Executive Information System

Definition :An executive support system is an information system at the strategic level of an organisation designed to address unstructured decision making through advanced graphics and communication.

Features :Based on the definition of the executive information system (EIS), we can identify their features as follows. 1. EIS are relevant for top management of an organisation, the level at which strategic decisions affecting the organisation as a whole or its major parts are made. 2. EIS cut across the functional areas. These systems may desire data from different functional areas but the decisions that are made by integrating these data are not meant for any specific functional area but for the organisation as a whole. 3. Since the top management relates the organisation with its environment, often EIS combines both external and internal information. While external information is related to customers, suppliers, competitors, and government policies. Internal information is related to the working of the entire organisation. 4. Most of the time, information generated through EIS is in the form of summary, reports and graphics. These forms of information helps the executives to draw conclusions about the underlying phenomena quickly without wasting any time. 5. Executives are helped by EIS coaches and chauffeurs. EIS coach is a member of the executives staff, information service, or an outside consultant who provides help in setting up the EIS. EIS chauffeur is a member of the executives staff who operates the equipment for the executive.

# Components of Executive Information System :

EIS has the same components like any other information system. 1. Users

2. Database 3. Software 4. Output However, the nature of all these components is different because of different requirements of EIS.

Database
Data warehouse Datamart

Executive

Data mining

Executive s staff

Query Output

EIS Software

Executive :- An executive is the end-user of output desired from EIS. Though executives may retrieve desired information on their own, specially when database contains information. Most of the executives prefer to get this job done by their staff members either because they are busy or they do not prefer to work on computer. Thus, executives staff personnel work as intermediaries between executives and EIS. The job of these personnel is to retrieve information , making analysis, and interpret results to the executives. Thus executives do not require to know how their staff personnel uses the EIS to get the desired information.

Database :Database for EIS is both comprehensive as well as specific*. It is comprehensive, in the sense that EIS requires data about the environmental factors customers, suppliers, competitors, government policies towards business & technological development.

*Database for EIS is specific because relevant data for EIS must be stored in concise form for easy retrieval and protecting them from unauthorised access, because a significant portion of data maybe sensitive and needs confidentiality. Data warehouse :- It is a collection of current and historical operational data stored in EIS. The data can be extracted from a number of sources, and collected, integrated and stored in a relational database for quick and easy access without affecting the data of the underlying transaction processing system. Data in a warehouse maybe updated daily, weekly, tri weekly or monthly, depending on the type & the need of data users. *Data warehousing, a process of creating data warehouse, has become quite popular because of many reasons. First, in a large organisation, data are spread at various points in different forms. This produce difficulty in locating and retrieving data at a time when these are needed. Second, in most of the organisations, information systems are developed as evolutionary process with application - specific databases. With the result, an organisation may have a number of databases, consisting of files, hierarchical databases, and relational databases*. This results into difficulty in data location & retrieval. Data warehousing overcomes this difficulty. Data Mart : is usually a customised database as per the requirement of a specific type of users. Data marts are created generally from data warehouse which contain data to be used for a variety of purposes & by a variety of users. For creating a data mart, relevant data are extracted from data warehouses and are earmarked for specific users. EIS data marts contains those data which are relevant for executives for strategic management that involves strategic planning and strategic control. Data are kept in precise form and whenever details of any issue are required, these are mined from data warehouses.

*Data mining is an activity which involves finding relevant data from data
warehouses. It is just like normal mining activity in which minerals are extracted from mines. Data mining attempts to discover various patterns which are followed by available data automatically. These patterns are represented as a set of rules which forms the basis for decision making.

EIS software :EIS software is used for data manipulation from database. It has three categories personal productivity software, prewritten EIS software, customised software. Personal Productivity Software : This software is a general purpose software that any one can use to develop his own applications. Many of the software system relevant for DSS such as spreadsheet, analysis package, model generator etc can be used for EIS too, though the orientation in two systems differ. While for DSS, such tools are used primarily for modelling and analysis in a

fairly narrow range of decision situations, EIS use them to provide status information about organisational performance. Pre written EIS software : This software is specially designed to meet the information needs of executives. Such a software generally provides compression and drill down facility. Some software developers have developed pre written EIS software which contains external information in the form of industry trends, competition analysis, proposed legislation changes and so on. This software enables the users to analyse the performance of the organisation. Customised EIS software : If the organisation does not want to use prewritten software, it can develop EIS software on its own, according to its specific requirements. Such software is more useful as compared to other software alternatives. However, development of customised EIS software is a costly alternative both in terms of money and time.

NOTES :
1. Strategic Planning : The concept of strategic planning depends on the concept of strategy itself. Strategy is a way in which the organisation reacting to its environment, deploys its principal resources and marshals its main effort to pursuit of its purpose. A strategy not merely a course of action but unique course of action that differentiates an organisation from others on the basis of the way its business is being conducted. This unique course of action emerges from meticulous strategic planning which, in turn, is supported by relevant information generated from EIS. Strategic planning refers to the formulation of a unified, comprehensive, and integrated plan which aims at relating to the organisational strength to the challenges of the environment. Depending on the nature of strategic planning that an organisation puts in pursuing its objectives, data requirements for EIS are determined. For example, if the organisation going for growth through takeovers and mergers interested of going through grass root projects, it requires information about the possible candidates for takeovers, & information is mostly external oriented. The nature of information requirements for strategic planning can be seen in terms of strength, weakness, opportunity, and threat analysis (SWOT analysis) Strength is an inherent capability of the organisation which it can use to gain competitive advantage over its competitors. Weakness it can be used to inherent constraint or limitations of the organisation which creates strategic disadvantages to it.

