Cultural Issues and Organizations - Essay Example

?Culture and Organizations Introduction Culture, in simple terms, can be defined as the sum total of knowledge, beliefs, art, law, morals, customs and other capabilities of one group that distinguish it from others. One can identify three key features of culture; culture is shared, culture is intangible, and culture is confirmed by others. However, culture may not be able to describe everything that is different from one place to another. Some examples of such factors are corporate strategy, structure, rivalry, governmental policy, and economics. In addition, one should remember the fact that culture is not synonymous to nation. However, it is true that national and cultural boundaries often overlap each other and most countries have their own culture. However, there are various typologies created by scholars that help connect cultural differences to national boundaries. The term ‘cultural distance’ can be used to show the difference that exists between two cultures. At this stage, it is worth remembering the Convergence Hypothesis which states that the combination of technology and economics is making countries more alike. For such a huge group of companies like Mitsubishi, this seems correct to a great extent. However, there is the Divergence Hypothesis which states that despite all the developments, countries will exhibit certain distinctive characteristics. There are two key cultural issues that require special attention. They are cultural etiquette, and cultural stereotypes. The former means the manners and behaviour that are expected in a given situation while the latter indicates beliefs about others, their attitudes and behaviour. The different identifiable layers of culture are ethnicity, industry, demography, and ideology. It is very evident that three of these factors except industry can have serious impact on the policies of a company. It is very evident that international business, to a great extent, is affected by culture. First of all, it can affect the way companies make strategic moves. Thus, culture directly influences important corporate decisions. Thirdly, culture is the easiest way through which motivation can be instilled. Thus, management, decision making, and negotiations are all influenced by culture. The company in concern The company in analysis here is Mitsubishi. In fact, Mitsubishi is a group of companies, and the number of companies under the label is around 400. In addition, there are many more Mitsubishi companies that do not have the name ‘Mitsubishi’ with them. The company was started by Yataro Iwasaki in the year 1870, and it was initially a shipping company. Later on, the founder spread the business into banking, shipbuilding, mining, and insurance too. With the large number of independently operating business under one roof, the company has developed a special kind of working culture. All the members companies share the same founding management philosophy, and cooperate in areas of common interest. It is really surprising to note that the company has its operations in Asia, North America, Central and Latin America, Europe, Oceania, Micronesia, Middle East, and Africa. It is very evident that managing such a great organisation strictly following the philosophies of good human resource management is a tremendous task. As a result, it is quite natural that the company, at times, may face issues related to human resource management. However, the success of the company, to a great extent, is dependent on how the company manages the issues, and what further steps are taken by the company to prevent the occurrence of the same kind of issues further. The problem in concern A few years ago, in 2003, the Mitsubishi Bank acquired the Tokyo Bank. However, the merger was not a cakewalk, because there was much dissimilarity in the nature of both the organisations. First of all, the employees of Mitsubishi bank were used to reporting for their duty in time. In addition they were used to wearing uniform, especially white shirts, at work. In addition, they used to thank their department managers for their monthly pay cheques. In fact, this had become a common method for them to show appreciation for being remunerated by the company. On the other hand, the Tokyo employees were not at all used to these practices. To illustrate, they were totally unable to report for duty in time, and getting reprimanded for getting late to work was beyond their understanding. In addition, those employees were not at all used to following a strict dress code. Worsening the problem, they found it unnecessary to thank the managers and supervisors for paying the salary. As a result of these issues, a number of Tokyo Bank employees voluntarily left their jobs. As Bhattacharyya 2010, p.200) opines, it is very evident that had Mitsubishi conducted cultural due diligence prior to the acquisition, this situation could have been avoided. In another incident in 1998, in the Mitsubishi car assembling company in Normal, Illinois, arose a number of allegations of sexual assault and racial discrimination. According to a lawsuit, sexual graffiti was written on the fenders of cars being assembled before they passed female production workers, pornographic photos hung on the walls, male workers taunted women, and women who complained were not promoted or perhaps were even fired (Mitsubishi law suit, Business and Human Rights Resource Centre). Eventually, Mitsubishi had to raise $ 34 million to settle the lawsuit that was filed by 500 workers at the plant. In addition, the company had to make another multi-million