Importance of Management Information Systems (MIS) in Business

What is MIS (Management Information Systems)?

MIS is the process of recording, storing, and processing data to provide information that decision-makers can use to make daily decisions.

It involves the use of information technology, people, and business processes. Management Information Systems is the full name of the acronym MIS. The goal of MIS is to gather data from many sources and generate insights that promote company’s growth.

Every business needs data to function. In the internet era, businesses are overloaded with data—and not just useful data. Data is gathered by businesses in the form of files, papers, cloud storage, hard copies, and soft copies. Data is primarily securely stored by the MIS.

A management information system (MIS) is used for data processing. Employees, supervisors, and staff have access to MIS within an organization. For daily tasks like printing invoices, paying bills, or conducting performance reviews, employees use MIS.

For instance: A bank keeps track of customer information, account deposits, and withdrawals.

Additionally, they employ MIS as a database for information to compare, examine, and save data. Hence, MIS aids businesses in making quick, correct judgements.

Employees receive initial training on the MIS interface, usage, and importance. Then, in certain businesses, training is provided to clients and customers who utilize the system rather than employees.

MIS focuses more on data analysis. An information system, at its core, is a shared framework that boosts the productivity of all firm employees.

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Example of MIS

1- Imagine a big hospital with lots of employees and patients. Each department in the hospital employs nurses, doctors, and surgeons. Some work on a temporary basis, while others are permanent employees. Everything must be documented by the hospital’s administration.

A health information system is installed by the hospital to keep track of every small detail. Every spending is tracked by the MIS as well. The result is less disruption and easy access to patient information for the doctors.

2- Let’s say a multinational corporation has numerous domestic and international offices. There are 960 workers in total. It is not possible to keep a manual record of every employee.

As a result, the human resource department of businesses collects, record, and classify employee information using a human resource information system. The company uses MIS to track employees’ absences and attendance. The business also decides to use a centralized database to hold a large amount of information.

Levels of Management

An organization’s “Levels of Management” serve as a boundary between different managerial levels. When a business and its workforce grow in size, so do the levels of management, and vice versa. Any managerial position’s authority, status, and chain of command are all based on the level of management. There are three basic levels of management:

• Top Level Management

• Middle Level Management

• Lower Level Management

Top Level Management

The board of directors, the CEO, and/or the managing director make up top level of management. The top management oversees an organization’s goals and policies and is the ultimate source of authority. It spends more time coordinating and planning tasks.

Middle Level Management

Middle level managers include branch managers and departmental managers. For the operation of their department, they answer to top management. They spend more time performing organizational and directional functions. There is just one layer of middle level management in small organizations, although middle level management may exist in large corporations.

Lower Level Management

A lower level of management is also referred to as the supervisory or operational level. Supervisors, foremen, section officers, superintendents, etc. make up lower level of management. R.C. Davis explains that “supervisory management refers to those executives whose work is mostly with personal control and direction of operational employees.” In other words, they are focused on the managerial function of direction and control. 

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Types of Information Systems

Types of information system includes:

1. Transaction Processing Systems (TPS)
2. Management Information Systems (MIS)
3. Decision Support Systems (DSS)
4. Executive Information System (EIS)
5. Enterprise Resource Planning (ERP)

Transaction Processing System (TPS)

The daily operations of a business are tracked using this kind of information system. A Point of Sale (POS) system is an example of a transaction processing system. The daily sales are recorded using a POS system.

To keep track of the organization’s daily business transactions, transaction processing systems are used. The operational management level users use them. A transaction processing system’s primary goal is to provide routine responses to issues like;

• What is the outstanding due for Mr. Ali?

• How much stock do we currently have?

• How were printers sold today?

The TPS system quickly responds to the queries above by keeping track of daily company transactions.

Functions of Transaction Processing System

• The transaction processing system generates extremely detailed information.

• Operational managers make routine decisions that are well-structured.

Example of Transaction Processing System

For instance, banks that offer loans require that a person’s employer have an MoU (memorandum of understanding) with the bank. The only thing the operational staff needs to do when a borrower whose employer has an MoU with the bank applies for a loan is to check the given paperwork.

The documents for the loan application are processed if they satisfy the standards. The client is recommended to meet with tactical management staff to discuss the option of signing an MoU if they do not meet the standards.

Other examples of transaction processing systems include;

• Flight booking management using flight booking systems

• Payroll systems: managing loans, processing employee salaries, etc.

• Stock Control systems – monitoring stock levels

• Point of Sale Systems – records daily sales

Decision Support Systems (DSS)

Top level managers use decision support tools to make semi-structured decisions. The decision support system receives its output from the management information system as input. DSS systems also get data input from external sources like competitors, current market forces, etc.

