Information System and Decision Making: 3 Essential Components for Effective Management

What is the relationship between the information system and decision making? How can an information system influence an organization’s effectiveness? This article defines the information system and how it aids decision making to reach an organization’s goals.

Computer-based information systems make the rapid pace of urban development in the information age possible. Middle level and upper-level managers benefit a lot from the outputs of a well-designed and efficient information system. In a highly competitive world, information systems define the winners and the losers in many areas: economic, political, social, among others.

But what is an information system? How can managers effectively use it in their decision-making activities?

Definition of Information System

An information system is an organized scheme of people and data collection and retrieval tools to produce information. Data is meaningless unless analyzed or processed to meet the needs of the users. Thus, data processors may be human or machines, process the data, and produce information. Information may be in the form of graphs, tables, figures, or any output that translates data into understandable formats. Thus, information is processed data.

Modern organizations use computer-based or computer information systems because of its high efficiency in delivering information. While still in use, manual information systems are slower and rely mainly on the ability of people to process data.

In the age of information, information system and decision-making are synonymous with computer-based or computer information systems. That is because computers are used to process data into understandable chunks of information that the user needs.

Slow data processing systems that rely on manual retrieval of data from physical folders or files in a metal cabinet are gradually phased out in modern workplaces. Many top business organizations adopt a speedy paperless system that cuts across the different levels of the organization.

information system
The keyboard and the mouse has been a part of modern-day information system.

1. How Does a Computer Information System Work?

A computer information system requires data input, a processing capability, and the ability to produce an output stored for future use. The acronym IPOS summarizes the components of an information system. This acronym stands for Input, Process, Output, and Storage.

In a computer information system, an input is made using a keyboard, a mouse, or a microphone. Process refers to data analysis using software applications that take advantage of the computer’s processor. Computers perform complex calculations to organize data into useful outputs displayed on a screen or printed on paper. It makes sense of data whose raw form is meaningless.

The output may be used immediately or retrieved from storage whenever necessary. Flash drives, hard disks, and cloud storage facilities are commonly used to store data and information.

2. Requisites of Good Information

The information produced in an information system is only as useful as the data used to generate it. It follows the GIGO principle: Garbage In, Garbage Out. Wrong information produces false results.

According to Zikmund (1999), useful information should be

  1. relevant,
  2. timely,
  3. of high quality, and
  4. complete.

Relevant Information

Relevance is the degree to which the information produced is related or useful to the current issue that needs resolution. A well-designed information system aligned with an organization’s goals and objectives produces relevant information.

Thus, before an information system launches, the desired parameters or variables would have to be included in that system to satisfy users’ needs.

Timely Information

Information is timely if it is available whenever needed. You can easily retrieve them through a preconceived or pre-designed retrieval system. That’s where computers excel.

High Quality Information

Information is of high quality if it is based on accurate data and analyzed correctly. And information is highly useful if it answers all the user’s queries or requirements.

Hence, a system must ensure data integrity, accuracy and reliability. Without applying concrete and insightful data management and sophisticated data visualization system, the information produced by an information would be next to useless.

Complete Information

All aspects of a business’ operation must be included to cover potential areas for development and uncover weakness. The data gathered by the system should be complete enough to allow projection into the future — forecasting capabilities that will propel business products and services in the future.

Thus, the company’s profitability in the long-term will be ensured and made sustainable. It becomes competitive despite changes in the social, economic, and political regime within which it operates. It spells the organization’s doom or boom.

Scenario building or systems modeling would be possible through machine learning, with complete data incorporated into the equation of efficient and effective business management. The hit-and-miss approach will be avoided thus bring more certainty in forecasting future business prospects.

3. Information System and Decision Making

Relevant information is helpful in decision making if it is produced through systematic means. The rigorous manner applied in conducting research and exploratory data analysis plays an essential role in delivering information that clarifies a decision maker’s options.

To illustrate this idea, see how information helps decision-making and management in the post titled: Market Analysis: The Pizza Study.

Customer feedback informs managers on how best to serve their clients. Thus, information system and decision-making work together to attain organizational goals. Guessing customers preferences, which will prove costly to the organization or company, will be avoided. The decision maker or manager can undertake a more pragmatic and logical approach to meet customers’ expectations. Profitability is achieved in a more predictable manner.

Using computers in processing data speeds up the decision-making process. They work faster and more accurately than any manual means a human can do.

Statistical software applications work best in analyzing data gathered and stored in the organization’s database.

Without the aid of computers in the digital age, the business manager’s decision making ability compromises the application of timely initiatives to rectify weaknesses in delivering their services and beat the competition.

Therefore, for managers to be at the helm of their respective business niches, adequate training on the use of modern software applications is a must. Information system and managerial decision making are tightly woven together in the fabric of top performing organizations.


Zikmund, W. (1999). Essentials of marketing research. Dryden Press. 422 pp.

© P. A. Regoniel 8 June 2016
Updated 29 October 2020, 25 May 2022