detailed ref. to mis and intro. to erp

8/3/2019 Detailed Ref. to MIS and Intro. to ERP

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INTRODUCTION TO MANAGEMENT

INFORMATION SYSTEMS

Management Information Systems - ConceptThe concept of the MIS has evolved over a period of time comprising many different facets ofthe organizational functions. MIS is necessity of all the organizations.

The initial concept of MIS was to process data from the organization and present it in the form ofreports as regular intervals. The system was largely capable of handling the data from collectionto processing. It was more impersonal, requiring each individual to pick and choose theprocessed data and use it for his requirements. This concept was further modified when adistinction was made between data and information. The information is a product of an analysisof data. This concept is similar to a raw material and the finished product. What is needed isinformation and not a mass of data. However, the data can be analyzed in a number of ways,producing different shades and specifications of the information as a product. It was, therefore,demanded that the system concept should be an individual oriented, as each individual may havea different orientation towards the information. This concept was further modified, that thesystem should present information in such a form and format that it creates an impact on its user,provoking a decision, an action or an investigation. It was later realized that even though suchan impact was a welcome modification, some sort of selective approach was necessary in theanalysis and reporting. Hence, the concept of exception reporting was imbibed in MIS.The concept remained valid till and to the extent that the norm for an exception remained trueand effective. Since the environment turns competitive and is ever changing, fixation of the normfor an exception becomes a futile exercise at least for the people in the higher echelons of theorganization. The concept was then evolved that the system should be capable of handling a needbased exception reporting. This need may be either of an individual or a group of people. Thiscalled for keeping all data together in such a form that it can be accessed by anybody and can beprocessed to suit his needs. The concept is that the data is one but it can be viewed by differentindividuals in different ways. This gave rise to the concept of Database, and the MIS based onthe database proved much more effective.The concept of MIS gives high regard to the individual and his ability to use the information. AnMIS gives information through data analysis. While analyzing the data, it relies on manyacademic disciplines. These include the theories, principles and concepts from the ManagementScience, Management Accounting, Operations Research, Organization Behavior, Engineering,

Computer Science, Psychology and Human Behavior, making the MIS more effective anduseful. These academic disciplines are used in designing the MIS, evolving the decision supporttools for modeling and decision-making.

MIS uses the concept of management control in its design and relies heavily on the fact that thedecision maker or the manager is a human being and is a human processor of information.


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A management Information System can be evolved for a specific objective if it is evolved aftersystematic planning and design. It calls for an analysis of a business, management views andpolicies, organization culture and the management style. The information should be generated inthis setting and must be useful in managing the business. This is possible only when it isconceptualized as a system with an appropriate design. The MIS, therefore, relies heavily on the

systems theory. The systems theory offers solution to handle the complex situations of the inputand output flows. It uses theories of communication which helps to evolve a system designcapable of handling data inputs, process, and outputs with the least possible noise or distortion intransmitting the information from a source to a destination. It uses the principles of SystemDesign, viz., an open system or a closed system. An open system of the MIS offers an ability ofcontinuous adjustment or correction in the system in line with the environmental changes inwhich the MIS operates. Such a design helps to keep the MIS tuned with the businessmanagement needs of the organization.

The concept, therefore, is a blend of principles, theories and practices of the Management,Information and System giving rise to single product known as Management Information System

(MIS).The MIS is a product of a multi-disciplinary approach to the business management. It is aproduct which needs to be kept under a constant review and modification to meet the corporateneeds of the information.The MIS model of organization changes over a time, as the business passes through severalphases of developmental growth cycle. It supports the management of business in each phase bygiving the information which is crucial in that phase. Every business has critical success factorsin each phase of growth cycle and the MIS model gives more information on the critical successfactors for decision making.

MIS - DefinitionThe Management Information System (MIS) is a concept of the last decade or two. It has beenunderstood and described in a number of ways. It is also popularly known as the InformationSystem, the Information and Decision System, the Computer-based Information System.The MIS has more than one definition, some of which are given below:

The MIS is defined as a system which provides information support for decision makingin the organization.

The MIS is defined as an integrated system of man and machine for providing the

information to support the operations, the management and the decision making functionin the organization.

The MIS is defined as a system based on the database of the organization evolved for thepurpose of providing information to the people in the organization.

The MIS is defined as a Computer-based Information System. The MIS is a system to support the decision making function in the organization. The

difference lies in defining the elements of the MIS. However, in todays world, the MISis a computerized business processing system generating information for the people in


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organization to meet the information needs for decision making to achieve the corporateobjectives of the organization.

In any organization, small or big, a major portion of the time goes in data collection, processing,documenting and communicating it to the people. Hence, a major portion of the overheads goes

into this kind of unproductive work in the organization. Every individual in an organization iscontinuously looking for some information which is needed to perform his/her task. Hence, theinformation is people-oriented and it varies with the nature of the people in the organization.In order to get a better grip on the activity of information processing, it is necessary to have aformal system which should take care of the following points:

Handling of a voluminous data Confirmation of the validity of data and transaction Complex processing of data and multidimensional analysis Quick search and retrieval

Mass storage Communication of the information system to the user on time Fulfilling the changing needs of the information.

The management information system uses computers and communication technology to dealwith these points of supreme importance.

Role of the Management information systemThe role of the MIS in an organization can be compared to the role of hear in the body. Theinformation is the blood and MIS is the heart. In the body the heart plays the role of supplyingpure blood to all the elements of the body including the brain. The heart works faster and

supplies more blood when needed. It regulates and controls the incoming impure blood,processes it sends it to the destination in the quantity needed. It fulfills the needs of blood supplyto human body in normal and also in crisis.The MIS plays exactly the same role in the organization. The system ensures that an appropriatedata is collected from the various sources, processed, and sent further to all the needydestinations. The system is expected to fulfill information needs of an individual, a group ofindividuals, the management functionaries; the managers and the top management.The MIS satisfies the diverse needs through a variety of systems such as Query Systems,Analysis Systems, Modeling Systems and Decision Support Systems. The MIS helps in Strategic

Planning, Management Control Operational Control and Transaction Processing.The MIS helps the clerical personnel in the transaction processing and answers their queries onthe data pertaining to the transaction, the status of a particular record and references on a varietyof documents. The MIS helps the junior management personnel by providing the operational datafor planning, scheduling and control, and helps them further in decision making at the operationslevel to correct an out of control situation. The MIS helps the middle management in short termplanning, target setting and controlling the business functions. It is supported by the use of the


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management tools of planning and control. The MIS helps the top management in goal setting,strategic planning and evolving the business plans and their implementation.The MIS plays the role of information generation, communication problems and helps in the process of decision making. The MIS, therefore, plays a vital role in the management,

administration and operations of an organization.The impact of the Management Information SystemThe impact of MIS on the functions is in its management. With a good MIS support, themanagement of marketing, finance, production and personnel becomes more efficient, thetracking and monitoring the functional targets becomes easy. The functional managers areinformed about the progress, achievements and shortfalls in the activity and the targets. Themanager is kept alert by providing certain information indicating the probable trends in thevarious aspects of business. This helps in forecasting and long-term perspective planning. Themanager' attention is brought to a situation which is exceptional in nature, inducing him to takean action or a decision in the matter. A disciplined information reporting system creates a

structured database and a knowledge base for all the people in the organization. The informationis available in such a form that it can be used straight away or by blending and analysis, savingthe managers valuable time.The MIS creates another impact in the organization which relates to the understanding of thebusiness itself. The MIS begins with the definition of a data entity and its attributes. It uses adictionary of data, entity and attributes, respectively, designed for information generation in theorganization. Since all the information systems use the dictionary, there is commonunderstanding of terms and terminology in the organization bringing clarity in thecommunication and a similar understanding of an event in the organization.

