Simon's decision making theory

Herbert A. Simon is an American economist, political scientist, sociologist and cognitive psychologist. He was awarded the Nobel prize in Economics in 1978 for his work on organizational decision-making. He was known for his interdisciplinary research across the fields of cognitive science, computer science, public administration, management, and political science. He was also a pioneer of modern-day Artificial Intelligence and Information system. He is best known for his research in decision-making within an organisation and the theories of bounded rationality and satisficing. He considered decision-making as the core of Administration. To him, the administration is nothing but decision-making.

Simon’s criticism of classical theories

Simon was inspired by

Follett’s ideas on group dynamics in the organization,
Mayo’s Human relations approach
Bernard’s Functions of Executive (Simon mentioned Bernard’s name 37 times in his theory)

According to Simon classical theories as mere “proverbs, myths, slogans and pompous inanities “. Because he claimed that classical principles appear to be logical and nicely argued, but when applied in reality they are contradictory to each other. Therefore he remarked, ” When these principles of administration Confront evidence they fail. “

For example, he highlighted the contradiction between the following principles

Principle of Span of Control vs Principle of Communication
Unity of Command vs Division of work as per the principle of Specialization
- He argued how can different aspects of a job be supervised by a single superior
Concept of Departmentalization based on the 4 P’s
- Simon says purpose and process are hardly different
- In fact, people and place can be a purpose in itself

Simon even went to the extent of criticizing classical theories as unscientific and based on rule-of-thumb. He argued anything to be science should be based on observation, empiricism, and inductive analysis rather than being based on casual approach experience and deductive analysis. Moreover, everything in science is provisional and permanently provisional.

Theories of Herbert Simon

Decision-Making Theory
- Facts and Value
- Stages of Decision Making
- Nature of Decision Making
- Types of Decision Making
Modes of Influence

Decision-Making Theory – Facts and Value

According to Simon, every decision (choice) has two components

Facts
Values

To explain facts and values he used the means-end paradigm. The factual component is the means and the value component is the end. This means-end process is a never-ending process. The means become the end when the goal is achieved, while the end becomes a means for a new goal and thus this means-end process is a never-ending process.

Simon was interested only in the factual component of decision-making while he avoided the value component of decision-making. He believed the ‘ Science of administration ‘ could be built only over the factual premise and not on the value or ethical premise of decision-making. So he remarked, ” An administrative science, like any science, is concerned purely with factual statements. There is no place for ethical statements in the study of science”.

So many argued his fact-value premise is very similar to the classical politics-administration dichotomy where the administration should only focus on facts or instrumental roles and not on the values or ethics or political questions which are part of politics. But Simon actually challenged dichotomy and observed ” Administration deal in a range of values “. Here the values mean broader philosophical values and constitutional values and not policy values.

Stages in decision making

According to Simon, decision-making is a 3 stage process

Intelligence – gather intelligence on problematic situations that need a fresh decision or action
Design – Create multiple alternate courses of action based on gathered intelligence
Choice – choose the best course of action from among the multiple courses of action
Feedback stage (was added later)

Nature of Decision making (bounded rationality)

He included the idea of rationality in decision-making. But he rejected the classical concept of absolute(total) rationality in decision-making. Instead, he proposed his concept of bounded rationality.

He argued that absolute rationality(only best) in decision-making is made under the following assumptions.

The decision-makers know all the alternatives
He knows the consequence of all the alternatives
He has the ordered preference among all alternatives

For the above assumption to be a reality. He needs the following four things

Access to Infinite data
Capacity to process infinite data
Capacity to generate all possible alternatives

But in reality, the data and capacity are limited by men, materials and money. Therefore absolute rationality is a myth and what is possible is bounded rationality.

Bounded Rationality

According to bounded rationality, decisions are taken with limitations. He explained bounded rationality with three models of decision-maker

Economic Man
Administrative Man
Social Man

To be continued……..

