Emad Abdalla Atwa Ibrahim

05 July 2016

The Cross-Cultural Management and its relevance

in supporting the Global Business Operations

Table of Contents Introduction 1

The Cross-Cultural Diversity in Global Business

The Advantages of Cross-Cultural Diversity in the Global Business

The Cross-Cultural Issues, Hinders and Challenges in Global Business

Action Plan for Managing the Cross-Cultural Diversity in Global Business

Conclusion

References

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Cross-Cultural Diversity Management in Global Business 3

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Introduction 1

The continuous and rapid changes in technology and the liberalization of the world trade enabled the organisation to expand its business operations globally, crossing the domestic boundaries. In the time, the organisation deemed its global businesses as lucrative and attractive, the management of the global business operations became so difficult and more complicated due to the influence of some factors such as cross-cultural diversity, communication, legal framework and political circumstances, which require the HRM to work on all organisational levels within both domestic and global business. The cross-cultural diversity within the organisation’s workforce is one of the important factors that may have negative or positive impact on the global business operations according to the environmental circumstances and the strategy adopted by the organisation. The cross-cultural management became a significant important for multinational organisations and comes in the constant increase of the overseas business operations and the global ventures in different countries while there are different hinders and challenges arise from the cultural diversity that impact the organisation’ businesses (Hofstede, 1980).

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This HRM Report demonstrates the importance of understanding the cross-culture in global business, the issues, hinders and challenges of the cross-cultural management in supporting the global business operations and in the meantime provides the relevant strategic option for managing the cross-cultural aspect effectively in order to ensure the success of the organisation’s business is the globalization era. The objectives of this report is to explore the following:

• The concept of cross-cultural diversity. • The Cross-Cultural Diversity Management in Global Business. • The advantages of cross-cultural diversity in the global business. • The cross-cultural issues, hinders and challenges in global business. • Overcome the hinders and challenges to cross-cultural adaptation. • The relevant strategic option for managing the cross-cultural diversity.

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The Cross-Cultural Diversity in Global Business 2

The global business witnesses a significant increase in the importance of cross-culture that became a common field of business research by the scholars, researchers and practitioners who paid extensive attention to cross-culture over the past decades and widely researched the topic in global business literature where several patterns and classifications have been emerged to provide a frame of reference (Reis, et al. 2011).

The culture can be defined as “unique set of expectations and assumptions about how to do business” and the Cultural Diversity deemed to be difficult for prediction (Gestland, 2013). The culture can be explained as the knowledge learned and acquired by the people that enables them in interpretation of behaviors and interacts with each other in the society (Luthans, 2005).

The global business management cannot be isolated from the models of cultural behaviors where the organisational culture is represented in forms of shared values, norms, rituals and symbols that shape the daily-life of members of different groups (Cullen and Parvoteeah, 2008).

Understanding culture diversity in global business is very important for organisation as culture within the society characterizes the people in different aspects such as how the people within the society live, how they behave and interact with each other and with other groups, culture also identifies the norms, values and beliefs of the society and how the people perceive their life (Cavusgil et al., 2007).

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The organizational culture has a number of important characteristics such as norms, dominant values, rules, observered behaviors and organisational climate (Luthans, 2005) and that the influence of culture on the management is reflected by the basic values, forms, beliefs and behaviors of the employees. In the meantime, the Culture has impact on the technology transfer, managerial attitudes, managerial ideology and the way, employees think and behave (Hodgetts and Luthans, 1994).

The diversity can be described as “any mixture of items characterised by differences and similarities” (Thomas, 1996) and it involves “the collective, all encompassing mix of human differences and similarities along any given dimension” (Mazur, 2010). The diversity also refers to the “differences between individuals on any attribute that may lead to the perception that another person is different from the self” (Knippenberg, et al., 2004).

As it is imperative for mangers to understand the cultural diversity, there are two dimensions that enable to view the cultural diversity : The primary dimensions are more visible and distinguish a group of people from other groups and these dimensions primary impact on personal identities such as gender, sex, age, race and physical characteristics. The primary dimensions of diversity have the most influence on workgroups and shape their basic self-image (Loden, and Rosener, 1991).

The secondary dimensions are less visible but have more impact on identities such as language, religion, geographical location, social class, education level, experience, position and work style. The secondary dimensions of diversity have influence on self-definition and self-esteem (Loden, and Rosener, 1991).