Senior management utilises decision support systems while making non-routine decisions. Both internal (such as transaction processing systems and management information systems) and external systems provide input to decision support systems.

Decision support systems’ primary goal is to offer unique, ever-changing challenges with solutions. Decision-support systems provide answers to issues;

• How will a new competitor entering the market affect our sales?

• What effect will doubling the factory’s production lot have on the performance of the workers?

Decision support systems are highly interactive and use complex mathematical models and statistical techniques (probability, predictive modelling, etc.) to deliver solutions.

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Examples of Decision Support Systems

Examples of decision support systems include;

Bank loan management systems: they are used to assess a loan applicant’s creditworthiness and forecast the possibility that the loan will be repaid.

Bank loan management systems: they give managers the ability to assess alternative approaches to achieving objectives. The goal is to identify the most effective method of accomplishing it.

For instance, the formula Total Sales less (Cost of Goods + Expenses) is used to determine a company’s net profit. Senior executives will be able to make adjustments to the values for total sales, cost of products, etc. using a financial planning system to examine the impact of decisions on net profit and determine the best course of action.

Management Information Systems (MIS)

Tactic managers are guided to make semi-structured decisions using management information systems.  The output of the transaction processing system serves as the input for the MIS system.

Tactical managers utilise management information systems (MIS) to track the organization’s current performance status. 

The tactical managers use the reports that the MIS system generates to monitor, regulate, and forecast future performance by routinely analysing the data with algorithms that aggregate, compare, and summarise the findings.

Example of Management Information Systems

For instance, data from a point-of-sale system can be utilized to examine trends in the sales of both successful and unsuccessful products. Future inventory orders can be made using this information, increasing orders for products that are performing well and decreasing orders for underperforming products.

Examples of management information systems include:

• Human resource management system – overall welfare of the employees, staff turnover, etc.

• Budgeting systems provide an overview of the amount of money spent both temporarily and permanently within the organization.

• Sales management systems – they get input from the point-of-sale system.

Tactical managers are responsible for the semi-structured decision. The tactical managers make judgement decisions based on their knowledge and the information provided by MIS systems to forecast how much inventory or products should be ordered for the second quarter based on the first quarter’s sales.

Executive Information System (EIS)

It compiles reports and summaries that are simple to read. The display of data is also optimized by organizational systems, which reorganize data into graphs, spreadsheets, and statistical tables. Managers are able to process graphical data more quickly as a result.

Enterprise Resource Planning (ERP)

ERP, which stands for Enterprise Resource Planning, is a software program made to make daily operations of a business, from managerial to logistical, easier. It aids in maintaining balance with the essential corporate operations, such as order management, accounting, and human resource management. This program serves as a central hub for streamlining information flow and all organizational processes.

These are a few key ERP features:

• These programs are employed to manage an organization’s resources.

• These web-based programs are accessible through all interfaces.

• ERP software is responsible of monitoring the organization’s growth.

• All of the services required to run the business are integrated using this software.

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Customer Relationship Management (CRM)

CRM, or customer relationship management, is a software tool that enables a business to communicate with current and potential customers. This customer relationship management (CRM) programme controls, automates, and coordinates sales. The goal of creating such an application is to foster and amuse prospect leads, which aids the company’s growth in sales and overall performance.

The following are some key CRM features:

• It aids in improving sales performance.

• This is utilized to oversee and manage the organization’s operations.

• All customer services are integrated into one location using this programs.

• Primarily focused on customer.

Importance of MIS in business

1- Assists in Data Management

MIS assists management in making complicated decisions by maintaining and managing important company data. The administration can easily obtain the important data whenever needed because it is arranged and stored in an organised manner.

2- Goal Setting

Setting goals is an important task for every firm, one that necessitates extensive study and growth. As the data in MIS reports is based on recent data analysis, it is deemed appropriate and important for establishing an enterprise’s purpose. The analysis of the present market trend and the forecast of the next trend are also included in MIS reporting. So, it is challenging for any organization to ignore MIS and reporting.

3- Comparison Of Business Performance

The MIS database stores and maintains the company’s relevant business data and information. As the MIS database is always accessible, it is possible to compare the firm’s present performance to its accomplishments from the prior year in order to measure the organization’s growth.

4- Helps In Strategic Planning

The company’s strategic planning heavily relies on MIS reports. It assists in identifying the company’s future requirements and in developing goals and a strategy based on those requirements. The management information system report is useful in determining the resources needed to achieve the company’s goal. Therefore, it is crucial that the data generated by MIS and reporting is accurate and trustworthy.

