the data processing methodology
• Costs of information
▪ Cost of data acquisition – the cost of data acquisition from the point of view of time and resource (technical)
costs. A piece of data is supposed to be costly to acquire if say, it is recovered from a secondary source after
processing it for a long time. On the other hand the cost of acquisition of data is low for such cases when
(say), the customer is himself putting such data into the system (like in the case of ATMs or online banking,
the systems cost of acquiring data is very low is such cases)
▪ Cost of data maintenance – is the cost of maintaining the data in terms of technical costs of space and efforts
(technical) in maintaining it. A data source that requires a lot of technical efforts like indexing, etc., and
requires huge storage (for say storing images, etc.), is said to be more costly.
▪ Cost of data access – is the cost in terms of resource requirements (both processing and network) for
accessing the data. Data that can be accessed after utilizing a lot of CPU and network resources is said to be
costly to access.

2.3 Information Quality

Information is a vital resource for the success of any organization. Future of an organization lies in using and
disseminating information wisely. Good quality information placed in right context in right time tells us about
opportunities and problems well in advance.
Good quality information − Quality is a value that would vary according to the users and uses of the information.
According to Wang and Strong, following are the dimensions or elements of Information Quality −
• Intrinsic − Accuracy, Objectivity, Believability, Reputation
• Contextual − Relevancy, Value-Added, Timeliness, Completeness, Amount of information
• Representational − Interpretability, Format, Coherence, Compatibility
• Accessibility − Accessibility, Access security

1) Timeliness: - Timeliness means that information must reach the recipients within the prescribed time frame.
Timely information can ensure correct executive action at an early stage. The characteristic of timeliness, to be
effective, should also include current information.
2) Accuracy:- Accuracy is another key-attribute of management information. It means that information is free from
mistakes and errors, is clear and accurately reflects the meaning of data on which it is based. It conveys an accurate
picture to the recipient, who may require a presentation in graphical form rather than tabular form. It should be free
of errors and mistakes, true, and not deceptive.
3) Relevance: -Relevance is yet another key attribute of management information. Information is said to be relevant
if it answers specifically for the recipient what, why, where, who and why? In other words, the MIS should serve
reports to managers, which are useful, and the information helps them make decisions.
4) Adequacy: -Adequacy means information must be sufficient in quantity. MIS must provide reports containing
information, which is required in deciding processes of decision-making.
5) Completeness: - The information, which is provided to a manager, must be complete and should meet all his
needs. Incomplete information may result in wrong decisions and thus may prove costly to the organization. It should
be adequate in quantity, so that decisions can be made on its basis.
6) Explicitness: -A report is said to be of good quality if it does not require further analysis by the recipient for
decision-making. Thus the reports should be such that a manager does not waste any time on the processing of the
report, rather he should be able to extract the required information directly.
7) Exception based: -Top managers need only exception reports regarding the performance of the organization.
Exception reporting principle states that only those items of information, which will be of particular interest to a
manager, are reported. This approach results in saving precious time of the top management and enables the
managers to devote more time in pursuit of alternatives for the growth of the organization.
8) Unambiguous: -It should be expressed in clear terms. In other words, in should be comprehensive.
9) Comparable: -It should be of uniform collection, analysis, content, and format.
10) Unbiased: -It should be impartial, free from any bias. In other words, it should have integrity.

2.4 Concept and Definition of System

In the Management Information Systems, the concept of the ‘Systems’ play a very essential and a defining role and it
can be surely referred to as the backbone of the management Information Systems. The major concept of the
systems involves basically the pattern or a way in which one thinks about managing optimally. In management
Information Systems, it acts as the framework for the visualization and the analysation of the internal as well as the
external environments and the factors affect these particular environments in a very integrated way or pattern.

The word systems refer to as the arrangement or the way of organizing some specific things in a particular way. So
now a system can be defined as the regularly interacting interdependent group of the items ultimately leading to the
formation of a united whole. Particularly for the management Information Systems, a system consists of certain
specific set of elements that can be identified as the belonging together because of the common purpose, goal or the
objective.
The features defining the system usually act as its boundaries, so it can be said that the system is inside the boundary
and the environment is outside the boundary.
Each system is further made of the sub systems, which further consist of the other subsystems and one very
important point to be kept in mind here is that all of these subsystems are defined specifically by its boundaries. Each
subsystem itself actually acts as the system. The Interconnections and the various interactions that generally take
place between the various subsystems are referred to as the interfaces.
These interfaces are generally known to occur at the boundary and usually take the form of the inputs and the
outputs. A system is not at all arranged randomly but is arranged with the help of certain logic, which are governed
by the rules, the regulations, the principles, the policies etc. Such an arrangement of a system is generally influenced
by the objective which the system always desires to achieve.
In the management Information Systems, the concept of the system is very much important and one should have an
in depth knowledge of it as with the help of this, one can easily have a look at the individual elements, subsystems in
the larger perspective of the whole system leading to the optimal solutions and the synergy

A system is “an orderly grouping of interdependent components linked together according to a plan to achieve a
specific goal.”
System 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. 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. 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.

Subsystem is defined in terms of the component of the system. it is a set of elements, which is a system itself, and a
component of a larger system. A subsystem description is a system object that contains information defining the
characteristics of an operating environment controlled by the system. The Data tests are performed to verify the
correctness of the individual subsystem configuration data and they are related to a single subsystem in order to test
its Specific Application.

