Chapter 7 Information

1. Chapter 7 Information INFORMATION CONCEPTS Information is data that has been processed into a form that is meaningful to the recipient and is of real or perceived value in current or prospective actions or decisions. The relation of data to information is that of raw material to finished product. Transformation of data into information in an information system: Data storage Processing Information Data Certain characteristics of Information are: • Improves representation of an entity. • Updates the level of knowledge. • Reduces uncertainty. • Aids in decision making.

2. Whether an entity is a data or an information, it must be transferred through communication from the ‘Source’ to the ‘Destination’ without loss of content. The general model of such communication is as follows: Source Transmitter Encoder Channel Receiver Decoder Destination Noise and distortion • The purpose of a communication system is to reproduce at the destination a message selected at the source. • A transmitter provides coded symbols to be sent through a channel to a receiver. • The message which comes from a source to the transmitter is generally encoded there before it can be sent through the communication channel and must be decoded by a receiver before it can be understood by the destination. • The channel is not usually a perfect conduit for the coded message because of noise and distortion

3. Information Presentation The data may be collected in the best possible manner and processed analytically, bringing a lot of value in the information; however if it is not presented properly, it may fail to communicate anything of value to the receiver. The methods used for improving communication are summarization and message routing. Message Summarization: • Within organizations, message summarization is commonly utilized to reduce the amount of data transmission required without changing the essential meaning of the original message. • The president of an organization cannot normally review each sale to get information for decisions. Instead the accounting system summarizes all sales into a “sales for the period” total. • The system may provide more meaningful information for decision purposes by summarizing sales by product group, geographical area, or other classification. • The level of summarization is dependent on the organizational level of the decision maker. For example, the president may need only the total sales by area, but the sales for manager for the area may need sales by sales representative and sales by product. Message Routing: • Any particular message is distributed / routed only to those individuals or organizational units which require the information for some action or decision. • This is illustrated by the transmission of copies of purchase orders to only those departments (production, distribution, billing) which take direct action based on the information on the order. • The marketing department does not require the particular information on the order but may require summarized information on a periodic basis.

4. Information could be misused by a person to achieve personal goals undermining the functional and organizational goals. This should not be allowed. In order to curb the misuse of information, a control is exercised on the content of information and its distribution. Methods to Avoid Misuse of Information

5. Bias in Information • While choosing the appropriate method of communicating information, a care has to be taken to see that it is not biased. • This bias enters because people try to block a sensitive information which affects them. To overcome this problem, a formal structure of organization should be adopted and the type of information and its receiver should be decided by the top management. • The presentation of the information will generate a bias and may influence the user. For example, if the information is presented in an alphabetical order and if it is lengthy, the first few information entities will get more attention. • Disregarding its bias in information, it must have certain attributes to increase its utility. Attributes of information

6. QUALITY OF INFORMATION • Even if information is presented in such a way as to be transmitted efficiently and interpreted correctly, it may not be used effectively. • The quality of information is determined by how it motivates human action and contributes to effective decision making. • The quality of information can be measured on four dimensions: utility of information, information satisfaction error and bias Utility of Information Four information Utilities are: • Form Utility: As the form of information more closely matches the requirements of the decision maker, its value increases. • Time Utility: Information has greater value to the decision maker if it is available when needed. • Place Utility (physical accessibility): Information has greater value if it can be accessed or delivered easily. • Possession Utility (organizational location): If the information is possessed by the manager who needs it, then its utility is the highest. Information has a cost as well as a value associated with it, in terms of both accuracy and utilities. If the cost of acquiring information exceeds its value then, there are two alternatives: • Increase its value by increasing accuracy and/or increasing utilities • Reduce its cost by decreasing accuracy and/or reducing utilities

