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INFORMATION SYSTEMS Systems: The term systems is derived from the Greek word synistanai, which means to bring

together or combine. The term has been used for centuries. Four major concepts underlie the systems approach Specialization: ! system is divided into smaller components allowing more speciali"ed concentration on each component. Grouping: To avoid generating greater comple#ity with increasing speciali"ation, it becomes necessary to group related disciplines or sub$ disciplines. Coor ination: !s the components and subcomponents of a system are grouped, it is necessary to coordinate the interactions among groups. Emergent properties %ividing a system into subsystems &groups of component parts within the system', re(uires recogni"ing and understanding the emergent properties of a system) that is, recogni"ing why the system as a whole is greater than the sum of its parts.

!e"ining System: ! collection of components that work together to reali"e some objective forms a system. *asically there are three major components in every system, namely input, processing and output.

+nput

,rocessing

-utput

+n a system the different components are connected with each other and they are interdependent. For e#ample, .uman body represents a complete natural system. /e are also bound by many national systems such as political system, economic system, educational system and so forth. The objective of the system is that some output is produced as a result of processing the suitable inputs. 0ach system consists of subsystems which in turn are made up of other subsystem, each subsystems being surrounded by some boundary. +f we consider 1,2 as a system then !rithmetic 2nit, 1ontrol 2nit and 3torage 2nit are its subsystems.

3ubsystem 4

3ubsystem 5

3ubsystem 6

!rithm eti c 2nit

1ontrol 2nit

3torage 2nit

Su#systems in a C$% TY$ES OF SYSTEM 3ystems can be categori"ed as natural systems and man$made systems. !nd under man$made system we also have automated system. a& Natural systems There are a lot of systems that are not made by people they e#ist in nature and, by and large, serve their own purpose. +t is convenient to divide natural systems into two basic subcategories physical systems and living systems. ,hysical systems include such diverse e#ample as 3tellar systems gala#ies, solar systems, and so on. Geological systems rivers, mountain ranges, and so on. 7olecular systems comple# organi"ations of atoms. 8iving systems encompass all of the myriad animals and plants around us, as well as our own human race. #& Man'ma e systems 7an$made systems include such things as 4. 3ocial systems organi"ations of laws, doctrines, customs, and so on. 5. !n organi"ed, disciplined collection of ideas. 6. Transportation systems networks of highways, canals, airlines and so on. 9 1ommunication systems telephone, tele#, and so on. :. 7anufacturing systems factories, assembly lines, and so on. ;. Financial systems accounting, inventory, general ledger and so on. 7ost of these systems include computers today. -ne must analy"e, or study, the system to determine its essence and understand the system<s re(uired behavior, independent of the technology used to implement the system. 3ome information processing systems may not be automated because of these common reasons 1ost) 1onvenience) 3ecurity) 7aintainability) ,olitics. c& Automate systems

!utomated systems are the man$made systems that interact with or are controlled by one or more computers. /e can distinguish many different kinds of automated systems, but they all tend to have common components 4. 1omputer hardware &1,2s, disks, terminals, and so on'. 5. 1omputer software system programs such as operating systems, database systems, and so on. 6. ,eople those who operate the system, those who provide its inputs and consume its outputs, and those who provide manual processing activities in a system. 9. %ata the information that the system remembers over a period of time. :. ,rocedures formal policies and instructions for operating the system. !ETERMINISTIC AN! $RO(A(I)ISTIC SYSTEMS a& !eterministic System These are the systems that operate in a predictable manner, The interaction among the parts is known with certainty. +f one has the description of the state of the system at a given point in time plus a description of it operation, the ne#t state may be given e#actly without error. For e#ample computer program that work according to a set of instructions. ! program that is written to find out the class obtained by a student when his percentage of marks is given as a input. whereas in probabilistic systems, output are defined in probable terms. #& $ro#a#ilistic System These are the systems that can be described in terms of probabilistic behaviour but a certain degree of error is always attached to the prediction of what the system will do. -utputs are stated in probability like the probability of the success a new product in the market is 9= per cent. 0#amples are +nventory 3ystems in which we can define average demand but e#act value at given time is not known e#actly. C)OSE! AN! O$EN SYSTEMS a& Close Systems These are the systems that are self contained. +t does not e#change information, material or energy with the environment. For e#ample systems in manufacturing are designed to be closed as possible so that they can operate without disturbances from the suppliers, customers etc. #& Open Systems

-pen 3ystems e#change information, material or energy with the environment including random and undefined inputs. They tend to have some form, structure that allow them to adopt to changes in environment in such a way to continue their e#istence. They are self organi"ing in a sense that they change their organi"ation in response to changing conditions. -rganisations are open systems. Their e#istence depends on their capacity to handle the changing environment. +t receives unplanned and unscheduled inputs from the environment and it should thus be able to adjust to them to continue their e#istence. INFORMATION SYSTEMS +nformation 3ystem is a combination of people, hardware, software, communication devices, network and data resources that processes &can be storing, retrieving, transforming information' data and information for a specific purpose. +t is the discipline covering the application of people, technologies, and procedures to solve business problems. There are many elements to +nformation 3ystems &7+3' which include

