1. Management, Organizational Policies & Practices Lecture 13 Dr. Amna Yousaf PhD (HRM) University of Twente, the Netherlands

2. Recap Lecture 12  Employee Involvement –Participative Management –Representative Participation –Quality Circles  Linking Employee Involvement programs & Motivation Theories  Using Rewards to Motivate Employees  What to Pay: establishing a Pay Structure

3. Recap Lecture 12  How to Pay: Rewarding individual Employees Through Variable-Pay Programs –Piece-Rate Pay –Merit Based Pay –Bonuses –Skill Based Pay –Profit-sharing plans –Gain –sharing –Employee Stock Ownership Plans  Global Implications © 2007 Prentice Hall Inc. All rights reserved.

4. Managing Information Lecture 13

5. Outline  After going through this lecture you should be able to: 1.explain the strategic importance of information. 2.describe the characteristics of useful information (i.e., its value and costs). 3.explain the basics of capturing, processing, and protecting information. 4.describe how companies can share and access information and knowledge. © 2007 Prentice Hall Inc. All rights reserved.

6. Then and Now… Adding machines instead of spreadsheets’ Filing system instead of storing in hard drives Hard copy summary sent by post to head office instead of transferring through satellite Electric typewriter instead of word processor Sticky notes instead of email Coworkers and assistants writing them instead of voice mail

7. Moore’s Law 1966 © 2007 Prentice Hall Inc. All rights reserved. Gordon Moore one of founding member of Intel Corp, which makes 80% of integrated processors used in PC’s. Moore predicted that every 18 months, the cost of computing will drop by 50% as computer processing power doubled. Computer today is much smaller and faster than mainframes used in 1990’s. Use of similar technological advances in cars would have made them much cheaper too. Gordon Moore one of founding member of Intel Corp, which makes 80% of integrated processors used in PC’s. Moore predicted that every 18 months, the cost of computing will drop by 50% as computer processing power doubled. Computer today is much smaller and faster than mainframes used in 1990’s. Use of similar technological advances in cars would have made them much cheaper too.

8. Why Information Matters  When raw data is used in useful, informative and meaningful way; it becomes information –5, 18$, 39, 49, 21 are just raw data without any usefulness. –Information is useful when that can influence some one’s choice and behavior. Managerial decision making based on information © 2007 Prentice Hall Inc. All rights reserved.

9. Characteristics of Useful information  Accurate Information –Information must be accurate to be useful. For accuracy it should be reliable and valid –Airline maintenance crew cant service and fix passenger jets unless they receive information from plane’s own information system. –False problems at Boeing’s 747 passenger jet which can be misleading for maintenance crew. Maintenance costs represent 20% of the cost of running an airline Inaccurate information lead to expensive mistakes © 2007 Prentice Hall Inc. All rights reserved.

10. Characteristics of Useful information  Complete Information – to begin to identify problems and identify potential solutions –New generation planes like Boeing’s 777 contain 600 computer sensors that airline can use to schedule maintenance.  Relevant Information –Information is useful when relevant and relevant when pertains to problem © 2007 Prentice Hall Inc. All rights reserved.

11. Characteristics of Useful information –FAA classifies maintenance problems on planes into three categories Priority one problem must be fixed after plane lands or before it allowed to take off Planes with priority 2 problems are allowed to operate for a limited time period Priority three problems are minor, the airline can fix at their own discretion  Timely Information –“ I wish had known that ahead of time” –Information available nowadays to plane maintenance crew is more accurate, reliable and timely. United Airline’s new AMIS allows the crew to track plane performance while they are en route to their destinations © 2007 Prentice Hall Inc. All rights reserved.

12. Costs of Useful information  Acquisition Costs –Collection of CIB reports by SBP  Processing Cost –The expense of turning raw data into usable information –Insurance company having information about 10 million households that could do a better job to help it target its insurance. Processing costs might be higher as it might need around 15 computers to process all data in incompatible format. Reader’s Digest © 2007 Prentice Hall Inc. All rights reserved.

13. Costs of Useful information  Storage Costs –Is the cost of physically or electronically archiving information for later use and retrieval. –Following information available with SBP data base such as age, estimated income, home ownership, cars ownership, occupation, children, number of credit cards and so on. Strong MIS and a number of computers required to store all this information © 2007 Prentice Hall Inc. All rights reserved.

14. Costs of Useful information  Retrieval Costs –The cost of already stored and processed information. –Might be costly as first you have to find the information, then convince whoever has it to share it, then it should be processed into a form usable for you and by the time you get it, it may no longer be timely.  Communication Cost –The cost of transmitting information from one place to the other Electric companies have employed meter readers to walk from house to house to gather information that would then be entered into company computers © 2007 Prentice Hall Inc. All rights reserved.

