Herbert Simon

“The capacity of the human mind for formulating and solving complex problems is very small compared with the size of the problems whose solution is required for objectively rational behaviour in the real world—or even for a reasonable approximation to such objective rationality” (Simon, 1957, p. 198). 

Discuss Simon’s quote in reference to a critical examination of four discrete concepts (any four- overconfident, heuristics, escalating commitment, motivation & emotion, and Bounded awareness) that may explain bias in decisions. 

Identify a decision-making scenario (e.g., real-world application) applicable to each of the four concepts (any four- overconfident, heuristics, escalating commitment, motivation & emotion, and Bounded awareness) examined in Part 1. You may use four different scenarios here (one for each concept), one general scenario (applied to each concept), or anything in between. Briefly describe the scenario and then, for each concept, explain (1) how bias is recognised or identified in the scenario, (2) methods by which bias may be measured or evaluated in the scenario, (3) strategies to address, ameliorate or overcome bias in the scenario, and (4) how this process may improve decision outcomes in the scenario. 

Part 1 and 2 should be clearly separate although Part 2 discussion may refer to Part 1. 

Discussion of Discrete Concepts of Decision Making

Decision making process is conceptualized as the cognitive process for selecting the course of action among the different scenario. The selection of the alternative solution is necessary for making any relevant decision (Puranam et al., 2015). People chose their decision by selecting the preferable alternatives for making the relevant decision. Herbert Simon has presented the discrete concepts related to the decision making process that has the significant impact on the real life scenario. He has presented the discrete concepts of the decision making process. The study will explore the discrete concepts of decision making represented by Herbert Simon. These discrete concepts, such as overconfident, motivation & emotion, escalating commitments, and Bounded Awareness will be explained in a significant manner. The exemplification of the real life scenario will also be highlighted in this study.

The contribution of Herbert Simon in enhancing the understanding capabilities of decision-making process is much commendable. He is considered as the pioneer of the decision-making support system. According to his perspective values, the decision-making process involves different concepts that influence the human intellect while undertaking any decision. Herbert Simon has mainly divided the concept of decision-making into two integral parts, such as the decision-being arrived and the second is the action process (Reyna et al., 2014). These sections are much important and interconnected.  Simon stated,

“The capacity of the human mind for formulating and solving the complex problem is very small compared with the size of the problems whose solutions is required for objectively rational behaviour in the real-world or even for a reasonable approximation to such objective rationality” (Simon, 1957).

The above quote exemplifies that the rational behaviour of the human beings is essential for making the relevant approaches to the decision-making process. It can be inferred that the people tend to act in a diverse way that depends on the different situations (Sharma, Mithas & Kankanhalli, 2014). One of the most discrete concepts of decision making is overconfidence that may create significant effects. The effects of the overconfidence bias are equivalent to a person’s judgmental values that is relatively high. Overconfidence signifies the different interpretation of the subjective confidence. In the decision-making process, influence of the overconfident attitude increases the level of risks since people tend to stick to their decisions. Shepherd, Williams & Patzelt (2015) argued that overconfidence is the recognizable and documented biases that may lead the decision towards negative approaches. I many of the cases, it has been noticed that the individuals are much confident about their decision and inattentive towards the exact manner of forming a decision. Simon also defined that the overconfidence may manifest the effects of the overestimation by judging one standing point of performance judgment or dimension (Taylor, 2013).  This overestimation determines the feeling of one’s capabilities by focusing on the performance parameter and chance of success.

Overconfident Bias

Another most significant and discrete concept of decision making introduced by Herbert Simon is ‘bounded rationality’. It is important to state that the bounded rationality does not refer to the ineffective decision making approaches of the individuals (Johnson et al., 2013). The behavioral aspects do not compare to the irrationality that confirms the failure of the norms of the full rationality. A decision makers are sometimes guided by aspiration adaption rather than being perfectly rational in everyday’s life. It has been observed that Simon challenges the conceptual analysis of the rational man in neoclassical and classical economic theories. He presented the strong argument over the rationalism that is full of limitations (Helfat & Peteraf, 2015). He also exclaimed that rational thinking is necessary for resolving the theoretical problems during a decision making process. However, it is also notable that the rational behaviour is not much effective in resolving the practical problems. He mentioned,

“In the process of decision those alternatives are chosen which are considered to be appropriate means of reaching desired ends. Ends themselves, however, are often merely instrumental to more final objectives. We are thus led to the conceptions of a series, or hierarchy, of ends. Rationality has to do with the construction of means-ends chains of this kind. The fact that goals may be dependent for their force on other more distant ends leads to the arrangement of these goals in a hierarchal-each level to be considered as an end relative to the levels below it and as a mean to the levels above it.” (Simon, 1957).

