Management Misinformation Systems

This case is from a classic article entitled “Management Misinformation Systems.” It was written
by Russell L. Ackoff and appeared in Management Science. In the article, Ackoff identified five
common assumptions about information systems and then explained why he disagreed with them.
REQUIRED:
Read the five assumptions, contentions, and
Ackoff’s explanation. For each of the five,
decide if you agree or disagree with Ackoff’s
contentions. Defend your stand by preparing a
report to explain your beliefs. Be prepared to
defend your beliefs in class.
ASSUMPTION 1: MANAGEMENT NEEDS
MORE INFORMATION
Assumption 1. Most management information
systems (MISs) are designed based on the assumption that the critical deficiency under
which most managers operate is the lack of relevant information.
Contention 1. I do not deny that most managers lack a good deal of information that they
should have, but I do deny that this is the
most important informational deficiency from
which they suffer. It seems to me that they suffer more from an overabundance of irrelevant
information.
This is not a play on words. The consequences of changing the emphasis of an MIS
from supplying relevant information to eliminating irrelevant information is considerable. If
one is preoccupied with supplying relevant
information, attention is almost exclusively
given to the generation, storage, and retrieval
of information; hence, emphasis is placed on
constructing data banks, coding, indexing,
updating files, using access languages, and so
on. The ideal that has emerged from this orientation is an infinite pool of data into which
managers can reach to pull out any information
they want. If, however, one sees the manager’s
information problem primarily, but not exclusively, as one that arises out of an overabundance of irrelevant information, most of which
was not asked for, then the two most important
functions of an information system become filtration (or evaluation) and condensation. The
literature on the MIS seldom refers to these
functions, let alone considers how to carry
them out.
My experience indicates that most managers receive much more data (if not information) than they can possibly absorb even if they
spend all of their time trying to do so. Hence
they already suffer from an information overload. They must spend a great deal of time separating the relevant documents. For example, I
have found that I receive an average of 43 hours
of unsolicited reading material each week. The
solicited material is usually half again this
amount.
I have seen a daily stock status report that
consists of approximately 600 pages of computer printout. The report is circulated daily
across managers’ desks. I’ve also seen requests
for major capital expenditures that come in
book size, several of which are distributed to
managers each week. It is not uncommon for
many managers to receive an average of one
journal a day or more. One could go on and on.
Unless the information overload to which
managers are subjected is reduced, any additional information made available by an MIS
cannot be expected to be used effectively.
Even relevant documents have too much
redundancy. Most documents can be considerably condensed without loss of content. My
point here is best made, perhaps, by describing
1
2 CASE 1-1
briefly an experiment that a few of my colleagues and I conducted on the operations
research (OR) literature several years ago. By
using a panel of well-known experts, we identified four OR articles that all members of the
panel considered to be “above average” and
four articles that were considered to be “below
average.” The authors of the eight articles were
asked to prepare “objective” examinations
(duration 30 minutes) plus answers for graduate students who were to be assigned the articles
for reading. (The authors were not informed
about the experiment.) Then several experienced writers were asked to reduce each article
to two-thirds and one-third of its original length
only by eliminating words. They also prepared a
brief abstract of each article. Those who did the
condensing did not see the examinations to be
given to the students.
A group of graduate students who had not
previously read the articles was then selected.
Each one was given four articles randomly
selected, each of which was in one of its four versions: 100 percent, 67 percent, 33 percent, or
abstract. Each version of each article was read by
two students. All were given the same examinations. The average scores on the examinations
were compared.
For the above-average articles there was no
significant difference between average test
scores for the 100 percent, 67 percent, and 33
percent versions, but there was a significant
decrease in average test scores for those who had
read only the abstract. For the below-average
articles there was no difference in average test
scores among those who had read the 100 percent, 67 percent, and 33 percent versions, but
there was a significant increase in average test
scores of those who had read only the abstract.
The sample used was obviously too small for
general conclusions, but the results strongly
indicate the extent to which even good writing
can be condensed without loss of information. I
refrain from drawing the obvious conclusions
about bad writing.
It seems clear that condensation as well as
filtration, performed mechanically or otherwise, should be an essential part of an MIS, and
that such a system should be capable of handling much, if not all, of the unsolicited as well
as solicited information that a manager receives.
ASSUMPTION 2: MANAGERS NEEDTHE
INFORMATION THEY WANT
Assumption 2. Most MIS designers “determine” what information is needed by asking
managers what information they would like to
have. This is based on the assumption that
managers know what information they need
and want.
Contention 2. For a manager to know what information he needs, he must be aware of each
type of decision he should (as well as does) make
and he must have an adequate model of each.
These conditions are seldom satisfied.
