Multinational Organizations - Case Study Example

Managing cross cultural differences Introduction Workforce diversity has become a non negligible factor and an essential characteristic in today’s globalized business environment. Workforce diversity essentially means the coexistence of individuals from different backgrounds in the same company. Multinational organizations have caused the movement of labour from one nation to the other so that organizational needs can be fulfilled. While operating in foreign nations, it becomes essential for a company to recruit individuals from the host nation. As a result, employees from parent companies, the host nation and other nations all are seen to coexist in the same company. Diversity management is not an easy task. Companies are required to formulate a culture where by all individuals irrespective of their ethnicity or any other factors are able to adjust themselves well in the organizational climate. Multinational organizations are majorly seen to develop a culture incorporating both the values of the organization and those existing in the host nation. In some multinational organization it is also seen that irrespective of its location, a similar culture is established across all strategic sub units. Organizational culture includes the manner in which the employees communicate with each other, both formally and informally. It also includes different type of values and beliefs which the organization has been carrying along since ages. Theories relating to culture diversity management Hofstede’s cultural theory In the research work of Altman and Baruch (1998) the cultural diversity existing within an organization was analysed on the basis of Hofstede’s five dimension theory. The power distance dimension identifies the level of inequality which exists within an organization and the acceptance mentality towards it. In organizations where individuals are viewed upon as equals, the power distance aspect is low. The second dimension is individualism. Individualism is associated with the level of group behaviour existing within an organization. If an organization consists of weak individualism, it means that dependency and team behaviour are high. The fourth dimension relates to uncertainty. Uncertainty is related to the degree of anxiety which member of the organization feel when they are faced with unpredictable situation. The fifth dimension is long term orientation which determines whether an organization is committed towards its long term goals or believes more in short term orientation (Hofstede, 2011). Hofstede had developed his theory for analysing the cultural norms existing in a country as a whole. However, the theory can also be applied to an organization or for assessing the cultural factors existing within a single individual. Hofstede had framed the theory on the basis of practical analysis and therefore is considered to have greater reliability. De Mooij, (2010) has critically stated in his research work that Hofstede theory is not wide enough to analyse all dimensions of cultural diversity existing in international organizations. Moreover modern organizations have a complex system of functioning and it might be difficult to analyse all cultural parameters on the basis of the theory alone. Trompenaar’s cultural theory Trompenaar had developed the seven dimension culture theory after spending almost ten years in researching the values of people across different cultures (Pagell, Katz, and Sheu, 2005). He had concluded from his research that due to differential values, thinking and traditions, individuals vary from each other in almost every predictable manner. The model is used largely to compare and understand behaviour of the people from different cultural backgrounds. Trompenaar states that familiarizing oneself with different cultures reduces conflicts. It also becomes easier for an individual to adapt themselves in new societies or workplaces. Like Hofstede the model can be used to analyze both organizational as well as a nation’s cultural environment (Straub, et al., 2002). In the opinion of Straub, et al., (2002) the theory is considered to be useful for mangers to understand foreign cultural norms while participating in international projects. The model is considered as an effective culture measuring tool. Trompenaar states in his theory that the manner in which business activities are carried out in one nation is radically different from others. Hence, in multinational companies, when individuals from different nationalities are required to work together, there are chances of different kinds of issues to emerge. Trompenaar recognizes that effective communication is one of the most crucial challenges faced when employees from different nations work together. Comparative analysis While Hofstede focuses upon the culture of a nation as a whole, Trompenaar model is more related to how a nation’s culture influences an organizations activity. Hofestede’s cultural analysis is more related values, while Trompenaar’s theory is more focussed upon behavioural aspects and it speaks more about the mindset of people and how they deal with cultural differences. The theory focuses upon the manner in which an organizations cultural framework gets developed due to the behavioural characteristics of the employees. However, Hofstede model is more focussed upon the characteristics of the society as a whole. Hofstede’s model is seen to be deeper and analyses multiple layers of the culture existing in an organization. The theory goes beyond analysing behavioural characteristics alone and includes the values which exist within employees. As per the Hofstede model, individual behaviour is affected by their value system. Value systems get developed on the basis of the manner in which individuals are brought up, their lifestyle and how the social norms have been constructed. These aspects influence the behaviour of individuals which ultimately directs the manner in which they conduct themselves within the organization (Björkman, Stahl and Vaara, 2007). Addressing cultural issues Increased interaction between employees from different backgrounds facilitates minimizing the issues which arise out of culture differences. Cultural difference can be managed also through proper training and group assignments (Miroshnik, 2002). Multinational corporations include the aspect of respecting the cultures of different nations in their code of ethics. In order to reduce the issues arising out of cultural differences, multinational companies are usually set up in the host nations taking into consideration their cultural norms and values. This makes it easier for host nation employees to work in a multinational firm operating in their nation (Harris, R.T. Moran and