Cross Cultural Management PDF

Cross Cultural Management Prepared By: Asst. Lecturer Rozhan Mahmood [email protected] Office: G27 DIMENSIONS OF CULTURE IN BUSINESS  Culture and International Business Why culture is important? Impacts the way strategic moves are presented. Influ...

Cross Cultural Management Prepared By: Asst. Lecturer Rozhan Mahmood [email protected] Office: G27 DIMENSIONS OF CULTURE IN BUSINESS  Culture and International Business Why culture is important? Impacts the way strategic moves are presented. Influences management, decision making, negotiations Culture makes international business difficult or easy  Levels of cultures in a business context According to Schein (1980): A culture starts developing in a contact where a group of people have a shared experience. In a business content, culture can develop at different levels. A company or organization can develop its own culture, provided that it has what Schein calls ‘sufficient shared history’ (collective experience)  Cultures can develop at different levels: National culture Organizational culture Corporate culture Professional culture Culture and management  NATIONAL CULTURE National differences refer to the cultural influences of a nation that result in its national characteristics. Although nation-states have regional and political differences, national culture can be viewed as the values held by a majority of the population within the nation. These values are largely unconscious and developed throughout one’s childhood.  Cont. Within national cultures, values are generally seen as stable over time. National values, because they reflect the traditions of the nation-state over time, will change slightly from generation to generation, but the overall values will remain the same. For example, a German who comes from a culture of punctuality and travels for business in Italy will notice a national cultural difference in how Italians view time (more leisurely and relaxed) as compared to their own national culture. CLUSTER OF CULTURE  The countries composing each cluster Anglo Latin Europe Nordic Europe Germanic Europe Australia France Canada Austria Israel England Germany (Former East) Italy Denmark Ireland Germany (Former West) Portugal Finland New Zealand Netherlands Spain Sweden South Africa Switzerland Switzerland (White sample) (German speaking) (French-speaking) United States Eastern Europe Latin America Sub-Saharan Africa Middle East Argentina Albania Bolivia Georgia Brazil Namibia Egypt Greece Colombia Nigeria Kuwait Hungary Costa Rica South Africa Morocco Kazakhstan Ecuador (Black sample) Qatar Poland El Salvador Zambia Turkey Russia Guatemala Zimbabwe Slovenia Mexico Venezuela Southern Asia Confucian Asia India China Indonesia Hong Kong Iran Japan Malaysia Singapore Philippines South Korea Thailand Taiwan  Regional Culture All national cultures consist of regional subcultures that influence the characteristics of one group from another in a nation state. In the United States, the word ‚pop‛ refers to a soft drink in the Midwest, but if you go to the East Coast, it is referred to as ‚soda.‛ In other regions of the United States, a soft drink is referred to as ‚Coke.‛  Organizational Culture Organizational culture speaks to the culture that is specific to an organization—the culture that makes it distinctive from competitors and non- competitors.  Organizational cultures are often referred to as ‚corporate cultures‛ and reflect the beliefs, values, and assumptions of an organization. For example, the culture of one school in a school district can be different than the culture of another school located in the same district simply because of what the people in one school culture adhere and react to.  Team Culture The values, beliefs, and norms of culture are present in team environments, dictating the team’s operations and efficiency. Cultural norms in teams guide members in their dress and appearance, their language, how they relate to one another, and how they get along.  Some teams are very serious, while others use humor in their work life. Departments, teams, or workgroups can, and will, act very differently from each other even though they are located in the same building and in the same organization. Although you might not think about personality or temperament as cultural elements, they can and do shape a team’s culture.  