LECTURE 9

LECTURE - 9 PERFORMANCE MANAGEMENT INFORMATION SYSTEM

Introduction

The main goal of information systems is to give management the information they need to make good decisions and check how well the company is doing. Good decision-making is based on having accurate and timely information, making information systems very important in today’s business. This chapter looks at the different information needs across various management levels, stressing the need for custom information for making strategic, tactical, and operational decisions.

Levels of Management and Information Requirements

1. Strategic Planning

This level is about setting the long-term direction of the company (usually for at least five years) and making important decisions that match this direction. Key decisions may include launching new products, entering new markets, or shifting resources to better opportunities.

Information Sources:

• External: Analysis of competitor data, government policy impacts, economic indicators, and market research.

• Internal: Profit forecasts, capital spending needs, past performance data, and resource availability.

Strategic Information: Strategic information is essential for supporting long-term business views, which can vary greatly depending on the company's goals and industry context. This information is generally broad and summary-oriented, vital for carrying out thorough SWOT (Strengths, Weaknesses, Opportunities, Threats) analyses. Examples include looking at new products for launch or assessing competitive challenges in the market.

2. Tactical Information & Management Control

Tactical control deals with putting the strategic plan into action in the short term, often within a year. This process involves setting short-term budgets and closely tracking operational performance against these benchmarks to ensure that the strategy is being followed correctly.

Information Needs:

• External: Market conditions, competitor analysis, consumer preferences, and economic trends.

• Internal: Variance analysis (comparing actual performance to budgeted performance), productivity reports, and performance metrics for departments.

Tactical Information: Tactical information helps managers make informed choices that steer the company toward its short-term goals. Examples of tactical decisions include deciding whether to open new locations based on market data or hiring more staff to improve service quality.

3. Operational Control

Operational control is vital for overseeing daily performance and ensuring smooth and efficient operations. The information needed at this management level is immediate, detailed, and mainly focused on internal metrics.

Information Required:

• Internal: Tracking employee work hours, raw material usage data, quality control metrics, and inventory management.

Operational Information: Operational information meets short-term needs and is crucial for guiding immediate actions by managers. This information helps managers check sales levels, track service metrics, and effectively manage customer complaints. Examples include deciding whether overtime is needed due to unexpected demand spikes or identifying specific training needs for staff to achieve operational targets.

Information Systems Used by Management

To make effective decisions, management uses different types of information systems that help turn data into useful information, such as:

1. Transaction Processing Systems (TPS): These systems are necessary for recording daily transactions, like financial transactions and inventory management. They are vital for operational control, allowing businesses to keep accurate records and track activities in real time.

2. Management Information Systems (MIS): MIS transforms raw data into useful information specifically for management, especially at the control level. They provide insights into sales trends, accounts receivable, and operational efficiency. MIS may include subsystems like TPS, ERP, and EIS.

3. Executive Information Systems (EIS): EIS is designed for top management, allowing for flexible, non-standard report generation and easy interaction. They support high-level strategic decision-making by showing data graphically and enabling detailed analysis.

4. Enterprise Resource Planning Systems (ERP): ERP systems connect various functions across departments into one system that uses a shared database. This setup improves efficiency, promotes collaboration, and ensures accurate information throughout the company.

5. Open and Closed Systems

• Open Systems: These systems adjust to external changes and are important for businesses that need to respond quickly to market conditions and customer needs.

• Closed Systems: These systems follow set procedures and rules, making them simpler to maintain but less adaptable to change.

Tutorials - Short and Long Questions

Question 1: Discuss different types of MIS that allow timely decision-making in the case of JKH Coffee Machine Company using an integrated system for real-time data updates. Various types of Management Information Systems (MIS) can facilitate timely decision-making for the JKH Coffee Machine Company. An Integrated System can include:

• Transaction Processing Systems (TPS): These systems record daily transactions, enabling real-time updates of operational data such as sales and inventory, which is crucial for quick decision-making.

• Management Information Systems (MIS): These systems transform raw data into useful information and provide insights into sales trends, which help in adjusting strategies in real time.

• Executive Information Systems (EIS): Designed for top management, EIS provides enhanced data visualization and interactive reporting, allowing for quick analyses and decisions related to long-term strategy.

• Enterprise Resource Planning Systems (ERP): These can integrate various processes across departments, ensuring that all staff have access to the same up-to-date information, thus supporting better decision-making using shared data.

Question 2: Explore the different types of information needed by management levels with examples.

1. Strategic Planning: Examples include market research reports, economic indicators, and competitor data that help make long-term decisions like launching new products.

2. Tactical Information: Examples involve variance analysis and productivity reports, which help managers track operational performance against the budgets that align with the strategic plan.

3. Operational Control: Examples include tracking employee work hours and quality control metrics necessary for daily management of operations.

Question 3 - Lengthy Questions: Case Study of Sigma Company evaluating current information systems and their efficiencies concerning ERPS and EIS. Discuss the advantages of ERPS and EIS compared to traditional TPS.ERP systems offer comprehensive tracking of performance across various functions, which enhances strategic management reporting capabilities. Compared to traditional TPS, ERP provides higher quality management information, essential for senior management in decision-making. Additionally, EIS allows executives to receive real-time performance information and improves control procedures by being user-friendly and requiring minimal technical knowledge. Unlike traditional TPS, which focuses primarily on recording transactions, both ERP and EIS facilitate informed decision-making through enhanced accessibility and quality of information. Furthermore, the integration of data across departments in ERP systems ensures that all relevant information is available in a unified manner, reducing data silos and improving overall efficiency. This holistic view allows for better forecasting and resource allocation, which are critical for organizational success. In summary, the transition from traditional TPS to ERP and EIS not only streamlines operations but also empowers organizations to adapt quickly to changing market conditions and make strategic decisions based on comprehensive data analysis.

Conclusion

Benefits of ERP Systems: ERP systems allow for thorough performance tracking across various activities, substantially enhancing strategic management reporting. They provide higher quality management information than traditional TPS, which is especially useful for senior management in decision-making.

Understanding EIS:EIS provides real-time performance information from multiple sources, letting executives effectively monitor operational performance and improve control procedures. It is user-friendly and requires little technical knowledge, which helps managers make quick, informed decisions.

Evaluation of ERPS and EIS

The advantages of ERPS and EIS are mostly qualitative, focusing on better information quality that positively impacts decision-making. Such improvements can lead to higher revenue potential and cost savings through good management and well-informed operational strategies.

Study of Sigma Company evaluating current information systems and their efficiencies concerning ERPS and EIS. Discuss the advantages of ERPS and EIS compared to traditional TPS.