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The diversity of managers and employees can be demonstrated based on four main-dimensions that called “Dimensional approach to cross-cultural comparisons” (Hofstede, 1980):

• Power Distance The dimension “Power Distance” denotes that employees with lesser power effect inside their respective work places have to admit the inequality of power distribution.

Thus in certain regions with high levels of power distances (e.g. France, Argentina & Russia); some highly ranking employees enjoy such powers the aren’t likely to be challenged by their low power peers. Likewise, in other regions with low levels of power distance (e.g. Netherland; USA and Australia), the individuals are respected and appreciated for what their input is and what they offer (Adler, 2002).

• Uncertainty Avoidance This refers to employee’s effort in keeping away from future ambiguities, through upholding established formal practices, rituals and work–related norms. So in areas where the drive for avoiding future ambiguity tends to rise considerably (as in e.g. China, Sweden & Germany), it is well noticeable the employees strive at avoiding confrontations with unpredictable future events that could possibly compromise their respective workplaces operations’ stability.

This phenomenon is tightly attached to job stability, tight formal rules and firm standard of the decision-making processes (Adler, 2002).

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• Individualism versus collectivism The Individualism versus collectivism dimension refers to the degree of which the employees are taking care of themselves or keeping integrated as part of their corporate groups. The distinction between these two cultures normally reflects within the organisational culture (i.e. individualism & collectivity). So, recognizing individuals as being interdependent with certain roles and obligations towards other members, constitutes certain attributes of the culture of collectivism (Adler, 2002).

For example, comparing the cross-cultural for Individualism and Collectivism among India, Brazil, China and Russian, reveals that in India individualistic behaviors spikes higher than Chinese, Brazilian and Russian cultures, while Chinese culture denotes higher collectivism than Brazilian , Indian and Russian’ Cultures (Tu, Lin, and Chang, 2011). The high individualistic cultures result in more time consumed on direct communication while the high collectivism cultures result in more time consumed on indirect activities not related to communication (Gulbro, and Herbig, 1999).

• Masculinity versus Femininity This cultural dimension indicates the distribution of emotional roles between the societies in terms of genders as it reflects on whether the dominant values that are associated with gaining of money and valuable things as contrasted with the values associated with caring of others, personal relations and quality of life. The Masculinity-Femininity opposes “tough” masculine to “tender” feminine societies.

The “male achievement reinforces masculine assertiveness and competition while female care reinforces feminine nurturance, a concern for relationships and for living environment” (Adler, 2002).

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Cross-Cultural Diversity Management in Global Business 3

The cross-cultural diversity within the organisation’s workforce has both negative and positive influences on the global business operations according to the strategy adopted by the organisation. The cross-cultural diversity influences the employees behaviors, business process, communication and decision-making, therefore, it is imperative to select the appropriate strategy for managing the cross-cultural diversity. The traditional strategies for managing cultural diversity proved to be inappropriate to resolve the cross-cultural issues and overcome the challenges that hinder global business operations (Cullen and Parvoteeah, 2008). There are different strategies for managing the organisation’s cultural diversity (Adler, 1997) and the organisation can adopt the relevant strategy that supports its global business operations: • Ignorant of Cultural Diversity “our way is the only way” This strategy may be suitable for a parochial type of organizations where managers and employees alike believe that “our way is the only way” for managing and organising.

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With adoption of ignore cultural diversity strategy, the managers omit the cultural diversity as it is irrelevant and that they will not be able to identify the cultural diversity and its related negative influences on the organization (Adler, 1997). The Ignore Culture Diversity Strategy is irrelevant in global business as it precludes the role of cross-cultural management in global business operations and in the meantime, it precludes the negative and positive impact of culture diversity on the business (Adler, 1997). • Minimizing Cultural Diversity “our way is the best way” This strategy may be suitable for only an ethnocentric type of organizations where managers deem that “our way is the best way” for managing and organising while they consider the others’ ways as inferior ways for managing and organising.

With adoption of the minimizing cultural diversity strategy, the managers identify the cultural diversity but they do not deem it as a source of problems and that this strategy prevents the organisation from gaining the benefits and advantages of cultural diversity. When managers adopt this strategy, they intend to reduce the problems at workplace via reducing the diversity either by selection of culturally homogenous employees or by socializing the employees into patterned cultural behaviors at workplace (Adler, 1997).