Individual Culture Individual cultural differences relate to your preferences for things through your personal experiences that include the influence of your family, your peers, school, media, co-workers, and so on. You may share a national culture, such as being an American, with another person and live in the same regional culture, the Midwest. You may even work with the person in the same organization and department, thus sharing an organizational and team culture, and even though you share similar interests, you will likely have differences in individual culture based on who you are and your social upbringing THE HOFSTEDE MODEL OF NATIONAL CULTURE  HOFSTED’ CULTURAL DIMENSIONS THEORY Hofstede’s Cultural Dimensions Theory, developed by Geert Hofstede, is a framework used to understand the differences in culture across countries and to discern the ways that business is done across different cultures. The framework is used to distinguish between different national cultures, the dimensions of culture, and assess their impact on a business setting. Hofstede’s Cultural Dimensions Theory was created in 1980 by Dutch management researcher, Geert Hofstede. The aim of the study was to determine the dimensions in which cultures vary. Hofstede’s Cultural Dimensions Theory Hofstede studied people who worked for IBM in more than 50 countries in 1967 ~ 1973. Initially, he identified four dimensions that could distinguish one culture from another. Later, he added fifth and sixth dimensions, in cooperation with Drs Michael H. Bond and Michael Minkov Prof. Geert Hofstede  Hofstede's Cultural Dimensions Power Distance Index (high versus low). Individualism Versus Collectivism. Masculinity Versus Femininity. Uncertainty Avoidance Index (high versus low). Long- Versus Short-Term Orientation. Indulgence Versus Restraint.  Power Distance Index (PDI) This refers to the degree of inequality that exists – and is accepted – between people with and without power. A high PDI score indicates that a society accepts an unequal, hierarchical distribution of power, and that people understand "their place" in the system. A low PDI score means that power is shared and is widely dispersed, and that society members do not accept situations where power is distributed unequally.  So far as international business is concerned, the dimensions of culture form an important feature. Knowledge of the manner in which different features of a business are viewed in different cultures, can help a manager in understanding and sailing successfully across the international business market.  Application: According to the model, in a high PDI country, such as Malaysia (100), team members will not initiate any action, and they like to be guided and directed to complete a task. If a manager doesn't take charge, they may think that the task isn't important.  Low power distance High power distance Inequalities among people should be Inequalities among people are both expected minimized and desired Interdependence between less and Less powerful people should be depended on more powerful people the more powerful Hierarchy in organizations means an Hierarchy in organizations reflects inequality of roles the existential inequality Decentralization is popular Centralization is popular Narrow salary range Wide salary range Subordinated expect to be consulted Subordinated expect to be told what to do The ideal boss is a resourceful The ideal boss is a benevolent autocrat or democrat good father Privileges and status are disapproved Privileges and status are both expected and popular  Low power distance High power distance Countries which people (supervisors and Countries in which people blindly obey the Sub ordinates) are apt to regard one another orders of their superior, employees equal in power. acknowledge the boss’s authority simply by respecting that individual’s formal position in Results : the hierarchy, and they seldom bypass the chain More harmony and cooperation. of command Decentralized structure Democratic leadership Results : Flatter organization structure Less Harmony and less cooperation Centralized order Examples : Austria, USA, UK, Denmark Autocratic Leadership Taller Organization structure Examples : Mexico, South Korea and India  Low power distance High power distance Flatter organizations. Centralized organizations. Supervisors and employees are More complex hierarchies. considered almost as equals. Large gaps in compensation, authority and respect. TIPS Delegate as much as possible. TIPS Ideally, involve all those in decision Acknowledge a leader's status. As an making who will be directly affected by outsider, you may try to circumvent his or her the decision. power, but don't push back explicitly. Be aware that you may need to go to the top for answers.  Example : A company from Austria (low power distance) is considering entering the Mexican (high power distance) market Communication tips for the Austrian manager: Give clear and explicit directions to those working with him Deadlines should be highlighted and stressed Do not expect subordinates to take initiative Be more authoritarian in his management style Show respect and deference to those higher up the ladder  Masculinity Versus Femininity (MAS) This refers to the distribution of roles between men and women. In masculine societies, the roles of men and women overlap less, and men are expected to behave assertively. Demonstrating your success, and being strong and fast, are seen as positive characteristics. In feminine societies, however, there is a great deal of overlap between male and female roles, and modesty is perceived as a virtue. Greater importance is placed on good relationships with your direct supervisors, or working with people who cooperate well with one another.  