15.1 Data versus Information

Differences in Information Needs

The job is complicated by the fact that information needs vary according to different levels, operational units, and functional areas. Consider, for instance, the information needs of managers at several levels:

• Top managers need information for planning, setting objectives, and making major strategic decisions.
• Middle managers need information that helps them allocate resources and oversee the activities under their control.
• First-line managers require information that helps them supervise employees, oversee daily operations, and coordinate activities.

Figure 15.1 “Information Needs and Flows” illustrates a hypothetical hierarchy of information needs at Caesars. The president, for example, needs information to determine whether profitability is up or down or if the organization is facing any new competitive threats. At the vice-presidential level, executives need information that will help them in controlling and planning for specific areas of operations. The VP of casino operations, for example, might need to know which operations are most profitable—slots, table games, or other gaming activities. The VP of hotel operations might want to know whether room revenues are going up or down.

The information needs of middle-level and lower-level managers are different still. The slot-machine manager might want to know whether the placement of machines on the casino floor affects profitability. The poker manager might want to know whether all table games comply with state regulations. At a lower level, the pit manager (who’s in charge of table games in a particular area) needs to know whether there’s a card-counter at his blackjack table or whether a dealer’s activities are suspicious.

Even at a given level, information needs can vary. A manager on the hotel side of the business, for instance, doesn’t care much about profitability at the poker tables, while a pit manager doesn’t have much use for hotel housekeeping reports. The reports that an accountant needs would hardly be the same as those needed by a human resources manager.

The Need to Share Information

Having stressed the differences in information needs, we should pause to remind ourselves that the managerial levels, operations, and functions of every organization are intertwined, to a greater or lesser degree. If you’ll glance again at Figure 15.1 “Information Needs and Flows”, you’ll be reminded that organizations need to share information, that information must flow, and that it must flow in both directions, bottom-up and top-down. At Caesars, for instance, both casino and hotel managers are concerned about security, which is also of interest to managers in different functional areas. Information supplied by the security group is obviously vital to managers in the gaming areas, but HR managers also need it to screen potential employees. Marketing information is clearly important to both casino and hotel operations: to maximize overall profits, the company uses marketing data to fill hotel rooms with customers who spend big in the casinos (Kilby, et. al., 2005).

Caesars’s information needs entail more than allowing individuals in a given casino to share information; information has to be shared among all of Caesars’s thirty-nine casinos. Thus, Caesars relies on an integrated IT system that allows real-time communication among all its properties. Installing the system (in the mid-1990s) was complicated, and not everyone in the organization liked the idea. Some managers felt that information sharing threatened their independence. Others, including some in the IT group, doubted that a large number of separate IT systems could be adequately integrated. To get everyone on board, John Bushy, then senior VP of information technology, pledged that he wouldn’t cut his hair until the system was up and running. By the time it was operational in 1997, Bushy had hair down to his shoulders, but it was worth it: Caesars’s ability to share real-time information across all its properties has been a major factor in the company’s success. Caesars’s new system cut costs by $20 million a year, increased brand recognition, and increased the number of customers playing at more than one Caesars property by 72 percent (LeVinson, 2011; Global Supply Chain Management Forum, 2011).

Enterprise Systems

Many large and mid-size companies rely on a highly integrated system called an enterprise resource planning (ERP) system to channel information to multiple users. To understand what an ERP system does, forget about the P for planning (it really doesn’t have much to do with planning) and the R for resource (it’s an imprecise term) (Koch, 2011). Focus on the E for enterprise. An ERP system integrates the computer needs of all activities across the enterprise into a single system that serves all users. Such broad integration isn’t a simple task, and you wouldn’t be the first person to wonder whether it wouldn’t be easier to give each department its own computer system. Salespeople, for example, need a system that tracks sales and generates sales reports. Meanwhile, manufacturing personnel don’t need to track sales but do need to track inventory. What’s the problem with stand-alone computer systems? Quite simply, users in various departments can’t share information or communicate with each other.

What If You Don’t Have ERP?

Imagine that you’re a sales manager for a fairly large manufacturing company that produces and sells treadmills. Like every other department in the organization, you have your own computer system. A local sporting-goods store orders one hundred treadmills through a regional sales representative. It’s your job to process the order. It wouldn’t be much of a problem for you to go into your computer and place the order. But how would you know if the treadmills were actually in stock and when they could be delivered? How would you know if the customer’s credit was any good? You could call the warehouse and ask if the treadmills are in stock. If they are, you’d tell the warehouse manager that you’re placing an order and hope that the treadmills are still in stock by the time your order gets there two days later. While you’re at it, you’d better ask for an expected delivery date. As a final precaution, you should probably call the finance department and ask about your customer’s credit rating. So now you’ve done your job, and it can hardly be your fault that because the cost of manufacturing treadmills has gone up, accounting has recommended an immediate price increase that hasn’t shown up in your computer system yet.

What If You Do Have ERP?

Wouldn’t it be easier if you had an ERP system like the one illustrated in Figure 15.2 “ERP System”—one that lets you access the same information as every other department? Then you could find out if there were one hundred treadmills in stock, the expected delivery date, your customer’s credit rating, and the current selling price—without spending most of the day exchanging phone calls, e-mails, text messages, and faxes. You’d be in a better position to decide whether you can give your customer credit, and you could promise delivery (at a correct price) on a specified date. Then, you’d enter the order into the system. The information that you entered would be immediately available to everyone else. The warehouse would know what needs to be shipped, to whom, and when. The accounting department would know that a sale had been made, the dollar amount, and where to send the bill. In short, everyone would have up-to-date information, and no one would have to reinput any data.