Reading: What is the Importance of MIS in Business Organization?

What is the Importance of MIS in Business Organization?

Every business has an accountant who prepares monthly profit and loss statements and a balance sheet. That’s a good start. But, it’s not enough for a business owner to adequately manage a company. The importance of MIS in business organization is that every business owner needs a system that provides data about the current activities of the company.

Think about the gauges in the dashboard of your car. The importance of MIS in business organization is similar, a series of gauges sitting on your desk. They report the crucial financial metrics about the performance of the business. They let you see in an instant if the business is operating as expected. The MIS definition includes those gauges.

Why Is the MIS Important?

At the beginning of the year, you have some idea of where you want the business to go. You set up goals for sales, establish product profit margins, figure how much credit the company will need from the banks, create performance standards, and so on.

Now, the job is to guide the business down the road toward achieving those objectives.

An MIS system provides the reports that allow you to keep the business on the road. If sales are not meeting monthly projections, you have a meeting with the sales manager. If a few accounts receivable go 90 days past due, you get the finance director on the phone. A report shows that raw materials in a product have gone up, so you go to the production floor to talk with the area supervisor.

The purpose of the MIS system is to set performance standards and alert the business owner to deviations from those objectives in time to take corrective actions.

How Is the MIS System Applied?

An effective management information system identifies and collect data on all the important metrics of the operations of a company.

For example, the MIS provides data on sales, customer profitability and on the degree of market penetration.

Supervisors and employees receive reports about productivity, the number of sick days taken and payroll budgets. This data is used to evaluate employee performance and to find who is due for a raise.

Manufacturing supervisors are kept informed with product cost analysis, scheduling plans and raw materials inventory levels. The MIS system helps planners coordinate sales with production schedules.

A management information system helps a company become more competitive. It reports and identifies what is working and what is not. These reports give owners the information they need to make decisions and improve the performance of their employees and the business. It will be an important moment for the owner when the IT people install the hardware and software for the MIS, meaning that he now has better control of the business.

Role of MIS in Business Organisation

• 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 work faster and supplies more blood when needed. It regulates and controls the incoming impure blood, processed it and sends it to the destination in the quantity needed. It fulfils 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 send further to all the needy destinations. The system is expected to fulfil the information needs of an individual, a group of individuals, the management functionaries: the managers and top management.

How MIS helps in Business Organisation

• The MIS satisfies the diverse needs through variety of systems such as query system, analysis system, modelling system and decision support system.
• The MIS helps in strategic planning, management control, operational control and transaction processing. The MIS helps in the clerical personal in the transaction processing and answers the queries on the data pertaining to the transaction, the status of a particular record and reference on a variety of documents.
• The MIS Executive helps the junior management personnel by providing the operational data for planning, scheduling and control, and helps them further in decision-making at the operation level to correct an out-of-control situation.
• The MIS helps the middle management in short term 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-level 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 vital role in the management, administration and operation of an organization.

Importance of MIS in Business Organization

• Importance of MIS in Business Organization that 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 MIS supports the management of marketing, finance, production and personnel becomes 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 activity and the targets.
• The manager is kept alert by providing certain information indicating and probable trends in the various aspects of business. This helps in forecasting and long-term perspective planning. The manager’s attention is bought to a situation which is expected in nature, inducing him to take an action or a decision in the matter. Disciplined information reporting system creates structure database 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 by blending and analysis, saving the manager’s valuable time.

Impact of MIS

• The MIS creates another impact in the organization which relates to the understanding of the business itself.
• The MIS begins with the definition of data, entity and its attributes. It uses a dictionary of data, entity and attributes, respectively, designed for information generation in the organization. Since all the information systems use the dictionary, there is common understanding of terms and terminology in the organization bringing clarity in the communication and a similar understanding of an event in the organization.
• The MIS calls for a systematization of the business operations for an effective system design. This leads to streaming of the operations which complicates the system design. It improves the administration of the business by bringing a discipline in its operations as everybody is required to follow and use systems and procedures. This process brings a high degree of professionalism in the business operations.

Goal of MIS

• The goals and objectives of the MIS are the products of business goals and objectives. It helps indirectly to pull the entire organization in one direction towards the corporate goals and objectives by providing the relevant information to the organization. A well-designed system with a focus on the manager makes an impact on the managerial efficiency.
  • The fund of information motivates an enlightened manager to use a variety of tools of the management. It helps him to resort to such exercises as experimentation and modelling.
  • The use of computers enables him to use the tools and techniques which are impossible to use manually.
  • The ready-made packages make this task simple. The impact is on the managerial ability to perform. It improves decision-making ability considerably high.

Since, the MIS work on the basic system such as transaction processing and database, the drudgery of the clerical work is transferred to the computerized system, relieving the human mind for better work. The importance of MIS in business organization observed that lot of manpower is engaged in this activity in the organization. Seventy (70) percent of the time is spent in recording, searching, processing and communicating. This MIS has a direct impact on this overhead. It creates information –based working culture in the organization.

It goes without saying that all managerial functions are performed through decision-making; for taking rational decision, timely and reliable information is essential and is procured through a logical and well-structured method of information collecting, processing and disseminating to decision makers. Such a method in the field of management is widely known as MIS. In today’s world of ever-increasing complexities of business as well as business organization, in order to service and grow, must have a properly planned, analysed, designed and maintained MIS so that it provides timely, reliable and useful information to enable the management to take speedy and rational decisions.

MIS has assumed all the more important role in today’s environment because a manager has to take decisions under two main challenges: Ø First, because of the liberalization and globalization, in which organizations are required to compete not locally but globally, a manager has to take quick decisions, otherwise his business will be taken away by his competitors. This has further enhanced the necessity for such a system. Ø Second, in this information age wherein information is doubling up every two or three years, a manager has to process a large voluminous data; failing which he may end up taking a strong decision that may prove to be very costly to the company.

In such a situation managers must be equipped with some tools or a system, which can assist them in their challenging role of decision-making. It is because of the above cited reasons, that today MIS is considered to be of permanent importance, sometimes regarded as the name centre of an organization. Such system assists decision makers in organizations by providing information at various stages of decision making and thus greatly help the organizations to achieve their predetermined goals and objectives. On the other hand, the MIS which is not adequately planned for analysed, designed, implemented or is poorly maintained may provide developed inaccurate, irrelevant or obsolete information which may prove fatal for the organization. In other words, organizations today just cannot survive and grow without properly planned, designed, implemented and maintained MIS. It has been well understood that MIS enables even small organizations to more than offset the economies of scale enjoyed by their bigger competitors and thus helps in providing a competitive edge over other organization.

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