Different Kinds of Systems

Different Kinds of Systems

Three main categories of information systems serve different organizational levels: operational-level systems, management-level systems, and strategic-level systems. Operational-level systems support operational managers by keeping track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory. The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions through the organization. How many parts are in inventory? What happened to Mr. Williams’s payment? To answer these kinds of questions, information generally must be easily available, current, and accurate. Examples of operational-level systems include a system to record bank deposits from automatic teller machines or one that tracks the number of hours worked each day by employees on a factory floor.

          Management-level systems serve the monitoring, controlling, decision-making, and administrative activities of middle managers. The principal question addressed by such systems is this: Are things working well? Management-level systems typically provide periodic reports rather than instant information on operations. An example is a relocation control system that reports on the total moving, house-hunting, and home financing costs for employees in all company divisions, noting wherever actual costs exceed budgets. 

          Some management-level systems support nonroutine decision making. They tend to focus on less-structured decisions for which information requirements are not always clear. These systems often answer “what-if” questions: What would be the impact on production schedules if we were to double sales in the month of December? What would happen to our return on investment if a factory schedule were delayed for six months? Answers to these questions frequently require new data from outside the organization, as well as data from inside that cannot be easily drawn from existing operational-level systems. 

          Strategic-level systems help senior management tackle and address strategic issues and long-term trends, both in the firm and in the external environment. Their principal concern is matching changes in the external environment with existing organizational capability. What will employment levels be in five years? What are the long-term industry cost trends, and where does our firm fit in? What products should we be making in five years?

          Information systems also serve the major business functions, such as sales and marketing, manufacturing and production, finance and accounting, and human resources. A typical organization has operational-, management-, and strategic-level systems for each functional area. For example, the sales function generally has a sales system on the operational level to record daily sales figures and to process orders. A management-level system tracks monthly sales figures by sales territory and reports on territories where sales exceed or fall below anticipated levels. A system to forecast sales trends over a five-year period serves the strategic level. We first describe the specific categories of systems serving each organizational level and their value to the organization. Then we show how organizations use these systems for each major business function.