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Designing Executive Information Systems

Dr. Robert H. Reck and James R. Hall
(Adapted from original submission to Auerbach Magazine, 1989)

Payoff Idea

A effective method is needed to provide senior executives with information. Reams of paper from transactional information systems or access to current management information systems are not effective. Proven techniques are available for estimating executives' functional behavior, determining the functions and scope of an executive information system (EIS), and implementing such systems. To succeed in these systems definition and implementation efforts, senior-level managers must focus on the appropriate problems and use the right tools, personnel, and approach at an appropriate pace. A break from traditional approaches is required. This article provides MIS executives and systems development managers with an overview of these systems, steps to ensure successful implementation, and an actual case study of one executive who successfully implemented an EIS.

Introduction

An EIS is any organized means of providing information to a senior-level manager. In the context of this article, computer systems are assumed to be involved in some way in helping to obtain and organize information - that is, collect it or extract it from an available mass of larger information, clarify it and make it more understandable, analyze it, and provide decision alternatives. A computer is not a requirement, however; good staff members have been functioning in this role for a long time and, in the case of many computer-based implementations, continue to play a vital role in the overall flow and interpretation of information.

For the purposes of this article, data is considered a mass of records unsuitable for scanning or use by an executive. The data may be useless because it is too massive or incomplete or not readily accessible. Knowledge and wisdom are derived by combining information with experience.

An EIS is used by on one or more senior-level managers. Although their roles and responsibilities may vary significantly, they share a concern for strategy formulation, implementation, and tracking. They are relatively unconcerned with the daily, detailed transactions of their business; rather, they are concerned with whether those aggregate transactions indicate a trend toward strategy adherence or indicate other pressing problems starting to develop in the business. Senior-level managers are frequently concerned with the interpersonal relationships surrounding their business - for example, those among employees, colleagues, suppliers, customers, and competitors.

The Functions, Content, And Scope Of An EIS

An EIS may support some or all of the following executive functions:

• Discovery (i.e., idea generation)
• Planning
• Analysis
• Decision making (in the context of alternatives)
• Communication
• Motivation
• Monitoring and controlling of performance

Although organizational behaviorists have studied executive and managerial functions and styles, none has captured what is considered the best model of these executives' behavior. One common element of their findings in that executives rely on fuzzy information (i.e., what one executive calls rumor, gossip, and innuendo) and high levels of interpersonal communication as well as information from outside traditional information paths, including that external to the normal systems and procedures of the business.

Exhibit 1 illustrates areas of informational interest according to levels of management. The bases of the pyramids indicate the greater interest at a particular level of

management; the points of the pyramids indicate least interest. Line managers and supervisors at the bottom of the organizational pyramid usually are concerned with transactions and operations. The operational or transactional systems of most businesses were designed to support these managers' need for tactical management and control. The upright pyramid in the exhibit indicates that less and less of this type of information is needed at executive levels.

Executives are at the top of the organizational pyramid. They have a relatively modest need for information generated within the business (i.e., contained within and extracted from the transactional systems of the business). They have a greater need for unusual information that provides unique views of their business, its potential, the competition, and strategic alternatives, among others. These needs are shown within the inverted pyramid.

In the traditional approach, the information flow follows the concept that data is successively aggregated and filtered in a bottom-up manner on its way to senior executives (see Exhibit 2). Unfortunately, although such information may be interesting,

especially to those senior managers who have retained their involvement in tactical management, it seldom meets the executives' real or complete needs.

EISs that are based on the bottom-up model usually fail because they do not capture or make available the information executives really need to run the business. Too often, these systems are built to provide data, not information, or they passively support only one of the executive functions listed previously.

An alternate framework for the content of an EIS follows the precept that soft (i.e., non quantitative) information and information external to the organization, not merely hard (i.e., accurate, numeric) data, is also valuable. Exhibit 3 illustrates this concept.