The gap between men's and women's values is largest in Japan and Austria, with MAS scores of 95 and 79 respectively. In both countries, men score highly for exhibiting "tough," masculine values and behaviors, but, in fact, women also score relatively highly for having masculine values, though on average lower than men.  Application: As we've highlighted, Japan has the highest MAS score of 95, whereas Sweden has the lowest measured value of five. Therefore, if you open an office in Japan, you should recognize you are operating in a hierarchical, deferential and traditionally patriarchal society. Long hours are the norm, and this, in turn, can make it harder for female team members to gain advancement, due to family commitments.  At the same time, Japan is a culture where all children (male and female) learn the value of competition and winning as part of a team from a young age. Therefore, female team members are just as likely to display these notionally masculine traits as their male colleagues. By comparison, Sweden is a very feminine society, according to Hofstede's model. Here, people focus on managing through discussion, consensus, compromise, and negotiation.  Low masculinity High masculinity Dominant values: caring for others Dominant values: material success and preservation and progress People and warm relationships are Money and things are important important Sympathy for the strong Sympathy for the weak In family, fathers deal with facts and mothers with feelings In family, both fathers and mothers Stress on equity, competition among colleagues and deal with facts and feelings performance Stress on equality, solidarity , and Managers are expected to be decisive and assertive quality of work life Resolution of conflicts by fighting them out Managers use intuition and strive for consensus Resolution of conflicts by compromise and negotiation  Low masculinity High masculinity Importance is placed on cooperation Career is considered as most and friendly atmosphere. important Employee security gets precedence. Work needs take precedence Group decision – making is Individual decision-making is emphasized emphasized Achievement is defined in terms of Achievement is given importance and human contacts and living is defined in terms of money and environment recognition Examples : Denmark, Norway, Sweden etc. Examples : India, Japan, USA, UK etc.  Low masculinity High masculinity Relationship oriented/consensual. Strong egos – feelings of pride and importance are More focus on quality of life. attributed to status. Money and achievement are important. TIPS Success is more likely to be achieved through TIPS negotiation, collaboration and input from all Be aware of the possibility of differentiated gender levels. roles. Avoid an "old boys' club" mentality, although this A long-hours culture may be the norm, so recognize may still exist. its opportunities and risks. Workplace flexibility and work-life balance may be People are motivated by precise targets, and by being important, both in terms of job design, able to show that they achieved them either as a organizational environment and culture, and the group or as individuals. way that performance management can be best realized.  Example : A company from Denmark ( low masculinity) is considering investing in Mexico (high masculinity) Communication tips for the Danish manager : Be aware that people will discuss business anytime, even at social gatherings Avoid asking personal questions in business situations Take into account that people are not interested in developing closer friendships Communicate directly, unemotionally and concisely In order to assess others use professional identity, not family or contacts  Individualism Versus Collectivism (IDV) This refers to the strength of the ties that people have to others within their community. A high IDV score indicates weak interpersonal connection among those who are not part of a core "family." Here, people take less responsibility for others' actions and outcomes.  Difference between individualist and collective cultures. INDIVIDUALIST CULTURE COLLECTIVE CULTURE 1- Transaction oriented (focus on results). 1- Relationship oriented (focus on process) 2- Short-term gains 2- Long-term growth 3- Emphasis on content (facts, numbers, ratios, statistics) 3- Emphasis on context (experience, intuition, the relationship) 4- Independent 4- Interdependent 5- Competitive, decision-driven 5- Collaborative 6- Direct, explicit communication 6- Indirect, circuitous communication 7- Personal accountability 7- Protection of face 8- Private offices 8- Open office plan 9- Linear time, impatient 9- Flexible time, patient  INDIVIDUALIST CULTURE COLLECTIVE CULTURE High value placed on people's time and their need for Emphasis on building skills and becoming master of privacy and freedom. something. An enjoyment of challenges, and an expectation of People work for intrinsic rewards. individual rewards for hard work. Maintaining harmony among group members overrides Respect for privacy. other moral issues. TIPS TIPS Acknowledge individual accomplishments. Wisdom is important. Don’t mix work life with social life too much. Suppress feelings and emotions that may endanger Encourage debate and expression of people's own harmony. ideas. Avoid giving negative feedback in public. Saying "No" can cause loss of face, unless it's intended to be polite. For example, declining an invitation several times is expected.  