The
point of the rational approach is that managers should try to use systematic
procedures to arrive at good decisions. Yet research into managerial decision
making shows managers are unable to follow this ideal procedure much of the
time. Time pressure, a large number of factors affecting a decision, and the
ill-defined nature of many problems make systematic analysis nearly impossible.
Managers have only so much time and mental capacity and hence cannot evaluate
every goal, problem, and alternative. The attempt to be rational is bounded
(limited) by the enormous complexity of many problems. There is a limit to how
rational managers can be. For example, an executive in a hurry may have a
choice of fifty ties on a rack, but will take the first or second one that matches
his suit. The executive doesn’t carefully weigh all fifty alternatives because
the short amount of time and the large number of plausible alternatives would
be overwhelming.
The manager simply selects the first tie that solves the
problem, and moves on to the next task.
Large
organizational decisions are not only too complex to fully comprehend, but many
other constraints impinge upon the decision maker, as illustrated in exhibit
11.2. The circumstances are ambiguous, requiring social support, a shared
perspective on what happens, and acceptance and agreement. For example, in a
study of the decision making surrounding the Cuban missile crisis, the
Executive Committee in the White House knew a problem existed but was unable to
specify exact goals and objectives. The act of discussing the decision led to
personal objections and finally to the discovery of desired objectives that
helped clarify the desired course of action and possible consequences. In
addition, personal constraints such as decision style, work pressure, desire
for prestige, or simple feelings of insecurity may constrain either the search
for alternatives or the acceptability of an alternative. All of these factors
constrain a perfectly rational approach that should lead to an obviously ideal
choice. Recent research on the importance of personal decision style is
discussed in Book Mark 11.0. Even seemingly simple decisions, such as selecting
a job upon graduation from college, can quickly become so complex that a
bounded rationality approach is used. Graduating students have been known to
search for a job until they have two or three acceptable job offers, at which
point their search activity rapidly diminishes. Hundreds of firms may be
available for interviews, and two or three job offers are far short of the
maximum number that would be possible if students made the decision based on
perfect rationality.
The
bounded rationality perspective is often associated with intuitive decision
processes. In intuitive decision making, experience and judgment, rather than
sequential logic or explicit reasoning, are used to make decisions. Intuition
is not arbitrary or irrational because it is based on years of practice and
hands on experience, often stored in the subconscious. Long experience with
organizational issues provide managers with a gut feeling or hunch about which
alternative will solve a problem. Indeed, many universities are offering
courses in creativity and intuition so business students can learn to
understand and rely on these processes.
In
a situation of great complexity or ambiguity, previous experience and judgment
are needed to incorporate intangible elements. The intuitive processes may be
associated with both the problem identification and problem solution stages of
a decision. A study of manager problem finding showed that thirty of
thirty-three problems were ambiguous and ill defined. Bits and scraps of
unrelated information from informal sources resulted in a pattern in the
manager’s mind. The manager could not “prove” a problem existed, but knew
intuitively that a certain area needed attention. A too simple view of a
complex problem is often associated with decision failure, and research shows
managers are more likely to respond intuitively to a perceived threat to the
organization than to an opportunity.
Examples
of problems that might be discovered through informal, intuitive processes are
the possibility of impending legislation against the company, the need for a
new product, customer dissatisfaction, and a need for reorganozation by
creating new departments.
Intuitive
processes are also used in the problem solution stage. A survey found that
executives frequently made decisions without explicit reference to the impact
on profits or to other measurable outcomes. As we saw in exhibit 11.2, many
intangible factors such as a person’s concern for support of other executives,
fear of failure, and social attitudes influence selection of the best
alternative. These factors cannot be quantified in a systematic way, so
intuition guided the choice of a solution. Managers may make a decision based
upon what they sense to be right rather than upon what they can document with
hard data.
A
number of important decisions, some quite famous, have been based on hunch and
intuition. One was film director George Lucas’s choice of Star Wars as the title of his film. Researchers who analyzed hard
data warned him that the title would turn away crowds at the box office. In
another example, Ray Kroc felt that purchasing the McDonald name for $2.7
million was highway robbery, but he knew intuitively that he should pay
whatever price was demanded, and he did.
Remember
that the bounded rationality perspective applies mostly to nonprogrammed
decision. The novel, unclear, complex aspects of nonprogrammed decisions mean
hard data and logical procedures are not available. A study of executive
decision making found that managers simply could not use the rational approach
for nonprogrammed decisions, such as when to buy a CT scanner for an
osteopathic hospital, or whether a city had a need for and could reasonably
adopt a data processing system. In those cases, managers had limited time and
resources, and some factors simply couldn’t be measured and analyzed. Trying to
quantify such information could cause mistakes because it may oversimplify
decision crireria. When Michael Eisner was president of Paramount Pictures, he
learned to rely on intuition for making nonprogrammed decisions. His decision
approach was astonishingly successful at Paramount and more recently at Disney.