!ata $ The data input to the system must be as accurate as it can be, subject to its costs and timescales for capture. +t should then be stored in the most logical way. This often differs from how the data is input. The data then needs to be summari"ed to create information in a way that best meets the needs of the systems users $ this may not necessarily be the most logical way or the easiest or cheapest for the +T team. $eople $ ,eople are involved both in capturing the data and in e#ploiting the information. +t is important to motivate those who capture the data by highlighting the value that the e#ploited data brings to the organi"ation. *ar +are $ +n a small organi"ation, the 7+3 may run on just the sales or finance director<s ,1. +n larger businesses, it usually runs on a server, shared or dedicated, with +nternet or intranet access for those who need it. +t is unusual to re(uire speciali"ed software. So"t+are $ the simplest 7+3 can be built using standard software. .owever, most 7+3 use speciali"ed software, which has the most common features of an 7+3 already built in. The developer configures this by describing the database and its structure, where the data comes from, how to summari"e the data and what standard (ueries will be re(uired. The cost of this software varies widely. The cheapest offers limited functions for one ,1. The most e#pensive is highly functional, providing high performance and many features for hundreds or thousands of users and vast amounts of data.

/ithout these things effective information system would be forfeit to many problems, including +nformation flaws, which if e#ploited and proved to be wrong could bring about harsh fines from publishing false information &fraud'. Management In"ormation Systems ,MIS& 7+3 is a combination of three keywords) 7anagement, +nformation and 3ystem and to understand what is 7+3, one must consider these keywords that has significant implications.
7+3

7anagement

+nformation Fig >.4

3ystem

Management: +t comprises the processes or the activities that describe what managers do in the operation of their organi"ation ? plan, organi"e, initiate, control operations. They plan by setting strategies and goals and by selecting best course of action to implement the plan. They organi"e the tasks necessary for operational plan, set these tasks into groups and assign authority delegation. They control the performance of work by setting performance standards and avoiding deviations from the standard. 3ince decision making is a fundamental prere(uisite to the processes of planning, organi"ing and control, job of the 7+3 thus becomes that of facilitating decision making for these processes. In"ormation: %ata must be distinguished from +nformation. %ata are raw facts and figures that describe some object or event. For e#ample, temperature, your age, the current value of a share in the stock market, and price of a product are all data.

+nformation is the data that has been processed, organi"ed and integrated to provide more insight which will form the basis for decision making. For e#ample reports regarding the fluctuation of market over the period three years or annual report of the sales of a product makes up the information based on which decision regarding for further action can be taken.

System: +t is a set of interrelated components that work together to accomplish a common goal within an environment. For e#ample, a computer system is a collection of components like input device, output device, memories and processor, all are working together to accomplish a common goal of giving out the desired output to the user. 7anagement +nformation 3ystem can thus be described as a system with set of interrelated components that collect, process, store and distribute information to support decision making and control in an organi"ation. +n addition to supporting decision making, co$ordination and control, information systems may also help managers and workers analy"e problems, visuali"e comple# subjects and create new products. +nformation 3ystem can be either computer based information systems or manual but computer based information systems provides better solution as it has the features and advantages that technology has to offer. ! 7+3 or 1omputer based +nformation 3ystem consists of five related components @ @ @ @ @ .ardware 3oftware ,eople ,rocedures and 1ollections of data

The physical e(uipment used in the computing is called the hardware and the set of instructions that control the hardware is known as the software. +t includes the computers, networking e(uipment and related software that is needed to disseminate the information across the organi"ation. +n the early days of computers, people directly involved with 7+3 were the programmer, design analyst or some technical person who is considered to be a 1omputer 0#pert. .owever nowadays everyone within and outside the organi"ation is involved with the information system and they include the employees, customers, competitors and suppliers and they may or may not be computer e#pert. ,rocedures are the instructions that help the people use the system. +t includes items such as user manuals, documentation and procedures to ensure backups are made in regular

basis. ,rocedures also include the guidelines that are followed by the organi"ation in performing a particular task and in using the system. 7anagement +nformation 3ystems are distinct from regular information systems in that they are used to analy"e other information systems applied in operational activities in the organi"ation. !cademically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making.

CONCE$T OF MIS 7anagement +nformation 3ystem has been evolving and thus its concept has also been undergoing change in these years. The initial concept of 7+3 was that of collecting data from all the sources within and outside the organi"ation and then presenting in some form of reports to the user. These reports were impersonal and did not suit an individual need. The user will e#tract his re(uired information from that report. /hen a distinction between data and information was made, it was understood that information is the need of the hour and information is individual oriented. 3ince information is perceived differently by different individuals, reports should be presented

in a form that suits a particular person. .ence reports that fulfills a specific individual need is framed. ! single system taking care of the entire organi"ation information was found to be inefficient and inade(uate thus 7+3 emerged as collection of different subsystems, designed to perform a particular task but all working towards the common plan, standards and procedures adopted by the organi"ation. %ata is collected from various sources and are stored in database from which they are later retrieved. This data is then fine tuned and processed on a form for e#erting management control over the organi"ation. %ecision 3upport 3ystem &%33' and 0#ecutive 3upport 3ystems &033' emerged as e#tension to support decision making. /ith globali"ation and rise in the competition, information gained importance as strategic resource and management information system emerged as a strategic weapon to combat the stiff competition. To achieve the goal of providing competitive edge, 7+3 involves various academic disciplines both technical and behavoural as depicted in the fig.