The MIS calls for a systemization of the business operations for an effective system design. Thisleads to streamlining of the operations which complicate the system design. It improves theadministration of the business by bringing a discipline in its operations everybody is required tofollow and use systems and procedures. This process brings a high degree of professionalism inthe business operations.Since the goals and objective of the MIS are the products of business goals and objectives, ithelps indirectly to pull the entire organization in one direction towards the corporate goals andobjectives by providing the relevant information to the people in the organization.A well designed system with a focus on the manager makes an impact on the managerial

efficiency. The fund of information motivates an enlightened manager to use a variety of toolsof the management. It helps him to resort to such exercises as experimentation and modeling.The use of computers enables him to use the tools and techniques which are impossible to usemanually. The ready-made packages make this task simpler. The impact is on the managerialability to perform. It improves the decision making ability considerably.

Management Information System and Computer


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Translating the real concept of the MIS into reality is technically, an infeasible propositionunless computers are used. The MIS relies its ability to store, process, retrieve and communicatewith no serious limitations.The variety of the hardware having distinct capabilities make it possible to design the MIS for a

specific situation. For example, if the organization needs a large database and very littleprocessing, a computer system is available for such a requirement. Suppose the organization hasmultiple business locations at long distances and if the need is to bring the data at one place,process, and then send the information to various locations, it is possible to have a computersystem with a distributed data processing capability. If the distance is too long, then thecomputer system can be hooked through a satellite communication system.The ability of the hardware to store data and process it at a very fast rate helps to deal with thedata volumes, its storage and access effectively. The ability of the computer to sort and mergehelps to organize the data in particular manner and process it for complex lengthy computations.Since the computer is capable of digital, graphic word, image, voice and text processing, it is

exploited to generate information and present it in the form which is easy to understand for theinformation user.

The software, an integral part of a computer system, further enhances the hardware capability.The software is available to handle the procedural and nonprocedural data processing. Forexample, if you want to use a formula to calculate a certain result, an efficient language isavailable to handle the situation. If you are not required to use a formula but have to resort everytime to a new procedure, the nonprocedural languages are available.

The advancement in computer and the communication technology has made the distance, speed,volume and complex computing an easy task. Hence, designing the MIS for a specific need andsimultaneously designing a flexible and open system becomes possible, thereby saving a lot ofdrudgery of development and maintenance of the system. The concept of user friendly systemsand the end user computing is possible, making information processing a personalized function.However, the application of the management principles and practices in todays complexbusiness world is possible only when the MIS is based on a computer system support.

Management information system and academicsThe management information systems draw a lot of support from other academic disciplines too.The foundation of MIS is the management theory. It uses the principles and practices ofmanagement while designing the system, and gives due regard to the theory of organizationalbehavior.

It considers the human mind as a processor of information. While designing the report formatand forming communication channels, MIS takes into account the behavior of the manager as anindividual and in a group. It gives due regard to the personal factors such as bias, thinking with afixed frame of reference, risk aversion, strengths and weaknesses.Another area of academics is operational research. The operational research is used fordeveloping the models of management problem and they are then incorporated in MIS as


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decision support systems. The inventory control, queuing theory, and resource programming areused in the MIS as decision support systems. The network theory is used for planning andcontrolling large projects.In the area of accounting application, it uses the accounting principles to ensure that the data is

correct and valid. It uses the accounting methodology for generating a trial balance, balancesheet and other books of accounts.The MIS uses the communication theory in a significant manner. The principle of feedback isused while designing analysis and reporting systems. While designing the report format,attention is paid to avoid noise and distortions in the communication process.

The MIS is based on database and uses the database for generating information. The three typesof data structures, viz., hierarchical, network and relational database have roots in themathematics and the set theory.

The MIS becomes rich in content and more useful when it becomes more and more a decision-making or decision support system. This is possible when it builds decision making systems inMIS which in turn is possible if it draws tools, techniques, methods, rules and principles frompure science and application science, and uses them as an integral part of the system. The MISuses knowledge from management, business management, mathematics, accounting, psychology,communication theory, operations research and probability theory for building processes,methods, and decision-support systems in designing business applications.

MIS and the UserEvery person in the Organization is a user of the MIS. The people in the organization operate atall levels in the hierarchy. A typical user is a clerk, an assistant, an officer, an executive or a

manager. Each of them has a specific task and a role play in the management of business. TheMIS caters to the needs of all persons.The main task of a clerk is to search the data, make a statement and submit it to the higher level.A clerk can use the MIS for a quick search and reporting the same to higher level. An assistanthas the task of collecting and organizing the data, and conducting a rudimentary analysis of it.The MIS offers the user tools to perform these tasks. An officer has a role of integrating the datafrom different systems and disciplines to analyze it and make a critical comment if anythingadverse is found.

In MIS offers the methods and facilities to integrate the data and report the same in a proper

format. An executive plays the role of a decision maker. He is in a position of responsibility andaccountability; a position of a planner and a decision maker. He is responsible for achieving thetargets and goals of the organization. The MIS provides facilities to analyze the data and offersthe decision support systems to perform the task of execution. The MIS provides action-orientedinformation.The manager has a position of responsibility and accountability for the business results. Hismanagement role expands beyond his management function. The MIS provides information in a


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structured or unstructured format for him to react. The MIS caters to his constant changing needsof information. The user of the MIS is expected to be a rational person and the design of the MISis based on this assumption.However, in reality the impact created on individuals by MIS is difficult to explain.

The recent major technological advances in communication such as Multimedia, Imaging,Graphical User Interface (GUI) etc and the ability to access the data stored at different locationson the variety hardware of platforms would make MIS more attractive and efficient proposition.An intelligent user of information can demonstrate the ability of decision making, since hismanipulative capability is considerably increased, with the information now being available onhis desktop.Through the MIS, the information can be used as a strategic weapon to counter the threats tobusiness, make businesses more competitive, and bring about the organizational transformationthrough integration. A good MIS also make an organization seamless by removing all the

communication barriers.

IMPORTANCE OF MANAGEMENT

Introduction to ManagementManagement as defined by Mary Follet is the art of getting things done through people. Amanager is defined as a person who achieves the organizations goals by motivating others toperform not by performing himself. Whether management is an art or a science is a verysubjective question. But it can be said without doubt that modern management in theenvironment of technology is becoming more of a science than an art. We define management

for the purpose of Management Information Systems as the process of planning, organizing,staffing, coordinating and controlling the efforts of the members of the organization to achievecommon stated goals of the organization.In the process of management, a manager uses human skills, material resources and scientificmethods to perform all the activities leading to the achievement of goals. The managementprocess involves a continuous resolution of conflicts of one kind or the other which affects theachievement of goals, conflict between alternative resources, conflict of time, conflict of goals,conflict of approach or method and the conflict of choice. The manager uses a variety of tools,techniques and skills while executing the management process of planning, organizing, staffing,coordinating and controlling.

The key concepts of the systems theory used in the management are as follows:

A system is comprehensive assembly of parts becoming an organization to achieve thestated goals.

A system is called open if it has an interaction with the environment, and closed if it doesnot have an interaction with the environment.


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A system is defined, described and understood by the boundaries within which itperforms.

The systems are subject to entropy, i.e., the tendency to run down. Closed systemssuffer from entropy as they are cut off from the environment, while open systems interactwith the environment and draw upon the support of resources to maintain a given

condition. System tries to remain in equilibrium or a steady state by taking recourse to corrective

action. This is possible when the system has its own feedback, i.e., an informational inputabout the state of the system.

