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Management Information Systems (MIS): Tools That Support Managerial Decisions
Business Essentials · Chapter 17: Information Systems and Digital BusinessSection 17.4 · lesson 80 of 10513 min · free with a free account
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In this lesson
Tools that support managerial decisions: the right information, at the moment of decision.
- Describe the decision-support role of an MIS
- Match information to frontline, middle, and senior levels
- Apply exception reporting and what-if analysis
- Assess a reporting system by working backwards
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Everything said in the video, section by section (1,888 words). Read along, or search it.
Information Systems and Digital Business
Management Information Systems
The last two sections covered systems that communicate, and systems that analyze. This one is about the manager, at the moment of decision. We'll define management information systems in a specific, decision-support sense. We'll see why frontline, middle, and senior managers need very different information, and what goes wrong when they get the wrong kind. We'll set out four questions every report should answer, and make the case for exception reporting. Then interactive tools: what-if analysis, sensitivity testing, and drill-down. Then the limits of more information, the pull between timely and accurate, and the boundary of automated decisions. And we'll finish by assessing reports the right way, working backwards from the decision.
Decision Support
Information for the Manager Who Must Act
The term management information systems, or MIS, gets used in several senses. So let's pin this one down. It's not the operational role from chapter eight, running the transactions that keep a business functioning. And it's not the analytical function of the last section, turning data into insight. That was description, diagnosis, prediction, and prescription. Here, an MIS exists for one purpose. It puts the right information in front of a manager who is making a decision. Think of it as a layer. On one side, the operational data a business generates, and the analytical techniques available. On the other side, the particular manager who has to act. The MIS is the reporting, modeling, and decision-support layer between them.
Information by Level
3 Levels, 3 Kinds of Information
Chapter five described three levels of management, and each needs a different kind of information. Frontline managers need information that's detailed, current, internal, and narrow. The status of today's orders. Which employee is on which task. Whether a machine is running. It's updated in close to real time, and confined to their own area of responsibility. Middle managers need information that's summarized, periodic, and comparative. How does this month's department performance compare with last month's, or with a target? It's updated weekly or monthly, and aggregated above the level of any single task. Senior managers need information that's highly summarized, external as well as internal, and forward-looking. How is the whole organization doing against its strategy, and against the wider market and economy? What trends are coming? The common failure is giving each level the wrong kind. A frontline supervisor buried in a monthly summary can't use it to decide what to do this afternoon. And an executive handed real-time detail drowns in volume that says nothing about strategic direction.
Table 17.4.1
The Report That Fits Each Level
This table pairs each level with the report that fits it, and the failure when the wrong one arrives. The frontline needs real-time or daily operational status, organized by task or by shift. Give that manager a summary instead, and it arrives too late, and covers too broad an area to act on. Middle managers need weekly or monthly department performance, set against a target or a prior period. Without that, they either drown in raw detail, or lack the comparison needed to judge whether performance is good. Senior managers need a periodic strategic summary, with market context and trend. Hand them operational detail, and they can't see the pattern beneath it. Or they're left with no external context. So the basic design task of an MIS is matching the level of summary, the timeliness, and the scope to the manager. Send one standard report format to every level, and you're very likely serving none of them well.
Report Design
4 Questions Every Report Must Answer
Every report should be designed by answering four questions. What decision does this report support? Who makes that decision, and how often is it made? And what in the report would actually change the decision? Picture a report that can't be tied to a specific decision, made by a named person, at a known frequency. If nothing in it could change what that person does, it has no clear reason to exist. The practical discipline is blunt. A report nobody can name a decision for should be stopped. Many organizations carry reports built for a decision that no longer needs making, or for a manager who has since moved on. Why do they survive? Because producing a report that already exists costs less attention than questioning it.
Exception Reporting
Point Attention at What Varies
Exception reporting directs a manager's attention to results that vary significantly from a standard. The alternative is routinely presenting every result, whether it varies or not. It applies a principle from the control discussion in chapter five, management by exception. Scarce managerial attention should go to variance, not to confirmation that everything is proceeding as expected. Picture a report that lists every branch's performance, in undifferentiated detail. It hands the reader a search problem. Which of these actually matter? Now picture a report that highlights only the branches performing well outside the expected range. That one directs attention exactly where it's needed. Exception reporting doesn't make routine information disappear. Routine information is simply available on request, rather than pushed at the same priority as a genuine exception.
