What is the relationship between rational decision making and problem solving? (simon’s model)

• Intelligence which deals with the problem identification and the data collection on the problem.
• Design which deals with the generation of alternative solutions to the problem at hand.
• Choice which is selecting the ‘best’ solution from amongst the alternative solutions using some criterion. 

The figure given below depicts Simon’s decision-making model clearly.

We’ll be covering the following topics in this tutorial:

• Intelligence Phase
• Design Phase
• Choice Phase

Intelligence Phase

This is the first step towards the decision-making process. In this step the decision-maker identifies/detects the problem or opportunity. A problem in the managerial context is detecting anything that is not according to the plan, rule or standard. An example of problem is the detection of sudden very high attrition for the present month by a HR manager among workers. Opportunity seeking on the other hand is the identification of a promising circumstance that might lead to better results. An example of identification of opportunity is-a marketing manager gets to know that two of his competitors will shut down operations (demand being constant) for some reason in the next three months, this means that he will be able to sell more in the market.

Thus, we see that either in the case of a problem or for the purpose of opportunity seeking the decision-making process is initiated and the first stage is the clear understanding of the stimulus that triggers this process. So if a problem/opportunity triggers this process then the first stage deals with the complete understanding of the problem/opportunity. Intelligence phase of decision-making process involves:
Problem Searching: For searching the problem, the reality or actual is compared to some standards. Differences are measured & the differences are evaluated to determine whether there is any problem or not.
Problem Formulation: When the problem is identified, there is always a risk of solving the wrong problem. In problem formulation, establishing relations with some problem solved earlier or an analogy proves quite useful.

Design Phase

Design is the process of designing solution outlines for the problem. Alternative solutions are designed to solve the same problem. Each alternative solution is evaluated after gathering data about the solution. The evaluation is done on the basic of criteria to identify the positive and negative aspects of each solution. Quantitative tools and models are used to arrive at these solutions. At this stage the solutions are only outlines of actual solutions and are meant for analysis of their suitability alone. A lot of creativity and innovation is required to design solutions.

Choice Phase

It is the stage in which the possible solutions are compared against one another to find out the most suitable solution. The ‘best’ solution may be identified using quantitative tools like decision tree analysis or qualitative tools like the six thinking hats technique, force field analysis, etc.

This is not as easy as it sounds because each solution presents a scenario and the problem itself may have multiple objectives making the choice process a very difficult one. Also uncertainty about the outcomes and scenarios make the choice of a single solution difficult.

Effective decision making is an integral part of modern workplace management. Managers, team leaders and even employees need to make rational and sound decisions every day. The right decisions, choices and approaches help in meeting organizational goals more efficiently. It helps organizations adopt and implement measures that optimize growth in terms of products and/or services offered. In other words, decisions drive actions.

Herbert Simon was one of the first theorists to highlight the importance of decisions in a business environment. Read on to see why the Herbert Simon Decision Making Theory still holds relevance in current times.

History Of The Herbert Simon Decision Making Theory

Before we explore the Decision Making Theory, let’s understand the context in which it emerged. Herbert A. Simon is an American economist and popular scientist who was known for his multiple contributions in the fields of psychology, statistics and mathematics, among others. He was awarded the Nobel Prize for Economics in 1978. He is best known for his work on corporate decision making, also called behaviorism.

The Herbert Simon Decision Making Theory first appeared in his renowned book, Administrative Behavior (1947). He suggested that decisions were critical because if they weren’t taken on time, it’ll negatively impact an organization’s objective. The concept can be divided into two parts—one is the decision that someone arrives at and another is the process or actions taken. In other words, implementing a decision is as important as making that decision.

Understanding The Decision Making Theory By Simon

The Simon Decision Making Theory is a framework that provides a more realistic view of the world, where decisions affect prices and outputs. The theorist argued that making a decision is making a choice between alternative courses of action. It can even mean choosing between action and non-action. In contrast to classical theorists, Simon suggests that there is never one best course of action or decision. It’s because one can’t have complete information about something, therefore, there will always be a better course of action or decision.

The Decision Making Theory by Simon also considers psychological aspects that classical economists overlooked or ignored. Internal factors such as stress and motivations, among others, limit an individual’s capacity to solve complex problems. In short, decisions are based on bounded rationality—humans behave differently when there are risks and uncertainty involved. At the core of the theory lies ‘satisficing’, which is a combination of satisfying and sufficing. It suggests that one should pursue objectives or make decisions that involve minimum risks and complications as opposed to focusing on maximizing profits.

There are three stages involved in the decision making process:

1. Intelligence Activity Stage

At this stage, people identify the problems in an organization and the upper management analyzes the organizational environment to work toward a solution.

In order to identify possible solutions to problems, the upper management looks for suitable strategies. They further analyze the merits and demerits to select a particular course of action.

After making a list of alternatives, the choice activity stage begins. It critically examines and evaluates the various consequences of all alternatives and the most suitable course of action is selected. This stage requires creativity, judgment and quantitative analysis skills.

Exploring The Types Of Decisions

With respect to organizational decision-making, the Simon Decision Making Theory recognized two types of decisions:

Programmed decision making involves those decisions that already have a plan or rule in place, which is used to reach a solution or conclusion. They follow already established guidelines and formal patterns. For example, managers have already made such decisions before and it’s a repetitive and routine process.

Contrary to programmed decision making, non-programmed decisions are ill-structured and one-time decisions. Problems or situations that don’t have a concrete set of rules or guidelines to follow rely on non-programmed decision making. These are complex and have long-term impact.

Whether it’s a programmed or non-programmed decision, here are effective strategies to make sound decisions at work.

• Clearly define the problem you need to solve through your decision

• Always do your homework and collect relevant information before arriving at a decision

• Evaluate whether the information you gathered addresses the original purpose

Herbert Simon’s Decision Making Theory also emphasized the importance of rationality. He proposed the concept of bounded rationality, where people make decisions within certain limitations. He further supported the behavioral aspect of organization theory as personal biases and perspectives affect the way employees make decisions.

Conclusion

The Herbert Simon Decision Making Theory opened new doors for an organization. By shifting focus to the human mind, he helped administrations identify and resolve many unaddressed issues.

Effective decision making is a much-needed fundamental skill in your personal and professional life. Harappa’s Making Decisions course will equip you with frameworks to process, reflect and include multiple perspectives for informed decision making. Enrolling with Harappa is good decision making!

Explore topics such as How To Overcome Indecisiveness, What Are Values and Conflict Of Interest In The Workplace from Harappa Diaries to make informed decisions.

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