You are on page 1of 28

Course: Managing People across a Global Context Book: Managing Across Cultures by Schneider and Barsoux (second edition)

Chapter 1: The Undertow of Culture All people are the same. Its only their habits that are so different. (Confucius) Culture is the most neglected influence on management due to the problem of recognizing the presence and the force of culture. Converging cultures? The believe is that cultures melt together into one global culture (due to advances in communication systems etc.), this phenomenon is called a melting pot. However, it seems that the pressure for convergence or integration may in fact create an equal if not stronger pressure for divergence, or fragmentation. Management practice is considered to be scientifically engineered and therefore able to transcend national boundaries. However, the practice of management is shaped by its cultural origin in practice and therefore management cannot simply be seen as a single practice. Factors favouring integration and convergence of cultures are economic, technological, and managerial development. However, there are perhaps stronger forces favouring fragmentation of cultures, like the reassertion of local values and beliefs, national pride (resistance against invasion of foreign companies), and the desire to develop own style of management. Culture as a source of competitive advantage/disadvantage. There is evidence that culture can provide a source of competitive advantage. Porter has argued that nations derive competitive advantage from a set of country-level factors such as the availability of resources, the size and sophistication of the market, the nature of government intervention, and the type of strategic linkages or networks. Examples on page 8 demonstrate that each country has its unique institutional and cultural characteristics, which can provide sources of competitive advantage at one point, only to become liabilities when the environment changes. In every cross-border alliance there are seeds of potential cultural conflict and misunderstanding. The reason behind this is not only that behaviour, values, and beliefs differ across cultures, but also their relative importance to those cultures. One culture may value something what another culture finds irrelevant. The trouble is that it is difficult to recognize just what matters to another culture. Companies need to discover how culture can be harnessed to drive business forward. Recognizing culture. Describing our own culture is difficult since we only begin to perceive it when we are out of it, confronted with another. Culture can be seen as a lens through which we perceive the other, it distorts how we see the world and how the world sees us. E.g. according to Europeans, British drivers drive on the wrong side of the road instead of on the left side.

Recognizing cultural differences is the necessary first step to anticipating potential threats and opportunities for business encounters. The Johari Window (figure 1.4 on page 12) provides a way of discussing and negotiating the different perspectives.

This framework may be helpful in making cultural differences open to discussion. The Facade could also be called Their blind spot. However, for many people discussing cultural differences is considered to be dangerous since differences are believed to be a source of conflict. Discussions of cultural differences are thus avoided. Another reason for avoiding discussion is the fear of stereotyping. Stereotyping seems to come naturally in describing someone elses culture. Stereotypes may represent mental files that are used to help process new information by comparing it with past experience and knowledge. However, stereotypes are far from sufficient. Stereotypes can be used as a starting point, but should be continually revised as more experience is gained. This requires careful observation, suspending judgement, and looking for explanation. It may be more useful to see stereotypes as prototypes, which allow for variation around a set of core characteristics. In accordance, we can create a normal distribution of a cultures aspect, with a mean and standard deviation. If a culture is homogeneous, the curve will be rather steep than flat. Discovering cultural advantage. National identity (how we see us) and image (how they see us) has important consequences for a countrys role in the global economic and political arena. The national identity and image tend to be more aligned if one has travelled abroad.

Chapter 2: Exploring Culture This chapter introduces cultural dimensions, some of which are easy to detect; others require diving below the surface. Exploring culture can be compared to exploring the ocean (figure 2.1 on page 21). On the surface, riding the waves, we can observe artifacts, rituals and behaviour. To verify these, one has to look below by asking questions to discover the values and beliefs which are given to explain that behaviour. Further down are the underlying assumptions which can only be assessed through interpretation. The search for meaning. The precise meaning of culture is hard to grasp, there are over 164 definitions. Although explanations may be given for values and beliefs, it is not certain whether this is in line with the underlying assumptions. This is the difference between espoused theory (what people say) and theory in use (what people mean). Ed Schein defines culture as a set of basic assumptions shared solutions to universal problems of external adaption (how to survive) and internal integration (how to stay together) which have evolved over time and are handed down from one generation to the next. The appeal of this definition is that it directly addresses the key challenges facing managers: finding solutions to problems of external adaption (developing strategies) and of internal integration (designing organisations and HR practices). Exploring culture calls for an interpretive approach, meaning extensive observation and interviewing to provide detailed (or thick) descriptions. From this, grounded theory can emerge. This approach requires living the life. Artifacts and behaviour. Cultural assumptions can be observed in artifacts and behaviour such as architecture and interior design, greeting rituals, dress and codes of address, and contracts. Entering an organisation the most obvious artifact is the architecture and design of the building. The architecture and design hint at the underlying assumptions regarding internal integration (bringing people together of keeping them apart) and external adaption (harmonizing with or dominating nature). They indicate the importance of hierarchy, of collective rather than individual effort, the preferred type of activity and interaction between people. More clues can be found in formalized exchanges such as greeting rituals. The importance of these rituals should not be overlooked. In the US it might not be that important, but in Japan and France it is of vital importance. The degree of formality in addressing business relations sends important signals. Formality is expressed in the use of last names, the formal version of you, and titles. Another aspect of the initial encounter is the amount of physical space considered necessary to be comfortable. Northern Europeans tend to require a larger personal space/protective bubble than their Latin European counterparts. Observations of how people get to know each other, the degree of formality and personal contact preferred

