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Chapter 8

Chapter 8 BU398.docx

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Shawn Komar

BU398 Chapter 8 – Information Technology and Control Week 7 Information Technology Evolution -Transaction Processing Systems (TPS) – automate the organization’s routine, day-to-day business transactions -A TPS collects data from transactions such as sales, purchases from suppliers, and inventory changes, and stores them in a database -Data warehousing – the use of huge databases that combine all of an organization’s data to allow users to access the data directly, create reports, and obtain responses to what-if questions -Business intelligence – the high-tech analysis of a company’s data in order to make better strategic decisions – often referred to as data mining -Business intelligence means searching out and analyzing data from multiple sources across the enterprise, and sometimes from outside sources as well, to identify patterns and relationships that might be significant Information for Decision Making and Control -Managers have tools to improve performance of departments and the organization as a whole -Management information systems – including information reporting systems, decision support systems, and executive information systems – facilitate rapid and effective decision making Organizational Decision-Making Systems -Management information system (MIS) – a computer-based system that provides information and support for managerial decision making -Information reporting system – provides mid-level managers with reports that summarize data and support day-to-day decision making -Executive information system – a higher-level application that facilitates decision making at the highest levels of management -Decision support system – provides specific benefits to managers at all levels of the organization -Using decision support software, users can pose a series of what-if questions to test possible alternatives -Organizations need to be careful to ensure that the information that their IT systems generate is as useful as they can be Feedback Control Model -Effective control systems involve the use of feedback to determine whether organizational performance meets established standards to help the organization attain its goals -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 -Helps managers make needed adjustments in work activities, standards of performance, or goals to help the organization be successful Management Control Systems -Management control systems – the formal routines, reports, and procedures that use information to maintain or alter patterns in organization activities -Formalized information-based activities for planning, budgeting, performance evaluation, resource allocation, and employee rewards -Targets are set in advance, outcomes compared to targets, and variance reports to managers for corrective action -Dashboard systems coordinate, organize, and display the metrics that managers consider most important to monitor on a regular basis, with software automatically updating the figures Subsystem Content and Frequency BU398 Chapter 8 – Information Technology and Control Week 7 Budget, financial Financial, resource expenditures, profit and loss; monthly, usually computer reports based Statistical reports Nonfinancial outputs; weekly or monthly, usually computer based Reward systems Evaluation of managers based on department goals and performance, set rewards; yearly Quality-control Participation, benchmarking guidelines, Six Sigma goals; continuous systems -Thes are the four control system elements that are often considered the core of management control systems -The budget is typically used to set targets for the organization’s expenditures for the year and then report actual costs on a monthly or quarterly basis -The statistical reports are used to evaluate and monitor nonfinancial performance, such as customer satisfaction, employee performance, or rate of staff turnover -Reward systems are often tied to annual performance appraisal process, during which managers assess employee performance and provide feedback to help the employee improve performance and obtain rewards -Quality-control systems are used by managers to train employees in quality-control methods, set targets for employee participation, establish benchmarking guidelines, and assign and measure Six Sigma goals -Benchmarking – the process of continually measuring products, services, and practices against tough competitors or other organizations recognized as industry leaders -Six Sigma – a highly ambitious quality standard that specifies a goal of no more than 3.4 defects per million parts -Each of the four control systems focuses on a different aspect of the production process The Balanced Scorecard -Balanced scorecard – combines several indicators of effectiveness into a single framework, balancing traditional financial measures with operational measures relating to an organization’s critical success factors -A balanced scorecard contains four major perspectives: financial performance, customer service indicators, internal business process indicators, and the organization’s potential for learning and growth -The financial performance reflects a concern that the organization’s activities contribute to improving short- and long-term financial performance -Customer service indicators measure things such as how customers view the organization, as well as customer retention, and satisfaction -Internal process indicators focus on production and operating statistics, such as order fulfillment or cost per order -Learning and growth focuses on how well resources and human capital are being managed for the company’s future -The components of the scorecard are designed in an integrative manger so that they reinforce one another and link short-term actions with long-term strategic goals -Managers can use the scorecard to set goals, allocate resources, plan budgets, and determine rewards -Helps managers focus on the key strategic measures that define the success of a particular organization over time and communicate them clearly throughout the organization Adding Strategic Value: Strengthening Internal Coordination -Three IT tools for internal coordination: intranets, enterprise resource planning (ERP), and knowledge-management systems BU398 Chapter 8 – Information Technology and Control Week 7 Intranets -Networking – links people and departments within a particular building or across corporate offices, enabling them to share information and cooperate on projects, has become an important strategic tool for many companies -Intranet – a private, organization-wide information system that uses the communications protocols and standards of the Internet but is accessible only to people within the organization -Ex. City of Orillia home page when I would go onto the internet -Intranets can improve internal communications and unlock hidden information -Enables employees to keep in touch with what’
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