Role of Management Information Systems in Reporting - Term Paper Example

Role of MIS in Reporting Table of Contents Introduction Today, companies have been spanned across geographical boundaries and are known as multinational organizations. So the management of such a distributed organization, globally, is critical to the proper operation of the organization. Information plays that flows through the subsidiaries of a multinational organizations, plays an important part in its correct functioning and must be managed efficiently. Management information systems are specifically designed for this purpose. A management information system (MIS) provides the information needed to manage an organization in an efficient manner. Therefore, these management information systems and the information produced by them are usually considered as crucial components of sensible and practical business decisions. For effective management in the organization, an MIS provides decision makers with facts and supports and enhances the overall decision making process. For top management and local managers, it provides the data and information that is needed to assist the board and management in making strategic decisions. At other levels, management information system offers the capabilities for monitoring and distribution of information to the management, employees, and customers (Comptroller of the Currency, 2000). Information management with in an organization is a sequence of processes that assists the organization in managing the information that flows across organizational units, identifying information needs, obtaining the information, storage and organization of information, developing information products and services, distributing information, and using information that information for effective decision making. Managing the information in this way proposes new strategies for getting the most out of the value of information in organizations, and for a redefinition of the roles of organizational professionals, be they top management, local managers, employees, or other staff (Choo, 1995). Information Management in Multinational Organizations Now a days Managers have to cope with high information-processing demands in various circumstances because of the uncertainty of environmental factors and the increasing complexity of organizational activities. Operating in international markets has resulted in significant increase in information- processing demands for top managers. International growth may also cause increased proper information management demands because of the reasons such as: more complex organizational structure of MNEs, communication problems, and the geographical distance between the head office and foreign subsidiaries. Managers will be obligatory to use greater efforts to acquire adequate information through proper information management to assess the situation of their foreign operations (Tihanyi & Thomas, 2005). MIS for multinational organization refers to software and information systems development work that engages the alliance between two or more geographically dispersed organizations, or between one organization and its subsidiaries, which occurs across national boundaries. With the emergence of an expanding interdependent global economy, companies have internationalized their businesses in order to achieve a global growth. This multinational nature of business have completely changed the structure of organization so the information that is important for the business doesn’t only flow locally but have to be communicated to all the subsidiaries all around the globe. Thus management of information is really important for a multinational organization, to achieve its business goals (Huang & Trauth, 2007). While the information that flows across the subsidiaries of a multinational company is very crucial to its adequate operation, professionals who r managing information systems need to face the challenges of internationalization. The expansion of multinational business has caused considerable increases in international MIS’s operations. Now it is not unusual for companies to manage considerably high level of information system operations in foreign environments. Up till now, research focusing on global concerns and the respective implications of information technology is very insufficient. The problem is more severe when it comes to IS global strategies of multinational enterprises (MNEs). Conventionally, the charm of information technology has given birth to an approach to managing information systems globally. Moreover, the national orientation of IS strategists has expanded the gap between the globalization dimension and IS mainstream management (Abdul-Gader, 1997). The fundamental aim of information management in multinational organization is to bind the information assets and information competencies of the organization through MIS in order to enable the organization to learn and adapt to its changing environment and in the long run, achieving the competitive advantage. Information generation, possession, storage, analysis and use therefore provide the base line for managers to take decisions that may support the growth and improvement of the multinational organization (Choo, 1995). For developing a multinational MIS strategy, it is needed to define a structure and direction for MNE’s Information system’s operations and application development. These strategies must clearly address the environmental variables that have direct belongings to business and Information system’s functions. These strategies and policies may enable professionals/managers to perform their tasks successfully in an international setting. This global strategy for management of information must define the core problems of international management of information and information systems operation (Abdul-Gader, 1997). Even though MIS in multinational organizations may not necessarily lessen operating cost, the development of significant MIS’s, and their proper use, will reduce the likelihood that wrong decisions will be made because of erroneous or untimely information. If wrong decisions are made by the managers then it will always result in improper utilization or waste resources. In the long run, this may result in an undesirable impact on the operation of organization. MIS is a significant constituent of an organization’s short- and long-term decision making by the management. To attain and effective MIS, the organization's strategists should consider information needs at both the technical and strategic levels. For a multinational organization, at a strategic level MIS systems and reporting should support the annual operating practice and budgetary procedure. They should also support long term strategic information management and business planning initiatives. If there is not an effective MIS running for MNE’s, it is more complicated for management to evaluate and observe the success of new projects and the progress of continuing tasks. This would also be helpful in the management of mergers and acquisitions or the continuing development and the introduction of new products and services (Taylor et al., 2010) and (Comptroller of the Currency, 2000). Role of Information economics Information economics possesses a great importance while