Page 121 - Fundamentals of Management Myths Debunked (2017)_Flat

◂ ◂ ◂ From the Past to the Present ▸ ▸ ▸

Who: Bounded rationality and satisficing Why: His work in bounded rationality helps
are the work of Herbert A. Simon, who won When faced with too us make sense of how managers can behave
a Nobel Prize in economics for his work on many choices, we rationally and still make satisfactory decisions,
decision making. SATISFICE! even given the limits of their capacity to pro-
What: His primary concern was how people cess information.
use logic and psychology to make choices and proposed that If your professor has assigned this, go to the Assignments
individuals were limited in their ability to “grasp the present section of mymanagementlab.com to complete these dis-
and anticipate the future.” This bounded rationality made it cussion questions.
difficult for them to “achieve the best possible decisions,” but
they made “good enough” or “satisficing” choices. 14 Talk About It 1: Is satisficing settling for second best?
How: Simon’s important contributions to management think- Discuss.
ing stemmed from his belief that understanding organizations Talk About It 2: How does knowing about bounded
meant studying the complex network of decisional processes rationality help managers be better decision makers?
that were inherent.

• Most managerial decisions don’t fit the assumptions of perfect rationality, but can still be
influenced by (1) the organization’s culture, (2) internal politics, (3) power considerations,
and (4) a phenomenon called:

escalation of commitment An increased commitment to a

previous decision despite evidence that it may have been wrong. 15

• Why would anyone—especially managers—escalate commitment to a bad decision?

— Hate to admit that initial decision may have been flawed.
—
Don’t want to search for new alternatives.
3 Intuition and Managerial Decision Making

When deciding yay or nay on new shoe styles, Diego Della Valle, chairman of Tod’s luxury
shoe empire, doesn’t use common decision-making tools like focus groups or poll test-
ing. Nope . . . he wears the shoes for a few days. If they’re not to his liking, his verdict:
No! His intuitive decision approach has helped make
Tod’s a successful multinational company. 16

Smalik/Fotolia

• intuitive decision making—making decisions on the basis of experience, feelings, and
accumulated judgment

— Described as “unconscious reasoning.” 17
— Five different aspects of intuition: See Exhibit 4–7. 18

Almost half of managers rely on intuition more often than

formal analysis to make decisions about their companies. 19

120