7. Information Satisfaction • Information Satisfaction is the degree to which the decision maker is satisfied with the output of the formal information system. • The degree of satisfaction would determine the quality of the information. • If the information queried by the decision maker is readily available, then satisfaction with the information system is reinforced. • If it is not, the decision maker must conduct an expanded search for the required information; frustration or dissatisfaction with the formal information system is reinforced. Errors and Bias • Information varies in quality because of bias or errors. • Bias, is caused by the ability of of individuals to exercise discretion in information presentation. • If the bias of the presenter is known to the receiver of the information, he or she can make adjustments. The problem is to detect the bias, the adjustment is generally failry simple. • Errors may be a result of: • Incorrect data measurement and collection methods • Failure to follow correct processing procedures • Loss or non-processing of data • Wrong recording or correction of data • Incorrect history(master) file or (use of wrong history file) • Mistakes in processing procedure (such as computer program errors) • Deliberate falsification

8. The difficulties due to bias may be handled in information processing by procedures to detect and measure bias and to adjust for it. • The difficulties with errors may be overcome by: • Internal controls to detect errors. • Internal and external auditing • User instruction in measurements and processing procedures, so users can evaluate possible errors. Parameters of Quality • Information is termed as of good quality if it meets the norms of impartiality, validity, reliability, consistency and age. Impartiality: An impartial information contains no bias, and has been collected without any distorted view of the situation. The partiality creeps in, if the data is collected with a preconceived view and a predetermined objective or a certain motive. Validity: Validity relates to the purpose of the information. The validity also depends on how the information is used. For example, if the quality of the manufactured product is deteriorating and it is decided to select the causes of poor quality, then one must collect all the possible causes which may affect the quality. Quality is a function of the raw material, the process of manufacture, the tools applied, the measures of the quality assessment, the attitude of the people towards the control of quality. However, the information collected talks only about raw material and the process of manufacture, then this information is not sufficient and hence it is not valid for all the decisions which are required to control the quality.

9. Reliability:It is connected to the representation and the accuracy of what is being described. For example, if the organization collects the information on the product acceptance in the selected market segment, the size of the sample and the method of selection of the sample will decide the reliability. If the sample is small, the information may not give the correct and a complete picture and hence it is not reliable. The reliability is also affected if data is not collected from the right source. Consistency: The information is termed as inconsistent if it is derived from a data which does not have a consistent pattern of period. Somewhere the information must relate to a consistent base or a pattern. Age: If the information is old, it is not useful today. If the information is old, it does not meet any characteristics of the information, i.e., the update of knowledge, the reduction of uncertainty, and the representation. CLASSIFICATION OF INFORMATION John Dearden of Harvard University classifies information in the following manner: Action versus no-action information • The information which induces action is called action information. • The information which communicates only the status of a situation is a no-action information. • ‘No stock’ report calling a purchase action is an action information but the stock ledger showing the store transactions and the stock balances is a No-action information.

10. Recurring versus non-recurring information • The information generated at regular intervals is a recurring information. • The monthly sales reports, the stock statements, the trial balance, etc. are recurring information. • The financial analysis or the report on the market research study is a non-recurring information. Internal versus external information • The information generated through the internal sources of the organization is termed as an internal information. • The information generated through the Government reports, the industry surveys, etc. is termed as an external information, as the sources of the data are outside the organization. The information can also classified as under, in terms of its application. Planning Information Certain standards, norms and specifications are used in the planning of any activity. Hence, such information is called the planning information. The time standards, the operational standards, the design standards are the examples of the Planning Information. Control Information Reporting the status of an activity through a feedback mechanism is called the control information.when such information shows a deviation from the goal or the objective, it will induce a decision or an action leading to a control.

11. Knowledge Information A collection of information through the library reports and the research studies to build up a knowledge base as an information source for decision making is known as knowledge information. Information can also be classified based on its usage: Organization Information: When the information is used by everybody in the organization. Database Information: When the information has a multiple use and and application. Functional or Operational Information: When the information is used in the operations of a business. METHODS OF DATA AND INFORMATION COLLECTION • Observation • Experiment • Survey • Subjective Estimation – In the absence of all the three above, the expert opinions may be called to collect the information. • Transaction Processing – The data exists but needs a processing and an integration for reporting. • Publications - Low cost but may project or emphasize one view or the other. Information may be lopsided. • Government Agencies – available but may not be directly useful not knowing the details of collection analysis and is usually not the latest.

