The Simon Decision Making Theory

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Decision making is an essential part of a workplace where managers, leaders, and employees need to make effective decisions that will cause benefit. It helps in reaching the beneficial goals of the organizations. Herbert was one of the first theorists who introduced the importance and benefits of effective decision-making. Herbert A. Simon was a political scientist from America. He contributed a lot to administrative theory. He was also awarded the Nobel Prize for economics science in 1978. 

Simon argued that the decisions are an integral and critical part of an organization, and if they are not taken correctly and on time, they may harm the organization’s goals. Decision Making is a process that includes two steps; the first one is the decision itself and the second one is its application. Both the phases are equally important.

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The Simon Decision Making Theory

The Simon decision making theory is a descriptive theory that gives a clear picture of the world in which decisions are significant. Here, decisions will decide the outputs or prices. Simon says in the theory that the decisions are the choice of selecting an option among the different possibilities of options. The chosen option can even be action or non-action.

The theory basically predicts the importance of a decision and how to imply it. Based on Simon’s opinions, there can be multiple actions that can best suit the situation, as there can always be some missing information to the person who is making the decision. In other words, it can be said that there can always be a better way to make decisions based on the available information on the situation.

In the classical aspects of economics, the psychological angle was not considered, while in this theory, Simon considered the psychological aspects also. The limit of an employee to solve a complex problem depends on factors like stress and motivation very much. In simple words, the ability or decision of a person to perform is different when there is a possibility of risk or uncertainty. The theory deals with a satisficing strategy that considers a satisfactory and adequate result instead of an optimal result. This strategy gives a result with minimum risk and maximum profit while ignoring high complexities. 

Three Stages of the Decision Making Process

The whole process of decision-making is divided into three stages. Each stage has its own importance and cannot be skipped while making decisions.

Stage 1: Intelligence Activity Stage

It is the stage of the decision-making process where some experts identify the problems of an organization. Based on the issues, the management will try to find a solution that can be applied to the system in order to provide an effective environment. 

Stage 2: Design Activity Stage

This stage involves the study of several strategies which can be applied to find the solution to the problem. The main characteristic of this stage is the analysis of strategies based on the merits and demerits. The management analyses the merits and demerits and hence decides which strategy is best suited for the given problem. 

Stage 3: Choice Activity Stage

The third and last stage gives the decision output. In this stage, the management decides the best-suited strategy, which can be applied based on the merits and demerits listed in the previous stage. This stage is the qualitative and quantitative analysis of the strategies and requires creativity and judgemental skills.

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Rational Decision Making

The main purpose of this theory is to find a rational decision that can benefit the system and its ingredients. There are several methods that can be used to improve the rationality of organisational decisions.

• Improving the specialization.
• Use of scientific tools to improve the outcomes.
• Understanding the market mechanism and enhancing the operations involved.
• Providing a vast information base to improve problem-solving techniques.
• Improving the political-institutional system.

The Types of Decisions

There are two types of organisational decisions based on Simon’s decision-making theory; “programmed” and “non-programmed”. Each decision is discussed below in detail.

Programmed Decision

As the word programmed says, these decisions are designed by a proper plan or rule of action to reach the solution. The guidelines or instructions to be followed are predefined. These decisions are generally repetitive and have the same pattern. For example, the decisions by management on a routine process. 

Non-Programmed Decisions

These decisions are the opposite of programmed decisions. These decisions are not planned and don’t follow a fixed pattern. These decisions are generally one-time decisions. The dynamic problems which a rigid set of rules can’t solve are solved by non-programmed decisions. These decisions are complex and can have a long-term impact. 

The strategy for programmed and non-programmed decisions can be different, but the basic rules are always the same. These rules include; defining the problem properly, collecting the information, and scrutiny of the information which perfectly satisfies the purpose. 

Conclusion

Simon’s decision-making theory proposes the concept of bounded rationality, which means that people can make decisions within certain limitations. The theory focuses on psychological aspects and helps solve many unaddressed problems. The theory explains the possessiveness of decision-making and its importance at the personal and professional level. Organisations always get benefitted from effective decision-making. 

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