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.
Types of Information Systems
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.
Decisions Based on Latest Information
Management information systems bring together data from inside and outside the organization. By setting up a network that links a central database to retail outlets, distributors and members of a supply chain, companies can collect sales and production data daily, or more frequently, and make decisions based on the latest information.
Interpret Results Efficiently
Management information systems help decision-makers understand the implications of their decisions. The systems collate raw data into reports in a format that enables decision-makers to quickly identify patterns and trends that would not have been obvious in the raw data.
Decision-makers can also use management information systems to understand the potential effect of change. A sales manager, for example, can make predictions about the effect of a price change on sales by running simulations within the system and asking a number of “what if the price was” questions.
Capability to Run Scenarios
The capability to run scenarios is a key decision-making tool. Some management information systems have this feature built in, while others can provide the information required for running scenarios on other applications, such as spreadsheets. Your decision is influenced by what happens if you decide a certain way. What-if scenarios show you how different variables change when you make a decision.
You can enter reduced staff levels or increased promotion budgets and see what happens to revenue, expenses and profit for different levels of cuts or increases. Management information systems systems play a critical role in making realistic scenarios possible.
Ease of Presentation
The reporting tools within management information systems enable decision-makers to tailor reports to the information needs of other parties. If a decision requires approval by a senior executive, the decision-maker can create a brief executive summary for review. If managers want to share the detailed findings of a report with colleagues, they can create full reports and provide different levels of supplementary data.