Management Information System Lecture notes

management information systems vs decision support systems and what is management information system architecture, what is information system report
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Introduction to Management Information Systems 1. Introduction 2. Role and Importance Of Management 3. Process of Management 4. Organisation Structure and Theory 5. Strategic Management of Business Exercises pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA CHAPTER-1 Introduction 1.1 MANAGEMENT INFORMATION SYSTEM ( MIS) CONCEPT The concept of the MIS has evolved over a period of time comprising many different facets of the organizational function. MIS is a necessity of all the organizations. The initial concept of MIS was to process data from the organization and present it in the for of reports at regular intervals. The system was largely capable of handling the data from collection to processing. It was more impersonal, requiring each individual to pick and choose the processed data and use it for his requirements. This concept was further modified when a distinction was made between data and information. The information is a product of an analysis of data. This concept is similar to a raw material and the finished product. What are needed are information 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 be an individual- oriented, as each individual may have a different orientation. Towards the information. This concept was further modified, that the system should present information in such a form and format that it creates an impact on its user, provoking a decision or an investigation. It was later realized then even though such an impact was a welcome modification, some sort of selective approach was necessary in the analysis and reporting. Hence, the concept of exception reporting was imbibed in MIS. The norm for an exception. Was necessary to evolve in the organization. The concept remained valid till and to the extent that the norm for an exception remained true and effective. Since the environment turns competitive and is ever changing, fixation of the norm for an exception becomes ka futile exercise at least for the people in the higher echelons of the organization. The concept was then evolved that the system should be capable of handling a need based exception reporting. This need maybe either of an individual or a group of people. This called for keeping all data together in such a form that it can be accessed by anybody and can be processed to suit his needs. The concept is that the data is one but it can be viewed by different individuals in different ways. This gave rise to the concept of DA ‘ABASE, and the MIS based on the DATABASE proved much more effective. Over a period of time, when these conceptual developments were taking place, the concept of the end user computing using multiple databases emerged. This concept brought a fundamental charge in MIS. The change was decentralization of the system and pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA the user of the in formation becoming independent of computer professionals. When this becomes a reality, the concept of MIS changed to a decision making system. The job in a computer department is to manage the information resource and leave the task of information processing to the user. The concept of MIS in today’s world is a system which handles the databases, databases, provides com-putting facilities to the end user and gives a variety of decision making tools to the user of the system. The concept of MIS gives high regard to the individual and his ability to use information. An MIS gives information through data analysis. While analyzing the data, it relies on many academic disciplines. These include the theories, principles and concepts from the Management Science, Psychology and Human Behavior, making the MID more effective and useful. These academic disciplines are used in designing the MIS, evolving the decision support tools for modeling and decision - making. The foundation of MIS is the principles of management and if its practices. MIS uses the concept of management Information System can be evolved for a specific objective if it is evolved after systematic planning and design. It calls for an analysis of a business, management views and policies, organization culture and the culture and the management style. The information should be generated in this setting and must be useful in managing the business. This is possible only when it in conceptualized as system with an appropriate design. The MIS, therefore, relies heavily on the systems theory offers solutions to handle the complex situations of the input and output flows. It uses theories of communication which helps to evolve a system design capable of handling data inputs, process, and outputs with the lest possible noise or distortion in transmitting the information form a source to a destination. It uses the principles of system Design, Viz., an ability of continuous adjustment or correction in the system in line with the environmental change in which the MIS operates. Such a design help to keep the MIS tuned with the business managements needs of the organization. The concept, therefore, is a blend of principle, theories and practices of the Management, Information and System giving rise to single product known as Management Information System (MIS). The conceptual view of the MIS is shown as a pyramid in Fig.1.1. The Physical view of the MIS can be seen as assembly of several subsystems based on the databases in the organization. These subsystems range from data collection, transaction processing and validating, processing, analyzing and storing the information in databases. The subsystem could be at a functional level or a corporate level. The information is evolved through them for a functional or a department management