Extracts from current transactional systems are still included. These extracts might include routine sales and orders, inventory levels, and financial information. Other information is included in this hypothetical system, however. New sources are established to give insight into the internal operations of the business as well as external information regarding such areas as competitors, markets, and channels. In addition, new information channels to funnel soft information to the executive are also included.

The following scenario illustrates the importance of selecting the scope of the EIS. The vice-president of marketing for a computer peripherals manufacturing company received all of the company's standard financial and sales information. Because sales ordered showed up on management reports six to eight weeks after they were taken, it was very difficult to stay ahead in this fast-paced business. The vice-president's most important critical success factors were knowing what the competition was doing and knowing how the customers perceived the company's products.

Members of the sales force were given laptop computers and were asked to send the vice-president an electronic mail message after each sales call, especially when they heard something significant about competitor offerings or customer opinions. The vice-president rated the continuing growth and success of the company on its ability to respond to rapidly changing market situations before the competition and to keep its customers more content then other companies' customers. The simple EIS formed the foundation for that success.

Thus, the scope of a system is an important component of its eventual success. All-purpose systems designed to fulfill the needs of dozens of executives and managers are likely to have low utility and value. Systems designed for specific business problems or the needs of only one or two executives have higher value and are usually more cost-effective and easier and faster to build than all-purpose systems.

EIS Applications

An individual executive's style is the single most important determinant of how an EIS will be used. The following situations illustrate:

• The CEO of a high-technology firm built and created a microcomputer- based EIS, which included models and extensive simulations of business operations. This EIS was used daily by the CEO to derive new strategies for market penetration, plant expansion and consolidation, and corporate financing.

• The management team of a manufacturing firm jointly developed a system to track and analyze the performance of the group's critical success factors.

Team members used the system several times each week until an electronic bulletin board (i.e., electric mail) was added, at which time use increased to several times daily.

• The president of a consumer goods firm wanted a chauffeured system (i.e., a system that the staff could manage but from which it was possible to personally obtain information). The specifications for the system were set by the president, whose assistant used the system daily to screen important operating and external (i.e., competitive) information. The staff member verbally informed the president of important developments.

• A governor used his computer skills to extract and analyze information to develop budgets and monitor the performance of state organizations.

When executives ask for an EIS, some organizations are thrown into chaos. The model of a bottom-up, carefully filtered information flow (which is illustrated in Exhibit 3) has been used for many decades. When challenged, individual dynasties may be threatened. Systems developers who build EISs can easily get caught in the middle. For example, at one company, the president requested an EIS that could access and extract data concerning the company's transactions. Both the MIS and business departments were in chaos fearing that the president would see unfiltered data. Because of this conflict, the system was never implemented. Although the president was frustrated about not having access to information about business operations, it was conceded that such a system would produce undesirable tensions in the company.

The way systems will be used is a prime consideration for all concerned -- the users, the systems development staff, and those who provide data for the system. There is no common model for EIS use. An increasing number of executives create, use, or have access to such systems. Many executives access preprogrammed (i.e., tabular or graphic) information through a terminal in their office. There is an increasing number of other more sophisticated systems with video and audio or other novel accessories.

Technical Capabilities Of An EIS

To perform the executive functions listed in a preceding section of the article, the EIS may need one or more special technical capabilities. The EIS must be able to:

• Inquire -- View specific information sets.

• Extract -- Move segments of information to one specified location for easier access and analysis

• Analyze -- Interpret what the data or information means for the business or organizational unit.

• Model or simulate -- Define options or alternatives for dealing with specific situations.

• Communicate -- Allow information to flow to or from the point of use.

• Present graphically -- Make the information easier to understand and interpret.

• Present visually -- See or send video information about a topic and enable users to see it (or those presenting the
  information) for improved personal contact or understanding.

• Present aurally -- Listen to or send messages, analyses, and explanations, among other information, rather than
  rely on the written word.

With the exception of the last two technical functions (i.e., video and audio), several software packages are available that work in various hardware environments and that easily support EIS implementation and use, including Pilot Executive Software's Command Center, Metapraxis's Resolve, and Comshare's Commander.

