Download - BOUNDED RATIONALITY
BOUNDED RATIONALITYA Research study
NATIONAL LAW UNIVERSITY,JODHPUR
ORGANIZATIONAL
BEHAVIOU
R
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BOUNDED RATIONALITY
Herbert Simon
Organizational Behaviour, Project, NLU, Jodhpur
• The term bounded rationality was coined by Herbert Simon•Most people are not completely rational that is they are only partially rational, in fact they are emotional or irrational in remaining part of their action boundedly rational agents experience limits in formulating and solving complex problems and in processing (receiving, storing, retrieving, transmitting) information.
3Organizational Behaviour, Project, NLU, Jodhpur
•PRINCIPLE OF SATISFACTION• Limited list of more conspicuous ideas
• Familiar criteria and previously tried-and-
true solutions
• “good enough” criterion
•INTUITIVE DECISION MAKING• More than using common sense
•HEURISTICS• Judgments on information that is readily
available
• Seeing identical situations
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FIELD STUDY:
Organizational Behaviour, Project, NLU, Jodhpur
BANK OF RAJASTHAN LTD., Lachoo Memorial College, Jodhpur
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RESEARCH OBJECTIVES:
Organizational Behaviour, Project, NLU, Jodhpur
To identify the reasons wherein employees use Bounded
Rationality.
To determine scope of bounded rationality in practice in
To measure the consequences of Bounded Rationality.
To suggest measures to prevent the impact of Bounded
Rationality.
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DATA ANALYSIS
Organizational Behaviour, Project, NLU, Jodhpur
1. In which cases you can afford to take decision with limited information? Why?a) Routine decisions b) Time is limited c) Limited resourcesd) Others please specify
option aoption b
option coption d
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2
4
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No. of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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2. What according to you is most important quality of managers on which success of such decisions depends?
a) Experienceb) Just a matter of chancec) Does not affect much as loss suffered due to their failure is
negligibled) Others please specify
option aoption b
option coption d
01234567 6
1
0 4th op-tion, 0
No. of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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3. What is the frequency of such decisions in your job?
a) Rarelyb) Frequentlyc) Only when time is limitedd) Others please specify
option aoption b
option coption d
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2 3rd option, 2
No. of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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4. Were you satisfied by the decisions taken by you?
a) Highly satisfied b) Satisfied c) Dissatisfiedd) Highly dissatisfied
option aoption b
option coption d
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1
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No. of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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5. Which factors help while taking decisions in such conditions?
a) Ability b) Rules of thumb c) Personal experienced) Others (Specify)
option aoption b
option coption d
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1
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No. of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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6. Which factors influence these decisions?a) Past decisions related to such conditions b) Events recently occurred c) Stereotypes d) Others please specify
option aoption b
option coption d
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4
3
00
No. of respondents
12Organizational Behaviour, Project, NLU, Jodhpur
7. On which level of management such decisions are usually taken?
a) Top b) Middlec) Lowerd) Combinations of above, please specify
option aoption b
option coption d
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No.of respondents
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8. “In recent times frequency of such decisions are increasing in the organisations.” Do you agree with this?
a) Highly agreed b) Agreed c) Disagreedd) Highly disagreede) Can’t say
option aoption b
option coption d
option e
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1
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No.of respondents
14Organizational Behaviour, Project, NLU, Jodhpur
9. If agreed then what is the reason behind this?a) Increased mental capabilities of new managersb) High work loadc) Trained managersd) Time constrainte) Others please specify
option aoption b
option coption d
option e
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0
2
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No.of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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10. What kind of loss does the organisation suffers due to the irrational decisions taken?