and it provides the information for the management of business at the corporate level. The physical view of the MIS can be shown as in Fig.1.2. The MIS is a product of a multi- disciplinary approach to the business management. It is a product which needs to be kept under a constant review and modification to meet the corporate needs of the information. It is prescribed product design for the organization. The MIS differs since the people in two organizations involved in the same business. The MIS is for the people in the organization. The MIS model may be the same but it differs greatly in the contents. The MIS, therefore, is a dynamic concept subject to change, time and again, with a change in the business management process. It continuously interacts with the internal and the external environment of the business and provides a corrective mechanism in the pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA system so that the change needs of information are with effectively. The MIS, therefore, is a dynamic design, the primary objectively. The MIS, therefore, is a dynamic design the primary objective of which is to the information the information for decision making and it is developed considering the organizational fabric, giving due regard to the people in the organizational the management functions and the managerial and the managerial control. The MIS model of the organization changes over a time as the business passes through several phases of developmental growth cycle. It supports the management of the business in each phase by giving the information which is crucial in that phase. Every has critical success factors in each phase of growth cycle and the MIS model gives more information on the critical success factors for decision making. 1.2 MIS DEFINITION The Management Information System (MIS) is a concept of the last decade or two. It has been understood and described in a number ways. It is also known as the Information System, the Information and Decision System, the Computer- based information System. The MIS has more than one definition, some of which are give below. 1. The MIS is defined as a system which provides information support for decision making in the organization. 2. 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 function in the organization. 3. The MIS is defined as a system based on the database of the organization evolved for the purpose of providing information to the people in the organization. 4. The MIS is defined as a Computer – based Information System. Thought there are a number of definitions, all of them converge on one single point, i.e., 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 today’s world MIS a computerized .business processing system generating information for the people in the organization to meet the information needs decision making to achieve the corporate objective of the organization. In any organization, small or big, a major portion of the time goes in data collection, processing, documenting 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 is continuously looking for some information which is needed to perform his/her task. Hence, the information is people-oriented and it varies with the nature of the people in the organization. The difficulty in handling this multiple requirement of the people is due to a couple of reasons. The information is a processed product to fulfill an imprecise need of the people. It takes time to search the data and may require a difficult processing path. It has a time value and unless processed on time and communicated, it has no pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA value. The scope and the quantum of information is individual-dependent and it is difficult to conceive the information as a well-defined product for the entire organization. Since the people are instrumental in any business transaction, a human error is possible in conducting the same. Since a human error is difficult to control, the difficulty arises in ensuring a hundred per cent quality assurance of information in terms of completeness, accuracy, validity, timeliness and meeting the decision making needs. In order to get a better grip on the activity of information processing, it is necessary to have a formal 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 deal with these points of supreme importance. 1.3 ROLE OF THE MANAGEMENT INFORMATION SYSTEM The role of the MIS in an organization can be compared to the role of heart in the body. The information is the blood and MIS is the heart. In the body the heart plays the role of supplying pure 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 and sends it to the destination in the quantity needed. It fulfills the needs of blood supply to human body in normal course and also in crisis. The MIS plays exactly the same role in the organization. The system ensures that an appropriate data is collected from the various sources, processed, and sent further to all the needy destinations. The system is expected to fulfill the information needs of an individual, a group of individuals, 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 on the data pertaining to the transaction, the status of a particular record and references on a variety of documents. The MIS helps the junior management personnel by providing the operational data for planning, scheduling and control, and helps them further in decision making at the operations level to correct an out of pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA control situation. The MIS helps the middle management in short them planning, target setting and controlling the business functions. It is supported by the use of the 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, problem identification and helps in the process of decision making. The MIS, therefore, plays a vita role in the management, administration and operations of an organization. 