Decision making model analysis

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 to process only a limited amount of information on which to base decisions" (Daft 1999, p. 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 be available. The classical model would suggest that all potential alternatives be considered, thoroughly evaluated, and then the best option chosen. In addition, this approach would probably include considering how all the people in the organization would react to each decision. While this might suggest that a thorough analysis be completed, it is not practical to approach the decision by taking major surveys of all employees or by taking considerable time to develop methods to effectively compare alternatives. With a limited amount of time to make the decision, the goal becomes to make an adequate decision in the least amount of time and with the least cost. This approach makes use of the bounded rationality approach, where the decision-making process includes recognizing that there is a limited amount of information. This limited amount of information especially applied to how well the system will be received by employees and how effectively it will work in the future. The features of a database system, the ease of use, the training options available, and the adaptability can be used to guess at which alternative will be best received and will be best in the future. However, it is not possible to accurately determine how people will react or how well they will adjust to the system. It is also not possible to know the exact needs of the organization in the future. This means that the bounded rationality approach is applicable, since not all information is available. The decision must then be made by satisficing. This means finding the solution that satisfies the minimum criteria. This means selecting a system that has the features needed, that is in the budget, and that is likely to produce the least implementation problems. It is noted that this decision is based more on avoiding potential problems than on finding the best possible solution, with this a satisficing approach. The administrative approach also requires that the human element be included in the decision. In this context, the main issue is that people will reject the changes and that this will create problems. Therefore, even if another system is superior, it becomes more beneficial to choose the option that creates the least problems with the people in the organization. In saying this, it must be noted that not everybody in the organization will be able to be satisfied. The focus is then placed on the people that have the most power and influence to impact the effectiveness of the system. This becomes part of satisficing, with one of the minimum criteria being that senior managers accept the decision and support implementation.