The advantage of viewing the management as a system is that it enables us to see the criticalvariables, constraints and their interaction with one another. It forces the manager to look at thesituation in such a way that due regard is given to the consequences arising out of interactionwith the related elements or subjects.

Approaches to Management

Frederick W Taylor, is recognized as the father of scientific management. His principles can besummarized as follows:

Replace the rules of thumb with scientific rules Obtain a harmony in group action. Achieve cooperation of human beings, rather than chaotic individualism. Work for a maximum output. Develop all workers to the fullest possible potential for their own highest possible

prosperity.Fayol regarded the elements of management as planning, organizing, commanding, coordinating

and controlling. He believed that the operational management would succeed through theelements of management.Hawthornes studies brought out the theory that man is Social Animal operating in the socio-technical system and, therefore, the emphasis in effective management is on behavioral sciences.Chester Barnard advocated the theory of systems as an approach to the management. Barnardsaid that due to the physical and biological limitations of individuals, they cooperate in the workenvironment. The cooperation increases with effective and efficient incentives.He further said that the cooperation is more effective if the members of the group communicatewith one another, are willing to contribute to group action, and have a conscious common

purpose. He further said that a group of people in the system work as an organization. Aneffective management is possible if the organization is looked upon as a system of functions, asystem of incentives, a system of authority and a direction and a system of logical decisionmaking. The emergence of the modern management thought is credited to the social scientists,the behavioral scientists, the systems scientists and the practicing managers.

Function of the Manager


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An individual who gets the things done is a Manager. It is necessary to distinguishbetween the tasks and the functions. While managing, a manager may perform theactivities such as accounting selling, manufacturing, purchasing, etc. Theseactivities are called as tasks and not as functions. The activities that are performedthrough the managerial functions are:

Planning Organizing Staffing Directing Coordinating and Controlling.

PlanningPlanning is a process of determining the goals and objectives and evolvingstrategies, policies, programmes and procedures for the achievement of thesegoals.OrganizationOrganization involves evolving the structure of the people working in theorganization and their roles.StaffingStaffing involves manning the positions in the organization structure. It requiresdefining the manpower needs per position or centre of activity.DirectingDirecting is a complex task of implementing the process of management. In theprocess, the manager is required to guide, clarify and solve the problems of thepeople and their activities.CoordinatingCoordinating is the function which brings a harmony and smoothness in the variousgroup activities and individual efforts directed towards the accomplishment ofgoals. It is a process of synchronizing individual actions and the efforts which maydiffers because of the differences in the personal goals and the common goals, thedifferences in the interpretation of methods and directions.Controlling is a process of measurement of an output, comparing it with the goals,the objectives and the target, and taking corrective actions, if the output is fallingshort of the stated norms. Controlling ensures an achievement of the plan.

Managers and the EnvironmentAll managers, whether they are managing a business, a school, a hospital, Governmentdepartment, or any enterprise, work in an environment in which the organization operates. There


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are a number of forces which are generated in the environment, which have an impact on themanagerial performance. These forces may be from within or from outside the organization.They affect, directly or indirectly, the process of the management and a manager is required tomeet these forces effectively. While to some extent the internal environment is controllable, theexternal environment is beyond his control. Since it is preventing that the external environment

also has an impact on the business managers performance, it is necessary to know andunderstand the environment. For the purpose of discussion, the external environment isclassified into five classes as the economic, the technological, the social, the political and theethical environment.

Economic Environment

The economic environment comprises capital, labor, price changes, productivity,fiscal and monetary policy and customers.Capital

It is required to run the organization. The enterprise needs a long-term and a short-term capital. The capital required can be either from the internal sources orborrowed from the financial institutions. When a capital is borrowed, it is borrowedat an interest. The organizational is forced to borrow for various reasons and theinterest charged by the lending financial institutions forms the cost of the capital.Hence management of the capital is an important aspect of the business.Labor

The next important cost of a business is the cost of labor. The cost of labor isdetermined every two to three years by a union agreement. The settlement of anagreement is based on the cost of living index, the industry wage standards, the

availability of labor, etc. These aspects are external to the organization and amanager has no control on them.Price ChangesPrice changes occur in the economy for various reasons. The changes occurbecause of decrease in the demand and supply, the changes in the consumerbehavior, in the consumption pattern and the money supply, and so on. The pricechanges affect the cost of raw material and labor and on these changes a managerhas no control.Productivity

Productivity is a result of the capital, labor and technology. Many a times anorganizations business is taken over by better technology. The costs are affectedby the technology changes affecting the productivity. The manager has to respondquickly to the technological changes to save the business.Fiscal and Monetary Policy


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The Government announces fiscal policies and controls them. The organizationsprofit position is affected by these policies. These policies affect the credit terms,the prices of the inputs and the money supply affecting the cash position of theorganization. A manager has a very little leverage to deal with these policychanges.

Changes

The customers rule the business, especially when the business operates in a buyersmarket. In a competitive world, it is very difficult to predict the customer behavior.

The changes in the demands occur with growth and technology. The customer doesnot show consistent preference to the product. The change in the businessorientation to suit the changes in the customer demand is a difficult task for themanager. It is not always possible to predict these changes well in advance in orderto take any managerial action to meet the changed situation.

Technological Environment

The technology has a major impact on the business. It affects the business prospects, cuts downthe profits and forces the management to change the course of the business operations. Anychange in technology changes the work cultures, the methods and the systems. It affects thespeed of the operations and gives a boost to the productivity of the production systems.Examples of technological changes are seen in aviation, electronics, energy, communication,consumer goods industry, optics, medicines and manufacturing.

Social EnvironmentThe social environment is built around the attitudes, the desires, the expectations, the degree ofintelligence and education, the beliefs and customs, the religion, the caste and creed of thepeople. The social environment is built in centuries and hence it is deeply rooted in the society.The social environment has an important impact on the business and the organizationalproductivity.Social factors create an attitude towards the work, generate the product choices, and manipulatethe consumer behavior. It is well known that it took a lot of time to convince the farmers in Indiaabout the use of fertilizers. It is recognized that rural marketing is different from the urbanmarketing. Inspite of the technological advances, frozen foods are not finding consumerpreferences. Introduction of computers in the service industry is still a difficult proposition. Anumber of such examples can be cited to prove that the social environment affects business andmakes the managers task very difficult and challenging.

Political EnvironmentThe political factor is the most important factor which affects the business in Indianenvironment. The unstable political environment brings stagnancy in the development. Thechanges in ruling party bring economic policy changes, affecting the business. The sectorialpreferences, such as an agricultural versus an industrial, an educational versus a basic research,an investment in the service versus a core sector come about with change in the ruling political


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party and its policies. Such changes have a long-term impact on business performance. Themanager has to deal with such changes effectively.

Ethical Environment - Systems of a Moral BehaviorSome business problems arise due to failing on the ethical grounds. The government has enacted

many laws and regulations to bring about harmonious operations in business. However, someaspects of the business operations are left as ethics, called the business ethics. The businessethics emerge from the professional conduct, the business norms and codes on confidentiality,the payment and documentation, the adherence to generally accepted standards of accountingand auditing. Business ethics is a set of norms which are universally accepted as a businessbehavior.All these factors discussed so far, are beyond the control of the manager. At best he can predict,assess, evaluate and take such action which will help him to control the situation.

