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Bounded Rationality

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The following is an example of how this assignment might look when finished. The word limits are indicated at the end of each section. This is neither an essay or a report; it is simply an assignment with 3 sections. It does not need to have an introduction or a conclusion. Clarity is achieved by clear section headings, and clear paragraphing.

NB: our example does not reach 1500 words; further paragraphs need to be written in sections 2 and 3.

The Decision
A mining claim of 60 miles had to be staked, and the project manager Tom Parker decided to budget 7 days and 3 assistants to do it. He based this decision on his own physical experience and skill. He was an outdoors man, skilled in all non-technical aspects of mining claims. He himself proved able to do 8 claims per day, and he assumed that each assistant would be able to do the same. The workers were poorly paid, but if they completed the job in 7 days they would receive a $300 bonus. Parker may have negotiated this bonus with the company when he budgeted 7 days. The main outcome of this decision was that the job was not completed in time. There were several smaller consequences of the initial budgeting decision that resulted in this outcome.

No planning of the details was done until after Parker and the men set up camp. Only at this stage did they consider differences in the terrain, the order of areas to be staked, and where the helicopter might land. Progress was uneven, and Parker seemed to lay most of the blame on Millar. Talbot suggested to Parker that he could give Millar the easier terrain, but Parker refused to make this change. Even when Millar completed more than required, Parker would not praise him. Parker was continually angry at Millar, but wasn’t angry at the other two even if they had done the same or less than Millar. Parker criticised Millar for taking too much time to make perfect posts. Millar felt he was being unfairly picked on, and eventually stopped trying to work well. He no longer cared about the team getting the bonus. Millar refused to work for the company again, but Talbot works for them full time.

Analysis of the Decision
Parker’s budgeting decision is a good example of an individual acting with bounded rationality. This term was introduced by Simon in 1957 (as cited in Tolbert & Hall, 2008) to argue that normative models of decision making, which assume fully rational and objective judgement (Teale, Dispenza, Flynn & Currie, 2003), are unrealistic because human rationality is limited. Parker’s judgement may have seemed rational to him, but it was not rational for the organisation, a subtle distinction about rationality made by Storing (as cited in Tolbert & Hall, 2008).

Parker’s judgement was also not rational in that he did not have all available knowledge and awareness of risk, which are the conditions of normative models (Teale et al, 2003) and the “official theory” of management (Anthony, as cited in Teale et al, 2003, p. 14). For example, Parker did not know about the variations in the terrain when he made his decision, and he also assumed that the assistant workers could work at the same physical rate that he could. Both of these limitations were factors resulting in a risk to on-time task completion.

This is one paragraph; this section requires another 2 or 3 paragraphs to fulfil the requirement of 700 words for this section.

Reflection
If I had been project manager I would have based my budgeting decision on a rational assessment of available information. This reflects rational or prescriptive models of decision-making, which assume that decision-makers are objective (Teale et al., 2003). Taking this rational approach, I would have employed the Eight-step decision making model (McKee, 2010) which aims to rationally identify and evaluate alternative options to a situation. The first step in the mining situation would have been to clearly identify any possible problems by gathering all available data on geographical area, and if such data had not been available, I would have allocated the first work day to flying around the claim perimeters with the helicopter.

In a similar vein, I would have made a rational assessment of the workers’ strengths and weaknesses before choosing them. According to rational models, decision-makers ‘have excellent judgment’ (Teale et al., 2003 p.16), and I would have based my judgement on knowing more about each worker’s personality type (Robbins & Judge, 2011), rather than assuming, as Parker did, that experienced workers would all be the same. …. Furthermore, I would have involved the assistant workers in the decision making process because, as Simon (as cited in Tolbert & Hall, 2008) argued, the more people involved in the decision making, the more rational and considered the decision is likely to be.

In this section each of these ‘shifts in focus’ could be expanded to fuller 2nd and 3rd paragraphs to fulfil the requirement for 500 words. The topic, i.e. the focus, of each paragraph is highlighted.

NB: in our example, we have used a theory of Rationality for our Reflection. Please DO NOT do this for your assignment; you are asked to use Bounded Rationality.

REFERENCE LIST

McKee, A. (2010). The human side of planning: decision making and critical thinking. In M. Fitzgerald & S. Ayson (Eds.), Managing Under Uncertainty (pp. 40-73). Frenchs Forest: Pearson.

Robbins, S. & Judge, T. (2011). Personality and values. In M. Fitzgerald & S. Ayson (Eds.),
Managing Under Uncertainty (pp.200-233). Frenchs Forest: Pearson.

Teale, M. Dispenza, V., Flynn, J. & Currie, D. (2003). Management decision-making in
context. In M. Fitzgerald & S. Ayson (Eds.), Managing Under Uncertainty (pp.7-25). Frenchs Forest: Pearson.

Tolbert, P. & Hall, R. (2008). Decision-making. In M. Fitzgerald & S. Ayson (Eds.),
Managing Under Uncertainty (pp.28-38). Frenchs Forest: Pearson.

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