1MANAGERIAL DECISION MAKING Part One: Introduction The essay will be structured on part one; it will be focused on an essential quote and implementing strategies along with the desired solutions. In part one, the famous quote “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 behavior in the real world- or even for a reasonable approximation to such objective rationality” of Herbert A. Simon will be examined by applying specific theories such as framing, bounded awareness and emotion theory in the field of management. Simon has stated about the size of the problem, which is quite small compared to the quantity of the mind of human beings that intends to solve the problem (Simon, 1990). Therefore, the capacity of dissolving those complicated problems as well as achieving the solutions through one’s rational behavior in the present generation is quite tricky and hard to achieve appropriately (Simon, 1972). The main objective of the essay is to analyze Simon’s quote which is based on bounded rational theory as well as decision making. The essay is going to be discussed under various aspects such as Simon’s principles and theories along with the three discrete theories in order to develop a better understanding among readers so that they can stimulate their ideas appropriately.
2MANAGERIAL DECISION MAKING Discussion In this previous section, the quote of Simon is focused on his principle of bounded rationality, and therefore, it is essential to understand the principle and then discuss the three discrete theories including framing, bounded awareness and emotion theory. The principle of bounded rationality is defined as the idea that is instigated on the method of decision-making, the concept of rationality among several individuals that is restricted by the information they have been provided (Simon, 1972). The concept was proposed by Herbert A. Simon, which throws challenges of the notion of human rationality and the theory of homo economicus implemented it. Therefore, the quotation has various boundaries to showcase and that there are certain limitations to an individual’s thinking ability or capability along with the gathered information and time (Simon, 1990). This process actually accounts the effective behavior, which is separated from the conjecture of absolute rationality. Its main objective is to highlight the essential features of contributions such as decision-sciences, cognitive as well as neuropsychology, economics, computer science, biology, and philosophy that are attached to the recent development of understanding related to the principle of bounded rationality. Therefore, the set of principles addresses the correct assumptions and sets the aim of classical economic theory, which helps to foresee the desired behavior of the rational man. It does not directly focus on an individual’s behavior without building an empirical investigation on an individual’s psychological elements (Simon, 1972). An individual needs to accomplish a simplified model of that actual situation so that he or she can deal with it appropriately and accordingly. Nevertheless, in order to foresee the actual behavior of an individual, one must comprehend in such a way so that the simplified model can be constructed effectively (Simon, 1957). Thus, the building up of the simplified model will definitely address their respective psychological elements such as the thought process, observing, along with learning animal. Therefore, it can be justified by utilizing the three concrete theories including framing, bounded awareness and emotion theory. Framing: Framing is defined as the concept where the main focus is always upon the attention of an individual in the range of meanings (Guo, Trueblood & Diederich, 2017). The approach is linked with the rational choice theory which is based on rational choices and is focused on precise
3MANAGERIAL DECISION MAKING rational calculations that an individual along with a group of individuals rely on so that they can make rational choices (Young, 2016). In this way, the desired outcome has been arranged according to their individual and separate interests. The work of Cesare Beccaria actually developed the rational choice theory in the late 18thcentury. The main objective of this theory is to help in the utilization in the model of decision-making of human beings especially in the subject of micro-economics. The theory of framing always suggests that some things are presented in a frame that affects the rational choices of the individuals. The individual choices are basically consistent as they are produced by their personal choices as well as preferences (Clarke & Cornish, 2013). Therefore, the theory can be utilized in the process of decision-making, which helps the individuals to limit the information they have obtained and certain cognitive limitations have been recognized in their individual minds. Therefore, due to less time, an individual is unable to make any rational choice regarding any decision (Young, 2016). Suppose in an organization, numerous employees give interviews in order to get selected but only some get selected because of the decisions made by the higher authority and they take various decisions based on different factors. In short, their decision differs according to their general choices. Bounded Awareness: The theory of bounded awareness is the concept that encompasses a various range of psychological processes that guide on to the similar issues such as could not see, utilize, seek or share essential and current information, which is easily available to view it (Murata, Nakamura & Karwowski, 2015). It is a theory that occurs when individuals fail to seek information from their surroundings because they are wholly focused upon other problems, which can be seen in the environment. The process of decision-making is defined by executing a difficult task after applying some logical ideas and thoughts (Young, 2016). There are several means of selecting the perfect choices among several other options. These decisions are based on personal analysis as well as it may affect the individuals at a certain point in time (Newell, Lagnado & Shanks, 2015). Some essential steps can be taken such as identifying the decisions and recognizing that there is a need to deliver the decisions such as vital decisions for an organization regarding incentive policy, promotion of the desired employees and significant decisions regarding taking any risks for the betterment of the organization (Groeneveld et al., 2017). The organization needs