Management as a control systemPlanning, organizing, staffing, coordinating, directing and controlling are the varioussteps in a management process. All the steps prior to a control are necessary butare not necessarily self-assuring the results unless it is followed by strong controlmechanism. The management experts have viewed these steps as `ManagementControl System. They postulate the hypothesis that unless a control is exercised onthe process, the goals will not be achieved. They advocate a system of effectivecontrol to ensure the achievement of the business objectives.DefinitionA definition of control is the process through which managers assure that actual

activities conform to the planned activities, leading to the achievement of thestated common goals. The control process measures a progress towards thosegoals, and enables the manager to detect the deviations from the original plan intime to take corrective actions before it is too late. Rober J Mockler defines andpoints out the essential elements of the control process.

The management is a systematic effort to set the performance standards in linewith the performance objectives, to design the information feedback systems, tocompare the actual performance with these predetermined standards, to identifythe deviations from the standards, to measure its significance and to takecorrective actions in case of significant deviations. This systematic effort isundertaken through the management control system.

The control system is essential to meet the environmental changes discussedearlier, to meet the complexity of todays business, to correct this mistakes madeby the people, and to effectively monitor the delegation process. A reliable andeffective control system has the following features.Early Warning Mechanism


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This is a mechanism of predicting the possibility of achieving the goals and thestandards before it is too late and allowing the manager to take corrective actions.

Performance Standard

The performance standard must be measurable and acceptable to all the

organization. The system should have meaningful standards relating to the workareas, responsibility, and managerial functions and so on. For example, the topmanagement would have standards relating to the business performance, such asproduction, sales, inventory, quality, etc. The operational management would havestandard relating to the shift production, rejection, down time, utilization ofresources, and sale in typical market segment and so on. The chain of standards,when achieved, will ensure an achievement of the goals of the organization.Strategic ControlsIn every business there are strategic areas of control known as the critical successfactors. The system should recognize them and have controls instituted on them.

Feedback

The control system would be effective, if it continuously monitors the performanceand send the information to the control centre for action. It should not only highlightthe progress but also the deviations.Accurate and Timely

The feedback should be accurate in terms of results and should be communicatedon time for corrective action.Realistic

The system should be realistic so that the cost of control is far less than thebenefits. The standards are realistic and are believed as achievable. Sufficientincentive and rewards are to be provided to motivate the people.The Information Flow

The system should have the information flow aligned with the organization structureand the decision makers should ensure that the right people get the rightinformation for action and decision making.Exception Principle

The system should selectively approve some significant deviations form theperformance standards on the principle of management by exception.A standard is meaningful when it is achievable and provides a challenge to theachiever. A management control system has a set of objectives, standards tomeasure, a feedback mechanism and an action centre as elements of the system.


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They need to be properly evolved and instituted in the organization with duerecognition to the internal and the external environment. The system as a wholeshould be flexible to be changed with ease so that the impact of changedenvironments is handled effectively.

Management by Exception

Paretos principle of 80:20 is applicable to the management of enterprise. Several terms havebeen coined on this principle such as management by objectives, management by results, andmanagement of strategic areas. At the roof of the management methodology is the managementby exception. When the management operates under time constraint, each manager has toallocate specific time for the several demands made on his time. It is, therefore, necessary forhim to attend the situation where his attention is necessary. Such attention would lead to anaction, a decision or a wait-and-see approach.If all the situations are considered in a routine manner, it consumes time and tends to beneglected over a period of time. An efficient manager tries for selective attention to manager

within the available time resource. The principle evolved, therefore, is of the management byexception. The exception is decided on the impact a situation would make on the performance,the process and the standards set in the management control system.The exception is defined as a significant deviation from the performance, or the process and thestandard. The deviation could be abnormal on a positive or on a negative side of the standard.The deviation could be abnormal on a positive or on a negative side of the standard. Thedeviation could be predictive or could be arising out of random causes in the business operations.It is, therefore, necessary to assess whether the deviation is sporadic or consistently coming in,calling for managerial attention. The manager is interested in knowing the significant deviationby the yardsticks of consistency and not our of random causes. The significant deviations are

exceptional in nature and require to be attended to immediately. A manager is further interestedin knowing the reasons behind the exceptional nature of the situation. It is possible to trace thereasons of deviation, and it is possible to take a corrective action.

MIS - A Support to the ManagementThe management process is executed through a variety of decisions taken at each step ofplanning, organizing, staffing, directing coordinating and control. If the management is able tospell out the decisions required to be taken, the MIS can be designed suitably. The decisionsrequired to be taken in these steps are tabulated in Table below.Table: Decisions in Management

Steps in Management DecisionPlanning A selection from various alternatives - strategies, resources,

methods, etc.

Organization A selection of a combination out of several combinations of the goals, people, resources, method and authority.

Staffing Providing a proper manpower complement.


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Directing Choosing a method from the various methods of directing theefforts in the organization.

Coordinating Choice of the tools and the techniques for coordinating theefforts for optimum results.

Controlling A selection of the exceptional conditions and the decision

guidelinesThe objective of the MIS is to provide information for a decision support in the process ofmanagement. It should help in such a way that the business goals are achieved in the mostefficient manner. Since the decision making is not restricted to a particular level, the MIS isexpected to support all the levels of the management in conducting the business operations.Unless the MIS becomes a management aid, it is not useful to the organization.

MANAGEMENT PROCESS

Management Effectiveness`Negandhi Estafen provides a good model for the analysis of management effectiveness inachieving the goals and objectives. The model puts a lot of emphasis on the management philosophy and the environment factors on which the effectiveness is dependent. Theenvironment factors provide the opportunities to survive and grow with certain constraints whilethe management philosophy sets the guidelines for deciding the management practices to run theenterprises.Figure: * Nagendhi Estates Model for Analysis of Management EffectivenessWhile the environment factors are difficult to control, it is left for the management to change its

philosophy towards the various players in the business, viz., the employees, the consumers, thesuppliers, the government, the community and the shareholders. Basically, it is a change inattitude towards these players. For example, how to look at the employees? If the attitude willhave an impact on the management practices, where the employee will play a decisive criticalrole. IT will affect the organization structure by reducing its size and the reporting levels.If the attitude towards the consumer is changed to fulfill the expectations giving rise to a highersatisfaction, then the management practices in the product design, manufacturing and marketingwill undergo a significant change. The product life cycle will then be short, and more featuressand functions will be added to the product fulfilling not only the functional needs but also theservice needs of the consumer.

Goals - Objectives and TargetsThe process of management begins with setting of goals, objectives and targets. The goals arelong term aims to be achieved by the organization; objective are relatively short term milestonesto be accomplished, while the targets generally refer to physical achievements in theorganizations business. The goals, objectives and targets are so set that they are consistent witheach other and help to achieve each other. These are to be achieved within a stipulated time and


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failing to achieve the same, means less of business profit and image. The difference betweenthese entities can be best understood by examples in the three types of organizations given inTable below.Table:

Business

Organization

Hospital State Transport

OrganizationGOAL Be a leader in the

household consumergoods industry, withmodern amenities

Be a hospital providingtotal service to thepatients.

Connect all villages of population 5000 andabove by S T service

OBJECTIVES Provide complete productrange in the area ofcleaning, preserving andentertainment.

Establish 300 bedhospital in three years.

Management statetransport at the rate of $ 5per mile traveled.

TARGETS 20 per cent growth per annum in turnover.

Achieve $ 800 bed perday earnings.

Achieve 90 percentaverage seat occupancyeveryday.

In an organization, as time progresses, business goals, departmental goals, functional goals andpersonal goals emerge, which create conflicting environment in the organization. The goals,objectives and targets helps in accomplishing objectives and accomplishment of objectives leadsto the attainment of goals. Careful determination of these entities is, therefore, essential for asuccessful management process. The goals, objective and targets become reference points forstrategic planning, resource planning, and operations planning.

