Factoring and Satisficing

David Wiles, Eaps 760


The time period between the end of World War II and the early l960's provided as dramatic a change in the way problem solving and rational decisions were made as in the descriptions of how large, complex bureaucracies operate. As noted in the Sh afritz and Hyde article by Herbert Simon, the challenge to the normative or "proverbs" description of management decision making demanded documentation of the behaviors in specific choices and description of the environmental context where a choice took p lace. Although later criticized as relying too much on positivistic logic and quantifying qualitative features of choosing, the 1946 publication did trigger a "hard data gained through systematic analytical approach" to describing organizational choice.

The words "factoring" and "satisficing" are part of a whole vocabulary of terms used to describe the meaning of rational decision making that takes place in complex organizations. Classic theories of decision rationality assumed a person wo uld define a problem to be solved, match "utilities" of costs to benefits for each alternative of possible resolution and, third, select the option that would provide the maximum or "optimum" solution choice. When applied to the rationality of individual s deciding rationally within the context of a complex organization or explaining a bureaucratic decision after the fact the terms factoring and satisficing imply a dramatic change in the meaning of choosing.

By the late 1950's scholars like Herbert Simon, James March and Richard Cyert had led the challenge to the long held perception that the rationality of a large organization exhibited the classic assumption of defining "big picture" probl ems to be solved. While there might be "big picture" intentions, the actual reality of how decisions were perceived was to break down or to "factor" the problem to subunits of the organization. Subunits defined and resolved their portion of the "big pic ture." The collection of subdecisions were then reaggregated and what resulted was the rational choice of the entire organization.

Satisficing choice uses the analogy of the needle in the haystack. Where classic rationality argued that the selection among options was a search for the premise of satisficing was to use the first needle that could alleviate the stress of an unresolved situation. In effect, the nature of organizational adaptation overrode the concept of logic or ethic driven behavior. Maslow's hierarchy of need, for example, would likely drive the perception of the "useful" needle long before the classic logic behind an "optimum" or "maximum benefit" standard of needle takes place.

Notice how well, satisficing and factoring in making rational decisions fit with assumptions of incremental muddling and evolving maturity as descriptions of complex bureaucracy. Of course, the contributions of all lead to assumptions tha t bureaucratic decisions tend to promote the status quo of precedent and "red tape," the inertia of "getting by," and the instrumental rationality of "dealmaking and logrolling" choices.

Readings

  • Graham Allison, The Essence of Decision. (1980);
  • Herbert Simon, Models of Man. (1957);
  • Herbert Simon, "Rational Choice and the Structure of the Environment" Psychological Review, (Volume 63, 1956 pages 129-138);
  • James March and Herbert Simon, Organization, (1958);
  • Herbert Simon "Theories of Decision Making in Economics and Behavioral Science", The American Economic Review (1959, pages 253-283);
  • Herbert Simon, The New Sciences of Management Decisions (2nd Edition, 1977);
  • Herbert Simon, The Science of the Artificial, (1969);
  • Herbert Simon and Jack Newell, Human Problem Solving, (1974);
  • Herbert Simon, Reason in Human Affairs, (1983).