An executive information system (EIS) is a type of management information system intended to facilitate and support the information and decision-making needs of senior executives by providing easy access to both internal and external information relevant to meeting the strategic goals of the organization. It is commonly considered as a specialized form of decision support system (DSS).
The emphasis of EIS is on graphical displays and easy-to-use user interfaces. They offer strong reporting and drill-down capabilities. In general, EIS are enterprise-wide DSS that help top-level executives analyze, compare, and highlight trends in important variables so that they can monitor performance and identify opportunities and problems. EIS and data warehousing technologies are converging in the marketplace.
The components of an EIS can typically be classified as:
When talking about computer hardware for an EIS environment, we should focus on the hardware that meet the executive’s needs. The executive must be put first and the executive’s needs must be defined before the hardware can be selected. The basic hardware needed for a typical EIS includes four components:
- Input data-entry devices. These devices allow the executive to enter, verify, and update data immediately
- The central processing unit (CPU), which is the kernel because it controls the other computer system components
- Data storage files. The executive can use this part to save useful business information, and this part also help the executive to search historical business information easily
- Output devices, which provide a visual or permanent record for the executive to save or read. This device refers to the visual output device such as monitor or printer
In addition, with the advent of local area networks (LAN), several EIS products for networked workstations became available. These systems require less support and less expensive computer hardware. They also increase access of the EIS information to many more users within a company.
Choosing the appropriate software is vital to design an effective EIS. Therefore, the software components and how they integrate the data into one system are very important. The basic software needed for a typical EIS includes four components:
- Text base software. The most common form of text are probably documents
- Database. Heterogeneous databases residing on a range of vendor-specific and open computer platforms help executives access both internal and external data
- Graphic base. Graphics can turn volumes of text and statistics into visual information for executives. Typical graphic types are: time series charts, scatter diagrams, maps, motion graphics, sequence charts, and comparison-oriented graphs (i.e., bar charts)
- Model base. The EIS models contain routine and special statistical, financial, and other quantitative analysis
An EIS needs to be efficient to retrieve relevant data for decision makers, so the user interface is very important. Several types of interfaces can be available to the EIS structure, such as scheduled reports, questions/answers, menu driven, command language, natural language, and input/output.
As decentralizing is becoming the current trend in companies, telecommunications will play a pivotal role in networked information systems. Transmitting data from one place to another has become crucial for establishing a reliable network. In addition, telecommunications within an EIS can accelerate the need for access to distributed data.
EIS enables executives to find those data according to user-defined criteria and promote information-based insight and understanding. Unlike a traditional management information system presentation, EIS can distinguish between vital and seldom-used data, and track different key critical activities for executives, both which are helpful in evaluating if the company is meeting its corporate objectives. After realizing its advantages, people have applied EIS in many areas, especially, in manufacturing, marketing, and finance areas.
Basically, manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. It is a large branch of industry and of secondary production. Manufacturing operational control focuses on day-to-day operations, and the central idea of this process is effectiveness and efficiency.
In an organization, marketing executives’ role is to create the future. Their main duty is managing available marketing resources to create a more effective future. For this, they need make judgments about risk and uncertainty of a project and its impact on the company in short term and long term. To assist marketing executives in making effective marketing decisions, an EIS can be applied. EIS provides an approach to sales forecasting, which can allow the market executive to compare sales forecast with past sales. EIS also offers an approach to product price, which is found in venture analysis. The market executive can evaluate pricing as related to competition along with the relationship of product quality with price charged. In summary, EIS software package enables marketing executives to manipulate the data by looking for trends, performing audits of the sales data, and calculating totals, averages, changes, variances, or ratios.
A financial analysis is one of the most important steps to companies today. The executive needs to use financial ratios and cash flow analysis to estimate the trends and make capital investment decisions. An EIS is a responsibility-oriented approach that integrates planning or budgeting with control of performance reporting, and it can be extremely helpful to finance executives. Basically, EIS focuses on accountability of financial performance and it recognizes the importance of cost standards and flexible budgeting in developing the quality of information provided for all executive levels.
Advantages of EIS
- Easy for upper-level executives to use, extensive computer experience is not required in operations
- Provides timely delivery of company summary information
- Information that is provided is better understood
- EIS provides timely delivery of information. Management can make decisions more promptly.
- Improves tracking information
- Offers efficiency to decision makers