role of mis in business management 1

8/4/2019 Role of MIS in Business Management 1

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Role of MIS in Business Management

Despite the vast improvements in information technology, computers (on which modern IT is

based) cannot as yet take over business management. However, business information systems

have transformed the effectiveness, power and efficiency of management.

In an earlier article on business management software, we looked at surface aspects of how

modern management information systems help businesses. We saw how computers speeded

up and improved the quality of operations. We also mentioned the existence of broad

categories of business software - office suites, functional software such as accounting and

inventory, and industry software such as retail management software. In this article, we seek

to look more analytically at the role of information management systems.

Decision Support, Problem Analysis and Overall Control

Business managers often need to make decisions that can affect the business' fortunes one

way or other. For example, a company with sales outlets or distributors spread over a wide

geographic area might want to optimize the logistical operations of delivering merchandise tothe outlets. The best solution might be affected by numerous factors such as demand patterns,

availability of merchandise, distances involved and the option of using external carriers (who

can find two way loads and might prove a lesser cost option over long distances) instead of

own vehicles.

While it might be possible to use complex mathematical formulas by hand to compute the

best solution, computers transform the whole process into a routine task of feeding certain

information as input and obtaining suggestions for best solutions as output. The task can

typically be done in a few minutes (instead of hours or even days) and it becomes possible to

examine several alternatives before deciding upon one that seems most realistic.

Identifying problems and analyzing the factors that cause them also has been transformed by

modern computer information systems. In a typical MIS environment, standard reports are

generated in a routine manner comparing actual performance against original estimates. The

software that generates the report can be instructed to highlight exceptions, i.e. significant

variations between original estimates and actual performance. Managers will thus become

aware of problem areas in the daily course of their work simply by looking at the reports they

receive, without having to do detailed data collection and computations themselves.

Identifying the factors responsible for the problem can also be routinized to some extent by

using such tools as variance analysis. Variance analysis is an element of standard costing

system that splits deviations from estimates (or standards) into causative factors such as

increase in price of materials used, excessive usage of materials, unexpected machinedowntimes, etc. With such a detailed report, managers can delve deeper into the problemfactor, such as why there was excessive usage of materials.

Control is also exercised through variance analysis. Budgets are prepared for all business

operations by concerned managers working in a coordinated fashion. For example, estimated

sales volumes will determine the levels of production; production levels will determine raw

material purchases; and so on. With good information system management, it then becomes


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possible to generate timely reports comparing actual sales, production, raw materialdeliveries, etc against estimated levels.

The reports will help managers to keep a watch on things and take corrective action quickly.

For example, the production manager will become aware of falling sales (or rising sales) of

particular products and can prepare to make adjustments in production schedules, and

purchasing and inventory managers will become quickly aware of any mounting inventoriesof unused materials. MIS thus enhances the quality of communication all around and can

significantly improve the effectiveness of operations control.

Effective MIS Involves Humans and Computers Working together

The major aspect to note is that MIS provides only the information; it is the responsibility of

concerned managers to act on the information. It is the synergy between efficient, accurateand speedy equipment and humans with commonsense, intelligence and judgment that really

gives power to MIS.

Role of MIS in Business Management

Despite the vast improvements in information technology, computers (on which modern IT is

based) cannot as yet take over business management. However, business information systemshave transformed the effectiveness, power and efficiency of management.

In an earlier article on business management software, we looked at surface aspects of how

modern management information systems help businesses. We saw how computers speededup and improved the quality of operations. We also mentioned the existence of broad

categories of business software office suites, functional software such as accounting andinventory, and industry software such as retail management software. In this article, we seek

to look more analytically at the role of information management systems.

Decision Support, Problem Analysis and Overall Control

Business managers often need to make decisions that can affect the business fortunes one

way or other. For example, a company with sales outlets or distributors spread over a widegeographic area might want to optimize the logistical operations of delivering merchandise to

the outlets. The best solution might be affected by numerous factors such as demand patterns,availability of merchandise, distances involved and the option of using external carriers (who

can find two way loads and might prove a lesser cost option over long distances) instead of

own vehicles.

