Managing Decision Making: Simon's Model of Decision - Assignment Example

? Decision Making Table of Contents Table of Contents 2 Introduction 3 Literature Review & Summary of Research Findings- Simon's Model of Decision 3 Case Study- Drug Scandal at Essendon Football Club - problem for AFL 5 Reference List 7 Introduction “Limits of human capability to calculate, the sever deficiencies in human knowledge about the consequences of choice, and the limits of human ability to adjudicate among multiple goals” -Simon (1979, p. 270) The above phrase is not scholarly citation of Herbert A. Simon who is referred as one of the most influential decision scientist of the last century but also the core essence of this report. In such context, the researcher will shed light on the decision theory of Simon in context to research works of other research scholars.   Literature Review & Summary of Research Findings- Simon's Model of Decision According to classical decision making theory, individuals need to gather information regarding the emergent issue, then search for plausible alternativeness which can be used in order to address the issue and then select the most optimal alternatives (Bechara and Damasio, 2005). But, Simon (1979) criticized the classical decision making approach by stating that model doesn’t correspond with real world decision dilemmas. One needs to understand the key steps in Simon’s decision making model in order to criticize or appreciate it in context to research works of different research scholars. Bechara and Damasio (2005) stated that there are three phases in Simon’s decision making model such as, 1- intelligence phase, 2- design phase and 3- choice. Intelligence Phase- in the intelligence phase, individuals formulate the problem or decision statement by comparing the current process status with historical data or reference points. In this phase, individuals gather information from external environment without knowing exact outcome of such information crunching. Design Phase- in this phase, individuals try to formulate the probable alternatives to address the decision statement by considering the gathered information from macro environment. Decision makers need to analyze the information collected from external environment in order to generate alternative approach to the problem statement. Choice- in this phase, individuals select the most feasible alternative in order to address the decision problem or take decision. Important thing to remember that, the most potential alternative to the decision problem might not be the most feasible one hence decision makers must take care while selecting potential choice. There is no doubt that Simon’s decision model is based on the concept of bounded rationality. Simon (1979) pointed out that rational decision making becomes difficult due to various reasons such as lack of knowledge about all the alternatives, uncertain events, inability to calculate consequences, lack of knowledge about the consequence of particular decision, human behavioural limits etc. Due to such shortcomings, rationality of any decision making is subjected to be bounded hence a decision cannot be optimized. Sent (2005) supported the bounded rationality model of Simon and stated that although rationality might be the goal for decision making but ability of the decision maker is limited due to cognitive (such as personal values, lack of computational ability, reflexes and lack of knowledge) as well as exogenous factors (uncertainty regarding the outcome of decision). DellaVigna (2009) stated that the concept of bounded rationality is very much pertinent in context to modern day business problems while Bromiley (2005) appreciated decision making model of Simon for its usability in investment decision making and behavioral economics. However, there are other group of research scholars such as Campitelli and Gobet (2010) and Levinthal (2011) who criticized Simon’s decision making model for lacking in depth. Levinthal (2011) stated that decision makers need to create representation in explicit or implicit manner while making deductive reason but research work of Simon remained silent about creation of representation. Campitelli and Gobet (2010) pointed out that although decision model of Simon gives importance on creation of representation but the model fails to provide sufficient evidences which can be used to show how the representation might be created. Despite these shortcomings, DellaVigna (2009) stated that decision making model of Simon can be optimized in case structured and semi structured business problems. Summary of the research findings can be represented in the following manner; Decisions should be made under bounded rationality environment. Simon’s decision making model is good in those cases where need of representation is less but the models might not work properly in those case unstructured business problems which need significant amount of detailing in representation. Decision makers might face cognitive and exogenous barrier while making rational decisions and they might use Simon’s decision making model in order to identify optimal alternatives by accessing information from environment. Case Study- Drug Scandal at Essendon Football Club - problem for AFL The researcher will use the example from Australian Football League (AFL) in order to test how the above mentioned findings can be applied to real world social problems. Herald Sun (2013) reported that AFL has released the report of seven month drugs scandal against Essendon Football Club. The 34-page report published by AFL contains evidences of illegal drug usage against Essendon Football Club such as, 1- detail identity of players of the club who took the drug injection, 2- substances illegally brought back by the club from China, 3- claims regarding health scare of a renowned footballer of the club caused by injection exotic substance. After detail investigation, AFL decided to punish Essendon Football Club and officials of the club who were linked with the drug scandal. AFL and ASADA found evidences against Essendon Football Club that they are using performance enhancing drugs and the club has also crime links. AFL can use Simon’s decision making model to address the problems associated with “Drug Scandal at Essendon Football Club” and the steps can be defined in the following manner; AFL should gather information from drug suppliers of Essendon Football Club and also from the officials of the club in order to get the real picture. AFL should also consult with ASADA in order to define actual problem statement. AFL should consult with ASADA and lawyers in the associated field in order to identify potential alternatives that can be used in order to punish Essendon Football Club or legal actions against the club. Drug Scandal at Essendon Football Club has degraded the image of Australian Football in front of the world hence AFL should take strongest possible measures not only to punish officials of Essendon Football Club but also discourage any other football club from committing such type of scandalous activities. It is evident from the above discussion that the problem for AFL is semi-structured in nature hence using Simon’s decision model can help AFL to reach a conclusive decision regarding the drug scandal problem. Reference List Bechara, A. and Damasio, A. R., 2005. The somatic marker hypothesis: A neural theory of economic decision. Games and Economic Behavior, 52, pp. 336-72. Bromiley, P., 2005. The behavioral foundations of strategic management. Malden, MA: Blackwell Publishing. Campitelli, G. and Gobet, F., 2010. Herbert Simon’s decision-making approach: Investigation of cognitive processes in experts. Review of General Psychology, 14(4), pp. 354-64. DellaVigna, S., 2009. Psychology and economics: Evidence from the field. Journal of Economic Literature, 47(2), pp. 315-72. Herald Sun., 2013. Essendon coach James Hird to launch Supreme Court action against AFL. [online] Available at: [Accessed 21 August 2013]. Levinthal, D. A. 2011. A behavioral approach to strategy – what’s the alternative? Strategic Management Journal, 32(13), pp. 1517-23. Sent, E. M., 2005. Simplifying Herbert Simon. History of Political Economy, 37(2), pp. 227-32. Simon, H. A., 1979. Rational decision making in business organizations. American. Economic Review, 69(4), pp. 493-513. Read More