Chapter 16Executive Information SystemsExecutive Information Systems
MANAGEMENT INFORMATION SYSTEMS 8/ERaymond McLeod, Jr. and George Schell
Copyright 2001 Prentice-Hall, Inc.16-1
The Executive PositionThe Executive Position
Unique demands of the executive positionUnique demands of the executive position
Executives require unique information Executives require unique information processingprocessing
An executive is not just a lower-level manager on a higher level!
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Marketinginformation
system
Manufacturinginformation
system
Financialinformation
system
Human resource
informationsystem
Environmental information and data
Environmental information and data
Top-levelmanagers
A Firm Without An EIS
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Environmental Information and data
Environmental Information and data
Marketinginformation
system
Manufacturinginformation
system
Financialinformation
system
Human resource
informationsystem
Executive information
system
A Firm With An EIS
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What Do Executives Do?What Do Executives Do?
Term executive is loosely appliedTerm executive is loosely applied– No clear dividing line between executives and No clear dividing line between executives and
other managersother managers Executive manager on the upper level of the Executive manager on the upper level of the
organizational hierarchy who exerts a organizational hierarchy who exerts a strong influence on the firmstrong influence on the firm
Long term planning horizonLong term planning horizon
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Fayol's Management Fayol's Management FunctionsFunctions
PlanPlan OrganizeOrganize StaffStaff DirectDirect ControlControl
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Mintzberg's Managerial Mintzberg's Managerial RolesRoles
Different levels of management perform Different levels of management perform same roles but relative time spent on each same roles but relative time spent on each differsdiffers
High-level management focusHigh-level management focus– Long-range, entrepreneurial improvementsLong-range, entrepreneurial improvements– Responding to unanticipated situations Responding to unanticipated situations
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Kotter's Agenda and Kotter's Agenda and NetworksNetworks
John P. Kotter, Harvard professorJohn P. Kotter, Harvard professor Executives follow a three step strategyExecutives follow a three step strategy
– Agenda -- objectives the firm is to achieveAgenda -- objectives the firm is to achieve– Networks -- cooperative relationshipsNetworks -- cooperative relationships
» Hundreds or thousandsHundreds or thousands
» Inside and outside the firmInside and outside the firm
– Environment -- norms and values so the Environment -- norms and values so the network members can achieve agendasnetwork members can achieve agendas
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How Do Executives Think?How Do Executives Think?
Daniel J. Isenberg, Harvard professorDaniel J. Isenberg, Harvard professor Studied more than one dozen executives Studied more than one dozen executives
over a 2-year periodover a 2-year period What they think aboutWhat they think about
1. How to get things done1. How to get things done
2. A few overriding issues2. A few overriding issues
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How Do Executives Think? How Do Executives Think? (cont.)(cont.)
More concerned with process than solutionMore concerned with process than solution Thought processes do not always follow the Thought processes do not always follow the
step-by-step patterns of the systems step-by-step patterns of the systems approachapproach
Intuition is used at each stepIntuition is used at each step
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Unique Information NeedsUnique Information Needs
Mintzberg was first to conduct a formal Mintzberg was first to conduct a formal study of executive information needsstudy of executive information needs
Studied 5 executives in early 1970s Studied 5 executives in early 1970s Five basic activitiesFive basic activities
– desk workdesk work– telephone callstelephone calls– unscheduled meetingsunscheduled meetings– scheduled meetingsscheduled meetings– tourstours
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How Minzberg’s How Minzberg’s CEOs Spent TimeCEOs Spent Time
Legend:Interpersonal
Communication
Desk Work22%
Unscheduled Meetings
10%
Telephone Calls6%
Scheduled Meetings
59%
Tours3%
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Unique Information NeedsUnique Information Needs
Jones & McLeod StudyJones & McLeod Study Studied 5 executives in early 1980sStudied 5 executives in early 1980s QuestionsQuestions
1) How much information reaches the executive ?1) How much information reaches the executive ?
2) What was the information value ?2) What was the information value ?
