Chapter 16Executive Information SystemsExecutive Information Systems

MANAGEMENT INFORMATION SYSTEMS 8/ERaymond McLeod, Jr. and George Schell

Copyright 2001 Prentice-Hall, Inc.16-1

The Executive PositionThe Executive Position

Unique demands of the executive positionUnique demands of the executive position

Executives require unique information Executives require unique information processingprocessing

An executive is not just a lower-level manager on a higher level!

16-2

Marketinginformation

system

Manufacturinginformation

system

Financialinformation

system

Human resource

informationsystem

Environmental information and data

Environmental information and data

Top-levelmanagers

A Firm Without An EIS

16-3

Environmental Information and data

Environmental Information and data

Marketinginformation

system

Manufacturinginformation

system

Financialinformation

system

Human resource

informationsystem

Executive information

system

A Firm With An EIS

16-4

What Do Executives Do?What Do Executives Do?

Term executive is loosely appliedTerm executive is loosely applied– No clear dividing line between executives and No clear dividing line between executives and

other managersother managers Executive manager on the upper level of the Executive manager on the upper level of the

organizational hierarchy who exerts a organizational hierarchy who exerts a strong influence on the firmstrong influence on the firm

Long term planning horizonLong term planning horizon

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Fayol's Management Fayol's Management FunctionsFunctions

PlanPlan OrganizeOrganize StaffStaff DirectDirect ControlControl

16-6

Mintzberg's Managerial Mintzberg's Managerial RolesRoles

Different levels of management perform Different levels of management perform same roles but relative time spent on each same roles but relative time spent on each differsdiffers

High-level management focusHigh-level management focus– Long-range, entrepreneurial improvementsLong-range, entrepreneurial improvements– Responding to unanticipated situations Responding to unanticipated situations

16-7

Kotter's Agenda and Kotter's Agenda and NetworksNetworks

John P. Kotter, Harvard professorJohn P. Kotter, Harvard professor Executives follow a three step strategyExecutives follow a three step strategy

– Agenda -- objectives the firm is to achieveAgenda -- objectives the firm is to achieve– Networks -- cooperative relationshipsNetworks -- cooperative relationships

» Hundreds or thousandsHundreds or thousands

» Inside and outside the firmInside and outside the firm

– Environment -- norms and values so the Environment -- norms and values so the network members can achieve agendasnetwork members can achieve agendas

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How Do Executives Think?How Do Executives Think?

Daniel J. Isenberg, Harvard professorDaniel J. Isenberg, Harvard professor Studied more than one dozen executives Studied more than one dozen executives

over a 2-year periodover a 2-year period What they think aboutWhat they think about

1. How to get things done1. How to get things done

2. A few overriding issues2. A few overriding issues

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How Do Executives Think? How Do Executives Think? (cont.)(cont.)

More concerned with process than solutionMore concerned with process than solution Thought processes do not always follow the Thought processes do not always follow the

step-by-step patterns of the systems step-by-step patterns of the systems approachapproach

Intuition is used at each stepIntuition is used at each step

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Unique Information NeedsUnique Information Needs

Mintzberg was first to conduct a formal Mintzberg was first to conduct a formal study of executive information needsstudy of executive information needs

Studied 5 executives in early 1970s Studied 5 executives in early 1970s Five basic activitiesFive basic activities

– desk workdesk work– telephone callstelephone calls– unscheduled meetingsunscheduled meetings– scheduled meetingsscheduled meetings– tourstours

16-11

How Minzberg’s How Minzberg’s CEOs Spent TimeCEOs Spent Time

Legend:Interpersonal

Communication

Desk Work22%

Unscheduled Meetings

10%

Telephone Calls6%

Scheduled Meetings

59%

Tours3%

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Unique Information NeedsUnique Information Needs

Jones & McLeod StudyJones & McLeod Study Studied 5 executives in early 1980sStudied 5 executives in early 1980s QuestionsQuestions

1) How much information reaches the executive ?1) How much information reaches the executive ?

2) What was the information value ?2) What was the information value ?

