executive information system

1. INF 310 Management Support Systems UCC Level
300
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
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2. INF 310 Management Support Systems UCC Level
300
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;
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3. INF 310 Management Support Systems UCC Level
300
(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 vendor-
specific 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,
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4. INF 310 Management Support Systems UCC Level
300
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.
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5. INF 310 Management Support Systems UCC Level
300
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.
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6. INF 310 Management Support Systems UCC Level
300
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.
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7. INF 310 Management Support Systems UCC Level
300
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,
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8. INF 310 Management Support Systems UCC Level
300
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.
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9. INF 310 Management Support Systems UCC Level
300
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
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10. INF 310 Management Support Systems UCC Level
300
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.
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11. INF 310 Management Support Systems UCC Level
300
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
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12. INF 310 Management Support Systems UCC Level
300
• 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.
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