Page 120 - Fundamentals of Management Myths Debunked (2017)_Flat

• A “rational” decision maker . . .
Should Be: Can Ever Be?

Fully objective and logical Can we ever be fully objective and logical?

Problem is clear and Can problems ever be totally clear
unambiguous and unambiguous?

Clear and specific goal Can a goal ever be made that clear
regarding decision and specific?

All possible alternatives Can all possible alternatives and
and consequences known consequences ever be known?

Alternative selected maximizes Can any alternative ever really do that?
likelihood of achieving goal

Organization’s best interests Managers should do this but may face
are considered factors beyond their control.

Rationality is not a very realistic approach.

2 Bounded Rationality

“A. More. Realistic. Approach.”

• bounded rationality: Managers make rational decisions, but are limited (bounded) by
their ability to process information. 13
• Most decisions managers make don’t fit the assumption of perfect rationality.

• No one can possibly analyze all information on all alternatives so they . . .
• satisfice—that is, accept solutions that are “good enough,” rather than spend time and

other resources trying to maximize. (See From Past to Present box on p. 120.)

Example: As a newly graduated finance major, you look for a job as a
financial planner—minimum salary of $55k, and within
100 miles of your hometown. After searching several
different options, you accept a job as a business credit an-
alyst at a bank 50 miles away at a starting salary of $52k.
HOORAY! If, however, you’d maximized—that is, con-
tinued to search all possible alternatives—you’d have
eventually found this financial planning job at a trust bounded rationality
company 25 miles away with a starting salary of $57k. Making decisions that are rational within the limits
However, the first job offer was satisfactory—“good of a manager’s ability to process information
iQoncept/Fotolia within the bounds of your abilities to process information! satisfice
enough”—and you took it! Your decision making was still rational . . . but
Accepting solutions that are “good enough”

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