Post-Materialist Business

Spiritual Value-Orientation in Renewing Management

László Zsolnai

• Publisher: Palgrave Pivot
• Year: 2015
• Print ISBN:
  9781137525963
• eBook ISBN:
  9781137525987
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Post-Materialist Business presents a spiritual-based approach to business and management. It uses pluralistic view of spirituality and provides a number of inspiring cases of alternative organizations which go beyond the materialistic mindset of business and serve the common good of society, nature, and future generations.

1

The Fallacy of Materialistic Management

Abstract: The dominant model of today’s mainstream business is the materialistic management model, which uses money-driven, extrinsic motivation and measures success only in money terms. Profit is not appropriate as the sole measure of the success of economic activities, as it provides an incomplete and imperfect evaluation of economic activities. Money becomes problematic as the exclusive motivation for economic activities. It can crowd out the intrinsic motivation of economic actors and cultivates self-centered value orientation, which results in socially insensitive and ethically irresponsible behavior.

Zsolnai, Laszlo. Post-Materialistic Business: Spiritual Value-Orientation in Renewing Management. Basingstoke: Palgrave Macmillan, 2015. DOI: 10.1057/9781137525987.0005.

The basic assumptions underlying mainstream business management have become questionable. The dominant model upon which modern business is based involves a materialistic conception of man. Human beings are considered creatures with only materialistic desires, who act out of egoistic motivation alone. This materialistic and individualistic model is leading to decreases in the well being of people and their communities and resulting in large-scale ecological destruction.

American psychologist Tim Kasser states that materialistic values reflect the priority that individuals give to goals such as money, possessions, image, and status. Numerous empirical studies have documented the fact that the more people prioritize materialistic goals, the lower their personal well being, and the greater the likelihood they will engage in manipulative, competitive and ecologically degrading behaviors (2002, 2011).

1.1 Malfunctioning business

The main problem with modern business is that it employs self-centered perspectives and pursues the goal of self-enhancement. Mainstream business leaders act as if they and their organizations are separate from their larger environment and tend to pursue goals that are narrowly defined. Business organizations are disembedded from the environmental and social context in which they function and may consider the natural environment and humans as mere means to accomplish their own purposes and goals. This self-centered, self-enhancement orientation of modern business unavoidably leads to ecological destruction and human deprivation.

Self-centered orientation

The perverse decisions of modern business organizations occur in such phenomena as decision under risk and the discounting of value over space and time. Prospect theory and the general theory of discounting can help us to describe these phenomena.

Consider the following decision problem:

(1)Choose between making a sure gain “G” or making a gain of “xG” with 1/x probability where x > 1.

Prospect theory tells us that the majority of decision makers will prefer the first alternative (a sure but smaller gain) against the second one (a greater but uncertain gain). Decision makers usually display risk aversion in choices involving sure gains. (Kahneman and Tversky 1979)

Now, observe at the situation in reverse:

(2)Choose between making a sure loss “L” or making a loss of “yL” with 1/y probability where y > 1.

Prospect theory indicates that the majority of decision makers will prefer the second alternative (a greater but uncertain loss) against the first one (a smaller but sure loss). Decision makers are usually risk seeking in choices involving sure losses. (Kahneman and Tversky 1979)

The next decision problem concerns a combination of situations (1) and (2):

(3)Choose between making a sure gain “G” and a loss of “yL” with probability 1/y, or making a sure loss “L” and a gain of “xG” with a probability of 1/x.

Prospect theory tells us that the majority of decision makers will prefer the first pair of alternatives (a smaller but sure gain and a larger but uncertain loss) against the second pair of alternatives (a smaller but sure loss and a larger but uncertain gain). Decision makers are usually more sensitive to losses than to gains. (Kahneman and Tversky 1979)

Risky decisions made by business organizations often endanger the safety and integrity of the natural environment and human populations. So-called catastrophic risk is a closely related phenomenon. The probability of a catastrophe being caused by modern, large-scale forms of technology is usually low, but it is never zero, while the potential consequences may be horrifying: the destruction of ecosystems and enormous losses to society. Recent examples of this kind of ecological and human tragedy include Fukushima and the BP oil spill in the Gulf of Mexico.

Decision makers usually overvalue things that are in the here and now, compared to things further away in space and time. This phenomenon is called “discounting”. The main principles of discounting in space and time can be studied through examining the following decision problems:

(4)Choose between making a gain “G” here and now, and making the same gain “G” further away, and later in time.

According to the general theory of discounting, the majority of decision makers will prefer the first alternative (a gain here and now) to the second (the same gain further away and later in time). The adage “a bird in the hand is worth two in the bush” encapsulates how people discount gains that are distant in space and time.

Now, consider the situation in reverse:

(5)Choose between making a loss “L” here and now and making the same loss “L” further away and later.

According to the general theory of discounting, the majority of decision makers will prefer the second alternative (a loss further away and later) to the first (the same loss here and now). Individuals tend to put off negative things until tomorrow because they discount losses that are distant in space and time.

