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Towards a Human Centered Theory and Practice of the Firm
Pirson, Michael Kimakowitz, Ernst von
Pirson, Michael
Kimakowitz, Ernst von
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Abstract
Management theory and practice are facing unprecedented challenges. The lack of sustainability, the increasing inequity and the continuous decline in societal trust pose a threat to ‗business as usual‘ (Jackson & Nelson, 2004, p. 214 ). Capitalism is at a crossroad and scholars, practitioners and policy makers are called to rethink business strategy in light of major external changes (Arena, 2004; Hart, 2005). As current management theory is largely informed by economics, it draws substantively from neoclassical theories of human beings (Ghoshal, 2005). Accordingly, humans are materialistic utility maximizers that value individual benefit over group and societal benefit. A ‗homo economicus‘ engages with others only in a transactional manner to fulfill his or her interests. He/she is amoral, values short term gratification and often acts opportunistically to further personal gain. Theories of the firm and ensuing business strategies as well as organizational designs have been largely based on the economic assumptions, and, in turn, are blamed by others for creating negative externalities (Ghoshal, 2005; Ghoshal & Moran, 1996). Argyris (1973) for example claims that organizational mechanisms based on principal-agent theory create opportunistic and short-term gain oriented actors in a self-fulfilling prophecy (see also Davis, Schoorman, & Donaldson, 1997). Other critical scholars argue that management theory needs to be rethought based on psychological insights rather than theoretical assumptions (Ghoshal 2005; Tyler 2006). Tyler (2006) finds overwhelming evidence that people look for respect, acceptance, communion and shared values instead of short sighted personal utility increases. Seligman and Diener (2004b) find that ‗Leading a meaningful life‘ is more important to most people than money, power, and status. De Cremer and Blader (2005) underline the importance of a sense of belongingness, which is contradictory to the individualization aspects of economic theory. We hence suggest that we need a broader way of understanding human beings on which we can prescribe a renewed theory of the firm, better understand leadership and management, design our organizations and formulate business strategy
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