1omputer 3cience helps in providing the features of computing with speed, accuracy and large storage capacity. -peration Aesearch methods are used to solve business problems. 7anagement 3cience and 0conomics is needed by the manager in planning and control whereas ,sychology and 3ocial 3cience helps in understanding the nature of the people involved and thus the manager can act accordingly.

Structure o" MIS 7+3 can be viewed in two ways 1onceptual and ,hysical Conceptual -ie+:

7+3 is a multi disciplinary approach to the business management and is a combination of different concepts In"ormation System: ! system that helps in information dissemination among different users in different levels of management. +t thus tries to create an impact in the user and help in decision making. (usiness Goals an Mission: +nformation 3ystem should be built in accordance to the organi"ational goals and objectives. This will ensure that entire organi"ation is streamlined to a common goal with the help of the information system. Application o" $ure an Social Science: ,ure and 3ocial 3cience helps in coming up with the functionality and goals of an organi"ation which in turn is the basis for 7+3.

Applications o" $rinciples an $ractices o" Management: The management information system is built with the sole aim to cater to the management tasks and help in different levels of management. %se o" ata#ase an .no+le ge #ase: The main essence of the information system is the data and analy"ed data referred as knowledge. The concepts of database and knowledge base are of primary importance to 7+3. Computers an In"ormation Tec/nology: The main components of 7+3 is 1omputer and the concept of computing and information technology helps in preparing efficient 7+3 that is accurate, fast, reliable and can handle large amount of data. $/ysical -ie+:

7+3 is a combination of different subsystems to take care of different activities in the organi"ation. O)T$0 !ata an -ali ation System: The core element of 7+3 is data which is obtained from daily transactions. -8T,&-nline Transaction ,rocessing' systems handles daily transaction as it occurs and feeds into data and validation system to get validated or accurate data.

!ata $rocessing an Analysis System: The raw data obtained needs to be processed and analysed and be made into a format that can help in easier access later for adhoc (ueries. !ata#ase an 1no+le ge #ase: The processed data is stored in the database which is handled by database management system and analysed information i.e., knowledge is stored in knowledge base which is handled by data warehousing system. Functional In"ormation System: The main function of 7+3 is to collect the information from various sources and present them to the manger at different levels of management. +t is designed to support structured and semi$structured decisions at the technical and management control level. +t should also coordinate different activities among divisions and functional areas like marketing, finance, manufacturing, human resources and so forth. Mission Critical Applications: 0very organi"ation will have few applications that can be termed as mission critical application. These are the applications that are critical to the proper running of a business. +f this application fails for any length of time the entire business may fall down. For e#ample, an order$entry system may be considered mission critical if a business relies on taking lots of orders. (usiness In"ormation Systems: The combination of all subsystems together constitutes the business information systems. Enterprise In"ormation System: %ifferent business information system constitute enterprise information system that basically holds summari"ed data to be needed by the top e#ecutives of the organi"ation. !EFINITIONS There are various definitions given for 7anagement +nformation 3ystems. The definitions are 4' ! 7anagement +nformation 3ystem &7+3' is a system that gathers comprehensive data, organi"es and summari"es it in a form valuable to functional managers and then provides those same managers with the information they need to do their work. 5' ! set of interrelated components that collect &or retrieve', process, store, and distribute information to support decision making and control in an organi"ation 6' 7+3 &management information systems' is a general term for the computer systems in an enterprise that provide information about its business operations. 9' 7+3 refers broadly to a computer$based system that provides managers with the tools for organi"ing, evaluating and efficiently running their departments. +n order to provide past, present and prediction information, an 7+3 can include software

that helps in decision making, data resources such as databases, the hardware resources of a system, decision support systems, people management and project management applications, and any computeri"ed processes that enable the department to run efficiently. RO)E OF MIS The role of 7+3 can be compared with that of the role of heart in the human body. The function of the heart is to pump blood to various parts of the body based on their need. +n the same way, 7+3 disseminates information to various levels of management in the organi"ation as the need arises. +t serves the management level of an organi"ation, providing managers with reports and in some cases with on$line access to the organi"ation<s current performance and historical records. 7+3 are oriented towards internal operations of the organi"ation. 7+3 primarily serve the functions of planning, controlling and decision making at the management level. +t is dependent on Transaction ,rocessing 3ystem &T,3', a system that performs and records the daily routine transactions necessary to conduct of business. 3ales order entry, payroll, shipping and employee record keeping are some of the e#amples of the transactions. The information received from T,3 is used by the lower level management to support day to day operations and control. The second level consists of information system resources to aid in tactical planning and decision making for management control by the middle level management. The top level consists of information to support strategic planning, policy making by top level management.

