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Ch08 Information Technology and Control.doc

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Wilfrid Laurier University
Joel Marcus

Chapter 8: Information Technology and Control Information Technology Evolution • Essential for organizations • Managers spend at least 80% of time actively exchanging information • Problems and information differ depending on place in organization o First-line management focuses on well-defined problems, operational issues, and past events o Top management focuses on ambiguous issues, strategy, and planning • Transaction processing systems (TPS) are automation of the organization’s routine, day-to-day business transactions and its goal is to reduce labour costs and make the system more efficient • Data warehousing is the use of a huge database that combines all of an organization’s data and allows users to access the data directly, create reports, and obtain answers to “what-if” questions • Business intelligence refers to the high-tech analysis of a company’s data in order to make better decisions. Also known as data mining, it allows for data analysis from multiple sources (inside and outside of the organization) to identify patterns and relationships • Evolution of Organizational Applications of IT: Information for Decision Making and Control Organizational Decision-Making Systems • Management information system (MIS) o Computer-based system that provides information and support for rapid and efficient managerial decision making • Information reporting system o Most common form of MIS, and are computerized systems that provide managers with reports that summarize data and support day-to-day decision making • Executive information system (EIS) o A higher-level application that facilitates decision making at the highest levels of management that are based on software that convert large amounts of complex data into pertinent information and provide that info to top managers quickly • Decision support system (DSS) o Enables managers at all levels to retrieve, manipulate, and display info from integrated databases for making decisions, and they can test multiple alternatives and choose the one with the best outcome Feedback Control Model • A control cycle that involves setting goals, establishing standards of performance, measuring actual performance and comparing it to standards, and changing activities as needed based on the feedback • This model explains why McDonald’s for example, started introducing healthier items on their menu • 2 types are management control systems and balanced scorecard • The following is a simplified feedback control model: Management Control Systems • The formalized routines, reports, and procedures that use info to maintain or alter patterns in organizational activity • Targets are set in advance, outcomes are compared to the targets, and differences reported to managers for corrective action • Many organizations use executive dashboards, which enable managers to see at a glance key control indicators such as sales in relation to targets, number of products on back-order, or percentage of customer service calls resolved within a specified time period • 4 elements of management control systems include: o Budget, financial reports  Controls financial resources and reduces uncertainty about availability of resources o Statistical reports  Control departmental outputs  For e-commerce, for example, measures can be used such as stickiness (how much attention a site gets over time), conversion rate (ratio of buyers to site visitors), etc. o Reward systems  Control managers based on department performance  They provide incentives to meet goals and help control employee behaviour o Quality control systems  Control according to guidelines and goals, and it specifies standards for employee participation, teamwork, and problem solving • 2 types of management control: o Benchmarking, which is the process of continually measuring products, services, and practices against tough competitors or other organizations recognized as industry leaders o Six sigma, which is a highly ambitious quality standard that specifies a goal of no more than 3.4 defects per million parts, and it emphasizes pursuit of quality over higher cost Balanced Scorecard • A comprehensive management control system that balances traditional financial measures with operational measures relating to an organization’s critical success factors • It examines financial performance, customer service, internal business processes, and capability for learning and growth • Major perspectives of the balanced scorecard are illustrated below: Adding Strategic Values: Strengthening Internal Coordination Intranets • A private, company-wide info network that uses the communications protocols and standards of the Internet but is accessible only to people within the company • It uses networking to link people and departments together in order to increase communication amongst employees Enterprise Resource Planning (ERP) • Sophisticated computerized systems that collect, process, and provide info about a company’s entire enterprise, including order processing, product design, purchasing, inventory, manufacturing, distribution, HR, receipt of payments, and forecasting of future demand • Helps determine how decisions in one part of the organization will affect other parts of the organization, and helps show the “big picture” • For example, when a salesperson takes an order, the ERP system checks to see how the order affects inventory levels, scheduling, HR, etc. by replicating organizational process in software and guides employees through the process step-by-step • Example of an ERP Network: Knowledge Management • The efforts to systematically find, organize, and make available a company’s intellectual capital and to foster a culture of continuous learning and knowledge sha
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