While it might be possible to use complex mathematical formulas by hand to compute thebest solution, computers transform the whole process into a routine task of feeding certain

information as input and obtaining suggestions for best solutions as output. The task cantypically be done in a few minutes (instead of hours or even days) and it becomes possible to

examine several alternatives before deciding upon one that seems most realistic.


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Identifying problems and analyzing the factors that cause them also has been transformed bymodern computer information systems. In a typical MIS environment, standard reports are

generated in a routine manner comparing actual performance against original estimates. Thesoftware that generates the report can be instructed to highlight exceptions, i.e. significant

variations between original estimates and actual performance. Managers will thus become

aware of problem areas in the daily course of their work simply by looking at the reports they

receive, without having to do detailed data collection and computations themselves.

Identifying the factors responsible for the problem can also be routinized to some extent by

using such tools as variance analysis. Variance analysis is an element of standard costing

system that splits deviations from estimates (or standards) into causative factors such as

increase in price of materials used, excessive usage of materials, unexpected machine

downtimes, etc. With such a detailed report, managers can delve deeper into the problem

factor, such as why there was excessive usage of materials.

Control is also exercised through variance analysis. Budgets are prepared for all business

operations by concerned managers working in a coordinated fashion. For example, estimated

sales volumes will determine the levels of production; production levels will determine raw

material purchases; and so on. With good information system management, it then becomes possible to generate timely reports comparing actual sales, production, raw material

deliveries, etc against estimated levels.

The reports will help managers to keep a watch on things and take corrective action quickly.

For example, the production manager will become aware of falling sales (or rising sales) of

particular products and can prepare to make adjustments in production schedules, and

purchasing and inventory managers will become quickly aware of any mounting inventories

of unused materials. MIS thus enhances the quality of communication all around and can

significantly improve the effectiveness of operations control.

Effective MIS Involves Humans and Computers Working together

The major aspect to note is that MIS provides only the information; it is the responsibility ofconcerned managers to act on the information. It is the synergy between efficient, accurate

and speedy equipment and humans with commonsense, intelligence and judgment that reallygives power to MIS.

Role of the Management information system

The role of the MIS in an organization can be compared to the role of hear in the body. The

information is the blood and MIS is the heart. In the body the heart plays the role of supplying pure

blood to all the elements of the body including the brain. The heart works faster and supplies more

blood when needed. It regulates and controls the incoming impure blood, processes it sends it to the

destination in the quantity needed. It fulfills the needs of blood supply to human body in normal

and also in crisis.


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The MIS plays exactly the same role in the organization. The system ensures that an appropriate

data is collected from the various sources, processed, and sent further to all the needy destinations.

The system is expected to fulfill information needs of an individual, a group of individuals, the

management functionaries; the managers and the top management.

The MIS satisfies the diverse needs through a variety of systems such as Query Systems, Analysis

Systems, Modeling Systems and Decision Support Systems. The MIS helps inStrategic Planning,

Management Control Operational Control and Transaction Processing.

The MIS helps the clerical personnel in the transaction processing and answers their queries on the

data pertaining to the transaction, the status of a particular record and references on a variety of

documents. The MIS helps the junior management personnel by providing the operational data for

planning, scheduling and control, and helps them further in decision making at the operations levelto correct an out of control situation. The MIS helps the middle management in short term planning,

target setting and controlling the business functions. It is supported by the use of the management

tools of planning and control. The MIS helps the top management in goal setting, strategic planning

and evolving the business plans and their implementation.

The MIS plays the role of information generation, communication problems and helps in the process

of decision making. The MIS, therefore, plays a vital role in the management, administration and

operations of an organization.

role of mis in business management 1

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