The role of 7+3 in each level of 7anagement for a decision on a launch of a new product is depicted in the below table
)e2el o" Management Top Level Type of Decision Example Launch New Product Role of MIS Provide information regarding the present market trend. Provide a list of different types of campaigning methods and success rate of each method Provides means to analy!e the results of the survey.

Strategic Decision

Middle Level

Tactical Decision

Promotion Campaigns

Lower Level

perational Decision

Customer Survey

Thus it serves the management level of an organi"ation, providing managers with reports and in some cases with on$line access to the organi"ation<s current performance and historical records. 7+3 primarily serve the functions of planning, controlling and decision making at the management level.

IM$ACT OF MIS ON MANAGEMENT /hat is the impact of 7+3 on the organi"ationB .ow 7+3 has helps the organi"ation in achieving its goal of efficient work cultureB These (uestions can be answered by considering two major types of theories about how +nformation 3ystems affect organi"ations economic theories and behavioral theories. Economic T/eories: +t<s sometimes cheaper to hire a computer than to hire a person. /e may not like the idea that machines can replace human beings, but when you think about it, they have been doing this for thousands of years. To better illustrate this concept, let<s take a look at how a company can find it cheaper to use an +nformation 3ystem to develop and disseminate a .uman Aesources policy regarding dress codes for employees. The .A assistant may write the first draft of the policy and give it to the .A director on paper. The director will review it and make changes. The assistant then must incorporate the changes and reprint the document. *ut, if there is an +nformation 3ystem, the assistant can submit the draft to the director

electronically and the director can make changes to the electronic version of the file and return it to the assistant. -f course others in the organi"ation must review the new dress code policy. The proposed policy can be printed in fifteen copies, a person can manually send the copies out, track where they went and when, and then track all the changes made to the proposal. -r, the proposed policy can be sent electronically to reviewers who will electronically collaborate on necessary changes. 0ach of the reviewers can see in real time what the others think and the changes they would like to make. -nce the policy is set, it is sent to each employee. This can be done through old method of printing hundreds of copies. -r we could send the policy to each person electronically &email'. 0veryone would have personal copy stored on computer. There is no need to print it out on paper since it will be stored electronically and can be accessed whenever it is convenient. *y acknowledging receipt of the policy via email, the .A department knows everyone has received it. 3o what about the people who don<t have their own personal computerB Cou could post the new policy to the company +ntranet, which would be available to all employees whenever they find it convenient. Time and resources are cut drastically through the use of an +nformation 3ystem. +f the policy needs to be revised, the same process can be used to make and send out changes. The revised policy can be posted on the +ntranet for all to see. (e/a2ioral T/eories: Technology doesn<t automatically transform organi"ations. There is no magic wand companies can wave and have all their problems solved just because they install the latest information system. ,eople using technology efficiently and effectively, however, can transform organi"ations. /hen a company introduces change to the organi"ational structure because of a new or revamped information system, there will be some change in overall working of the organi"ation. Daturally people will resist changes since they cannot digest the idea of working in a way they are not used to. +t will take some time for them to adjust to the new system in place but the information system will help the people in doing the task in more efficient and (uick manner. +t can perform most of the clerical work of heavy computation without any human feelings of tiredness. This would free the employees mind and he can concentrate on other things. -ne of the biggest benefits would be the fact that the decision$making process can be pushed to lower levels, and management can check progress electronically. ,erhaps the managers wouldn<t be as afraid to give responsibility to lower level management because they can keep an eye on the committee throughout the process. 0veryone in the entire organi"ation could have access to the work of the committee.

The benefits of 7+3 when it is employed in organi"ation are Operational E""iciency: 1an carry most of the operational tasks in more efficient and (uick manner. Functional E""iciency: 7uch of the functional areas of the management like marketing, finance, human resource, manufacturing can be automated, thus helps in better control and operation. (etter Ser2ice: +nternet has made the world a small place. ,eople from any part of this world can get access to the information and the organi"ation can better serve these people. Altering t/e #asis o" competition: /ith the information and technology in hand one can have competitive edge. 3or.ing to+ar s common goal: 7+3 is built on the common goal of the organi"ation. .ence even though an organi"ation which is divided into different functional areas are working independently, 7+3 will bring them together. E""icient Manager: 7+3 emerges as a useful tool for the manager to carry out his task in efficient manner. C/ange in organizational climate: 7+3 brings both economical and behavioural change in the functioning of the organi"ation. Increase employee pro ucti2ity: Aeducing the time, errors, and costs associated with the processing information. En/ance ecision ma.ing: .elping the manager to analyse a situation and then leaving the decision entirely up to the manger or actually making some sort of recommendation concerning what to do. Impro2e team colla#oration: +mproving the performance of teams by supporting the sharing and flow of information. Create #usiness partners/ip an alliances: .elping organi"ations work together to provide better and more timely products and services Ena#le glo#al reac/: 7arketing the products and services in countries all over the world and developing partnerships and alliances with other business throughout the globe.

