Cross-cultural management Dr. Chin-Ju Tsai MN513 International HRM and OB

Cross-cultural management

Dr. Chin-Ju Tsai

MN513 International HRM and OB

Outline

• What is culture?

• Levels of culture in multinational management

• Cultural models

• Home and host country effects on IHRM

What is culture?

Visible cultural differencesLanguageHousingFoodClothes Key beliefs

Our understandingsabout what is true.

Norms and valuesWhat we can do and

cannot do.

What is right or wrong.

The layers of culture/onion metaphor:

Other metaphors such as iceberg and ocean have also been used.

What is culture? Some definitions:• ‘Culture consists in patterned ways of thinking, feeling and

reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artefacts; the essential core of culture consists of traditional (i.e. historically derived and selected) ideas and especially their attached values.’

(Kluckhohn, 1951: 86 cited in Hofstede, 2001: 9)

• ‘the collective programming of the mind that distinguishes the members of one group or category of people from another’

(Hofstede, 2001: 9)

• ‘Culture is the characteristic way of behaving and believing that a group of people in a country or region (or firm) have evolved over time and share.’ (Briscoe and Schuler, 2004: 116)

Why is it important to study culture and understand cultural differences?

Levels of culture in multinational management

National Culture

Business Culture

Occupational CultureOrganizational Culture

Multinational Management

(Source: Cullen and Parboteeah, 2008: 49)

Three cultural modelsHofstede’s model of national culture• the first cultural model• introduced by Geert Hofstede in the early 1980s• includes 5 dimensions of culture• has been used extensively to understand cultural differences

Fons Trompenaars and Hampden-Turner’s 7d cultural model• includes 7 dimensions of culture• builds on anthropological approaches to understand culture (humans must solve basic problems of survival)

GLOBAL national culture framework• most recent national culture framework• derives from the Global Leadership and Organisational Behavior

Effectiveness (GLOBE) project• based heavily on Hofstede’s model• includes 9 cultural dimensions

Hofstede’s model of national culture (1)

• based on 116,000 questionnaires from employees of IBM subsidiaries

• conducted in 50 countries and 3 regions (East Africa, West Africa and Arab countries)

• identified 5 dimensions of cultural variation in values

• for each dimension, possible origins, predictors and consequences for management behaviour are presented

Hofstede’s model of national culture (2)• Power distance is the extent to which the less powerful

members of organizations and institutions accept and expect that power is distributed unequally.

• Uncertainty avoidance is the extent to which a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. (Unstructured situations are novel, unknown, surprising, different from usual. )

• Individualism on the one side versus its opposite, collectivism, is the degree to which individuals are supposed to look after themselves or remain integrated into groups, usually around the family.

Source: Hostede (2001: xix) and Hofstede (1985: 348)


• Masculinity, which stands for a preference for achievement, heroism, assertiveness, and material success; as opposed to femininity, which stands for a preference for relationships, modesty, caring for the weak, and the quality of life.

• Long-term versus short-term orientation refers to the extent to which a culture programs its members to accept delayed gratification of their material, social and emotional needs.

source: Hostede (2001: xix) and Hofstede (1985: 348)


• High levels of power distance = high levels of formality and elitism

• High levels of uncertainty avoidance = high need for security and fear of the unknown

• High levels of individualism = looser sense of solidarity between people

• High levels of masculinity = high levels of assertiveness and distinction between gender roles

• High level of long-termism = high sense of need to plan for the future

Power DistanceArab World * * 80 Argentina 49 Australia 36 Austria 11 Austria 11 Bangladesh * 80 Belgium 65 Brazil 69 Bulgaria * 70 Canada 39 Chile 63 China * 80 Colombia 67 Costa Rica 35 Czech Republic * 57 Denmark 18 East Africa * * 64 Ecuador 78 El Salvador 66 Estonia * 40 Finland 33 France 68 Germany 35 Greece 60 Guatemala 95 Hong Kong 68 Hungary * 46 I ndia 77 I ndonesia 78 I ran 58 I reland 28 I srael 13 I taly 50 J amaica 45 J apan 54