The above statement made by Herbert Simon attempts to prove that the individual rationality lacks the adequate information that creates the cognitive limitation on their minds. Majority of the individuals face issues while resolving the complex problems due to such limitations (Hardy & Comfort, 2015). The decision theory is highly influenced by the human cognitive capabilities. On the other hand, the lack of sufficient time can also affect the decision making process. In usual cases, it has been observed that the time constraints are the major issues that lead towards the sub optimal or improper decisions (Hahn et al., 2014). Moreover, the lack of proper knowledge to resolve the complex problems are also other most significant limitations found in the bounded rationality.

Human decision making process depends on the motivation and emotional factors as well. In most of the cases, it has been noticed that the human thoughts are influenced by the emotional biases. The influential biases create the long term memories that control the minds of the individuals. Therefore, in future, they start thinking about the probable consequences that may take place. Due to emotional instability of the human beings, the decision often leads towards biased scenario (Ben-David, Graham & Harvey, 2013). It is generating the high level of depression and low motivation for the associated people. Accordingly, the workforce is unable to pay attention towards the functionalities that they have to perform within the workplace. Herbert Simon has clearly pointed out such biasness relates to the emotional judgment during the decision-making process. The psychological reaction affects the sub conscious or conscious mind in a significant way. People tend to think in an informal way since it influences the sentiments of the human beings (Bohnet, Van Geen & Bazerman, 2015). In such time, it is necessary to motivate the individuals to make the relevant decisions free from all biases. Simon has connected this emotional biasness with the global rationality. He commented,

Bounded Rationality

“Global rationality, the rationality of neoclassical theory, assumes that the decision maker has a comprehensive, consistent utility functions, knows all the alternatives that are available for choices that can compute the expected value of utility associated with each alternative, and chooses the alternative that maximizes expected utility. Bounded rationality, a rationality that is consistent with our knowledge of actual human choice behaviour, assumes that the decision maker must search for alternatives, has egregiously incomplete and inaccurate knowledge about the consequences of actions, and chooses actions that are expected to be satisfactory”. (Simon, 1957).

It is essential to determine a conclusion that can satisfy the decision at the end. Another most suggestive concept of decision making is escalating commitments. In the process of administrative behaviour, Herbert Simon has presented the specification of the goals. The contribution of the individual to achieve these goals ensures their commitments towards the administrative behaviour (Bouyssou et al., 2013). This behaviour is essential to identify the relevant steps or initiatives for fulfilling the commitments. In order to describe such attribute of the ‘administrative man’, Simon stated,

“In the process of decision, those alternatives are chosen which are considered to be appropriate means of reaching the desire end. Ends themselves, however, are often merely instrumental to more final objectives. We are this led to the conceptions of a series, or hierarchy, of ends. Rationality has to do with the construction of means-ends chains of this kind. The fact that goals in a hierarchy-each level to be considered as an end relative to the levels below it and as a mean to the levels about it.” (Simon, 1957).

It is necessary to escalate the commitments to fulfill the specified goals. Especially, during the decision making process, these specified goals and escalations are needed to be taken into account. it is also notable that the rational behaviour is not much effective in resolving the practical problems. The reputational damage creates the effects upon the socio-cultural background where the individual is disrespected. The information flow is the most necessary aspects for achieving these goals. The lack of sufficient information can even lead towards failure. Hence, the alternative solutions are necessary to undertake the commitments during the decision making process.

