Organization

1. Simon argues that Economic man has a complete and consistent system of preferences that allows him to choose correctly among the entire set of alternatives available to him. He is completely aware of what these alternatives are, there are no limits on the complexity of the computations he can perform to determine what alternatives are best, and he correctly makes all probability calculations

2. The rational decision makers make optimal choices in a highly specified and clearly defined environment

3. As performance may be limited by manual dexterity or reaction time so does decision-making processes may be limited by the speed of mental processes.

4. The first cognitive mechanism is located within the individual decision maker; the second mechanism, within the organizational unit; and the third mechanism, in the environment of the organizational unit.

5. Simon’s major contribution to the economics of organization, as well as to organization theory, is the argument that human behavior is intendedly rational, but only limitedly.

6. Whereas neoclassical economic man maximizes—selects the best alternative from among all those available to him—organizational man satisfices—looks for a course of action that is satisfactory or good enough.

7. The number of alternatives the individual must explore is so great, the information the individual would need to evaluate so vast so it is impossible for the behavior of a single, isolated individual to reach a high degree of rationality.

So …

8. There are practical limits to human rationality and that these limits are not static but depend on the organizational environment in which the individuals’ decisions take place. The task of organization is to design this environment so that individuals approach as close as practicable to rationality in their decisions.

9. Organizations face environments of varying complexity. Organizations must adjust their internal decision-making procedures to...