The Role of Management Information Systems in Decision Making

Management information systems combine hardware, software and network products in an integrated solution that provides managers with data in a format suitable for analysis, monitoring, decision-making and reporting. The system collects data, stores it in a database and makes it available to users over a secure network.

Managers need rapid access to information to make decisions about strategic, financial, marketing and operational issues. Companies collect vast amounts of information, including customer records, sales data, market research, financial records, manufacturing and inventory data and human resource records. However, much of that information is held in separate departmental databases, making it difficult for decision-makers to access data quickly.

A management information system simplifies and speeds up information retrieval by storing data in a central location that is accessible via a network. The result is decisions that are quicker and more accurate.

Management information systems bring together data from inside and outside the organization. By setting up a network that links a central database to retail outlets, distributors and members of a supply chain, companies can collect sales and production data daily, or more frequently, and make decisions based on the latest information.

In situations where decision-making involves groups, as well as individuals, management information systems make it easy for teams to make collaborative decisions. In a project team, for example, management information systems enable all members to access the same essential data, even if they are working in different locations.

Management information systems help decision-makers understand the implications of their decisions. The systems collate raw data into reports in a format that enables decision-makers to quickly identify patterns and trends that would not have been obvious in the raw data.

Decision-makers can also use management information systems to understand the potential effect of change. A sales manager, for example, can make predictions about the effect of a price change on sales by running simulations within the system and asking a number of “what if the price was” questions.

The reporting tools within management information systems enable decision-makers to tailor reports to the information needs of other parties. If a decision requires approval by a senior executive, the decision-maker can create a brief executive summary for review. If managers want to share the detailed findings of a report with colleagues, they can create full reports and provide different levels of supplementary data.