Chapter 6 (Part I) Organizational Information Systems www.pearsoned.ca/jessup Robert Riordan, Carleton University

Learning Objectives Describe the characteristics that differentiate the operational, managerial, and executive levels of an organization Explain the characteristics of the three information systems designed to support each unique level of an organization: Transaction Processing Systems (TPS), Management Information Systems (MIS), and Executive Information Systems (EIS)

Learning Objectives 3. Describe the characteristics of six information systems that span the organizational, managerial, and executive levels: Decision Support Systems (DSS), Expert Systems (ES), Office Automation Systems (OAS), Collaboration Technologies, Functional Area Information Systems, and Global Information Systems

The Organizational Pyramid Figure 9.1 The management pyramid

The Nature of Managerial Work Management:   - the process of directing tasks and directing resources to achieve organizational goals - management functions: planning, organizing, directing, motivating, controlling...  

The Nature of Managerial Work Planning Planning at different levels Long-term mission and vision Strategic goals Tactical objectives Most important planning activities Scheduling Budgeting Resource allocation

The Nature of Managerial Work Figure 9.3 An example of a mission statement, strategic goals, and tactical objectives for an in-line skate manufacturer

The Nature of Managerial Work Figure 9.4 The main ingredients of planning

The Nature of Managerial Work Control Managers control activities by comparing plans to results. Figure 9.5 Examples of processes used to control projects

Levels of the Organization

Levels of the Organization Explained Executive Level Strategic planning and responses to strategic issues occur here. Executive decisions are usually unstructured and are made using consolidated internal and external information Managerial Level Monitoring and controlling of operational activities and executive information support occur here. Managerial decisions are usually semistructured and are made using procedures and ad hoc tools Operational Level Day-to-day business processes and interactions with customers occur here. Operational decisions are usually structured and are made using established policies and procedures

Who, What, Why: Organizational Level

Who, What, Why: Managerial Level

Who, What, Why: Executive Level

Basic Systems Model

System Type: Transaction Processing Systems

System Description: Transaction Processing Systems TPSs are a special class of information system designed to process business events and transactions Architecture Components Source Documents – these contain the event or transaction information to be processed by system Data Entry Methods Manual – a person entering a source document by hand Semiautomated – using a capture device to enter the source document (e.g. a barcode scanner) Fully Automated – no human intervention, one computer talks or feeds another computer (e.g. automatic orders from inventory systems) Processing – transactions can be either: Online – processed individually in real-time Batch – grouped and processed together at a later time

System Example: Payroll System (TPS)

System Architecture: Transaction Processing System

System Type: Management Information System

System Description: Management Information Systems MISs are used by managerial employees to support recurring decision making in managing a function or the entire business Supported Activities Scheduled Reporting - the system produces automatically based on a predetermined schedule. Some include: Key Indicator – High-level summaries to monitor performance (e.g. Monthly Sales Report) Exception – Highlights situations where data is out of normal range (e.g. Monthly Late Shipments) Drill Down – Provides lower-level detail aggregated in a summary report (printed only if needed) Ad Hoc Reporting – unscheduled reports that are usually custom built to answer a specific question (e.g. sales data by person report to identify issues)

System Architecture: Management Information System

System Type: Executive Information System (EIS)

System Description: Executive Information Systems EISs, also called Executive Support Systems (ESS), are special purpose information systems to support executive decision-making System Details These systems use graphical user interfaces to display consolidated information and can deliver both: Soft Data - textual news stories or non-analytical data Hard Data – facts, numbers, calculations, etc. Supported Activities The activities supported by these kinds of systems include: Executive Decision Making Long-range Strategic Planning Monitoring of Internal and External Events Crisis Management Staffing and Labour Relations

System Architecture: Executive Information Systems

System Example: Executive Reporting Drill-down (EIS) Second Level Data Drill Down First Level Graphical Summary

Systems That Span Organizational Boundaries

Systems That Span Organizational Boundaries

System Description: Decision Support Systems Special-purpose information systems designed to support managerial-level employees in organizational decision making System Details These systems use computational software to construct models for analysis (most common is MS Excel) to solve semi-structured problems (e.g. sales or resource forecasts) Supported Activities: “What-if” analysis – changing one or more variables in the model to observe the effect (e.g. What is the payment if the interest rate increases by 1% ?)

Characteristics of Decision Support Systems

System Description: Common Decision Support Systems

System Architecture: Decision Support Systems

System Example – Loan Calculator Variables to be Analyzed Loan Calculator Model Analysis Results

Systems That Span Organizational Boundaries

System Description: Expert Systems Special-purpose systems used by operational level employees to make decisions usually made by more experienced employees or an expert in the field System Details These systems use inference engines that match facts and rules, sequence questions for the user, draw a conclusion, and present a recommendation to the user Supported Activities: These systems support many activities, including: Medical Diagnosis Machine Configuration Financial Planning Software Application Assistance (help wizards)

System Architecture: Expert Systems

System Dialogue Example – Expert Systems End user The end-user usually sees an expert system through an , an example of which follows: Q. Do you know which restaurant you want to go to? A. No Q. Is there any kind of food you would particularly like? Q. Do you like spicy food? Q. Do you usually drink wine with meals? A. Yes Q. When you drink wine, is it French wine? As can be seen from this dialog, the system is leading the user through a set of questions, the purpose of which is to determine a suitable set of restaurants to recommend. This dialog begins with the system asking if the user already knows the restaurant choice (a common feature of expert systems) and immediately illustrates a characteristic of expert systems; users may choose not to respond to any question. In expert systems, dialogs are not pre-planned. There is no fixed control structure. Dialogs are synthesized from the current information and the contents of the knowledge base. Because of this, not being able to supply the answer to a particular question does not stop the consultation. Explanation system Another major distinction between expert systems and traditional systems is illustrated by the following answer given by the system when the user answers a question with another question, "Why", as occurred in the above example. The answer is: A. I am trying to determine the type of restaurant to suggest. So far Chinese is not a likely choice. It is possible that French is a likely choice. I know that if the diner is a wine drinker, and the preferred wine is French, then there is strong evidence that the restaurant choice should include French.