Conclusion

The essay exemplifies the four discrete concepts presented by Herbert Simon, the famous economist. The first concept signifies the overconfidence of the human being during the decision making process. In some of the cases, the decision maker becomes overconfident about the decision that may lead towards misleading or misguidance. On the other hand, the concept of bounded rationality explores the major limitation faced by the human being to make any relevant decision. The limitation of time and knowledge somewhat restrict the human mind that affects the decision making process. In fact, the emotional instability leads to the decision biases, which is the major limitation for the individuals. The goal specifications help the individuals identifying their commitment. Fulfillment of such escalated commitments would ensure the achievement of goals in a significant way. Hence, it is necessary to formalize the rational behaviour in order to make the fruitful decision.

Motivation and Emotional Biases

The workplace is associated with the skilled employees and the organisation requires taking care of the welfare approaches of these employees. However, the mismanagement or ill-treating the employees may lead to negative consequences that may affect the organisational scenario. This ill-treatment of the employees not only affects the productivity of the organisation, it also affects the reputational value for the long term sustainability. Australian Broadcasting Corporation, mainly known as ABC Company faced the similar situation due to the ineffective decision making process that led towards hampering the reputed position in this competitive world (Aph.gov.au, 2017). The study will explore the decision biasness faced by the company that led towards mismanagement of the employees’ welfare. The identification of the biases will be fruitful enough for the study to ensure the probable solutions for the future preventions of such issues.

The biases in the decision making process were triggered more when there was the declaration of the ill-treatment defined by an “asylum seeker” presented in front of the management. The governance personnel had to review the situation before undertaking any functionality within the organisational scenario. It was necessary to interrogate the situation to identify the actual scenario behind such discrepancy (Ben-David, Graham & Harvey, 2013). It can be interpreted that the Asylum is the place where the people with mental disabilities find the shelter for gaining back their balance in life. The management of ABC needs to take this task as the challenge for bringing more success to the organisation. The major mismanagement was recognized by Tony Abbott, the Prime Minister. The associated stakeholders also complained about the ill-behaviour of the personnel that affects their partnerships in the business zone. If it continues affecting the organisational functionalities, it might cause the severe damage in the reputational value for the future prospects.

In terms of the political aspects, it has been noticed that the company has been facing more difficulties in retaining the sustainable position. The management was alleged due to the ill-behaviour and careless attitude. In such situation, the interconnection between the individual emotions and rational behaviour is clearly reflected. The personnel were alleged to be involved with the illegal outside partners that are creating hazards for the ‘asylum seekers’ (Theguardian.com, 2017). As a result, it is generating the high level of depression and low motivation for the associated people (Felin et al., 2014). Accordingly, the workforce is unable to pay attention towards the functionalities that they have to perform within the workplace. The violation took place for not being capable of respecting other associated people by the victims. Hence, the scenario questioned the decisions undertaken by the management personnel of ABC.

Escalating Commitments

The incident has the probability of the severe form if it continues like this. The personnel of the company can pay attention towards such hazardous scenario if they keep the rational attitude towards resolving the emerging problems (Johnson et al., 2013). It was essential for the personnel to keep the full record of the partnership, negotiation, and workplace functionalities at the initial stage. Undertaking the proper means of negotiation is one of the most effective processes of gathering the supports of the employees (Hardy & Comfort, 2015). In fact, it was even necessary to engage some of the indicators to the electoral politics to prevent future difficulties. In fact, it is essential to pay focus on the welfare of the entire society to maintain the effective and remarkable corporate social responsibility. Moreover, gaining the public trust is necessary too for ensuring the long term sustainable values of the company in this competitive scenario. Affected trust is reflecting the involvement of more illegal activities that hampers the organisational reputation.

Establishing reliability among the public is somewhat responsible for gaining back the lost position. However, it is necessary to monitor the behavioural assessment to prevent the ill-treatment of the associated workers at the workplace. It clearly highlights the humanitarian aspects and the motivational factors that can balance the damaged situation and drive the organisational functionalities. The lack oriental approach may create the rational boundary to undertake any decision (Johnson et al., 2013). However, the results derived from the stagnancy report would help in specifying the future activities to gain the balance back. Another major negative consequence is the employee dissatisfaction. The job dissatisfaction increases the employee attrition rate. The decision biases may cause the job dissatisfactions of the associated employees. Hence, it is essential to manage the complaints against the decision biases to mitigate the issues with the employee attrition rate.