In a collectivist society, however, people are supposed to be loyal to the group to which they belong, and, in exchange, the group will defend their interests. The group itself is normally larger, and people take responsibility for one another's well-being. Application: Central American countries Panama and Guatemala have very low IDV scores (11 and six, respectively). In these countries, as an example, a marketing campaign that emphasizes benefits to the community would likely be understood and well received, as long as the people addressed feel part of the same group.  The outcome of individualism and collectivism focuses on the degree a society reinforces individual or collective achievement and interpersonal relationships. In high individual ranking, individuality and individual rights are paramount within the society. In low individualism ranking, societies are more collectivist with close ties between individuals. It reinforces extended families and collectives, where everyone takes responsibility for fellow members of their group.  The United States is one of seven countries where high individual ranking indicates a society with a more individualistic attitude and relatively loose bonds with others. In these countries, the populace is more self-reliant and family-oriented. The others are Australia, United Kingdom, The Netherlands, Canada, Italy and New Zealand.  On the collectivist side are societies where people are integrated from birth into strong cohesive in-groups. The extended family – grandparents, uncles and aunts – is protected in exchange for unquestioned loyalty. Countries with high collectivistic values include Pakistan, Indonesia, Colombia, Panama, Venezuela, Ecuador and Guatemala. Countries with even stronger collectivistic cultures are China, Taiwan, Korea, Japan, Mexico, the Philippines, nations in East and West Africa as well as Arab nations. In Individualism and Collectivism, the determining question is, ‚Are you motivated to do things for yourself or for the group?‛  Low individualism High individualism Individuals learn to think in terms Individuals learn to think in terms of “we” of “I” High-context communication Low-context communication Diplomas provide entry to higher status groups Diplomas increase economic Relationship employer- employee worth and/or self- respect is perceived in moral terms, like a Relationship employer-employee family is a contract based on mutual Hiring and promotion decisions advantage take employees’ ingroup into Hiring and promotion are supposed to be based on skills account and rules only Management is management of Management is management of groups individuals Relationship prevails over task Task prevails over relationship  Example : A company from UK (high individualism) is considering investing in Mexico (low individualism) Communication tips for the UK manager: Note that individuals have a strong sense of responsibility for their family Remember that praise should be directed to a team rather than individuals Understand that promotions depend upon seniority and experience Be aware that the decision making process will be rather slow, as many members across the hierarchy need to be consulted  Uncertainty Avoidance Index (UAI) Uncertainty avoidance – The extent to which members of a society feel threaten by uncertain or unknown situations. This dimension describes how well people can cope with anxiety. In societies that score highly for Uncertainty Avoidance, people attempt to make life as predictable and controllable as possible. If they find that they can't control their own lives, they may be tempted to stop trying. These people may refer to "mañana," or put their fate "in the hands of God.‚  People in low UAI-scoring countries are more relaxed, open or inclusive. Bear in mind that avoiding uncertainty is not necessarily the same as avoiding risk. Hofstede argues that you may find people in high-scoring countries who are prepared to engage in risky behavior, precisely because it reduces ambiguities, or in order to avoid failure.  