Simon’s Decision-Making Theory

Herbert Simon

Behaviouralist, humanist, social psychologist theorist. Academician and his theories are by product of his academic knowledge and his association with many practitioners of administration. He has brought about an alternative.
Simon departed from the manner in which classical – theories explain theories of administration.

His criticism to the classical theory: Simon on theory criticizes the classical theory of administration. As being mere proverbs. Or myths, so gains and pompous entities.
He says classical principles of administration is are un scientific. Classical principles of administration are in fact based on rule of thumb. The principle of classical theories of administration individually appear to be logical and nicely argued, but when applied to reality they are contradictory to each other. When these principles of administration Confront evidence they fail. His associates were march, Thompson etc.
E.g.: principle of span of control – limited number of sub-ordinates
Principle of communication any communication has to be done through a proper channel. Moment try to others of span of control principle of communication gets squeezed. Unity of command v/s principle of specialization. How can diff. aspects of a job be supervised by only one superior. Different types of work undertaken by different types category of workers having specialized skills in relation to that particular work.
Simon is highly critical of concept of departmentalization based on 4p’s. Simon says there is hardly any difference between purpose & process.
- Person & the place there are the two concepts which themselves be covered under purpose.
- There are many organisation based on both purpose & process.
They are unscientific, referred them as rule of thumb. Simon says Authority to be science should be based on observation empiricism and rather than being based on casual observation, experience and deductive analysis.

Simon has rejected the classical view of politics administration dichotomy.
He believed in politics – administration fusion. Basic character of behavioral theorist descriptive. Basic character of classical theorists prescriptive. Simon believes that administration is a set of decisions administration is all about a series of decisions. Every individual is involved in an act of choice. Simon is interested in bringing about a science of administration. Simon has rejected them on methodological as well as the content. Simon explains that every decision has two components. In his most imp work on administrative behavior he has referred to Bernard’s theory 37 times.
Every decision has two components:

1. ‘Value’ component

2. Fact component

By using means – ends paradigm he has divided it into two parts. Anything which involves preference is value component/variants a fact observable/invariant.
Means-end paradigm is an unending process.
Moment the goal is achieved it becomes fact and that becomes a means to some other goal or end. Simon being essentially in science of administration says that science is built on the basis of fact.
Science can never be based on value.
For classical theorists – politics is value & administration is fact.
Administration to be science to bring about science of administration the studies should only be based on administration Away from polities. Whole of the administration is not fact.
Administration is set of dictions.
Science of administration should be based only on a part of the administration. Only factual premise within the administration should be the basis for science of administration.
Simon deals with the types of decisions, nature of decisions stages of decisions, while dealing Simon primarily investigating important component of decision that is rationality of decision

Nature of Decision
While Simon rejected the nature of decision making as discussed by classical theorists of administration. He also rejected the concept of absolute rationality, and in return discussed the concept of bounded rationality

Classical theory – ‘one best way’ approach that can be achieved only through:

• All the info relating to issues is there.

• Able to compute all the data.

• Using those data able to establish the strategies alternatives.

With mathematical accuracy forecast what are the benefits, what are the costs absolute rationality presuppose the individual to envision all the possibilities. Simon says, within the administration this is a hypothetical situation. There is limitation of individual capacity, time knowledge, information etc. That is the reason he says that absolute rationality is a hypothetical concept.

Bounded Rationality
Surrounded with limitations individual tries to take the decision. Individual within the organisation takes the decisions by remaining within the multiple limitations. Simon does not dilute the concept of rationality. He has never undermined the concept of rationality. within the organisation individuals decision has to be based on rationality.
Since, limitations are there is organisation, within the organisation individual has to take decision bounded within limitation that is the reason he comes with ‘hounded rationality.

Simon’s view on different kinds of man:

1. Economic man

2. Administrative man

3. Social man

1. Economic man is based on the concept of absolute rationality and absolute rationality is hypothetical so economic man is impossible.

2. Administrative man is desirable for an organisation as he is based on bounded rationality within the org approach is not to maximize rather the approach is to satisfied not the best price, rather the fair price.

3. Social man is undesirable for an organisation

Stages of decision making: Decisions are not one shot activity. Decision involves series of activities.

Decision involves three stages:

1. Intelligence activity

2. Design activity

3. Choice activity

1. Intelligence: “Root of the decision lies in the identification of the problem” Once the problem is identities. Start collecting data and information relevant for that problem.

2. Design: Then create strategies how to solve the problem. Number of strategis.

3. Choice: Mathematically calculate the pros & cons of each of these strategies. And then choosing of one strategy based on cost – benefit analysis among the rest of the strategies. Later on he added a fourth stage.

4. Feedback: These could be treated both from the absolute rationality perspective and bounded rationality

Limited data limited computing. Views of Simon relating to types of decision making;

1. Programmed
2. Non-programmed decision making within the organisation there can be decisions which are usual, repetitive & routine.

• These decisions are referred to as programmed decision.

• Non-repetitive, unusual it might be new this type of decision are referred to as non-programmed decision.

• With the changes in the organisation new problems are increasing, thus the role of the non-programmed decisions are increasing.

• Rationality will be more in programmed decision.

More rationality and less risk

• Level of rationality is less in non-programmed decision and thus more risk.

• Where the decisions goes wrong it will have huge negative fallout for the organisation

• Role of the manager within organisation is to convert non-programmed decisions into programmed decision.
  Manager should always try to reduce the non rationality and increase rationality.

• Simon believes that the individual within an org should always striving for efficiency rather then adequacy.

Can’t achieve the best but it does not mean that one should stop straining for the best. One should always try to optimize the best of his capacity.

He did not say: Take non-programmed decisions in a manner that it carries the characteristics of programmed decisions. In order to convert n.p.d to p.d many traditional and new strategies are to be followed:

E.g: traditional : recruiting on merit training regular enrichment of skills & expertise.
These traditional strategies have their limitations: Simon advocates for making new strategies, Like taking help of advanced, Operational research game theory.
Electronic data analysis using computer simulated situations within computer analyze which strategy will be successful.
Simon has as well dealt with “ Displacement of Goal”, within the organisation many times the rationality is compromised because of “displacement of goal”, Simon has discussed 2 major reasons:

1. Commitment of the members – towards sub goals.

2. Introduction of value or preference into decision making.

1. These goals must be linked to higher goals. since the organisation have become complex the link between the goals & the sub-goals have become distorted thus the commitment of the members of different units of the organisation

2. Decisions should be based on rationality means end correlation. when the values are introduced or personal preferences are introduced this goal is displaced i.e. to say individual might move away form the goal.

Mechanism of influence
All those factors which induce on individual to contribute towards the organizational goal. Simon accepts this not as the only criteria for motivation: It is one of the criteria Simon.

An individual to be fully motivated within the organisation should move beyond his/her zero point. Simon says individual is going to compare his opportunity – cost with zero – point
The best alternative a person has lost in availing the present opportunity.
Zero point: Best alternative available to an individual (best other satisfaction.) Simon while dealing with motivation has dealt with another idea similar to Bernard:

Zone of Acceptance
He has introduced a positive term. Psychological state where an individual is positively disposed towards the order of the superior.
The zone of acceptance can be increased by working out “contribution satisfaction equilibrium” and “ zero – point”.

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