The information revolution: Output standards

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Output standards

Controlling a system, then, requires that the outputs of that system have been carefully planned and precisely stated. A controller must be able to check whether his or her system has or has not achieved the plan. If the plan is stated in vague terms he will often be left in doubt, for he will not be able to make a precise comparison between the performance (as measured in the reports of the type described above) and the plan. The result will be that he may not know whether any input adjustments are required (overtime work­ing, training, etc.), and his system's outputs will vary from what is required, to the detriment of other systems that depend upon it.

Systems theory emphasizes the need to lay down precise and realistic standards (targets) expressed in terms of quan­tity, quality, and time. In other words, the plan for a system should state how much is to be produced within a given time, and at what quality. The plan should be stated in quantitative (i.e. numerical) terms, which means putting a precise value on the amount to be produced and on the quality standards.

The output standards of a system must be realistic. If they are too easy to achieve then the system will be working below its capacity and resources of manpower and equipment will be underutilized. If they are too difficult, then the system will not be able to achieve its planned output, which will adversely affect other dependent sys­ tems, as well as affecting the morale of people working within the system.

The information processing system

Most systems are made up of a number of subsystems. The human body - itself a system - is made up of a digestive system, a nervous system, a lung system, and so on. A business contains many subsystems, like sales, purchasing, stores, etc. Each subsystem has as its environment - from which it receives inputs and to which it gives outputs- other subsystems within the overall system as well as the overall system's environment. One of the subsystems within a business will be its information processing system.

The information processing system receives a variety of data inputs from other subsystems within the business, as well as data inputs from customers and suppliers in the business's environment. From those inputs it produces a variety of outputs. These outputs are of two sorts:

• Transaction documents. Invoices sent to customers, purchase orders sent to suppliers, works orders sent to the business's factory, and so on. Large numbers of these documents are produced (perhaps in electronic form, displayed on computer screens). They are the crucial 'paperwork' without which the business would rapidly come to a halt.

• Reports. Profit and loss reports generated for top man­ agement, sales reports generated for the marketing manager, scrap reports generated for the factory man­ ager, and so on. These reports summarize many hundreds of thousands of individual transactions into a few key figures, so giving management an overall per­ spective of the business's performance. Compared to the large number of transaction documents, relatively few reports are generated, but it is these documents that provide feedback on how the business is doing and so enable management to exercise control over it.

Computers have proved invaluable in business not only because they can automate the production of transaction documents, but also because they can produce accurate and up-to-the-minute reports. Before the days of computers, armies of clerks were needed to produce these summaries and analyses of the business's performance, which were therefore expensive to produce, often weeks or months late, and frequently incomplete. Because of the patchiness of this information, management could not properly control the business, which resulted in reduced competitiveness and reduced profitability.

One of the valuable results of the systems approach is the emphasis that is now placed on exception reporting. Since the manager of a system only needs to take action when the output deviates from the planned figures, there is no point giving a detailed report on those areas in which performance does not deviate from but matches the plan. That would cause the manager not only to waste time reading unnecess­ary information, but it might also result in him or her missing the important information that requires a response.

Performance reports should clearly give deviations only. Computers are able to automatically do this.

A well-designed information processing system today can produce as many performance reports as are required by the various managers in an organization, tailored to meet their precise requirements and produced at exactly the frequency they need.

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