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76 Part One Organizations, Management, and the Networked Enterprise

A typical firm also has different systems supporting the decision-making
needs of each of the main management groups we described in Chapter 1.
Operational management, middle management, and senior management each
use systems to support the decisions they must make to run the company. Let’s
look at these systems and the types of decisions they support.

SYSTEMS FOR DIFFERENT MANAGEMENT GROUPS

A business firm has systems to support different groups or levels of management.
These systems include transaction processing systems and systems for business
intelligence.
Transaction Processing Systems
Operational managers need systems that keep track of the elementary activities
and transactions of the organization, such as sales, receipts, cash deposits,
payroll, credit decisions, and the flow of materials in a factory. Transaction
processing systems (TPS) provide this kind of information. A transaction
processing system is a computerized system that performs and records the
daily routine transactions necessary to conduct business, such as sales order
entry, hotel reservations, payroll, employee record keeping, and shipping.
The principal purpose of systems at this level is to answer routine questions
and to track the flow of transactions through the organization. How many parts
are in inventory? What happened to Mr. Smith’s payment? To answer these
kinds of questions, information generally must be easily available, current, and
accurate.
At the operational level, tasks, resources, and goals are predefined and highly
structured. The decision to grant credit to a customer, for instance, is made by
a lower-level supervisor according to predefined criteria. All that must be
determined is whether the customer meets the criteria.
Figure 2.2 illustrates a TPS for payroll processing. A payroll system keeps
track of money paid to employees. An employee time sheet with the employ-
ee’s name, social security number, and number of hours worked per week
represents a single transaction for this system. Once this transaction is input
into the system, it updates the system’s master file (or database—see Chapter 6)
that permanently maintains employee information for the organization. The
data in the system are combined in different ways to create reports of interest
to management and government agencies and to send paychecks to employees.
Managers need TPS to monitor the status of internal operations and the
firm’s relations with the external environment. TPS are also major producers of
information for the other systems and business functions. For example, the
payroll system illustrated in Figure 2.2, along with other accounting TPS,
supplies data to the company’s general ledger system, which is responsible for
maintaining records of the firm’s income and expenses and for producing
reports such as income statements and balance sheets. It also supplies employee
payment history data for insurance, pension, and other benefits calculations to
the firm’s human resources function, and employee payment data to govern-
ment agencies such as the U.S. Internal Revenue Service and Social Security
Administration.
Transaction processing systems are often so central to a business that TPS
failure for a few hours can lead to a firm’s demise and perhaps that of other
firms linked to it. Imagine what would happen to UPS if its package tracking
system were not working! What would the airlines do without their computer-
ized reservation systems?

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