Strategic

Meaning of Bounded Rationality and Incrementalism

Bounded rationality: Strategies are made in conditions of partial ignorance. In practice, managers are limited by time, by the information they have and by their own skills, habits and reflexes.

It can be argued that managers do not optimize (i.e. get the best possible solution). Instead the manager satisfices. In other words, the manager carries on searching until he or she finds an option which appears tolerably satisfactory, and adopts it, even though it may be less than perfect. This approach is known as bounded rationality.

Incrementalism

Incrementalism refers to ‘strategy in small steps’ rather than radical shifts following the prolonged and comprehensive search suggested by the rational planning approach.

The main reasons cited (by Lindblom) for organisations (particularly those in public administration) exhibiting this approach are:

 The need to gain wide consent for changes means more radical options are rejected, or simply not suggested

 The personal career security of managers is not served by suggesting or being associated with unpopular or unsuccessful radical departures from tradition

 A lack of external motivation for changes e.g.. lack of competition or external scrutiny  The inability to afford the costs associated with radical changes of direction (e.g. redundancy, training, capital expenditure)

 The necessity to seek accommodation or compromise with interest groups makes policy-making a process of political bargaining.

Logical incrementalism

Identified by Quinn, logical incrementalism is a half-way house between the planning approach and the incrementalist approach. It describes both the analytical and behavioural aspects.

Strategy is described as a learning process, by which managers have to deal with major internal or external events. For this reason managers deliberately keep their decisions small scale, so that these decisions can be tested.

 Managers have a ‘vague notion’ as to where the organization should be.
 Strategies will be tested in small steps, simply because there is too much uncertainty about actual outcomes.
 Because precise objectives discourage experimentation by business units, these objectives are reformulated.
 Managers as individuals avoid ‘going out on a limb’ with radical ideas in case their careers fail because their ideas failed. They seek to get a consensus of support for ideas first.

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