Humanizing the firm and the Management Profession

2. Objectives:
At the end of this lesson, the students should be
able to:
1. Discuss the neo-classical theory of the firm;
2. Introduce the humanistic approach to
business:
3. Present a new theory of the firm for the 21st
Century; and
4. Explain how the Virtue Theory lens can be
used for viewing the firm.

3. NEO-CLASSICAL THEORY
OF THE FIRM

4. “Our highest priority going forward
is to fix our broken political system.
Short of that, there is no viable long
term solution to our badly warped
economy.”
- Alan Greenspan,
“The Map and the Territory”

5. The first 15 years of the 21st century have
at least wo major global financial crises.
In 2001, everyone witnessed the high-
profile scandals at Enron, WorldCom,
Global Crossing, and Tyco, among
others and the closing of the accounting
firm Arthur Andersen that accompanied
the collapse of Enron.

6. Numerous and Voluminous news
reports have revealed huge failures
by top executives and their
advisers- including accountants,
investments, bankers and lawyers-
to fulfil their basic fiduciary duties
to serve the interests of
shareholders and the public.

7. Roubini & Mihn (2010)
“What do economic crisis
occur?”. Some will tell you
that crisis are the inevitable
consequences of
government meddling in
markets. Some economists
will claim with a straight
face that the very idea of a
crisis is illusory, a fiction
perpetrated by those who
doubt the market’s ability to
allocate goods and resources
with astonishing efficiency.
Ricart and Rosanas (2012) “
The economic theories and
trends that have come to
dominate modern
management practice over the
past 30-40 years need to be re-
visited. Given the dominance
of economic theories based on
self-interest and a free market,
the business landscape
became bereft of humanity, as
people became like square
pegs being hammered into

8. The assumption that individuals act
rationally may be viewed as ignoring
important aspects of human behavior.
May see the homo economicus (
economic man) as being quite different
fro the real people.
Attempts to maximize
utility as a customer and
economic profit as a
producer.

9. Neoclassical economics is also often
seen as relying too heavily on
complex, mathematical method such
as those used in general equilibrium
theory, without enough regard to
whether these actually describe the
economy.

10. The Humanistic Approach:
Human Persons as the
Most Important Stakeholders

11. Management theory and practice
are facing unprecedented
challenges. The Lack of
sustainability, increasing inequity,
and the continuous decline in
societal trust pose a threat to
“business as usual”.

12. Capitalism is at crossroads, and
scholars, practitioners, and policy
makers are called to rethink
business strategy in high of major
external changes (Pirson &
Kimakowits, 2014).

13. People is one of the domains that
should be sustained in inclusive and
sustainable enterprise.
Economic Growth is undoubtedly
an important determinant;
however it is one of many
elements of human well-being.

14. The businessman has to produce
social cohesion, which refers to
fulfilling individual community
needs.It has been shown that this
humanistic paradigm provides the
foundations for a more sustainable
business practice, in the following
ways:

15. a.The companies are steadfastly purpose-
driven.
b.Humanistic management styles as
implemented in specific firms aim to
promote human development which
includes: psychological, physical, social
and financial dimensions.
c.Managers in those firms are “servant
leaders” and regard themselves as

16. A New Theory of the Firm
for the 21st Century

17. The document “the vocation of the
business” speaks of the vocations of the
business men and women of our time
who act in broad and diverse business
institutions such as:
cooperatives Multinational corporations
Family business Social business
For-profit/non-profit collaborations

18. The challenges and opportunities
which the business world offers
them in the context of intense
such as:
a. Financial Practices
b.Technological Communications
c. Short Term
d.Profound Cultural Changes

19. In the document business leaders
are called to engage the
contemporary economic and
financial world in light of the
principles of human dignity and
the common good.

20. This section will be based chiefly on
the notions of the Spanish
philosopher and business professor,
Juan Antonio Perez Lopez.
A notion of man as homo humanus
( human man) with his true an real
nature, as well as needs and wants.

21. Juan Antonio Perez Lopez(1934-
1996)
He was a Spanish business theorist
He was a professor of organizational
behavior at the IESE Business school
(University of Navarra).
In 1916, he began to teach at the IESE
Department of Qualitative Analysis.

22. He was a contemporary of Leonardo Polo,
whose transcendental anthropology
described the human person as an open and
free system.
Lopez proposed three main activities than
managers must carry out, adding
leadership capacity, strategic capacity
and executive capacity.

23. Leadership capacity or “transcendent
motives” (different from the extrinsic
and intrinsic motives)
- refers to a genuine
interest in the development and
motives of the other person than
go beyond considering
exclusively future effectiveness.

24. a.Transcendent motives
- reflect the value given to the
repercussions of ones decisions on
others.
b. Transcendental leadership
- goes beyond transformational
leadership in the sense that it is a
relationship of influence between
leader and collaborators.

25. Anthropology of Organizations
- also distinguishers affective
needs as the highest among three
levels of needs.
Theory of Human Action in Organizations
- explains that the human person
in business organizations in capable
of having transcendent motives.

26. Viewing the Firm from
a Virtue Theory Lens

27. This view of governance based on
the idea of human needs and human
values takes into account the
connection between good human
performance and good organization
outcomes.
Requires examining the character of individuals
employees and the responsibilities associated with
the roles which those individuals play within
organizations(Racells, 2014;
Mele,2013,Maguire,1997).

28. Studies have shown that benefits
accrue to virtuous leadership and
performance:
1.The role virtuousness plays in
creating a fixed point in decision-
making.

29. Virtuous behavior is associated with
desirable outcomes.
Example: Honesty, transcendent meaning;
a. Caring
b. Giving
Behavior
c. Gratitude
d. Hope
e. Empathy
f. love
g. forgiveness

30. Among other virtues have been found to
predict desired outcomes such as:
a. Individuals commitment
b. Motivation
c. Positive emotions
d. Psychological Health
e. Effort
f. Physical Health
g. Satisfaction

31. QUIZ
(10 Items)

32. 1. Attempts to maximize utility as a
customer and economic profit as a
producer.
2. It is also often seen as relying
too heavily on complex, mathematical
method such as those used in
general equilibrium theory, without
enough regard to whether these

33. 3. One of the domains that
should be sustained in inclusive
and sustainable enterprise.
4. A notion of man as
( human man) with his true
an real nature, as well as
needs and wants.

34. 5. Who is the Spanish philosopher
and business professor that he began
to teach at the IESE Department of
Qualitative Analysis, In 1916?
6. Refers to a genuine interest in
the development and motives of
the other person than go beyond
considering exclusively future
effectiveness.

35. 7. Explains that the human person in
business organizations in capable of
having transcendent motives.
8. Requires examining the character of
individuals employees and the
responsibilities associated with the
roles which those individuals play
within organizations.

36. 9. Goes beyond transformational
leadership in the sense that it is a
relationship of influence between leader
and collaborators.
10. Reflect the value given to the
repercussions of ones decisions on
others.