operations research

Table of Contents

References & Edit History Quick Facts & Related Topics

Images

For Students

operations research summary

The system design problem

in operations research in Frontiers of operations research

Also known as: operational research

Written by Russell L. Ackoff, Morris Tanenbaum•All

Fact-checked by The Editors of Encyclopaedia Britannica

Article History

Also called:: operational research

Key People:: Charles Babbage; George Dantzig

Related Topics:: systems engineering; industrial engineering; queuing theory; management

See all related content

Operations research has traditionally been concerned with finding effective solutions to specific operational problems. It has developed better methods, techniques, and tools for doing so. But operations researchers have found that too many of their solutions are not implemented and, of those that are, too few survive the inclination of organizations to return to familiar ways of doing things. Therefore, operations researchers have gradually come to realize that their task should not only include solving specific problems but also designing problem-solving and implementation systems that predict and prevent future problems, identify and solve current ones, and implement and maintain these solutions under changing conditions.

The planning problem

Operations researchers have come to realize that most problems do not arise in isolation but are part of an interacting system. The process of seeking simultaneous interrelated solutions to a set of interdependent problems is planning. More and more operations research effort is being devoted to developing a rational methodology of such planning, particularly strategic planning.

Most organizations resist changes in their operations or management. The organizational need to find better ways of doing things is often not nearly as great as is the need to maximize use of what it already knows or has. This is apparent in many underdeveloped countries that, while complaining about the lack of required resources, use what resources they have with considerably less efficiency than do most developed countries. Operations research, therefore, has been addressing itself more and more to determining how to produce the willingness to change.

Types of organization

Operations researchers have become increasingly aware of the need to distinguish between different types of organization because their distinguishing features affect how one must go about solving their problems. Two important classifications exist, the first of which is homogeneous–heterogeneous. Homogeneous organizations are those in which membership involves serving the objectives of the whole (e.g., a corporation or military unit), while heterogeneous organizations are those whose principal objective it is to serve the objectives of its members (e.g., a university or city). The second classification is unimodal–multimodal. Unimodal organizations are hierarchical organizations with a single decision-making authority that can resolve differences between any lower level decision makers. Multimodal organizations have no such authority but have diffused decision making and hence require agreement among the several decision makers in order to reach conclusions.

Since current skills in operations research are largely restricted to homogeneous unimodal organizations, attempts are under way to develop methodologies adequate for improving the other three types of organization.

In order to solve any of the preceding problems more effectively, operations research requires a better understanding of human behaviour, individual and collective, than is currently available. Furthermore, what understanding the behavioral sciences claim to provide is seldom available in a form that lends itself to symbolic representation and hence to operations research methodology. Operations researchers, therefore, are increasingly working with behavioral scientists to develop behavioral theories that are expressible in a more usable form.

As the scope of problems to which operations research addresses itself increases, it becomes more apparent that the number of disciplines and interdisciplines that have an important contribution to make to their solution also increases. An attempt to provide such a higher order integration of scientific activity is being made in the management sciences.

Russell L. Ackoff

decision making

Table of Contents

References & Edit History Related Topics

decision making

Written by Keith Nitta

Fact-checked by The Editors of Encyclopaedia Britannica

Article History

Key People:: Daniel Kahneman

Related Topics:: prospect theory; logic of appropriateness; decision strategy; sequential decision making; decision tree

See all related content

decision making, process and logic through which individuals arrive at a decision. Different models of decision making lead to dramatically different analyses and predictions. Decision-making theories range from objective rational decision making, which assumes that individuals will make the same decisions given the same information and preferences, to the more subjective logic of appropriateness, which assumes that specific institutional and organizational contexts matter in the decisions that individuals make.

(Read Steven Pinker’s Britannica entry on rationality.)

Rational decision making

In modern Western societies the most common understanding of decision making is that it is rational—self-interested, purposeful, and efficient. During rational decision making, individuals will survey alternatives, evaluate consequences from each alternative, and finally do what they believe has the best consequences for themselves. The keys to a decision are the quality of information about alternatives and individual preferences. Modern economics is built on this understanding of how individuals make decisions.

Rational decision making becomes efficient when information is maximized and preferences are satisfied using the minimum of resources. In modern societies, rational decision making can occur in markets or firms. Both assume that individuals will act rationally, maximizing self-interest, but each works most efficiently under different conditions. Markets are most efficient when both buyers and sellers exist, when products or services are discrete so that the exchange can be one-time, when information about a product or service (such as its technology or means of evaluation) is broadly understood, and when there are enforced penalties for cheating.