Implementing An EIS

Executive information systems should not be implemented in the same way as transactional and operational systems and management information systems. The approach to implementing an EIS is crucial to its ultimate success and value. The following steps (discussed in detail in the following sections) have proved successful in developing useful EISs:

• Determine the critical success factors (CSFs) of the executive or senior-level managers.

• Include business process redesign reengineering within the scope of the project.

• Use a prototyping approach.

• Start with easy-to-use tools and focus on obtaining and implementing the perfect tool much later in the project.

• Focus on turning data into information and be willing to create new and novel data and information acquisition methods.

• Ensure that the EIS team is led by the business executive.

Determining Critical Success Factors

The first step toward implementing an EIS is defining the issues and factors that are most important to the achievement of business objectives. Information is valuable only if it addresses the issues that are most relevant to an executive and the business.

Unclear business objectives and strategies make the implementation of an EIS (as well as running the business) very risky. in addition, clear objectives with an unclear means of achieving them also frustrate EIS development. These problems intensify when a management team is the target for the future EIS, especially when team members cannot agree on the goals or key actions needed to achieve them. The executive or a team of executives must have a clear, well-understood definition of the objectives for the business (i.e., what it wants to achieve) as well as the key actions that it must follow to achieve the objectives (or CSFs).

Critical success factors can be separated into those requiring monitoring and those requiring action. To meet the CSFs requiring action, a more complex EIS is needed whose capabilities include modeling or rapid on line analysis of action and progress. Because of performance considerations, the impact on data base administrators is different for these two types of CSFs.

After the executive team has determined and agreed on the CSFs, it must determine what information is needed to monitor and act on the CSFs. This is typically done in brainstorming sessions with the executive or CSF owner. The results can be distilled into information groups and elements. In some cases, they may require carefully massaged (i.e., selected and formatted) data from the corporate data coffers. In other cases, the information needed may require establishing completely new collection, accumulation, and analysis channels and techniques as well as new display or communications mechanisms, such as video.

EISs that are oriented toward supporting CSF achievement are the most valuable and important. Although other information or issues are valuable, systems that facilitate strategy creation, implementation, and adherence are vital. In a previously mentioned example, the vice-president of marketing targeted the EIS to two CSFs. The fact that the company's systems lacked the information needed did not deter the executive from finding out the needed information.

Redesigning The Business Process

A clear understanding of business direction and actions is only one step in successfully implementing an EIS (see Exhibit 4). A second ingredient to successful EIS implementation is consideration of the business processes surrounding the system.

Business processes include virtually anything a business does to achieve its objectives, including the actions of the executives using the system. These processes may include - but are not limited to - all transactional operations, all management functions, data collection activities, reward-recognition processes, marketing and sales activities, and interpersonal relationships. An EIS has the potential to affect many of these, and thus, systems development and senior-level managers must use care in implementation.

In the example cited previously the responsibility of the sales staff was increased because they were asked to report vital information to the vice-president of marketing. To make this additional burden acceptable to the sales force, the vice-president provided them with more valuable data on present customer and prospective customer accounts; they in turn used this information to improve the quality of their sales calls. Several business processes were changed by implementing the EIS.

Implementing An EIS Prototype

The third component to successful EIS implementation is using a prototype to create the system. An EIS prototype should be used to test and develop the preliminary collection, manipulation, interpretation, and communications functions of the EIS in a successive, evolutionary manner. A prototype allows senior-level managers and systems developers to experiment with the approach, review costs and benefits, and assess tangible results in a relatively risk-free environment.

As the prototype develops through successively more complex versions in terms of scope, organizational coverage, and technical complexity and completeness, better technological tools or techniques may be required to extend to the next version. When this occurs, the new version is based on firm knowledge of what is needed and the direction that the EIS is taking. Prototypes evolve rapidly, initially at the rate of a version every week or so.

With a prototype, senior-level managers help to develop the EIS based on the experience they gained while initially attempting to use a version of the system. The prototype process recognizes that senior-level managers find it difficult to articulate their information support needs to the EIS development team in a requirements definition (i.e., systems specification).

