Introduction
Simon’s Theory of Organizational Goals is widely accepted as one of the most important theories of organizational goal setting. The theory has had a drastic impact on how organizations establish, monitor and review their goals. This essay will first explain the history of the theory and then go on to discuss its various implications.
History of Simon’s Theory of Organizational Goals
Simon’s Theory of Organizational Goals was proposed by Herbert A. Simon, an economist, in 1966. The theory is based on the concept that organizations must establish objectives to achieve their overall goals. The organization must then define the objectives in terms of measurable and attainable outcomes in order to reach them. In this sense, the organization must then consider the cost and benefit of achieving these objectives. This is fundamental to achieving optimal performance.
A large part of the theory was based on the notion of bounded rationality and satisficing behaviour. This means that in decision-making, an organization should accept a satisfactory solution to a problem rather than an optimal one. This is the basis of Simon’s cost-benefit analysis model which looks at the cost and returns of achieving objectives. The theory emphasizes the importance of understanding the cost and benefit of different courses of action and that organizations cannot always afford to go for the ‘ideal’ solution.
Implications of Simon’s Theory of Organizational Goals
The theory has major implications for organizations in terms of goal setting and decision-making. First, it emphasizes the importance of identifying and setting achievable objectives. Organizations must understand the environmental and resource constraints they face in order to set optimal goals. It also emphasizes the need to consider the cost and benefit of achieving these goals. This requires the use of advanced risk analysis and cost-benefit analysis models to make the right decisions.
Secondly, the theory highlights the importance of monitoring and assessing goals and objectives. Organizations must develop systems to track the performance of their objectives and review their effectiveness in achieving their goals. This is especially important for complex organizations that have many different objectives and need to focus their attention on critical areas.
Finally, the theory reinforces the notion of bounded rationality and satisficing behaviour. This means that organizations should accept a satisfactory solution to a problem rather than an optimal one. This means that organizations must look to maximize value within the constraints they face. This requires organizations to understand their limitations and be realistic in their objectives.
Conclusion
Simon’s Theory of Organizational Goals is an important part of modern organizational theory. The theory highlights the importance of understanding the cost and benefit of achieving objectives and making decisions in a practical and realistic way. It emphasizes the need for organizations to identify achievable objectives and to monitor their progress and make changes as necessary. The theory has had a drastic impact on how organizations establish, monitor and review their goals and has implications for any organization attempting to be successful.
