Sunday, March 16, 2008

Two tenets of good MIS

Two tenets of good MIS design are: 1) the information should be unbiased, and 2) the benefits to the firm of having the information should outweigh its costs. MIS that is designed to demonstrate the value to the firm of a department’s activity almost always violates both these tenets. When they produce MIS designed to demonstrate the impact on profit of their activities, it’s easy for support managers to rationalize that the MIS is cost effective and free of bias. But support activities such as those performed by building maintenance, the transportation pool, the janitorial services, etc.,. are done because they are deemed necessary to the operation of the business. They are already considered valuable and trying to put a profit measure around them will not alter that.

A janitor once tried to show the impact his work had on the bottom line of the firm. He undertook a study of the impact on employees when he failed to fill the men’s room toilet paper dispensers. Measuring the time delays caused by this lack of paper he determined that on average this would cost the firm 59 second per employee per day. He further then estimated the impact of filling soap dispensers, vacuuming the carpets, sweeping and mopping, emptying trash cans, etc.,. Ultimately his analysis showed that his work contributed close to $1.5 million per year to the firm’s bottom line.

Even if we assume the janitor’s information is unbiased and accurate। What is the value of this information? Is the firm going to go out and hire 20 more janitors and realize a $30 million benefit to the bottom line? Is the firm going to give the janitor a ten-fold increase in salary? Is management going to look at the janitor’s activities with a new sense of awe?

When a department mixes useful management information with MIS of this nature, it undermines the perceived value of the information. It is important for any support function to be careful to only produce information which will have a meaningful impact on decisions which affect the bottom line.

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