1.4 IMPACT OF THE MANAGEMENT INFORMATION SYSTEM Since the MIS plays a very important role in the organization, it creates an impact on the organization’s functions, performance and productivity. The impact of MIS on the functions is in its management. With a good support, the management of marking, finance, production and personnel become more efficient. The tracking and monitoring of the functional targets becomes easy. The functional, managers are informed about the progress, achievements and shortfalls in the probable trends in the various aspects of business. This helps in forecasting and long- term perspective planning. The manager’s attention is brought to a situation which is exceptional in nature, inducing him to take an action or a decision in the matter. A disciplined information reporting system creates a structured data and a knowledge base for all the people in the organization. The information is available in such a form that it can be used straight away or by blending analysis, saving the manager’s valuable time. The MIS creates another impact in the organization which relates to the understanding of the business itself. The MIS begins with the definition of a data entity and its attributes. It uses a dictionary if data, entity and attributes, respectively, designed for information generation in the organization. Since all the information system use the dictionary, there is common understanding of terms and terminology in the organization brining clarity in the communication and a similar understanding an even of the organization. The MIS calls for a systemization of the business operation for an affective system design. A well designed system with a focus on the manger makes an impact on the managerial efficiency. The fund of information motivates an enlightened manger to use a variety of tools of the management. It helps him to resort to such exercises as experimentation and modeling. The use of computers enables him to use the tools techniques which are impossible to use manually. The ready-made packages make this task simpler. The impact is on the managerial ability to perform. It improves the decision making ability considerably. Since the MIS works on the basic systems such as transaction processing and databases, the drudgery of the clerical work is transferred to the computerized system, relieving the human mind for better work. It will be observed that a lot of manpower pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA is engaged in this activity in the organization. It you study the individual’s time utilization and its application; you will find that seventy per cent of the time is spent in recording, searching, processing and communication. This is a large overhead in the organization. The MIS has a direct impact on this overhead. It creates an information- based work culture in the organization. 1.5 MANAGEMENT INFORMATION SYSTEM AND COMPTER Translating the real concept of the MIS into reality is technically, an infeasible proposition unless computers are used. The MIS relies heavily on the hardware and software capacity of the computer and its ability to process, retrieve communicate with no serious limitations. The variety of the hardware having distinct capabilities makes it possible to design the MIS for a specific situation. For example, if the organization needs a large database and very little processing, a computer system is available for such a requirement. Suppose the organization has multiple business location at long distances and if the need is to bring the data at one place, process, and then send the information to various location, it is possible to have a computer system with a distributed data processing capability. If the distance is too long, then the computer 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 the data volumes, its storage and access effectively. The ability of the computer to sort and merge helps to organize the data in a 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 the information user. The ability of a computer system to provide security of data brings a confidence in the management in the storage o data on a magnetic media in an impersonal mode. The computer system provides the facilities such as READ ONLY where you cannot delete to UPDATE. It provides an access to the selected information through a password and layered access facilities. The confidence nature of the data and information can be maintained in a computer system. With this ability, the MIS become a safe application in the organization. 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. For example, if you want to use a formula to calculate a certain result, an efficient language is available to handle the situation. If you are not use a formula but have to resort every time to a new procedure, the nonprocedural languages are available. The software is available to transfer the data from one computer system to another. Hence, you can compute the results at one place and transfer them to a computer located at another place for some other use. The computer system being able to configure to the specific needs helps to design a flexible MIS. The advancement in computers and the communication technology has the distance, speed, volume and complex computing an easy task. Hence, designing the MIS for a specific need and simultaneously designing a flexible and open system becomes possible, thereby saving a lot of drudgery of development and maintenance pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA and maintenance of the system. The concept of user – friendly systems and the end user computing is possible, making information processing a personalized function. However, the application of the management principles and practices in today’s complex business world is possible only when the MIS is based on computer system support. 