S. V. Moran, 2004). Multinational and the roles of expatriates Alongside globalization the need for expatriates also grow so that organizational talent can be used in an effective manner. Multinational organizations are required to move skilful human resource from one business location to other so that different strategic requirements of the organization can be met. The movement is usually for a temporary time period and as soon as the designated assignment or project is completed, they return to their home country. Expatriates are seen to face immense challenges in respect of accommodating themselves in a new society and organizational setting. So, before employees are sent for working overseas, it becomes essential to impart proper training. In certain cases training is provided to the family member of the expatriates as well when they also accompany the employee to a foreign nation (Cui, et al., 2006). Expatriate preparation The preparation of an expatriate is an essential process foe the success of the foreign assignment. Before being sent to a foreign country, the expatriate is required to be provided with suitable cross cultural training. Such training acts as a suitable motivating factor for the employee. The purpose of such training is to provide information to employees in respect of the cultural norms existing in the nations where they are shifted to. Adequate familiarity with the cultural norms makes it easier for the expatriate to adjust himself in the new society. Such training sessions are provided before their departure. The training generally includes aspects such as language, traditional norms, economic and lifestyle conditions and the values and beliefs of the people in general. It is also essential that expatriates are trained upon the rules and regulations existing in the foreign subsidiary business location, their manner of functioning, organizational set up and the general values followed by the employees (Harzing, 2001). Adapting with foreign cultures If expatriates are being sent to a foreign nation for a very long duration it becomes essential for them to adapt with the social norms. The level and extend of adaptation depends upon the personality of the employee. Individuals who are reserved or hostile towards other cultures generally take longer periods to develop adaptability. Open mindedness and respect towards all cultures is an important characteristic feature which expatriate employees must possess in order to minimise conflicts and give effect to greater adaptability. Managers are therefore required to analyze the personality of the employees before selecting them for foreign assignments. In order to develop greater adaptability, managers are required to train expatriate employees regarding developing a clam and positive mentality towards foreign cultures. Cultural awareness and how expatriates can solve issue arising out of cultural differences become important segments of cultural training. Expatriates are also required to be trained regarding how they must communicate and mange the employees who are designated under them. Cross cultural training is also helpful for minimizing the resistance towards foreign cultures and reducing stereotype thinking (Cui, et al., 2006). Essential features of an expatriate In order to qualify as an expatriate, employees are required to possess characteristic features such as adaptability, respect towards foreign cultures, ability to manage and resolve conflicts, eagerness to know about different social systems and the ability to take effective decisions swiftly. Employees who are sent to other nations are usually designated at the managerial level and are required to meet a particular requirement of a project. Expatriates are also sent for introducing a new system of working or to assess the existing working conditions in a foreign sub unit location. They are required to identify existing problems are provide suitable solutions. Hence, highly skilful employees are only selected for such expatriate posts. Such employees are required to possess adequate knowledge regarding their domain of work and the needs of the organization as a whole (Cui, et al., 2006). Conclusion Multinational organizations require having a diverse workforce so that they are able to function effectively. Employing workforce from the host nations facilitate foreign firms to understand the market situation existing in that nation better. Government policies in many nations also specify that foreign multinationals must be composed of majority workers and employees from the host nation. Additionally, it is also seen that multinational firms often relocate employees from one nation to the other, further increasing the scope of interaction with different cultures. Hence a multinational organization comprises of employees from the host nation, parent nation and other countries as well. While recruiting, it becomes essential for companies to ensure that the employees who are hired can adapt themselves easily in a culturally diverse environment. The culture existing with an organization impacts the manner in which the daily activities are carried out Hofstede and Trompenaar’s cultural theories are utilized in by managers to assess the cultural environment existing within an organization and determine whether they are compatible with it growth. Reference List Altman, Y. and Baruch, Y., 1998. Cultural theory and organizations: analytical method and cases. Organization Studies, 19(5), pp. 769-785. Björkman, I., Stahl, G. K. and Vaara, E., 2007. Cultural differences and capability transfer in cross-border acquisitions: The mediating roles of capability complementarily, absorptive capacity, and social integration. Journal of International Business Studies, 38(4), pp. 658-672. Cui, A. S., Griffith, D. A., Cavusgil, S. T. and Dabic, M., 2006. The influence of market and cultural environmental factors on technology transfer between foreign MNCs and local subsidiaries: A Croatian illustration. Journal of World Business, 41(2), pp. 100-111. De Mooij, M., 2010. The Hofstede model. International Journal of Advertising, 29(1), pp. 85-110. Harris, P. R., Moran, R. T. and Moran, S. V., 2004. Managing cultural differences: Global leadership strategies for the 21st century. London: Routledge. Harzing, A. W., 2001. An analysis of the functions of international transfer of managers in MNCs. Employee Relations, 23(6), pp. 581-598. Hofstede, G., 2011. Dimensionalizing cultures: The Hofstede model in context. Online readings in psychology and culture, 2(1), p. 8. Miroshnik, V., 2002. Culture and international management: a review. Journal of management development, 21(7), pp. 521-544. Pagell, M., Katz, J. P. and Sheu, C., 2005. 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