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The pioneering scholar of the theory of decision making in organizations, was Herbert Simon. He was born in Milwaukee, Wisconsin and was one of the most celebrated political scientist, economist, sociologist and also a psychologist.
His body of work covers topics from administration to cognitive psychology to artificial intelligence. He was awarded the Nobel Memorial Prize in Economics for his most important work, the decision making process of the organizations. Therefore, for the sake of our discussion we shall refer to the theories and concepts provided by Simon for the administrative decision making.
In his book Administrative Behavior: a Study of Decision Making Processes in Administrative Organizations, he makes a very remarkable statement that decision making is the heart of administration. He went on to add further that the logic and psychology of human choice determine the administrative theory.
The entire premise of Simon’s work is based on the logical rational model as mentioned earlier, but it is important to understand rationality within this particular context of decision making.
In Simon’s work, rationality becomes a variable and he was aware of the limitations of human rationality as well which are not static but depend on the environment of the organization in which the decisions take place.
According to Simon, the task of the administration should be to design such an environment in which the individual approach becomes as rational as practicably be possible.
To understand the concept, we need to understand three important aspects:
The Economic Man is all about the ideal and rational model of decision making. In an organization the decisions are made on empirical and normative elements, these premises can also be called the factual or the value premises.
The factual premise is nothing but all the information and knowledge regarding the organization and its environment.
The value premises on the other hand are the morals and legal constraints.
A rational decision is to choose those alternatives which are appropriate to reach the desired end. The means and ends have to be connected in the organizational hierarchy.
The Administrative Man depicts the objective rationality, determining whether the selected alternative’s course of action is good enough. The administrative man’s approach to the world is simplistic and would take into account only a few most relevant and critical factors unlike the economic man for whom knowing all the alternatives and its consequences is a complex task.
Lastly, the Organization Perspective criticizes the earlier established principles of administration which were:
Simon argues that the applicability of administrative principles needs to be based on an underlying understanding of the administrative decision making. Organization manifests its influence through five mechanisms as identified by Simon. These are:
Therefore, the decision making within an organization is a complex process which is influenced by several factors. It is advisable to the readers to study more about Herbert Simon and his work on decision making to be able to appreciate the vastness and complexity of the decision making process in administrative organizations and economy.
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