1.6 MANAGEMENT INFORMATION SYSTEM AND ACADEMICS The management’s information system draws a lot of support from other academic disciplines too. The foundation of MIS is the management theory. It uses the principles and practices of management while designing the system, ant gives due regard to the theory of organizational behavior. It considers the human mind as a processor of information. While designing the report format and forming communication channels, MIS takes into account the behavior of the manager as an individual and in a group. It gives due regard to the personal factors such as bias, thinking with a fixed frame of reference, risk aversion, strengths and weaknesses. Another area of academics is operational research. The operational research is used for developing the models of management and they are then incorporated in the MIS as decision support systems. The inventory control, queuing theory, and resource programming are used in the MIS as decision support systems. The network theory is used for planning and controlling large projects. The application of PER / CPM to a project planning is now easily possible through the MIS support. In the area of accounting application, it uses the accounting principles to ensure that the data is correct and valid. It uses the principles of double entry bookkeeping for balancing the accounts. It uses the accounting methodology for generating a trial balance sheet and other books of accounts. The MIS uses the communication theory in a significant manner. The principle of feedback is used while designing analysis. Systems. While designing the report format, attention is paid to avoid noise and distortions in the communication process. The MIS further relies heavily on the decision methodology. It uses different mathematical techniques to handle the situation of decision making uses the method of decision- making under certainty for decision- making and action. The MIS is based on database structures, viz .hierarchical, network and relational database have roots in the mathematics 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. The is possible when it builds decision making systems in MIS which in turn is possible if it draws tools, techniques, methods, rules and principles from pure and application science, and use them as an integral part of the system. The MIS draws data from its own source and uses it in the application of a variety of tools and techniques to solve the management, mathematics, and accounting. Psychology, communication theory, operations pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA research and probability theory for building processes, methods, and decision – support systems in designing business application. 1.7 MIS AND THE USER Every person in the organization is a user of the MIS. The people in the organization operate at all 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 to play in the management of business. The MIS 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 assistant has the task of collecting and organizing the data, and conducting a rudimentary analysis of integrating the data from different and disciplines to analyze it and make a critical comment if anything adverse is found. The 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 of responsibility and accountability a position of a planner and a decision maker. He is responsible for achieving the target and goals of the organization. The MIS provides facilities to analyze the data and offers the decision support systems to perform the task of execution. The MIS provides an action – oriented information. The manager has a position of responsibility and accountability for the business results. His management role expands beyond his management function. He is a strategist and a long-term planner. He is a person with a foresight, an analytical ability and is expected to use these abilities in the functions of top management. The MIS provides information in a structured or unstructured format for him to react. The MIS caters to his constant changing needs of information. The user of the MIS is expected to be a rational person and the design of the MIS is based on this assumption. However, in reality the impact created on individuals by MIS is difficult to explain. The nature of the impact in a few cases is negative. However, this negative impact can be handled with proper training and counseling. It is observed that at lower level, is a sense of insecurity. As the MIS takes away the drudgery of search, collection, writing and reporting the data, the work vacuum, so created is not easily filled, thus creating a sense of insecurity. To some extent the importance of the person is also lost, giving rise to a fear of non-recognition in the organization. pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA At the level of an officer and an executive, the MIS does the job the of data manipulation and integration. It analyses the data in a predetermined manner. This means that the knowledge of business is transferred from an individual to the MIS and is made available to all in the organization. This change arising out of the MIS creates a sense of being neglected for knowledge, information and advice. The psychological impact is larger if the person is not able to cope up with this change by expanding or enriching the job and the position held by him. The manager holding a position in the top or middle management suffers from fear of challenge and exposure. The MIS makes these competitors more effective as they have access to the information and have an ability to interpret. This leads to a situation where he is afraid that that his position, decision and defense will be challenged and may be proved wrong sometime. The risk of adverse exposure to the higher management also increases. The effects so far pointed out are all negative and they are seen only in few cases. The positive