descriptive theory

7/29/2019 descriptive theory

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4.4. Administrative model:

this model of decision making describe how

managers actually make decision in difficult situations, such as those

characterized by none programmed decisions, uncertainty and ambiguity. Many

management decisions are not sufficiently programmable to lend themselves to

any degree of quantification. Managers are unable to make economically rational

decision even if they want to. None programmed decisions: are used for

unstructured, novel, and ill-defined situations of a nonrecurring nature. Example

is the developing of the four-wheel-drive passenger car by Audi. In fact strategic

decisions, in general, are none programmed decisions. Most decisions are

neither completely programmed nor completely none programmed: they are a

combination of both. [Heinz Weihrich et al 2005]. The administrative model of decision making is

based on the work of Herbert

Simon. Simon proposed two concepts that were instrumental in shaping the

administrative model: bounded rationality and satisfying. According to the

administrative model:

Decision goals often are vague conflicting and lack consensus among managers.

Managers often are unaware of problems or opportunities that exist in the

organization. Rational procedures are not always used, and, when they are, they

are confined to a simplistic view of the problem that does not capture the

complexity of real organization view. Managers searches for alternatives are

limited, because of human, information andect. Most managers settle for a

satisfying rather than a maximizing solution. The administrative model is

considered to be descriptive, meaning that it describes how managers actually

make decision in complex situations rather than dictating how they should make

decisions according to a theoretical ideal. This model recognizes the human and

environmental limitations that affect the degree to which managers can pursue a


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rational decision-making process.

4.4.1. Intuition: another aspect of administrative decision making is intuition.

Intuition represents a quick apprehension of a decision situation based on past

experience but without conscious thought. [Weston. H, Agor 1986]. Intuitive

decision making is not arbitrary or irrational, because it is based on years of

practice and hand-on experience that enable managers to quickly identify

solutions without going through painstaking computations.

. Principles of Good Administrative Decision Making

The principles of good administrative decision making include:

Understand the Act

Relevant/irrelevant considerations A decision maker is obliged to consider all matters relevant to the

decision to be made.

Relevant matters are the factors which the decision maker should rely on. A decision

maker is obliged to consider those matters expressly referred to in the Act, or those

factors which may arise by implication from its subject matter, scope and purpose.

If the Act does not specify any relevant considerations and leaves the discretionary

power largely unconfined, then it is for the decision maker to determine which matters

are relevant and the level of importance to be attached to them. This determination of

what is relevant must be consistent with the goals of the Act. However, a decision maker

is not obliged to make an exhaustive list of all matters that might conceivably be relevant

to a decision and then consider them all. Relevant matters are those which must be

considered, or relied on, for the exercise of the power. Agents should make sure they

consider all matters relevant to the decision to be made.

Taking into account an irrelevant consideration can be just as fatal to a decision as

failing to take into account a relevant consideration. Whether a matter is irrelevant (like

whether a matter is relevant) is a matter of understanding the Act conferring the power.

Reliance on an incorrect or unsubstantiated fact may be treated as an irrelevant

consideration. Agents should take care to avoid relying on an 'insupportable finding' or


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'mere conjecture'. Agents must ignore irrelevant matters and consider only relevant

matters.

The role of policy and discretion

Discretion is a term often used when discussing statutory decision making. It refers to

the element of choice a decision maker has in forming their view or making their

decision. Discretion may be obvious where the Act uses the term 'may' instead of the

term 'must'. However, this is not a definitive test of the existence of discretion.

Discretions are vested in the decision maker. A decision maker may act improperly if

they act at the command of another person. Limits to the exercise of discretion may be

found in the Act or in the nature of the decision making function itself. For example:

Agents should always consider the limits of their discretion and ensure they act

reasonably and in accordance with the legislative framework.

In addition to statutory limits and in order to ensure administrative consistency, discretion

should be exercised in accordance with the VWA's policies and procedures. Agent staff

exercising statutory powers should comply with all relevant and applicable VWA policies

and procedures, including the Claims Manual. However, care needs to be taken to

ensure that VWA policies and procedures do not inappropriately interfere with a decision

makers discretion. That is, policies and procedures can help agents exercise their

discretion by, for example, identifying relevant criteria or setting out a consultation

process. However, policies and procedures should not be followed blindly - agents still

need to use their discretion to make a decision considering all of the circumstances of

the particular matter.