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• Managing Cultural Diversity “our way and their way” This strategy is the relevant strategic option as it is suitable for synergistic organization where managers believe that “our way and their way of behaving and managing differ, but neither is superior to the other”. This combined approach is the best approach for managing and organising the cross-cultural diversity in the global business operations..

With the adoption of this strategic option “our way and their way”, the managers and employees recognize that the cultural diversity may lead to both negative and positive impact on the organisation. The strategy “our way and their way” is recommended as the optimal approach that enables to manage the cultural diversity to minimize the potential issues and in the meantime maximize the advantages (Adler, 1997).

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The Advantages of Cross-Cultural Diversity in Global Business 4

Nowadays, the globalization of workforce is deemed as a positive trend that benefits the organisation (Johnston, 1991) and the importance of Cross-Cultural Management increased significantly in global business operations as it focusses on the behaviors of employees of diverse culture and provides interpretation on how they work together within the organisation and the client population (Adler, 2008).

The practitioners demonstrated the value of cultural diversity since the diversity at workplace enhances the workgroup effectiveness, the highly managed diverse groups lead to enhance the performance (Cox et al., 1991), and that the effective cross-cultural management in global business became an important source of a competitive advantage and paramount in management responsibilities that include:

• Product development. • Service enhancement. • Interaction and communication with international businesses. • Assessment and selection of overseas distributors. • Interaction with potential overseas clients. • Screening and selecting foreign distributors and other partners. • Preparation of advertisement campaign. • Contracts’ negotiation for international business.

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According to Neil, the diversity among the organisation’s workforce includes age, gender, personnel traits, origin, sexual orientation and culture where the cultural diversity provides the organisation with several advantages and benefits such as: • Global Advantages The development in the world trade provides great opportunities for the organisation to grow and expand its business operations and that the organisation may face hinders and challenges to its business expansion due to lack of employees of different cultures who are capable of cultural understanding and can overcome the language barriers in the new markets. Therefore, the organisation must ensure the cross-cultural diversity of its workforce to be able to expand its business operations globally (Neil, n.d.). • Development of Workforce Skills Cross-Cultural diversity at workplace can be an advantage for development of the organisation’s workforce where the employees can develop their skills in an effective and efficient manner when the work environment is rich with a wide array of diverse knowledge, background and experiences.

Thus, the organisation should foster the supportive surrounding environment at workplace where the workforce become ambitious to learn and obtain these benefits (Neil, n.d.).

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• Morale Support and Motivation Organisation’ cultural diversity provides the staff with the needed moral support to motivate them to increase the work performance and productivity. The effective cross-cultural management considers the workforce training programs on cultural adaptation and awareness while all different employees are regarded as important which consequently encourage respect of the people and improve the individual morale at workplace (Neil, n.d.). • Community Relations The employees from diverse cultures can interact as individual and as groups, which enable them to learn, grow together, share experiences and build strong relations. in the meantime, the Communities prefer that the organization employs staff who represent the community as a whole. The community relations describes the organisation’s interaction with diverse communities and it is one of the advantages of cross-cultural diversity that support the global business operations. When the organisation expands its business geographically, it becomes multicultural organisation and the communities become more different in functional and psychological aspects which results in creation of community relations which support the business success (Neil, n.d.).

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• Global Business Development The global business environment became more complicated, which needs the organisation to have qualified workforce with intercultural capabilities to engage in the cross-cultural exchange and communicate effectively to be able to develop the business in the global market ventures (Okoro, 2013). The global business operations are reliant on effectiveness of multinational management and skilled employees of different cultures that enables the organisation to retain efficient cross-cultural negotiators, creation of roots and global business development and establishing good well with the partners and suppliers in the international markets (Neil, n.d.). • Creative Ideas and Broader Perspectives Cross-Cultural diversity enables to generate creative ideas and broaden perspectives at workplace where people can share different ideas and perspectives based on their knowledge, background and previous experiences that will contribute to the improvement of decision-making and problem-solving (Neil, n.d.). The workforce diversity enables the organisation to explore and strive gaining different views that support the process of decision-making (Luthans, 2005).