effects on the individuals at all levels are that they have become more effective operators. The time and energy which was spent earlier in unproductive work is now applied for a productive work. Some are able to use their analytical skills and knowledge with the in formation support for improving their position in the organization. Managers, having improved their decision – making ability, are able to handle the complex situations with relative ease. Some are benefited by improving their performance and being held in high esteem by the higher management. The enterprising managers are able to use the systems and the models for trying out a Number of alternatives in a given problem situation. The impact of the MIS on people Of the organization is phenomenal as it has made the same body of people collectively more effective and productive. The recent major technological advances in communication such as Multimedia, Imaging. Graphical User Interfaces (GUI), Internet, Web etc. and the ability to access the data stored at different locations on 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 his manipulative capability is considerably increased, with the information now being available on his desktop. Through the MIS, the information can be used as a strategic weapon to counter the threats to business, make business more competitive, and bring about the organizational transformation through integration. A good MIS also makes an organization seamless by removing all the communication barriers. pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA REVIEV QUESTIONS 1) What is the scope of information system and Management Information system? 2) Give three reasons for using computer for MIS in the organization? 3) Designing an MIS for an organization? 4) Can you think of an MIS which could be user independent and business dependent? 5) State the difference between MIS and a computer system. 6) Take an organization of your knowledge and give a conceptual view of MIS and physical view of MIS. 7) State which capabilities of a computer are used in MIS to create an impact. 8) Identify the nature of impact of MIS on people, organization and the management style. 9) If application science and MIS can be brought together, the MIS design would be realistic and useful. Discuss. 10) Why is MIS looked upon as a strategic need of management today? pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA CHAPTER-2 Role and Importance of Management 2.1 INRODUCTION TO MANAGEMENT Management as defined by Mary Follett is “the art of getting things done through people” A manger is defined as a person who achieves the organization’s goals by motivating others to perform – not by performing himself. Whether management is an art or a science is a very subjective question. But it can be said without doubt that modern management in the environment 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 achieve common stated goals of the organization. In the process of management, a manager uses human skills, material resources and scientific methods to perform all the activities leading to the achievement of goals. The management process involves a continuous resolution of conflicts of one kind or the other which affects the achievement of goals. In the management of any activity, a manager comes across human conflict, conflict of goals, between alternative resources, conflict of time, 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. An effective way of handling this process is to treat the organization as a system. The result – oriented management approaches the problem of management through the system view of the organization. The key concepts of the system theory used in the management are as follows: 1. A system is a comprehensive assembly of parts becoming an organization to achieve the stated goals. 2. A system is called OPEN if it has interaction with the environment and CLOSED if it not have an interaction with the environment. 3. A system is defined, described and understood by the boundaries within which it performs. 4. The system are subject to entropy, i..e., the tendency to “ run down”. Closed systems suffer from entropy as they are cut off from the environment, while open systems interact with the environment and draw upon the support of resources to maintain a given condition. 5. Systems try to remain in an 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 input about the state of the system. The advantage of viewing the management as a system is that it enables us to see the critical variables, constraints and their interaction with one another. It force pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA the manager to look at the situation in such a way that due regard is given to the consequences arising out of interaction with the related element or subjects. The process of management explained earlier consists of steps which are relationally linked and locked with each other. In the context of the MIS, the systems approach to management is the most efficient one. The understanding of the basic principle of management theory evolved the scholars Henri Fayol, Chester Barnard and Alvin Brown is very much essential. The application of management principles in an environment, recognizing the specific situation, is the accepted practice of management. Deviating from the principle to honour the situation and at the same time not diluting the management principle is the managerial skill. The manager must have a knowledge of management theory and principle as the skill to use them in a particular environment. 2.2 APPROACHES TO MANAGEMENT Frederick W Taylor, is recognized as the father of scientific management. His principles can be summarised as follows : 1. Replace the rules of thump with scientific rules. 2. Obtain a harmony in group action. 3. Achieve cooperation of human beings, rather than chaotic individualism. 