Decision making theory propounded by Herbert Simon, known as bounded rationality, posits that human decision makers are bound by limited information and cognitive abilities, leading them to make “satisficing” decisions that are practical rather than seeking the ideal, perfectly rational choice.
Introduction
In the realm of organizational and administrative theory, Herbert Simon’s rational decision-making approach is a well-known concept. This theory fundamentally reshapes how we perceive decision-making within organizations. In this article, we will delve into Herbert Simon’s key ideas about decision-making and its criticisms.
Table of Contents
Decision-Making Theory by Herbert Simon
Herbert Simon gave his decision making theory in his book “Administrative Behaviour: A Study of Decision Making Process in Administrative Organization” in 1948 considering arrival of decisions and process of action. Herbert Simon considers Decision making as the heart of every organization and forms one of the most important principles.
A policy or decision maker faces various options both before and during the decision-making process. They must then select one or more alternatives that align with their organization’s objectives and management goals. This aspect of decision-making is often challenging, as individuals are often compelled to make compromises in order to achieve the organization’s objectives and management goals. The decision-making process needs to be rational.
Compromise and decision-making are closely interconnected. Policymakers are often required to compromise in order to ensure that their decisions are practical, what Simon called “Zone of acceptance”. Throughout the decision-making process, it is imperative for the decision maker to exhibit a high level of rationality. A decision should be rational from both a subjective and objective standpoint.
Decision-making is not a single, isolated activity; it involves multiple brainstorming sessions and the collaboration of numerous individuals. Decision-making is akin to a continuously evolving process that is influenced by changing circumstances and the passage of time. Decision-making varies according to the specific situation and cannot be universally applied to all scenarios. Decisions take into account a multitude of factors, including political, economic, geographical, and social considerations.
Decision Making Process
The decision-making process essentially comprises the following steps:
- Identifying the problem.
- Gathering the necessary information related to the problem.
- Defining alternative solutions.
- Selecting the most suitable solution.
Once these steps are completed, there are additional stages in the final phase of the process.
Intelligence Activity: This initial phase involves identifying indicators or problems that necessitate decisions. It’s the stage where information is gathered and analyzed to understand the context and challenges.
Design Activity: In this phase, alternative options for addressing the identified issues are formulated. It’s where potential solutions are developed and evaluated.
Choice Activity: The final phase involves making decisions from the available options. It’s the point where a course of action is selected from the alternatives.
Herbert Simon emphasizes that these decision-making phases are not isolated or overlap each other, making the process dynamic and interconnected.
Concept of Bounded Rationality
The concept of bounded rationality, as introduced by Herbert Simon, presented an alternative to classical decision-making methods, such as those advocated by thinkers like Fayol. Herbert Simon’s model, known as the “economic rationality model”, aimed to be a more realistic approach and was named bounded rationality to reflect its core idea.
In this model, Herbert Simon emphasized the role of administrative man rather than economic man.. He argued that decision-making was subject to various legitimate limitations. For instance, deciding whether to take an umbrella when leaving home depends on the weather conditions, illustrating that decisions consider such constraints and conditions. These types of decisions are referred to as “satisficing,” a term formed by combining “satisfying” and “sufficing.”
Herbert Simon’s model rejected the notion of an ideal, completely rational choice because humans cannot possess complete knowledge and cannot foresee every possible future outcome when making decisions. Even if individuals believe they have made the best decision for a given situation, there may still be better opportunities unknown to them due to their limited knowledge or other unforeseen circumstances. This leads them to make satisfying decisions instead of always pursuing the best or maximizing choice, a concept known as bounded rationality, which serves as a replacement for the classical model. Herbert Simon criticized classical theorists for being overly idealistic and not practical.
Value- Fact Dichotomy
Herbert Simon also introduced the concept of the “Value-Fact Dichotomy.” According to him, every decision is a combination of facts, which are established and proven examples, and values, which encompass both moral propositions and preferences. Facts are statements of reality, such as the sun rising in the east, which remain constant regardless of geographical location. Values, on the other hand, are subjective and subject to change over time.
Herbert Simon advocated that decisions should primarily be based on facts and should not be unduly influenced by value judgments. Decisions grounded in facts are considered most beneficial as they have been proven, tested empirically, and calculated over time, making them reliable and dependable.
Criticisms of Decision Making Theory of Herbert Simon
While Herbert Simon’s rational decision-making approach offers valuable insights, it has faced criticism:
Divorce of Means and Ends: Some critics, like Selznick, argue that Herbert Simon’s efforts to construct a value-free science of administration encourage a separation between means and ends. This can lead to a disconnect between the objectives of an organization and the methods employed to achieve them.
Neglect of Intuition and Tradition: Argyris criticizes Herbert Simon’s theory for not acknowledging the role of intuition, tradition, and faith in decision-making. He contends that focusing on satisficing can be used to rationalize incompetence and may overlook valuable aspects of the decision-making process.
Conclusion
Decision-making theory of Herbert Simon has significantly influenced our understanding of how decisions are made within organizations. By highlighting the three phases of decision-making and the concept of bounded rationality, Herbert Simon has provided a framework that remains relevant in administrative theory. However, it’s essential to consider the criticisms as well, as they underscore the complexity of decision-making processes and the need to balance rationality with intuition and tradition in real-world situations.
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