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The Cross-Cultural Issues, Hinders and Challenges in Global Business 5

It became significant important for global business management to adopt the strategy “our way and their way” as the relevant strategic option to manage the Cross-cultural differences. The cross-cultural diversity may complicate the business expansion and the lack of effective management will lead to critical cross-cultural issues in global business operations such as:

• Workgroup Performance The cross-culture diversity affects the cooperation between the workgroup members and their performance to achieve the organisational objectives, which critically impacts on the workgroup processes, achievements and organisation’ success (Knippenberg and Schippers, 2007), as there is a relation between the diversity within the workgroup and the workgroup’s performance that may lead to inconsistent consequences and outcomes (Knippenberg et al., 2004).

• Lifetime of employee engagement The cross-cultural diversity affects the lifetime of employee engagement, where managers of western countries struggle employees’ motivation at workplace with those staff who always expect having the same work regardless of quality. Some employees of Asian cultures tend to tie with the organisation for a long-term as they feel stability at their workplace and enjoy their paternalistic relation with their organisation, which creates complicated issues when such employees are required to work globally outside the domestic business (Cavusgil et al., 2007).

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• Performance Appraisal The cross-cultural diversity may create issues and complicate the work globally with respect to the applicable performance appraisal system. In some Asian countries such as China, the employee’s age is the key factor used as a basis for promotion at work, which constitute an obstacle at work if these employees are required to work in western country where the promotion is based on performance appraisal (Cavusgil et al., 2007). • Organizational structure The diversity in the global business includes system diversity, which is characterized by organizational structure and management system (Michele et al., 2004) and the organisation structure has an impact on the organisation’s global business in terms of delegation of authority to country managers, span of control, formalization and chain of command. The organisation structure in global business operations has an effect on the way the suppliers respond to the organisation’s demand in terms of time of delivery and performance (Cavusgil et al., 2007).

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• Work-related attitude towards uncertainly The organisation should consider the Uncertainty avoidance as one of the important cultural dimension since it identifies to what extent the workforce feel threatened by uncertainly and that the organisation is required to provide the employees with job stability, clear regulations, reject the deviant perspectives and attain the talents (Adler, 1997). Employees with high uncertainty avoidance cultures tend to be high stress, hard-working, avoiding uncertainly situations, stay longer in their jobs and follow the organisational rules and regulations. On the other side, the employees with low uncertainty avoidance tend to be less pressurized and did not adhere always to the organisational rules and regulations (Hofstede, 1980). The tolerance of uncertainly differs from one culture to another as part of managers give their staff clear commands with complete information of the required tasks whereas others give incomplete and ambiguous commands which result in difficulties for the employees to adapt to some cultures (Cavusgil et al., 2007).

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The Hinders and Challenges to Cross-Cultural Adaptation

As the organisation become multicultural, the biggest challenge to the organisation is to build effective workforce blending from different cultures which require to work on all levels within the organisation to ensure successful cross-cultural adaptation. There are several hinders and challenges that affect the employee’s capability to adapt with the new culture and function efficiently such as:

• Parochialism When the global businesses are operating in environment with social system that is diverse from the domestic organisation, the new social system impacts on the individuals’ behaviors and they may become unable to recognize the cultural diversity between their own culture and the other new culture or they may deem both cultures are similar (Keith, and Newstorm, 1997).

• Ethnocentrism (self-reference criterion) Ethnocentrism or self-reference criterion is viewed as a lack of acceptance for the cross-cultural difference (Berry & Kalin, 1995) and it is one of the potential obstacle to the cross-cultural adaptation, which happens when the employees tend to believe that the conditions of their home country are better than any elsewhere.

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Ethnocentrism leads to negative assumptions without conscious awareness about others’ cultural differences and interferes with understanding the behaviorism of employees from other cultures and hinders the cross-culture adaptation (Keith, and Newstorm, 1997).

• Individualism One of the barrier that hinders that cross-cultural adaptation is “Individualism” where some employees are individualistic by nature and that they concentrate on their own needs and interests as the top priorities, which consequently affect their behavior (Hofstede, 1980). For examples, if the organisation’s business operations situated in the countries with cultures that value the individualism, then, the operations will rely on more independent managers and employees who will take the full responsibilities towards their tasks with very low level of authority delegation (Chaney, and Martin, 2011).