The involvement of the politicians does not signify any positive approach for the employees. The effects of the overconfidence bias are equivalent to a person’s judgmental values that is relatively high (Pettigrew, 2014). Overconfidence signifies the different interpretation of the subjective confidence. In the decision-making process, influence of the overconfident attitude increases the level of risks since people tend to stick to their decisions (Kor & Mesko, 2013). In fact, it was noticed that due to the interruption of the political parties, the underlying issues were spread all over the country. Hence, it damaged the reputational value of the company. Hence, hiring the politicians for advertising the issues is needed to be eliminated. Rational thinking is necessary for resolving the theoretical problems during a decision making process. It clearly highlights the humanitarian aspects and the motivational factors that can balance the damaged situation and drive the organisational functionalities. The lack oriental approach may create the rational boundary to undertake any decision (Montibeller & Winterfeldt, 2015). However, the results derived from the stagnancy report would help in specifying the future activities to gain the balance back. However, it is also notable that the rational behaviour is not much effective in resolving the practical problems. The reputational damage creates the effects upon the socio-cultural background where the individual is disrespected. The decision biases are needed to be involved with the frequent monitoring and review process. Measuring the consequences will also be helpful in determining the reduction of the decision biases within a workplace.

Bounded Awareness

Conclusion and Recommendation

The mismanagement or ill-treating the employees may lead to negative consequences that may affect the organisational scenario. It was necessary to interrogate the situation to identify the actual scenario behind such discrepancy. It can be interpreted that the Asylum is the place where the people with mental disabilities find the shelter for gaining back their balance in life. This ill-treatment of the employees not only affects the productivity of the organisation, it also affects the reputational value for the long term sustainability. The behavioral aspects do not compare to the irrationality that confirms the failure of the norms of the full rationality. A decision makers are sometimes guided by aspiration adaption rather than being perfectly rational in everyday’s life. The personnel were alleged to be involved with the illegal outside partners that are creating hazards for the ‘asylum seekers’. As a result, it is generating the high level of depression and low motivation for the associated people. In such scenario, the company needed to arrange the conference meetings and the discussion sessions with the associated stakeholders to understand the difficulties.

Maintaining the decorum and harmony of the workplace is also much necessary for the management team of ABC Company. The ethical checklist is needed to be reviewed by the managers to understand whether the company has been performing the ethical activities or not. The clarification of the business initiatives for the employee welfare purposes is also necessary. It will help the personnel to generate trust among the associated stakeholders. It was essential for the personnel to keep the full record of the partnership, negotiation, and workplace functionalities at the initial stage. Undertaking the proper means of negotiation is one of the most effective processes of gathering the supports of the employees. In fact, it was even necessary to engage some of the indicators to the electoral politics to prevent future difficulties. The increasing level of the reliability among the employees will decrease the attrition rate. However, it is essential to ensure whether the organisational behaviour is maintained properly. In fact, the measurement of the progress report will also be beneficial to recognize the emerging or probable risks within the workplace. Frequent review and monitoring is the integral part of the organisational functionalities. In addition to this, the skilled and effective leadership attributes will help in driving the organisation towards the reputed position and long term sustainability.

References

Real-life Examples and Strategies to Address Bias

Aph.gov.au (2017). About Australian Parliament. [online]. Retrieved 6^th June 2017 from https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1415/ABCoverview

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Bohnet, I., Van Geen, A., & Bazerman, M. (2015). When Performance Trumps Gender Bias: Joint vs. Separate Evaluation. Management Science, 62(5), 1225-1234.

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Dane, E., & Sonenshein, S. (2015). On the role of experience in ethical decision making at work: An ethical expertise perspective. Organizational Psychology Review, 5(1), 74-96.

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Felin, T., Kauffman, S., Koppl, R., & Longo, G. (2014). Economic opportunity and evolution: Beyond landscapes and bounded rationality. Strategic Entrepreneurship Journal, 8(4), 269-282.

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Theguardian.com (2017) Is the ABC biased and effective? [online] Retrieved 6^th June 2017 from https://www.theguardian.com/media/datablog/2014/feb/06/australian-broadcasting-corporation-australia