Administrative model is defined as "a decision-making model that describes how managers actually make decisions in situations characterized by nonprogrammed decisions, uncertainty, and ambiguity" (Daft 1999, p. 284). This approach to decision-making recognizes that not all decisions are able to be considered and judged based on quantitative methods. While it may be preferred that decisions be made by a process where the outcomes are known and can be compared, it is not always possible to know the outcomes. For these types of decisions, a new kind of model is needed that takes into account the uncertainty. This model is the administrative model.
Herbert A. Simon is the founder of the administrative model. He considered the economic model of decision-making and noted that one major element was missing. This element was the human element. Taking the human element into consideration, Simon rejected the idea that people make decisions based on rational choices. Instead, he argued that people are limited in their knowledge and in their ability to think rationally. He describes this in his paper titled "Rational Decision Making in Business Organizations" where he argues that people are not capable of making decisions based on perfect rationality. As he states,
" ... The assumption of perfect rationality - are contrary to fact. It is not a question of approximation; they do even remotely describe the processes that human beings use for making decisions in complex situations" (Simon 1979, p. 510).
He then proposed the term bounded rationality to explain how people really make decisions. Bounded rationality is defined as "the concept that people have the time and cognitive ability...
284). Simon also expanded on this by stating that people do not find the best possible solution. Instead, they satisfice. This means that they choose the first decision that satisfies minimal criteria, regardless of whether there might be better solutions.
Another important aspect of Simon's approach was based on recognizing that people do not make decisions in isolation. The classical model suggests that everyone is focused on the overall needs of the organization. In reality, people are as likely to be more concerned about themselves than the organization as a whole. This means that anyone making a decision in an organization is impacted by how it will impact the other members of the organization. Simon argued that individual decisions are actually made in competition with other people in the organization. This refers to the fact that every decision made will probably involve somebody in the organization losing something. This human element than becomes a factor in the decision making. For example, if the person losing out is someone of power or influence in the organization, the individual may factor this into their decision-making and reject a decision that negatively impacts this person. This example illustrates that decisions are not made in isolation, but impact on other people. In turn, this impact can become a factor in the actual decision-making process.
As an example of using the administrative model, consider a case where someone needs to decide which database system to implement. The first point to note is that this is not a decision where unlimited time and resources will…
