Fundamentals of Accounting Computers in Accounting and Management 19. Introduction to Computers in Management Given the complexities of business environment today, it is imperative for all the organizations at all levels to be highly effective and efficient in their various business processes, be it production, marketing, financial activities or labour management. While addressing the complexities of business environment especially under the situation of rapidly changing technology, organizations are required to have appropriate technology to facilitate the task of management and decision-making. This lesson will be useful in the context of technology driven managerial processes and make students aware of various dimensions of computer technology and its usefulness in managerial decision-making processes.
19.0 Objectives After going through this lesson you will be able to: • • • •
Understand managerial process Distinguish various elements of computer in management Understand usefulness of computer in decision-making process Appreciate some of the key technical aspects of computer processing.
19.1 Introduction Computers are increasingly being used to assist management in decision making. Besides data crunching, computers are also being programmed to carry out logical functions. Thus based on a given set of input computers are able to suggest a valid output. Management can then consider this output and use their judgement to arrive at a decision. As we go forward, computers are expected to play an ever increasing role in this area.
19.2 Managerial Process and Computer Technology Management, as a process, is concerned about efficient and effective utilization of productive resources. Main focus of all managerial efforts is to improve the quality of processes so as to ensure optimum use of productive resources thereby improving the quality of output. Hence managerial process is vitally important for the success of any organization.
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Given the complexity attached with each and every productive resource, dynamic nature of environmental factors and unpredictable behaviour dimensions, the task of managerial process itself becomes significantly complex. In order to achieve its objective of efficient and effective utilization of productive resources and address the complexities of global business environment, management involves the following functions: • • • • • •
Planning Organizing Staffing Directing Coordinating Controlling A detailed discussion on these functions of management can be found out in management literature, however the common thread running through all these is the requirement of decision-making. Effective decision-making depends upon how information flowing within and outside the organization are processed, analyzed and used. Hence the main driving force of the organization is information. There is a distinction between data and information. Information consists of data that have been retrieved and processed - its data plus interpretation. Conversion of data into information is a complex process and requires system support to facilitate decision-making. This processing of information calls for establishment of management information system (MIS) in the organization to facilitate various managerial processes. System is essentially a set of things interconnected or interdependent so as to form a complex unit. Modern business has achieved a very high degree of automation and overall business activities can be viewed as input output matrix in a manner similar to a system’s approach. Thus management information system (MIS) is a system which provides information to managers in order to formulate plans, organize resources and control other organizational activities so that the organizational goals are achieved efficiently, effectively and economically.
Self-Check Questions 1. What is the main focus of all managerial efforts? 2. How is effective decision making dependent on flow of information?
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19.3 Role of Computers in Management Information was processed and analysed manually before the arrival of computer technology. This made it an inefficient and high cost activity. With the introduction of computer technology, the complex job of management is being efficiently executed involving less time and cost, primarily due to the following aspects: •
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The ability to process data with accuracy and high speed. It involves making complex computations, analysis, comparisons and summarizations. Though humans can do this process, the computer’s ability to process huge amount of data in a very short period of time is phenomenally greater and its reliability in following a standard set of instructions is also very high Ability to organize and upload large amounts of raw data, of even unrelated nature, derived from internal and external sources at different period of time Availability of real time information for ongoing activities and events Ability to generate customized output for a variety of purposes. The system is so organized that managers at different levels and in different activity units can easily obtain information in whatever form they want, provided that the system has been programmed for the same in advance Ability to handle very large volumes of data and information. This can then be retrieved at the touch of a button whenever required
19.4 Advantages of Computer Technology 1. Speed – Computers can perform a set of given instructions in the split of a second 2. Accuracy – Computers are very reliable when it comes to following a standard set of instructions. If input data consistency is maintained, output data consistency can be more or less guaranteed 3. Versatility – Previously, the computer was thought of as only a calculating machine, but a computer can also carry out logical operations. Today a very large number of jobs in an office setup can be computerized with the help of appropriate software 4. Reliability – Information stored in computer is in digital form. This ensures that it can be stored easily and over large amounts of time without any degradation
Self-Check Questions Fill in the Blanks 3. The _________ has the ability to process data into ________ with accuracy and high speed.
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4. The input _________ in the computer can be processed into a number of different _________ and for a variety of purposes. 5. Tremendous volume of _________ and _____________ can be stored in the computer and retrieved as and when needed.
19.5 Technical Attributes The memory of a computer is one of the most important components of the CPU (Central Processing Unit). Memory storage units can be broadly classified into two types: •
Primary storage device – This is the temporary storage that the CPU uses for processing data and instructions. Primary Storage generally device consists of the following: o RAM (Random Access Memory) o ROM (Read Only Memory) o PROM (Programmable Read Only Memory) Any data existing in primary storage is lost when the power to the computer is switched off.
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Secondary Storage Device – Secondary Storage is the semi-permanent storage in the computer and allows for holding files and information until it is needed. These devices enable a computer system to possess greater processing potential by expanding the CPU’s ability to handle data. The typical secondary storage devices are: o o o o o
Hard Disk Floppy Disk Magnetic Tape Optical Disk Compact Disk
Data stored in these I not lost even when the power to the computer is switched off.
Self-Check Questions Fill in the Blank 6. The memory of a computer ___________________.
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is
the
most
important
component
of
7. What does the primary storage device consist of?
19.6 Summing Up Information technology possesses tremendous potential for both business and non business organizations. Economy, speed of communication, quick access to data base etc. are some of the basic features of computer technology that greatly facilitate managerial decision-making process. The input data can be processed into a number of different outputs for a variety of purposes thus assisting in decision making.
19.7 Answers to Self-Check Questions 1. The focus of all managerial efforts is to improve the quality of processes to ensure optimum use of productive resources. 2. Effective decision making depends upon how information flowing within & outside the organisation are processed, analysed and used. 3. Computer, Information 4. Data, Outputs 5. Data, Information 6. Central Processing unit. 7. A Primary storage device consists of: o RAM (Random Access Memory) o ROM (Read only memory) o PROM (Programmable Read Only Memory)
19.8 Terminal Questions 1. Give introduction to managerial process and as to how computer facilitates these processes. 2. What are the features of computerized management information system? 3. What are the advantages of using computers in managerial decision-making?
19.9 References and Suggested Readings • • • •
Rajaraman, V. Fundamentals of Computers Kemerer, C. Software Project Management Kanter, Jerome. Managing with Information Ross, E Joel. Information System for Modern Management
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19.10 Glossary •
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Computer : It is a programmable machine with two principal characteristics: o It responds to a specific set of instructions in a well-defined manner o It can execute a prerecorded list of instructions (a program). Hardware: All the ‘hard’ parts of the computer, consisting of components and devices that you can see, touch, and feel, are collectively called ‘hardware’ Software: Written coded commands that tell a computer what tasks to perform Management Information System - MIS refers broadly to a computer-based system that provides managers with the tools for organizing, evaluating and efficiently running their departments. Memory: Memory is of two types – RAM (Random Access Memory), and permanent storage (usually on a device called a ‘hard disk’). RAM is much faster and is where the Operating System keeps whatever application program is being used. However, RAM gets wiped clean whenever the electricity is switched off, which is where the hard disk is required. All data that needs to be saved for future use needs to be ‘saved’ or ‘written’ to the hard disk for it to be available in future