reveals underlying assumptions about what is considered to be public versus private space. The prevailing dress code in a culture can serve as a subtle signalling mechanism for the degree of formality. Northern European are dressed more informal than southern European workers. For Latin managers, personal style is important, while Anglo and Asian managers do not want to stand out. However, nowadays it is the idea to adapt your dress code to the one of the customer in order to make a good impression. Whether business agreements are sealed by being put in writing or by giving ones word is also highly important. Americans are seen as excessive when it comes to the use of formal contacts and lawyers. The USA has the largest amount of lawyers per 100.000 citizens, 279, where UK has 114, Germany 77, and Japan 11. Observing the artifacts and behaviour described above provides clues to assumptions regarding external adaption how space is used, how strangers are dealt with, how contracts are established and internal integration how formal, what is the proper way of getting to know someone, and how much personal space is expected. Beliefs and values. Beliefs are statements of facts, about the way things are. Values are preferred states about the way things should be, about ideals. Using questionnaires and surveys, management scholars have provided more and more evidence for different organizationally related beliefs and values of employees and managers from around the world. Here we focus more specifically on beliefs and values regarding certain aspects. Criteria for success; different stakeholders mean different criteria for success. Therefore beliefs and values differ in terms of what is considered to be important: - Product quality; the German corporate obsession is products. - Technological leadership; in French industries, they belief in the supremacy of technology. - Market share; Japanese companies have revered market share as the road to success. A famous definition of what management is; getting things done through other people. This implies doing over being, through rather than with other people. However, this definition may be rejected in cultures that emphasize the spiritual over the material, and concern for people over concern for the task. Beliefs about who is the right manager, what is management, and what constitutes success are ultimately linked to values which indicate what is considered to be important. Digging deeper into culture leads us to basic assumptions. Basic assumptions. Model by Schneider and Barsoux for analyzing cultures (table 2.1 on page 48) can be explained as follows: - External adaption;

- Relationship with nature; can either be that nature is seen as something controllable, where other cultures accept it is a given thing. Destiny or fate, is predetermined. Rather than try to change things or make things happen, it is considered to be more natural to let things happen. In countries where Islamic regions play an important role, Gods will is followed, which implies that the events cannot be controlled. Uncertainty avoidance refers to the discomfort with uncertainty, preference for predictability and control. These assumptions are reflected in planning rituals, the importance placed on schedules and belief in taking initiative and responsibility. - Nature of human activity; the desirability to taking action refers to making things happen and taking decisions quickly in order to survive. On the other hand people say; better to do nothing than to disappoint. When managers assume that they have control over nature, they are more likely to take action. In turn; greater importance is placed upon doing versus being. This means that the quality of thinking, education and of personal character is less important than what you do. This difference is also referred to as achievement versus ascription. - Nature of truth and reality; in many Anglo-Saxon cultures, truth is synonymous with facts and figures (unshakeable facts). In European countries, however, interpretation and reasoning are seen as far more important than just numbers/facts. There are two approaches in business decisions: deductive (deriving solutions from theory) and inductive (theory is derived from data and experience). In Asian countries, once the conclusion is presented and taken as given it is difficult to criticize. Other cultures rely more on feeling, intuition, and spirituality. They are convinced in their truth only if it feels right. - Internal integration; - Human nature; some cultures belief that people are basically evil and can be redeemed only though certain acts of religious faith. Other cultures assume that people are basically good, that they live and work to fulfil or maximize their human potential. This translates to Theory X and Y. Theory X assumes that workers are lazy, need constant direction and supervision. Theory Y assumes that workers are self-directed, willing to take initiative and do what has to be done without supervision. - Relationships with people; 1. A key assumption differentiating cultures is the importance of relationships over tasks. Lets keep it strictly business is likely to confuse managers in Asia, Latin America, and the Middle East. In the US and Europe managers prefer to focus on the task and to keep personal relationships aside. 2. In masculine cultures, importance is placed on assertiveness, competitiveness, and materialism in the form of earnings and advancement, promotions, and big bonuses. 3. In European cultures the leader has considerably less importance than in the hierarchic cultures in South-America and Asia. 4. Is the prevailing ethos one of cooperation or competition group-oriented or every man for himself? - Linking assumptions: space, language, time; - Space; because Japan has not much space, the people value their personal space very high. They do not like to be touched and prefer bowing to handshakes.

Assumptions regarding personal space determine the nature and degree of involvement with others; what is expected from friendships and family. - Language; the distinction lies in high context (communication is higly dependent upon the person and the situation, much is communicated in what is not said. Being able to read non-verbal signs and body language is crucial) and low context cultures (communications are expected to be clear and direct, or explicit). In Asian cultures expressing emotion may be considered a sign of immaturity and dangerous impulsiveness. - Time; in Anglo-saxon and northern European cultures, time tends to be seen as limited. In Latin and Middle Eastern cultures, time is experienced as unlimited and simultaneous. Cultural attitudes to time also differ in the relative importance accorded to past, present, and future. In Europe and Asia, there is greater emphasis on the past and on the importance of tradition.

Chapter 3: Interacting Spheres of Culture The influence of culture on business practice can be explored in several spheres. Culture can be discovered in many places: regional cultures within nations (urban versus rural, north versus south), among groups of nations (Nordic versus Latin American), industry cultures (pharmaceutical versus automotive), and corporate cultures and subcultures (such as professional or functional groups). What is important is to recognize which dimensions of culture are relevant, assessing their potential impact, and devising strategies for using them creatively. Cultural spheres of influence. Regional cultures Regional cultures refer to differences within countries (such as the various Lnder in Germany) and similarities between countries (such as Scandinavia). It is important to recognize both (doing business in Rome is different from doing business in Milan). Within countries: regional cultures have evolved due to geography, history, political and economic forces, language and religion. Within countries, the easy-west division may be important (NY versus LA). In addition, strong regional ties may compete with national identity (Basques in Spain for instance). Regional differences are also clear when different languages are spoken within one country (Belgium, Switzerland). Another intra-country cultural difference may exist between rural and urban areas. Between countries: similarities among countries create regional cultures beyond national borders. As can be seen in figure 3.2 on page 56, countries are put into clusters with related countries. These country clusters have geographical, religious, linguistic, or historical ties which cut across national boundaries. Cultural similarity has an obvious bearing on patterns of trade and on the likely success of alliances or mergers between companies from those countries. Industry cultures One can also identify industry cultures (advertising is clearly different from banking). This makes it sometimes difficult to diversify into other markets (in terms of other products and other countries) since different countries have different perceptions of the same industry and selling travel packages is not the same as selling insurances. Differences in industry cultures are due to different task environments such as the nature of decision-making (degree of risk and speed of feedback/payoff), the nature of the products or services (patents/secrecy versus openness), rates of technology change (depends on government regulation, high technology change is valued higher), degree of state intervention (protected environments versus open environments (higher competition)), and sources of competitive advantage (efficiency over customer satisfaction, cost effectiveness over quality). Professional cultures Companies want a professional culture due to the fact that employees are empowered and decision-making is pushed down the ranks. The need for professionalism is pushed