Best available information Decisions should be based on and supported by the best available

evidence. Courts may imply into statutes an obligation to consider the

most recent and accurate information available to the decision maker.

In some situations, there is an obligation to seek out relevant

information. For example, the Act may make clear there is an obligation


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to conduct an inquiry to discover relevant information. However, even

without such an express obligation, the courts may hold the obligation

exists where:

- it is obvious that information is readily available that is centrally

relevant to the decision to be made

- the decision maker is on notice the information existed but chooses not

to seek it out (known as 'constructive knowledge' or 'willful

blindness')

- the information available to make a decision is clearly inadequate

Proper, genuine, realistic consideration

A decision maker must act reasonably and give proper, genuine and realistic consideration

to the merits of a decision. File notes and evidence used to reach the decision (decision

record) should reflect this, in case there is a challenge to a decision.

While the failure to mention a matter expressly will not necessarily give rise to an inference

that it was not considered, it is nevertheless good practice to list all matters considered.

The theory of administrative behaviour is a generic term used to describethe process by which people within organizations work. The theory iscredited to Herbert Simon, and in particular to Simons findings about how

organizations function that run counter to other, classical approached. Forexample, Simon (1976) clarified the processes by which goal specificityand formalization contribute to rational behavior in organizations. Hecriticizes Fayol's platitudes and Taylor's "economic man" assumptions,proposing the "administrative man" who pursues his self-interests but oftendoesn't know what they are, is aware of only some of the possible decisionalternatives, and is willing to settle for an adequate solution than continuelooking for an optimal one (p. 45).

Participants in high positions make decisions with a higher value

component, people in lower positions make decisions with a higher factualcomponent. The top makes "what" decisions, the bottom "how" decisions.


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Choice of ends can only be validated by fiat or consensus, choice of meansempirically.

Each goal in the means-end hierarchy is an end to things below it and amean to those above it. Activities can only be evaluated against the goalsabove it. Goals can be delegated to different units which simplifies thedecision making process for participants. Scott notes that "from thisperspective, an organization's hierarchy can be viewed as a congealed setof means-ends chains promoting consistency of decisions and activitiesthroughout the organization". p. 46

Two key concepts, both attributed to Simon, are related to the theory ofadministrative behavior. The first is the concept of bounded rationality.Bounded rationality notes the cognitive limitations of decision makers.

Simon points out in his book, Models of My Life, that most people are onlypartly rational, and are in fact emotional/irrational in the remaining part oftheir actions. In other work, he states "boundedly rational agentsexperience limits in formulating and solving complex problems and inprocessing (receiving, storing, retrieving, transmitting) information"(Williamson, p. 553, quoting Simon). Simon describes a number ofdimensions along which "classical" models of rationality can be madesomewhat more realistic, while sticking within the vein of fairly rigorousformalization. These include:

- limiting what sorts of utility functions there might be.

- recognizing the costs of gathering and processing information.

- the possibility of having a "vector" or "multi-valued" utility function.

The second concept related to the theory of administrative behaviour issatisficing. Satisficing is a behaviour which attempts to achieve at leastsome minimum level of a particular variable, but which does not strive toachieve its maximum possible value. The most common application of the

concept is in administrative behavior, which, unlike classical economicaccounts, postulates that producers treat profit not as a goal to bemaximized, but as a constraint. Under these theories, although at least acritical level of profit must be achieved by firms; thereafter, priority isattached to the attainment of other goals.

The bureaucratic or administrative model of decision makingIn reaction to the unrealistic assumptions of the rational model, Herbert Simon (1960) sought todevelop a model of decision making based on the actual behaviour of decision makers. This approach

has come to be known as the bureaucratic oradministrative model. Simon recognized that the humananimal has a limited capacity for processing information, and thus that there are cognitive or mental


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limits to human rationality. These limits or constraints on individuals mean that decision making isgoverned, according to Simon, by bounded rationality. Seemingly sub-optimal efforts to reachdecisions (Minkes 1987: 703; Mouzelis 1967: 124) in everyday life also result from the influence ofnon-rational, emotional and unconscious elements in human thinking and behaviour, for example poorwork habits, limited skills and pressure of time. Group pressures are also likely to limit the optimizingbehaviour so central to the rational model of decision making. Furthermore, perfect information (onwhich to make decisions) is not always available, and there are time and cost considerations attachedto information gathering and evaluation (Williamson, 1975). The sheer amount of information to beprocessed and the necessity to meet deadlines frequently rules out optimal decisions.