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4MANAGERIAL DECISION MAKING to gather relevant information in order to impose rules and regulations on such decisions. They should be willing enough to provide the alternatives of such decisions and should be ready to accept other options as a backup plan. The shreds of evidence should be quite essential as well as the right action should be taken under any circumstances. Finally executing the decisions as per one has planned will be reviewed in order to understand the ways of dealing with it appropriately. Therefore, bounded awareness can be utilized by recognizing the relevant information and valid shreds of evidence that will help to follow up on the strategies appropriately. Most of the individuals always tend to get distracted from the main information during the process of decision-making. In this way, they could not utilize the essential information which should be recognized by the individuals efficiently and adequately. Emotions: The theory of emotions is defined as the relationship between the physiological arousal as well as cognition. In the field of management, emotions are defined as understanding the aspects, realizing, and successfully handling the feelings of their own (Rolls, 2013). It is basically a skill that is essential to transform their ideas, thoughts along with feelings and it helps in preventing one’s reactive outbursts. There are six types of emotions that are interlinked with each other such as anger, joy, sadness, fear, love, andsurprise. It is interlinked with the organizational theory is focused on the influence that individuals, group of individuals, along with structures, have on the behavior of human beings within the organization (Thompson, 2017). This theory has been linked with several types of subjects such as psychology, sociology, management and communication. Its main objective is based on the behavior of an individual, groups, structure, and several processes (Lee & Lawrence, 2013). Therefore, it can be related to Simon’s quote, an individual can sense the problems which are quite big enough and it may not be dissolved unless one intends to dissolve it by implementing critical decisions (Simon, 1957).
5MANAGERIAL DECISION MAKING Conclusion Therefore, concluding part one, Simon’s quote was an essential part to realize the inner parts of the behavioral issues, rationality and decision-making processes. The framing will serve a better way to deal with the problems that can be dissolved in order to meet the desired goals. The rational choice theory has been associated with the theories of rational actors, the assumptions based on rationality, self-interest along with the invisible hand. The bounded awareness will provide the basic abilities and capabilities that an individual should take time and should research more about the relevant information. Lastly, the theory of emotion helps to instigate all the other activities in order to sustain the organization along with groups and an individual that can be channelized in different fields of subjects such as communication, association, and so on. There are such feelings that help to enhance the situation and the company may take appropriate decisions in their individual workplaces. Therefore, having limited time and information, the individuals may have to deal with several issues but they have to spend enough time to come to an adequate decision.
6MANAGERIAL DECISION MAKING References Clarke, R. V., & Cornish, D. B. (2013). The rational choice perspective. In Environmental criminology and crime analysis (pp. 43-69). Willan. Groeneveld, J., Müller, B., Buchmann, C. M., Dressler, G., Guo, C., Hase, N., ... & Liebelt, V. (2017). Theoretical foundations of human decision-making in agent-based land use models–A review.Environmental modelling & software,87, 39-48. Guo, L., Trueblood, J. S., & Diederich, A. (2017). Thinking fast increases framing effects in risky decision making.Psychological science,28(4), 530-543. Lee, R., & Lawrence, P. (2013). Organizational Behaviour (RLE: Organizations): Politics at Work. Routledge. Li, Y., Ashkanasy, N. M., & Ahlstrom, D. (2014). The rationality of emotions: A hybrid process model of decision-making under uncertainty.Asia Pacific Journal of Management,31(1), 293-308. Murata, A., Nakamura, T., & Karwowski, W. (2015). Influence of cognitive biases in distorting decision making and leading to critical unfavorable incidents.Safety,1(1), 44-58. Newell, B. R., Lagnado, D. A., & Shanks, D. R. (2015).Straight choices: The psychology of decision making. Psychology Press. Rolls, E. T. (2013). Emotion and decision-making explained. OUP Oxford. Simon, H. A. (1957). Models of man; social and rational. Simon, H. A. (1972). Theories of bounded rationality.Decision and organization,1(1), 161-176. Simon, H. A. (1990). Bounded rationality. InUtility and probability(pp. 15-18). Palgrave Macmillan, London. Thompson, J. D. (2017). Organizations in action: Social science bases of administrative theory. Routledge. Wilson, F. M. (2017). Organizational behaviour and gender. Routledge.
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