Herbert Simon: Organizational Decision-Making
Herbert Simon’s Organization Theory (1950-1960)
Herbert Simon emphasized the integration of formal and informal efforts within organizations. His work aimed to develop more realistic models of human behavior in administrative settings.
The Administrative Behavior (1946)
Simon’s early work, often referred to as “Administrative Behavior” (published 1947), focused on changes in organizational structure and operational management. It was based on more realistic models of human decision-making. Key concepts include:
- Administrative Man: Characterized by bounded rationality and cognitive limitations, rather than perfect rationality.
- Decision Analysis: A comprehensive approach to decision-making, control, and delegation.
- Equilibrium Model: Organizations are viewed as systems in a state of balance between the contributions of their members and the inducements (recognition, rewards) they receive. An imbalance can lead to conflict and reduced efficiency.
- Model of Conflict: Well-managed conflict can be a catalyst for organizational growth and improvement.
Organizational Theory Developments (1956)
Simon further argued that decision-making is a dynamic process involving interaction between the decision-maker and the context. This process unfolds when critical elements are at play:
Key Elements in Decision-Making:
- Power: Simon described power as limited or discrete. Power influences the decision-making process; those with more power have a greater impact on decisions.
- Time: The time available for decision-making is a crucial factor. Decisions are often constrained by deadlines. Having adequate time generally leads to better decisions.
- Information: It’s essential to distinguish between raw data and processed information. Organizations are often saturated with data, but decision-making requires relevant information. As Simon noted, “Decision making is necessary to have information, not data.”
Decision-Making Models and Risk
The decision-making process operates on a spectrum from total uncertainty to complete certainty.
Degree of Risk
The degree of risk influences whether a decision is deemed satisfactory or positive. In situations of uncertainty, the goal is to reduce the degree of risk. Since perfect accuracy is often unattainable, minimizing risk is a primary objective. Effectively managing time, information, and power is crucial when accepting and navigating risks. Decisions can also be extended through delegation.
The Delegation Process
Delegation involves temporarily transferring functional authority to one or more individuals to achieve an objective in a timely manner. This process includes several stages:
- Assignment: Analyzing the required capabilities and profiles for the delegated task.
- Training: Providing necessary instruction, which can include discussions or guidance.
- Follow-up: Monitoring the progress of delegated tasks and providing support to those to whom tasks were delegated.
- Feedback (or Review): Analyzing the experience and outcomes. Based on this, tasks can be reassigned or further training provided.
Systems Theory (1954) – Johnson, Katz, Rosenzweig
Systems theory, as discussed by theorists like Johnson, Katz, and Rosenzweig, involves analyzing systems in various fields beyond organizations, such as the universe or physics.
Levels of System Complexity
Systems can be categorized by their complexity or level:
- Static Systems: e.g., the structure of the universe.
- Simple Dynamic Systems: e.g., mechanisms like a clock.
- Control Mechanisms (Cybernetic Systems): e.g., thermostats. Within organizations, this includes systems like maximum and minimum stock levels.
- Open Systems: e.g., cells, which can reproduce and are therefore open. Organizations are also open systems, constantly interacting with and adapting to their environment (feedback).
- Genetic-Societal Level (Primary): e.g., plants, characterized by a division of labor among cells.
- Animal Level (Secondary): Characterized by mobility and awareness.
- Human Level (Tertiary): Characterized by self-consciousness, symbolic language, and complex thought processes.
From this, we can deduce typical processes:
Individual Decision Process:
- Ponder
- Choose
- Act
- Ponder (Reflect)
Organizational Process:
- Plan
- Organize
- Decide
- Execute
- Control
- Check (Evaluate)