Weak uncertainty avoidance Strong uncertainty avoidance (Low UAI) (High UAI) Uncertainty: normal feature of life Uncertainty : continuous threat that must be fought and each day is accepted as it comes High stress – subjective feeling of Low stress – subjective feeling of anxiety well-being Aggression and emotions may be shown at proper Aggression and emotions must not be shown times Comfortable in ambiguous situations Fear of ambiguous situations and of unfamiliar risk and with unfamiliar risk Emotional need for rules, even if they never work There should not be more rules than Precision and punctuality come naturally necessary Resistance to innovation Precision and punctuality have to be Motivation by security learned Tolerance to innovation Motivation by achievement  Weak uncertainty avoidance Strong uncertainty avoidance (Low UAI) (High UAI) Conservative, rigid and structured, unless the danger of failure Openness to change or innovation, and generally inclusive. requires a more flexible attitude More inclined to open-ended learning or decision making. Many societal conventions People are expressive, and are allowed to show anger or emotions, Less sense of urgency. if necessary A high energy society, if people feel that they are in control of their TIPS life instead of feeling overwhelmed by life's vagaries. Ensure that people remain focused, but don't create too much structure. TIPS Titles are less important, so avoid "showing off" your Be clear and concise about expectations and goals, and set clearly knowledge or experience. defined parameters. But encourage creative thinking and dialogue Respect is given to those who can cope under all where you can. Recognize that there may be unspoken "rules" or cultural circumstances. expectations you need to learn. Recognize that emotion, anger and vigorous hand gestures may simply be part of the conversation.  For Example : A company from France (high uncertainty avoidance) is considering investing in Denmark (low uncertainty avoidance) Communication tips for the French manager: Try to be more flexible or open in his approach to new ideas than he may be used to Be prepared to push through agreed plans quickly as they would be expected to be realized as soon as possible Allow employees the autonomy and space to execute their tasks on their own; only guidelines and resources will be expected of him  Application: In Hofstede's model, Greece tops the UAI scale with 100, while Singapore scores the lowest with eight. Therefore, during a meeting in Greece, you might be keen to generate discussion, because you recognize that there's a cultural tendency for team members to make the safest, most conservative decisions, despite any emotional outbursts. Your aim is to encourage them to become more open to different ideas and approaches, but it may be helpful to provide a relatively limited, structured set of options or solutions.  Long- Versus Short-Term Orientation This dimension was originally described as "Pragmatic Versus Normative (PRA)." It refers to the time horizon people in a society display. Countries with a long-term orientation tend to be pragmatic, modest, and more thrifty. Long- term orientation – A basic orientation towards time that values patience  Different cultures have different expectations or assign different meanings to what time is. Some cultures perceive time to be scarce, while others believe time to be infinite. Some view time management as a skill while others find it unimportant. Every society maintains link with its own past while dealing with the challenges of the present and preparing for future. Long-term orientated countries focus on the future.  In short-term oriented countries, people tend to place more emphasis on principles, consistency and truth, and are typically religious and nationalistic. Application: The U.S. has a short-term orientation. This is reflected in the importance of short-term gains and quick results (profit and loss statements are quarterly, for example). It is also reflected in the country's strong sense of nationalism and social standards.  Every society has to maintain some links with its own past while dealing with the challenges of the present and the future. Societies prioritize these two existential goals differently. Countries that score low on this dimension, for example, prefer to maintain time-honoured traditions and norms while viewing societal change with suspicion. They are past and present oriented and value traditions and social obligations.  Countries with cultures that scores high on this dimension on the other hand take a more pragmatic approach: they are future oriented and encourage thrift and efforts in modern education as a way to prepare for the future. Asian countries such as China and Japan are known for their long term orientation. Morocco is a short term oriented country.  Short- term orientation Long-term orientation Need for achievement, self determination Need for accountability, self discipline Loyalty towards others can vary according to the Adaptation of traditions to a modern context needs of business Develop and maintain lifelong personal networks Quick results expected Large social and economic differences should not People should be rewarded according to their be tolerated abilities Respect for social and status obligations within Respect for social and status obligations regardless limits of cost Stress is on future market position Stress is on short term profits Owner-managers and workers share the same Managers and employees are in different camps aspirations  Short- term orientation Long-term orientation People often want to know “Why?” People always wonder how to know what is true. Strong convictions Questions like “What?” and “How” are asked more As people tend to oversell themselves, others will often than “Why?” assess their assertions critically Thrift and education are seen as positive values Values and rights are emphasized Modesty Virtues and obligations are emphasized TIPS Sell yourself to be taken seriously TIPS People are less willing to compromise as this Behave in a modest way would be seen as weakness Avoid talking too much about yourself Flattery empowers People are more willing to compromise, yet this may not always be clear to outsiders.  