Opportunity is a favourable condition in the organisations environment which enables to strengthen its position. Threat is an unfavourable condition in the organisations environment which causes risk for, or damage to the organisations position.

Strategic Control :Another area for which EIS should provide information relates to strategic control. Though all managers in an organisation perform control activity, they are primarily concerned with exercise of control in their respective areas. The control report for these managers are in detailed form. Strategic control is relevant for overall organisation and is based on management by exception which is a system of identification & communication of these signals to an executive where his attention is required. Strategic control involves exercising three types of controls strategy implementation control, financial performance control, and social performance control.

Strategy Implementation Control :Strategy implementation means putting the strategy into action. Before the implementation of a strategy, it is only in the form of a conceptual framework. Eg, a decision about entering a new business which is a strategic decision may remain a concept unless the suitable actions are taken to enter that business . strategy implementation involves securing various resources (financial as well as human), organising these resources & directing the use of these resources where these are required.

Financial Performance Control :Financial performance control, or simply referred to as financial control, is relevant for these aspects of business operations whose outcomes are expressed in monetary terms. It can be applied at operation level as well as at overall organisation level though techniques involved are different. An executive is more concerned with financial control at overall organisation level. At this level, techniques that are used for financial control are : 1. Budget Summaries & report 2. Profit and loss control 3. Return on investment.

*Budget Summaries & report :

Budgetary control is practiced almost in all organisations. It is a process of comparing the actual results with the corresponding data in order to approve accomplishments or to remedy differences by either adjusting the budget estimates or correcting the cause of the differences. This exercise is exercised at all levels of management but emphasis differs on different levels. While at lower levels, minute details of budgetary data are more relevant, at the top level summary budgets are widely used for overall control. It is better that budgetary control is exercised at regular intervals rather than waiting for the end of year control. EIS can provide information for preparing budget summaries and reports indicating deviations between the budgeted data & actual results.

*Profit and loss control :

P & L statements for the organisation as a whole serve important control purpose, largely because they show the constituent parts of profit and loss for a given period. Therefore, they provide the basis for determining the immediate revenue or cost factors that have accounted for success, or failure. For exercising P & L control, it is better to prepare performance profit and loss statements that show the projected profit and loss. A comparison of actual profit and loss with projected profit and loss gives better understanding of where the organisation lacks in terms of its efforts. EIS should provide such a comparison in the form of reports.

*Return on Investment :
Return on Investment judges the efficiency of an organisation by the amount of profit it earns in relation to the amount of its investment. ROI does not emphasise absolute profit for judging the performance of the organisation, rather the amount of profit is related with the amount of facilities or capital invested in the organisation. The objective of the business, accordingly is not to optimise profit but to optimise returns on capital invested for business purposes.

*Social Performance Control :

Every organisation is an organ of the society in which it operates. Therefore, it has to discharge its obligations to the society, called social responsibility. Most of the organisations set their social objectives, either explicitly or implicitly depending on the organisational practices. Social performance control deals with assessing the extent to which the organisation is achieving its social objectives. Social performance of an organisation can be measured in terms of social cost benefit analysis. This analysis is based on evaluating benefits that accrue

to society through various activities that an organisation undertakes and cost of undertaking such activities. While cost can be measured in terms of money, same is not the case with social benefits because quantitative measures are hard to apply to measure these benefits. Therefore some qualitative criteria has to be applied which measure the level for satisfaction which society derives from various social activities undertaken by the organisation. Such an exercise is known as social audit and the report that an outside agency prepares is known as social audit report.

DEVELOPING EIS :
Developing computer-based EIS is more tedious as compared to other information system because requirements of EIS are very fluid as most of the data are drawn from external environment. A portion of EIS can be computer based which can be developed through the process consisting of the following steps :1. Defining EIS requirements. 2. Designing EIS database. 3. Developing/ procuring EIS software. 4. Designing EIS output.

Designing EIS requirements :

EIS requirement is the critical aspect of developing computer-based EIS because of two reasons First, executive information requirements are quite varied because each executive is responsible to relate his organisation with its environment. Because of heterogeneity and variability of environment, executive information requirements cannot be defined so precisely as EIS developers would like it to be. Second, only a part of EIS can be computerised. Computerisation beyond that level is not cost effective. If computerisation goes beyond that optimum level, the marginal cost of generating information will be more than the marginal value of information, hence making the whole EIS ineffective. The following steps are suggested for determining EIS requirements : 1. Identify a set of issue-generating critical events. 2. Elicit from the executive, his assessment of the impact of the critical events on his goals & derive a set of critical issues. 3. Elicit from the executive three to five, indicates which can be used to track each critical issues. 4. Elicit from the executive, a list of potential information sources for indicators. 5. Elicit from the executive, exceptions heuristics for each indicators.

Designing EIS database :

Based on the EIS requirements, EIS database can be designed. A basic feature of EIS database should be its brevity followed by details at successive levels. This type of database arrangement makes easy retrieval of information. When detailed description of an item of summary reports is required, such a detail should be available at a subsequent stage. While designing EIS database, care should be taken that it is protected from unauthorised access as EIS database contains many information of sensitive and confidential nature.

Developing/Procuring EIS software :

EIS may use either software package available in the form of personal productivity software, prewritten EIS software or customised EIS software can be developed. Each alternative has its own pros and cons. While software packages

are less costly alternative, they may not necessarily meet the requirements of specific organisations. Customised EIS software meets these requirements but its development is a costly affair.

Designing EIS output :

While designing EIS output considerations should be given to individual executives tastes and styles. Each executive has his own styles and way of working and consequently, the linking for format of information in textual form supported by elementary graphics in the form of bar charts and trend lines. Against these, many executives prefer to have information in tabular form supported by more complex graphics. Therefore, EIS output should match with individual executives linking.