Previous years Public Administration Questions and answers from Simon’s decision-making theory

2018 – “Herbert Simon’s book Administrative Behavior presents a synthesis of the classical and behavioural approaches to the study of Public Administration:’ Explain. (Administrative Behaviour

Herbert Simon presented his theory of ” bounded rationality “ and ” satisficing model “ in his book ” Administrative Behaviour “. As a behavioural scholar, he took the behavioural approach to achieve the classical goal of E³ – Efficiency, economy and effectiveness in administration. He said classical theories assume human being as ” economic man “ with ” absolute rationality “ takes ” the best “ decision but in reality, he is an “administrative man “ who is limited by information and cognition capacity to analyse the info and takes a decision that is ” good enough “ that is satisfactory(satisficing) in nature. Which he described as bounded rationality.

At the same time, he claimed this good enough decision can be made as good as ” the best ” decision by overcoming the shortcoming of information and analysis by providing the two things

Information Management system (solves info problem)
Information processing model and Artificial Intelligence (force multiplier to human cognition and analysis)

Although he criticized principles of administration as proverbs that occur in pairs. In the 2nd chapter of his book ” administrative behaviour,” he identified the problems in principles of administration and provided solutions to make it better. He said administrative efficiency can be increased by

Limiting the span of control
Specialization of the task group
Grouping of worker
Establishing members in a hierarchy of authority

Thus his theory of administrative behaviour presents the synthesis of the classical and behavioural approach to the study of Public Administration because he corrected the principles of administration in addition to his behavioural theory.

2013 – Decisions are not made by ” organizations “, but by ” human beings ” behaving as members of organizations. ” How do Bernard and Simon conceptualize the relations between the decisions of the individual employee and the organizational authority?

Simon is a behavioural scholar who rejected the machine and structural model of organisation theory in favour of human, behavioural and psychological aspect of organisation theory. Therefore he defined an organisation as a collection of human beings and not some mechanical construct and decision made by an organisation is nothing but human being behaving as members of the organisation. In classical theory, there was an artificial segregation between organisational authority and individual employees. Simon debunked it as the face behind the organisational authority is nothing but another individual employee.

Bernard introduced the idea of ” Inducement-Contribution “ net balance to align the decisions of the individual employee with the expectations of organisational authority. Simon took this idea to next level by prescribing organisations to be magnanimous and offer more than fair inducement for the given contribution. As for tipping, the scale of inducement-contribution net balance in favour of individual employees will bring them into the ” zone of acceptance ” (similar to Bernard’s zone of indifference). Only when the individual employee and the organisational authority are one the same page decisions of the organisation (read manager-level employee) can be in sync with the decisions of individual employees(esp lower-level employees).

2012 – ” Three features characterize Simon’s original view of bounded rationality: search for alternatives, satisficing and aspiration adaptation. ” Elucidate

Simon proposed that there are four stages in decision-making – Intelligence, design, choice and feedback. Which, the design is the stage where a search for an alternate course of action takes place. Because of certain limitations, these alternate courses of action will be satisficing in nature rather than the optimum and best course of action. He called these limitations bounded rationality.

BOUNDED RATIONALITY: Simon also gave the example of an administrative man(bounded rationality) who unlike an economic man will settle (satisficing) for a course of action that adapts to his aspiration. While an economic man(absolute rationality) settles only for the best course of action suitable for his aspiration. But in reality economic man doesn’t have access to infinite data and the capacity to process this infinite data and to come up with the best course of action. Such situations are hypothetical and are limited by cognitive impediments, external impediments and informational shortages.

2010 – ” Simon’s identifying decision – making as the core field of public administration appears logically acceptable but his positivist underpinning is problematic “. Critically examine the statement.

Simon claimed that there are two components in decision-making – value and fact. So he argued an administrative science or science of decision-making, like pure science, should be concerned only with the facts and not values. This is the positivist approach to creating a value-free science of administration.

Critics like Chris Argyris questioned his positivist approach to have the science of administration validated like pure science although sounds logical, is problematic because public administration always deals with values.

To put this criticism in correct perspective Simon actually challenged dichotomy and observed: ” Administrators must deal in a range of values “. Values here mean broader philosophical and constitutional values. So, in reality, the positivist underpinning is not problematic.

2006- ” Simon’s work has had major implications for the study of public administration and the practice of public administration professionals. ” Comment.

Implications of bounded rationality: In bounded-rationality, Simon proposed the rationality of decision is bounded by limitations like information, analysis and cognition. In legal-rational authority, Weber proposed the rationality of decision are limited by the legality of the decisions i.e rules and regulations that govern the decisions.