dollar settlement to African American and Hispanic employees who claimed that there were serious levels of racial discrimination. Though the issues were settled, the image of the company was totally tarnished beyond recognition. Employees were reluctant even to wear the company log outside. In addition, there was a downfall in productivity too. However, the company managed to regain its lost value through a number of effective measures, the most effective one being the strict implementation of EEO laws. As a part of recovery measures, an independent department was set up to investigate all employee complaints. In addition, employees were given training on how to avoid illegal discrimination issues. As a part of the program, more than hundred cases of discrimination and harassment were identified; and that resulted in eight dismissals, fourteen suspensions, and thirty other disciplinary actions. At this stage, there arose serious allegations that the Mitsubishi Company failed to communicate well with its employees, especially it was alleged that the managers of its overseas companies failed to follow the company policies properly. Though the company managed, through strict measures, to regain its lost image in that particular plant, it is very evident that for such a huge group of companies, managing the concept of equal employment is a very difficult task as is evident from the issue that took place at Illinois. From both these cases, it becomes evident that the most important issue Mitsubishi has to deal with in its operations is the effective handling of cross-cultural issues, especially in its mergers and cross-cultural operations. The theoretical frameworks being used for the analysis To analyse the culture in Mitsubishi, the Geert Hofstede model of Five Dimensions of culture is used. In fact, the method was developed by Hofstede in 1970s through a study among the organisational members of IBM. Through the Hofstede study of five dimensions, it is possible to analyse the culture of any country or organisation. According to Hofstede (as cited in Boyd), a country’s cultural attitude has five dimensions; (1) power distance, (2) uncertainty avoidance, (3) individualism v. collectivism, (4) masculinity v. femininity, and (5) time orientation (Source: Hofstede’s cultural attitudes research- cultural dimensions). It was found by Hofstede that managers in international organisations often tend to operate according to their own country’s values, rather than that of the organisation. In addition, he pointed out that employees of some national cultures show similarity in work, and thus, there is reduced risk of conflict. It is worth remembering here that culture is linked to other variables such as religion and language. However, it is possible for culture to cut across these borders, and vice versa. In fact, corporate culture is the culture adopted, developed and distributed in an organisation. In other words, corporate culture can deviate from national culture, and this deviation depends on the strength of culture, and also on technology and economics. Here, one should remember the Hypothesis of Convergence. In the case of Mitsubishi, one can see that the corporate has adopted a corporate culture that is very similar to that of Europe and America. Analysis of culture using the Hofstede Five Dimension According to the Geert Hofstede analysis, Japan is dramatically different from other Asian countries like Hong Kong, Korea and China. In Japan, the most important factor is Masculinity and the lowest ranking factor is Individualism. In addition, generally, Japan shows high degree of uncertainty avoidance and collectivist tendency. There is relatively low value for personal freedom. (1) Uncertainty avoidance (UA) This term indicates the extent to which uncertainty and ambiguity are tolerated by an organisation. If a country shows high degree of uncertainty avoidance, that means the country has a rule-oriented society that has well defined laws, regulations and controls which are aimed to reduce uncertainty to the maximum possible extent. Certain essential features of uncertainty avoidance are; (a) standardisation, (b) structured activities, (c) written rules, (d) specialists, (e) no risk tolerance, (f) ritualistic behaviour (Source: Hofstede’s cultural attitudes research- cultural dimensions). Now, a look back into the Mitsubishi Company proves that the company epitomises the concept of uncertainty avoidance. The company prefers to have well-defined rules and regulations. From the Corporate Social Responsibility of the company, it is evident that the company prefers to apply strict rules and regulations to ensure employee compliance with the codes of conduct of the company. On the other hand, the Tokyo Bank failed in this connection as the Tokyo Bank employees were not used to a situation with high degree of uncertainty avoidance. So, they found it difficult to cope with the highly structured situation in Mitsubishi. However, it seems that the Mitsubishi, Illinois, failed to impose the same, probably due to the fact that the American society is known for individualism, individual freedom, and liberty. However, had the company imposed strict rules and regulations of codes of conduct, the incident would not have taken place. In addition, one could see the absence of structured activities in the Illinois Company unlike as mentioned in the company Corporate Social Responsibility fact sheet. However, it seems that the incident helped the company make dramatic changes. An independent department was opened to handle issues of violating codes of conduct. In