3) What are the information sources ?3) What are the information sources ?

4) What media are used to communicate the 4) What media are used to communicate the information ?information ?

5) What use is made of the information ?5) What use is made of the information ?

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HIGHHIGH HIGHHIGH

HIGHHIGH HIGHHIGH

HIGHHIGH

AVGAVG

LOWLOW

AVGAVG

LOWLOWAVGAVG

LOWLOWAVGAVG

LOWLOW

BankCEO

VicePresidentof Tax

The Volume of Information Reaching the Executives

0

10

20

30

40

50

60

Retail ChainCEO

InsurancePresident

VicePresident ofFinance

AVGAVG

LOWLOW

Nu

mb

er

of

Tra

ns

ac

tio

ns

16-14

Jones & McLeod Study Jones & McLeod Study (cont.)(cont.)

How much information reaches the How much information reaches the executiveexecutive– A transaction - a communication involving any A transaction - a communication involving any

mediummedium– Daily volumeDaily volume

» Varies from executive to executiveVaries from executive to executive

» Varies from day to dayVaries from day to day

16-15

0

5

10

15

20

25

30

0 1 2 3 4 5 6 7 8 9 10

All fiveexecutives

Vice President of tax

Bank CEO

Value

Per

cen

tage

of

tran

sact

ion

sThe Value of Information Reaching

Executives

16-16

Sources of InformationSources of Information

Some executives went down 7 levels to Some executives went down 7 levels to gather informationgather information

Sources were internal and externalSources were internal and external External sources provided the most volume External sources provided the most volume

but also the lowest average valuebut also the lowest average value

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EnvironmentEnvironment

Upper levelsUpper levels

The The executiveexecutive

CommitteesCommittees

Internal support units Internal support units and individualsand individuals

1 level down1 level down

2 levels down2 levels down

3 levels down3 levels down

4 levels down4 levels down

Legend:Legend:Percentage of Percentage of totaltotaltrans-trans-actionsactions

.43.433.83.8

.05.055.25.2

.20.205.25.2

.10.105.35.3

.06.064.34.3

.02.024.44.4

.02.027.57.5

.13.134.64.6

Average Average transactiontransaction

valuevalue16-18

The Sources of Information Reaching the The Sources of Information Reaching the ExecutivesExecutives

Media Used for Media Used for CommunicationCommunication

Written media accounts for 61% of the Written media accounts for 61% of the transactionstransactions– Computer reportsComputer reports– Letters and memosLetters and memos– PeriodicalsPeriodicals

Oral media is preferred by executivesOral media is preferred by executives– ToursTours– Business mealsBusiness meals– Telephone callsTelephone calls

16-19

The Executive Does not The Executive Does not Control:Control:

LettersLetters MemosMemos Telephone callsTelephone calls Unscheduled meetingsUnscheduled meetings

16-20

The Media Pie The Media Pie (in Percentages of Total Transactions)(in Percentages of Total Transactions)

WrittenWritten

OralOral

Note:Note:Percentages do not add to 1.00 due to rounding

Computer Computer Reports (.03)Reports (.03)

Noncomputer Noncomputer Reports (.09)Reports (.09)

Memos (.19)Memos (.19)

Letters (.20)Letters (.20)Periodicals (.10)Periodicals (.10)

Business Business Meals (.02)Meals (.02)

Telephone Telephone Calls (.21)Calls (.21)

UnscheduledUnscheduledMeetings (.06)Meetings (.06)

Scheduled Meetings (.05)Scheduled Meetings (.05)

Tours (.03)Tours (.03)

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Ranking of Media by ValueRanking of Media by Value

Medium Mode Average ValueMedium Mode Average Value

Scheduled meetings Oral 7.4Scheduled meetings Oral 7.4

Unscheduled meetings Oral 6.2Unscheduled meetings Oral 6.2

Tours Oral 5.3Tours Oral 5.3

Social activity Oral 5.0Social activity Oral 5.0

Memos Written 4.8Memos Written 4.8

Computer reports Written 4.7Computer reports Written 4.7

Noncomputer reports Written 4.7Noncomputer reports Written 4.7

Letters Written 4.2Letters Written 4.2

Telephone calls Oral 3.7Telephone calls Oral 3.7

Business meals Oral 3.6Business meals Oral 3.6

Periodicals Written 3.1Periodicals Written 3.1

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Information Use by Decisional Role