It further helps the management to identify key areas of business and key areas of managementattention. Its advantage is that it stimulates the development of people and provides motivation.According to Peter Drucker, goals and objectives are necessary in every area where performance and results directly and vitally affect the survival, growth and prosperity ofbusiness.

PlanningPlanning is basic to all managerial functions. It is a process of selecting one course of action,

from different alternatives, for achieving the stated goals, objectives and targets. It is a decisionmaking process determining in advance what to do, how to do, when to do and who is to do.Planning creates a frame of activity and events which are to happen or a runway for achievingcorporate goals, objectives and targets. Planning process demands resource allocation throughdecision marking. The organization may have a plan; but question is how effective the plan is.


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The efficiency of a plan is measured by the amount it contributes towards achievement of goals.It further helps to control business operations at all levels with common reference to goals,objectives and targets.Planning is a process and hence it has a methodology. The first step in planning is forecasting the

environment, in which the plan is to be made and operated. Forecasting provides information onpopulation, growth, price trends, market changes, new opportunities, changes in technology andthe external factors affecting the business.The second step in planning process is to evaluate the best among all the feasible alternatives.The analysis and evaluation is done with reference to the objectives such as, minimization ofcost, maximization of profit, yield, and productivity, etc. The right choice of an objective is acrucial factor in the selection process. The planning begins with the setting of goals andobjectives and end up in selecting the most rational course of action.The organization has a network of goals, objectives and targets. It is necessary to develop the

network of plans corresponding to this network. The process leads to the development ofcorporate plans, functional plans, and departmental plans and so on. For example, theorganization may have business plans, investment plans, marketing plans, and advertising plans.Normally, the corporate plans are for a longer period and the derived plans are for shorterperiods. Since the plan has a commitment to time, it is necessary to build a flexible plan capableof undergoing a suitable change to alter the goals and objectives within the same time.An effective planning should begin at the top and flow down the line. The effectiveness isbrought in by taking a series of decisions, committing resources, giving directions, and executingcontrols to achieve the goals and objectives. The process of planning, therefore, is to develop thealternatives, evaluate them by meaningful analysis of costs and benefits, and make a rationalselection based on some choice about goals. If the situation is that of uncertainty, then theevaluation is done thorough risk analysis and preference theory using utility as criteria.

OrganizingOrganizing is an important step in the managerial process and relates to the people in anenterprise. It deals with a quantitative and a qualitative aspect of manpower in terms ofplacement, the roles they play and the relations amongst them, with the aim that they worktogether effectively towards accomplishing the goals, objectives and the targets of theorganization.The organization could be formal or informal. The organization is formal when the roles, the

relations of the people and the objectives they should achieve are well defined. In an informalorganization, it is left to the people to understand and evolve suitable roles and relationship toachieve the objectives.

While creating the organization, attention is given to an appropriate splitting of the enterpriseactivities, by way of function, and grouping them in such a way that they form a division, adepartment, a section or a formal group. The people heading these entities should have enoughauthority to decide, and should exercise a discretion in using the authority. The people should be


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put in such a structure of roles and relationships that it is designed to work effectively and themembers of the structure are able to contribute substantially towards the achievement of goals.Peter Drucker recommends three ways to determine the structure:Activity analysis;

Decision analysis; andRelation analysis.Organizing is a process by which the manager can bring a smoothness of operations, by way ofconflict resolution, assigning work responsibility, and creating appropriate work environment ofteamwork while deciding on the process of organizing. There are certain important factors towhich attention should be paid and which are discussed as follows:

Organization Levels and the Span of ControlThis factor deals with grouping the people in hierarchical form, determining the levels in theorganization. The levels get determined by the span of control, i.e., in the organization how many

subordinates a superior can manage. This number can vary anywhere between four to eight inhigher levels of management and eight to fifteen in lower levels of management. The span ofcontrol is determined on the basis of the task to be performed, decisions to be taken, and thestrengths and weaknesses of the people and the degree of the delegation of the responsibilitiesthat superior is willing to attain.

DepartmentationDepartmentation is a process of breaking an enterprise into smaller groups and levels. There area number of ways to break the enterprise. A widely accepted practice is by functions of theenterprise, viz., Marketing, Production, Finance, Personnel, Materials, etc. The second method isbased on geographic area distribution. This method is resorted to when the distances are long, theactivities are many and the decision making is decentralized. Many organizations have divisions,branches and territories through which the business operations are conducted. The third methodto departmentalize is by way of the product or the services the organization is providing.

Relations of Line and Staff FunctionsThe functions of a department can be as a line or a staff. The functions which have a directresponsibility of achieving the targets for production or sales are line functions. The stafffunctions are those which do not participate directly in the activity but aid line functions toachieve the targets. Production Planning, Marketing, Purchasing, etc., are staff functions. Thedistinction is more clear and precise at higher levels. The staff function is advisory but owns the

responsibility for the results and in accountable for non-performance.Delegation of AuthorityThe function may either be a line function or a staff function; but still it requires decisionmaking. As one person cannot plan, execute and control all the tasks in the functions, owing tothe limitations of time and capacity, it is necessary that the decision making is not centralized atone point.


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Handing over limited authority of decision making to the subordinates is called delegation. Theconcept of delegation is based on the premise that an individual can take decisions if supportedby information, knowledge and guidance, and is motivate enough to perform. The concept ofdelegation accepts the responsibility of non-performance of the delegated person or the mistakes

made by him. Hence, most routine types of decisions are delegated with the support of rules,conditions and the method of decision making.The failure in delegation occurs not because of the lack of understanding of the principle ofdelegation, but because of the inability to implement it into practice. A lot depends upon theability of the manager to delegate and upon the capabilities of the subordinates to use theauthority. The manager is not able to delegate, if he does not have a positive attitude towardsdelegation, if he is not receptive to the subordinates ideas and is not willing to accept the risk offailure or mistakes of his subordinates. A failure to use the delegated authority emanates from alack of communication, guidance, training and motivation.

Towards Effective OrganizingOrganizing is an activity of building a structure of roles and relations of the people to securecoordination of individual efforts to achieve common state goals, objectives and targets. Thefailure in organizing occurs due to the failure to plan properly, to delegate the authority and dueto the confusion of roles, relations and authority.

StaffingThe function of staffing deals with manning the enterprises as per the organization structure sothat they together implement the process of management. Staffing involves not only selection ofpersons but also their appraisal and development so that they perform their designated roles. Theselection of a person is a difficult task. However, the chances of selecting a wrong person arevery less if a proper method is used. Since people cannot be easily replaced because of socio-political and legal reasons, their selection, in terms of quality and quantity, is of paramountimportance.Staffing of enterprise should be for todays needs, as well as that of the future. The requirementof the future is difficult to predict in precise terms and this requirement needs to be forecasted formore than five to six years. So the purpose of staffing is not manning for the current plan ofbusiness but to create a manpower potential capable of undergoing development, so that thesame manpower is able to perform the changed roles in the future.

