What is management information? Put simply, it is the result of collecting, processing, analysing and transforming data into action-inducing knowledge.
Why is it important? Because it provides management with the tools to cut costs, save time, improve quality, mitigate risk and, crucially, to successfully grow their businesses.
Management information can be derived from a number of sources, such as employees, customers, suppliers and competitors. It may or may not be financial.
For example, a recruitment firm may need to measure the number of candidates placed; a biotechnology company in its development phase may count the number of months of operation for which it still has funds; and a restaurant could analyse the number of customers served and their average spend.
Different information requirements exist within the same organisation. For example, the information a sales manager requires may not be relevant to the finance director. Therefore, when deciding what information is critical to each manager, you should also ensure that it is readily available and tailored to their needs.
Decide what your key performance indicators are and concentrate the efforts of your support team on producing this information. Don't allow the important information to be lost in the middle of a large, confusing report.
Management information should be generated as a valuable tool for the user. It needs to be timely, accurate and not overly long or complex.
Too much information can be counter-productive; its production is likely to waste time and energy that could otherwise be spent more effectively. Excessive information is also less likely to highlight the key issues. In short, it is unlikely to be read or understood.
Good management information should contain internal and external data. For example, a growth in revenue of 10 per cent may be considered a good performance.
But if you also knew that your competitors' revenues had grown by 25 per cent in the same period, and that your market share had decreased, your view of the performance may not be the same.
Effective decision making is based on sound management information. During periods of change the value of good quality information rises.
The management of growing companies would be well advised to take the time to ensure that the information they receive meets these criteria.
Nitin Joshi is a partner at accountancy and insolvency specialist PKF.
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