3) What are the information sources ?3) What are the information sources ?
4) What media are used to communicate the 4) What media are used to communicate the information ?information ?
5) What use is made of the information ?5) What use is made of the information ?
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HIGHHIGH HIGHHIGH
HIGHHIGH HIGHHIGH
HIGHHIGH
AVGAVG
LOWLOW
AVGAVG
LOWLOWAVGAVG
LOWLOWAVGAVG
LOWLOW
BankCEO
VicePresidentof Tax
The Volume of Information Reaching the Executives
0
10
20
30
40
50
60
Retail ChainCEO
InsurancePresident
VicePresident ofFinance
AVGAVG
LOWLOW
Nu
mb
er
of
Tra
ns
ac
tio
ns
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Jones & McLeod Study Jones & McLeod Study (cont.)(cont.)
How much information reaches the How much information reaches the executiveexecutive– A transaction - a communication involving any A transaction - a communication involving any
mediummedium– Daily volumeDaily volume
» Varies from executive to executiveVaries from executive to executive
» Varies from day to dayVaries from day to day
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0
5
10
15
20
25
30
0 1 2 3 4 5 6 7 8 9 10
All fiveexecutives
Vice President of tax
Bank CEO
Value
Per
cen
tage
of
tran
sact
ion
sThe Value of Information Reaching
Executives
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Sources of InformationSources of Information
Some executives went down 7 levels to Some executives went down 7 levels to gather informationgather information
Sources were internal and externalSources were internal and external External sources provided the most volume External sources provided the most volume
but also the lowest average valuebut also the lowest average value
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EnvironmentEnvironment
Upper levelsUpper levels
The The executiveexecutive
CommitteesCommittees
Internal support units Internal support units and individualsand individuals
1 level down1 level down
2 levels down2 levels down
3 levels down3 levels down
4 levels down4 levels down
Legend:Legend:Percentage of Percentage of totaltotaltrans-trans-actionsactions
.43.433.83.8
.05.055.25.2
.20.205.25.2
.10.105.35.3
.06.064.34.3
.02.024.44.4
.02.027.57.5
.13.134.64.6
Average Average transactiontransaction
valuevalue16-18
The Sources of Information Reaching the The Sources of Information Reaching the ExecutivesExecutives
Media Used for Media Used for CommunicationCommunication
Written media accounts for 61% of the Written media accounts for 61% of the transactionstransactions– Computer reportsComputer reports– Letters and memosLetters and memos– PeriodicalsPeriodicals
Oral media is preferred by executivesOral media is preferred by executives– ToursTours– Business mealsBusiness meals– Telephone callsTelephone calls
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The Executive Does not The Executive Does not Control:Control:
LettersLetters MemosMemos Telephone callsTelephone calls Unscheduled meetingsUnscheduled meetings
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The Media Pie The Media Pie (in Percentages of Total Transactions)(in Percentages of Total Transactions)
WrittenWritten
OralOral
Note:Note:Percentages do not add to 1.00 due to rounding
Computer Computer Reports (.03)Reports (.03)
Noncomputer Noncomputer Reports (.09)Reports (.09)
Memos (.19)Memos (.19)
Letters (.20)Letters (.20)Periodicals (.10)Periodicals (.10)
Business Business Meals (.02)Meals (.02)
Telephone Telephone Calls (.21)Calls (.21)
UnscheduledUnscheduledMeetings (.06)Meetings (.06)
Scheduled Meetings (.05)Scheduled Meetings (.05)
Tours (.03)Tours (.03)
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Ranking of Media by ValueRanking of Media by Value
Medium Mode Average ValueMedium Mode Average Value
Scheduled meetings Oral 7.4Scheduled meetings Oral 7.4
Unscheduled meetings Oral 6.2Unscheduled meetings Oral 6.2
Tours Oral 5.3Tours Oral 5.3
Social activity Oral 5.0Social activity Oral 5.0
Memos Written 4.8Memos Written 4.8
Computer reports Written 4.7Computer reports Written 4.7
Noncomputer reports Written 4.7Noncomputer reports Written 4.7
Letters Written 4.2Letters Written 4.2
Telephone calls Oral 3.7Telephone calls Oral 3.7
Business meals Oral 3.6Business meals Oral 3.6
Periodicals Written 3.1Periodicals Written 3.1
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Information Use by Decisional Role
Disturbance handler (.42)
Entrepreneur (.32)
Resource allocator
(.17)
