The theory of “bounded rationality” says that, though we often act on incomplete information, and possibly inaccurate or false assumptions, we are still “rational.” That is, we make the best decisions we can based on:

• Our values, assumptions, and interests
• Our beliefs about the values, assumptions, and interests of the people we are dealing with
• Our beliefs about the context—what we think is “going on” in the present moment, and what the events of that present moment might mean for the future

Think of the three bullets above as being the “premises” of our decisions. Herbert Simon (1945) believed that the most efficient way to get people to change their behavior was to change their premises (since people are assumed to be rational). So, suppose you are a new supervisor of a work group that is performing well below the collective capabilities of its members. How would you use the theory of bounded rationality to get them to improve their performance? In other words, how would you make it rational for them to increase their supply of productive effort?

Justify your answer by citing the class text, the lectures, or by your own research.

reply1

In careful consideration of theory of “bounded rationality”, it is true that people often make decisions based on their personal values, available received information, time restraints, and interests in mind. However, all these “premises” may be limited depending on decision maker’s cognitive knowledge and certain circumstance. Translating this theory into business organizations, people work in the same team and have different values and perceptions have to find a way to work effectively with each other. ” Organizations influence people’s habits and organizations influence the flow of communications(Hernandez,2019). If I was a supervisor to a group, I would heavily promote the healthy team-work environment and emphasize the importance of team effort. Instead of thinking about individual gains and performances, I would evaluate the overall performance of a team. In my opinion, the right culture is very important in any groups or organizations. People behave based on the company culture so if we were to get the best outcome from group effort then first I need to set the right culture for them. Another aspect I’d focus on is that the rewards system. I believe that the fastest way to motivate people work harder is to give them the incentive to do so. According to the outcome, there will be extra bonus or rewards for the best team. Hopefully, with the right culture and leadership and rewards, people will put in more hard work and produce the best result possible!

Reference:

Hernandez JGV, Ortega RP. Bounded rationality in decision–making. MOJ Research Review. 2019;2(1):1-8 DOI: 10.15406/mojcrr.2019.02.00047

reply2

Bounded Rationality Model, as known as Simon’s Bounded Rationality Model. In this theory, ‘Simon maintained that individuals do not seek to maximize their benefit from a particular course of action, since they cannot assimilate and digest all the information that would be needed to do such a thing. Not only can they not get access to all the information required, but even if they could, their minds would be unable to process it properly. The human mind necessarily restricts itself. It is, as Simon put it, bounded by “cognitive limits”.’ (Simon, 1945) The group cannot reach the optimization while all the individuals try to maximize their benefits, because they cannot get and understand all the information required for the group. Bounded rationality model can explain why work group always perform below the collective capabilities of all its members.

In my opinion, if I were the manager of the team, I will take the following action to solve this problem. First, I will analysis the whole task and target of the team and try to find the relationship between the individuals’ tasks and the whole task. Then I will arrange the individual tasks to the members and tell them the significance of their task, in which way they can know how to perform better to make more contribution to the whole task. As the manager of the team I will monitor the process of all the individual tasks and the team task, rectify them if something wrong happens. Finally, I will give them some extra rewards to incentive them work hard and make more contributions to the team.

Reference

Simon, Herbert A. (1945). Administrative behavior. New York: The Free Press.