4. Work for a maximum output . 5. Develop all workers to the possible potential for their own highest possible prosperity. Car George Barth, Henry L Gantt, Frank and Lillian Gilberth are the disciples of Taylor, who promoted the thought of the scientific management. The French industrialist Henri Fayol promoted the theory of operational management. Fayol is of the view that all the activities of an industrial or a business or a business undertaking can be ____________ F W Taylor, The Principles of Scientific Management, Harper, New York, 1911. Henri Fayol, General and Industrial Management, translated by Constance Storrs, London, Sir Isaac Pitman and Sons Ltd, 1949. Broken into operational functions such as technical, commercial, financial, security, accounting, and so on. He evolved the principles of operational management. These are as given in Table 2.1. pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA Table 2.1 Principles of Operational Management Principle Comments Division of work Efficient handling of work. Authority and responsibility Pinpoints accountability. Discipline Adherence to rules, regulations, norms and priorities. Unity of command Single source directed towards one objective. Unity of direction Efforts should be directed towards one objective. Subordination of individual Ignore the individual interests for overall betterment of to the organization. Corporate interest Should be fair for maximum satisfaction. Remuneration Authority should be centralized just enough for control. Centralisation Overgeneralization is unproductive. Chain of authority vested into the people should not be Scalar chains short-circuited. Orderly arrangement of men, material and other Order resources is necessary. Subordinates should be dealt with kindliness and justice Equity to elicit loyalty and devotion. It is necessary to ensure that the turnover of people is Stability of tenure controlled for stability. The initiative of subordinates should be encouraged, Initiative sacrificing personal vanity of the superior. Fayol regarded the elements of management as planning, organizing, commanding, coordinating and controlling. He believed that the operational management would succeed through the elements of management. During the same period when Taylor, Fayol and others were concentrating on the scientific management, another group of scholars was concentrating on industrial psychology and social theory as the basis for the scientific management. Robert Owen, Rountree, Lyndall Urwick are credited to evolve the management with a focus on the personal management. Max Weber, Vilfredo Pareto, Mayo Elton are the scholars who thought that productivity can be improved through the social factors as morale and satisfactory relation between the members of work group, and an effective management is possible only if human behavior and group behavior is managed through the interpersonal skills, viz, motivating, counseling, leading and communication. Hawthorne’s studies brought out the theory that man is a “Social Animal” operating in the socio – technical system and, therefore, the emphasis in effective management is on behavioral sciences. Chester Barnard advocated the theory od system as an approach to the management. Barnard said that due to the physical and biological limitations of individuals, they cooperate in the work environment. The cooperation increases with pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA effective and efficient incentives. He further said that the cooperation is more effective if the members of the group communicate with one another, are willing to contribute to group’s action, and have a conscious common Purpose. He father said that a groups of peoples in the system work as an organization is looked upon as a system of factions, a system of in a system of incentives, a system of authority and a direction and a system of logical decision making. The emergence of the modern management thought is credited to the social scientists, the behavioral scientists, the systems scientists and the practicing managers. 2.3 FUNCTIONS OF THE MANAGER An individual who gets the thing done is a Manager. It is necessary to distinguish between the task and the functions. While manager may perform the task such as accounting, selling, manufacturing, purchasing, etc. These activities are called as tasks and not as functions. The activities that are performed through the managerial functions are planning, organization, staffing, directing coordinating and controlling.  Planning is a process of determining the goals and objectives and evolving strategies policies, programmers and procedures for the achievement of these goals. The essence of the process is decision making as there are a number of alternatives in each of these factors.  Organisation involves evolving the structure of the people working in the organization and their roles. It specifies an authority structure and assigns activities to the people backed by the delegation of authority. Building a meaningful effective structure of authority and the relationship is known as organizing.  Staffing involves manning the positions in the organization structure. It requires defining the manpower needs per position or centre of activity. It requires appropriate selection of the person or persons ensuring that they together will achieve the goals and objectives of the organization.  Directing is a complex task of implementing the process of management. In the process, the manger is required to guide, clarify and solve the problems of the people and their activities. It is necessary to motivate the people to work for the goal with an interest and a confidence.  