even further by the trend for organizations to become networks of specialists. They do not want people with a generalist approach (knowing a bit of everything). The tension between specialists who are supervised by generalists can result in clashes with regard to who is formally or informally more highly valued. Professional cultures differ in what is considered proper behaviour (meaning dress codes, codes of conduct etc.). This way of looking at cultures implies that doctors are doctors, as long as they have the same beliefs and values. Functional cultures The importance of understanding differences in functional cultures becomes apparent when cross-functional teams are created to develop new product, design new policies, or explore new markets. Here it becomes clear that the different functions (HR, finance, marketing etc.) have different cultures. The reasons for these differences can be found in the external environment, such as stakeholder demands (one stakeholder finds A important while other cares about B), and the nature of the task (task variability (preferred by marketing) versus task stability (preferred by production for efficiency reasons)). Thus different functions have different cultures due to task requirements, time frames, and customer demands. Which functions are valued the highest is in part determined by the nature of the industry (high-tech industry may favour R&D where in consumer goods, marketing is favoured). Corporate culture Corporate culture is influenced by the nature of the industry, business, and product. So it is difficult to judge how American IBMs culture is or how German Volkswagens culture is because it depends on other spheres. Corporate culture depends on several aspects: 1. Role of founder: founders influence the culture of the company through their values and beliefs. 2. Leaders: strong leaders can change a culture. 3. Administrative heritage: different structures, standard operating procedures or routines that evolve over time shape a culture by prescribing certain behaviour and reinforcing certain values and beliefs. 4. Stages of development: the companys position in its life cycle influences the culture. A start-up focuses on technology and re-investing. After a while, the start-up has to change from an organic form into a more structured form. 5. Nature of product: is important in creating a culture and in shaping its evolution. Some companies focus mainly on marketing where others focus on R&D, as said before. It is argued that the culture of multinational companies is the glue that holds geographically dispersed units together. However, Hofstedes research pointed out that even within corporate cultures like the one of IBM, national cultures can be recognized. A research by Laurent underpins this idea. Creating competitive advantage: interacting spheres. There are multiple cultural spheres of influence which interact in ways that can provide competitive advantages or disadvantages. Any cross-border venture harbours potential

for cultural threats and opportunities among spheres. Companies need to be able to detect the different cultural spheres of influence in order to anticipate and plan for their impact and interaction. However, a lot of companies find out about conflicts in the implementation phase instead of beforehand.

Chapter 4: Culture and Organization In order to demonstrate the impact of culture on organizational structure, systems, and processes, this chapter presents the evidence for national differences and consider the cultural reasons for these differences. Different schools, different cultures. Managers are not convinced that a culture can really affect the structure, systems and processes of the organization. The culture-free (etic) argument is that structure is determined by organizational features such as size and technology. Structuralists argue that structure creates culture, while the culturalists argue that culture creates structure. The books argument is that different forms of organization emerge which reflect underlying cultural dimensions. Culture and structure. Geert Hofstedes research in the late 1960s involved interviews with 116.000 IBM employees in 40 different countries. Hofstede identified four value dimensions on which countries differed: 1. Power distance; indicates the extent to which a society accepts the unequal distribution of power in institutions and organizations. More levels of hierarchy (vertical differentiation), a higher proportion of supervisory personnel (narrow span of control), and more centralized decision-making. 2. Uncertainty avoidance; refers to a societys discomfort with uncertainty, preferring predictability and stability. Higher need for written rules and procedures. 3. Individualism/Collectivism; reflects the extent to which people prefer to take care of themselves and their immediate families, remaining emotionally independent from groups, organizations, and other collectivities. In collectivist cultures, group orientation, consensus and cooperation are valued higher than individual initiative and effort. 4. Masculinity/Femininity; reveals the bias towards masculine values of assertiveness, competitiveness, and materialism, or towards feminine values of nurturing, and the quality of life and relationships. Country rankings on each dimension are provided in Table 4.1 on page 88. Due to a research in Asia, a fifth dimension was added; 5. Long term orientation; meaning the degree in values like persistence, thrift and patience. These were considered the reason for the economic success of the Asian Tigers. Figure 4.1 on page 91 shows the division of countries when it comes to power distance on the one hand and uncertainty avoidance on the other. Another study based on uncertainty avoidance and power distance concluded 4 clusters of countries, as can be seen in figure 4.2 on page 93. The different clusters are; - Village market (Anglo/Nordic); low uncertainty avoidance and low power distance. Characteristics are; decentralized, generalist, people as free agents, entrepreneurial,

flexibility, more delegation, coordination through informal communication, output control. - Family or tribe (Asian); high power distance, low uncertainty avoidance. Characteristics are; centralized, paternalistic, loyalty, generalist, strong social versus task roles, personal relationships, social control. - Traditional bureaucracy pyramid of people (Latin); high power distance and high uncertainty avoidance. Characteristics are; centralized decision-making, coordination at the top, less delegation, highly specialized (versus generalist), strong role of staff, analytic ability, pyramid of people, informal relationships, power and authority (elitist), input control. - Well-oiled machine (Germanic); high uncertainty avoidance and low power distance. Characteristics are; decentralized d-m, narrow span of control, specialists, discretion, strong role of staff experts, top management team, industry and company knowledge, organized by function, compartmentalized, coordination through routines and rules, structural solutions, throughput control, efficiency. What can be concluded from these researches is that the primary cultural determinants appear to be those related to relationships between people in terms of power and status and relationship with nature (uncertainty avoidance). A research by Laurent concluded that managers have different conceptions of organizations: one which focused on the task, called instrumental, and one which focused on relationships, called social. Culture and processes. The characterization of organizations as pyramids, well-oiled machines, village markets, and family tribes is further reflect in the organizational process. The formalization and standardization of policies and procedures may reflect low tolerance for uncertainty, as they can be clearly spelled out they leave little room for doubt. Procedures or job descriptions are less likely to be made explicit where communication is more embedded in relationships and in situations. Control systems reflect different cultural assumptions regarding relationships with people (in terms of power and human nature) and relationship with nature (uncertainty and control). Furthermore, the nature of control depends on assumptions regarding human nature. When employees are seen as capable and self-directed (Theory Y), there is more reliance on communication, rather than direct supervision. When managers assume that workers are basically lazy and need to be directed by others (Theory X), they are more likely to set up tight control processes. Planning practices also reflect underlying cultural assumptions. The shorter-term and the more operational/administrative orientation reflects the need to limit uncertainty to more manageable time frames and with more concrete outcomes. Office design, building layout, and information technology can encourage managers to share information or to keep it to themselves, and can facilitate whether communication channels are open and multiple, or limited to a one-to-one basis.