utilizing MIS’s for managing the information across the subsidiaries of a multinational enterprise. Because of internationalism, making economically balanced decisions about MIS’s investments is becoming both more essential and more complex. The hope of remarkable output gains from IT investments i.e. MIS’s seems to increase as the power of computing increases. One pointer of this confidence in IT is the increasing implementations of information systems in nearly every company. For many companies it has become the largest of all investment portfolios. Up till now, this increase in IT investments especially for an MIS and the power of computing has not been coordinated by an increase in flourishing techniques for discovering the suitable combination of IT investments. This is a real dilemma because it may cause wrong investments for MIS and other IT assets. This may widen the difference between the right and the wrong decision, causing adverse affect on the achievement MNE’s business goals (Hubbard Decision Research, 2004). Recent survey of literature has shown that the understanding of Information Economics provides the management in MNE’s with the capabilities to investigate related economic settings. Decision makers and strategists must analyze different relationships between the subsidiaries with asymmetrically or symmetrically distributed information across the subsidiaries, while setting up an MIS for information management. Information economics will let the management analyze the respective profits and losses. Furthermore, it will be helpful in determining that how information should be transmitted in such relationships. If it will be known that how economic relations (between subsidiaries all around the globe) affect the transmission of information, it will be helpful in answering the question that how this information must be managed so it may be processed by the respective receiver. Additionally, it will be helpful in analyzing various choices for MIS with respect to market design, if unusual economic relations influence information management. Understanding of information economics would be helpful for creating and managing information for effective use in MNE’s. It will turn the attention of decision makers and managers to the issues such as the influence of information upon economic markets outside to the firm, issues of information related to decision making and the inner organization of the MNE, and those that will help to make decisions about distribution and management of information assets within the MNE. Recent research shows that MIS researchers are now focusing their approaches to use cleverly the economics of information models related to organization design .Organizational design will reveal the group of problems in which the organizational structure for MNE’s itself is taken as an effecting variable and has influence on organizational performance by some criteria. In this way economics of information will let the decision makers realize that organizational design have significant and direct implication for MIS (Kriebel & Moore, 1982), (Laudon & Laudon, 1999) and (Abdul-Gader, 1997). Control Problems causing failure of MIS It has been observed that in adequate MIS in foreign affiliates can become a control problem for MNE’s. The control problem is described as that of choosing operating policies for subsidiaries of an MNE and enforcement rules for those operating policies. The purpose of definition and enforcement of these policies is to make the most of the organization's objective function and achieving its business goals. There are three types of large organizations that usually face the risk of occurrence of control problem. These include large corporations (MNE’s), governments in their budgetary aspects, and economic systems as a whole. The important roles of vagueness of differential amounts of information in different subsidiaries of a multinational organization in the problem of control are needed to be brought out in order to cope with the control problem (Arrow, 1964) and (Laudon & Laudon, 1999). The main problem of control that may occur in multinational organizations is because of the realization that individual managers, who r managing local subsidiaries, will certainly be more familiar with about their own circles of activity than higher officials and top management in head quarters. It has resulted in the decentralization of decision-making but decision about overall operational policies and their enforcement are hard to make because top management may know very little about the conditions, culture and working practices corresponding to a particular foreign affiliate. But it has also been accepted that, firstly, decentralization can make the allocation of responsibility better; and secondly, the subordinate (local area managers) has more possibilities of brining up their own ideas also, since responsibility is divided, accomplishments and failure can be more easily known by top management and MIS plays a great part in this scenario (Arrow, 1964) and (Laudon & Laudon, 1999). The problem of control occurs due to the fact that mostly MIS’s are not providing such a way to manage information so that coherence and synchronization of the operating polices and their enforcement in a decentralized (multinational) organization have not been dealt with systematically. The main business goals for the organization as a whole may be well identified, but their achievement depends on the decisions of many managers (controlling different foreign affiliates of an MNE). So the problem is that objective to be maximized by a manager usually depends upon his own decisions, to provide an appropriate set of directions to him, without taking care of overall organization’s objective (Arrow, 1964) and (Laudon & Laudon, 1999). In addition there are also other reasons for the occurrence of control problem due to the failure of MIS in managing the information properly. The most important reason that, why Management Information Systems (MIS) have failed to manage the information for MNE’s, is because of the way systems designer and strategists view organizations, their affiliates, and the job of an MIS within them. These views then become the basis of a design method or approach which further guides development and implementation of an MIS. At present, systems designers and strategists who are responsible designing the MIS for MNE’s, do not effectively use the power it provides. The real power resides in considering the organization as a whole rather than keeping in mind a particular foreign affiliate. They usually give less importance to the organizational structure, which changes considerably in case of an MNE and it implicitly guide many design decisions. The equal part of the problem is that managers let the MIS designers take the responsibility to define the requirements, although the management must continuously monitor if the designer is considering all the required aspects in MIS design (Bostrom & Heinen, 1977). MIS in MNE’s may fail due to the fact that local subsidiary managers face varied requirements from workforces. On the other hand, the managers in foreign subsidiary of multinational company require distinctive decision making capabilities in the sense that they face dual conflicts causing MIS