Herbert A. Simon - Study of Decision-making

Study of Decision-making

Administrative Behavior from 1947 was based on Simon’s doctoral dissertation. It served as the foundation for his life's work. The centerpiece of this book is the behavioral and cognitive processes of making rational human choices, that is, decisions. An operational administrative decision should be correct and efficient, and it must be practical to implement with a set of coordinated means.

Any decision involves a choice selected from a number of alternatives, directed toward an organizational goal or subgoal. Realistic options will have real consequences consisting of personnel actions or non-actions modified by environmental facts and values. In practice, some of the alternatives may be conscious or unconscious; some of the consequences may be unintended as well as intended; and some of the means and ends may be imperfectly differentiated, incompletely related, or poorly detailed.

The task of rational decision making is to select the alternative that results in the more preferred set of all the possible consequences. This task can be divided into three required steps:

1. the identification and listing of all the alternatives;
2. the determination of all the consequences resulting from each of the alternatives; and
3. the comparison of the accuracy and efficiency of each of these sets of consequences.

Any given individual or organization attempting to implement this model in a real situation would be unable to comply with the three requirements. It is highly improbable that one could know all the alternatives, or all the consequences that follow each alternative.

The question here is: given the inevitable limits on rational decision making, what other techniques or behavioral processes can a person or organization bring to bear to achieve approximately the best result? Simon writes:

“The human being striving for rationality and restricted within the limits of his knowledge has developed some working procedures that partially overcome these difficulties. These procedures consist in assuming that he can isolate from the rest of the world a closed system containing a limited number of variables and a limited range of consequences.”

Administrative Behavior, as a text, addresses a wide range of human behaviors, cognitive abilities, management techniques, personnel policies, training goals and procedures, specialized roles, criteria for evaluation of accuracy and efficiency, and all of the ramifications of communication processes. Simon is particularly interested in how these factors directly and indirectly influence the making of decisions.

Weaving in and out of the practical functioning of all of these organizational factors are two universal elements of human social behavior that Simon addresses in Chapter VII—The Role of Authority, and in Chapter X—Loyalties, and Organizational Identification.

Authority is a well studied, primary mark of organizational behavior, and is straightforwardly defined in the organizational context as the ability and right of an individual of higher rank to determine the decision of an individual of lower rank. The actions, attitudes, and relationships of the dominant and subordinate individuals constitute components of role behavior that can vary widely in form, style, and content, but do not vary in the expectation of obedience by the one of superior status, and willingness to obey from the subordinate. Authority is highly influential on the formal structure of the organization, including patterns of communication, sanctions, and rewards, as well as on the establishment of goals, objectives, and values of the organization.

Decisions can be complex admixtures of facts and values. Information about facts, especially empirically proven facts or facts derived from specialized experience, are more easily transmitted in the exercise of authority than are the expressions of values. Simon is primarily interested in seeking identification of the individual employee with the organizational goals and values. Following Lasswell he states that “a person identifies himself with a group when, in making a decision, he evaluates the several alternatives of choice in terms of their consequences for the specified group”. A person may identify himself with any number of social, geographic, economic, racial, religious, familial, educational, gender, political, and sports groups. Indeed, the number and variety are unlimited. The fundamental problem for organizations is to recognize that personal and group identifications can either facilitate or obstruct correct decision making for the organization. A specific organization has to deliberately determine and specify in appropriate detail and clear language its own goals, objectives, means, ends, and values.

Chester Barnard pointed out that “the decisions that an individual makes as a member of an organization are quite distinct from his personal decisions”. Personal choices may be determined whether an individual joins a particular organization, and continue to be made in his or her extra–organizational private life. But, as a member of an organization, that individual makes decisions not in relationship to personal needs and results, but in an impersonal sense as part of the organizational intent, purpose, and effect. Organizational inducements, rewards, and sanctions are all designed to form, strengthen, and maintain this identification.

The correctness of decisions is measured by two major criteria:

1. adequacy of achieving the desired objective; and
2. the efficiency with which the result was obtained. Many members of the organization may focus on adequacy, but the overall administrative management must pay particular attention to the efficiency with which the desired result was obtained.

Simon's contributions to research in the area of decision-making have become increasingly mainstream in the business community thanks to the growth of management consulting.