C. Executive Information Systems

Transcription

1 C. Executive Information Systems Introduction An Executive Information Systems (EIS) is a type of management information system intended to facilitate and support the information and decision making needs of senior executives by providing easy access to both internal and external information relevant to meeting the strategic goals of the organization. It is commonly considered as a specialized form of a Decision Support System (DSS) and otherwise referred to as an Executive Support System (ESS). EIS are targeted at management needs to quickly assess the status of a business or section of business. These packages are aimed firmly at the type of business user who needs instant and up to date understanding of critical business information to aid decision making. The idea behind an EIS is that information can be collated and displayed to the user without manipulation or further processing. The user can then quickly see the status of his chosen department or function, enabling them to concentrate on decision making. Generally an EIS is configured to display data such as order backlogs, open sales, purchase order backlogs, shipments, receipts and pending orders. This information can then be used to make executive decisions at a strategic level. The emphasis of the system as a whole is the easy to use interface and the integration with a variety of data sources. It offers strong reporting and data mining capabilities which can provide all the data the executive is likely to need. Traditionally the interface was menu driven with either reports, or text presentation. Newer systems, and especially the newer Business Intelligence systems, which are replacing EIS, have a dashboard or scorecard type display. The Role of ESS in the Organization Executives often face information overload and must be able to separate the chaff from the wheat in order to make the right decision. On the other hand, if the information they have is not detailed enough they may not be able to make the best decision. An ESS can supply the summarized information executives need and yet provide the opportunity to drill down to more detail if necessary. As technology advances, ESS are able to link data from various sources both internal and external to provide the amount and kind of information executives find useful. As common software programs include more options and executives gain experience using these programs, they're turning to Page 1

2 them as an easy way to manipulate information. Many executives are also turning to the Web to provide the flexibility they need. Rationale They provide executive information in a readily accessible, interactive format using graphics based queries on summarized and detailed data. They are also used to analyse, compare and highlight trends to help govern the strategic direction of a company. They are commonly integrated with operational systems, giving managers the facility to drill down to find out further information on a problem. It usually allows summary over the entire organisation and also allows drilling down to specific levels of detail. Thus they described as an MIS for executive use. They are designed to the individual to let chief executive officers of organisations tie in to all levels of the organisation. They are very expensive to run and require extensive staff support to operate. In recent years and in the USA, the term EIS has lost popularity in and the terms business intelligence and online analytical processing are often used for these types of applications. Types of Executive Information System Corporate Management - responsible for business and fiscal planning, budgetary control, as well as for ensuring the corporate information technology needs are met in a co-ordinated and cost effective manner. E.g., Management functions, human resources, financial data, correspondence, performance measures, etc. (whatever is interesting to executives) Technical Information Dissemination for the purpose of disseminating the latest information on relevant technologies, products, processes and markets E.g., Energy, environment, aerospace, weather, etc. Executive Information System Components The components of an EIS can typically be classified as: Hardware: When talking about hardware for an EIS environment, we should focus on the hardware that meet executive s needs. The executive must be put the first and the executive s needs must be defined before the hardware can be selected. The basic computer hardware needed for a typical EIS includes four components: (1) Input data-entry devices. These devices allow the executive to enter, verify, and update data immediately; Page 2

3 (2) The central processing unit (CPU), which is the kernel because it controls the other computer system components; (3) Data storage files. The executive can use this part to save useful business information, and this part also help the executive to search historical business information easily; (4) Output devices which provide a visual or permanent record for the executive to save or read. This device refers to the visual output device or printer. In addition, with the advent of local area networks (LAN), several executive information system products for networked workstations became available. These systems require less support and less expensive computer hardware. They also increase access of the EIS information to many more users within a company. Software: Choosing the appropriate software is vital to design an effective EIS. Therefore, the software components and how they integrate the data into one system are very important. The basic software needed for a typical executive information system includes four components: 1. Text base software. The most common form of text is probably documents; 2. Database. Heterogeneous databases residing on a range of vendorspecific and open computer platforms help executives access both internal and external data; 3. Graphic base. Graphics can turn volumes of text and statistics into visual information for executives. Typical graphic types are: time series charts, scatter diagrams, maps, motion graphics, sequence charts, and comparison-oriented graphs (i.e., bar charts); 4. Model base. The executive information system models contain routine and special statistical, financial, and other quantitative analysis. Perhaps a more difficult problem for executives is choosing from a range of highly technical software packages. Ease of use, responsiveness to executives' requests, and price are all reasonable considerations. Further, it should be considered whether the package can run on existing hardware. Interface: An EIS needs to be efficient to retrieve relevant data for decision makers, so the interface is very important. Several types of interfaces can be available to the EIS structure, such as scheduled reports, questions & answers, menu driven, command language, natural language, and input & output. It is crucial that the interface must fit the decision maker s decision-making style. If the executive is not comfortable with the information questions & answers style, the EIS will not be fully utilized. The ideal interface for an executive support system would be simple to use and highly flexible, Page 3