Value-Fact Premises: Simon’s quest for value-free administrative science not only gave the muscle and flesh but also the soul to Weber’s bureaucratic model. As Weber also wants his bureaucracy to deal with just the factual aspect of administration and not deal with the value aspect of administration which is a question of the political executive.

Stages of Decision Making: Simon proposed there are three and later four stages in decision making – Intelligence, Design, Choice and Feedback which is also the SOP of the bureaucratic decision-making process – Intelligence is the stage Bureaucrats identify areas of interest or that need government focus (e.g economy), the design is the stage they come up with alternatives(e.g capitalism, socialism, communism), the choice is the stage where political executives decide based on values enshrined in the constitution (e.g socialism) and feedback is the stage bureaucrats gives policy feedback(e.g 1991 economic reforms).

2001 – ” The ‘ decision-making scheme ‘ and ‘ satisfying model ‘ of Herbery A Simon is the major component of administrative theory. Comment

Simon is a behavioural scholar who in his book ” Administrative Behaviour “ wrote about the research he conducted on decision-making in organisations. In his attempt to come up with an administrative theory he claimed decision-making is the heart of administration theory and nothing else is more important than decision-making in an organisation. But unlike decision-making in classical theories where there is an assumption of absolute rationality, his decision-making scheme is based on ” bounded rationality ” i.e decisions are taken with limits in the three stages of decision making

Intelligence – use of cognition and info in search for situations that need decisions
Design – of alternate and various decision
Choice – between various decision

He claimed that the limits are due to impediments to rationality because of info shortage or info overload and cognitive impediments to processing the info available. Therefore the decision-maker whom he called as ” administrative man “ resorts to a good enough satisfactory decision(satisficing model).

2000 – ” Administrative efficiency is enhanced by keeping at a minimum the number of organisational levels through which a matter must pass before it is acted upon ” – (Herbert A. Simon). Comment

Although Simon criticized principles of administration as proverbs that occur in pairs. In the 2nd chapter of his book ” administrative behaviour,” he identified the problems in principles of administration and provided solutions to make it better. One such solution is he said administrative efficiency can be increased by keeping at a minimum the number of organisational levels through which a matter must pass before it is acted upon will increase efficiency because

Reduce red-tapism
Because too many cooks spoil the broth i.e too many decision makers will spoil the decisions
Reduces any potential loss in information(affects the quality of decision) when they are passed through many levels

According to him this can be achieved by delegation and keeping the chain of command short and in Modern day Management by exception, i.e get involved only when there is an exceptional need to involve else just delegate.

1999 – ” The basic question in the relationship between political and permanent executives is the separation of facts and values at the operational level.” Comment

Simon proposed that there are two components in decision-making. – Facts and Values. He aimed to create a science of administration on par with applied science like physics and chemistry. So he approached administration from a positivist perspective and wants the science of administration to be validated like applied science. So he proposed science of administration should focus only on the facts and not values. At the same time, he challenged dichotomy and observed: ” Administration must deal in a range of values “. By this, he meant values like broad constitutional values. But when it comes to operations or execution permanent executives should only focus on facts not the values like emotions, loyalty ..etc, which are the prerogative of political executives.

1995 – ” The study of decision-making is proceeding in so many directions that we can lose sight of the basic administrative process that Barnard and Simon were trying to describe and that so many men have been trying to improve.” Elucidate

To be compiled. please leave your best answer or any other best answer you came across to this question in the comment section. Thank you

1994 – ” As March and Simon point out, there seems to exist a ” Gresham’s Law ” of decision-making.” Explain

According to Gresham’s Law ” Bad money drives out good money “ in economics. When applied to Simon’s decision-making theory, March and Simon point out that ” Bad Info drives out good Info “ and therefore ” Bad analysis drives out good analysis “ and thus ” Bad decisions drive out good decisions “.

Therefor to avoid bad decisions good info is necessary, so Simon proposed an Information management system that filters out only good info from bad info. This good info is passed on to the next stage i.e Information processing systems like Artificial Intelligence which uses the computational power of modern supercomputers and simulation tests will give a “satisficing” result that is good enough.