In countries where power and hierarchy are played down, there is the greatest evidence of participation in decision-making. In contrast, companies in cultures which emphasize power and hierarchy are more likely to centralize decision-making. The way decisions are made has, obviously, an effect on the time it takes for reaching decisions. In general, the more people involved in decision making the longer it takes to reach consensus. Furthermore, in cultures where the past plays an important role (like Asia), traditions cannot be dismissed so quickly and therefore decisions need to be taken and implemented more slowly.

Chapter 5: Culture and Strategy The definition of culture as solutions to problems of external adaption and internal integration could be taken as a fitting definition of strategy. In devising and implementing strategies, organizations need to assess their external environments as well as their internal capabilities. Strategic decisions are, in effect, intended to achieve external adaption. This chapter addresses the question: how does national culture affect strategy? The cultural roots of strategy. Strategy is considered to be the means for achieving corporate objectives. In creating a strategy, corporate soldiers use a SWOT analysis, BCG matrix, Porters 5 forces. These fashions which have carried strategic management practices promote certain sets of beliefs and values, such as analytic rationality. The rational/economic view. This approach takes for granted certain assumptions. It assumes, for example, that the environment and the organization are objective realities (meaning the same to everyone) that are similarly perceived and analysed by intelligent managers. Rather than taking them as objective realities, it can be argued that both environments and organizations are subjective realities that are perceived and enacted in different ways. As such, national culture can play an important role in determining different types of strategic behaviour. The rational analytic approach also assumes that managers making strategic decision follow a similar route: (1) gathering all relevant information, (2) generating all possible alternatives, (3) evaluating the costs and benefits of each alternative, (4) choosing the optimal solution, and (5) then acting upon it. Another view of strategy. Henry Mintzberg argues that rather than planned, strategy is considered as emergent, or as evolutionary. This means that the intended strategy and the emergent one may not necessarily coincide. More recently in the field of strategic management, there has been a growing interest in developing organizational resources and capabilities. These resource-based and core competencies views suggest that building corporate character (or developing resource bases) provides the capability and flexibility to respond to environmental events. These approaches reflect different underlying assumptions by placing the emphasis on what the company is versus what the company does (being versus doing). Cultural models of strategy. Assumptions having to do with the relationship with nature (control), human beings (as capable), the nature of truth and reality (facts and figures, logic), and the nature of relationships (the role of hierarchies and the collective) influence the sources and type of information sought, and the methods of interpreting that information. Different assumptions obviously lead to different models of strategic management which can be categorized as controlling versus adapting. Controlling model.

This model can be characterized as centralized and formalized. Information is often obtained from industry reports, or consultants, and tends to be quantitative and objective. Based on this information and analysis, top management makes the decisions and then hands them down to be implemented. The cultural assumptions embedded in this model are: (1) the environment can be known (is intelligible and predictable). Specific information can be obtained (by active and focused scanning) and analysed (interpreted) to reduce environmental uncertainty. Truth is determined by facts and figures. Strategic vision can be expressed as concrete, explicit and tangible (lowcontext). Implementation is therefore highly task- and achievement-oriented. According to this perspective, the purpose of strategic management is to achieve control of what happens both outside as well as inside the organization, hence controlling. Adapting model. In contrast, this model is more decentralized and informal. Responsibilities are diffused throughout the organization. Information is gathered from personal sources and through observation and thus tends to be more qualitative and subjective. Rather than a discrete strategic decision per se, a strategic direction tends to emerge. The underlying assumptions in this model are that the environment cannot be readily known or controlled. Therefore the organization must be flexible and prepared to react to unforeseeable environmental events. Personal relationships and interactions are considered key to developing shared understanding, thus information sources are more personal and subjective. Truth and reality are more likely to be arrived at through feelings or intuition (a sixth sense). Strategy implementation is considered to hinge on the development of internal capabilities knowledge, competencies, and learning in order to be able to continuously improve, hence adapting. The cultural determinants of strategy are the following: - External adaption: - Relationship with nature (uncertainty versus control) - Human activity (doing versus being and achievement versus ascription) - Truth and reality (facts versus intuition) - Internal integration: - Human nature - Nature of relationships (power distance, individualism, and task/social) - Language (high- versus low-context) - Time (monochromic versus polychromic) - Long term versus short term Interaction effects. The national context, or institutional environment, includes the role of government and unions, the market conditions, economic and political systems, educational systems, and history. These factors play an important role in determining strategy. There are more or less two strategic profiles: 1. Defender: wherein efficiency and control are considered necessary to protect product/market niches and core business. These tend to be more centralized and formalized. 2. Prospectors: where they search for new product and market opportunities and the emphasis is on flexibility and adaptability. These tend to have structures that are more decentralized and informal, which reinforce an adaptive approach.

National context also helps to explain the different approaches to strategy through its effect on other spheres of cultural influence, such as corporate and industry cultures. Corporate culture is shaped in part by government regulation and resulting market conditions. Industry culture is driven by national context, or the institutional environment and legislation. However, broader, supra-regional institutional pressures, such as EU regulations, also drive industry cultures. Strategic implications of culture. Different cultural assumptions drive different models of strategic process. In MNCs, those at HQ need to understand and appreciate how at the local level strategy is formulated and implemented in order to best integrate it with corporate-level strategic management. For example, if the predominant model at headquarters is controlling, the strategic planning staff are likely to be frustrated in their discussions with managers in subsidiaries that opt for the adapting model. What this highlights is the need to question the roles of HQ and subsidiaries in formulating as well as implementing strategies. Research has shown that the more subsidiaries are involved in formulating the strategies, the more readily they are implemented. Recognizing key cultural dimensions can help anticipate the way in which a competitor may interpret and respond to strategic issues such as new regulations or new market opportunities. Strategic issues are for instance likely to be interpreted as a threat given perceptions of low control over environment. Going international. Cultural dimensions have also been found to explain strategic actions, such as the mode of entry into foreign markets or how companies go international. When a culture strives to reduce uncertainty, they tend to prefer greenfield operations and joint ventures rather than acquisitions. Given cultural distance, they also tend to rely more on rules rather than value-based controls. When cultures are similar, companies can rely on shared values to create high degrees of trust. Thus, licensing arrangements and networks may be preferred within cultural borders, there is a preference for direct ownerships outside cultural borders.

