Acoff's Management Misinformation Systems

Brian Gros

Ackoff’s Management Misinformation Systems

ACCT 326 7380

UMUC

July 6, 2015

Abstract

Ackoff’s 1967 article identifies five assumptions that designers of management information systems (MIS) commonly make. Ackoff argues these assumptions are, in most cases, wrong, and often lead to deficiencies in the systems. Although written 50 years ago, these assumption still apply today and Ackoff’s arguments to each are still valid. The internet and advances in technology has made it easier to obtain information; however, not all the information is relevant. Today’s managers have a better understanding of the information they need; however, a lack of a proper decision model, limits managers ability to anticipate all of the information needed. Even with the needed information, managers still have to adapt to changes in the decision model and deal with unforeseen issues and misunderstanding of management information systems (MIS). In the fast paced, global, business environment of today, it is not good enough to know how to use MIS, managers and accountants must understand how MIS works and be able to manage them effectively.

Assumptions

 In 1967, Russel Ackoff identified five common assumptions regarding management information systems. The first assumption states that Management Information systems (MIS) are based on the lack of relevant information that managers have to operate off. The second assumption claims that MIS designers determine information inputs based off managers request, because managers know the information they need and want. Assumption 3 says that, managers, if provided with the information they need, will use information effectively. The fourth assumption claims that with improved internal communication channels, managers can make more efficient and effective decisions which leads to a better overall performance for the organization. The fifth and final assumption says that managers do not need to understand how an MIS functions, only how to use the system (Ackoff, 1967).

 Ackoff disagreed with these assumptions and believed they often led to deficiencies. He suggests that management information systems should be set in a management control system. A  way of designing an MIS would start with identifying the different managerial decisions that need to be considered and the MIS would impact them. This can be done by using a decision flow diagram. The management team must be involved during the system design phase in order to encompass all aspects of the decision process and ensure the system is able to perform all the required task. Each decision requires a separate decision model, which generate a separate list of information requirements to aid in the decision making process. Consideration needs to be made for the system to identify and effectively handle duplicate information. (CEMA, 2008)

Ackoff’s Five Assumptions

First Assumption: Most managers operate under the deficiency of lack of relevant information.

Ackoff states that managers seem to suffer from an “overabundance of irrelevant information” and a “lack of relevant information”. Ackoff goes on to suggest that out of all the information available to management, only a small amount is actually useful (1967). I believe this is truer now than it was in 1967. Advances technology and the rapid growth of the internet, put an abundance of information at our fingertips. The downside, anyone can post information online. Online sources do not have to be verified, making “irrelevant” information, more irrelevant. On the other hand, the internet gives managers access to a list of relevant databases, that span across the globe, that provide relevant information that can be used to make logical and effective decisions (Stahl, 2006).

The relative importance of information depends on the person using it and the decision that it to be made from it.  Information needs to be disseminated on an as needed basis according to assigned duties. In addition, information is only relevant at certain times. Information pertaining to setting up initial accounts is not useful in analyzing current transactions; however,   that same information may become relevant for in a different scenario (CIMA, 2008).

Second Assumption: Managers know what they need and want.

Ackoff contends that managers cannot know the information they need because they do not know all of the decisions they will have to make or the situations surrounding those decisions (Ackoff, 1967). It is difficult to provide relevant information without knowing the details of the decision to be made. I believe that management today, has more knowledge of the decisions they are required to make than managers have 50 years ago. Decisions have to be made at a faster pace and managers require as much detail of the decision model as possible. Srinivas says that managers need to take time to define the problem, address the issues to be considered and decide what decisions need to be made. Once management has identified these, they can then define what information they need and what sources the information will be pulled from (2015).

Third Assumption: “If managers are provided with the information they need, they will use it effectively”

Ackoff’s argues that in there are too many variables in the decision making process for managers to use given information effectively. Ackoff continues to say that “judgement and experience” will help to a certain extent; however, they will not be very successful (Ackoff, 1967). I believe that experience play a key role in how managers are able to use the information they need. Experience brings an understanding that unforeseen things are going to come up and most experienced managers will plan for certain risk. Today’s managers have to include the different probabilities into their planning as well as identify potential risk that will arise in the decision making process. Needed information alone will not lead to effective decisions, however, relative information paired with good judgement, prior experience and effective communication will lead to effective decisions more times than not.

Fourth Assumption: “Better communication between departments will enable managers  to coordinate decisions more effectively”  

Ackoff argues that departments within an organization do not always need to know what the other is doing. In some cases, communication between departments can do more to hurt the organization than help it. In Ackoff’s example, the purchasing and selling sections of a department store gained knowledge of how the other was forecasting and started to make adjustments based on the others information. One would adjust the price as the other adjusted the inventory. Before long, there would have been nothing to sell because no purchases were being made (Ackoff, 1967). I do not believe that all information needs to be shared within an organization. Only information critical to the success of another department needs to be shared.