Coordinating and Directing

After organizing the resources and staffing the planning activities, the business plan is launched.The process of implementing the plan is dynamic. It calls upon the manager to perform anumber of things in a coordinated manner so that the plan remains valid and the developmenttakes place as per the plan.The process meets with a number of difficulties and the manager is supposed to resolve them.There will be a lag and lead in many activities. There could be shortfalls and overruns. There


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could be sudden developments which may disturb the plans and the process of implementation.The managers role, in this situation, is to coordinate all the activities and provide leadership tothe group to keep the plan moving. Directing and leading are the methods, whereby thesubordinates are lead to understand the purpose of the activity, and by way of guidance, adirection and conflicts are resolved, bottlenecks removed and a clear path is created to progress

on plan achievement.ControllingThe last but the most important step in the process of management is controlling, the successfulexecution of management plan. Without control, the process becomes unproductive. The purposeof control is to regulate the process in such a way that the management process continuouslystrives for the achievement of the goals, objectives and targets.The control is exercised through a system. The system measures the performance of themanagement in terms of some predefined measures of output. It compares the output with thestandard, identified the deviations from the standard, and corrects the management process to

ensure that the plan continues to be effective in terms of achieving goals, objectives and targets.The control system work on the principle of feedback. The feedback on the performance shouldbe quick without any loss of time, so that corrective action can be taken immediately. Theprocess of correction involves changes in the plan, reallocation of resources, application of newsystems, procedures and rules. The best control is the one which brings the process back intooperation on the main track without outside intervention. The control system must get into actionautomatically to correct the midstream adverse development.

MIS - A Tool for Management ProcessThe process of management requires a lot of data and information for execution of the plan. Thisrequirement arises on account of the fact in each step of management, a variety of decisions aretaken to correct the course of development. The decisions or actions are prompted due to thefeedback given by the control system incorporated in the management system. The control ofoverall performance is made possible by way of Budget Summarizes and reports. The summaryshowing sales, costs, profit and return on investment throws light on the direction theorganization is moving to. The exception reports identify the weaknesses tin the system ofmanagement.If effective management system is to be assured, it has to rest on business information. Themanagement performance improves if the business risk and uncertainties are handled effectively.If the information provided is adequate, one can deal with these factors squarely. Theinformation support improves the lack of knowledge, enriches experience and improvesanalytical abilities leading to better business judgment. So, if efficient information support is tobe provided, it calls for a system with the goals of generating management information. A goodMIS must furnish information to the managers to expand their knowledge base. He must knowthe adverse trends in business, the shortfalls and failures in the management process.

STRUCTURE AND THEORY OF ORGANIZATION


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Basic Model of Organization StructureThe word organization means two things. The first meaning of the word organization is aninstitution or a functional group. A business organization, a hospital, a school, a university aresome such institutions. There is another meaning of `organization, that is an arrangement of

people in an institution keeping in view the concept of division of labor, authority, responsibilityand decision making so that the institution, as a stable system, works coherently towards theachievement of goals.The organization structure is built by arrangement of organizational subsystems. Theorganization structure is built on four basic principles, viz. Hierarchy of authority,specialization, standardization or formalization and, centralization. The structure is built toachieve goals and objectives fitting into the environment. The structure built on any principleshows division of work, managerial and non-managerial manpower allocation as well as flow ofdecision responsibility and exchange of information.

Hierarchy of AuthorityThe authority rests with the individual in the organization. The degree and strength of authoritydepends on the level at which at person is holding position. The authority is measured on thebasis of command on control of resources, the risk of business, and the decision making power tomanage the risks and rewards. When the authority s distributed in a vertical order in terms oflevels, the organization is built on the principle of hierarchy of authority. The effectiveness ofthe authority is based on the span of control, i.e., the number of persons being managed andcontrolled by a person. Depending on the organization, and business, the span may differ fromfour to seven. The span outside this range has proved to be unproductive and inefficient.

SpecializationThe second principle of building organization structure is specialization. Specialization can bedecided in a number of ways, arranging all similar and associated tasks under one head. Forexample, a business organization can be structured on the specialization such as Manufacturing,Marketing, Accounting and Personnel. A hospital can be structured on the basis of specializationsuch as General Medicine, Surgery, Heart diseases, Orthopedics and so on. The specializationprinciple brings clarity in organization functions, helps to select right people and group themproperly, aids in functional planning and control of the activities of the organization.

Standardization - FormalizationThe purpose of standardization or formalization is to make a person in an organizationindependent, whereby the interaction between the individuals in the organization is minimum.The people work on the basis of rules, procedures, systems, guidelines and policies. If thedegree of such specialization is very high a person can supervise more number of people. Inother words, it affects the span of control favorably. With specialization, the delegation of workand its control has become easier. Where standardization is not possible owing to the nature ofbusiness, the risk in business and decision making complexity span of control is reduced as the


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number of people handle similar range of operations. Requirement of manpower then increasesmaking the organization top heavy.

CentralizationCentralization refers to the location or position where the decision-making centre is localized. In

a highly centralized organization, the decision making is at the top and in a decentralizedorganization; it is delegated down the line in the organization hierarchy. When business risks arehigh and difficult to manage, the organization emerges as centralized.The organization is structured on the basis of the above four principle. The blend of theseprinciples is decided on the nature of business, risk of business, management style and theenvironment of business. The blending of this principle would undergo a change as the businessgrows. The organization is under a continuous process of change to meet the changing needs ofbusiness. The organization emerges as centralized.The organization is structured on the basis of the above four principle. The blend of these

principles is decided on the nature of business, risk of business, management style and theenvironment of business. The blending of this principle would undergo a change as the businessgrows. The organization is under a continuous process of change to meet the changing needs ofbusiness. The organization will have a different structure in its various business stages namely,inception, growth, maturity and decline. The structure of organization affects organizationalproductivity, individual performance, growth of human resource, and the manpower itself. Aconsiderable amount of saving in manpower and overhead expenses is possible, if theorganization is properly structured to the business needs and towards fulfilling the objectives.Independent of the blend of these principles, the effectiveness of the structure largely depends onthe quality of people ability, skills, knowledge, attitude and motivation. The basic model of the

organization structure is shown in Fig 4.1. It shows the arrangement of the people in a reversetree structure.The basic model will have more levels if the size of the organization is very large. The numberof levels will be determined on the basis of the span of control and the nature of work. Theappropriateness of the structure can be decided based on the factors like responsibility andauthority, economy in conducting the business, the ability to achieve the goals and objectives, asmooth flow of information exchange and communication. There are four variations of the basicmodel which are widely used in real life.

Modifications to basic model

There are four modifications to the basic model of organization as under:

Functional Product/Market/Service Project Matrix

Functional Organization


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The functional organization is most suitable where the organization business can besplit into clear divisions of activity and all of them are equally important. Forexample, the business organization can be functionally organized into four to fivefunctions such as marketing, manufacturing, finance, personnel, and marketing,manufacturing, finance, personnel, and materials.

The strength of the people and the hierarchy in each of the functional organizationswould vary depending upon the size and the number of activities. Decision makingin any functional organization is at the level of the functional head withaccountability to the chief of the organization. The implications of the decisions arelargely on the functions themselves. A decision affecting other functions of thebusiness, however, is referred to the top management. The information flow is fromthe top to the bottom and in the reverse order. The information flow across thefunctions is not expected. Accumulation of information is at the chief executiveslevel and is shared by the others.

The functional organization is most suited where each function is a specialty andcalls for an expertise in the field; and where coordination is of a very low order and

can be handled easily through the management process. The organization worksefficiently when the business is stable and expected to grow in a steady manner.When the business becomes competitive and develops threats to its growth, thefunctional structure undergoes a change. The development of people is on thespecialized functions and hence they are not equipped to handle other functions ifrequired. The people in a functional organization develop a narrow outlookrestricted to their own functions and responsibilities. The corporate culture isdifficult to imbibe in a functional line. The government departments and agenciesare organized on the functional principle.Product - Market - Service OrganizationWhen the organization grows large in turnover and strength, and when the decision-making relates to, either the product or the market or the service, the organizationstructure is built around one of these factors. In this structure, the totalresponsibility rests with the product/market/service head. He is expected to take allthe decisions regarding finance, material, etc. The people in the organization reportto the product head.