a) Managers start relying more on such decisions which affects their information processing capability
b) Failure of decisions will increasec) Decreases the interaction of the organisation with the
external environmentd) Others please specify
option aoption b
option coption d
01234567
0
2
4
1
No.of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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11. Managers often take decisions based on:a) Available informationb) Representation of the problemc) Defer the decision because of person’s backgroundd) Caste, creed sex, community.e) Others (specify)
option aoption b
option coption d
option e
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2 2
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No.of respondents
Organizational Behaviour, Project, NLU, Jodhpur
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12. Excessive manpower results when:
a) Preference is given to ad-hoc policies b) Accommodate members on local referencec) Belief in personal loyaltyd) Distribution of poverty e) Others (specify)
option aoption b
option coption d
option e
01234567
0
5
1
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No.of respondents
18Organizational Behaviour, Project, NLU, Jodhpur
13. Have you ever taken any decision in favour of your relative or friend? Why?
a) Due to disabilityb) Preference c) In influence of powerd) Others please specify
option aoption b
option coption d
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1
No.of respondents
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1st OBJECTIVE & RELATED QUESTIONS
Organizational Behaviour, Project, NLU, Jodhpur
To identify the reasons wherein employees use
Bounded Rationality.In which cases you can afford to take decision with limited
information and why?
Which factors help while taking decisions in such conditions?
Which factors influence these decisions?
The decisions taken by managers are based on what criteria?
In what conditions does the manpower becomes excessive?
Have you ever taken any decision in favour of your relative or friend?
Most of the decisions are taken during routine work, the managers take such decisions influenced by similar past decisions and Events recently occurred and that available information plays
an important role in taking decisions.
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2nd OBJECTIVE & RELATED QUESTIONS
Organizational Behaviour, Project, NLU, Jodhpur
To determine scope of bounded rationality in
practice inWhat according to you is most important quality of
managers on which success of such decisions depends?
Were you satisfied by the decisions taken by you?
On which level of management such decisions are usually
taken?
“In recent times frequency of such decisions are
increasing in the organisations.” Do you agree with this?
If agreed then what is the reason behind this?These type of decisions are taken due to experience, most of them were satisfied with their decisions. These decisions are
usually taken in the middle level and they agree that frequency of these decisions is increasing because of high work load.
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3rd OBJECTIVE & RELATED QUESTIONS
Organizational Behaviour, Project, NLU, Jodhpur
To measure the consequences of Bounded Rationality.
What is the frequency of such decisions in your job?
What kind of loss does the organisation suffers due to
the irrational decisions taken?
Frequency of such decisions is increasing and that the interaction of the organisation with the external environment decreases.
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4th OBJECTIVE & RELATED QUESTIONS
Organizational Behaviour, Project, NLU, Jodhpur
To suggest measures to prevent the impact of Bounded Rationality.
Can you suggest some measures to prevent the impact of such decisions taken irrationally?
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FINDINGS:
Organizational Behaviour, Project, NLU, Jodhpur
These decisions are taken in routine life, and in which
experience plays a major role for the decision makers to arrive at
their decisions.
These type of decisions are generally taken when time is limited
and the decision takers were generally satisfied with their
decisions.
Most of the people believe that their personal experience helps
them in taking decisions, and that these decisions are influenced
by the past decisions taken earlier.
Most of the people agree that frequency of such decisions is
increasing most probably due to the high work load.
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IMPACTS
Organizational Behaviour, Project, NLU, Jodhpur
1. Bounded rationality (& satisficing) leads to self-
organizing
2. The managers start relying on the decisions taken by
the use of bounded rationality
3. The decision maker seeks self interest
4. The decision maker starts taking decisions rapidly
with limited information available
5. The rate of errors and the chances of failure of the
decision taken also increase
6. Negative outcomes too readily discounted
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SUGGESTIONS/RECOMMENDATIONS
Organizational Behaviour, Project, NLU, Jodhpur
1. Reducing complexity reduces costs . . . which include
mental cost too.
2. Judgment performance in professional settings is
determined by the joint effects of cognition and
incentives
3. Combine rational analysis with intuition
4. Use creativity-stimulation techniques
5. Be aware of biases.
26Organizational Behaviour, Project, NLU, Jodhpur
Khelendra KumarMBA Insurance1st Semester