This article throws light upon the two types of information systems needed by organisations to make decisions. The types are: 1. Management Information System (MIS) 2. Decision Support System (DSS).
Type # 1. Management Information System:
To carry out managerial functions for various functional areas (production, marketing etc.) and integrate them with the external environment (government, customers etc.), managers need different types of information (quantitative and qualitative).
Earlier, this information was provided by the accounting system which was limited and quantitative in nature. With introduction of computers, managers have access to huge quantity of data at very high speed. Computers help managers create data base and manipulate the information for taking various managerial decisions.
It helps in storage and retrieval of information. Computers enable managers to collect data at very short intervals of time; process, analyse and convert it into useful information and relate it to the external environment.
This system of obtaining timely, relevant and accurate information based on computer technology is known as management information system. The system helps in preparing reports for carrying out planning and controlling functions.
“MIS is a formal method of making available to management the accurate and timely information necessary to facilitate the decision-making process and enable the organisation’s planning, control and operational functions to be carried out effectively.”
—Stoner and Wankel
“MIS is a formal system of gathering, integrating, comparing, analysing and dispersing information internal and external to the enterprise in a timely, effective and efficient manner.”
— Weihrich and Koontz
“MIS is a system that gathers comprehensive data, organises and summarizes it in a form valuable to managers, and provides those managers with the information they need to do their work.” —R. W. Griffin
A well-designed MIS provides information related to internal and external environmental factors. Internal information relates to functional areas and external information relates to competitors, customers, suppliers, government, debtors, creditors, etc.
Features of MIS:
Effective management information system has the following features:
Up-to-date and timely information is needed by managers to make decisions. On-line facilities provide access to latest information with respect to functional areas.
Not only should information be provided on time, it should also be accurate. Wrong information will lead to wrong decisions. MIS helps in providing accurate information.
MIS has access to huge data with respect to various business activities. Data relevant to the decision-making process is used by managers and the rest is left out.
The data is related only to that area or activity with respect to which decisions have to be made.
While picking up data, managers collect complete information relevant for solving the problem.
MIS and Decision-Making:
MIS plays important role in facilitating decision-making. It provides timely, accurate, useful and relevant information for carrying out planning, organising, staffing, directing and controlling functions and making decisions relevant to these functions.
Type # 2. Decision Support System:
“A decision support system is an interactive computer system that is easily accessible to, and operated by, non-computer specialists to assist them in planning and decision-making functions.” DSS provides managers the ability to receive condensed and analysed information that enhances their job performance.
Managers can simulate problems and use formal mathematical models to test outcomes of various alternatives to reach the best possible decision. It is “a system that automatically searches for, manipulates, and summarises information needed by managers to make specific decisions.”
Features of DSS:
DSS has the following features:
1. It is a powerful decision-making tool that searches information for specific decisions.
2. It helps to solve non-routine problems. For example, effect of price increase by 10% on sales, market share and profits can be known through DSS. Prices charged by competitors, inflation rates, seasonal variations in demand etc. are already known to the DSS.
3. It is a complex system and managers require considerable time and resources to learn it.
4. It improves quality of information and helps in making important decisions. On receiving sales data from stores, managers can know which products are selling above and below average and make decisions such as reduce prices, improve transportation etc.
DSS and Decision-Making:
While MIS helps to solve problems that can be anticipated (structured problems), DSS is a computer-based system that helps to make decisions with respect to ill-structured problems. They do so by interacting with data and analysing mathematical models.
DSSs focus on flexibility, adaptability and quick response to various decision-making problems. They help in finding solutions to problems for which there are no pre-defined solutions. Decision-makers rely on their ability to manipulate data to search solutions.
DSS helps decision-makers to analyse data for making control and allocation decisions. It helps to solve the problem in different ways. They are designed on the assumption that decision-makers have the expertise to use the decision support system (computer system).
Users of DSS operate directly through on-line system without waiting for results from MIS. The information can be manipulated according to specific needs of users without explaining it to the MIS staff. MIS provides standard, periodical reports which cannot be manipulated. It does not respond to additional special requests.
DSS is, thus, an outgrowth of MIS that can be more conveniently and flexibly used by the users. It has reduced dependence of organisational members on MIS staff. The DSS system solicits input data from the user and prompts him to consider all relevant factors in decision-making.
Many DSS application software packages as spreadsheet package, data management packages, financial analysis and planning packages support decision-making in functional areas such as production, marketing, finance and personnel.