Whilst ideally organizational arrangements should be set up to enhance decision making, which

Simon sees as a primary management function, in practice the conditions for perfectly rational

decisions will seldom, if ever, be attained. Thus, in lieu of the optimizing economic man of the

rational model, Simon proposes an administrative man who satisfices. Satisficing is a term he

coined to describe a best in the circumstances decision. The metaphor suggested is that of looking

for a needle in a haystack. If one discovers a blunt or rusty needle that will more or less do the job

required, it is unlikely one will keep searching until the perfect needle is discovered there may not

even be one! Thus a satisficing decision is one which broadly satisfies the parameters of a problem.

To continue to search for an ideal or optimal solution may not only exceed the informationprocessing capcity of the decision maker, it may also involve a cost which must be offset against the

advantage of a quicker, near-enough or satisficing decision: hence the bounded rationality of

decisions (Perrow 1972: 1546; March and Simon 1958; Minkes 1987: 715).

In addressing the question of what needs to be done to enhance organizational decision making,

Simon distinguishes between two types of decisions: programmed and non-programmed.

Programmed decisions are not novel in nature and evolve from policies, precedents and guidelines.

These decisions deal with repetitive and procedural events and could include such things as

decisions about salary payments, customer orders, inventory restocking, etc. (i.e. they appear as

clear choice criteria). In larger organizations, procedure manuals and precedents often set the

direction for a programmed decision. This type of decision making is very amenable to

bureaucratization (red tape and rules) and computerization (Weeks 1980). By contrast, a non-

programmed decision involves finding solutions to problems which are novel or unstructured.

Examples would be a decision to diversify, relocate, acquire a new business or initiate a range of

staff redundancies for the first time. Usually there is little in the way of precedent or procedure to

guide such decisions. This distinction can be related back to the typology of Hickson et al. (1986) that

we considered earlier. Sporadic decisions are similar to what Simon terms non-programmed

decisions, whilst fluid and constricted decisions may be seen as examples of programmed decisions,

although fluid decisions tend to have a greater element of uncertainty than a limited reading of

programmed would imply.

The distinction between programmed and non-programmed decision making is important because

they not only require different methods of problem solving but also involve different modes ofmanaging and organizing. The implications and characteristics of the two decision-making modes areset out in the table below (14.2 in the text). Programmable decisions lend themselves readily tooperations research techniques and are compatible with mechanistic organizational structures. In a

modernist view non-programmable decisions are best approached heuristically (i.e. using predictivemodels, including informal ones, to answer what if? questions) and are compatible with more

organic (i.e. non-bureaucratic or flexible) organizations. Simon believed that the decision-makingactivities of the middle and lower-level groups within an organization were more amenable toprogrammable decisions, while the upper levels were to deal more regularly with non-programmabledecisions. Indeed, the bounded rationality of human beings is frequently used to account for, and thusalso to naturalise, the existence of the hierarchical structures we see in organizations. The argumentruns something like this: if each of us can only process a limited amount of information, then to deal

with complex matters that involve processing amounts of information that exceed these limits wemust organize ourselves in ways that enhance our collective information processing powers.


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Hierarchy provides just such a form of organization. It ensures that the information processingpowers of senior decision makers are not overloaded by making subordinates both summariseinformation, passing only its most salient aspects to those above, and apply pre-programmed rules tofamiliar problems, so that they only need to pass up exceptional cases (Galbraith, 1974; see alsoSchotter, 1981). Within such moves, the problem of limited human information processing capacityis re-cognized and re-presented in the form of a solution: that of a formally organized hierarchy(Cooper, 1992). But there is no such thing as a free lunch! Rules begin to take precedence over whatthey are intended to achieve and hierarchical position becomes more important than level ofcompetence, as we saw in the cases above. Furthermore, questions concerning who passes (Munro,2001) what to whom become ever more pressing, as we shall see in our later consideration of thepolitical model. Nevertheless, Simon hoped that through the application of sophisticatedorganizational design many decisions would become programmable and subject to more control andpredictability.

In the postmodern context programmable decisions operate through various forms of self-

discipline and control. Non-programmable decisions are associated with the so-called virtual

organization. Simon did not include postmodern techniques of decision making in his typology, but

these have been added to help draw comparisons between techniques of decision making.

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