Luxembourg * 40 Malaysia 104 Malta * 56 Mexico 81 Morocco * 70 Netherlands 38 New Zealand 22 Norway 31 Pakistan 55 Panama 95 Peru 64 Philippines 94 Poland * 68 Portugal 63 Romania * 90 Russia * 93 Singapore 74 Slovakia * 104 South Africa 49 South Korea 60 Spain 57 Surinam * 85 Sweden 31 Switzerland 34 Taiwan 58 Thailand 64 Trinidad * 47 Turkey 66 United Kingdom 35 United States 40 Uruguay 61 Venezuela 81 Vietnam * 70 West Africa 77

Uncertainty avoidanceArab World * * 68 Argentina 86 Australia 51 Austria 70 Austria 70 Bangladesh * 60 Belgium 94 Brazil 76 Bulgaria * 85 Canada 48 Chile 86 China * 30 Colombia 80 Costa Rica 86 Czech Republic * 74 Denmark 23 East Africa * * 52 Ecuador 67 El Salvador 94 Estonia * 60 Finland 59 France 86 Germany 65 Greece 112 Guatemala 101 Hong Kong 29 Hungary * 82 I ndia 40 I ndonesia 48 I ran 59 I reland 35 I srael 81 I taly 75 J amaica 13 J apan 92


IndividualismArab World * * 38 Argentina 46 Australia 90 Austria 55 Austria 55 Bangladesh * 20 Belgium 75 Brazil 38 Bulgaria * 30 Canada 80 Chile 23 China * 20 Colombia 13 Costa Rica 15 Czech Republic * 58 Denmark 74 East Africa * * 27 Ecuador 8 El Salvador 19 Estonia * 60 Finland 63 France 71 Germany 67 Greece 35 Guatemala 6 Hong Kong 25 Hungary * 80 I ndia 48 I ndonesia 14 I ran 41 I reland 70 I srael 54 I taly 76 J amaica 39 J apan 46


MasculinityArab World * * 52 Argentina 56 Australia 61 Austria 79 Austria 79 Bangladesh * 55 Belgium 54 Brazil 49 Bulgaria * 40 Canada 52 Chile 28 China * 66 Colombia 64 Costa Rica 21 Czech Republic * 57 Denmark 16 East Africa * * 41 Ecuador 63 El Salvador 40 Estonia * 30 Finland 26 France 43 Germany 66 Greece 57 Guatemala 37 Hong Kong 57 Hungary * 88 I ndia 56 I ndonesia 46 I ran 43 I reland 68 I srael 47 I taly 70 J amaica 68 J apan 95


Long-term orientationAustralia 31 Bangladesh * 40 Brazil 65 Canada 23 China * 118 Czech Republic * 13 East Africa * * 25 Germany 31 Hong Kong 96 Hungary * 50 I ndia 61 J apan 80 Netherlands 44 New Zealand 30 Norway 20 Philippines 19 Poland * 32 Singapore 48 Slovakia * 38 South Korea 75 Sweden 33 Taiwan 87 Thailand 56 United Kingdom 25 United States 29 Vietnam * 80 West Africa 16


True or false??

The U.S.A. scores high on individualism, so it is safe to conclude that all Americans are individualists.

• Be cautious in interpreting cultural difference using country scores!!

Management processes

HRM

Management selection

Training

Evaluations/promotion

Remuneration

Management styles

Motivational assumptions

Decision making/ organisational design

(Source: Cullen and Parboteeah, 2008)

Hofstede’s model and management implications (1)