Unknown (.06)
Negotiator (.03) 16-23
Jones & McLeod Study Jones & McLeod Study FindingsFindings
Most executives’ information came from Most executives’ information came from environmental sources, but the internal environmental sources, but the internal information was valued higherinformation was valued higher
Most of the executives’ information came in Most of the executives’ information came in written form, but the oral information was written form, but the oral information was valued highervalued higher
Executives receive very little information Executives receive very little information directly from a computerdirectly from a computer
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Disturbance handler .42
Entrepreneur .32
Resourceallocator
.17
Negotiator .03
Unknown.06
Environment.43
Lowerlevels
.38
Internal support units & individuals .13
Upperlevels .05
Committees .02
Sources of Decisional InformationSources of Decisional Information
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Unique Information NeedsUnique Information Needs
Study conducted by John Rockart and Study conducted by John Rockart and Michael Treacy, both of MITMichael Treacy, both of MIT
Studied 16 companies in early 1980sStudied 16 companies in early 1980s Found many computer users Found many computer users Found some executives interested in detailFound some executives interested in detail Coined the term “executive information Coined the term “executive information
system”system”
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EIS FeaturesEIS Features A central purposeA central purpose A common core of dataA common core of data Two principal methods of useTwo principal methods of use
– Retrieve reportsRetrieve reports
– Conduct analysesConduct analyses A support organizationA support organization
– EIS coachEIS coach
– EIS chauffeurEIS chauffeur
From Rockart and Treacy16-27
Putting Computer Use in Putting Computer Use in PerspectivePerspective
Two key points:Two key points:
1. Computer use is personal1. Computer use is personal
2. Computer produces only a portion of the 2. Computer produces only a portion of the
executive's informationexecutive's information
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Suggestions to Improve Suggestions to Improve EISsEISs
1. Take an inventory1. Take an inventory
2. Stimulate high-value sources2. Stimulate high-value sources
3. Take advantage of opportunities3. Take advantage of opportunities
4. Tailor the system to the executive4. Tailor the system to the executive
5. Take advantage of technology5. Take advantage of technology
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Personal computer
Make corporate
information available
Informationrequests
Executivedatabase
Corporatedatabase
Electronicmailboxes
Softwarelibrary
Current news,explanations
Externaldata and
information
Informationdisplays
Executive workstationExecutive workstation
Corporate mainframeCorporate mainframe
To otherexecutive
workstation
To otherexecutive
workstation
An EIS Model
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Make corporate
information available
Informationrequests
Executivedatabase
Corporatedatabase
Electronicmailboxes
Softwarelibrary
Current news,explanations
Externaldata and
information
Informationdisplays
Executive workstation
Corporate mainframe
To otherexecutive
workstation
To otherexecutive
workstation
An EIS Model
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Dialogue Between Dialogue Between Executive and EISExecutive and EIS
Typically by a series of menus, keyboarding Typically by a series of menus, keyboarding is minimizedis minimized
Drill down to specific information needed Drill down to specific information needed from the overview levelfrom the overview level
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MEDIAL INTERNATIONAL GROUP MIGMEDIAL INTERNATIONAL GROUP MIG
N P U P0
100
200
300
400
500
N P U P
Actual/Planned
Product Profitability Product Profitability AnalysisAnalysis
Magazines in Europe have been Magazines in Europe have been performing poorly. While sales performing poorly. While sales are up, production costs have are up, production costs have soared. This is due to the labor soared. This is due to the labor disputes in the pulp and paper disputes in the pulp and paper industry. Starting next month, industry. Starting next month, costs should be back in line costs should be back in line with earlier projections.with earlier projections.