Most managers have some conception of at
least some of the types of decisions they must
make. Their conceptions, however, are likely to
be deficient in a very critical way, a way that follows from an important principle of scientific
economy: The less we understand a phenomenon, the more variables we require to explain it.
Hence managers who do not understand the
phenomena they control play it “safe” and, with
respect to information, want “everything.” The
MIS designer, who has even less understanding
of the relevant phenomena than the manager,
tries to provide even more than everything. She
thereby increases what is already an overload of
irrelevant information.
For example, market researchers in a major
oil company once asked their marketing managers what variables they thought were relevant
in estimating the sales volume of future service
stations. Almost 70 variables were identified.
The market researchers then added about half
again this many variables and performed a large
multiple linear regression analysis of sales of
existing stations against these variables and
found about 35 to be statistically significant. A
forecasting equation was based on this analysis.
An OR team subsequently constructed a model
based on only one of these variables, traffic flow,
CASE 1-1 3
which predicted sales better than the 35-variable
regression equation. The team went on to
explain sales at service stations in terms of the
customers’ perception of the amount of time
lost by stopping for service. The relevance of all
but a few of the variables used by the market
researchers could be explained by their effect
on such a perception.
The moral is simple: One cannot specify
what information is required for decision making until an explanatory model of the decision
process and the system involved has been constructed and tested. Information systems are
subsystems of control systems. They cannot be
designed adequately without taking control into
account. Furthermore, whatever else regression
analyses can yield, they cannot yield understanding and explanation of phenomena. They
describe and, at best, predict.
ASSUMPTION 3: GIVING MANAGERS
THE INFORMATION THEY NEED
IMPROVES THEIR DECISION MAKING
Assumption 3. It is frequently assumed that if
managers are provided with the information
they need, they will then have no problem in using it effectively.
Contention 3. Operations research (an academic subject area dealing with the application
of mathematical models and techniques to business decisions) stands to the contrary.
Give most managers an initial tableau of a
typical “real” mathematical programming,
sequencing, or network problem and see how
close they come to an optimal solution. If their
experience and judgment have any value, they
may not do badly, but they will seldom do very
well. In most management problems there are
too many possibilities to expect experience,
judgment, or intuition to provide good guesses,
even with perfect information.
Furthermore, when several probabilities are
involved in a problem, the unguided mind of
even a manager has difficulty in aggregating
them in a valid way. We all know many simple
problems in probability in which untutored
intuition usually does very badly (e.g., What are
the correct odds that 2 of 25 people selected at
random will have their birthdays on the same
day of the year?). For example, very few of the
results obtained by queuing theory, when
arrivals and service are probabilistic, are obvious
to managers; nor are the results of risk analysis
where the managers’ own subjective estimates of
probabilities are used.
The moral: It is necessary to determine how
well managers can use needed information.
When, because of the complexity of the decision process, they cannot use it well, they should
be provided with either decision rules or performance feedback so that they can identify and
learn from their mistakes.
ASSUMPTION 4: MORE
COMMUNICATION MEANS BETTER
PERFORMANCE
Assumption 4. The characteristic of most MISs
is that they provide managers with better current information about what other managers
and their departments are doing. Underlying
this provision is the belief that better interdepartmental communication enables managers
to coordinate their decisions more effectively
and hence improves the organization’s overall
performance.
Contention 4. Not only is this not necessarily
so, but it seldom is so. One would hardly expect
two competing companies to become more cooperative because the information each acquires
about the other is improved.
For example, consider the following very
much simplified version of a situation I once ran
into. The simplification of the case does not affect any of its essential characteristics. A department store has two “line” operations: buying and
selling. Each function is performed by a separate
department. The Purchasing Department primarily controls one variable: how much of each
item is bought. The Merchandising Department
controls the price at which it is sold. Typically,
the measure of performance applied to the Purchasing Department was the turnover rate of
4 CASE 1-1
Q Demand
1
Q
2
Q
3

Figure 1
always ordered optimistically. Therefore, using
the same curve, she read over from Q1 to the
upper limit and down to the expected value,
from which she obtained Q2, the quantity she
actually intended to make available. She did
not intend to pay for the merchandising manager’s optimism. If merchandising ran out of
stock, it was not her worry. Now the merchandising manager was informed about what the
purchasing manager had done, so he adjusted
his price to P2. The purchasing manager in
turn was told that the merchandising manager
had made this readjustment, so she planned to
make only Q3 available. If this process (made
possible only by per fect communication
between departments) had been allowed to
continue, nothing would have been bought
and nothing would have been sold. This outcome was avoided by prohibiting communicainventory. The measure applied to the Merchandising Department was gross sales; this department sought to maximize the number of
items sold times their price.