addition, the company started imposing its zero tolerance policy as it used to do in other companies. In addition, the company started strictly following the EEO laws. Thus, it becomes evident that in the crisis, the company showed its character of uncertainty avoidance by immediately imposing strict rules. Disciplinary actions too were imminent. There were many dismissals and suspensions. The feature of ritualistic behaviour cannot be neglected at this stage. The company seems strict in its policies, and Mitsubishi does not deviate from its core principles put forward by its founder. All the more than 400 companies of Mitsubishi are made to strictly follow the same philosophies. Thus, it becomes evident that Mitsubishi shows high degree of uncertainty avoidance, probably as a result of the Japanese cultural influence. (2) Long Term Orientation. (LTO) A look into Mitsubishi will prove the fact that the company is set to have long term orientation. For example, one can see features like thrift, persistence, and traditional respect of social obligations in the company. In this aspect too, the company scores highly. From the Company’s Corporate Social Responsibility statement, it becomes evident that the company aims at perfection through continuous struggle and improvement. In addition, there are various activities that the company undertakes to fulfil its social responsibility and obligation (Representative Community Involvement). (3) Masculinity vs. Femininity Japan is a nation which is considered highly masculine in character. The company, Mitsubishi too, is totally masculine in its character. For example, the company considers work as a central life interest. For example, it is this high degree of masculinity that makes the company even touch the private lives of employees to protect their interests. This is evident from the Corporate Social Responsibility of the company. Furthermore, in the company, competition and aggression are considered as two essential features, and are rewarded. (4) Individualism vs. Collectivism In this case, it is evident that Mitsubishi shows low degree of individualism. Though the company is greatly influenced by the western notion of individualism, yet, traditionally, the company holds a view point that the organisation is a family. In addition, one can see an attempt from the part of Mitsubishi to protect the interest of its various employees like old people and women. Now, it is very evident from Mitsubishi that though the company is result oriented, it is lack of concern towards employee welfare that led to the issue in both the cases. In addition, it is evident that despite the best efforts from the company, it still remains, to a great extent, job-oriented. However, evidently, the company prefers to adopt a professional approach as is evident from the fact that immediately on the development of the issue, the company took a number of measures ranging from a special department for handling such issues. In addition, EEO laws were strictly implemented. Theories on cross-cultural issues and international acquisitions There are many studies that assert that cultural distances are a great barrier to international expansion of businesses, and thus suggesting that companies should be careful while dealing with culturally distant areas. Some such studies are Barkema, Bell, and Pennings (1996), and Johanson and Vahlne (1977). However, there are studies that are quite opposite in direction in the fact that they claim international expansion is beneficial for companies. For example, Zahra, Ireland, and Hitt (2000) claim that MNCs get a chance to expand their knowledge bases, to access innovative technological capabilities, and to gain valuable international experience. In addition, Morosini et al. (1998) claim that national culture differences may enhance the performance of international acquisitions by providing access to the acquired organisation’ unique and valuable routines and repertoires embedded in their respective national cultures. Thus, it becomes evident that differences in organisational or national cultures can be advantageous if they are managed effectively. Now the question is how such a cross-cultural merger can be done successfully. In the study by Veiga, Lubatkin, Calori and Very (2000) it became evident that the acquisitions that focused on cultural issues in the post-acquisition period are 26 percent more successful than the ones that do not. Suggestible solutions Thus, the first suggestion for Mitsubishi is to focus on cultural issues prior to acquisition of other organisations. This is because it has been proved from studies that post-acquisition performance significantly improves when cultural issues are identified in the pre-acquisition period. Cultural Due Diligence Culture due diligence is considered as an essential tool that could help avoid many cultural conflicts that arise on acquisition. Cultural due diligence is conducted prior to an acquisition. It is usual for business to give more importance to financial issues and neglect cultural issues during pre-acquisition stage. However, it is very necessary to check if the different cultures are at least combinable. However, various studies like the one by Angwin (2001) proved that majority of companies give low priority to cultural compatibility during due diligence. Now it is necessary to see how the result of due diligence is to be interpreted. The best approach, according to experts is that if two cultures are found totally incompatible, it is better to give up the idea of acquisition. Methods suggested by Kerber and F Buono (2009) In the case of mergers and acquisitions, there are three different approaches as suggested by Kerber and F Buono (2009); directed change, planned change, and guided change. The first one indicates that change is enforced through persuasion. The second one indicates that the changes should be brought about through participation while the last one, guided change, indicates that the total involvement of all sections of employees of the organisation should be ensured (ibid). There are various steps that can be adopted to manage cultural diversity in an organisation. 