Chapter 6: Culture and Human Resource Management. Any international company hoping to implement a global strategy must choose the human resource policies and practices that will best support that strategy. This is, in essence, the meaning of strategic international human resource management. Unfortunately, however, the same policies will not produce the same effects in different cultural contexts. This chapter discusses the influence of national culture on the development and transfer of HRM practices such as selection, socialization, training, performance appraisal, compensation, and career development. The cultural meaning of HRM. Different cultural assumptions regarding organizations as systems of tasks versus relationships, the role of the individual and the collective, and the importance of being versus doing make HRM practices culture-bound. The idea of humans as resources assumes that people can be utilized like capital or raw materials, another factor of production which can easily be bought or sold, and whose value must be maximized and exploited. This is a rather hard approach. This view of human resource management (which is very American) may cause offense in cultures which take a less instrumental (task-oriented) and more social view of organizations and prefer a soft approach. In the US, HRM has its roots in psychology, its prime concern being the improvement of worker motivation, whereas in Europe, HRM has evolved more from a sociological perspective, which pays more attention to the social system. As a result, the nature of the employment contract, which defines the relationship between the employer and employee both legally and psychologically, differs. In the USA, this relationship is considered contractual, based on notions of fair exchange. In Europe, many aspects of the employment contract are decided outside the company walls; employment is seen more as a social contract (paternalism) based on moral commitment. Choosing from the HRM menu. Companies can choose from a menu of HRM practices. However, it is important to decipher the cultural assumptions underlying these choices in order to consider how these practices may need to be modified, or how their implementation needs to be managed. Selection. Finding the right people is often one of the most important challenges, particularly when unfamiliar with the nature of the local labour market or the available human resources. What represents a standard profile in one country may be quite exceptional in another. Additionally, differences in education systems make it difficult to figure out who has the right profile. Foreign MNCs may also have difficulty assessing the most exclusive labour pools, as competition from local companies may be quite aggressive. The optimal solution is for a MNC to find the right balance between imitating local firms and making its own path. It must learn about the local norms, values, and assumptions, in order to decide which ones must be respected and which, if ignored, may actually provide a competitive edge versus local rivals.

Socialization. This is the process by which new members absorb the corporate culture and become acquainted with the values and behaviour expected of them. These are transmitted in a variety of ways: (1) they may be learned through arduous training programs, (2) they may be absorbed informally by observing other members. Embedded in these practices are cultural assumptions regarding the nature of peer and hierarchical relationships. Furthermore, how they are transmitted is closely tied to use of language; high-context versus low-context. For instance, the need to spell things out, clearly and directly, reflects the low-context culture in the USA. Training. Besides teaching the rules of the game, companies have to train and develop technical and managerial competencies. But cultural views differ on how training is provided, by whom, and for what purpose. Training is provided to develop the know-how thought necessary for success on the job and within the company. This type of know-how differs in terms of specialists versus generalists. Cultural differences will influence who decides on training needs the firm or the individual. The attitude of wanting training (individualism) may not be so eagerly received in cultures where people are less accustomed to taking responsibility for their own development (collectivism). How to learn is another important issue. The idea of working in groups may come more naturally to Asian managers than to more individualistic Anglo-Saxons. Wisdom resides in the hierarchy, relating to power distance. The extensive use of case studies, business games etcetera reflects a preference for experiential (active, inductive approach (cases used to arrive at theory), American) rather than cognitive (passive, deductive approach (theory used to do cases), European) learning. Standardizing training might be important if the company needs to communicate specialized knowledge quickly across different units. Performance appraisal. Performance management involves setting goals, measuring outcomes, and providing feedback to improve future performance. Some even argue that goal setting and feedback are the most important contributions made by psychologists to management. The notion of managing performance is heavily embedded in an instrumental view of organizations which might have little appeal to those cultures that see organizations in terms of social relationships where what counts is managing people, not tasks. Other cultural assumptions regarding performance management are control over the environment, time can be managed, what counts is results (achievement rather than ascription, doing over being) and that reality is objective. MBO = Management by objective, which is particularly common in Germany. Giving feedback can present a cultural minefield. Different norms for being critical and being direct make it very difficult. Europeans are used to being only critical and direct, whereas Americans usually use a hamburger approach to feedback: positive, negative, and positive. In Asia, confronting an employee with failure is considered to be very tactless and even dangerous. Appraisal systems typically emphasize individual responsibility for assigned work. This focus on the individual may seem inappropriate in collectivist cultures.