4 providing consistent performance, reflecting the executive s world, and containing help information and error messages. Telecommunication: As decentralizing is becoming the current trend in companies, telecommunications will play a pivotal role in networked information systems. Transmitting data from one place to another has become crucial for establishing a reliable network. In addition, telecommunications within an EIS can accelerate the need for access to distributed data. Executive Support Systems Characteristics. A number of definitions have been put forward to describe EISs. While a definition is useful, in a complex area such as EISs a better understanding is obtained by looking at their characteristics. Some of these are given below: Executive support systems are end-user computerised information systems operated directly by executive managers. They utilise newer computer technology in the form of data sources, hardware and programs, to place data in a common format, and provide fast and easy access to information. They integrate data from a variety of sources both internal and external to the organisation. They focus on helping executives assimilate information quickly to identify problems and opportunities. In other words, EISs help executives track their critical success factors. Each system is tailored to the needs and preferences of an individual user, and information is presented in a format which can most readily be interpreted. Although these characteristics apply to all EISs, each individual system can potentially differ in scope, nature, purpose and content, depending on the environment in which it is implemented. Capabilities of Executive Support Systems Most executive support systems offer the following capabilities: Consolidation involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information Drill-down enables users to get details, and details of details, of information Slice-and-dice looks at information from different perspectives Digital dashboard integrates information from multiple components and presents it in a unified display. Page 4

5 Fig 4.1 Examples of Digital dashboard Advantages of Executive Information System As more executives come up through the ranks, they are more familiar with and rely more on technology to assist them with their jobs. Executive Support Systems don't provide executives with ready- made decisions. They provide the information that helps them make their decisions. Executives use that information, along with their experience, knowledge, education, and understanding of the corporation and the business environment as a whole, to make their decisions. Executives are more inclined to want summarized data rather than detailed data (even though the details must be available). ESS rely on graphic presentation of information because it's a much quicker way for busy executives to grasp summarized information It provides timely delivery of company summary information. It provides better understanding of information It filters data for management. It provides system for improvement in information tracking It offers efficiency to decision makers. Page 5

6 Disadvantages of Executive Information System Functions are limited, cannot perform complex calculations. Hard to quantify benefits and to justify implementation of an EIS. Executives may encounter information overload. System may become slow, large, and hard to manage. Difficult to keep current data. May lead to less reliable and insecure data. Small companies may encounter excessive costs for implementation. Highly skilled personnel requirement can not be fulfilled by the small business. Executive Information System Features EIS are intended as decision support tools for senior managers. Since these strategic decisions are based on a wide range of input information, they always need to be well integrated with operational systems in a business. Some important features of executive support system include the fact that: They provide summary information to monitoring of business performance. This is often achieved through measures known as critical success factors or key performance indicators (KPIs). These will be displayed in an easy-to-interpret form such as a graph showing their variation through time. If a KPI falls below a critical preset value, the system will notify the manager through a visible or audible warning. They are used mainly for strategic decision making, but may also provide features that relate to tactical decision making. They provide a drill-down feature which gives a manager the opportunity to find out more information necessary to take a decision or discover the source of a problem. E.g. a manager with multinational manufacturing problem might find from the EIS that a particular country is underperforming in production. He could drill down to see which particular factory was responsible for this. They provide analysis tools. They must be integrated with other facilities to help manage the solving of problems and the daily running of the business. These include electronic mail and scheduling and calendar facilities. They integrate data from a wide range of information sources, including company and external sources such as market and competitor. They have to be designed according to the needs of managers who do not use computers frequently. They should be intuitive and easy to learn. All these facilities require integration with operational data. Since this information is commonly stored in the ERP systems, these are often integrated with EIS or have EIS functions built in. Page 6

