Reading: Lesson 6 - Managing with Information

1.6.A - Managing with Information

1. USING MANAGEMENT INFORMATION SYSTEMS

1. To make information readily available to managers when and where needed, companies develop management information systems. A management information system (MIS) is a computer based system that stores, organizes, and provides information about a business. Every company needs such a system as an important management tool. Computerized information systems help managers develop effective plans, ensure sufficient staffing, and control business operations.
   
2. Planning involves making choices. Plans should be based on information from past experience as well as anticipated changes. With an effective management information system, managers can use information to answer “what ­if” questions. What-if analysis is a systematic way to explore the consequences of specific choices using computer software. A sales manager may ask, “What if we increased sales by 5 percent?” Using a computer to analyze the records of past costs and sales will show the manager whether the additional sales will generate more profit. An operations manager may ask, “What if we replaced our aging fleet of trucks with new, more fuel ­efficient models?” Again, the computer analysis will provide the needed information to determine whether the purchase would be cost effective.
   
3. Managers can also use information systems to reduce the amount of time spent on controlling activities. If managers took the time to review all of the information collected on business operations, they would have little time for other activities. Computers can be used to monitor the performance of activities in a company. If activities are performed as planned and standards are met, no management attention is needed. Managers should become involved only when activities do not occur as planned or results do not meet standards. When managers want to evaluate performance, they can quickly access data from the management information system related to that performance. The data can be used to compare performance to previously established standards, to the performance of a similar group, or to a previous time period.
   

2. BUSINESS RESEARCH

1. Managers must be careful not to make decisions without sufficient information about the problem and possible solutions. When they need more information to make a good decision, they may need to conduct research. Research gathers new information not yet included in the management information system. The results of business research can be added to the information available to managers and then used for future decisions.
   
2. Business research is conducted in many areas. Wherever and whenever managers need information to make decisions and the needed information is not available, business research should be considered.
   
3. Marketing research and product development research are two common areas of study. A marketing manager may want to determine why certain groups of customers are purchasing a product whereas others are not. A proposed new product should not be developed unless research shows that consumers are likely to purchase the product and the item can be produced at a profit.
   
4. Marketing research and product development research are two common areas of study. A marketing manager may want to determine why certain groups of customers are purchasing a product whereas others are not. A proposed new product should not be developed unless research shows that consumers are likely to purchase the product and the item can be produced at a profit.
   
5. Research centers and faculty members at universities conduct studies that are often helpful to businesses. Various agencies of the federal government undertake extensive research, and much of this information is available for use by businesses. Trade and professional associations conduct research studies that are useful to the particular industries they serve. Companies may also pay research organizations or individual consultants to gather and analyze information to help solve problems or improve decision making. As research departments are expensive to maintain, small companies often depend on external professional research organizations.
   

3. DECISION MAKING

1. In the process of planning, organizing, staffing, leading, and controlling, managers encounter problems that require them to make decisions. Top level managers make some of the decisions, such as the development of new products or new markets that the business will enter. Middle managers make other decisions that may result in new ways of organizing work, preparing employees for the use of new technology, or reducing the time and cost of a work procedure. First level supervisors make decisions about the daily operations of their units including work schedules and project assignments. It is important to the overall success of any business that the decisions be made as carefully as possible at every level of management.
   
2. Generally, a problem is a difficult situation requiring a solution. A problem usually does not have just one possible solution. There may be several good solutions, but there may also be several poor solutions. For example, the problem may be to find the most efficient method to ship products from a manufacturing plant in Texas to customers outside the United States. Possible solutions are to transport by airplane, ship, train, or truck. Depending on the circumstances, any one of the shipping methods could be the best or the worst available solution. To find the best solution, managers should follow a systematic approach to solving problems. 
   

   
   

4. STEPS IN PROBLEM SOLVING

1. Most problems can be analyzed by completing a series of steps. You may have learned this problem solving approach in other classes. The procedure works as well in business as it does in scientific problem solving. The seven steps in problem solving are (1) identify the problem, (2) gather relevant information or data, (3) determine alternative courses of action, (4) evaluate each alternative, (5) decide on the best possible alternative, (6) implement the alternative chosen, and (7) evaluate the decision over time, making changes as necessary.
   
2. Before a manager can make a decision to solve a problem, the problem must first be identified. Often, a manager may not even be aware that a problem exists. For example, employees may be unhappy about a coworker. The manager may not know about the problem unless employees communicate this concern or it begins to affect their work.
   
3. A manager must also be careful not to identify a symptom as the problem. A symptom is a sign or indication of something that appears to be the problem. When a patient complains to a doctor of a headache, the headache may be a symptom. The problem could be high blood pressure, a cold, or another illness.
   
4. Falling sales of a product line for a retailer is a symptom. The problem could be ineffective advertising, a bad product location in the store, untrained salespeople, quality problems in the products, poor service, and so on. Therefore, it will be difficult to change the symptom until the problem can be correctly identified.
   
