Herbert Simon is unique in our discipline in terms of the far-reaching impact which his work has had on management and the understanding of managerial decision making, especially when his further work with James March is considered. Mintzberg himself, who considerably advanced our ideas on management practice, noted that he always considered Simon to be the most influential and important contemporary author in terms of organizational theory (1990, p. 94). Jared Cohon, president of Carnegie Mellon University, where Simon was a fixture for 52 years said “few if any scientists and scholars around the world have had as great an influence as had Simon across so many fields, economics, computer science, psychology, and artificial intelligence amongst them.” Indeed, Herbert Simon’s contribution to management and DSS is such that the science and practice of management and decision making has been durably changed under his influence. This article considers the new ideas brought by Simon in management theory and looks at his contribution to our understanding of managerial decision making and DSSs.
Key Terms in this Chapter
Bounded Rationality: Bounded rationality was proposed by Herbert Simon as a way to represent how real managers make decisions in real organisations. It is the rationality that takes into account the limitations of the decision maker in terms of information, cognitive capacity, and attention as opposed to substantive rationality, which is not limited to satisficing, but rather aims at fully optimized solutions.
Structured and Unstructured Decisions: The degree of structuredness of a decision is analogous to Simon’s notion of programmable vs. nonprogrammable decision, which describes the extent to which a complete model can be proposed for the decision in all its aspects—it is all the variables it involves and the relationships amongst them.
Satisficing: The notion of satisficing is linked to the notion of bounded rationality. Satificing involves searching and selecting a soluition that satisfies the preferences of managers to a certain extent, rather than searching for an optimal solution, which, given the volatility of most real life situations, is totally impossible.
Normative Model of Decision Making: The normative model of decision making is one of Simon’s key contributions. It proposes that the decision making of organisational actors can be appropriately thought to follow four phases: intelligence, design, choice, and review.