7 EIS Project Team The process of establishing organizational objectives and measures is intimately linked with the task of locating relevant data in existing computer systems to support those measures. Objectives must be specific and measurable, and data availability is critical to measuring progress against objectives. Since there is little use in defining measures for which data is not available, it is recommended that an EIS project team including technical staff be established at the outset. This cross-functional team can provide early warning if data is not available to support objectives or if senior manager's expectations for the system are impractical. A preliminary EIS project team might consist of as few as three people. An EIS Project Leader organizes and directs the project. An Executive Sponsor promotes the project in the organization, contributes senior management requirements on behalf of the senior management team, and reviews project progress regularly. A Technical Leader participates in requirements gathering, reviewing plans, and ensuring technical feasibility of all proposals during EIS definition. As the focus of the project becomes more technical, the EIS project team may be complemented by additional technical staff who will be directly involved in extracting data from legacy systems and constructing the EIS data repository and user interface. Factors influencing the functioning of Executive information systems Organizational setup The policies and procedures followed in an organization have a great impact in the manner management information systems are implemented in an organization. For e.g. If a company believes in centralization of authority and hesitates to delegate authority then EIS will be provided for the top most managers in the organization. On the contrary if the company is of the opinion that decentralization of authority will help in better governance then EIS will be introduced in a separate manner. They will be given to a couple of managers even at the junior level if it is believed that it will aid them in one way or the other. Other factors The internal and external factors connected directly or indirectly with the organization will have their own say in establishing executive information systems in an organization. For e.g. if matters relating to compliance of tax, Page 7

8 audit and other statutory matters are handled by the senior mangers only then EIS will be targeted to them alone. On the other hand if clerical labour is also involved in the same procedures EIS they will also be able to access EIS and render the necessary supporting functions to the senior managers. Whatever be the case the role of men in an organization plays a crucial part in implementation and functioning of executive information systems. The success of executive information systems lies in two issues. Firstly the information should properly reach the concerned executives. Secondly they should accord importance and act upon it. Above all whatever they say must be given due consideration by the decision making authority. The system must be a fool proof one. Only then the results will reveal the true picture. Characteristics of Successful EIS Implementations Find an Appropriate Executive Champion - EIS projects that succeed do so because at least one member of the senior management team agrees to champion the project. The executive champion need not fully understand the technical issues, but must be a person who works closely with all of the senior management team and understands their needs, work styles and their current methods of obtaining organizational information. The champion's commitment must include a willingness to set aside time for reviewing prototypes and implementation plans, influencing and coaching other members of the senior management team, and suggesting modifications and enhancements to the system. Deliver a Simple Prototype Quickly - Executives judge a new EIS on the basis of how easy it is to use and how relevant the information in the system is to the current strategic issues in the organization. As a result, the best EIS projects begin as a simple prototype, delivered quickly, that provides data about at least one critical issue. If the information delivered is worth the hassle of learning the system, a flurry of requirements will shortly be generated by executives who like what they see, but want more. These requests are the best way to plan an EIS that truly supports the organization, and are more valuable than months of planning by a consultant or analyst. One caveat concerning the simple prototype approach is that executive requests will quickly scatter to questions of curiosity rather than strategy in an organization where strategic direction and objectives are not clearly defined. A number of methods are available to support executives in defining business objectives and linking them to performance monitors in an EIS. These are discussed further in the section on EIS and Organizational Objectives below. Page 8

9 Involve Your Information Systems Department - In some organizations, the motivation for an EIS project arises in the business units quite apart from the traditional information systems (IS) organization. Consultants may be called in, or managers and analysts in the business units may take the project on without consulting or involving IS. This is a serious mistake. Executive Information Systems rely entirely on the information contained in the systems created and maintained by this department. IS professionals know best what information is available in an organization's systems and how to get it. They must be involved in the team. Involvement in such a project can also be beneficial to IS by giving them a more strategic perspective on how their work influences the organization. Communicate & Train to Overcome Resistance - A final characteristic of successful EIS implementations is that of communication. Executive Information Systems have the potential to drastically alter the prevailing patterns of organizational communication and thus will typically be met with resistance. Some of this resistance is simply a matter of a lack of knowledge. Training on how to use statistics and performance measures can help. However, resistance can also be rooted in the feelings of fear, insecurity and cynicism experienced by individuals throughout the organization. These attitudes can only be influenced by a strong and vocal executive champion who consistently reinforces the purpose of the system and directs the attention of the executive group away from unproductive and punitive behaviours. Executive Support System Applications EIS enables executives to find those data according to user-defined criteria and promote information-based insight and understanding. Unlike a traditional management information system presentation, EIS can distinguish between vital and seldom-used data, and track different key critical activities for executives, both which are helpful in evaluate if the company is meeting its corporate objectives. After realizing its advantages, people have applied EIS in many areas, especially, in manufacturing, marketing, and finance areas. Manufacturing - Basically, manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. It is a large branch of industry and of secondary production. Manufacturing operational control focuses on day-to-day operations, and the central idea of this process is effectiveness and efficiency. To produce meaningful managerial and operational information for controlling manufacturing operations, the executive has to Page 9

