A Behavioral Theory of the Firm by Richard M. Cherty and James G. March This book explains the model that the authors created for administrative decision making. The basis for the model the authors created has two main ideas: (1) it includes a comprehensive set of changeable categories; (2) it has a set of relational concepts. The classic model had two basic assumptions. The first assumption is that making money is always the bottom-line and the second is perfect knowledge. The classic theory was not adequate to deal with oligopolies markets.

The theory in this kook is an alternative to manage modern, multi-product firms. Categories The authors feel that organizations operate using goals, expectations, and decisions. Organizational goals are controlled by 2 things: (1) what things are viewed as important; (2) the aspiration level of the organization toward accomplishing each goal. Expectations are what the organization sees as being reasonable prospect using available information from past endeavors and from other organizations in the market. Organizational choices are the actions taken by an institution when problems rise.

Choices are made according to previously established rules and regulations. These variable categories make up the first part of the Behavioral Theory Model. Concepts The second part of the model is made up of relational concepts. There are 4 major concepts in Cherty and March’s theory: (1) quasi resolution of conflict, (2) uncertainty avoidance, (3) problematic search, and (4) organizational learning. These ideas are the fundamentals to understanding decision-making processes in contemporary, large-scale business organizations. Quasi Resolution of Conflict.

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The quasi resolution of conflict is related to goals, local rationale, decision rules, and attention to goals. Organizational goals are constraints that institution members must strive toward, regardless of personal ambitions. Rationality is facilitated by decision rules and the attention to goals. Decisions can be inconsistent and weaken an organization, but the authors propose that local decisions must adhere to a series of rules to maintain reliability. Organizations deal with conflicting demands toward en goal or another by attending to one goal at a time.

Uncertainty Avoidance Uncertainty is a permanent feature in today’s decision making world. From the mind-sets of shareholders to suppliers’ distribution to the behavior of competition, there are uncertainties at every turn. The authors feel that organizations can avoid uncertainty by reacting to pressing problems rather than creating long-term policies. Uncertainty can also be averted by eliminating plans and development based on uncertain future predictions. Another meaner of avoiding uncertainty is by creating external and internal stability through guaranteeing prices from suppliers, implementing budgets, etc.

Problematic Search The authors consider search to be as problem-oriented as decision making. They also assume three things regarding searches. First, search is motivated. ‘Motivated’ meaner that the search is driven from either the buyer or seller side of the market in order to solve a problem. Second, search is simple-minded. This meaner that search starts as a simple endeavor until it is driven to a more complex one. Third, search is eased. It is biased because an organization’s environment is a reflection of member training, experience, and goals.

Organizational Learning Organizations exhibit adaptive behavior over time Just like individuals. The authors denote three different phases of adjustment in the decision process; (1) adaptation of goals, (2) adaptation in attention rules, and (3) adaptation in search rules. Adaptation of goals refers to the idea that goals are variable based on past goals, experience with past goals, and experience of comparable organizations guarding past goals. As organizations develop and change they learn to allocate more attention to certain aspects and not to others, which is what is meant by adaptation in attention rules.

Search rules also develop based on experiences to better solve problems, since search is problem-driven. Conclusion In closing, this paper has outlined the fundamental ideas behind the Organizational Decision-Making Process Theory proposed in the reading. The four basic concepts of quasi resolution of conflict, uncertainty avoidance, problematic earache, and organizational learning along with the variable categories of goals, expectations, and decisions are the building blocks of the environment that the model addresses.

The graphic is from the text and is a graphical representation of the decision making model. It begins with receiving feedback from past decisions, but the starting point is arbitrary. The figure also shows the relationship between the different components of the theory. These concepts have proven beneficial in organizational decision making over the past 50 years, and papers have been written praising this model.