5- Trends Analyses

Management must set future objectives and create forecasts for strategic planning. So, accurate reports on current industry trends are crucial for developing such a plan. The current market trend is analysed by MIS, which then makes predictions about future trends based on this data.

6- Problems Identification

Information on every facet of company activity is provided in a MIS report. As a result, MIS reports are quite useful in locating the source of the problem in the event that management encounters a problem. Moreover, MIS and reporting are quite helpful in identifying a remedy to such a problem.

7- Increases Efficiency

The company’s goals and strategy are developed using the relevant information provided by MIS and reporting. MIS reports can also be used to evaluate how well the company is performing. Thus, MIS is essential for boosting a company’s productivity.

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Characteristics of MIS

In every part of an organization, MIS has very important part.

Here are some characteristics of MIS.

• Sub-System Concept

• Management Oriented

• Long Term Planning

• Integrated

• Future Oriented

• Central Database

• System Approach

• Exception Based

• Need-Based

1- Future Oriented

In addition to exception-based reporting, MIS needs to consider the future. In other words, MIS shouldn’t just provide information from the past or the recent past; rather, it should provide information based on projections from which actions may be taken.

2- Sub-System Concept

Due to the complexity of the MIS development process, one may frequently lose understanding. The system must be divided into manageable sub-systems that are more significant during the planning stage even though it is seen as a single entity.

3- Management Oriented.

The MIS must be designed using a top-down approach. According to the top-down approach, system development should begin with the identification of management requirements and overall company objectives.

The overall business plan should serve as the basis for the MIS development plan. The fact that MIS is management-oriented suggests that management actively directs system development efforts.

4- Long Term Planning

MIS is created over a sizable amount of time. A system like that does not emerge overnight. There is a significant planning component. Future business goals and requirements must be considered by the MIS designer.

5- Integrated

An essential quality of a management information system is integration. Integration is important since it can result in more insightful information.

For instance, balancing aspects like setup costs, workforce, overtime rates, production capacity, inventory level, capital requirements, and customer services is important to build an efficient production scheduling system.

6- Central Database

The interconnectedness of the functional systems is maintained through a central database. The master file with data pertaining to inventories, people, vendors, customers, etc. must be accessible to each system. It would make sense to collect data once, fully verify it, and then store it on a central storage device that any other subsystem could access.

7- System Approach

A System’s approach is used by the information system. The system’s approach denotes a comprehensive approach to the study of the system and its performance in the context of the goal for which it was created.

8- Exception Based

The exception-based reporting principle, which states that an abnormal event, i.e., the maximum; minimum or predicted values fluctuate beyond tolerance limits, should guide the development of MIS. In such cases, the decision-maker should receive the necessary level of exception reporting.

9- Need-Based

Strategic planning, management control, and operational control levels should all be taken into consideration while designing and developing a MIS. In other words, MIS should be tailored to the unique requirements of managers at various levels of a organization’s hierarchy.

Role of MIS

Benefits of MIS

An MIS’s primary purpose is to gather data, either automatically or manually, and provide a report to aid management in making important business decisions. Using a MIS has a number of advantages, including the following:

• Better marketing and promotional decisions can result from excellent customer data management and analysis.

• MIS can give a business a competitive edge while assisting in reducing downtime for decision-making.

• Product development, operational effectiveness, and business-critical decision-making can all be enhanced using MIS.

• Organization and communication among employees can be facilitated by certain forms of MIS, such as office automation systems.

• Data and reports generated by MIS can help organizations see more clearly within their own structures.

• The identification of an organization’s strengths and shortcomings through the use of MIS reports can result in the strategically reproducing of strengths and successes as well as the exercise of weaknesses and failures.

Why is a Management Information System (MIS) crucial in the workplace?

An MIS is crucial in the workplace as it efficiently processes and interprets large volumes of data from diverse sources, generating detailed reports for informed decision-making. Automation of data organization means employees spend less time managing critical information and more time applying it to daily operations. With MIS, employees can track business transactions, manage inventory, and stay updated on various organizational aspects like personnel, manufacturing, and finances.

Using insights from an MIS, employees can correlate different data points, uncover trends, and analyze sales data from various periods and locations to enhance decision-making. For instance, comparing sales figures from different years or regions can help identify strategies to increase revenue. Analytical reports produced by an MIS aid in making strategic decisions that benefit the organization.

Other articles

Please read through some of our other articles with examples and explanations if you’d like to learn more about mangement.