Page 74 - DMGT402_MANAGEMENT_PRACTICES_AND_ORGANIZATIONAL_BEHAVIOUR

Unit 3: Planning and Decision-making

How does bounded rationality work for the typical individual? Once the problem is Notes
identified, the search for criteria and alternatives begins. But the list of criteria is likely to
be far from exhaustive. The decision-maker will identify a limited list made up of the
more conspicuous choices. Once this limited set of alternatives is identified, the decision-
maker will begin reviewing them. But the review will not be comprehensive. That is, not
all alternatives will be carefully evaluated. The decision-maker proceeds to review
alternatives only until he or she identifies an alternative that satisfies – one that is
satisfactory and sufficient. So the satisficer settles for the first solution that is "good enough",
rather than continuing to search for the optimum. The first alternative to meet the 'good
enough 'criterion ends the search. The Figure 3.3 below illustrates the satisficing model.
Figure 3.3: The Satisficing Model

Problem
Ascertain the need for
a decision

A 1
Prob. Minimum
A 2
standards
Simplify X A 3
problem Y
Z Identify a limited
set of alternatives
Set Satisficing criteria

1.
A 1
2. A 2
Satisficing
3. A 3 ? choice
Yes
Does a Select the first
Compare alternatives satisficing "good enough"
one at a time, against alternative choice
the satisficing criteria exist?

A 4
A 5

Expand search
for alternatives

Source: Stephen P Robbins "Organisational Behaviour – Concepts, Controversies, Application", Prentice Hall,
Englewood Cliffs, NJ 07632 (Seventh Edition) 1996 page 151.
Bounded rationality assumes that managers satisfice; that is, they select the first alternative
that is "good enough", because the costs of optimizing in terms of time and effort are too
great. Further, the theory assumes that managers develop shortcuts called heuristics, to
make decisions in order to save mental activity. Heuristics are rules of thumb that allow
manager to make decisions based on what has worked in past experiences. According to
March and Simon, it is often too inefficient or too costly to make optimal decisions in
organisations. For example, while selecting a new employee, the organisation can just
hire the first applicant who meets all the minimum requirements instead of wasting time

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