As Mintzberg said, the manager is the information nerve center of the organization; he becomes the information epicenter as he brings together the information of his organization and becomes the person best informed about his operations and his environment. However, his information needs will depend on the nature of his managerial functions, i.e., the type of decisions he can make according to his hierarchical level.
The types of information that managers need, depending on their hierarchical level, are as follows:
Information levels, Strategic information.
Top management will need information that will allow them to determine the degree of compliance of the company with the needs of the environment. This means that they basically need external information (what customers want, what suppliers want, etc.), but of course they also need internal information (what resources are available or lacking to respond to the needs of the environment). This information must reach them properly analyzed, synthesized and with high added value.
Among the internal information needs of a strategic nature that may be of interest to the manager are
Annual budgets.
One and five year forecasts.
Three- and five-year trend analyses.
Five- and ten-year strategic plans.
General management by objectives.
Special programs such as Total Quality Management, Health and Safety.
Information levels, tactical information.
Middle managers need a balanced mix of internal and external information, giving real relevance to the opportunism with which information is obtained. Much of their time is spent gathering information and reporting on data from both primary sources (customers, suppliers, competitors, government agencies, etc.) and secondary sources (market research, competitor reports, magazine articles, the Internet, etc.). In some cases, they also access higher value-added information sources.
Today’s managers are increasingly interested in understanding the external factors and causes that affect the company’s profitability. Modern planning techniques used by managers include a tactical element focused on the short term (one or two years) and designed to counteract any competitive action that might jeopardize the position achieved in the market. Tactical planning also takes into account changes in external variables such as exchange rates, stock prices, and financial positions.
As an example, here are some of the tactical information needs of managers:
Market share.
Competitive pricing.
Company performance/profitability statistics.
Competitive market information.
Exchange rates.
Interest rates.
New services/innovations, e.g., market reaction to new product introduction.
Stock price.
Special needs for specific industries, e.g. product pricing, legislative changes, etc.
Information levels, operational information.
Lower-level managers need information almost exclusively about the day-to-day operations of the company. This information is obtained directly from within the company (operational reports), from external primary sources (information on the maintenance or repair of machinery used in the production line, provided directly by the manufacturer of the same) or from external secondary sources (magazines or trade fairs specialized in each operational area). For the manager, the ability to react immediately to any problem that may arise in the daily activity is as important or more important than having strategic or tactical information. Operational information needs can be classified as follows
Daily information. In general, managers are very interested in having daily information on those areas (sales, cash, inventory and production) that allow them to send warning signals about any negative deviation that may affect the company’s profitability. The types of information that may be of interest to the manager are daily performance indicators in absolute terms (pesetas, units, tons, etc.) and in graphical terms for areas such as
Sales.
Sales returns.
Cash receipts and payments.
Inventory levels.
Production statistics.
Factory results.
Information levels, permanent discretionary information.
For the manager, the use of permanent weekly or monthly information, elaborated on the basis of key management factors, both quantitative and qualitative, affecting the profitability of the company, is of the utmost importance. Managers’ needs for this type of information, expressed in absolute and graphical terms, are as follows
Working capital ratios.
Investments.
Accounts Receivable.
Accounts payable.
Cash flow ratios.
Personnel expenses.
Customer statistics.
Significant promotions, e.g. penetration levels, level of new business versus cost of origination, etc.
Major project tracking.
In general, management reporting should provide a complete picture of business performance, highlighting gaps and overlaps in roles and responsibilities, measuring what is being done, and taking a cross-functional and cross-process approach.
The top management information system should report on the strategic information of the business, which should include all the critical success factors that determine the achievement of strategic objectives, the basic activity indicators of those activities considered critical to the business, and the set of indicators that reflect the evolution of the critical elements of the environment (Coopers & Lybrand, 1993; p. 290).
The information system must be flexible enough to adapt as quickly and efficiently as possible to changes in the strategic objectives, the critical activities of the company and the critical elements of the environment, in order to redesign the entire system of indicators that evaluate and assess the aforementioned elements, adapting them to the new requirements.
The availability of environmental information is a primary necessity because of its impact on the company’s performance. This information must be systematized and included as an essential element of the information system for the top management of any company, focused on the achievement of strategic objectives.
How should managers be informed? Managers spend much of their time digesting and extracting the relevant information from the many reports they receive, and then processing this information to obtain ratios, trends, etc. Then, with the information obtained, an analysis is performed to determine which of the evaluated factors are not meeting the established goals. Finally, if the manager has time, he will try to complete his analysis by reworking the information to determine his short and long term forecasts.
In all likelihood, the manager’s analysis will be more useful for knowing what decisions should have been made than for making decisions. For this reason, with the help of the new information technologies, and more specifically with the help of E.I.S. systems, the manager must demand certain qualities from the information he receives, which are
Easy to use and attractive to the manager.
Fast and with reporting quality.
Efficient in the analysis of the information.
Concise, relevant, with identified activity indicators.
Easy to detect deviations.
Possibility to drill down into the details of the information.
Capacity for graphical presentation.
Possibility of connection to data sources.
When should the manager have access to the information? The information must be received by the manager at the right time. The periodicity with which it is received must be in line with the need to have it available for each type of analysis, in time for decision making, and with a vision of the future and not with a historical vision.
In conclusion, the information needs of managers vary according to the type of work they do and the objectives they pursue.
In the absence, until recently, of an executive information system, executives have had a preference for current information obtained informally (telephone, impromptu meetings, etc.), rather than routine information provided by their subordinates, due to its lack of usefulness. Thus, information technologies, together with the organization’s analyst, must provide an effective information system for top management, designed for executives.
Therefore, we conclude that the company must have an information system for the top management, before carrying out an analysis of the information needs of the executives through the critical success factors, based on the new information technologies (E.I.S. – Exexutive Information Systems, translated as Information Systems for Executives or for Top Management), which is mainly nourished by external information.
Finally, the information needs of managers are directly related to the hierarchical level at which they find themselves, since this determines the type of decisions they can make. Furthermore, each hierarchical level requires a specific combination of internal and external information. And that the information to the management, apart from the characteristics that it must have, must give a complete vision of the performance of the business, highlighting the indefinitions and the overlaps that originate in the functions and responsibilities, evaluating what is carried out, with a multifunctional and process approach.
The information must be presented to the executive in a simple and attractive way, quickly and with reporting quality, effective in the analysis, concise and relevant, with the critical success factors clearly established, with the possibility of deepening the information, with graphic representation capacity and with a great capacity of connection to data sources. This information must be received by the executive at the right time, with the periodicity determined by each decision-making process and with a vision of the future.