15. 14 CHAPTER FIVE Strategic Importance of Information 1 First-Mover Advantage Sustaining a Competitive Advantage

16. 15 CHAPTER FIVE First-Mover Advantage 1.1 First-Mover Advantage The strategic advantage that companies earn by being the first to use new information technology to lower costs or to differentiate a product

17. Strategic Importance of Information  First-Mover Advantage - Examples Amazon.com the first online store to sell books with 2.5 million books – 10 times more than Barnes & Nobles –Reduced costs. First movers earn 30% market share compared to 19 earned by followers. Early adopters of ATM earned 26% market share and profits more © 2007 Prentice Hall Inc. All rights reserved.

18. Strategic Importance of Information  Sustaining Competitive Advantage –The real challenge –Smaller banks united to form ATM networks like PLUS and Cirrus; transaction can be processed on most bank cards –Since new information costly; first mover strategies more expensive than following it after prices fall. In certain cases they can move the companies with first mover advantage out of business! © 2007 Prentice Hall Inc. All rights reserved.

19. Strategic Importance of Information  Resource Based View of IT –Does IT create value for firm by lowering costs of providing better quality or service? If no then it might be a competitive disadvantage –If yes then is it different form competitors? If NO then Competitive parity may arise. –If yes then is it difficult for others to create or buy IT? If no then competitive disadvantage –If yes then competitive sustainable advantage! © 2007 Prentice Hall Inc. All rights reserved.

20. 19 CHAPTER FIVE Sustaining a Competitive Advantage 1.2 Competitive Advantage Sustained Competitive Advantage Temporary Competitive Advantage Is it difficult for another firm to create or buy the IT? NOYES Does the information technology (IT) create value? NOYES Is the IT different across competing firms? NOYES Adapted from Exhibit 5.2

21. 20 CHAPTER FIVE Capturing Information 3.1 Methods of Capturing Information ElectronicElectronic ManualManual Bar Codes Radio Frequency Identification Tags Electronic Scanners Optical Character Recognition

22. Capturing Information  Capturing Information –Manual capturing of information – labor intensive process of data recording –Filling application for driving license or opening account; manually entering into system Slow, expensive and often inaccurate –Electronic storage allows to enter data directly into computer without manual entry; error free and less time taking © 2007 Prentice Hall Inc. All rights reserved.

23. Capturing Information  Electronic Scanners  An electronic device that converts printed text and pictures into digital images  Easy to use, inexpensive, fast way of electronic data capture  Text can not be edited once digitalized by this way  Companies can use Optical Character Recognition software to edit, read and process the text  Bar codes –A visual pattern that represents numerical data by varying thickness and pattern of vertical bars  Bar codes and document scanners are most common methods of electronic data capture © 2007 Prentice Hall Inc. All rights reserved.

24. Storing Information  Storing Information –Paper most common form – expensive; takes space, requires manual search process, slow and error-laden. Only one person at a time can access it.  Microfilm –Small photographic slides used to store data. A reel of microfilm can store hundreds of pages of data. Libraries often use microfilms to store issues of magazines and newspapers Inexpensive, permits faster retrieval than paper, requires little storage space and particularly good method of storing archived Longley inaccessed data. Downsides: can be accessed by only one person at a time; access of information available only where microfilm is stored © 2007 Prentice Hall Inc. All rights reserved.

25. Storing Information  CD-ROM (compact disk read only memory) –A compact disk that holds up to 650 megabytes of text, sound or graphic data One of the cheapest forms of electronic data storage; affordable by small businesses  DVD (digital video disk) –A compact disk that holds up to 17 gigabytes of text, sound or graphical data Another cheap and worthwhile storage options for most companies  Data storage Tape –A magnetic tape used to record and store data- used to archive data for long term storage in separate off site locations. Data storage tapes used ofr secondary data © 2007 Prentice Hall Inc. All rights reserved.

26. Storing Information  Hard drive –A magnetic disk, usually mounted inside a computer, that allows users to read its stored data and write data to it Hard drive is where all data in PC is stored Compared to CD-ROMs, DVDs and tape storage, hard drive permit fastest data retrieval Cheaply available Downside: they crash – they just lock up. Can destroy data and produce immediate work stoppages Most common form of primary storage – primary storage is for the data that workers and managers use most often in performing their jobs. © 2007 Prentice Hall Inc. All rights reserved.

