Organizational Decision-Making Systems

Management Information Systems

Management information systems—including information reporting systems, decision support systems, and executive information systems—facilitate rapid and effective decision making.

Elements for control include various management control systems, including executive dashboardsOpens in new window, and a procedure known as the balanced scorecardOpens in new window. In an organization, these systems are interconnected, as illustrated by the dashed lines in Figure X2 (shown below).

The MIS is supported by the organization’s transaction processing systems and by organizational and external databases.

• The information reporting system, the most common form of MIS, provides mid-level managers with reports that summarize data and support day-to-day decision making. For example, when managers need to make decisions about production scheduling, they can review data on the anticipated number of orders within the next month, inventory levels, and availability of human resources.

Figure XII Information Systems for Managerial Control

The systems for decision making and control often share the same basic data, but the data and reports are designed and used for a primary purpose of decision making versus control.

At Harrah’s casinosOpens in new window, an information reporting system keeps track of detailed information on each player and uses quantitative models to predict each customer’s potential long-term value. The information helps managers create customized marketing plans as well as provide customers just the right combination of services and rewards to keep them coming back rather than moving on to another casino. “Almost everything we do in marketing and decision making is influenced by technology,” says Harrah’s CEO Gary Loveman.

• An executive information system (EIS) is a higher-level application that facilitates decision making at the highest levels of management.

These systems are typically based on software that can convert large amounts of complex data into pertinent information and provide that information to top managers in a timely fashion. For example, Motorola’s Semiconductor Products Sector, based in Austin, Texas, had massive amounts of stored data, but managers couldn’t find what they needed.

The company implemented an EIS using online analytical processing software so that more than a thousand senior executives, as well as managers and project analysts in finance, marketing, sales, and accounting departments around the world, could quickly and easily get information about customer buying trends, manufacturing, and so forth, right from their desktop computers without having to learn complex and arcane search commands.

• A decision support system (DSS) provides specific benefits to managers at all levels of the organization. These interactive, computer-based systems rely on decision models and integrated databases.

Using decision-support software, users can pose a series of what-if questions to test possible alternatives. Based on assumptions used in the software or specified by the user, managers can explore various alternatives and receive information to help them choose the alternative that will likely have the best outcome.

The German airline Deutsche Lufthansa AG and Fraport AG, owner of Lufthansa’s hub airport, have collaborated on a valuable computerized system that helps make decisions to improve luggage handling.

Lufthansa and the Frankfurt Airport are exceptionally well-coordinated in the use of technology for handling baggage. The constant flow of information enables Lufthansa to locate any bag within seconds and make decisions that will it where it needs to be when it needs to be there.