Reference:

Simon, Herbert T. 1945.
Administrative Behaviour.
The Free Press, New York.

Herbert Alexander Simon (June 15, 1916 – February 9, 2001) was an American political scientist, sociologist, and psychologist, and professor—most notably at Carnegie Mellon University—whose research ranged across the fields of cognitive psychology, computer science, public administration, economics, management, philosophy of science, sociology, and political science.
Simon was a polymath, among the founding fathers of several of today’s important scientific domains, including artificial intelligence, information processing, decision-making, problem-solving, attention economics, organization theory, complex systems, and computer simulation of scientific discovery. He coined the terms bounded rationality and satisficing, and was the first to analyze the architecture of complexity and to propose a preferential attachment mechanism to explain power law distributions.
He also received many top-level honors later in life. These includethe Nobel Memorial Prize in Economics “for his pioneering research into the decision-making process within economic organizations” (1978).
Source: Wikipedia

Topic:

Proposal of a theory of human choice or decision-making including the rational aspects and its limits. It studies also the mechanisms of influencing its members and decisions’ premises.

Summary and citations:

• In his introduction to the 2nd ed. Simon writes that “social science suffer from a case of acute schizophrenia”, economists attribute to economic man an omniscient rationality and social psychology says that people are’nt as rational as they though to be. Which is Simon’s point of view on this issue?

Simon answers “human behavior is intendedly rational, but only limited so.”

I- Decision making and Administrative Organization

Value and fact in judgment-“In so far as decisions lead toward the selection of final goals, they will be called “value judgments”, so far as they involve the implementation of such goals they will be called “factual judgments”. “

II- Some problems of administrative theory
III- Fact and value in decision-making

• “Given a system of values ,there is one alternative that is preferable to the others”

IV- Rationality in Administrative Behavior: “is concerned with the selection of the effective means”

• P67: “The series of such decisions which determines behavior over some stretch of time may be called strategy”.
• Decision steps: 1) listing of all alternatives; 2) determination of conseguences;•3) evaluation or “valuation”
• Choice: 1) knowledge (to list all alternative strategies and determine the consequences); 2) preferences comparing set of consequences (this is the difficulty)
• “The ultimate aim of knowledge […] is to discover a single unique possibility which is consequent behavior alternative”
• “…means and ends do not completely correspond to facts and values…”
• Means-end chains. Intermediate ends are value-indices
• Behavior pattern of a group will be competitive (=>instabilaty) or cooperative
• Meanings of rationality: objective, subjective, conscious, deliberate, organizational, and personal.

V- The Psychology of Administrative Decisions

• “The limits of rationality have been seen to derive from the inability of the human mind to bring yo bear upon a single decision all the aspects of value, knowledge, and behavior that would be relevant.
• Stimulus-response pattern more than a choice of alternatives.
• “Social institutions may be viewed as regularizations of the behavior of individuals through subjection of their behavior to stimulus-patterns socially imposed on them.”

VI- The equilibrium of the organization

Organization is a system in equilibrium between 1) receives contributions and 2) offers inducements.

VII- The role of authority

• Decisions influenced by: stimuli (external) and psychological “set” (internal)
• sanctions of authority 1) social sanctions; 2) psychological differences; 3) “purpose has been stressed (…) as a sanction of prime importance”; 4) economic security and status; 5) disinclination of accept responsibility – p134
• uses of authority: 1) inforces responsibility of the individual to those who wield the authority; 2) It secures expertise in the making of decisions; 3) It permits coordination of activity
• Menber of a group: “appplies the same general scale of values (…) as do other members (…) and when his expectations of the behavior of other members influence his own decisions.”
• “When coordination goes farther than communication, (…)it generally involves (…) authority.”
• “Authority does not seek to convince the subordinate, but only to obtain his acquiescence.”

VIII- Communication

• Commnication upward if: 1) transmission will not have unpleasant consequences 2) better tell superior first; 3) helpful for superior’s dealings with his own superiors
• “The specialization of decision-making functions islargely dependent () of adequate channels of communication to and from decision centers”
• Formal and informal communication
• Units that are specialised for particular communication units: internal and external.

IX- The criterion of efficiency

• Efficiency: Maximization of output
• “The criterion of efficiency dictates that choice of alternatives which produces the largest result for the given application fo resources”. But criticisms have been made.