Compensation and rewards. Cultural differences also play a role in determining who gets rewarded and how. Pay for performance assumes that rewards should be based on contribution to the bottom line, or equity (American, individualism), rather than based on belonging to the group, or equality. Notions of equity are embedded in the contractual view of employment you get what you deserve, notions of equality correspond to the social view you deserve what you get. Assumptions regarding uncertainty, risk-taking, and control influence the preference for variable rather than fixed compensation. In cultures which tend to avoid uncertainty and perceive less control, efforts to introduce incentives may be met with suspicion and fail to produce the desired effect. Preference for financial or non-financial incentives is also culturally related. In countries that value being over doing, nonfinancial incentives like time-off are preferred. Career development. This involves the preferred paths for advancement, the traits and behaviour required for promotion are different in different cultures. What it takes to get ahead, varies according to assumptions regarding being versus doing and beliefs regarding the nature of the managerial task, or what managers are supposed to do or be. In the USA, drive and ability are considered to be the most important determinants. This reflects a pragmatic, individualistic, achievement-oriented and instrumental world-view. In France, it depends on attending an elite grande cole. In Germany, technical competence and functional expertise (Leistung) are considered necessary for advancement. In Brittain, skills in inter-personal relations and communication are the most important. The possibility of switching in and out of companies varies between countries and depends on the cultural assumption regarding the importance of the individual versus loyalty to the group, doing versus being, and tolerance for uncertainty. Usually, in specialists countries they do not appreciate job mobility. MNCs have to ensure that the perceptions of what it takes to reach the top, and the patterns of career development, do not exclude people with different skills, abilities, and perspectives. Making HRM meaningful across cultures. The impact of the local environment and more global pressures for convergence cannot be ignored. The resulting HR practices can be considered to reflect the dynamic interaction of the MNC home, host and institutional environments. Decisions regarding which HR policies can be globally exported and which need to be locally adapted can be effective only if the cultural assumptions embedded in these policies are brought to light and the differences evaluated in terms of their likely impact. This first step is vital in avoiding the possible alienation or low morale which comes from imposing HR policies that are ill-suited to the local culture, or the risks of confusion and lack of coherence which can arise when each local unit determines its own policies. There are of course different ways to ignore local norms; one extreme is to impose HR policies direct from HQ, our of ignorance of cultural differences or insistence on one best way. A more ambitious approach would be to try to seize the opportunity of mutual dialogue to experiment with creative variations. The pursuit of divergent initiatives around an agreed-upon theme may be the key to strategic flexibility and learning. Internationalizing HRM. Internationalizing requires a sound understanding of the corporate strategy to make sure that the HRM policies are aligned. Secondly, it demands a thorough awareness of

the cultural assumptions embedded in HR practices themselves, as well as those which prevail in local subsidiaries. And third, it requires the judgement to assess political concerns such that local resistance to HQ policies is really driven by cultural differences, or desire for local autonomy, or that HQ just wants to have its own way.

Chapter 7: The International Manager. Corporations increasingly search for executives who can leap borders in a single bound to do the implementing. This calls for a new type of cosmopolitan, multilingual, multifaceted executive who is operational across national borders. Companies having developed an international corps of executives have often found that such an elite is difficult to integrate into the corporate mainstream. The mere fact of operating across national boundaries does not mean that the minds of international managers are also travelling across boundaries. Changes over the last decade have made business not just more international but also more interdependent. Thanks to advances in communication and information technology, conferencing has become commonplace. So even those who rarely leave their home base may find themselves interacting with foreigners. However, the international content of jobs varies depending on the nature of the business, the company, the function, and the level of experience, but being able to handle cultural differences is becoming more and more a part of everybodys job. The image of the global manager may be more a myth than reality, the conventional distinction between international and domestic managers is fading, given the much broader distribution of international responsibilities. Lessons from abroad. For expatriate managers, living in a foreign country produces constant and unexpected challenges to their ways of perceiving, acting, and valuing things, making it difficult to correctly process and act on information. Therefore, the most often cited reason for failed international assignments is the inability of expatriates and their families to adapt to the local culture. The process of adjusting to a foreign culture is said to follow a U-curve comprising three main phases: 1. Initial stage of elation and optimism (the honeymoon) 2. Irritability, frustration, and confusion (the morning after), this is the phase when most assignments are at risk of failure. However, there are reasons for welcoming its arrival: (1) it signals that the employee is becoming involved in the new culture, (2) it provides the motivation to try to understand and come to grips with the cultural differences. 3. Gradual adjustment to the new environment (happily ever after), mostly happens after acquiring greater knowledge of the local culture, more interaction and language. The intensity of these reactions often depend upon the motivation and prior expectations of the expatriates and their family, the amount of cultural distance, and the degree of uncertainty in job/daily living activities. Competencies for managing internationally. Managing differences abroad requires the following skills: - Interpersonal (relationship) skills; are most often the most important. It helps managers to integrate into the social fabric of the host culture. It satisfies the needs for friendship and intimacy, but also facilitates the transfer of knowledge, and improves coordination

and control. However, MNCs often send task-oriented people abroad whereas peopleoriented managers are way more effective. - Linguistic ability; this helps to establish contact. However, it is better to pick up bits of conversational currency (local expressions, information, and interest) rather than speaking the whole language. - Motivation to live abroad (cultural curiosity); expatriates should be selected based on a genuine interest in other cultures and new experiences. Wanderlust was rated as top motive for going abroad by Swedish managers. - Tolerance for uncertainty and ambiguity; action often has to be taken on the basis of insufficient, unreliable and/or conflicting information. Additionally, circumstances may change unexpectedly, the behaviour and reactions of local employees may be unpredictable. Therefore you should tolerate uncertainty and ambiguity. It often requires letting go of control and going with the flow of the host culture. - Patience and respect; this is necessary because different cultures have different rhythms and it takes time to learn the ropes. - Cultural empathy; this requires respecting behaviour, ideas, feelings, thoughts, and experience of others. - Strong sense of self (or ego strength); this allows interaction with another person or culture without fear of losing ones own identity. This also enables the manager to be self-critical and open to feedback. It also reinforces the ability to handle stress. - Sense of humour; humour is important on two levels: as a coping mechanism and for relationship building. It is seen as a way for managers to buffer the frustration, uncertainty, and confusion. Most of these skills are equally valid for those who deal with foreigners at home. Managing differences at home requires some additional skills: - Understand interdependencies; it requires a more complete understanding of the interdependencies between different parts of the organization worldwide. - Respond to different cultures simultaneously; international managers have to be able to deal with a mixed group of individuals all at the same time, whereas you being in a foreign country only confronts you with one other culture. - Recognize cultural differences at home; this enables one to benefit from value added that outsiders can contribute from their different experience, skills, and perspective. - Be willing to share power; the dispersal of key resources and markets means that head office is no longer all-powerful. Increases in economic power, wider access to business education, and the decentralization of organizations have put these relationships on a much more equal footing. - Demonstrate cognitive complexity; to be effective requires the ability to simultaneously recognize the need for differentiation while understanding the need for integration. This requires a matrix of the mind. The ability to think along multiple dimensions while seeing the ways that these dimensions are interrelated has been labelled cognitive complexity. - Adopt a cultural-general approach; rather than knowing one culture from the inside out, international managers need to be aware of the cues signalling culture differences. It is more important to know which dimensions of culture may be relevant, rather than knowing the central tendencies of each particular country. This approach contrasts with the cultural-specific approach. - Rapidly learn and unlearn; this means being constantly ready to take on new perspectives and try new approaches.