Coordinating is the function which brings a harmony and smoothness in the various group activities and individual efforts directed towards the accomplishment of goals. It is a process of synchronizing individual actions and the efforts which may differ because of the differences in the personal goals and the common goals, the differences in the interpretation of methods and directions. It is, therefore, necessary to undertake centrally a process of coordinating and reconciling the differences in the approach, timing, efforts and interests towards a common goal. This task is to be carried out by the authority placed at a higher level in the organization structure.  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 falling short of the stated norms. Controlling ensures an achievement of the plan. The essence of the control lies in good planning. It helps to evaluate the performance, highlights abnormal deviations, and guides a manager to take specific corrective actions. This pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA may call for a change of plan, a reallocation of resources, a modification of methods, procedures and even the organization structure. The control is central to the managerial function. The manager’s main function, therefore, is planning and control of the business functions and operations. While performing these functions, he resorts to the scientific approach to the management. 2.4 MANAGERS AND THE ENVIRONMENT All managers, whether they are managing a business, a school, a hospital, Government Department, or any enterprise, work in an environment in which the organization operates. There are a number of forces which are generated in the environment, which have an impact on the managerial 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 to meet these forces effectively. While to some extent the internal environment is controllable, the external environment is beyond his control. Since it is proven that the external environment also has an impact on the business manager’s performance, it is necessary to know and understand the environment. For the purpose of discussion, the external environment is classified into five classes as the economic, the technological, the social, the political and the ethical 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 or borrowed from the financial institutions. When a capital is borrowed, it is borrowed at an interest. The organization is forced to borrow for various reasons and the interest 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 is determined every two three years by a union agreement. The settlement of an agreement 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 a manager has no control on them. pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA Price Changes Price changes occur in the economy for various reasons. The changes occur because of decrease in the demand and supply, the changes in the consumer behavior, in the consumption pattern and the money supply, and so on. The price changes affect the cost of raw material and labor and on these changes a manager has no control. Productivity Productivity is a result of the capital, labor and technology. Many a time’s an organization’s business are taken over by better technology. The costs are affected by the technology changes affecting the productivity. The manager has to respond quickly to the technological changes to save the business. Fiscal and Monetary Policy The Government announces fiscal policies and controls them. The organization’s profit position is affected by these policies. These policies affect the credit terms, the price of the inputs and the money supply affecting the cash position of the organization. A manager has a very little leverage to deal with these policy changes. Customers The customers rule the business, especially when the business operates in a buyer’s market. 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 does not show consistent preference to the product. The change in the business orientation to suit the changes in the consumer demand is a difficult task for the manager. It is not always possible to predict these changes well in advance in order to 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 down the profits and forces the management to change the course of the business operations. It requires changes in the product design and promotes new concepts. It generates new business opportunities. Any change in technology changes the work culture, the methods and the systems. It affects the speed 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 Environment The social environment is built around the attitudes, the desires, the expectations, the degree of intelligence and education, the beliefs and customs, the religion, the caste pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA and creed of the people. The social environments are built in centuries and hence it is deeply rooted in the society. The social environment has an important impact on the business and the organizational productivity. Social factors create an attitude towards the work, generate the product choices, and manipulate the consumer behavior. It is well known that it took a lot of time to convince the farmers in India about the use of fertilizers. It is recognized that rural marketing is different from the urban marketing. In spite of the technological advances, frozen foods are not finding consumer preferences. Introduction of computers in the service industry is still a difficult proposition. A number of such examples can be cited to prove that the social environment affects business and makes the manager’s task very difficult and challenging. Political Environment The political factor is the most important factor which affects the business in Indian environment. The unstable political environment brings stagnancy in the business development. The changes in ruling party bring economic policy changes, affecting the business. The sect oral preferences, such as an agricultural versus an industrial, an educational versus a basic research, an investment in the service