Management Control and
Information Systems
Chapter 8:
Management Control Information
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
1
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
2
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Source: https://internetofwater.org/wp-content/uploads/2018/12/01-Moving-from-Data-to-Action.pdf
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
3
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Data:
Data is fragmented pieces of symbols and characters strung together,
information is refined data whereas knowledge is useful information
Additionally, data can lack context when looked at singularly,
whereas information gives context to data and knowledge brings
depth in understanding to such information
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
4
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Information:
Information is created when data are processed, organized, or
structured to provide context and meaning. Information is essentially
processed data.
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
5
School (IBS) Hyderabad
Management Control Information
Information generation and transaction involve cost.
Information itself has a value. A valuable information
commands a price.
Expected value of the information depends on the decision
maker’s judgement. The amount a firm can afford to pay is
called “the expected value of sample information”.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
6
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Knowledge:
Knowledge is what we know. Knowledge is unique to
each individual and is the accumulation of past
experience and insight that shapes the lens by which
we interpret, and assign meaning to, information.
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
7
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Knowledge:
For knowledge to result in action, an individual must have
the authority and capacity to make and implement a
decision. Knowledge (and authority) are needed to produce
actionable information that
can lead to impact.
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
8
School (IBS) Hyderabad
Management Control Information
Information constitutes facts, data, observations,
perceptions, or any element contributing to knowledge
acquisition, requiring resources for generation and exchange,
thereby possessing inherent value.
Getting the information, the amount a firm can afford is
called “the expected value of sample information.”
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
9
School (IBS) Hyderabad
Information and Its Value
Information:
Information is a fact, datum, observation, perception or anything that
adds value to knowledge.
Information is obtained either by direct observation or by
communication.
Most of the information of a manager is obtained by communication-
ranging from informal conservation to formal reports
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
10
School (IBS) Hyderabad
Information and Its Value
Information:
In an optimum system, the difference between the expected value of
sample information furnished by the system and the cost of obtaining
the information is at a maximum.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
11
School (IBS) Hyderabad
Management Control Information
The expected value of information depends upon the
judgment of the decision-makers, yet uncertainty persists due
to the following factors:
1. Business problems are not clear-cut
2. The problems are not clearly defined
3. There are alternative solutions
4. The same information is used for several purposes
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
12
School (IBS) Hyderabad
Management Control Information
Information generation and transaction involve cost.
Information itself has a value. A valuable information
commands a price.
Expected value of the information depends on the decision
maker’s judgement. The amount a firm can afford to pay is
called “the expected value of sample information”.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
13
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Knowledge:
Knowledge is what we know. Knowledge is unique to
each individual and is the accumulation of past
experience and insight that shapes the lens by which
we interpret, and assign meaning to, information.
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
14
School (IBS) Hyderabad
Data vs Information vs Knowledge vs Insight vs Result
Knowledge:
For knowledge to result in action, an individual must have
the authority and capacity to make and implement a
decision. Knowledge (and authority) are needed to produce
actionable information that
can lead to impact.
Source: https://www.linkedin.com/pulse/differences-between-data-information-knowledge-why-mohamed-1e/
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
15
School (IBS) Hyderabad
Management Control Information
Information constitutes facts, data, observations,
perceptions, or any element contributing to knowledge
acquisition, requiring resources for generation and exchange,
thereby possessing inherent value.
Getting the information, the amount a firm can afford is
called “the expected value of sample information.”
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
16
School (IBS) Hyderabad
Management Control Information
The expected value of information depends upon the
judgment of the decision-makers, yet uncertainty persists due
to the following factors:
1. Business problems are not clear-cut
2. The problems are not clearly defined
3. There are alternative solutions
4. The same information is used for several purposes
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
17
School (IBS) Hyderabad
Information Processing by Human Beings
Decision makers use all the information available.
Instead, they search through the available
information and pick those messages that are of
interest to them and are relevant for certain
purpose.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
18
School (IBS) Hyderabad
Types of Information
Different types of information are generated in course of business
transactions and dealing with a large number of personalities.
Broadly these information may be classified in the following ways:
a. Systematic or non-systematic
b. External or Internal
c. Quantitative or non-quantitative
d. Accounting or non-accounting
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
19
School (IBS) Hyderabad
Management Information System (MIS)
An organization grows vertically and horizontally. With growth and
progress management, it needs more and more information for
timely decision and appropriate action.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
20
School (IBS) Hyderabad
Surrogates
A lot of accounting information is not precise , because they
are surrogates.