What is necessary for managing cultural differences, whether at home or abroad, is now often referred to as a global mindset, which can be described in terms of cognitive structures and processes; not only what one thinks but also how. Cognitive structures refer to the maps and scripts that managers use to navigate globally. A global mindset also refers to the ability to look for and learn from relevant differences while at the same time looking for commonality. Cognitive processes refer to the way information is gathered and interpreted. Having a global mindset requires broad scanning, peripheral vision, and keeping in mind that multiple interpretations are likely. Developing cultural competencies. Developing competencies to assess cultures depend on (1) individual background, and (2) work experience. Exposure to cultural differences is said to be better in order to understand different ways of thinking. However, cultural exposure is obviously more likely in some regions of the world than others. Europe has a lot of different cultures for instance. Figure 7.1 on page 204 provides a summary of the background and career factors which influence cross-cultural competence; - Personality development; depends on adaptability factors (early experience, bilingualism, multiple roots) and leadership factors (self confidence, responsibility, curiosity, imagination, communication skills, career goals). - Professional development; depends on training and education (analytical skills, professional skills, study in other cultures, languages), management development (early responsibility, variety of tasks, early international experience), and personal development (see above). - Organizational development; depends on organization structure (geocentric/regiocentric, use of third-country nationals, flat/lateral relationships, multicultural), and international human resource management (selection criteria, communication, mentoring, culture complexity factor, career path responsibility, reentry management).

Chapter 8: The Multicultural Team. As boundaries within and between companies, industries, and countries are breaking down due to the competitive pressures and globalization of business activities, teams are becoming more and more multicultural. These transnational teams create lateral networks, which can improve communication and information flow between subsidiaries and HQ and among subsidiaries. There may be wider strategic reasons for creating such teams: organizational integration, organizational learning, and managerial development. The major types of transnational teams are; 1. Business development/Product launch; where team members of multiple nationalities are responsible for developing or launching a product, which has multinational sales potential. 2. Regional headquarters; several nationalities, primarily from throughout a single region (e.g. Scandinavia), responsible for strategic coordination. 3. Functional; team members of multiple nationalities working in a particular functional area (finance, R&D etc.). 4. International joint venture; two or more nationalities are represented in nearly equal proportions. 5. Corporate headquarters; a corporate-level team composed of multiple nationalities. The cultural differences within these teams can contribute to new ways of looking at old problems, creating the opportunity for greater creativity and innovation. They can also help to minimize the risk of uniformity and pressures for conformity that can occur in groups where there are too many like-minded individuals. However, the cultural differences could also lead to interpersonal conflicts, communication problems, frustration, and dissatisfaction. For teams, it is important to making ends meet, meaning that they work towards the same objective. Cultural differences are expressed in different expectations about the purpose of the team. Some are related to task strategies how the task is structured, who does what and when, and when and how decisions are made. Others are related to process strategies team building, language, participations, ways of managing conflicts, and team evaluation. Table 8.2 on page 221 relates these things to cultural determinants. Task strategies. Issues involved in task strategies are: - Creating a sense of purpose; teams should have a shared sense of purpose/goal. - Setting agendas; cultures differ in expectations as to whether an agenda is set all (Germany), or whether the flow of the meeting should take its own course (France). - Assigning roles and responsibilities; in more individualistic cultures, team members split up the tasks so that everyone can go off and work on their own. In collectivist cultures, the work of the group is done together, interdependently. - Reaching decisions; voting rests on assumptions of egalitarianism/hierarchy (everyones vote counts equally versus different vote weights) and individualism.

Consensus may not necessarily be a good way of reaching decisions as it may be seen as a way of preserving social harmony rather than necessarily ensuring task integrity. Multicultural groups have to actively negotiate the task strategies in order to arrive at a common approach to working together. Process strategies. Issues involved in process strategies are: - Building a team; this depends on being task-oriented and having a mechanistic view (USA) versus being people-oriented. Team-building exercises are designed to establish trust. - Choosing how to communicate; communication reveals thoughts, feelings, enhancing relationships, problem-solving, and learning. Additionally it reveals how issues of identity, interdependence, power, social distance, conflict, and negotiation are managed. One of the first items to agree on is the working language, which can create winners or losers as language dominance is often synonymous with power and influence. It is also useful to summarize, paraphrase and keep a visual record. Aside from language fluency, patterns of language also differ (silence for instance, by one seen as shy (USA) where others find it wisdom (Japan)). - Eliciting participation; unless a conscious effort is made to integrate the diverse contributions, the very reason for the presence of multicultural teams is undermined and the experience only serves to reinforce the idea that diversity does not add value. Thus, some restraint of dominant members and encouragement of quieter members may well be needed. - Resolving conflict; is crucial for teams to function effectively. Figure 8.4 on page 237 shows a model by Gladwin and Walter. In individualistic countries, conflict is likely to be managed through avoidance and then confrontation or force. In collectivistic countries, conflict is more likely to be resolved through collaboration. Accommodation is likely in cultures that are relationship-oriented. - Evaluating performance; to ensure effectiveness, teams have to evaluate their progress continuously. Giving feedback might be a potential cultural minefield as not everyone is used to getting/giving feedback. In homogeneous cultures, preserving harmony is more important. In heterogeneous cultures, direct intervention is used. Multicultural teams have to find ways of describing and bringing differences to the surface in ways that are not personally threatening.