Now by examining a single item, let us consider what happens in this system. The merchandising manager, using his knowledge of
competition and consumption, set a price that
he judged would maximize gross sales. In doing
so, he utilized price-demand curves for each
type of item. For each price the curves show the
expected sales and values on an upper and
lower confidence band as well (see Figure 1).
When instructing the Purchasing Department
about how many items to make available, the
merchandising manager quite naturally used
the value on the upper confidence curve. This
minimized the chances of his running short,
which, if it occurred, would hurt his performance. It also maximized the chances of being
overstocked, but this was not his concern, only
the purchasing manager’s. Say, therefore, that
the merchandising manager initially selected
price P1 and requested that amount Q1 be made
available by the Purchasing Department.
In this company the purchasing manager
also had access to the price-demand curves.
She knew that the merchandising manager
tion between the two departments and forcing
each to guess what the other was doing.
I have obviously caricatured the situation in
order to make the point clear: When organizational units have inappropriate measures of performance that put them in conflict with each
other, as is often the case, communication
between them may hurt organizational performance, not help it. Organizational structure
and performance measurement must be taken
into account before opening the floodgates and
permitting the free flow of information between
parts of the organization.
ASSUMPTION 5: MANAGERS NEED ONLY
TO UNDERSTAND HOWTO USE AN
INFORMATION SYSTEM
Assumption 5. A manager does not have to understand how an information system works, only
how to use it.
Contention 5. Managers must understand
their MIS or they are handicapped and cannot
properly operate and control their company.
Most MIS designers seek to make their systems as innocuous and unobtrusive as possible
to managers, lest they become frightened. The
designers try to provide managers with very easy
CASE 1-1 5
access to the system and assure them that they
need to know nothing more about it. The
designers usually succeed in keeping managers
ignorant in this regard. This leaves managers
unable to evaluate the MIS as a whole. It often
makes them afraid to even try to do so, lest they
display their ignorance publicly. In failing to
evaluate their MIS, managers delegate much of
the control of the organization to the system’s
designers and operators—who may have many
virtues, but managerial competence is seldom
among them.
Let me cite a case in point. A chairman of
the board of a midsize company asked for help
on the following problem. One of his larger
(decentralized) divisions had installed a computerized production inventory control and
manufacturing manager information system
about a year earlier. It had acquired about $2
million worth of equipment to do so. The board
chairman had just received a request from the
division for permission to replace the original
equipment with newly announced equipment
that would cost several times the original
amount. An extensive “justification” for so
doing was provided with the request. The chairman wanted to know whether the request was
justified. He admitted to complete incompetence in this connection.
A meeting was arranged at the division, at
which I was subjected to an extended and
detailed briefing. The system was large but relatively simple. At the heart of it was a reorder
point for each item and a maximum allowable
stock level. Reorder quantities took lead time as
well as the allowable maximum into account.
The computer kept track of stock, ordered
items when required, and generated numerous
reports on both the state of the system it controlled and its own “actions.”
When the briefing was over, I was asked if I
had any questions. I did. First I asked if, when
the system had been installed, there had been
many parts whose stock level exceeded the maximum amount possible under the new system. I
was told there were many. I asked for a list of
about 30 and for some graph paper. Both were
provided. With the help of the system designer
and volumes of old daily reports I began to plot
the stock level of the first listed item over time.
When this item reached the maximum “allowable” stock level, it had been reordered. The system designer was surprised and said that by
sheer “luck” I had found one of the few errors
made by the system. Continued plotting showed
that because of repeated premature reordering
the item had never gone much below the maximum stock level. Clearly, the program was confusing the maximum allowable stock level and
the reorder point. This turned out to be the
case in more than half of the items on the list.
Next I asked if they had many paired parts,
ones that were only used with each other, for
example, matched nuts and bolts. They had
many. A list was produced and we began checking the previous day’s withdrawals. For more
than half of the pairs the differences in the
numbers recorded as withdrawn were very large.
No explanation was provided.
Before the day was out it was possible to
show by some quick and dirty calculations that
the new computerized system was costing the
company almost $150,000 per month more than
the hand system that it had replaced, most of
this in excess inventories.
The recommendation was that the system
be redesigned as quickly as possible and that the
new equipment not be authorized for the time
being.
The questions asked of the system had been
obvious and simple ones. Managers should have
been able to ask them, but—and this is the
point—they felt themselves incompetent to do
so. They would not have allowed a hand-operated
system to get so far out of their control.
No MIS should ever be installed unless the
managers for whom it is intended are trained to
evaluate and hence control it rather than be
controlled by it.
Source: ©1967 INFORMS. Reprinted by permission of
Russell L. Ackoff, “Management Misinformation
Systems,” Management Science 14, no. 4 (December 1967).
P u b l i s h e d b y The Institute of Management
Sciences, 290 Westminster Street, Providence, R.I. 02903
and JSTOR. See http://www.jstor.org.