Moreover, like the classical administrative approach, decision making theory in large part is prescriptive; that is it indicates often on the basis of mathematical analysis and logical reasoning, some times on the basis of distilled common sense -what steps a decision maker should follow if he wishes to make a rational decision.
However, in recent years, there has been growing interest in a descriptive theory of decision making which reports and analyzes how people actually make decisions. What prevents them from making rational ones and under what conditions they will make comparatively rational decisions? The descriptive approach still requires considerable development and needs to be extended from the individual to the organizational level.
HERBERT A: Simon pointed out that organizations are based on not one but two modes of division of labour and specialization. In addition to the recognized type of horizontal specialization-division of labour according to a particular task, is a vertical specialization. Here division of labour is based on power rather than work; jobs are more or less performance-jobs or decision making ones.
Simon points out that the higher the rank, the more jobs consists of decision making and fewer actual performances are carried out. In a typical factory, the job of the worker is almost all performance; the Supervisor’s Job contains some performance and some decision making duties; and the higher level administrator spends nearly all his time making decisions-that is telling lower-in-ranks what to tell their subordinates to do.
The higher-in-rank set the wide policy lines while the lower echelon administrators break the policy down into more detailed decision. In this way the whole organization can be viewed as an efficient tool, with general policy making concentrated at the top, policy specification carried out by the middle ranks and actual work performance carried out by the lower ranks.
This division of policy making and performance is a common mode of efficient allocation of decision making and work. The future of an enterprise largely depended on thoroughly calculated timely decisions pertaining to various aspects of the organization.
Thus, emerged says Venkateswarlu, the decision-making theory whose apostle was Noble Laureate Herbert Simon. Simon in his book Administrative Behaviour exposed the contradictions of the scientific administration school, and sought an alternative approach to administrative efficiency, through the designs of a rational model of decision making. He defines administrative efficiency thus:
A fundamental principle of administration is that among several alternatives involving the same expenditure the one should always be selected which leads to the greatest accomplishment of administrative objectives; and among several alternatives that lead to the same accomplishment the one should be selected winch involves the least expenditure. Since this principle of efficiency is characteristic of any activity that attempts rationally to maximize the attainment of certain ends with the use of scarce means, it is characteristic of economic theory as it is of administrative theory. – The “administrative man” takes his place alongside the classical economic man.
It is clear from the above that Simon finds analogy between economic man and administrative man. He believed that the latter would only become properly rational when his concepts of efficiency corresponded fairly closely to those of the economist.
Before going further into details of Simon’s ideas it will he convenient to refer first to his behaviour alternative model. According to Peter Self this model states that in any situation an administrator ought ideally to examine all possible courses of action open to him, trace through the consequence of each alternative courses, and then separately evaluate the benefits and the loses of each alternative.
He should then choose that course of action which is expected to provided the greatest net satisfaction. Simon says that his model is different from the traditional ends-means approach. He contends that determination of ends at the beginning forecloses unduly the courses that are considered by the administrator and also to some extent it draws the attention away from the actual situation in which he is placed.
Simon believes that separation of ends from means is false, since means also entail value judgments. Another name given to Simon’s decision-making model is rational comprehensive model. It assumes complete agreement on purposes, goals and preferences regarding the outcome of decisions.
There are three basic elements in decision-making :
(i) A comprehensive understanding of the available alternative courses of action in any given situation, and other consequences;
(ii) It takes for granted that the decision maker will have access to all of the needed information, and also has the capacity to fully analyse that information.
(iii) It is expected that in an organization, the top management is capable of such rationality, makes all basic decisions and sends them down the hierarchy for implementation. There is an alternative to the above explained rational-comprehensive model. That is the concept of limited rationality describes the reality of conditions of decision-making in an organization more truly than the above rational comprehensive model.
Simon mentions the following characteristics of that reality.
1. Organizational actors frequently do not agree on basic values, goals and outcome preferences and therefore, these are often vague and contradictory;
2. Decision makers typically do not know all of the possible alternatives available or their consequences;
3. More often than not, managers respond to problems on the basis of pre-conceived notions and habitual patterns;
4. The motives and values which come together to define a problem and structure the search for solution have their roots in group based perspective as opposed to an organizational point of view.
5. Organizational decision makers never have perfect information and they have, for technical and psychological reasons, only a limited capacity to analyze the information they do have”.
In view of these factors, the capacity for rationality is limited. Hence the people will accept satisfactory decisions. A satisfactory decision is one that allows a problem solver to achieve his or her goals, but the process does not involve a comprehensive analysis of all possibilities and outcomes nor does it require perfect information. Simon believes that the essence of administrative decision making is bounded (Limited) rational satisfying behaviour.
In Simon’s model of decision1 making, the formal structures and processes of the organization are very important. According to him, organizations achieve higher levels of overall rationality than individuals. Human rati
onality is primarily realized through participation in organizations, which structure and discipline the choices open to the individual.
The objectives and values of organization guide the decisions of its members in two ways;
(i) through the exercise of authority and the provision of information and
(ii) through the internalization of these values in the psychology of the individual. This process of identification, Simon believes, is essential for organizational efficiency.
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