Book: Organizations

Overview

James G. March and Herbert A. Simon present a foundational analysis of how organizations actually make decisions, challenging the assumption that actors behave as perfectly rational utility maximizers. Their account replaces the "economic man" with the "administrative man, " whose choices are shaped by limited information, cognitive constraints, and organizational routines. The emphasis falls on how structures, rules, and flows of information shape and often simplify decision processes inside formal organizations.
The book blends conceptual clarity with analytic rigor, using formal models and careful argumentation to show that organizational behavior is not merely the aggregation of individual preferences. Instead, organizations create procedures, responsibilities, and hierarchies that channel attention and define acceptability, making collective action feasible despite individual limitations.

Central Concepts

Bounded rationality is the keystone: decision makers satisfice rather than optimize, seeking solutions that are "good enough" given constraints on time, knowledge, and computational capacity. Satisficing emerges from the interaction of decision rules and the environment, and it helps explain why organizations persist with routines and standard operating procedures even when alternatives might appear better under full information.
Information processing is treated as the core activity that organizations perform. Attention allocation, communication channels, and the costs of obtaining and transmitting information determine which issues receive action and which become delegated or deferred. The notion of "organizational premises", accepted beliefs, goals, and rules, helps explain stable patterns of behavior and the selective attention that underlies policy making.

Theoretical Contributions

The authors formalize how hierarchical authority and delegated decision rules reduce the cognitive burdens on individuals while producing coordinated outcomes. Models show how organizations balance the trade-off between central control and decentralization: centralized decision making can be more coherent but imposes heavy informational demands, whereas decentralization reduces those demands but requires clear rules and incentives to maintain coherence.
March and Simon also highlight the role of ambiguity and conflict in shaping organizational goals. Rather than assume a unitary objective function, they view organizations as coalitions with negotiated foci, where the framing of problems and the structure of authority produce enduring patterns of compromise and drift. This non-unitary view helps explain why organizations often pursue mixed or loosely defined goals.

Method and Evidence

Analytic modeling is paired with careful attention to empirical plausibility. The authors employ simple formal constructs to make visible the information costs and decision trade-offs that underlie organizational practices. They draw on examples from public administration, business firms, and bureaucratic settings to ground abstractions in observable behavior.
The methodological contribution is as much about asking different questions as about providing definitive empirical measures. By treating organizations as information-processing systems and by focusing on the micro-mechanisms of decision making, the approach opened new empirical strategies for studying communication patterns, rule formation, and the dynamics of choice under constraint.

Legacy and Influence

The book reshaped multiple disciplines, giving rise to a behavioral theory of organizations that influenced economics, political science, management, and cognitive science. Its concepts of bounded rationality and satisficing became central to later work on organizational learning, routines, decision biases, and the design of institutions. Scholars have extended its insights into models of search, adaptive behavior, and distributed cognition.
Practical implications remain widely felt: the analysis informs organizational design, information systems, and governance reform by stressing the importance of information flows, procedural clarity, and realistic expectations about decision makers' capacities. The result is a durable framework that continues to guide thinking about how organizations can be structured to perform effectively under real-world limits.