Low Power Distance

Educational achievement

For autonomy

Performance

Small wage difference between management and worker

High Power Distance

Social class; elite education

For conformity/obedience

Compliance; trustworthiness

Large wage difference between management and worker

Participative; less direct supervision

People like work; extrinsic and intrinsic rewards

Centralized; tall pyramids; large proportion of supervisors

Assume people dislike work; coercion

Decentralized; flat pyramids; small proportion of supervisors

Theory X; authoritarian, with close supervision

Management processes High Uncertainty Avoidance

HRM

Management selection Seniority; expected loyalty

Training Specialized

Evaluations/promotion Seniority; expertise; loyalty

Remuneration Based on seniority or expertise

Management styles Task-oriented

Motivational assumptions People seek security, avoid competition


Larger organization; tall hierarchy; formalized; many standardized procedures



Low Uncertainty Avoidance

Past job performance; education

Training to adapt

Objective individual performance data; job switching for promotions

Based on performance

Nondirective; person-oriented; flexible

People are self-motivated, competitive

Smaller organizations; flat hierarchy, less formalized, with fewer written rules and standardized procedures

Management processes Low Individualism

HRM

Management selection Group membership; school or university

Training Focus on company-based skills

Evaluations/promotion Slow, with group; seniority

Remuneration Based on group membership; organizational paternalism

Management styles Appeals to duty and commitment

Motivational assumptions Moral involvement


Group; slow



Individual rewards and punishments based on performance

Calculative; individual cost/benefit

Individual responsibility

High Individualism

Universalistic based on individual traits

General skills for individual achievement

Based on individual performance

Extrinsic rewards (money, promotion) based on market value

Management processes

HRM

Management selection

Training

Evaluations/promotion

Remuneration

Management styles

Motivational assumptions



Hofstede’s model and management implications (4)High Masculinity

Jobs gender identified; school performance and ties important

Career oriented

Continues gender-tracking

More salary preferred to fewer hours

Low Masculinity

Independent of gender, school ties less important;

Job-oriented

Job performance, with less gender-based assignment

Less salary difference between levels; more time off

More Theory X; authoritarian More participative

Emphasis on quality of life, time off, vacations; work not central

Emphasis on performance and growth; excelling to be best; work central to life; job recognition important

Intuitive/group; smaller organizations preferred

Decisive/individual; larger organization preferred

Management processes Long-Term Orientation

HRM

Management selection Fit of personal and background characteristics

Training Investment in long-term employment skills

Evaluations/promotion Slow; develop skills and loyalty

Remuneration Security

Management styles Build social obligations

Motivational assumptions Subordinate immediate gratification for long-term individual and company goals


Synthesis to reach consensus; design for social relationships



Short-Term Orientation

Objective skill assessment for immediate use to company

Limited to immediate company needs

Fast; based on skill contributions

Pay, promotions

Use incentives for economic advancement

Immediate rewards necessary

Logical analyses of problems; design for logic of company situation

Contributions and limitations of Hofstede’s model

Main contributions:• identifies cultural dimensions with hard data• makes comparisons across countries• shows culture’s consequences in managerial behaviours

Main criticisms:

• the conceptualization of national culture (e.g. implicit, territorially unique)

• the representativeness of the survey respondents (i.e. IBM employees; the average sample size per country was small)

• a mismatch between some dimensions and their measurements

• three cultures at play: national, organisational and occupational

Group Work 1

Pick any two countries in the world. Discuss and summarize the managerial implications of cultural differences by applying the Hofstede model.

7d cultural model (Trompenaars and Hampden-Turner)

• based on results of a large-scale study (over 15,000 employees from 55 countries)

• like Hofstede, also proposed comparing countries using cultural dimensions

• all cultures have to deal with 3 basic problems: --social interactions --passage of time --relationship to the environment

7d cultural model Relationships with people: • Universalism vs. Particularism (the choce of dealing with other people

based on rules or based on personal relationships)• Individualism vs. Collectivism (the focus on group membership versus

individual characteristics)• Specific vs. Diffuse (the type of involvement people have with each other

ranging from all aspects of life to specific components)• Neutral vs. Affective (the range of feelings outwardly expressed in the

society)• Achievement vs. Ascription (the assignment of status in the society based

on performance vs. assignement based on heritage)

Perspective on Time:• Sequential vs. Synchronic (the orientation of the society to the past, present,

or future or some combination of the three)

Relationship with the Environment:• Internal vs. External Control (nature viewed as something to be controlled

vs. something to be accepted) (Trompenaars and Hampden-Turner, 1998)

GLOBAL National Cultural Framework (1)