Disturbance handler (.42)

Entrepreneur (.32)

Resource allocator

(.17)

Unknown (.06)

Negotiator (.03) 16-23

Jones & McLeod Study Jones & McLeod Study FindingsFindings

Most executives’ information came from Most executives’ information came from environmental sources, but the internal environmental sources, but the internal information was valued higherinformation was valued higher

Most of the executives’ information came in Most of the executives’ information came in written form, but the oral information was written form, but the oral information was valued highervalued higher

Executives receive very little information Executives receive very little information directly from a computerdirectly from a computer

16-24

Disturbance handler .42

Entrepreneur .32

Resourceallocator

.17

Negotiator .03

Unknown.06

Environment.43

Lowerlevels

.38

Internal support units & individuals .13

Upperlevels .05

Committees .02

Sources of Decisional InformationSources of Decisional Information

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Unique Information NeedsUnique Information Needs

Study conducted by John Rockart and Study conducted by John Rockart and Michael Treacy, both of MITMichael Treacy, both of MIT

Studied 16 companies in early 1980sStudied 16 companies in early 1980s Found many computer users Found many computer users Found some executives interested in detailFound some executives interested in detail Coined the term “executive information Coined the term “executive information

system”system”

16-26

EIS FeaturesEIS Features A central purposeA central purpose A common core of dataA common core of data Two principal methods of useTwo principal methods of use

– Retrieve reportsRetrieve reports

– Conduct analysesConduct analyses A support organizationA support organization

– EIS coachEIS coach

– EIS chauffeurEIS chauffeur

From Rockart and Treacy16-27

Putting Computer Use in Putting Computer Use in PerspectivePerspective

Two key points:Two key points:

1. Computer use is personal1. Computer use is personal

2. Computer produces only a portion of the 2. Computer produces only a portion of the

executive's informationexecutive's information

16-28

Suggestions to Improve Suggestions to Improve EISsEISs

1. Take an inventory1. Take an inventory

2. Stimulate high-value sources2. Stimulate high-value sources

3. Take advantage of opportunities3. Take advantage of opportunities

4. Tailor the system to the executive4. Tailor the system to the executive

5. Take advantage of technology5. Take advantage of technology

16-29

Personal computer

Make corporate

information available

Informationrequests

Executivedatabase

Corporatedatabase

Electronicmailboxes

Softwarelibrary

Current news,explanations

Externaldata and

information

Informationdisplays

Executive workstationExecutive workstation

Corporate mainframeCorporate mainframe

To otherexecutive

workstation

To otherexecutive

workstation

An EIS Model

16-30

Make corporate

information available

Informationrequests

Executivedatabase

Corporatedatabase

Electronicmailboxes

Softwarelibrary

Current news,explanations

Externaldata and

information

Informationdisplays

Executive workstation

Corporate mainframe

To otherexecutive

workstation

To otherexecutive

workstation

An EIS Model

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Dialogue Between Dialogue Between Executive and EISExecutive and EIS

Typically by a series of menus, keyboarding Typically by a series of menus, keyboarding is minimizedis minimized

Drill down to specific information needed Drill down to specific information needed from the overview levelfrom the overview level

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MEDIAL INTERNATIONAL GROUP MIGMEDIAL INTERNATIONAL GROUP MIG

N P U P0

100

200

300

400

500

N P U P

Actual/Planned

Product Profitability Product Profitability AnalysisAnalysis

Magazines in Europe have been Magazines in Europe have been performing poorly. While sales performing poorly. While sales are up, production costs have are up, production costs have soared. This is due to the labor soared. This is due to the labor disputes in the pulp and paper disputes in the pulp and paper industry. Starting next month, industry. Starting next month, costs should be back in line costs should be back in line with earlier projections.with earlier projections.