TY$ES OF INFORMATION SYSTEMS For most businesses, there are a variety of re(uirements for information. 3enior managers need information to help with their business planning. 7iddle management need more detailed information to help them monitor and control business activities. 0mployees with operational roles need information to help them carry out their duties. !s a result, businesses tend to have several information systems operating at the same time. They can be divided as !ctivity based information 3ystem and Functional +nformation 3ystems

Acti2ity #ase In"ormation Systems: a& E4ecuti2e Support Systems: !n E4ecuti2e Support System ,5ESS6& is designed to help senior management make strategic decisions. +t gathers, analyses and summarises the key internal and e#ternal information used in the business. ! good way to think about an 033 is to imagine the senior management team in an aircraft cockpit $ with the instrument panel showing them the status of all the key business activities. 033 typically involve lots of data analysis and modelling tools such as what$if analysis to help strategic decision$making. #& Management In"ormation Systems: ! management in"ormation system ,5MIS6& is mainly concerned with internal sources of information. 7+3 usually take data from the transaction processing systems &see below' and summarise it into a series of management reports. 7+3 reports tend to be used by middle management and operational supervisors. c& !ecision'Support Systems: %ecision$support systems &%33' are specifically designed to help management make decisions in situations where there is uncertainty about the possible outcomes of those decisions. %33 comprise tools and techni(ues to help gather relevant information and analyse the options and alternatives. %33 often involves use of comple# spreadsheet and databases to create what$if models. & 1no+le ge Management Systems: Enowledge 7anagement 3ystems &E73' e#ist to help businesses create and share information. These are typically used in a business where employees create new knowledge and e#pertise $ which can then be shared by other people in the organisation to create further commercial opportunities. Good e#amples include firms of lawyers, accountants and management consultants. E73 are built around systems which allow efficient categorisation and distribution of knowledge. For e#ample, the knowledge itself might be contained in word processing documents, spreadsheets, ,ower,oint presentations. internet pages or whatever. To share the knowledge, a E73 would use group collaboration systems such as an intranet. e&Transaction $rocessing Systems: !s the name implies, Transaction ,rocessing 3ystems &T,3' are designed to process routine transactions efficiently and accurately. ! business will have several &sometimes many' T,3) for e#ample *illing systems to send invoices to customers 3ystems to calculate the weekly and monthly payroll and ta# payments ,roduction and purchasing systems to calculate raw material re(uirements 3tock control systems to process all movements into, within and out of the business

"& O""ice Automation Systems: -ffice !utomation 3ystems are systems that try to improve the productivity of employees who need to process data and information. ,erhaps the best e#ample is the wide range of software systems that e#ist to improve the productivity of employees working in an office &e.g. 7icrosoft -ffice F,' or systems that allow employees to work from home or whilst on the move.

Functional In"ormation Systems:


7+3 supports the tasks at different functional areas in an organi"ation. %iffernet functional areas and the tasks in which 7+3 can provide help are as follows

"unctional M#S $rea

%&amples of computerised tasks $ccounts Paya(le $ccounts )eceiva(le *udgeting "inancial Statement Compilation "i&ed $ssets Control Payroll Portfolio $nalysis Market $nalysis rder %ntry $dvertising %ffectiveness Sales Tracking Computer $ided Design Computer $ided Machining Computer #ntegrated Manufacturing #nventory Control %nterprise )esource Planning Performance $ppraisal ,overnment )eport -uestion Training Needs and Development )ecruiting

"inance ' $ccounting

Marketing

Manufacturing

+uman )esources

Accounting management in"ormation systems: !ll accounting reports are shared by all levels of accounting managers. Financial management in"ormation systems The financial management information system provides financial information to all financial managers within an organi"ation including the chief financial officer. The chief financial officer analy"es historical and current financial activity, projects future financial needs, and monitors and controls the use of funds over time using the information developed by the 7+3 department.

Manu"acturing management in"ormation systems 7ore than any functional area, operations have been impacted by great advances in technology. !s a result, manufacturing operations have changed. For instance, inventories are provided just in time so that great amounts of money are not spent for warehousing huge inventories. +n some instances, raw materials are even processed on railroad cars waiting to be sent directly to the factory. Thus there is no need for warehousing. Mar.eting management in"ormation systems: ! marketing management information system supports managerial activity in the area of product development, distribution, pricing decisions, promotional effectiveness, and sales forecasting. 7ore than any other functional areas, marketing systems rely on e#ternal sources of data. These sources include competition and customers, for e#ample. *uman resources management in"ormation systems: .uman resources management information systems are concerned with activities related to workers, managers, and other individuals employed by the organi"ation. *ecause the personnel function relates to all other areas in business, the human resources management information system plays a valuable role in ensuring organi"ational success. !ctivities performed by the human resources management information systems include, work$force analysis and planning, hiring, training, and job assignments. The above are e#amples of the major management information systems. There may be other management information systems if the company is identified by different functional areas.