The decision making in this structure is faster and to some extent centralized. Theinter-functional conflicts are avoided resulting in speedy business progress. In thisstructure, people work more for product goals than the corporate goals. Thecontribution to profit by product can be easily measured as profit is earned byproduct business unit. In this structure, the manpower requirements are higher andthe people develop specializations in the specific technology and management.Project OrganizationA project organization is a special case of product organization where the commonservices like finance, purchase, etc. are organized at the functional level. But theproject resources are allocated to the project manager. Since the businessresponsibility rests with the project manager, necessary authority is given to him


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with the requisite resources. This type of organization structure helps in makingquick decisions for project control in terms of costs, resource and time. In a projectorganization some of the functions are of corporate responsibility and some of themare the project managers responsibility.In a project business, the activity is one at a time and has implications on the

subsequent activities in the project. Therefore, any problem or conflict relating tothe activity needs to be resolved immediately. This calls for quick decisions. This ispossible by organizing all the functional resources under one command of theproject manager.Matrix OrganizationIn all the three organization structures discussed so far, the communication protocolis vertical in the hierarchy. The information flow is within the hierarchy. The lateralcommunication between the functions is not permitted. In a matrix organization avertical as well as a lateral communication and information flow is allowed. Thematrix organization integrates functional responsibility with product responsibility.

It is combination of the functional and the product organization structure. A productmanager is responsible for the total performance of the product and he will havethe production manager, the marketing manager, the accounts manager as hiscounterparts in the manufacturing, marketing and accounting functionsrespectively. These functional managers report to the functional head vertically andthe product manager laterally.

The matrix organization structure is used in big companies having diverse businessactivities. The business units, known as strategic business units, are organized witha unit head at the top. The structure enjoys the advantages of a functional as wellas of a product organization. It should be noted that the organization structure is adynamic model. It is effective for the purpose it is set to fulfill under certainconditions. The moment the business conditions change, the structure shouldundergo a suitable change. The structural changes do not limit themselves from onetype to other but many other qualitative changes are also desirable.

There has to be a change in the people in terms of strengths, skills and abilities. Afunctional head in the functional organization may be not be suitable to shoulderthe responsibility of the Product Manager in a product organization structure,because of inherent limitations of narrow specialized experience as a functionalhead.With the standardization and formalization drive in the organization, the span ofcontrol can be enlarged than before. With the delegation of authority, backed bythe rules and policies, the junior level personnel become more knowledgeable,experienced and capable of shouldering higher responsibility. This would affect thelevels in hierarchy.

Organization Behavior

Though an organization is structured according to the goals and objectives to beachieved, the actual performance is at variance for various reasons. There aresome factors, beyond the control of the management, which affect the performance


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of the organization. However there are some factors, which relate to theorganization (independent of the type of structure). The performance is affecteddue to organizational behavior. The behavior of the organization is a result of thefollowing factors:

Organization Culture Organizational Power Organizational Change Organizational Learning Organizational Motivation

Organizational Culture

The culture is a set of attitudes, beliefs, values, norms and understandings, thepeople have in the organization. The culture is a collective behavioral result of thepeople who man the organization. Depending upon the person, whether he is amanager, an officer of a worker, the cultural pattern emerges and it is known as amanagerial culture and a work culture, etc. Long-term performance and managerial

actions depend on the managerial culture and the achievement of the targetsdepends on the work culture.

The culture may be reflected in the philosophy, policy, strategy, goals andmanagerial style of the organization. If the organization culture is generating abehavior which affects the performance adversely, it can be changed bymanagement actions such as training, education, creating awareness, transferringpeople, encouraging young recruitments and talent in the organization.Organizational Power

The organization power is the ability of the organization structure to use human andmaterial resources to achieve the stated goals and objectives of the organization.

The power of the organization is not distributed uniformly all over the organizationbut it may be concentrated in small groups representing a function, a departmentor a section. It might be localized with the individuals.Some individuals by virtue of their position, responsibility and seniority, enjoy morepower than others. Some individuals by virtue of their nearness to the managementand a strong personality derive power in the organization structure.Organizational ChangeEven though the organization is structured properly, over the period of time it startsfailing slowly due to the changes in the environment, the people and the business.Like a living organism, an organization undergoes a process of birth and death. Theprocess of organization outlives the purpose for which it is established moves muchfaster, if proper corrective action is not taken. The organization structure in its lifecycle, starting from the introduction, growth, maturity and decline should changesuitably in the respective phases. The behavioral change through the organizationalchange is achieved by creating a climate for change, deciding, designing andimplementing the change, watching and institutionalizing the change.


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Organizational Learning

The organizational behavior improves with the experience it gathers from allbusiness fronts. With experience, people are in position to identify the cause andeffect relationship. It is possible to predict the errors and probable mistakes in thebusiness operations. The rules, systems and procedures are streamlined over a

period of time. With this learning experience, some changes in the organizationstructure are inevitable and they should be carried out.

The individuals in the organization are able to assess the strength and weaknesseswithin them and are able to take steps to improve. As organizational learningincreases, the organizations behavior shows maturity. With increased learning, theorganization moves towards high degree of formalization, affecting the structureitself. The organizational learning is faster, if people and the management aredynamic and progressive.Organizational Motivation

There are two leadership styles, autocratic and supportive. In an autocratic style,the leader determines everything and dictates decisions. The decisions areenforced by the power of authority.

The supportive leadership style calls for participation, consultation and respects theopinion of the subordinates. The process evokes initiative amongst the subordinatesand gives them a feeling of importance and satisfaction.Organization as a SystemA system is an assembly of elements arranged in a logical order to achieve certainobjectives. The organization is also a system of people. The individuals in theorganization are selected in terms of number, quality and ability and are placed inhierarchical order to plan and execute the business activities to achieve certaingoals and objectives. This is the simplest justification for calling the organization asystem.

The arrangement of task in terms of process and work design is dependent on thepeople. The choice of technology of handling the task is dependent on the people.

You may choose the best technology and well designed tasks, but they have to besuited for the people. Over and above, these are to be arranged in proper structure.Further, fourth element has been added as culture. According to Leavitt anorganization should be viewed as a socio-technical system consisting of people,tasks, technology, culture and structure.In view of the nature of the task, the organization is supposed to carry out; it has tobe designed as an open system capable of adjusting itself to changing environment.

The organization continuously exchanges the information with the environment andis influenced by the changes in it. The organization, therefore, has to be built insuch a fashion that it adjusts with the changes in the environment and that thegoals and objectives are achieved.


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The system and their goals are not stable. The goals change in response to thechanges in the business focus, the environment and is influenced by the changes init. The organization, therefore, has to be built in such a fashion that it adjusts withthe changes in the environment and that the goals and objectives are achieved.

The systems and their goals are not stable. The goals change in response to the

changes in the business focus, the environment and in the people in theorganization. A significant change calls for change in the organization structure. Agoal displacement is said to have occurred when the system goals replace theorganization system goals. When a goal displacement occurs, it affects theorganizations goals significantly. Another reason for goals change is due to thenatural process of growth and decline.

All organizations and their business go through the different phase of growth cyclein stages as, Introduction, Growth, Maturity and Decline. Each phase generates newgoals to be served. If the changed or displaced goals are not reflected in theorganization as a system, the organization is bound to suffer from decay.