Indulgence Versus Restraint (IVR) This revolves around the degree to which societies can exercise control over their impulses and desires. Countries with a high IVR score allow or encourage relatively free gratification of people's own drives and emotions, such as enjoying life and having fun. In a society with a low IVR score, there is more emphasis on suppressing gratification and more regulation of people's conduct and behavior, and there are stricter social norms.  The Indulgence dimension is a relatively new dimension to the model. This dimension is defined as the extent to which people try to control their desires and impulses, based on the way they were raised. Relatively weak control is called Indulgence and relatively strong control is called Restraint. Cultures can, therefore, be described as Indulgent or Restrained.  Application: According to the model, Eastern European countries, including Russia, have a low IVR score. Hofstede argues that these countries are characterized by a restrained culture, where there is a tendency towards pessimism. People put little emphasis on leisure time and, as the title suggests, people try to restrain themselves to a high degree.  Indulgence Restraints Optimistic Pessimistic Importance of freedom of speech More controlled and rigid behavior Focus on personal happiness TIPS TIPS Avoid making jokes when engaged in Don’t take life seriously formal sessions. Instead, be professional Encourage debate and dialogue in Only express negativity about the world meeting or decision making during informal meetings Prioritize feedback, coaching and mentoring Emphasize flexible working and work-life balance  CRITICISM OF THE HOFSTEDE’S MODEL The model is not representative because it is only drawn from one company (IBM) involving only particular middle class workers. This model ignore the sub cultures of different ethnic groups in a country. The dimensions studied are too simple and few to differentiate the diversity of cultures in a country.  The relevancy of bilateral model used in this model is debatable because as a global organization, there are a number of cultures that are interacting and probably influencing each other. Labelling issues. For example, based on masculine and feminine dimension does not recommend to the domination of sexual category and this distinct labelling may lead to confusion. These indicators should change the dimension to career success and quality of life rather than using the sexist indicators.  Methodology was unrealistic and not reliable. Hofstede used one survey method to measure dozens of different national culture. The data collected from the questionnaires is too limited in terms of items asked and not reliable to determine and measure cult The problem of survey questions is the limitation of language translation which has different meaning in each culture. Cultural beliefs changed in languages which influence managerial practice directly.  Bias and reliability of questionnaire. Sometimes people cannot give real responses because the truth is not known. For instant, if people do not know their life and work value, it is impossible to get real answers about their values through analyzing information from questionnaires. It does not reflect the mentality.  Time changing. Today’s world is an era of globalization, the technology is modern. There has been a drastic change in the rate of development compared with the rate at Hofstede’s time. Although he assumes that cultural values are stable over time but some researchers also claim that the study is too old to have any modern value particularly in today’s rapidly changing environment.  Conclusion Different scholars have concrete point of view of flaws of Hostede’s model particularly in terms of reliability, validity, five simple dimensions to differentiate cultures, labelling issues and bilateral dimensions, out of date and his methodology of his research. However, culture is too complex and it is impossible to draw out a very comprehensive model to differentiate the country’s cultural difference.  Hofstede’s work helped many business people to develop their business successfully in a new country because of his simple and comparative model during 1980s where there were many businesses entering international market. Globalisation has let to mixing up cultures and hence, no culture entails its all of its original characteristics. It suggests time to time amendments need to be made to his model to ensure its suitability with changing time.