To run a business is to engage in a series of processes and activities that are interconnected to each other. These processes and activities must be coordinated in such a way that will facilitate smooth operation for the success and goal attainment of the organization at hand. This requires an adequate and accurate flow of information between the activities in a timely manner. And of course, at every stage of business process, certain people are in charge.
What process a person or group of people get involved in depends entirely on their ranks, expertise, position and authorization in the firm. Because of this reality and the fact that information systems become part and parcel of every organization, different business processes, as we may have known, are done by different level of management. And the kind of information system services these processes need differs as a result of their functional requirements that are distinctive from one another.
Therefore, against this background, we are going to examine the basic business functions and their processes, the levels of management in an ideal business organization, and lastly, we are going to see the various information systems out there that serve each level of management.
Business functions and processes
There are basically four functions that every business organization carries out. These functions or functional areas are often represented by a separate department in bigger firms. They are:
1. Manufacturing and production
This is an arrangement of people, machines and processes that produces a product. One example of the process involved in manufacturing and production could be assembling of parts to get a final product.
2. Sales and marketing
Every business organization’s ultimate goal is to sell what they produce. What they produce could be either a physical product or some sort of service they provide. Sales and marketing group ensures that customers know about the product or service and ensure the product gets to them (customers) at the appropriate time and place when they want to purchase it.
3. Finance and accounting
This group oversees the function of all financial transaction of a company from the preparation of invoices, employees’ payroll to the financial statement of the company and in fact, everything that has to do with money.
4. Human resources
This functional area carries the function of hiring, overseeing performance, retaining, firing and general welfare of employees. Other functions of the human resources group include keeping a record of potential employees in case of any eventuality and so much more.
Although there are certain functions that each and every functional area of an organization performs and are specific to it, some functions or processes are cross-functional while some span the organization to the external partners, for example, dealing with customers or dealing with suppliers or working with strategic partners like delivery companies for the delivery of product or services to the customers. Example of such a process could be the fulfilment of a customer order by employees. When a customer places an order, that order has to go through finance and accounting, sales and marketing and to manufacturing and production departments. To make better sense of it all, just think of what happens when you place an order in McDonald’s.
Levels of management
In order to understand how each business function and processes get executed, one needs to know that business organization like any other organization has different levels of management. These management levels include senior management, middle management and lower management or operational management. These levels of management are sometimes called management hierarchy. Take a look at the diagram below:
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Upper or senior management
Each of this management level has some specific function they oversee. For instance, senior or upper management takes care of the entire firm in terms of the long-term strategic plan and its overall financial performance. CEOs, CFO, CSO and the likes are found in this category of management. Because of their unique role, they have specific information system need that will serve this purpose.
Middle management
While middle management, on the other hand, serves as a bridge between the senior management and operational management. Therefore, their information system need will be to get the record of the daily transaction from lower management and make it in such a way that will serve the senior management. They ensure the long-term plan set out by senior management are being executed and that expected results are being yielded. Scientist and knowledge workers typically work in this category of management with heads of departments, regional managers and the likes.
Operational or lower management
As the name suggests, operational management oversees the day-to-day transaction of the organization operations to deliver on the senior management goals and objectives. Their information system needs, obviously, is basically to fulfil this function efficiently and effectively. Production and service workers, salespeople, data workers like clerks are found here.
Since we now established the fact that every organization has at least three levels of management and each of them has information systems need different from one another because of their varying functions, let’s look at the different information systems that serve each of them uniquely.
Different information systems for different levels of management
Transaction Processing System (TPS)
TPS are systems that are used to record day to day transactions of a firm. They give detailed records of transaction that will be used by lower management to make routines decision such as the sales made or whether credit should be given to a customer or not. The decision made at this level is highly structured; therefore, a TPS system must be consistent with a definite formula on how to use it. Workers at this level record every single transaction that occurs in the organization. The record found in TPS is central to the firm’s information need because that is what will be used in later time to prepare other report or document for the other various levels of management.
All records when inputted will be stored in a company’s database for future retrieval or for any authorized form of use in the company. Examples of different TPS include payroll system which takes care of employee payment, point of sales systems that are used to record sales at the point of sale, airline reservation systems for airline bookings, stock control system and more.