X- Loyalties and Organizational Identification

• “Identification is the process whereby the individual substitutes organizational objectives (service objectives or conservation objectives) for his own aims as the value-indices which determine his organizational decisions.”
• “Social values in place of personal motives”
• “An organizational structure is socially useful (…) brings a correspondence between social value and organizational value”
• Undesirable effect if organizational values must to be weighted against values outside the area by the individual.
• Useful in depersonalizing choice and enforcing social responsibility

XI- The anatomy of organization

• “How does the authoriry of the commander extend to the soldiers in the ranks? How does he limit and guide their behavior? He does this by specifying the general mission and objective of each unit on the next level below and by determining such elements fo time and place…assure a proper coordination…”

• Review and its function: 1) check work 2) influence further decisions 3) appellate function 4) effective exercise of authority

• “We may conclude, then, that some measure of centralization is indispensable to secure the advantages of organization: coordination, expertise, and responsibility. On the other hand,, the costs of centralisation must not be forgotten. It may place in the hands of highly paid personnel decisions which do not deserve their attention…. Duplication of function…”

• Area of rationality and its limits (i.e. limited alternatives, reorientation of values, limits of knowledge, indiviual vs group rationality)

Personnal comments, interesting issues and findings:

P67: “The series of such decisions which determines behavior over some stretch of time may be called strategy”. For me strategy would be what Simon calls the “ultimate” goal and successive decisions are made to reach that goal. As Simon defines strategy, it is like strategy is defined step-by-step over time and is not something agreed and planned.

P72: Barnard defined cooperative organizations. For Barnard, cooperation could be effective and efficient or not. Simon distinguishes cooperation and competition.

I found interesting Simon’s interest for firm values, identification the impact on social responsibility as it is an aspect that was not much analysed at that time (1945) and that took much more importance in research in recent years.

Common points with Barnard:

• P111: equilibrium: “If the sum of contributions [related to Barnard’s “effectiveness”] is sufficient, in quantity and kind, to supply the necessary quantity and kind of inducements [related to Barnard’s “efficiency”], the organization survives and grows; otherwise, it shrinks and ultimately disappears unless an euilibrium is reached”. Simon’s contributions = Barnard’s contributions; Simon’s inducements = Barnard’s compensations

• P116: Simon’s “limits and area of acceptance” when he refers to the limits of authority and Barnard’s “zone of indifference” on the study of incentives

• Authority: Barnard and Simon both agree that authority exists when both, superior and subordinate accept its role. Simon distinguishes between momentary instances of the exercice of authority and roles (over a period of time).

• Both defend the hierarchy of authority or pyramid.

• Formal and informal organisation.

• Importance of channels of communication to and from decision centers.

Differences between Barnard and Simon:

• P120: Simon: Equilibrium in commercial organizations by 1) PROFITS (modifying objective to satisfy customer demand) and CONSERVATION (reaching employees and firms’ goals)

• Simon’s definition of effectiveness (reaching firm’s goals) and efficiency (optimizing resources of the firm or the ratio between input and output) are different from Barnard’s.

• For Simon persuasion is separated from authority. Barnard: “persuasion is an important task of the executive achieving cooperation”; Simon: “confusion among these terms results from the fact that all three phenomena –persuasion, suggestion, and command- are frequently present in a single situation.” P127

• Barnard talks about methods of incentives and persuasion (changing subjective attitudes): a) coercitive conditions; b) rationalization of opportunity; c) inclucation of motives. And Simon talks about sanctions of authority 1) social sanctions; 2) psychological differences; 3) “purpose has been stressed (…) as a sanction of prime importance”; 4) economic security and status; 5) disinclination of accept responsibility – p134

• Administrative hierarchy (responsibility) and hierarchy of authority (expertise) p138. Is related to the fact that people with expertise are recognised by offering them hogher positions in the administrative hierarchy, where other skills other than technical expertise is required. The result is the Peter Principle: the principle that “in a hierarchy every employee tends to rise to their level of incompetence”.

• Simon’s book was more a “description rather than prescription”. Barnard’s book pretended to be more a guide to executives.

• Simon: “Authority does not seek to convince the subordinate, but only to obtain his acquiescence.” Barnard, in opposition, took into consideration persuasion and put a stress on cooperation and subordinates’ aims (efficiency)

• Barnard refers to communication up-down as a major function of the executive. Simon refers to communication also bottom-up (p163). Simon’s also talks about the receiver.