All businesses try to manage their operations as efficiently as possible in order to meet their goals and objectives. For profit-oriented entities, that goal is usually profit maximization.
Without information, leaders of a business will be steering the ship blindly. Management information refers to the “information used by the managers to manage the resources efficiently and effectively in order to achieve the business objectives”.
Information needs of managers can be broadly divided into following three categories:
It is a saying that “if you fail to plan, you are planning to fail”. Same goes for businesses.
Managers of a business need information for long-term and short-term planning. For instance, information about market trends, technological advances, long-term cash flow forecasts etc. may be needed for long-term (strategic) planning.
Similarly, for short-term (operational) planning, information about market demand of products, prices of materials, labour, other expenses etc. may be required to make budgets.
Plans are only effective if you keep track of the actual progress. Information is needed to compare the actual performance with planned or budgeted performance. In case of deviations from plans, remedial actions can be taken by management on timely basis.
Managers at all levels need to make decisions which involve choosing between different alternatives. Information is needed to evaluate different alternatives and choose the best possible options. Here are some examples of decisions required to be made by management:
- Evaluating long-term investments and projects
- Purchase of capital assets
- Pricing decisions
- Make vs. Buy decisions
- Business segment/product closure decisions
Information needs vary with the sizes of businesses. A large multi-national business will usually need a lot of detailed information as compared to small business. However, all businesses need information for planning, controlling and decision-making activities. Accordingly, organizations implement management information systems (MIS) to suit their relevant information needs.