2: The value and importance of information (Why managers need information,…
2: The value and importance of information
Why managers need information
All managers have to make decisions using information obtained from the day to day operations as well as from external information.
The types of decisions can be classified under:
Lower layers of management are responsible for:
Day to day management of the operations staff.
Allocating work to subordinates.
Arrangement of staff rotas, dealing with staff sickness/absence.
Handling a departmental budget.
Higher levels of management are responsible for:
Strategic planning - Involves the setting of overall objectives and policies.
Growth in profits.
How information aids decision making
More information there is that is relevant to making the decision, the less risk there is in taking the decision.
Information allows manager to take remedial action.
If a customer owes a large amount of money, no orders should be send to them until they are up to date with their account.
Simulations can be performed using spreadsheet software to experiment with 'what if' scenarios using the information in order to arrive at a decision.
Using information to monitor progress
Companies to use ICT to see how well they are performing against targets set.
Sales staff can judge their performance using information about previous year's sales or by comparing performance with other sales staff.
Monthly sales figures can be compared with previous monthly sales figures from other years.
Using information for the targeting of resources
Organisations only have a finite amount of resources.
These resources include:
Human resources (People with suitable expertise)
These resources need to be correctly allocated and can be achieved using ICT.
Creating production schedules.
Stock control systems that ensure that stock is always available when needed.
The competitive advantage information gives
Most businesses have competitors which are organisations selling similar products or services to the same type of customer.
Important organisations remain competitive.
To remain competitive, necessary to:
Use market research information collected from customers to understand why they choose the organisation or products or services.
Ensure that customer orders are always satisfied by having accurate stock information.
Be able to anticipate customer demand from previous sales information.
Could predict amount of barbecue food sold during a hot spell from information from previous sales during hot spells.
Importance of up to date, accurate and complete information
Information is only of use if it is:
Up to date.
Information should always be date stamped so that there's no danger of using out of date information.
If information is personal information, under Data Protection Act 1998, legal requirement for information to be kept up to date.
Consequences of using information not up to date:
If information being kept is personal and the person who the information is about suffers loss as a result of information being wrong, as it was not up to date, organisation can be sued.
Legal requirement for information to be kept up to date under Data Protection Act 1998 and not keeping it up to date can lead to prosecution.
Could send a letter to a customer threatening legal action for a bill that records show had not been paid, when the customer has paid, it just hasn't been updated on the computer.
Letter could be sent to someone who had died, which would distress the family of the bereaved.
Information from a computer system must be accurate as it can be because errors can result in the following problems:
Customers being sent the wrong items - This costs money to sort out and will upset the customer.
Customers being invoiced the wrong amount - Will waste time sorting out and will also upset the customer and damage any trust they had in the organisation.
Buyers basing their stock ordering decisions on incorrect sales information resulting in stock having to be sold off cheaply.
Misreading gas or electricity meters resulting in embarrassing mistakes, with ordinary domestic customers being sent bills for thousands of pounds.
Typing the details in from a customer over the phone and mishearing them.
Typing in the wrong address which results in goods being sent to the wrong address.
Important all information is complete, as incomplete can cause a number of problems including:
An order might be only partly fulfilled because an item was not in stock at the time.
Then the rest of the order is not sent later, resulting in an upset customer.
A manager has asked for a sales report and some of the information she asked for on the report is missing, resulting in her having to base her decision on only part of the information, which is more risky.
Not including the postcode on a letter, resulting in the letter being received late.
The costs of obtaining good quality information
Costs associated with data collection (Direct and indirect)
Information is never free, since there is always an associated cost of collecting it in the first place and is important the costs of obtaining the information does not outweigh the benefits obtained.
If certain information results in profit to the organisation of £200, yet costs £250 to collect, then its not worth having the information to start with.
The information provided by a system will do some of the following:
Use resources more effectively.
Provide better management information to aid more accurate decision making.
Costs associated with the collection of data includes:
Costs of employing an expert to design data collection forms.
Setting up of questionnaires to collect data.
Production of online forms to collect data from customers.
Travelling costs and other expenses involved in people performing interviews.
Costs of staff employed to work through documents to collect the information.
Costs for specialist staff to collect data from other systems.
Costs of buying information from a third party.
Data can be direct or indirect.
Direct - When the company collects data themselves.
Indirect - Data obtained from a third party rather than the organisation collecting it itself.
Costs associated with data entry
Human resources costs - The costs of any staff performing data entry, the costs of training these staff, the costs of any specialist staff needed for programming, etc.
Time costs - The entry of data, especially using keyboards, takes time.
This can slow down the whole process from collecting the data, to the production of the final information.
Hardware costs - Sometimes by spending money on automatic methods of data entry using bar coding, optical mark reading, magnetic ink character recognition, speech recognition, etc. the human resource costs can be lowered.
Costs associated with processing and maintenance
Once data has been collected and inputted into an ICT system, next stage is to process it.
Will be a number of maintenance activities that will need to be performed such as:
Keeping data in the database or other system up to data.
Taking backup copies of data for security purposes.
Small changes to the structure of the program or database so that the relevant processing can occur.
Data may need to be transferred from one place to another using expensive communication lines.
Outside firms may be used to ensure that the data is backed up off site.
Consumable costs such as printer paper and toner/ink cartridges.
Human resource costs
In some cases such as processing of questionnaires, staff needed to oversee batch processing performed using OMR or OCR and deal with any rejected forms.
Specialist staff needed to give instructions to the database to process the data by extracting specific details.
Software can be pushed to the limit by users' demands for more information.
Demands may not be satisfied unless programmer uses some programming tricks to enable the software to do something it was not really designed to do.
Staff may need to be employed to analyse information from system and produce meaningful reports for different groups of people.
Processing large amounts of data takes time and many ICT systems have many millions of records to process to extract certain information.
Reports are printouts obtained by applying search criteria to a database or other information system.
Some reports are complex and demand a lot of processing time for their production.
Once a report has been produced, must be checked and then distributed to all the interested parties.
Backing up of large amounts of data is necessary but time consuming.