Actual Planned Variance %VarianceNewspapers 1,421,709 1,559,184 (137,475) (8.82)Magazines 490,855 518,687 (27,832) (5.37)Periodicals 1,912,564 2,077,872 (165,308) (7.96)
Actual Planned Variance %VarianceNewspapers 1,421,709 1,559,184 (137,475) (8.82)Magazines 490,855 518,687 (27,832) (5.37)Periodicals 1,912,564 2,077,872 (165,308) (7.96)
x100
An Information Display That Includes a An Information Display That Includes a Computer-Generated Narrative ExplanationComputer-Generated Narrative Explanation
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Incorporation ofIncorporation ofManagement ConceptsManagement Concepts
Critical success factorsCritical success factors Management by exceptionManagement by exception Mental modelMental model
– Information compressionInformation compression
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0
500
1000
1500
2000
90 91 92 93 94 J F M A M J J A S O N D 95 96 97 98 99
SALES - $ IN MILLIONS
AS OF NOVEMBER 1994
SOURCEGLORIA YANDERSBILL BLASS
SALESSALES
CURRENTHISTORY
YEAR TO DATE OVER/ UNDER MB
PROGRAM ACTUAL THIS MO LAST MOHERC $861.4 $30.7 $59.1C-5B 621.9 0.3 4.5OTHER 398.7 12.9 10.1 TOTAL $1,882.0 $43.9 $44.4
YEAR-END FORECAST CURRENT FORECAST Y-L O/U MB YR CURRENT O/ U PRIOR
$949.8 $28.6 95 $2102.6 $ 8.0 699.0 1.2 96 2400.0 105.0 458.8 13.6 97 3130.0 98.0 $2107.6 $43.4 98 3390.0 58.0 99 2110.0 281.0
COMMENTSCOMMENTS FAVORABLE VARIANCE PRIMARILY DUE TO TWO ADDITIONAL HERCULESFAVORABLE VARIANCE PRIMARILY DUE TO TWO ADDITIONAL HERCULESSALESSALES
FORECAST
BUDGETACTUAL
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EIS Implementation EIS Implementation DecisionsDecisions
Three Key Questions:Three Key Questions:
1. Do we need an EIS?1. Do we need an EIS?
2. Is there application-development software 2. Is there application-development software available?available?
3. Should we purchase prewritten EIS 3. Should we purchase prewritten EIS
software?software?
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Advantages of Prewritten Advantages of Prewritten SoftwareSoftware
1. Fast1. Fast
2. Doesn't strain information services2. Doesn't strain information services
3. Tailored to executives3. Tailored to executives
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EIS Critical Success EIS Critical Success Factors Rockart and Factors Rockart and
DeLongDeLong1. Committed/informed executive sponsor1. Committed/informed executive sponsor
2. Operating sponsor2. Operating sponsor
3. Appropriate information services staff3. Appropriate information services staff
4. Appropriate information technology (IT)4. Appropriate information technology (IT)
5. Data management5. Data management
6. Link to business objectives6. Link to business objectives
7. Manage organizational resistance7. Manage organizational resistance
8. Manage the spread and evolution8. Manage the spread and evolution
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Prerequisite Activities for the EIS
Purchasing andPerformance
Systems
Informationtechnology standards
Informationneeds
Analysis ofOrganization
InformationSystems Plan
Corporatedata model
EIS16-39
Future EIS TrendsFuture EIS Trends
Use will become commonplaceUse will become commonplace Decreasing software pricesDecreasing software prices Will influence MIS/DSSWill influence MIS/DSS The computer will always play a support The computer will always play a support
rolerole
16-40
SummarySummary
Executives have unique information needsExecutives have unique information needs– Need for EISNeed for EIS– Specific uses of EISSpecific uses of EIS
EIS developmentEIS development– Personal productivity softwarePersonal productivity software– PrewrittenPrewritten– CustomCustom
EIS success factorsEIS success factors
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