1993 – ” Though somewhat unwittingly, Herbert Simon and James March have provided, the muscle and the flesh to the Weberian (bureaucratic) skeleton.” Comment.

Weber’s bureaucratic model aims to create a ” legal-rational authority “ which is very similar to ” Bounded-rationality “. In bounded-rationality, Simon proposed the rationality of decisions is bounded by limitations like information, analysis and cognition. In legal-rational authority, Weber proposed the rationality of decision are limited by the legality of the decisions i.e rules and regulations that govern the decisions.

1992 – Argue for and against Simon’s perspective that the ” decisional science envelopes decisional structure, decisions and their feedback not in an integrated manner but anything other than that. “

The study of decision-making has become a diverse and broad field, with many different theories, models, and perspectives being developed. This can make it difficult to understand the fundamental process of decision-making that Barnard and Simon were trying to describe. Barnard and Simon’s work focused on the administrative process of decision-making, which is the process by which organizations and individuals make decisions. They argued that decision-making is a complex process that involves multiple actors, competing goals, and limited resources. Many other scholars and practitioners have also been working to improve this process, by developing new models, tools, and techniques for making better decisions. However, with so many different approaches and perspectives, it can be challenging to understand the underlying principles and concepts that are common to all of these different approaches.

It’s important to remember that despite the diversity of perspectives, there are some basic concepts and principles that underlie all approaches to decision-making. These include understanding the decision-making process, recognizing the role of uncertainty and risk, identifying and evaluating alternatives, and assessing the consequences of different decisions. Additionally, it’s important to understand the context in which decisions are being made, including the goals, values, and constraints of the organization or individual making the decision.

Furthermore, understanding the different approaches to decision-making can be useful in different contexts. For example, some approaches are more appropriate for highly structured and predictable problems, while others are better suited to complex and uncertain problems. Some approaches are more effective for individual decision-making, while others are better for group decision-making.

In summary, while the field of decision-making is broad and diverse, it is important to keep in mind the basic administrative process that Barnard and Simon described and that many other scholars have been trying to improve. By understanding the basic concepts and principles of decision-making, and by being aware of the different approaches and perspectives that are available, we can make better decisions in a variety of contexts.

1988 – Discuss the Simonian concept of ” Satisfying ” as a bridge between rational and non-rational perspectives on organisation.

According to Simon Study of an organisation is nothing but the study of decisions taken by the organisation. According to classical theories, an Organisation takes a rational perspective while taking a decision because of the assumption that they have perfect information and they performed a perfect analysis of alternatives thus final choice from the existing alternatives is bound to be perfectly rational.

And there is another end of the spectrum where decisions are made based on thumb-rules or certain values like emotion and loyalty. At this end of the spectrum, the organisation take a completely non-rational decision, which he called the non-rational perspective.

But according to Simon, in reality, perfect information, analysis and cognition to zero down on a perfect decision is not available and therefore in reality organisations take a decision that is bounded by limited info, analysis and choice which he calls a ” satisfying ” decision in his ” bounded-rationality ” model. This bounded rationality model is a bridge between absolutely rational and non-rational organisations.

1987 – The first stage (in administrative decision-making) is what I call “Intelligence”, the second represents ” Design ” and the last stage is ” Choice “. Critically examine the Simonian Model of Rational Decision – Making in Administration.

According to Simon Study of an organisation is nothing but the study of decisions taken by the organisation. According to him, there are three stages to decision making

Stages of Decision Making: Simon proposed there are three and later four stages in decision making – Intelligence, Design, Choice and Feedback.

Intelligence – gather intelligence on problematic situations that need a fresh decision or action
Design – Create multiple alternate courses of action based on gathered intelligence
Choice – choose the best course of action from among the multiple courses of action
Feedback stage (was added later)

The above stages are also similar to the bureaucratic decision-making process

Intelligence is the stage Bureaucrats identify areas of interest or that need government focus (e.g economy)
the design is the stage they come up with alternatives(e.g capitalism, socialism, communism)
the choice is the stage where political executives decide based on values enshrined in the constitution (e.g socialism)
feedback is the stage in which bureaucrats give policy feedback(e.g 1991 economic reforms).