Chapter 9: The Global Organization. Relationships between HQ and subsidiaries have been classified as ethnocentric, polycentric, regiocentric, or geocentric by Heenan and Perlmutter. Where the relationship between HQ and subsidiaries is ethnocentric, all policies and procedures come from the top (HQ decides). Where the relationship is polycentric, how policies and procedures are implemented is determined locally (HQ decides what, locals decide how). In the case of regiocentric relationships, regional HQ serves as a buffer, negotiating between home country HQ and host country subsidiaries in a particular region. Where a geocentric relationship prevails, policies and procedures are developed with input from both HQ and subsidiaries, as well as across subsidiaries. Multinationals have to manage between the often conflicting demands to develop standardized products and policies (global integration) and to respond to local tastes and requirements (local responsiveness), as well as searching for ways to stimulate innovation and learning. Innovations, for example, can be developed by HQ and then diffused to local subsidiaries (global for local), developed by subsidiaries for the local market (local for local), or diffused to the wider organization (local for global). Strategies for managing cultural differences. In general, there are three strategies for managing cultural differences; 1. Ignore; sees culture as irrelevant. The HQ/subsidiary relationship is ethnocentric. The expected benefit of this strategy is standardization and global integration. Efficiency is seen as the performance criteria. Communication is top-down, from HQ to subsidiary. The major challenge is gaining acceptance. Major concerns are inflexibility and missed opportunities. 2. Minimize; sees culture as a problem/threat. HQ/subsidiary relationship is polycentric or regiocentric. Expected benefits are localization and responsiveness. A performance criterion is adaptability. Communication is done top-down, reporting is done bottom-up. The major challenge is achieving coherence. Major concerns are fragmentation, duplication of effort and loss of potential strategy. 3. Utilize; sees culture as an opportunity and a source of competitive advantage. HQ/subsidiary is geocentric. Expected benefits are innovation and learning. A performance criterion is synergy. Communication happens via all channels. The major challenge is leveraging differences. Major concerns are confusion and friction. Ignoring cultural differences: business is business. When companies ignore cultural differences, they are operating on the assumption that business is business, and that managers, engineers, or bankers are the same throughout the world. For these companies, policies and practices developed in the home country are considered to be readily transferable. The American company Disney is the best example of this in terms of artifacts and behaviours. Although people tend to see McDonalds as such a company as well, it is not entirely true (e.g. they serve wine and beer in Europe, halal in the Middle-East). Minimize cultural differences.

This is a strategy intended to minimize the impact culture has. Trying to minimize cultural differences means (1) finding ways of homogenizing them, creating sameness, or (2) isolating them, creating segregation, in order to reduce potential conflict. Within this strategy, three things can be done: 1. Creating a global corporate culture the melting pot; to reduce the impact of the different national cultures. This often meets resistance because the parent company culture is often like the culture in the home country. 2. Separate but equal cultural segregation; in this case, cultures are isolated from each other, thus avoiding clashes. This approach reflects a polycentric approach; each local company has the autonomy to make operating decisions, to do as it sees fit, provided targets are met. However, strategy formulation is centralized, while strategy implementation is a local decision. This type of encouraging pluralism is found to be costly. 3. Creating a buffer; in order to balance the need for global integration while remaining sensitive to local conditions, many MNCs have created regional headquarters (regiocentric approach). Regional HQ helps to improve coordination between national organizations and to seek potential synergies between them. The idea is to provide a buffer between national units and headoffice cultures. Utilizing differences: going global? MNCs have to manage the need for both global integration and local responsiveness. Companies try to improve integration between national companies by developing global business areas or product lines. Finding the proper balance between responsiveness to local needs and central control is an on-going dilemma for most multinational companies today. In Europe, MNCs tend to be more aware of and responsive to local needs, whereas American MNCs tend to treat the world as one. Although international competitive advantage may depend on national conditions, which stimulate innovation, it is increasingly evident that competitive advantage is also a matter of creating assets across borders, such as human capital or R&D, meaning that companies are having to search outside national boundaries to develop their capacity fully. Less global than we thought. It may be worth considering to what extend business is truly international. In a study on Fiats workforce, they found four types of managers: transnationals (who live abroad mostly on airplanes), multinationals (who travel extensively but live in the home country), open locals (who receive foreigners), and locals (who had little international contact). Being present in multiple markets is not all it takes to be called global. It includes a global mindset, which can be defined as the capacity to appreciate the beliefs, values, behaviours, and business practices of individuals and organizations from a variety of regions and cultures. It also depends on the configuration of the management board; can a board of only Americans ever become global? No. Creating culturally strategic alliances.

Perhaps the best model for managing diversity can be found in strategic alliances and joint ventures. By this, companies retain independence, avoiding antitrust regulations, and retain local identity, keeping political ties and the facility to raise capital. Although it offers a lot of benefits, the question remains as how to utilize cultural differences in order to provide competitive advantage. Gaining competitive advantage from cultural differences. A truly multicultural organization can be defined as one wherein diversity is valued and utilized rather than just contained. The advantages of cultural diversity are; - Marketing argument: increases the ability to respond to cultural preferences of local markets. - Resource acquisition: increases ability to recruit employees of different national backgrounds, and host country elites. - Cost argument: reduces cost incurred by turnover of non-home country managers. - Problem-solving argument: improves decision-making through wider range of perspectives and more thorough critical analysis. - Creativity argument: enhances through diversity of perspectives and less emphasis on conformity. - Systems flexibility argument: enhances organizational flexibility and responsiveness to multiple demands and changing environments. The representation among the top ranks of non-national managers sends the signal that capability not passport is what counts. Therefore it is said that multicultural diversity has to start at the top. Learning across cultures means learning to be open to self-awareness and to be willing to analyse ones own cultural baggage. It means being able to assess views of own and others culture, to evaluate the effectiveness of interaction, and to develop strategies for dealing with differences. Corporations are said to have to check the pulse continuously, to check on attitudes and perceptions regarding how the company is dealing with diversity, the representation of foreign nationals at various levels, as well as their career experiences. In addition, the corporate culture has to be checked for biases. Certain demands (like overtime) put family-oriented people in a disadvantage. Le dfi: the global challenge. The challenge, after all this, is to find ways to capitalize on differences, to utilize cultural differences in order to gain competitive advantage. But to do this, it is crucial that differences are acknowledged and accepted as legitimate. Many MNCs are in the process of adapting their strategies, structures, and systems accordingly. Ethnocentric thinking, our way is best, has to change. Multiparadigm thinking is necessary. It is important to create a cultural mosaic, where each culture preserves its uniqueness, instead of a cultural melting pot, where cultures are merged losing their distinctiveness. Some suggestions for managing cultural diversity are; - Build face-to-face relationships - Create international project groups

- Develop international management training and development - Build shared values, while encouraging local interpretation - Promote divergent values to provide seeds for flexibility

You might also like