Administrative Behaviour by Herbert A.Simon

Of late, consequent to a renewed interest in the very discipline of Management in which I hold qualifications as well as has been associated with in executive as well as academic capacities, I have developed an urge to learn from business/management classics. Of course, I had read many management classics from a number of management gurus including the so-called ‘godfather of management’, Peter Drucker, starting with The Practice of Management and recently ending with The Concept of The Corporation(written earlier than the other) and also what can be classified as a fundamental book on Corporate Governance, The Modern Corporation and Private Property by Adolf Berle and Gardiner Means. I tried to get a copy of Administrative Behaviour by Herbert A.Simon, the only one to win a Nobel Prize in Economics for his contribution to the general theory of management related to decision making in organizations(all others were from finance streams), but was not available. In the middle of 2009, I could get a copy of the same but could read it only recently as I was pre-occupied with writing my own book on Corporate Governance.The book, originally written in the year 1945,still makes real sense and is awesome from the point of depth of understanding and insight Prof.Simon had about the decision making administrative behaviours in organizations.No wonder the Royal Academy of Sciences in their presentation of Nobel Prize described the work as “An epoch-making book”.The fourth edition published in 1997 has been updated with extensive new commentaries at the end of each chapters by the author. Prof.Simon, born on June 15,1916, expired breathed his last on February 9,2001.
As described earlier, the book deals with the decision making behaviours in organizations.Prof. Simon describes the process of decision making by defining what is decision making and administrative organizations. Then he moves on to explain the problems that are inherent in the theory. For example the four universally accepted administrative principles in the initial days of administrative science like specialization, unity of command, span of control and organizing the employees according to purpose, process, clientele and place, something related to the first principle, have been severely criticized after a definite period. While criticisms exist, Prof.Simon feels that these do not necessarily change the decision making criteria and processes in an organization and hence it can be easily explained. He moves on to describe the role of facts and values in decision making and also the role of rationality. Then he explains the psychology of decision making, how organizational equilibrium affects decision making, what is the role of authority, communication in decision making, how efficiency criterion, loyalty and organizational identification of employees affects decisions etc. Prof. Simon concludes with the anatomy of organizations. The highlight of his contribution about decision making is the bounded rationality concept. Despite managers want to make decisions that are perfectly or fully rational or after considering all alternatives, managers usually consider only limited options or alternatives from a whole lot of options available to them.
While the book is fundamentally on decision making, Prof. Simon talks about a whole lot of other aspects that have relation to the decision making process. For example, he talks about the gap between theory and practice in administrative decision making. He also talks about the necessity of business schools having faculty drawn from the world of science as well as from the world of practice. He says that human decision making uses beliefs, or ‘factual premises’, which may or may not describe how the world really is or whether true or false.
A very important insight regarding how opportunities get noticed is given by Prof.Simon. He says that ‘one of the mechanisms that focuses human attention on important problems is surprise.’ And he goes on to explain the conditions for such surprise like we get surprised when we are knowledgeable about a situation and something unusual(contrary to our knowledge)occurs. He cites the example of Alexander Fleming getting surprised why bacteria in a dish was dying and leading to the discovery that penicillin can kill bacteria.
And Prof.Simon asserts that the critical scarce factor in decision-making is not information but attention. According to him what we attend to, by plan or by chance, is a major determinant of our decisions. Because of this ,he says that ‘company laboratory is seldom the major source of basic discoveries from which new products can be developed.’ The laboratory usually serves as an intelligence link between science and community. ’Its task is to observe and communicate with that community, and to notice and develop further opportunities that are presented by it’. This is what companies like P&G( through its Work it and Live it programs) do today.
According to him ,workers were poor but happy before industrial revolution but industrial revolution has made them richer but unhappy. Prof.Simon describes two charges that are levelled about work itself: industrial revolution dehumanized work and the appearance of the electronic computer has dehumanized it further.
Prof.Simon had even described the ‘repositories of organization memory’. This is nothing but the Knowledge Management we talk about today. He had said that ‘practices which would become simply habitual in the case of the individual must be recorded in manuals for the instruction of new organizational members.’
The only contention of Prof.Simon dating back to 1945, which today might be questioned, is about the role of authority. He had said that ‘a plan of action is developed for the group, and this plan is then communicated to the members of the group. The final step in the process is the acceptance of the plan by the members. Authority plays a central role in this acceptance’. While this might still be true of many organizations, I think good organizations have groups making the plan together and it automatically becomes acceptable to all. Hence the question of authority might not arise in the acceptance of the plan.
I thank Prof.Simon for enlightening me with his wisdom and insight!