5. Once the problem has been identified, the manager will ask a series of questions to gather data about the symptoms. One symptom could have many plausible root causes. In the example of the retailer, what are some reasons that sales are declining? Are fewer customers entering the store? Are customers shopping but deciding not to buy? Are customers buying but then returning the products because they are not performing as expected? Or, are customers using the Internet to buy the product rather than buying from the store? Managers can often identify the problem by asking questions and gathering information. They can use the symptom to help determine what type of information needs to be gathered to isolate the problem.
   
6. Sometimes managers are unaware that problems exist until it is too late. They need to review plans and performance regularly to determine if operations are proceeding as planned. When any evidence appears that suggests a problem, they should study the evidence carefully rather than ignore it. It is better to review symptoms and determine that there is no problem than to wait Sometimes managers are unaware that problems exist until it is too late. They need to review plans and performance regularly to determine if operations are proceeding as planned. When any evidence appears that suggests a problem, they should study the evidence carefully rather than ignore it. It is better to review symptoms and determine that there is no problem than to wait until problems are so big that they are difficult or impossible to correct.
7. Once they identify a problem, managers should begin to list all possible solutions. For example, if the problem is ineffective advertising, they should list all possible ways to change the advertising. The list might include a better advertising design, a change in the advertising media used, an adjustment to the frequency and timing of advertising, as well as other possibilities. Every problem has more than one possible solution. Managers need to identify at least two alternatives and should not overlook any reasonable solution at this point in the problem ­solving process.
   
8. There are many ways to identify possible solutions. Having a group participate in brainstorming can provide a list of possible solutions for later analysis. Managers should review solutions that have been used in the past or that were used to solve related problems. At times, managers may even have to revisit potential solutions that were previously rejected or unsuccessful. Discussing the problems with other managers, experienced employees, customers, or outside experts helps to identify solutions. Reading and studying can keep managers aware of new types of solutions.
   
9. The fourth step in problem solving is to analyze the solutions. Managers do this by studying each possible solution separately, comparing the solutions, and then reducing the number of solutions to the best two or three. To study each solution thoroughly and objectively, managers may need information from business records, trade associations, libraries, consultants, government sources, or the Internet. The use of management information systems and business research may be an important part of this step.
   
10. After collecting all of the necessary information, managers should examine the strengths (pros) and weaknesses (cons) of each solution individually. Then they should compare solutions and classify them in some way, such as very desirable, somewhat desirable, and least desirable. Some solutions may be too costly or impractical, whereas others may be inexpensive or very practical. For example, in a list of solutions comparing advertising media the business is considering, managers may find that the cost of television advertising is more than is available in the budget, whereas online advertising is affordable. Managers need to compare the solutions based on how effectively each will solve the problem, not just how well they treat the symptom. After all the analyses have been completed, two or three solutions may appear to solve the problem most effectively.
    
11. For very important decisions, managers may want to conduct an experiment to test one or more solutions before making a final choice. A likely solution may be tested in one part of the organization to see how it works. The results are then compared with those from other tests to determine which option was more effective in solving the problem before using it throughout the business. The results of the experiment may eliminate some solutions and identify those that seem effective.
    
12. The next step in problem solving is to make the final decision from among the alternative solutions. Some problems must be solved quickly, but for very important decisions, managers take more time before selecting the solution. Only after careful consideration do they make the final decision and put it into action. For certain problems, managers may be able to make the decision and implement the solution. For others, managers may need to seek the approval or cooperation of other managers before taking action.
    
13. After selecting a solution, the managers must determine the best way to implement it and who will be part of the implementation. This step will take some planning to determine the tasks involved. Managers will need to prepare work schedules and communicate with employees.
    
14. After the solution is implemented, the manager’s job is not done. Managers need to determine whether the selected solution is effective. The solution may cause additional unintended problems or require changes in processes. Measuring the results over time to evaluate the decision and implementation and to determine if changes are needed is one of the five functions of managers (controlling). To quickly and accurately report information, management information systems will be very helpful in monitoring the implementation of the solution and the results.
    

5. CONTINGENCY PLANNING

1. In some situations, managers do not wait for problems to occur. Instead, they anticipate problems and work in advance to develop contingency plans. A contingency plan is an alternative course of action to be followed if a specific problem arises.
2. Contingency planning is similar to problem solving, but the timing is different. Rather than waiting for problems to emerge or symptoms to be identified, managers are proactive. They work to identify potential problems that may occur. Then they develop alternative approaches that could be followed if the problem begins to emerge. In contingency planning, more than one problem can be identified. For each problem, just as in problem solving, several alternative solutions should be proposed and evaluated. Based on careful study, managers choose the best possible alternative. The next step is to develop procedures to use if the problem begins to occur.
   
3. Contingency plans are not prepared for all potential problems. Businesses often develop contingency plans for new procedures or expensive changes. The development of contingency plans also requires an investment of time and money. However, effective contingency plans can be a cost ­effective way to prevent or quickly solve problems.