Decision-making in running of organizations is paramount. This may take various dimensions depending on the decision-making team, the type of the organization operations and the environment within which the organization operates. Bounded rationality is one of the key decision-making models. This is a situation where decision makers are bound to make a decision that is limited to their minds and lacking the optimal solutions that are based on the existing values of the organization.

The origin of bounded rationality is attributed to Herbert Simon, who wrote in Models of man. In this book, Simon points out that the human mind is partly rational and irrational on the remaining part of their thinking as well as in performance of their duties and responsibilities. This affects the performance through experience where reception, storage, retrieval and transmission of the information available is concerned.

Bounded rationality works under three major constraints that are irrespective of the level of the decision-making within the organization. The three constraints are:

  1. Limited and unreliable information that is bound to give insight into available options as well as the consequences in adopting these alternatives.
  2. Limitation of the mind in making and evaluating the information on the basis of the available options.
  3. Lack of adequate time to evaluate the available choice and make informed decisions

It is in this respect that decision makers in this situation are unable to make informed choices that cover all aspects of running the business. This happens more so in complex situations where rules and regulations are required to be in place before any conclusions can be drawn.

Bounded rationality is applicable in different disciplines. They include among others economics, political science and related disciplines. It is effective as a complimentary decision-making process through which optimal choices are made while using the available information and data regarding the prevailing environment within which the organization operates.

According to various research indications, the human mind is always limited to a number of factors when it comes to decision-making. It is in this regard that a structural reality in the organization’s operation environment. While the decisions made are more likely to be in regard to individual preferences, the success of the organization requires more that this limited resource and, therefore, the need to create modalities that are used as the guiding block in making of important organization decisions. This is however crafted on the basis of the organization’s operational environment where available resources are put in place.

How and when to make choices is the responsibility of decision makers. With the limitations occasioned by the bounded rationality models, creation of adequate tools to enhance the decision-making process is paramount. This not only gives a chance to make optimal choices that ensure better performance of the organization but as well ensure that decisions made give a reflection of the expected performance of the organization based on the choices picked at any given instance.