!ECISION MA1ING The word decision is derived from the 8atin root decido, meaning to cut off. The concept of decision, therefore, is settlement, a fi#ed intention bringing to a conclusive result, a judgment, and a resolution. ! decision is the choice out of several options made by the decision maker to achieve some objective in a given situation. *usiness decisions are those, which are made in the process of conducting business to achieve its objectives in a given environment. +n concept, whether we are talking about business decisions or any other decision, we assume that the decision maker is a rational person who would decide, with due regard to the rationality in decision making. !ecision ma.ing can be regarded as an outcome of mental processes &cognitive process' leading to the selection of a course of action among several alternatives. 0very decision making process produces a final choice. The output can be an action or an opinion of choice. .uman performance in decision making terms has been the subject of active research from several perspectives. From a psychological perspective, it is necessary to e#amine individual decisions in the conte#t of a set of needs, preferences an individual has and values they seek. From a cognitive perspective, the decision making process must be regarded as a continuous process integrated in the interaction with the environment. From a normative perspective, the analysis of individual decisions is concerned with the logic of decision making and rationality and the invariant choice it leads to. Cet, at another level, it might be regarded as a problem solving activity which is terminated when a satisfactory solution is found. Therefore, decision making is a reasoning or emotional process which can be rational or irrational, can be based on e#plicit assumptions or tacit assumptions. 8ogical decision making is an important part of all science$based professions, where specialists apply their knowledge in a given area to making informed decisions. 3ome research shows, however, that in situations with higher time pressure, higher stakes, or increased ambiguities, e#perts use intuitive decision making rather than structured approaches. T/e ma7or c/aracteristics o" t/e #usiness ecision ma.ing are: &a' 3e(uential in nature. &b' 0#ceedingly comple# due to risks and trade offs. &c' +nfluenced by personal vales &d' 7ade in institutional settings and business environment. A. The business decision making is se(uential in nature. +n business, the decisions are not isolated events. 0ach of them has a relation to some other decision or situation. The decision may appear as a snap decision but it is made only after a long chain of developments and a series of related earlier decision.

(8 The decision making process is a comple# process in the higher hierarchy of management. The comple#ity is the result of many factors, such as the inter$relationship among the e#perts or decision makers, a job responsibility, a (uestion of feasibility, the codes of morals and ethics, and a probable impact on business. C The personal values of the decision maker play a major role in decision making. ! decision otherwise being very sound on the business principle and economic rationality may be rejected on the basis of the personal values, which are defeated if such a decision is implemented. The culture, the discipline and the individual<s commitment to the goals will decide the process and success of the decision. !8 /hatever may be the situation, if one analyses the factors underlying the decision making process, it would be observed that there are common characteristics in each of them. There is a definite method of arriving at a decision and it can be put in the form of decision process model. The decision making process re(uires creativity, imagination and a deep understanding of human behavior. The process covers a number of tangible and intangible factors affecting the decision process. +t also re(uires a foresight to predict the post$decision implications and a willingness to face those implications. !ll decisions solve a problem but over a period of time they give rise to a number of other problems. Rational !ecision Ma.ing ! rational decision is the one which, effectively and efficiently, ensures the achievement of the goal for which the decision is made. +f it is raining, it is rational to look for a cover so that you do not get wet. +f you are in business and want to make profit, then you must produce goods and sell them at a price higher than the cost of production. +n reality, there is no right or wrong decision but a rational or an irrational decision. The (uality of decision making is to be judged on the rationality and not necessarily on the result it produces. The rationality of the decision made is not the same in every situation. +t will vary with the organi"ation, the situation and the individual<s view of the business situation. The rationality, therefore, is a multi$dimensional concept. For e#ample, the business decisions in a private organi"ation and a ,ublic 3ector 2ndertaking differ under the head of rationality. The reason for this difference in rationality is the different objectives of the decision makers. !ny business decision if asked to be reviewed by a share$holder, a consumer, an employee, a supplier and a social scientist, will result in a different criticism with reference to their individual rationality. This is because each one of them will view the situation in different conte#ts and the motive with the different objectives. .ence, whether a decision is right or wrong depends on a specific rational view. In ot/er +or s0 so long as t/e ecision ma.er can e4plain +it/ logic an reason0 t/e o#7ecti2ity an t/e circumstances in +/ic/ t/e ecision is ma e0 it can #e terme as a rational ecision8