12. VALUE OF INFORMAION • The decision theory suggests the methods of solving the problems of decision making under certainty, risk and uncertainty. • Decision making under certainty assumes perfect information as to outcomes; risk assumes information as to the probability of each outcome but not which outcome will occur in any given case; and uncertainty assumes a knowledge of possible outcomes but no information as to probabilities. • The decision maker feels more secured when additional information is received in case of decision making under an uncertainty or risk. • The decision theory stipulates that the value of the additional information is the value of the change in the decision behavior, resulted by the information, less the cost of obtaining the information. • If the additional information does not cause any change in the decision behavior then the value of the additional information is zero. • The information is called a perfect information if it wipes out uncertainty and risk completely. The value of the additional information making the existing information perfect (VPI) is: • VPI = ( V2 – V1 ) – ( C2 – C1) • Where V = value of the information. • C = cost of obtaining the information. • V1 and C1 relate to one set of information • V2 and C2 relate to a new set of information • If the VPI is very high, then it is beneficial to serve the additional information need.

13. In MIS, the concept of the value of information is used to find out the benefit of a perfect information and if the value is significantly high, the system should provide it. • At the higher levels of management, the value of the additional information is very high, because the decision is mainly strategic in nature. • The decisions at the operational and the middle management level are such that the value of the additional or new information is low. GENERAL MODEL OF HUMAN AS AN INFORMATION PROCESSOR • A simple model of the human as an information processor consists of sensory receptors (eyes, ears, nose, etc.) that picks up signals and transmit them to the processing unit (brain with storage). The results of the processing are output responses (physical, spoken, written, etc.) which may be a decision, an action or atleast the recognition of an event for future use. Hence a manager can be said to be an information processor. Model of human as information processor Memory Filter Input from sensory receptors Output responses Mental processing Channel Channel

14. While processing the information for a managerial response, the manager also uses accumulated knowledge from memory. • The capacity of the human to accept inputs and produce outputs (responses) is limited. When the human capacity for processing information is surpassed, information overload can cause the response rate to decrease and performance is degraded. The manager in such a situation adopts the method of filtering the information. • Filtering is a selection process in which some inputs are blocked and prevented from entering processing • The filter may result from: • Frame of reference of the individual, based on prior knowledge, experience, background, customs, etc. • Normal decision procedure – decision procedures identify relevant data and therefore provide a filter to screen factors considered unnecessary to the decision. • Decision making under stress – the stress of making decisions under time pressure will cause filtering to increase, thereby reducing the amount of data to be processed by the decision maker. For example, a production line supervisor will, during a period of crisis and stress, concentrate on the most important problems and will not accept stimuli that are related to less important problems. • The concept of frame of reference applies to both input and processing. To develop a new processing routine for each new stimulus would use processing capacity and reduce the stimuli that could be processed. • Over an extended period of time, and on a continuing basis, the brain establishes patterns or categories of data which define the human understanding of the nature of environment. These patterns or frames of reference are called into use in processing the input, thereby reducing processing requirements.

15. Use of input data, stored data, and frame of reference to process a decision Data Storage Storage for frames of reference Input data Mental processing Decision • Besides blocking unwanted data. Filtering may work to block data that is inconsistent with an established frame of reference. • This factor and the natural limits on the human sense receptors may lead to information perception errors such as omissions, distortions, and inferences. • The writer of a report may mean one thing; the reader may perceive another. These errors of perception increase uncertainty as to the message being transmitted which reduces the information content. Manager’s Individual Differences • Each manager has his own style, a method to perceive the data, organize and process the same as per his frame of reference, confidence in the decision procedures and the time available for the decision making. • Even though these individual differences affect information system use and satisfaction, it is frequently not possible to design individually tailored systems. The systems have to be general enough to cover more than one user.

16. The reasons for individual differences is as given below:

17. SUMMARY OF INFORMATION CONCEPTS AND THEIR IMPLICATIONS FOR INFORMATION SYSTEM DESIGN