Bounded awareness in decision-making and organizational behavior

Decision Making

Bounded awareness, or bounded rationality, is a common factor in organizational decision-making. The key component of managerial decision-making is that it is bounded by what the managers know. Chugh and Bazerman (2004) note that while managers are often assumed to be perfectly rational, such a view is at odds with reality. It is in fact quite common that people fail to perceive and process the stimuli around them. This affects decision-making; while it is assumed that managers are rational, that rationality is bounded by the information that they have and their ability to process it.

People "routinely overlook important information during the decision-making process." This is because in part because people become overly focused, and any information that exists outside of the scope of this focus is overlooked. This is especially the case when the information is unexpected -- new technologies, new sources of information or news of change in a scenario where change seldom occurs (Merkhofer, 2014).

There are other times when the information is known, but for whatever reason it is not acted upon. There are a number of reasons why this occurs, for example group dynamics that create groupthink. There are other issues within the group dynamic. For example, sometimes information is not shared throughout the group. So the information exists, but has not been transmitted because of the nature of group dynamics (Merkhofer, 2014).

There are other factors that contribute to bounded awareness. Incrementalism is something that conveys a situation where the manager is not aware of something because the situation has changed incrementally. Major changes are generally noticed, but minor changes are not necessarily picked up as quickly by management. Awareness, therefore, is inhibited by incremental changes that might be too subtle for the managers to notice -- they cannot therefore effectively process this information in their decision-making processes (Merkhofer, 2014).

Another problem that plagues some businesses is the overreliance on experts (Merkhofer, 2014). This occurs when managers seek to tap outside help to provide them with insight, but failing to realize that there are significant limitations to what the "experts" or consultants know. This is definitely an issue, when somebody instead of gathering knowledge themselves, leans on the knowledge of others. There are major gaps that can be expected under that scenario. It is worth considering that this applies to information systems as well. Computer systems are powerful with respect to the information that they can process, but they are configured in a fixed manner. If there are gaps in terms of how that configuration gathers and disseminates information, those gaps will result in bounded awareness on the part of the managers who rely on those information systems.