A surrogate is a substitute measure of a phenomenon that is
used because it is not feasible to measure the phenomenon
directly.
Profit is a surrogate for the real performance of the division
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
21
School (IBS) Hyderabad
Surrogates
Similarly, sales returns may be a surrogate of fall in demand
The precise measurement is not only impossible but also
undesirable because of high cost involved in reaching precision
In MIS there is a trade off between precision and timeliness
Estimate of salses revenue for a month on the first day of
the following month vs. two weeks later
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
22
School (IBS) Hyderabad
Information Overload
There is always an upper limit to the amount of information
they can absorb. If this exceeds, then they may refuse to use
anyone of them.
Excessive information flow is equally inadequate information
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
23
School (IBS) Hyderabad
Management Control Information
In the management control process, information is used for
planning, for coordinating and for control
Reports are of two types:
1. Information Reports
2. Control Reports
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
24
School (IBS) Hyderabad
Management Control Information
Information Reports vs. Control Reports
What is going on? vs. Comparison
Information reports are to tell managers what is going on. They
may or may not lead to any action.
• Reports of orders received
• Accounts Receivable
• Inventory Statement
• Stock market quotations
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
25
School (IBS) Hyderabad
Management Control Information
• News on government regulations
• Competitor’s News
Control reports are specifically designed to facilitate the
management control process. Although they differ greatly in
the nature and in the way in which it is reported, they have the
common characteristic feature of comparing actual
performance with some measure of planned or expected
performance.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
26
School (IBS) Hyderabad
Management Control Information
Other
Goals and Standing Instructions Information
Strategies Reward (Feedback)
internal
Yes
Other Responsibility Report
Plans and actual Was
external Center
Objectives versus Performance
information Operations
Plan Satisfactory?
Measurement No
Revise Plan Corrective
action
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
27
School (IBS) Hyderabad
Management Information System (MIS)
An organization grows vertically and horizontally. With growth and
progress management, it needs more and more information for
timely decision and appropriate action.
MIS is a formal integrated system for management that provide
accurate and timely information for making decision in
organization.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
28
School (IBS) Hyderabad
MIS folders
MIS folders in an organisation contain present, past and future data
that provide assistance to management with right information at
right time .
MIS is described as an “input-process-output”
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
29
School (IBS) Hyderabad
Design of MIS
MIS is designed as per the requirement of management at
different levels. The form and control of information varies
widely between top, middle, and lower – levels.
• Top Level
• Middle Level
• Lower Level
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
30
School (IBS) Hyderabad
Design of MIS
Top Management:
The top-management formulates goals, strategies and policies.
Strategic planning activities primarily involve future interaction
between the organization and its external environment.
Strategic information:
• Market Analysis
• Business Growth
• Demographic information
• Technological Development
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
31
School (IBS) Hyderabad
Design of MIS
Top Management:
Strategic information:
• Political and government policies
These reports should be in brief, concise and yet covering all the
important points.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
32
School (IBS) Hyderabad
Design of MIS
Middle Level Management:
At the middle management level, such information is required for management
control, by the Department heads.
They require more information on their respective areas of operation such as
production, sales, etc.
Analysis of monthly operational results with their comparison against standard
or Budget or previous period, indicating monthly as well as cumulative data are
normally included in such reports .
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
33
School (IBS) Hyderabad
Design of MIS
Lower Level Management:
At the lower levels of management operational control is exercised by the
supervisors.
Information is collected more frequently depending on the item of operation to
be controlled.
Daily, weekly or fortnightly reporting is required in some areas with more
detailed information.
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
34
School (IBS) Hyderabad
Design of MIS
Lower Level Management:
• Daily Production
• Sales
• Inventory
• Overtime
• Absenteism
• Cash and bank position
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
35
School (IBS) Hyderabad
Designing Systems
• Preliminary Study : Collection of information
• Second Stage : Initial Design
• Final implementation Stage
• Linking with Databases
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
36
School (IBS) Hyderabad
Making MIS System Effective
a. System should be user-oriented
b. System design should not be assigned totally to an outside expert
c. The aims and objectives of MIS installation should be communicated to
all managers
d. Manual
e. Periodic review
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
37
School (IBS) Hyderabad
Reporting Format
MIS design ends with the preparation of reporting formats
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
38
School (IBS) Hyderabad
Management Control Information
Thank You
Dr. Ajay Prasad Adepu, Assistant Professor ICFAI Business
39
School (IBS) Hyderabad
