It is important to set up effective management information systems for the following reasons.
First, most organizations have grown in size and complexity. This results in management being removed from the scene of operations and hence it must rely on the information provided to them by the line supervisors about any operational problems needing attention.
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The dynamics of the environment further adds to the complexity of organizational operations. Some of the continuously changing factors affecting the volume and the type of information handled are:
a) Economic:
These factors include sudden changes in the economic structure in any part of the world, sudden energy crisis, worldwide inflation rate, higher interest rates, unemployment rate, and changes in GNP and so on. All or some of these factors may affect a given organization, thus requiring the organization to process the information generated by these changes.
b) Technological changes:
These include new technological innovations in such areas as computers, use of satellites in telecommunication, audio-visual teleconferencing and so on.
c) Social changes:
These include shift in work force from blue collar to white collar jobs, higher level of education of workers, computer networking at home, pollution problems, changes in consumer preferences and so on.
d) Political-legal:
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These include the effect of many new laws which are continuously being enacted and which affect the organizational systems. These laws include right to privacy, liability laws, anti- monopoly laws, truth in lending, truth in advertising, minimum wage standard laws and so on.
The second reason for growth in MIS is the need to control management’s decisions. More and more, large organizations are decentralizing their operations so that more information is needed about the operations of the unit managers. The performance of all units must be closely monitored and steps must be taken if the performance of any unit is below expectations. MIS can be effectively used for measuring performance and bringing about any necessary changes in accordance with the organizational goals and plans.
The third reason for the rapid growth in the field of MIS is the widespread use of computer capabilities. The computers are becoming more powerful and less expensive to operate. They have large data storage capacities and retrieval of data has become easier and faster. This has made information handling easier.