Prototyping requires that the senior-level managers identify the problem or issue to be addressed (e.g., through their CSFs), the initial project team, and a test business environment, which is probably smaller than the future scope of the mature system (e.g., one product line, sales region, or part of a problem). When an environment is chosen, the first version of the prototype is built, used and modified in successive iterations until it meets the full set of executive needs.

Often, a prototype can provide valuable insight into business problems from its inception. For example, one sales executive used an EIS that provided sales forecast information. Before long, this system was replaced with one that also provided information on production and product installation capacity and related that information to a projected sales force capability. This system was upgraded to compare sales expense patterns and sales, using a what-if capability. The need for these evolutionary additions to the EIS was not evident in the first prototype version but surfaced as the initial prototype began to satisfy critical business needs.

Using Basic Implementation Tools

The most common error that executives, senior-level managers, and systems development professionals commit in choosing the appropriate EIS hardware and software is overcomplicating the selection process by striving to find the perfect tool. It is most cost-effective and time-efficient for them to find an acceptable initial tool, try it, and then fix it, if necessary. Therefore, hardware and software for the EIS should be adaptable and easy to upgrade.

Computer hardware may already be available within the organization. Often a terminal with easy log-on and access procedures is sufficient to start with. Microcomputers are especially suited to the prototype process because of their system exclusivity and portability.

Software packages that fit the specific business problems being addressed may be available. There are many specific packages available (including those mentioned previously) that are targeted to creating EISs in a corporate environment.

Although it is assumed that support is computer-based, the systems development staff is encouraged to consider a broader range of technologies to incorporate in the EIS. Video and audio technologies can frequently be used to extend and add interest to an information system that presents information in an uncreative manner and thus can make the difference between a system that provides useful understanding and one that is used less and less.

Turning Data Into Information

An EIS requires an underlying framework of accurate, reliable, and timely data or information. Systems development personnel frequently place too much emphasis on accuracy. Many senior-level managers are content with such estimations as round numbers, arrows illustrating trends (i.e., up, down, or unchanged), and red or green lights, rather than complex numeric reports accurate to two places after the decimal point. However, the information that is provided must be considered reliable in terms of being there when needed as well as coming from what the executive deems a trusted and validated source.

Data availability is the initial consideration in EIS designs. As mentioned previously, executives can easily ask for data that is not available in any of the transactional or management information systems. When this occurs, unique or novel techniques to collect the data may be needed or useful surrogates for the required data may be found. Sometimes the channels for collecting this information may be well outside those channels used for transactional or management information systems. Sometimes executives must hold negotiations with other managers to obtain exactly the kind of data needed (i.e., a quid pro quo is required).

The infrastructure for the data supporting the EIS depends on the nature of the particular system. In some situations, manually reentered data may be sufficient to get an EIS operational, especially in early versions of the prototype. In other situations, large volumes of data may reside in several transactional systems and be extracted and sent to a subsidiary data base on which the EIS runs. Traditionally, systems development staff worry more than necessary about this aspect of an EIS. In the prototype approach, the data structure can be developed as successive prototype versions are built. Issues of data ownership and security may also arise, and these should be determined by the executives involved in the EIS project.

Selecting The EIS Implementation Team

A minimum of three people should participate in the prototype process: the executive (or owner), a business analyst familiar with the organization's data reservoir, and a technically qualified information systems developer.

The prototype process requires executive participation not only in the use of the system after it is operational but also in its development from the earliest stages. When the system is operational, the senior-level managers can use it directly or assign staff members to perform the work needed. Even is such intermediaries are used, these managers remain the prime directors of the EIS effort.

Often analyst-builders work with the executive to create and adapt the system to their needs. An analyst-builder is an individual with both business analyst and technical development skills. Because these individuals are rare in business, many teams are created with several individuals acting in concert to create this role.

