Sunday, March 13, 2016

IT Knowledge Information Systems at different levels of management Class 3

The Institute of Chartered Accountants of Bangladesh (ICAB)

IT Knowledge
Class No. 3

A.H.M. Ariful Islam ACA
Information Systems at different levels of management

Information Systems at different levels of management: (Page 44)

There is not a simple answer to this. As most organizations are hierarchical, the way in which the different classes of information systems are categorized tends to follow the hierarchy. This is often described as "the pyramid model"

Based on the hierarchy, Data, Information, Knowledge, Process, activities and criterion, we can classified the pyramid model in to the following:


Three level pyramid model-     based on the type of decisions taken         
          Five level pyramid model -      based on the processing requirement
           Four level pyramid model -    based on the hierarchy level

Details are given below:

Three level pyramid model

Four level pyramid model

Five level pyramid model

Three Level Model:
Information, as required at different levels of manage­ment can be classified as operational, tactical and strategic.
Strategic Decision -        Top management
Tactical  Decision -        Middle Management
Operational Decision -   Lower Level management

Strategic  Decision:
Tactical decisions by the top management are dependent on theInformation passed from middle management.While the operational information is needed to find out how the given activity can be performed better, strategic information is needed for making choices among the busi­ness options.
The strategic information helps in identifying and evaluating these options so that a manager makes informed choices which are different from the competitors and the limita­tions of what the rivals are doing or planning to do. Such choices are made by leaders only.

Tactical Decision:
At the middle level of management the decision making processstarts. Inputs from different internal and external information sources are collected andprocessed for strategic decisions.
Tactical information helps middle level man­agers allocating resources and establishing controls to implement the top level plans of the organization.
For example, information regarding the alternative sources of funds and their uses in the short run, opportunities for deployment of surplus funds in short- term securities, etc. may be required at the middle levels of man­agement.

Operational Decision :
All types of inputs available from various sources arecollected. No decision making process is carried out at this level. Operational information relates to the day-to-day operations of the organization and thus, is useful in ex­ercising control over the operations that are repetitive in nature. Since such activities are controlled at lower levels of management, operational information is needed by the lower management.
For example, the information regarding the cash position on day-to-day basis is monitored and controlled at the lower levels of manage­ment. Similarly, in marketing function, daily and weekly sales in­formation is used by lower level manager to monitor the perform­ance of the sales force.

Figure 1.2 represents the types of information required at different levels of managerial hierarchy.

It may be remembered that each type of information has its role to play in managerial effectiveness. Each type of information is needed with varying degree by the managers at all levels. Thus, a part of operational information may be used even by the chief executive of­ficer of a company. The difference lies in the proportion of each type of information in the total information needs of managers at different levels of managerial hierarchy.

Four  Level Model:
Using the four level pyramid model, we can now compare how the information systems in our model differ from each other:
TPS-                Transaction Processing System -      Lower Level Management
MIS-                Management information system -   Mid Level Management
DSS -           Decision support system -                Mid Level Management
ESS/EIS-         Executive information system-                   Top Level Management

Transaction Processing System-TPS
A transaction processing system collects and stores data about transactions and sometimes controls decisions made as part of a transaction. Thetransaction is the activity that changes stored data, examples of such an activity would be using a credit card, making a reservation or making a cash withdrawal at an ATM.

Functions of a TPS
TPS are ultimately little more than simple data processing systems.
Functions of a TPS in terms of data processing requirements
Activities/ Processing 
Capturing & Entries
Detail reports
Action reports
Summary reports.

Some examples of TPS

o    Payroll systems
o    Order processing systems
o    Reservation systems
o    Stock control systems
o    Systems for payments and funds transfers

The role of TPS

o    Produce information for other systems
o    Cross boundaries (internal and external)
o    Used by operational personnel + supervisory levels
o    Efficiency oriented

Management information system
A management information system (MIS) is a computerized database of financial information organized and programmed in such a way that it produces regular reports on operations for every level of management in a company. It is usually also possible to obtain special reports from the system easily.

Functions of a MIS

MIS are built on the data provided by the TPS
Functions of a MIS in terms of data processing requirements
Internal Transactions
Internal Files
Structured data
Summary reports
Action reports
Detailed reports

Some examples of MIS

o    Sales management systems
o    Inventory control systems
o    Budgeting systems
o    Management Reporting Systems (MRS)
o    Personnel (HRM) systems

The role of MIS

o    Based on internal information flows
o    Support relatively structured decisions
o    Inflexible and have little analytical capacity
o    Used by lower and middle managerial levels
o    Deals with the past and present rather than the future
o    Efficiency oriented?

Decision support system
A decision support system (DSS) is a computer program application that analyzes business data and presents it so that users can make business decisions more easily.

Functions of a DSS

DSS manipulate and build upon the information from a MIS and/or TPS to generate insights and new information.
Functions of a DSS in terms of data processing requirements
Internal Transactions
Internal Files
External Information?
Summary reports
Graphs / Plots

Some examples of DSS

o    Group Decision Support Systems (GDSS)
o    Computer Supported Co-operative work (CSCW)
o    Logistics systems
o    Financial Planning systems
o    Spreadsheet Models?

The role of DSS

o    Support ill- structured or semi-structured decisions
o    Have analytical and/or modeling capacity
o    Used by more senior managerial levels
o    Are concerned with predicting the future
o    Are effectiveness oriented?

Executive information system
An executive information system (EIS), also known as an executive support system (ESS), is a type of management information system that facilitates and supports senior executive information and decision-making needs. It provides easy access to internal and external information relevant to organizational goals.

Functions of an EIS

EIS organizes and presents data and information from both external data sources and internal MIS or TPS in order to support and extend the inherent capabilities of senior executives.
Functions of a EIS in terms of data processing requirements
External Data
Internal Files
Pre-defined models
"Drilling Down"
Summary reports
Graphs / Plots

Some examples of EIS

Executive Information Systems tend to be highly individualized and are often custom made for a particular client group; however, a number of off-the-shelf EIS packages do exist and many enterprise level systems offer a customizable EIS module.

The role of EIS

o    Are concerned with ease of use
o    Are concerned with predicting the future
o    Are effectiveness oriented
o    Are highly flexible
o    Support unstructured decisions
o    Use internal and external data sources
o    Used only at the most senior management levels