Condition for the System

A system must have three basic Conditions and check points −
• A system must have some structure and behavior which is designed to achieve a predefined objective.
• Interconnectivity and interdependence must exist among the system components.
• The objectives of the organization have a higher priority than the objectives of its subsystems.
For example, traffic management system, payroll system, automatic library system, human resources information
system.

Properties of a System
A system has the following properties −
1. Organization: Organization implies structure and order. It is the arrangement of components that helps to achieve
predetermined objectives.
2. Interaction: It is defined by the manner in which the components operate with each other. For example, in an
organization, purchasing department must interact with production department and payroll with personnel
department.
3. Interdependence: Interdependence means how the components of a system depend on one another. For proper
functioning, the components are coordinated and linked together according to a specified plan. The output of one
subsystem is the required by other subsystem as input.
4. Integration: Integration is concerned with how a system components are connected together. It means that the
parts of the system work together within the system even if each part performs a unique function.
5. Central Objective: The objective of system must be central. It may be real or stated. It is not uncommon for an
organization to state an objective and operate to achieve another.
The users must know the main objective of a computer application early in the analysis for a successful design and
conversion.

2.5 Kinds and Elements of System

Elements of a System
A. Outputs and Inputs
1. The main aim of a system is to produce an output which is useful for its user.
2. Inputs are the information that enters into the system for processing.
3. Output is the outcome of processing.

B. Processor(s)
1. The processor is the element of a system that involves the actual transformation of input into output.
2. It is the operational component of a system. Processors may modify the input either totally or partially, depending
on the output specification.
3. As the output specifications change, so does the processing. In some cases, input is also modified to enable the
processor for handling the transformation.

C. Control
1. The control element guides the system.
2. It is the decision–making subsystem that controls the pattern of activities governing input, processing, and output.
3. The behavior of a computer System is controlled by the Operating System and software. In order to keep system in
balance, what and how much input is needed is determined by Output Specifications.

D. Feedback
1. Feedback provides the control in a dynamic system.
2. Positive feedback is routine in nature that encourages the performance of the system.
3. Negative feedback is informational in nature that provides the controller with information for action.

E. Environment
1. The environment is the “supersystem” within which an organization operates.
2. It is the source of external elements that strike on the system.
3. It determines how a system must function. For example, vendors and competitors of organization’s environment,
may provide constraints that affect the actual performance of the business.

F. Boundaries and Interface

1. A system should be defined by its boundaries. Boundaries are the limits that identify its components, processes,
and interrelationship when it interfaces with another system.
2. Each system has boundaries that determine its sphere of influence and control.
3. The knowledge of the boundaries of a given system is crucial in determining the nature of its interface with other
systems for successful design.

Types of Systems
The systems can be divided into the following types −

1. Physical or Abstract Systems

• Physical systems are tangible entities. We can touch and feel them. Physical System may be static or dynamic
in nature. For example, desks and chairs are the physical parts of computer center which are static. A
programmed computer is a dynamic system in which programs, data, and applications can change according
to the user's needs.
 • Abstract systems are non-physical entities or conceptual that may be formulas, representation or model of a
real system.

2. Open or Closed Systems

• An open system must interact with its environment. It receives inputs from and delivers outputs to the
outside of the system. For example, an information system which must adapt to the changing environmental
conditions.
• A closed system does not interact with its environment. It is isolated from environmental influences. A
completely closed system is rare in reality.

3. Adaptive and Non-Adaptive System

• Adaptive System responds to the change in the environment in a way to improve their performance and to
survive. For example, human beings, animals.
• Non-Adaptive System is the system which does not respond to the environment. For example, machines.

4. Permanent or Temporary System

• Permanent System persists for long time. For example, business policies.
• Temporary System is made for specified time and after that they are demolished. For example, A DJ system is
set up for a program and it is dissembled after the program.

5. Natural and Manufactured System

• Natural systems are created by the nature. For example, Solar system, seasonal system.
• Manufactured System is the man-made system. For example, Rockets, dams, trains.

6. Deterministic or Probabilistic System

• Deterministic system operates in a predictable manner and the interaction between system components is
known with certainty. For example, two molecules of hydrogen and one molecule of oxygen makes water.
Probabilistic System shows uncertain behavior. The exact output is not known. For example, Weather
forecasting, mail delivery.

7. Social, Human-Machine, Machine System

• Social System is made up of people. For example, social clubs, societies.
• In Human-Machine System, both human and machines are involved to perform a particular task. For
example, Computer programming.
• Machine System is where human interference is neglected. All the tasks are performed by the machine. For
example, an autonomous robot.

8. Man–Made Information Systems

• It is an interconnected set of information resources to manage data for particular organization, under Direct
Management Control (DMC).
• This system includes hardware, software, communication, data, and application for producing information
according to the need of an organization.
Man-made information systems are divided into three types −
a. Formal Information System − It is based on the flow of information in the form of memos, instructions, etc., from
top level to lower levels of management.
b. Informal Information System − This is employee-based system which solves the day to day work related problems.
c. Computer Based System − This system is directly dependent on the computer for managing business applications.
For example, automatic library system, railway reservation system, banking system, etc.