27. Processing Information  Processing Information –Transforming raw data into meaningful information that can be applied to business decision making. Evaluating sales data to determine best and worst selling products; examining repair records to determine product reliability or monitoring the cost of long distance phone calls are examples of processing  Three kinds of computer processing 1.Centralized processing: processing and storing data from individual computer terminals on mainframe computers, which have gigabytes of memory and terabytes of hard drive storage spaces © 2007 Prentice Hall Inc. All rights reserved.

28. Processing Information 2.Distributed processing: processing and storing data in desktop computers unlike mainframe computers. 2.Rather than central processing of data and information; this forms gives mangers ready access to data and empowers them. 3.Loan officer can access all information and process the file of a customer coming for loan through desktop unlike mainframe where all information comes centralized 3.Shared processing: information processing that is shared by two kinds of computers, clients, servers, across a clients/server network  Companies use multiple processes of information; they being cheaper. Large companies use all there forms; smaller using combination of desktop and server/network computers © 2007 Prentice Hall Inc. All rights reserved.

29. Cost and Configuration for Desktop, Server and Mainframes ComputerPrice ($)ProcessorMemoryStorage Desktop1,000 to 3,000 200-400 MHz Pentium II processor 32-64 megabytes 4-8 gigabytes Servers5, 000 to 20, 000 Up to 4 400 MHz Pentium II processor Upto 4 gigabytes Upto 350 gigabytes Of total storage Mainframes5, 000,00 to 5, 000, 000 Up to 20 500 MHz processors 8-32 gigabytes 4-8 terabytes © 2007 Prentice Hall Inc. All rights reserved.

30. 29 CHAPTER FIVE Protecting Information 3.2  Authentication and authorization  Firewalls  Antivirus software  Data encryption  Virtual private networks

31. 30 CHAPTER FIVE Password Dos and Don’ts 3.2 1.Don’t use any public information 2.Don’t use complete words 3.Use eight or more characters 4.Use longer, unique passwords 5.Don’t write your password 6.Change it every six weeks 7.Don’t reuse old passwords

32. 31 CHAPTER FIVE Accessing and Sharing Information and Knowledge 4 Internal Access and Information Sharing External Access and Information Sharing Sharing of Knowledge and Expertise

33. Accessing and Sharing Information and Knowledge  Previously it would take weeks for companies to confirm customer orders.  Email: the transmission of messages via computers –Fastest and cheapest form of communication in companies –Downside: volume of emails  Voice Messaging: telephone answering system that records voice messages –More freedom of expression; some people are not readers they are talkers –Downside: reading messages is faster than listening © 2007 Prentice Hall Inc. All rights reserved.

34. Accessing and Sharing Information and Knowledge  Conferencing Systems: allows two or more users in different locations see and talk to each other as if they are in same room –Document conferencing: allows two or more persons in different locations to simultaneously view and make comments about documents –Application sharing: allows two or more people to actually make changes in document – a step ahead of document conferencing –Desktop Videoconferencing: allows two or more persons in different locations to use video cameras and see and hear each other and share documents Access to high speed internet is important for clear and smooth voice and picture quality © 2007 Prentice Hall Inc. All rights reserved.

35. Internal Access and Sharing  Executive Information System –Data processing system that uses internal and external data sources to provide the information needed to monitor and analyze organizational performance Since most managers are not computer experts; EIS should be user friendly Most EIS use touch screens “ point and click” commands, easy to understand displays such a color graphics, charts and summaries so that little learning is required. Other commands such as find, compare and show allow managers to easily and quickly get information © 2007 Prentice Hall Inc. All rights reserved.

36. 35 CHAPTER FIVE Characteristics of Best-Selling EIS  Few commands to learn  Important views saved  3-D charts  Geographic dimensions 4.1 Identification of Problems and Exceptions Ease of Use Analysis of Information Adapted from Exhibit 5.4  Compare to standards  Trigger exceptions  Drill down  Detect & alert newspaper  Detect & alert robots  Sales tracking  Easy-to-understand displays  Time periods

37. 36 CHAPTER FIVE Intranets 4.1  Private company networks  Allow employees to access, share, and publish information  More than 80 percent of companies have their own intranets

38. 37 CHAPTER FIVE Why 80% of Companies Use Intranets 4.1  Inexpensive  Increase efficiencies and reduce costs  Intuitive and easy to use  Work across all computer systems  Can be built on top of existing network  Work with software programs that convert to HTML  Software is available at no cost or is less expensive Adapted from Exhibit 5.5

39. Thank You © 2007 Prentice Hall Inc. All rights reserved.