T/e $ro#lems in Ma.ing Rational !ecisions (a) Ascertaining the problem !s ,eter %rucker points out, .the most common source of mistakes in the management decisions is the emphasis on finding the right answers rather than the right (uestions.. The main task is to define the right problem in clear terms. The management may define the problem as the .3ales are declining. !ctually, the decline of sales is symptomatic) the real problem may be somewhere else. For e#ample the problem may be the poor (uality of the product and you may be thanking of improving the (uality of advertising. (b) Insufficient knowledge For perfect rationality, total information leading to complete knowledge is necessary. !n important function of a manager is to determine whether the dividing line is reached between insufficient knowledge and the enough information to make a decision. (c) Not enough time to be rational The decision maker is under pressure to make decisions. +f time is limited, he may make a hasty decision which may not satisfy the test of rationality of the decision. (d) The environment may not cooperate 3ometimes, the timing of the decision is such that one is forced to make a decision but the environment is not conducive for it. The decision may fail the test of rationality as the environmental factors considered in the decision$making turn out to be untrue. For e#ample, in a product pricing, the factor of oil and petroleum product price is considered as stable. *ut the post decision environment proves the consideration to be wrong. (e) Other limitations -ther limitations are the need for a compromise among the different positions, misjudging the motives and values of people, poor communications, misappraisal of uncertainties and risks, an inability of a human mind to handle the available knowledge and human behavior. !ecision ma.ing process /e use our decision making skills to solve problems by selecting one course of action from several possible alternatives. %ecision making skills are also a key component of time management skills. %ecision making can be hard. !lmost any decision involves some conflicts or dissatisfaction. The difficult part is to pick one solution where the positive outcome can outweigh possible losses. !voiding decisions often seems easier. Cet, making your own decisions and accepting the conse(uence is the only way to stay in control of your time, your success, and your life. Types o" !ecision

The types of decisions are based on the degree of knowledge about the outcomes or the events yet to take place. +f the manager has full and precise knowledge of the event or outcome which is to occur, then his problem of the decision making is not a problem. +f the manager has full knowledge, then it is a situation of certainty. +f he has partial knowledge or a probabilistic knowledge, then it is decision making under risk. +f the manager does not have any knowledge whatsoever, then it is decision making under uncertainty. ! good 7+3 tries to convert a decision making situation under uncertainty to the situation under risk and further to certainty. %ecision making in the operations management, is a situation of certainty. This is mainly because the manager in this field has fairly good knowledge about the events which are to take place, has full knowledge of environment, and has predetermined decision alternatives for choice or for selection. %ecision making at the middle management level is of the risk type. This is because of the difficulty in forecasting an event with hundred per cent accuracy and the limited scope of generating the decision alternatives. !t the top management level, it is a situation of total uncertainty of account of insufficient knowledge of the e#ternal environment and the difficulty in forecasting business growth on a long$term basis. ! good 7+3 design gives ade(uate support to all the three levees of management. ! manager can make two kinds of decision Structure ? which are repetitive and need a definite routine and procedure to deal with them, e.g. stock is below 4: G, so an order need to be place with a supplier. %nstructure ? re(uire knowledge, insight, and evaluation. They may well crop up without warning, and the right decision can be critical.

Nature o" !ecision %ecision making is a comple# situation. To resolve the comple#ity, the decisions are classified as programmed and non$programmed decisions. I" a ecision can #e #ase on a rule0 met/o or e2en gui elines0 it is calle t/e programme ecision8 +f the stock level of an item is 5== numbers, then the decision to raise a purchase re(uisition for 9== numbers is a programmed$decision$making situation. The decision maker here is told to make a decision based on the instructions or on the rule of ordering a (uantity of 9== items when its stock level reaches 5==. +f such rules can be developed wherever possible, then the 7+3 itself can be designed to make a decision and even e#ecute. The system in such cases plays the role of a decision maker based on a given rule or a method. 3ince the programmed decision is made through 7+3, the effectiveness of the rule can be analy"ed and the rule can be revived and modified from time to time for an improvement. The programmed decision making can be delegated to a lower level in the management cadre.

A ecision +/ic/ cannot #e ma e #y using a rule or a mo el is t/e non'programme ecision8 3uch decisions are infre(uent but the stakes are usually larger. Therefore, they cannot be delegated to the lower level. The 7+3 in the non$programmed$decision situation can help to some e#tent, in identifying the problem, giving the relevant information to handle the specific decision making situation. The 7+3, in other words, can develop decision support systems in the non$programmed$decision$making situations. In"ormation as an Ai to !ecision Ma.ing .ow do we then ensure rationalityB +t is ensured, if the process of decision making is carried out systematically, whereby all the aspects of the decision making discussed above are taken care of. .erbert 3imon said that a decision maker follows the process of decision making disregarding the decision or the type of decision and the motive behind the decision. This process is followed consciously or without knowing it. /e can put this process in the %ecision 7aking 7odel 3imon &4H>>' describes the process of decision making as comprising four steps 98 Intelligence :8 !esign ;8 C/oice 9. )ater stage /as #een a e +it/ a 2ie+ o" impro2ing t/e ecision i8e8 Re2ie+8

