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

1. Cross-cultural managementDr. Chin-Ju Tsai MN513 International HRM and OB

2. Outline • What is culture? • Levels of culture in multinational management • Cultural models • Home and host country effects on IHRM

3. What is culture? The layers of culture/onion metaphor: Norms and values What we can do and cannot do. What is right or wrong. Visible cultural differences Language Housing Food Clothes Key beliefs Our understandings about what is true. Other metaphors such as iceberg and ocean have also been used.

4. 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)

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

6. Levels of culture in multinational management National Culture Business Culture Organizational Culture Occupational Culture Multinational Management (Source: Cullen and Parboteeah, 2008: 49)

7. Three cultural models Hofstede’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

8. 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

9. 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)

10. Hofstede’s model of national culture (3) • 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)

11. Hofstede’s model of national culture (4) • 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

12. Power Distance

13. Uncertainty avoidance

14. Individualism

15. Masculinity

16. Long-term orientation

17. Hofstede’s model of national culture (5) 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!!

18. Hofstede’s model and management implications (1) (Source: Cullen and Parboteeah, 2008)

19. Hofstede’s model and management implications (2) (Source: Cullen and Parboteeah, 2008)

20. Hofstede’s model and management implications (3) (Source: Cullen and Parboteeah, 2008)

21. Hofstede’s model and management implications (4) (Source: Cullen and Parboteeah, 2008)

22. Hofstede’s model and management implications (5) (Source: Cullen and Parboteeah, 2008)

23. 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

24. Group Work 1 Pick any two countries in the world. Discuss and summarize the managerial implications of cultural differences by applying the Hofstede model.

25. 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

26. 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)

27. 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)

28. 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)

29. Institutional effects too… Apart from culture, different countries have different institutions and legal systems 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…

30. 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.

31. 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

32. 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

33. 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.

34. 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

35. 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

36. Host country effects (3) Example: lean production • Impact of host country culture/ institutions on lean production • 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…

37. 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?

38. 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