Welcome to Class 15 Welcome to Class 15

Research: Research:

Qualitative DomainQualitative DomainPart 2Part 2

Chapter 7Chapter 7

"Culture" is a Primary Driver of "Culture" is a Primary Driver of Qualitative PerformanceQualitative Performance

National Culture + Corporate Culture = Impact on firm performance

"Culture" is characterized as the mental programming of people.

Wherever several people are gathered together for an extended period of time – a unique culture will emerge.

TMTs should:TMTs should:

1) Assess their corporate culture 2) Study the national cultures of countries in which they compete

1. Looking Inward – Corporate Culture

Corporate Culture: 1. Determines whether employees support each other or work

against each other.

2. Affects the manner in which employees interact with customerscustomers, creditorscreditors, competitorscompetitors, shareholdersshareholders, and other other stakeholdersstakeholders.

3. Determines the extent to which the interests of multiple stakeholders will be considered and balanced.

Nurturing and supporting a healthy Nurturing and supporting a healthy corporate culture is a challenging taskcorporate culture is a challenging task!

Corporate Culture is a reflection of a firm’s Corporate Culture is a reflection of a firm’s personality, character, and attitude.personality, character, and attitude.

TMTs need to ask questions such as: TMTs need to ask questions such as:

Are we lacking in efforts to promote the value of diversity of thoughts, ideas, and cultures?

Do we have dual standards of behavior, one for executives and another for all other employees?

Do our systems inadvertently reward indecision and/or incompetence?

Do we tolerate arrogance and condescension?

Do we discourage openness and truthfulness?

Do we really understand the interaction of corporate and national cultures?

They influence each other.

Capable corporate TMTs recognize – Capable corporate TMTs recognize – to fully understand either requires to fully understand either requires

understanding both.understanding both.

Corporate culture and National culture

ARE SYMBIOTIC.

2. Looking Outward – National Culture

National culture is:National culture is:1.The mental programming of a group of people

2.Comprised of the values, customs, and belief systems shared by a group of people

National cultures National cultures occasionally clash with Corporate culturesCorporate cultures

Clashes usually occur when employees of one nation work in another nation.

National Culture

TMTs who have cultural myopia…Lack the ability to recognize potential conflicts between

corporate culture and national culture.

Cultural CLASHES can cause irreparable Cultural CLASHES can cause irreparable damage to a firm’s reputation.damage to a firm’s reputation.

Potential Clash!

Corporate Culture: &

National cultures alien to the corporation can present formidable challenges.

They require flexibility and creative management thinking.

Challenges include understanding the value systems of:1. Newcustomers; and2. New employees from the local culture.

TMTs should understand the characteristics and subtleties of national culture of the “new” country in which they wish to compete.

A technique for corralling the characteristics and subtleties of national cultures was developed by Dr. Geert Hofstede. Dr. Geert Hofstede.

He organized national cultures into “dimensions” or categories of predispositions.

Hofstede’sHofstede’sCultural DimensionsCultural Dimensions

Five dimensions:Five dimensions:

• Power DistancePower Distance

• IndividualismIndividualism

• Uncertainty AvoidanceUncertainty Avoidance

• MasculinityMasculinity

• Short and long-term orientationShort and long-term orientation

The following slides are directly from Hofstede’s data

Power Distance Index (PDI)…Power Distance Index (PDI)…The degree of equality, or inequality, between people in

a country’s society 1. High Power DistanceHigh Power Distance

The imbalances of power and wealth that have been allowed to grow within the society. (Rich are powerful) These are more likely to follow a caste system that does not allow

significant upward mobility of its citizens.

2. Low Power DistanceLow Power Distance A society de-emphasizes the differences between

citizen’s power and wealth. In these societies equality and opportunity for everyone is stressed.

Uncertainty Avoidance Index (UAUncertainty Avoidance Index (UAI)…)… The level of tolerance for uncertainty and ambiguity

within the society – i.e. unstructured situations.

1. High Uncertainty AvoidanceHigh Uncertainty Avoidance Indicates the country has a low tolerance for

uncertainty and ambiguity. A rule-oriented society that institutes laws, rules, regulations, and

controls in order to reduce the amount of uncertainty.

2. Low Uncertainty AvoidanceLow Uncertainty Avoidance Indicates the country has less concern about ambiguity

and uncertainty and has more tolerance for a variety of opinions. A society that is less rule-oriented, more readily accepts change, and

takes more and greater risks.

Individualism (IDV)…Individualism (IDV)… The degree society reinforces individual or collective achievement and interpersonal relationships.

1. High IndividualismHigh Individualism Indicates that individuality in these societies may tend

to form a larger number of looser relationships.

2. Low IndividualismLow Individualism Typifies societies of a more collectivist nature with

close ties between individuals. Reinforced extended families and collectives where everyone takes

responsibility for group members

Masculinity (MAS)…Masculinity (MAS)…The degree the society reinforces, or does not reinforce,

the traditional masculine work role model of male achievement, control, and power.

1. High MasculinityHigh Masculinity Indicates the country experiences a high degree of

gender differentiation. Males dominate a significant portion of the society and power structure,

with females being controlled by male domination.

2. Low MasculinityLow Masculinity Indicates the country has a low level of differentiation

and discrimination between genders. Females are treated equally to males in all aspects of the society.

Long-term Orientation (LTO)…Long-term Orientation (LTO)…The degree to which a society respects cultural traditions

and the value it places on long-term commitments.

1. High Long-Term OrientationHigh Long-Term Orientation Indicates the country prescribes to the values of long-term

commitments and respect for tradition. Supportive of a strong work ethic where long-term rewards are expected as

a result of hard work. Business may take longer to develop in this society, particularly for an “outsider.”

2. Low Long-Term OrientationLow Long-Term Orientation Indicates the country does not reinforce the concept of

long-term traditional orientation. Change can occur more rapidly as long-term traditions and commitments

do not become impediments to change.

Summary…Summary…

Culture, both corporate and national, play a Culture, both corporate and national, play a significant role in a firm’s qualitative performance. significant role in a firm’s qualitative performance.

Qualitative performance should be the everyday Qualitative performance should be the everyday concern of every manager. concern of every manager.

The global nature of business increases the risk of The global nature of business increases the risk of clashes between corporate cultures and national cultures. clashes between corporate cultures and national cultures.

End: Research: Qualitative Domain – Part 2

Assignment: Read Chapter 8 Assignment: Read Chapter 8

Research: Issues & Research: Issues & ChallengesChallenges

Very Important: Very Important: Review Appendix B of your text (pages 170 – 172) Review Appendix B of your text (pages 170 – 172)

““Hofstede’s Cultural Dimensions.” Hofstede’s Cultural Dimensions.”

You are responsible for this information You are responsible for this information andand IT WILL BE ON THE TEST!IT WILL BE ON THE TEST!