TPS transaction could be batch processing or real-time processing. In batch processing, data are being inputted and get processed later. While in the case of real-time processing, as the name suggests, data get processed as they are inputted in real-time. Look at the below diagram of how TPS process takes place:
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Management Information System (MIS)
MIS systems are a type of information systems that helps to provide middle management with the ability to control and monitor performance in order to make an accurate and informed decision and to ultimately prepare a report for senior management. You should not misunderstand this MIS with the discipline of Management Information Systems which is a study of business and technology. MIS here refers to the type of business information systems that assist middle managers in delivering their work with ease.
Typically, MIS systems have provision for making a report with charts and graphs in such a way that will help the managers prepare their work for senior management needs. MIS systems are not such flexible systems though, as there is no need for data flexibility at this level. Hence, data collected from TPS have little possibility of being changed by the middle managers.
MIS systems get their data directly from TPS which is a record of every bit of transaction in the firm at hand. Examples of such systems include sales management systems which get their input from the point of sale systems, human resource systems which take care of everything regarding employees short-term and long-term welfare and performance. Others are budget systems, for long term spending of a firm. Check the illustrations of how MIS systems obtain their data from TPC below:
Photo credit: Essentials of Management Information Systems
Decision Support Systems (DSS)
DSS systems are a system that is designed to help managers, usually senior manager, to make an informed and non-routine decision. They are robust systems that get their data from TPS, MIS and even external systems in order to draw a conclusion on an important decision. These systems help to answer questions such as, what would be the impact of employees’ productivity if we were to cut their payment? How much sale would be made if a certain policy is put in place? DSS systems use a large amount of data to help managers make an informed decision. These systems are usually designed in such a way that they will be user-friendly and very flexible for users (managers) to work and interact with them. Examples include bank loan management systems, financial planning systems, voyage estimation systems and so on.
Photo credit: slideshare.net
Executive Support Systems (ESS)
ESS is another type of business information system that supply the senior managers with information that will help them in tackling strategic issues and long-term trend in a firm and its external environment. They answer questions such as, where would our firm fit in, in the next five years? What product should we be making in the next five or ten years to come? These systems help the senior manager to take decisions that are not routine and unstructured by providing useful information in the form of reports, charts, graphs that are extracted from many different systems such as MIS, DSS and other external systems. The information is usually received by the senior executive through a web portal which contains integrated, personalized business contents.
Apart from the above-mentioned different business information systems, there is also what is called an enterprise system that provides information systems need for all levels of management including external parties. Examples of such systems include supply chain management systems, customer relationship management systems, enterprise resource planning and so many others.
Systems for teamwork and collaboration
We all know for every organization, both for-profit and not-for-profit, teamwork and collaboration is key and cannot be avoided. Based on this need therefore, systems for teamwork and collaborations are needed apart from the business systems requirement.
These are special software that provide a conducive environment for working with a team and collaborate with one another. Software such as email, wiki, social networking serves this purpose. Every firm, therefore, must decide and provide the kind of systems for teamwork and collaboration for its employee. For instance, the email could be used to share messages that don’t need an immediate response. While direct messaging services, such as WhatsApp, for urgent messages that need immediate attention and social networking could be used for connecting all employee and sharing common messages for all.
To sum up
We have seen how every business organization has these essential functions, namely; production and manufacturing, sales and marketing, human resource management and finance and accounting. We talked about how these functions have processes that are specific to them and sometimes in order to deliver some of these processes more than one functional area gets involved, an example of an order fulfilment process was given. We also looked at different levels of management; senior, middle and operational or lower management. We then took the different information systems and discussed them one after another. TPS for operational management to help them with entering and processing routine record. While MIS help middle management to deal with the record gathered by TPS, and on the other hand, DSS and ESS help senior managers with the record from TPS, MIS and external data to make a non-routine decision and to plan for the future. Other things that we talked about were systems that span all organizational levels like ERP and also systems for teamwork and collaboration.
Finally, as we can see, information systems can be applied to almost all management levels of any organization, the only thing that an organization needs to work on is to find out what suits their need. Once this is sorted out, so many organizational works will be done with much ease and certainty. And I assure you, the result will be unmatched! That’s all I have for you regarding the types of information systems for different management levels, and as always, I would like to hear your opinion in the comment section below. Thank you for stopping by.