MIS - OrganizationManagement Information Systems (MIS) should be designed, viewing the organization asdiscussed earlier. MIS design should give due weight age to the human side of the organizationand its culture. The task and technology are the physical aspects of the organization which canbe ascertained very easily. But culture and people are very difficult to assess from the designpoint of view. The structure of the five sub-systems should be considered while designing theMIS. MIS design should give reports in line with the organization structure. This means that themain decision makers and the power centers must be recognized in the MIS.If the organization works on a standardized system where rules, policies, systems and procedures

have been laid down, then these become part of the MIS. The processing routines in the MISincorporate these features as an integral part. This is safe as it has already been approved by themanagement of the organization. Along with the information, if the decision makingresponsibilities are also clearly defined and allocated, then the MIS can produce informationreports by processing the data and summarizing the results in line with the decision makersposition in the structure.If the basic model of the organization is modified as a product or a project organization system,then the MIS should focus on the management of product or project where the concernedmanager has a composite responsibility of planning and control of the multiple functions.Besides these functions, he has to know the status of the other support functions.

The information should be such that it highlights the trouble spots and shows the interconnectionwith the other functions. It must summarize all information relating to the span of control ofproduct or project manager. The MIS should be able to cater to the view of the product or theproject manager and also of the top management.If the organization culture provides sufficient incentive for efficiency and results, the MIS shouldsupport this culture by providing such information which will aid the promotion of efficiency. If


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the culture encourages delegation of power and authority, then the MIS should incorporate thedecision making rules in the system.The organization system is an open system and MIS should be so designed that it highlights thecritical business, operational, technological and environmental changes to the concerned level in

the organization, so that the action can be taken to correct the situation. The principle of the feedforward control should be extensively used as a design feature to provide a prior warning to thedecision maker.The design of the MIS, in isolation from organizational factors, is destined to fail as it just doesnot fit into the structure. Since organization systems in the business differ for various reasonssuch as the leadership style, the management style, culture and group of people as a body and soon, it is difficult to evolve a standard model of the MIS for a business and / or an industry.MIS plays a very important role in creating organization behavior which in turn sets the goals forachievement. Technology and people decide the organization structure and style of the

management.

INFORMATION CONCEPTS

Information Concepts

The word `information is used commonly in our day to day working. In MIS,information has a precise meaning and it is different from data. The informationhas a value in decision making while data does not have. Information brings clarityand creates an intelligent human response in the mind.

In MIS a clear distinction is made between data and information. Data is like rawmaterials while the information is equivalent to the finished goods produced afterprocessing the raw material. Information has certain characteristics. These are:

Information Improves representation of an entity Updates the level of knowledge Has a surprise value Reduces uncertainty Aids in decision making

The quality of information could be called good or bad depending on the mix ofthese characteristics.Information PresentationPresentation of the information is an art. The data may be collected in the bestpossible manner and processed analytically, bringing lot of value in the information;however, if it not presented properly, it may fail to communicate anything of valueto the receiver. The degree of communication is affected by the methods of


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transmission, the manner of information handling and the limitation and constraintsof a receiver as the information user.

The methods used for improving communication are summarization and messagerouting. The concept of summarization is user to provide information which isneeded in the form and content. The information can be summarized in a number of

ways as shown in Table below.

The principle behind summarization is that too much information causes noises anddistortions, i.e., confusion, misunderstanding and missing and purpose. Thesummarization suppresses the noise and the distortions.

Table: Information Summarization

Key forsummarization

Focus of information

Example

Management position Responsibility General Manager,

Divisional Head Marketing,Materials

Management functionsLevels in theorganization

Performance, Goals, Targets Relevance to thelevel

Production Top, MiddleOperations

Selective on condition Exceptions Only those products,where sale is below thebudget

Another method of improving the degree of communication is through message

routing. The principle here is to distribute information to all those who areaccountable for the subsequent actions or decisions in any manner. That is if theinformation is generate with a certain purpose for a primary user, the informationmay have secondary purposes to some other users in the organization. This isachieved by sending the copies of the reports or documents to all the concernedpeople or users. The principle of the message routing achieves the spread ofinformation to the appropriate quarters.

Knowledge is a power and an intelligent person in the organization can misuse thispower to achieve personal goals undermining the functional and organizationalgoals. This tendency should be curbed. Further, the decision maker may call for theinformation on the grounds that, just in case required, he should readily have it.

Apart from the misuse of information, it has an impact on the cost of informationprocessing.

Bias in InformationWhile choosing the appropriate method of communicating information, a care has to be taken tosee that is not biased. For example, while using the techniques of classification or filtering theinformation, it should not happen that certain information gets eliminated or does not getclassified. That is, a deliberate bias in covering certain information is to be avoided. This bias


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enters because people try to block sensitive information which affects them. To overcome thisproblem, a formal structure of organization should be adopted and the type of information and itsreceiver should be decided by the top management.Many a times the data and the information are suppressed but the inferences are informed, with

no or little possibility of verification or rethinking. In this case one who draws inferences mayhave a bias in the process of collection, processing and presentation of data and information.Though the deliberate enforcement of the inference on the receiver avoids a possibility of themultiple inferences, but in this case processors bias is forced on the receiver. For example,organizations have departments like Corporate Planning, Market Research, R & D, HRD and soon, which collect the data and analyze it for the company and communicate the inferences. In allthese case personal bias, organizational bias and management bias may be reflected in the entireprocess of collection processing, and communication inferencing.Table: Methods to Avoid Misuse of Information

Method Reason ExampleDelayed delivery ofinformation

A possibility of immediateaction or decision is reduced.It will have only a knowledgevalue.

Sales report to the salesrepresentative or a copy ofinvoice to the salesrepresentative.

Change in the formatand content of thereport.

Provide only that informationwhich may be needed, hencethe misuse is averted.

Sales information tooperations management, salesversus target for the middlemanagement sales with atrend analysis to the topmanagement.

Suppression andfiltering of theinformation of confidential andsensitive nature.

To avoid the risk of exposureand the misuse of informationfor achieving the undesirablegoals.

The price, the costinformation. Drawing anddesign information.

Suppress the detailsand references of dataand information.

Make it difficult to collect,and process the data at theuser end to meet the personalneeds of information.

Statistical reports with noreferences.

Truncated or lopsidedpresentation

Make it difficult to readthrough the information and

avoid its probable misuse.

A focus on high value salesand production and suppress

the details.The presentation of the information will generate a bias and may influence the user. Forexample, if the information is presented in an alphabetical order and if it is lengthy, the first fewinformation entities will get more attention. If the information is presented with criteria ofexception, the choice of exception and deviation from the exception creates a bias by designitself. For a quick grasp, the information is presented in a graphical form. The choice of scale,the graphic size and the color introduce a bias in the readers mind.


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Information a Quality ProductInformation is a product of data processing. Even if we take care of the aspects discussed in theabove section, the manager will determine the quality of the information based on the degree ofmotivation it provides for action, and the contribution it provides for effective decision making.

The quality of information is high, if it creates managerial impact leading to attention, decisionand action. The quality of information can be measured on the four dimensions viz., utility,satisfaction, error and bias.The utility dimensions have four facets the form, the time, the access and the possession. If theinformation is presented in the form the manager requires, then its utility increases. If it isavailable when needed, the utility is optimized. If the information is easily and quicklyaccessible through the On-line Access system, its utility gets an added boost. Lastly, if theinformation is possessed by the manager who needs it, then its utility is the highest. Many of theorganization suffer from the possessive nature of the managers making an access difficulty forthe other users of the information.

The concept of the utility of the information is subjective to the individual manager, a

detailed ref. to mis and intro. to erp

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