Who am I? The Presenter Group 6 Mr. Chida Jones Bsc (Hons) Accountancy Question: The goal of any part of the information system is to help the decision-making process. Robert Anthony developed an approach for categorizing the decision-making activities within an organization. Having identified three levels of such activities, he stated that decision making differs so significantly between these levels that different information systems are needed at each level. Give these levels and the decision problems for each level, a tabular presentation is encouraged and a write up of the information needs an accounting information system should provide for such decisions to be made. Decision makers are found at all levels in an organization, and this is a central aspect of all management roles. All managerial activities revolve around decision making. In attempting to categorize how and where information is used in an organization to support decision making, it is useful to define a taxonomy of terms. One good starting point for building a framework is the Anthony Triangle, which diagrams operational activities, management control, and strategic planning. Goals, policies middle management Strategic Tactical/ management control Execution Operational 1. Strategic Planning activities A priority for top management The process involves: Definition of goals, policies Determination of organizational objectives. formulating strategic organizational goals and undertaking Allocating task assignments and providing resources to those employees (execution) Testing realization of the goals (evaluation) Undertaking corrective/ preventive measures if goals are not insufficiently realized (adjusting) 2. Management Control Activities are primarily the concern of an organization's middle management. It refers to the acquisition and efficient use of resources in the accomplishment of organizational goals Managers assure that resources are obtained and used effectively and efficiently to accomplish organizational goals and objectives identified by top management. The decisions made by middle management are sometimes called tactical decisions. 3. Operational control Activities are implemented by department heads and supervisors, the lowest level managers in an organization. It refers to the effective and efficient use of existing facilities and resources to carry out activities within budget constraints. Their aim is to achieve those specific tasks assigned to them by middle managers. Decision problems There are three types of decision problems which management at the three levels face namely: 1. Unstructured problems 2. Structured problems 3. Semi-structured problems Unstructured problems Problems for which there are no precise solution techniques. Either the data requirements are uncertain, the procedures are not specified, or the solution objectives have not been fully developed. Top management usually face these problems. Many alternatives are available but there is little guidance concerning the best one to pursue, for example, among all the possible new markets or new products top management must choose those that the organization can deliver successfully within the existing human and financial constraints Structured problems Problems in which data, procedures and objectives are known with certainty. They are well suited for traditional data processing techniques. These are usually faced at the operational level. Semi-structured problems Usually faced by middle managers and cannot be easily classified as structured or unstructured. Middle managers receive a set of objectives but have some freedom in choosing how to attain them. Decision Problems and managerial activities levels structured Operational control Management control Strategic planning Accounts payable Responsibility accounting Tanker fleet mix Cash disbursement Semi-structured Inventory control Warehouse and factory location Budget preparation Mergers and acquisitions Production scheduling unstructured Cash management Personnel management New products R&D planning Characteristic Levels Anthony’s Taxonomy Operational Tactical Strategic Information users Operational staff and Middle managers, supervisors business analysts Executives, senior analysts Nature of decisions Structured Semi-structured Unstructured Scope Narrow Intermediate Broad Term focus / Time Horizon Day-to-day, usually with immediate ramifications Within the current 12-month plan Future-oriented (2 year +), with trend analysis over time Characteristc Levels Anthony’s Taxonomy Operational Tactical Strategic Information systems Transaction oriented (OLTP) Online analytical systems (OLAP), Decision Support Systems (DSS) Online analytical systems (OLAP), Executive Information Systems (EIS) Data relationships, source Within datamart/ subject area, internal Includes some related datamarts, internal Cross enterprise integration plus external Data refresh rate Daily or more often By relevant business period or cycle Annually or by event Characteristic Levels Anthony’s Taxonomy Operational Tactical Strategic Summarization Detailed Exception and detailed Multidimensional with drill-down to detail Examples Managing expenses, cash flow, student interaction, fee collection, resource allocation Choosing instructional technologies, recruiting, personnel development, strategy implementation, project management New programs, markets, restructuring, strategic planning and prioritization Information needs provided by AIS for each decision problem at each managerial level. Unstructured problems Information systems that solve unstructured problems are largely predictive, long term forecasts about technology, demographics and market demand and that it consists of estimates that are relatively inaccurate and highly summarized. Information system that are used to solve unstructured problems are called Decision Support Systems. Information systems developed at the strategic level often decision specific, once a decision is made, information system used for it is no longer applicable in its current form. For subsequent decisions, the system must be modified or discarded. Structured problems The information systems needed for structured problems are different because they concentrate on processing historical data from within the organization. These systems are highly detailed and in that, they are both historical and internal and are usually inaccurate. Structured problems (cont…) Examples of information systems used in solving structured problems are transaction processing systems and the responsibility reporting system. Transaction Processing System It provides information needed by clerical managerial personnel at the operational level. Because it is structured, the organization can describe standard processes for these systems which are structured. Responsibility Reporting System It summarizes historical data on a periodic basis and provides the bottom-up information flows Semi-structured problems Information systems used for semi- structured decisions tend to combine the characteristics of systems used for structured and unstructured decision. The budgeting system is an example of a system used to solve semi-structured systems. Semi-structured problems (cont…..) Budgeting System It allows top management to communicate corporate objectives to all managers in the organization. It provides for the top-down information flows. A budgeting system utilizes both internal and external data, is predictive in nature, and involves estimates that are frequently imprecise thus, it is used in semi-structured decision processes involving management control activities. Conclusion while it is difficult to come up with a satisfactory taxonomy of knowledge types, “the question of how we are to arrive at a taxonomy of our problem domain that would be satisfactory” is even more difficult. Therefore, for a specific problem domain, such as managerial problem solving, one approach is to use Anthony’s taxonomy. Questions For this Presentation Collect the soft copy from Simon THANK YOU TATENDA SIYABONGA REFERENCES Boockholdt, J. L (1999) Accounting Information Systems: Transactions Processing and Controls, New York: McGraw-Hill. Hall, J. A (2008) Accounting Information Systems, 6th Edition, Ohio: Cengage Learning. Vaassen E.H.J (2002) Accounting Information Systems: A Managerial Approach, West Sussex: John Wiley& Sons Ltd.