The intelligence stage encompasses collection, classification, processing, and presentation of data relating to the organi"ation and its environment. This is necessary to identify situations calling for decision. %uring t/e ecision stage, the decision maker outlines alternative solutions, each of which involves a set of actions to be taken. The data gathered during the intelligence stage are now used by statistical and other models to forecast possible outcomes for each alternative. 0ach alternative can also be e#amined for technological, behavioral, and economic feasibility. +n the c/oice stage, the decision maker must select one of the alternatives that will best contribute to the goals of the organi"ation. +n the re2ie+ stage, past choices can be subjected to review during implementation and monitoring to enable the manager to learn from mistakes. +nformation plays an important

role in all four stages of the decision process. Figure 4 indicates the information re(uirement at each stage, along with the functions performed at each stage and the feedback loops between stages. !n e#ample of the 3imon 7odel would illustrate further its use in the 7+3. For e#ample, a manager finds on collection and through the analysis of the data that the manufacturing plant is under$utili"ed and the products which are being sold are not contributing to the profits as desired. The problem identified, therefore, is to find a product mi# for the plant, whereby the plant is fully utili"ed within the raw material and the market constraints, and the profit is ma#imi"ed. The manager having identified this as the problem of optimi"ation, now e#amines the use of 8inear ,rogramming &8,' 7odel. The model used to evolves various decision alternatives. .owever, selection is made first on the basis of feasibility, and then on the basis of ma#imum profit.The product mi# so given is e#amined by the management committee. +t is observed that the market constraints were not realistic in some cases, and the present plant capacity can be enhanced to improve the profit. !esira#le "eatures o" an MIS *e fle#ible $ allowing for different ways of analy"ing data and evaluating information. *e able to support a range of skills and knowledge. ,rovide interpersonal communication with other people in the organi"ation. Dot re(uire e#tensive periods of concentration as manager<s switch between different tasks. 7ake it easy to interrupt the work and return to it at a later time. ,rotect a manager, from information overload. Classi"ication o" !ecision Ma.ing Systems The decision making systems can be classified in a number of ways. There are two types of systems based on the manager<s knowledge about the environment. A8 Close ecision ma.ing system:

+f the manager operates in a known environment then it is a closed decision making system. The conditions of the closed decision making system are &a' The manager has a known set of decision alternatives and knows their outcomes fully in terms of value, if implemented. &b' The manager has a model, a method or a rule whereby the decision alternatives can be generated, tested, and ranked. &c' The manager can choose one of them, based on some goal or objective. ! few e#amples are a product mi# problem, an e#amination system to declare pass or fail, or an acceptance of the fi#ed deposits.

(8 Open ecision ma.ing system +f the manager operates in an environment not known to him, then the decision making system is termed as an open decision making system. The conditions of this system are &a' The manager does not know all the decision alternatives. &b' The outcome of the decision is also not known fully. The knowledge of the outcome may be a probabilistic one. &c' Do method, rule or model is available to study and finali"e one decision among the set of decision alternatives. &d' +t is difficult to decide an objective or a goal and, therefore, the manager resorts to that decision, where his aspirations or desires are met best. %eciding on the possible product diversification lines, the pricing of a new product, and the plant location, are some decision making situations which fall in the category of the open decision making systems. The 7+3 tries to convert every open system to a closed decision making system by providing information support for the best decision. The 7+3 gives the information support, whereby the manager knows more and more about the environment and the outcomes, he is able to generate the decision alternatives, test them and select one of them. ! good 7+3 achieves this. 3/y an MIS Mig/t Fail 7+3 systems are comple# and e#pensive pieces of software, and many people are involved with the design both within the organisation and from outside. -ften they are built by software houses to the precise re(uirements of the organisation. 3o the client organisation needs to be very clear as to what it wants, and the software house analysts need also to be very clear about the re(uirements. 7+3 failures can be e#pensive and bring bad publicity to all parties. They can arise due to

Ina e<uate analysis $ problems, needs and constraints aren<t understood in the early stages. )ac. o" management in2ol2e in t/e esign ? wrong e#pectations of a new system I no$one understands the system. Emp/asis on t/e computer system ? Deed procedures for handling input and output I select the right hardware and software

Concentration on lo+'le2el ata processing ? +nformation must be easily accessible and understood )ac. o" management .no+le ge o" ICT systems an capa#ilities ? managers know what they want from the system but don<t understand the technology )ac. o" team+or. ? !n +1T manager must co$ordinate the accounts, marketing, sales etc. departments and help everyone understand the benefits of the system )ac. o" pro"essional stan ar s ? !ll systems need clear documentation that all users can understand &not just the +1T literate'

Organisations can 7u ge /o+ success"ul t/e implementation o" an MIS system /as #een #y applying t/e "ollo+ing e2aluations:

*ig/ le2el o" use $ +s it actually usedB 3ome systems don<t become operational for reasons such as it taking too long to enter data. *ig/ le2el o" user satis"action $ %o users like the systemsB Accomplis/ment o" original o#7ecti2es $ .ave the objectives specified in the analysis stage been achievedB Appropriate nature o" use $ +s the software being correctly usedB .as proper training been givenB Institutionalization o" t/e system $ .as it been taken on board enthusiasticallyB