Decision Support Systems
Exploring Alternatives, Not Reading a Report
A decision support system is an interactive tool. It lets a manager explore alternatives, run scenarios, and test assumptions. That's a more active kind of inquiry than receiving a fixed report. Typically, the manager changes an input, like projected sales volume or a cost assumption, and watches the result change. The most practically valuable capability here is what-if analysis, and its partner, sensitivity testing. What-if analysis asks what would happen to an outcome if a particular input were different. Sensitivity testing asks how much a result changes as a given assumption is varied across a plausible range. Their real value is showing which assumption a decision actually depends on. Take a manager evaluating a new project, using the financial methods of chapter twenty-one. The projected return barely moves across a wide range of plausible costs. But it changes sharply with a modest change in the assumed sales volume. So sales volume is the assumption to scrutinize most closely. More precision on cost would add little. Without that testing, a single-point forecast hides which assumption matters, and effort goes into refining the wrong one.
Senior Views
Drill-Down, and the Limits of More
Senior managers often see information through an executive dashboard. It follows the same disciplines as any dashboard. A small measure set, so attention isn't diluted across too many figures. And it adds a drill-down capability, the ability to move from a summary figure to the detail beneath it. Drill-down matters because a summary alone can't show why a figure has moved. An executive who spots a concerning trend needs a path to the detail, without waiting for someone else to report back. That raises a broader question. Is more information always better? No. Past a certain point, it doesn't produce better decisions, and it can produce worse ones. Beyond what a manager can actually process and weigh, additional data adds noise, not insight. Worse, it can create a false sense of confidence. A manager facing a mountain of supporting detail may feel more certain, though nothing that matters has changed. It's the information overload from earlier in this chapter, now applied to the reports a manager decides by.
2 Tensions
Timeliness, and Selective Use
Two more tensions shape how reports actually work. The first is timeliness against accuracy. A fully verified, precisely accurate number often takes longer to produce than an approximate one. And a manager frequently needs an approximate figure now, rather than an exact one later, because the decision can't wait. An MIS that insists on full accuracy before releasing anything may deliver excellent numbers, too late to matter. One that supplies a clearly labeled approximate figure promptly, then a refined one later, often serves the manager better. The right balance depends on the cost of being wrong, against the cost of being late. And that differs by decision. The second tension is behavioral. Information isn't always used the way a designer intends. Managers, like people generally, sometimes use information selectively, favoring figures that confirm a decision they've already made. That's a documented pattern of behavior, not a claim about any individual's honesty or competence. Design can counter it in three ways. Agree a small set of measures in advance, so they can't be chosen afterward to fit a preferred conclusion. Require a decision record that states what evidence was considered. And review decisions against their later outcomes, so a pattern of selective use becomes visible in time.
Automated Decisions
Where a Decision Returns to a Person
Some decisions that a manager once made by reviewing a report are now made automatically. A system applies a rule. For example, it reorders a standard supply once stock falls below a threshold. Automation is appropriate where the decision is routine, well understood, and modest in its consequences. It becomes a governance question where the decision is consequential, or novel. Or where it affects a person in a way that calls for judgment a fixed rule can't supply. So there's a boundary, where a decision should return to a person instead of continuing automatically. And that boundary raises an accountability question. When an automated decision causes harm, or turns out to be wrong, who is answerable for it? The system? The person who configured its rule? Or the manager who approved its use? This section only names the question. Chapter eighteen takes up its governance, including what a business must assign before automating any decision of consequence.
Assessing a Reporting System
Work Backwards From the Decision
How do you assess a reporting system? Work backwards from the decisions it must support. Don't start forwards, from whatever reports happen to exist. The method has four steps. First, name the decision. Second, identify who makes it, and how often. Third, state what information would actually change it. And fourth, check whether any existing report actually supplies that information. Here's an example. A business must decide whether to approve a third delivery van for a route. Working backwards, it checks the four reports the organization already produces. Only one of them, the regional order volume and utilization report, contains what the decision actually needs. So an organization can have several reports in circulation, and still lack the one piece of information a decision requires. That's why the assessment has to start from the decision, not from the reports.
Case Vignette
The Report With the Wrong 2 Numbers
Here's a composite case, built for instruction. Felix is a divisional executive at a regional retail group. Each month he receives a lengthy report on sales, staffing, inventory, and customer feedback, across every store in his division. He must decide whether to approve extra seasonal staffing at a cluster of stores, ahead of the holidays. The decision depends on two questions. How much has foot traffic at those specific stores grown, compared with last year? And how much overtime has already been paid there this quarter? The report runs to many pages, and he can't find a clear answer to either. It wasn't designed backwards from this decision, or any other single one. It was built for a broad view of the division, and grew over several years as requests were added. Much of it is accurate and current. Very little bears on the decision in front of him. So Felix calls the store managers directly, to get the two numbers he actually needs. The trade-off is between one comprehensive report that feels thorough, and reports built around named decisions, perhaps several shorter ones. And the existing report has many stakeholders, each relying on some part of it. Shortening it isn't simple. Felix's answer is to request, for his own recurring decisions, a report with exactly the numbers needed, and nothing else.
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About Management Information Systems (MIS): Tools That Support Managerial Decisions
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