The next decision problem involves a combination of (4) and (5):

(6)Choose between making a gain “G” in the here and now and a loss “L” further away and later, and making a loss “L” here and now and a gain “G” further away in space and later in time.

The majority of decision makers will prefer the first pair of alternatives (a gain here and now as well as a loss further away and later) against the second pair of alternatives (the same gain further and later, as well as the same loss here and now) because they undervalue gains and losses that are distant in space and time.

Decision makers use discount rates to value things that are distant in space and time. The present value of a thing is calculated as follows:

(7)Pv = v / (1 + α)^x

where Pv is the present value of the item under valuation, x is a measure of the distance of v in space or in time, and α is the discount rate – which is usually between 5% and 15%.

If the distance of the evaluated item in space and/or time is great enough, then its present value is extremely small. Also, the present value depends on the discount rate that is applied: the higher the discount rate, the smaller the present value. Thus the present value of a thing is determined by the discount rate that is used, and its distance from the decision maker in space and time.

Discounting in space and time is liable to have negative consequences for business and society. Decision makers who significantly discount things in space and time are not interested in solving long-range ecological and human problems, or in the global impacts of their activities on the natural environment and human communities.

The international trade in hazardous wastes is an illustrative case in point. Industrially advanced countries transport and dump hazardous wastes in distant and less-developed countries, displaying no interest in the future ecological impact of these materials on human health.

By combining the main lessons of prospect theory and general theory discounting, we gain insight into the nature of the self-centeredness of modern business organizations.

Consider the following decision problem:

(8)There are two alternatives for a modern business organization. The first alternative is to make a sure gain, “G”, here and now, and at the same time, to make a loss of “yL” further away and later in time, with a probability of 1/y where y > 1. The second alternative is to make a sure loss, “L”, here and now, and at the same time, to make a gain of “xG” far away and later with a probability of 1/x where x > 1.

Decision makers in modern business organizations will prefer the first alternative (a smaller but sure gain here and now, and a greater but uncertain loss far away and later) against the second one (a greater but uncertain gain here and now and a smaller but sure loss further away and later). Generally speaking, modern businesses favor sure gains here and now and uncertain losses far and later, while they disfavor sure losses here and now and uncertain gains that are positioned further away and later in time (Table 1.1).

TABLE 1.1 The self-centered choices modern business organizations make

The self-centered orientation of modern business organizations produces environmental and social ills of various kinds.

Self-enhancement goals

Psychologists claim that a division between thought and action takes place when leaders break the rules or get involved in dirty business or politics. What is most surprising in cases of rule violation and misconduct is that leaders are not bothered by their consciences, do not fear being sanctioned, and do not feel obliged to make reparations (Caprara and Capanna 2006).

Stanford psychologist Albert Bandura has described the mechanisms of “moral disengagement,” the psychosocial maneuvers by which moral self-sanctioning becomes disengaged, giving free way to a variety of misbehaviors carried out without moral concern. Self-sanctioning can be disengaged through numerous means: by reconstructing the former conduct, obscuring personal causal agency, misrepresenting or disregarding the injurious consequences of one’s actions, and vilifying the recipients of maltreatment by blaming and devaluing them (1986, 1990, 1991).

The mechanisms of moral disengagement enable otherwise considerate decision makers to commit transgressive acts without experiencing personal distress.

Moral justification

Decision makers do not ordinarily engage in reprehensible conduct until they have justified the rightness of their actions to themselves. In this process of moral justification, detrimental conduct is made personally and socially acceptable by portraying it in the service of valuable social or moral purposes.

Euphemistic labeling

Activities can take on markedly different appearances depending on what they are called. Euphemistic labeling provides a convenient tool for masking reprehensible activities or even conferring respectable status upon them. Through sanitized and convoluted verbiage, destructive conduct is made benign, and those who engage in it are relieved of a sense of personal agency.

Advantageous comparison

Behavior can also assume very different qualities, depending on what it is contrasted with. By exploiting advantageous comparisons, injurious conduct can be rendered benign or made to appear to be of little consequence. The more flagrant the activities that are contrasted, the more likely it is that one’s own injurious conduct will appear trifling or even benevolent.

Displacement of responsibility

Through displacement of responsibility, decision makers view their actions as springing from the social pressures or dictates of others, rather than as something for which they are personally responsible. Because they are not the actual agents of their action, they are spared self-censuring reactions. Hence, they are willing to behave in ways they normally repudiate, if a legitimate authority accepts responsibility for the effects of their actions.

Diffusion of responsibility

The exercise of moral control is also weakened when personal agency is obscured by diffusion of responsibility for detrimenta...

Table of contents

• Cover
• Title
• 1  The Fallacy of Materialistic Management
• 2  The Promise of Spiritually-Based Management
• 3  Post-Materialistic Business Models
• 4  Conclusion
• References
• Index