10 make changes in the decision processes. EIS provides the evaluation of vendors and buyers, the evaluation of purchased materials and parts, and analysis of critical purchasing areas. Therefore, the executive can oversee and review purchasing operations effectively with EIS. In addition, because production planning and control depends heavily on the plant s data base and its communications with all manufacturing work centres, EIS also provides an approach to improve production planning and control. Marketing - In an organization, marketing executives role is to create the future. Their main duty is managing available marketing resources to create a more effective future. For this, they need make judgments about risk and uncertainty of a project and its impact on company in short term and long term. To assist marketing executives in making effective marketing decisions, an EIS can be applied. EIS provides an approach to sales forecasting, which can allow the market executive to compare sales forecast with past sales. EIS also offers an approach to product price, which is found in venture analysis. The market executive can evaluate pricing as related to competition along with the relationship of product quality with price charged. In summary, EIS software package enables marketing executives to manipulate the data by looking for trends, performing audits of the sales data, and calculating totals, averages, changes, variances, or ratios. All of these sales analysis functions help marketing executives to make final decisions. Medical - Executive information systems are coming to hospitals a little later than they did to other industries, but there appears to be tremendous interest at the executive level. These systems provide information that is more timely, relevant, and concise than paper-based systems. With the changing environment in healthcare, the ability to monitor key areas of the operation in near real time is critical. Hospitals are unusually information-rich environments. In fact, managements consider hospitals to be perfect models of information-based organizations. Within the hospital environment, EIS can gather up-to-the-minute information from all vertical areas of the enterprise--finance, nursing, clinical areas, medical staff--to provide executives with a high-level, real-time perspective on indicators and trends that affect business success. In truth, all hospitals already have some type of executive information system; every paper report, procedural update, telephone message, fax, or memo that executives receive serves as part of an information system. At worst, the system may provide information that is outdated, inaccurate, or open to misinterpretation. At best, it offers a temporary, static analysis of data that cannot meet the needs of the fast-moving, highly competitive atmosphere of today's healthcare operation. Page 10

11 Financial - A financial analysis is one of the most important steps to companies today. The executive (Eddie Frame) needs to use financial ratios and cash flow analysis to estimate the trends and make capital investment decisions. An EIS is a responsibility-oriented approach that integrated planning or budgeting with control of performance reporting, and it can be extremely helpful to finance executives. Basically, EIS focuses on accountability of financial performance and it recognizes the importance of cost standards and flexible budgeting in developing the quality of information provided for all executive levels. EIS enables executives to focus more on the long-term basis of current year and beyond, which means that the executive not only can manage a sufficient flow to maintain current operations but also can figure out how to expand operations that are contemplated over the coming years. Also, the combination of EIS and EDI environment can help cash managers to review the company s financial structure so that the best method of financing for an accepted capital project can be concluded. In addition, the EIS is a good tool to help the executive to review financial ratios, highlight financial trends and analyze a company s performance and its competitors. Government - Executive Information Systems in government have been constructed to track data about Ministerial correspondence, case management, worker productivity, finances, and human resources to name only a few. Other sectors use EIS implementations to monitor information about competitors in the news media and databases of public information in addition to the traditional revenue, cost, volume, sales, market share and quality applications. Future Trends in Executive Information System The future of executive info systems will not be bound by mainframe computer systems. This trend allows executives escaping from learning different computer operating systems and substantially decreases the implementation costs for companies. Because utilizing existing software applications lies in this trend, executives will also eliminate the need to learn a new or special language for the EIS package. Future executive information systems will not only provide a system that supports senior executives, but also contain the information needs for middle managers. The future executive information systems will become diverse because of integrating potential new applications and technology into the systems, such as incorporating artificial intelligence (AI) and integrating multimedia characteristics and ISDN technology into an EIS. Examples of ESS Page 11

12 The Sutter Home Winery uses mostly external data, including information from the Internet, in its ESS. It organizes the information in order to help executives make decisions based on trends in the marketplace. The information includes data on competitors and information from market research. Sutter uses its system output to determine sales forecasts, marketing campaigns, and investment plans. Managers at the Royal Bank of Canada are able to choose their own criteria (from among 15 choices) to drill down and navigate data through easy-to-use interfaces. They don't have to accept data in formats chosen by someone else who may not understand individual manager's needs. Data analysis is more timely because the information is quicker to obtain and more convenient than before. Summary Executive Support Systems meet the needs of corporate executives by providing them with vast amounts of information quickly and in graphical form to help them make effective decisions. ESS must be flexible, easy to use, and contain both internal and external sources of information. Page 12