to fail. One is between local manager and headquarters caused by cultural difference existing between headquarters and subsidiaries, and the other is between the IT manager and local workforces. Due to be deficient in of knowledge on IT artifacts or systems, end users in foreign subsidiary find it hard to report their problem to headquarters directly. Thus, managers are must get involved between the two parties as mediator, so local managers are required to play a great role in cooperation with the system designer in the development of a sound MIS that may resolve the aforementioned issues (Yu et al., n.d.). Another condition accountable for inadequate designs of MIS is the limited focus of work systems or user systems considered by systems designers in the design process. The main aims of a typical decision-support MIS are the decision-making, information acquisition, information processing, and information transmission tasks of the work systems. MIS typically is designed to transfer information processing and decision-making tasks between different employees and computing technology, to define new tasks and change old ones to support this new allocation of tasks, upon end of an analysis of information requirements and flow. The limited focus leads the systems designer to pay no attention to the fact that these changes cause more changes within other variables and the work systems in other subsidiary of MNE, which may hinder the development of adequate MIS (Bostrom & Heinen, 1977). The risks of an inadequate MIS that is not being able to manage MNE’s unstructured in­formation can be huge. This may result in bad & indefinite management decisions, ill-timed reactions, privacy and security gaps and failure to meet the terms of policies and regulations. The penalties can be severe and far-reaching, such as failure to achieve the business goal (Kazeon Systems, Inc., 2005). Developing a sound MIS In the light of aforementioned issues it is essential to develop a sound and effective MIS that may resolve these issues thus enhancing MNE’s performance. Though it is not always noticeable that MIS necessarily reduce expenses, but the development of sound and effective management information systems, and their correct usage, will reduce the likelihood that strategists and manager will make wrong decision because of imprecise or untimely information. As wrong decisions will always result in improper utilization and wastage of resources, this will cause an undesirable impact on achievement of MNE’s goals and objectives. Management must also focus on the adoption of good project management practices to examine progress when system designers may be developing the MIS system (Comptroller of the Currency, 2000). Thus, keeping in mind the abovementioned conflicts and issues it can be summarized that an effective MIS must exhibit the following characteristics to be suitable for functioning in an MNE: from (MSL Learning Systems Private Limited, 2010; SEKHAR, 2010) Orientation towards management An effective MIS must provide help to the management in the task for decision making. So the development of an effective MIS should include the evaluation and identification of management’s requirements, duties and business goals of the MNE. The MIS must be designed to serve all the levels of management i.e. top, middle and lower level. When MIS is management-oriented, its development must be done under the supervision of such individuals who may define management’s needs and requirements more effectively. Manager should direct the MIS designers at the phase of planning as well as its development and review. Integrated Approach: The development of effective MIS must be oriented towards taking a complete view of all the subsidiaries in the MNE. It must support the generation; processing and management integrated information so that all the operational information sub systems in different subsidiaries may work together as a single entity. This integration is necessary because it allows MIS to take the holistic view of MNE. Identification of common information flows: The development of MIS must be focused on the identification of a common data flow which will be helpful in avoiding duplication and redundancy in information generation, processing and storage. It will enable the management of the information with least number of processing procedures and the production output documents and reports in small numbers by getting rid of unwanted information. Divide and Conquer methodology Even if MIS must be viewed as a single entity for management in MNE but for its effective use, its development should be divided in subsystems so that more attention is paid to the needs of a particular subsidiary. These subsystems must be further composed to build the MIS for organization as a whole. Design of Common/Centralized database The design of an MIS must be based on the involvement of a common or centralized database. It will be helpful in avoiding duplication and redundancy of information resulting in the reduction of further maintenance costs. Centralize database supports the integration of information which was previously stored in many separate data files. The design of such a database allows it to be accessed by each subsidiary and thus, remove the need of repetition in information storage and processing. Information as an asset Information is the major constituent of any MIS. So, an MIS should consider the information as an asset that must be regularly maintained and checked for consistency in order to support proper management and good decision making. Conclusion Information that flows across the subsidiaries plays an important role for achievement of anticipated performance and business goals of an MNE. For the management of such information assets, organizations have increasingly shown the interest in the implementation of an effective and sound MIS that may allow generating, storing and processing that information in an effective manner. Though the idea of the development of the MIS is not a newer one but with the increasing trend of extending the organizational boundaries to achieve internationalism and involvement of information economics, some complexities have occurred that can not be resolved by a traditional MIS design. Traditional MIS’s have been found insufficient in dealing with the control problems that have occurred in the course of management of distributed information, generated in different subsidiaries of MNE. So there is a great need to change the traditional design of MIS and considering different factors that have been raised due to internationalism. To be most effective for an MNE, an MIS must be management oriented and must be designed by adopting an integrated approach with a central database to assure the reduction of duplication enabling the efficient processing of information assets. Bibliography 1. Abdul-Gader, A.H., 1997. Information systems strategies for multinational companies in Arab Gulf countries. International Journal of Information Management, 17(1), pp.3-12. 2. Arrow, K.J., 1964. Control in Large Organizations. Management Sceince, 10(3), pp.397-408. 3. Bostrom, R.P. & Heinen, J.S., 1977. MIS Problems and Failures: A Socio-technical Perspective Part 1: The Causes. 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