• the GLOBAL project involves 160 researchers

• data collected over 7 years from 18,000 middle managers in 62 countries

• based on Hofstede’s model and developed 9 cultural dimensions (only 2 are independent of the Hofstede model)

GLOBAL National Cultural Framework (2)9 cultural dimensions • Assertiveness • Gender egalitarianism• Institutional collectivism• In-group collectivism• Future orientation• Power distance • Uncertainty avoidance

• Performance orientation (the degree to which the society encourages societal members to innovate, to improve their performance, and to strive for excellence)

• Humane orientation (the extent to which individuals are expected to be fair, altruistic, caring, and generous.)

(House, Hanges, Javidan, Dorfman, and Gupta, 2004)

Institutional effects too…

National Culture

Common values, norms of behaviour & customs;

assumptions that shape manager’ perceptions…

Institutions

National labour laws; trade unions; educational & vocational training;

labour market/ professional bodies; employer’s federation;

consulting organisations…

National HRM

Recruitment & selection; training & development; career development; performance management; pay &

benefits; communication…

Apart from culture, different countries have different institutions and legal systems

Which has the greatest influence on an MNC?

The national culture and institutions of the

home country.

Or

The national culture and institutions of the

host country.

Home and host country effects

• Country of origin effects: the greatest influence on the MNC is the national culture and institutions of the country from which it originated

• Host country effects: the greatest influence on the MNC is the national culture and institutions of the country from which it is located

Country of origin effects (1)

Sources of the effect:

• the concentration of assets, sales and employment: on average around half of the operations of the largest 100 MNCs are located in the home base

• The dominance of home country nationals in senior managerial positions

• Main policies dictated by HQ

Country of origin effects (2) Example: Country of origin effects in US MNCs

McDonald’s• The chain has over 31,000 outlets in 119 countries• McDonald’s is known for exporting its HR practices rather than

adapting to local customs --McWork (standardisation, supervision…) --Part-time/ flexible working --Anti-union

• Overall, McDonald’s retains US business culture as much as possible• But evidence of adaptation too (e.g. increasingly responsive to

consumer tastes in different countries)• Country of origin effects, therefore, do not cover all complexities, major

influences come too from host country effects.

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Host country effects (1)

Also known as ‘societal effect’ or ‘national business systems approach’.

Sources of the effect:• different countries have different national cultures, institutions,

and legal systems

• subsidiaries have to conform to local social norms and legal regulations

• policies to reduce number of expatriates in favour of locals

Host country effects (2)Example: lean production

• Lean production: so-called as it uses less of everything (manpower, time, raw materials)

• Also known as ‘Toyotism’, or ‘Japanisation’

Characteristics of lean production• Team working with team leaders• Quality circles: workers spot own defects • Workers responsible for own discipline• Worker feels part of process• ‘Just in time’ supply systems• Dealers integrated into process

Host country effects (3)Example: lean production

• Impact of host country culture/ institutions on lean production

Country National culture/institutions

Impact on lean production

Germany --heavily legislated

--apprenticeship system

--adapted to German law

--skills hierarchy permitted

• But lean production was still broadly recognisable in all national contexts (e.g. focus on teamwork and consensus)

• Picture actually very complex… Home and host influences interact to create new hybrid cultures…

UK --hierarchical

--worker/ manager suspicion

--team leader as ‘foreman’

--quality circles ignored

Group Work 2

You have been hired as a consultant to three MNCs: an American high-tech firm opening a new site in China; a British retail bank setting up in India; and a German car manufacturing firm relocating its production to Japan.

You have been asked by all three firms to advise them on the desirability and feasibility of transferring HRM practices to their new locations. How would your advice differ in each situation?

Summary

• The study of management differences across countries has been conducted from cultural and insititutional perspetives

• International management can be affected by three levels of culture (i.e. national, business, organizational and occupational culture)

• Cultural models help us understand cultural differences across countries through using cultural dimensions

• An MNC can be influenced by the national cultures and institutions of its home country and host country

Documents

Cross-cultural management Dr. Chin-Ju Tsai MN513 International HRM and OB