The team should develop a loose, flexible style. Open communication, persistence, collaboration, and teamwork should be emphasized. In selecting team members, the executive should consider individuals who are anxious to see results rather than individuals who focus on the implementation process itself. Experimentation and trial and error should be encouraged.

Team members should meet at least weekly (or more often if possible) to explore the selected business area as well as the executive's decision processes, business needs, and CSFs. The team should then formulate the key questions that the EIS should address, which can be translated into systems and business process terminology and can subsequently evolve into an EIS design.

The team discusses each version with the executive. The executive directs the effort using the advice of technical specialists on such topics as complexity, speed of development, and data access. The team should set modest goals for each iteration of the project. At the start of the project, initial success in terms of working prototypes are more important that completion of the entire project. This process, guided by the executive's qualifications and version of business needs, increases the initial EISs level of sophistication.

Case Study

The senior vice-president of a major division of a Fortune 500 company was inundated with data. The piles of computer and staff reports contained nuggets of valuable information but required hours to sift through. In addition, the executive was faced with rapidly escalating operation costs and cash flow problems that defined explanation. Careful decisions in operating and financial areas could bring the situation under control without jeopardizing other areas of the business. The problem was how to accumulate and analyze enough of the right information to make valid decisions.

The vice-president therefore considered the purchase of a new information system that would access key corporate information and interface with the current operational systems. The organization's MIS department determined that the current systems were becoming outdated and the department required more money and more staff to provide the information necessary for running the business. In addition, any change from the current systems would involve years of work, and the corporate MIS division could not start working on the vice-president's system until the MIS system upgrade was completed.

Although the vice-president understood these constraints and agreed that existing systems needed to be upgraded, he sought another method for obtaining the information needed to run the business. The MIS department provided budget-to-actual financial data, information about production quality and rejects by plant and product, and detailed customer order and sales data, but did not distinguish between management data and operational data.

The vice-president decided to shift the focus of systems development from the traditional MIS approach to the EIS approach. CSF analysis revealed that control of the corporation depended on five factors: cash flow, product quality, customer service, management development, and market share. A system was needed that would measure these factors and allow the vice-president to analyze and model situations affecting the five factors. The vice-president then met with the business and systems analysts to determine how to measure the critical success factors and how to apply the information obtained.

After deciding that cash flow was an appropriate and highly visible critical success factor, the vice-president used it for the prototype. Measures were established to track components of the cash flow performance: on-hand cash balances, accounts receivable older than 60 days, and gross profit margin.

Although cash balances and accounts receivable were tracked as expected, the gross profit margin was lower than anticipated. Isolation of the components of the gross profit margin indicated that manufacturing costs were rising faster than revenues and that productivity was declining. After refining the prototype to include more detailed information, the vice president determined that an inefficient use of labor caused poor productivity, resulting in increasing costs, decreasing profit margins, and poor cash flow.

The vice-president then decided to access operational data to get status updates. This strategy proved successful, and a staff assistant was assigned a microcomputer to analyze and forecast information received on the vice-president's terminal. Eventually, the organization built a more sophisticated EIS that incorporated external and internal data bases, graphics packages, and several terminals in the executive's offices.

Conclusion

The objective in building an EIS is to organize and present the right information to a senior-level manager when it is needed. This information should help the executive gain greater insight into the business or problems involved and create feasible solutions or strategies. Proven techniques enable an EIS development team to focus on critical business problems and issues and key information needs and then develop a system in an evolutionary manner - starting small, growing, and adapting as the system expands.

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Archive Articles (below)

• Designing Executive Information Systems
• Executive Information Systems: An Overview of Development
• Implications of Transition From an Industrial Era to One of Information
• Critical Success Factors Techniques can Apply to Team Management, Too
• Decision Scenarios Ensure Information System Meets Business Needs
• Critical Success Factors : Helping IS Managers Pinpoint Information Needs
• Combining Quality and Reengineering for Operational Superiority
• Steering IS Committees Straight
• Internal Consultants and a Consultative Approach
• EIS Plays Critical Role in Reengineering
• Rapid Software Selection

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