• Cultural shock The new employees to the cross-cultural organisation tend to suffer the cultural shock, where the employees are encountered by cultural diversity, feel unsecured and disorientation (Robbins, 1996). The cultural shock has a negative impact of cultural adaptation as the employees may lose self-confidence or isolate themselves and they may decide to leave the work in order to return back to their home country.

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There are some reasons for the cultural shock that hinders the cross-cultural adaptation that include, different language, different philosophies adopted by the management, employees’ attitude at workplace and the currency system (Keith, and Newstorm, 1997).

• Cultural Distance Cultural distance is one of the barriers to cross-cultural adaptation and it refers to the amount of diversity between two social systems and it has an impact on the cross-cultural adaptation.

The cultural distance becomes a hinder to cross-cultural adaptation since most of the employees exposed to cultural diversity unconsciously assume that the others of different cultures experience the world as they act without considering that they react to different values, norms, behaviors and systems.

As the organisation’s business is expanding globally, there will be a cultural diversity between the organisation’s workforce, where some employees naturally tend to be ethnocentric and that when these employee moves globally or travels to another country on business and that it is important for the top management to understand the cultural distance between these two countries in order to enable prediction of the level of cross-cultural adaptation (Keith, and Newstorm, 1997).

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Action Plan for Managing the Cross-Cultural Diversity in Global Business 6 As the managers will face hinders and challenges from the cross-cultural diversity in global business (Yu, 2007), the organisation should overcome these barriers and ensure the cross-cultural adaptation (Keith, and Newstorm, 1997).

The managers should develop action plan to manage the cross-cultural diversity and handle the associated challenges and the action plan shall include the following priorities:

• Recruitment and Selection of employees The managers should be careful in selecting the new employees and make sure that they are low in ethnocentrism (self-reference criterion).

The managers should ensure compatibility for the official overseas assignments by sending employees to the other countries that are similar to their home country. • Acquire a base of Knowledge about other cultures It is essential for the managers to acquire factual knowledge about the cultures of the other countries related to the organisation’s global business operations, which they interact such as the values, norms, behaviors and the population’s lifestyles as this knowledge will ease decision-making, understanding the partner’s mindset and objectives.

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• Orientation and assistance The management should provide orientation and assistance to the employees who travel on global business and official overseas assignments in the new countries in order to help to ease transition and cultural adaptation with the new environment.

• Motivation via incentives and guarantees Using the incentives and guarantees will encourage the employees to work globally and accept the new challenges and responsibilities while they fell satisfied at the new workplace.

• Development of Cross-Cultural Skills within the Organisation The Organisation should include the cross-cultural training in the Employees’ Development Plan; link the outcomes of the cross-cultural training programmes to the performance appraisal, and the reward system.

Conducting the cross-cultural training enables to ensure managing the cross-cultural diversity effectively within the organisation and its global ventures.

• Effective Intercultural Communication The responsibility of the management is to ensure the effective communication for the overseas business that require international managers to take into consideration the values, customs, the local language, cross-cultural negotiation and the rules of business etiquette. For example, the business in England is based on English language and the rules of business etiquette in determined by strong sense of identity and the English businessmen tend to be very mater of fact and deadline oriented.

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Conclusion 7

The cross-cultural is significant important to the organisation‘s success in the era of globalization and managing the cross-cultural diversity effectively can be a source of competitive advantage, as it provides great opportunities for expansion of business globally, development of skilled workforce to engage in the cross-cultural exchange and communicate effectively, and morale support to motivate the employees, enables creation of creative ideas and broader perspectives. Cross-cultural differences may complicate the business expansion and the lack of managing the cross-culture will lead to critical issues in global business operations such as the issues associated with workgroup performance, work-relate attitudes towards uncertainty and lifetime of employees engagement and in the meantime, there are hinders and challenges to cross-cultural adaptation that include parochialism, individualism, cultural shock, cultural distance and ethnocentrism. The traditional strategies for managing cultural diversity proved to be inappropriate to resolve the cross-cultural issues and overcome the challenges that hinder global business operations, therefore, the organisation must adopt the strategy “our way and their way” as the recommended relevant strategic option for managing the cross-cultural diversity that enables to minimize the potential issues and in the meantime, maximize the advantages of cultural diversity.

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