Actual Planned Variance %VarianceNewspapers 1,421,709 1,559,184 (137,475) (8.82)Magazines 490,855 518,687 (27,832) (5.37)Periodicals 1,912,564 2,077,872 (165,308) (7.96)

Actual Planned Variance %VarianceNewspapers 1,421,709 1,559,184 (137,475) (8.82)Magazines 490,855 518,687 (27,832) (5.37)Periodicals 1,912,564 2,077,872 (165,308) (7.96)

x100

An Information Display That Includes a An Information Display That Includes a Computer-Generated Narrative ExplanationComputer-Generated Narrative Explanation

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Incorporation ofIncorporation ofManagement ConceptsManagement Concepts

Critical success factorsCritical success factors Management by exceptionManagement by exception Mental modelMental model

– Information compressionInformation compression

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0

500

1000

1500

2000

90 91 92 93 94 J F M A M J J A S O N D 95 96 97 98 99

SALES - $ IN MILLIONS

AS OF NOVEMBER 1994

SOURCEGLORIA YANDERSBILL BLASS

SALESSALES

CURRENTHISTORY

YEAR TO DATE OVER/ UNDER MB

PROGRAM ACTUAL THIS MO LAST MOHERC $861.4 $30.7 $59.1C-5B 621.9 0.3 4.5OTHER 398.7 12.9 10.1 TOTAL $1,882.0 $43.9 $44.4

YEAR-END FORECAST CURRENT FORECAST Y-L O/U MB YR CURRENT O/ U PRIOR

$949.8 $28.6 95 $2102.6 $ 8.0 699.0 1.2 96 2400.0 105.0 458.8 13.6 97 3130.0 98.0 $2107.6 $43.4 98 3390.0 58.0 99 2110.0 281.0

COMMENTSCOMMENTS FAVORABLE VARIANCE PRIMARILY DUE TO TWO ADDITIONAL HERCULESFAVORABLE VARIANCE PRIMARILY DUE TO TWO ADDITIONAL HERCULESSALESSALES

FORECAST

BUDGETACTUAL

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EIS Implementation EIS Implementation DecisionsDecisions

Three Key Questions:Three Key Questions:

1. Do we need an EIS?1. Do we need an EIS?

2. Is there application-development software 2. Is there application-development software available?available?

3. Should we purchase prewritten EIS 3. Should we purchase prewritten EIS

software?software?

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Advantages of Prewritten Advantages of Prewritten SoftwareSoftware

1. Fast1. Fast

2. Doesn't strain information services2. Doesn't strain information services

3. Tailored to executives3. Tailored to executives

16-37

EIS Critical Success EIS Critical Success Factors Rockart and Factors Rockart and

DeLongDeLong1. Committed/informed executive sponsor1. Committed/informed executive sponsor

2. Operating sponsor2. Operating sponsor

3. Appropriate information services staff3. Appropriate information services staff

4. Appropriate information technology (IT)4. Appropriate information technology (IT)

5. Data management5. Data management

6. Link to business objectives6. Link to business objectives

7. Manage organizational resistance7. Manage organizational resistance

8. Manage the spread and evolution8. Manage the spread and evolution

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Prerequisite Activities for the EIS

Purchasing andPerformance

Systems

Informationtechnology standards

Informationneeds

Analysis ofOrganization

InformationSystems Plan

Corporatedata model

EIS16-39

Future EIS TrendsFuture EIS Trends

Use will become commonplaceUse will become commonplace Decreasing software pricesDecreasing software prices Will influence MIS/DSSWill influence MIS/DSS The computer will always play a support The computer will always play a support

rolerole

16-40

SummarySummary

Executives have unique information needsExecutives have unique information needs– Need for EISNeed for EIS– Specific uses of EISSpecific uses of EIS

EIS developmentEIS development– Personal productivity softwarePersonal productivity software– PrewrittenPrewritten– CustomCustom

EIS success factorsEIS success factors

16-41