sector versus a core sector come about with change in the ruling political party and its policies. Such changes have a long-term impact on business performance. The manager has to deal with such changes effectively. Ethical Environment (Systems of a Moral Behavior) Some 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, some aspects of the business operations are left as ethics, called the business ethics. The business ethics emerge from the professional conduct, the business norms and codes on confidentiality, the payment and documentation, the adherence to generally accepted standards of accounting and auditing. Business ethics is a set of norms which are universally accepted as a business behavior. All these factors discussed so far, are beyond the control of the manager. At best he can predict, assess, evaluate and take such actions which will help him to control the situation. 2.5 MANAGEMENT AS A CONTROL SYSTEM Planning, organizing, staffing, coordinating, directing and controlling are the various Steps in a management process. All the steps prior to a control are necessary but are not necessarily self-assuring the results unless it is followed by a strong control mechanism. The management experts have viewed these steps as Management Control System. They postulate the hypothesis that unless a control is exercised on the process, the goals will not be achieved. They advocate a system of effective control to ensure the achievement of the business objectives. pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA A definition of control is the process through which managers assure that actual activities conform to the planned activities, leading to the achievement of the stated common goals. The control process measures a progress towards those goals, and enables the manager to detect the deviations from the original plan in time to take corrective actions before it is too late. Robert J Mockler defines and points out the essential elements of the control process. The basic steps of the control process are given in Fig. 2.1. The management is a systematic effort to set the performance standards in line with the performance objectives, to design the information feedback systems, to compare the actual performance with these predetermined standards, to identify the deviations from the standards, to measure its significance and to take corrective actions in case of significant deviations. This systematic effort is undertaken through the management control system. Estabilsh Actual Standards of Measure vs. Not O.K. Corrective Performance Performance STD. Action The control system is essential to meet the environmental changes discussed earlier, to meet the complexity of today’s business, to correct the mistakes made by the people, and to effectively monitor the delegation process. A reliable and effective control system has the following features. Early Warning Mechanism. This is a mechanism of predicting the possibility of achieving the goals and the standards 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 work areas, responsibility, and managerial functions and so on. Fro example, the management would have standards relating to the business performance, such as production, sales, inventory, quality, etc. The operational management would have standards relating to the shift production, rejections, down time, utilization of resources, sale in a typical market segment and so. On. The chain of standards, when achieved, will ensure an achievement of the goals of the organization. Strategic Controls pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA In every business there are strategic areas of control knows as the critical success factors. The system should recognize them and have controls instituted on them. Feedback The control system would be effective; it continuously monitors the performance and sends the information to the control centre for action. It should not only highlight the progress but also the deviations. Accurate and Timely The feedback should be accurate in terms of results and should be communicated on time for corrective action. Realistic The system should be realistic so that the cost of control is far less than the benefits. The standers are realistic and are believed as achievable. Sufficient incentive and rewards are to be provided to motivate the people. The Information Flow The system should have the information flow aligned with the organization structure and the decision makers should ensure that the right people get the right information for action and decision making. Exception Principle The system should selectively approve some significant deviations from the performance standards on the principle of management by exception. A standard is control system has a set of objectives, standards to measure, a feedback mechanism and an action centre as elements of the system. They need to be properly evolved and instituted in the organization with due recognition to the internal and the external environment. The system as a whole should be flexible to be change with ease so that the impact of changed environment is handled effectively. 2.6 MANAGEMENT BY EXCEPTION Pareto’s principle of 80:20 applications to the management of enterprise. Several terms have been coined on this principle such as management by objectives; management methodology is the management by exception. When the management operates under time constraint, each manager has to him to attend to the situation where his attention is necessary. Such attention would lead to an action, a decision or a wait – and- see approach. pdfMachine - is a pdf writer that produces quality PDF files with ease Get yours now “Thank you very much I can use Acrobat Distiller or the Acrobat PDFWriter but I consider your product a lot easier to use and much preferable to Adobe's" A.Sarras - USA

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