Systems That Span Organizational Boundaries

System Description: Office Automation Systems A collection of software and hardware products that increase productivity within the office setting Supported Activities The activities supported by these kinds of systems include: Scheduling Resources Examples: electronic calendars with resource management (equipment, facilities, etc.) Document Preparation Examples: software (word processing and desktop publishing); hardware (printers) Communicating Examples: e-mail, voice mail, videoconferencing and groupware

System Architecture: Office Automation Systems

System Example – Scheduling System

Systems That Span Organizational Boundaries

System Description: Collaboration Technologies Videoconferencing Software and hardware that allow parties to meet electronically with both picture and voice Supported Activities Stand-alone Videoconferencing High quality, typically very expensive systems using dedicated microphones, cameras and hardware Can support meetings between several people and locations simultaneously Desktop Videoconferencing Lower quality, relatively inexpensive systems using a PC, small camera, and a microphone or telephone for voice communication Allows two individuals to communicate from a desktop

System Description: Collaborative Techs (Groupware) Software that enables people to work together more effectively Supported Activities These systems come in two types: Asynchronous Groupware – Systems that do not require users to be on the system working at the same time, including: e-mail, newsgroups, workflow automation, group calendars, and collaborative writing tools Synchronous Groupware – Systems that allow and support simultaneous group interactions including shared whiteboards, electronic meeting support systems, video communication systems

System Description: Groupware

System Description: Groupware Benefits

System Examples – Groupware

System Examples – Collaborative Technology Children Create Awareness for Darfur http://voicethread.com/#q.b85497.i433611

Systems That Span Organizational Boundaries

System Description: Global Information Systems A variety of special-class systems used to support organizations that operate globally Supported Activities Depending on the organization, one or more of these systems may be required (definitions on next slide): International Accounting Systems Transnational Information Systems Multinational Information Systems Collaborative Information Systems

System Examples: Global Information Systems

System Examples: Global Information Systems

Systems That Span Organizational Boundaries

System Description: Functional Area Info Systems Functional Area Information Systems Cross-organizational information systems are designed to support a specific functional area Supported Activities The following functional organizations have systems to support their operational and managerial activities Accounting Finance Human Resources Marketing Operations

System Description: Functional Area Info Systems

System Examples: Functional Area Info Systems

Finance Information Systems Finance area: acquires and manages cash for a business Acquire thru shares or loans Invest cash wisely Company must maintain liquidity Meet short term obligations Need to analyze considerable financial info

System Description: Functional Area Info Systems

Tactical Systems in Finance A BUDGETING SYSTEMS - plan revenues and expenses line-by-line Can summarize in various ways Can compare this year’s budget to last year’s Can compare actual expenses vs budgeted (get actuals from General ledger System)

Tactical Systems in Finance BUDGETING (cont’d) Comparing budgeted to actuals allows for variances analysis Eg. Current budgeted expenses, actual expenses and variances by line item Eg. Projected expenses for each budget line item for entire year based on expenses incurred to date

Tactical Systems in Finance BUDGETING (cont’d) Spreadsheet-type systems are useful for budgeting (ie. formulas) Can use last year’s budget as a base for next year and maybe 5 years How are such system tactical? explain

Tactical Systems in Finance B CASH MANAGEMENT SYSTEMS Ensure that business has sufficient cash to meet its needs For day-to-day operations For acquisition of long-term assets Important output is the cash flow report Can forecast cash flows for , say 6 months Flow= tl cash receipts – tl cash payments

Tactical Systems in Finance C. CAPITAL BUDGETING SYSTEMS Provide help with planning acquisition (disposal) of major plant assets that will be used by the business during many years Provide outgoing and incoming cash for the life of the asset Use assumptions Consider the time value of money (net present value)

Tactical Systems in Finance C. CAPITAL BUDGETING SYSTEMS Eg. Can help to decide whether to lease or buy a new printer What computing is useful here?

Tactical Systems in Finance D. INVESTMENT MANAGEMENT SYSTEMS - oversee organization’s investment in stocks, bonds, and other securities - Online databases provide immediate updates for stock and bond prices

Tactical Systems in Finance INVESTMENT MANAGEMENT SYSTEMS e.g. Value Screen inputs the current price of each stock and calculates the gain or loss the company’s investment portfolio would generate if sold now what computing is needed here?

System Description: Functional Area Info Systems

Strategic Systems in Finance Support very high-level managers Strategic systems relate to organizational goals Often, such systems use internal data (which may have originated in organizational AIS) and external data (eg. From online databases that contain economic, social, demographic, etc, info)

Strategic Systems in Finance A FINANCIAL CONDITION ANALYSIS SYSTEMS Provide insightful analyses of financial statements and data (e.g., ratios: current ratio, debt:equity ratio) Online databases can allow for financial analysis of competitors, suppliers, buyers and other organizations)

Strategic Systems in Finance B. LONG RANGE FORECASTING SYSTEMS May use both internal and external data Apply statistical techniques May use graphics Analyze trends

Strategic Systems in Finance C. CORPORATE PLANNING SYSTEMS Use data from past, like forecasting systems More elaborate; contain simulation models of various aspects of business Models must have valid assumptions