Lacking these conditions, consensual exchange cannot occur, and rational individuals will try to cheat others to maximize their gain. In these cases a hierarchical organization is more efficient. The German sociologist Max Weber described how factories and bureaucracies became dramatically more efficient through growing technical expertise and, more importantly, a new division of labour, which divided work, specialized expertise, and coordinated individuals in a rule-based hierarchy. Bureaucracies decomposed complex technologies into manageable pieces, then allowed individuals to specialize and master a defined skill set. Using a clear hierarchy in which each position is controlled and supervised according to a stable and nonarbitrary system of rules, each individual’s work and expertise could be coordinated to achieve organizational goals, ranging from winning wars to making dresses.

Satisficing and bounded rationality

In the 1940s, organization theorists began to challenge two assumptions necessary for rational decision making to occur, both of which were made obvious in cases where markets failed and hierarchies were necessary. First, information is never perfect, and individuals always make decisions based on imperfect information. Second, individuals do not evaluate all possible alternatives before making a choice. This behaviour is directly related to the costs of gathering information, because information becomes progressively more difficult and costly to gather. Instead of choosing the best alternative possible, individuals actually choose the first satisfactory alternative they find. The American social scientist Herbert Simon labeled this process “satisficing” and concluded that human decision making could at best exhibit bounded rationality. Although objective rationality leads to only one possible rational conclusion, satisficing can lead to many rational conclusions, depending upon the information available and the imagination of the decision maker.

Simon argued that otherwise irrational individuals can behave rationally in the right context, particularly within a formal organization. Organizations can structure, or bound, individuals’ decisions by manipulating the premises on which decisions are made. Organizations can filter or emphasize information, bringing facts to an individual’s attention and identifying certain facts as important and legitimate. Individuals in hierarchies can take most of what happens around them for granted, concentrating only on a few key decisions. Hierarchies are efficient because they ensure that the correct information gets to the correct decision makers and that the correct person is making the decisions. At the same time, hierarchical organizations can socialize individuals to refrain from cheating by creating value decision premises that underlie decision makers’ judgments on what is right or good to do. These values, beliefs, or norms can come from family, from school, or from within the organization, but the organization can structure environments so that the most desirable value will be most salient at the time of decision.

Hierarchical organizations can structure factual and value decision premises so that the range of action becomes so narrow that only one alternative remains: the rational choice. Structuring decision premises can be done by directly managing information, selectively recruiting members, training members, and creating closed promotion patterns.

Organizations become rational in pursuing their missions through what Simon called ends-means chains. Leaders set the organizational mission, find a set of means for achieving the mission, take each of those means as a subgoal, and then find means for the subgoals and so on, until goals exist for every member of the organization. Leaders thus create a hierarchy of goals, in which each organizational level’s goals are an end relative to the levels below it and a means relative to the levels above it. Each individual’s work thus becomes a small part of accomplishing the organization’s mission.

Intra-organizational political decision making

Turning Simon’s bounded rationality on its head, other theorists argued that organizations are not purposeful cohesive actors but rather groups of competing coalitions made up of individuals with disparate interests. Individuals do not represent organizational interests; organizations represent individuals’ interests. Seen from this perspective, it is erroneous to ascribe a mission to an organization. Instead, organizations have goals set by a temporarily dominant coalition, which itself has no permanent goals and whose membership is subject to change. Members of the dominant coalition make decisions by bargaining, negotiating, and making side payments. Organizational decision making is the product of the game rather than a rational, goal-oriented process. Individual decision making is rational in the narrow sense that individuals pursue individual, self-interested goals, though this cannot always be accomplished directly. Individuals must pick their fights and use their influence carefully.

To understand and possibly predict what organizations will do, it is necessary to uncover and analyze the membership of the dominant coalition. The formal organizational chart is not a reliable map of organizational power. Instead, analysts must discover authority. Individuals gain authority by being able to resolve uncertainty. Individuals that can unravel technical problems, attract resources, or manage internal conflict demonstrate their usefulness to the rest of the organization and gain power. Working in concert with others who can perform similarly valuable functions, they become part of the dominant coalition. The size and composition of the dominant coalition depend on the types of environmental, technical, or coordinating uncertainty that must be resolved for the organization to survive. More technically complex, larger organizations in rapidly changing environments will tend to have larger dominant coalitions.