1) Cultural audit- in the first step, managers should audit their own culture and that of their organisation 2) Briefing from cultural expert- thereafter, explanation can be sought from a cultural expert. In multinational workplaces, intercultural briefing will serve better. 3) Checking policies for cultural assumptions 4) Grievance procedures- it is vital in certain cultures to ensure that grievances are met explicitly and timely. 5) Training- last but the most important one is training to live in a multicultural society. Training can be given through information sessions, affective education like role plays and discussions, or language and cultural training. It is very evident that these steps would have helped avoid the cultural conflicts associated with the Mitsubishi-Tokyo merger. Importance of communication- Schweiger and DeNisi (1991) It is pointed out by scholars (Schweiger & DeNisi 1991) that it is highly necessary to ensure proper communication with the employees of the combined organisation. This is especially because employees of culturally different organisations will possess prejudices and stereotypes about the other group. Communication in the first place will help stop the development of hostile attitudes towards others. However, it is evident that the result of many acquisitions and mergers is totally ineffective management of post-acquisition integration process. In addition, it is for the acquirer to take initiative for communication as studies have proved that employees of the acquired institution often possess fear of losing their jobs, and will not be able to communicate or work properly until the issues are properly addressed. So, it is evident that lack of communication at that stage will only exacerbate the problems. Importance of two-way communication- Krug and Hegarty (1997) The Mitsubishi-Tokyo Bank merger resulted in the resignation of Tokyo staff. The study by Krug and Hegarty (1997) has proved that it is a common phenomenon during such acquisitions for employees to opt voluntary turnover. This is often the result of irrational fear of dismissal, and hence preventable through two-way communication. To illustrate, the KMPG (1999) study proved that when there was no effective cross-cultural communication, 50 percent of managers voluntarily left their organisation within a year of acquisition. Thus, the second important thing that Mitsubishi will have to ensure in its acquisitions and cross-cultural operations is two-way communication. Connection- ensuring structural and relational ties It is very evident from studies that it is highly necessary for the acquirer to establish structural ties, that is, establishing formal communication patterns within the organisational hierarchy. However, it is more important to establish relational ties among employees to facilities the growth of shared values, beliefs, reciprocity, trust, and collective identification. There are various ways that can be adopted to establish relational ties among employees. Some such steps are suggested by Wall (2001). They include formal and informal meetings aimed at improving interaction, development of inter-group committees, creation of cross-cultural teams, and interchanging of work personnel between the acquirer and the acquired (ibid). Control The last point of consideration where confusion usually arises is control of the new entity. Acquisitions are often misrepresented as mergers, and thus create the wrong impression that both the acquirer and the acquired will have equal controlling authority. It is seen that misrepresenting an acquisition as a merger only has negative consequences. So, it is necessary to avoid creating incorrect impressions among the workforce regarding the control of the firm. However, it is advised that the acquirer should not use highly dominant types of control. This is because in cross-cultural acquisitions, it is seen that treating the acquired employees without the necessary deference results in their taking decisions that adversely affect the firm. In fact, the best way of control seems to come from Larsson and Lubatkin (2001); according to them, social control is the best possible approach. Social control means the sum total of coordination and socialisation efforts by the acquirer. Such efforts include training, cross visits, joint retreats, celebrations and such other programs that improve interaction (ibid). Conclusion In total, it becomes evident that the issues faced by Mitsubishi in its mergers, acquisitions, and cross-cultural operations are the result of poor management of cross-cultural interaction. In fact, in the modern globalised economy, it is necessary for organisations to review and make necessary changes in their own cultural attitudes. By improving their cultural management methods, especially by enhancing communication and pre-acquisition analysis, it is possible for Mitsubishi to improve its cross-cultural dealings. References Angwin, D 2001, Mergers and acquisitions across European borders: National perspectives on pre-acquisition due diligence and the use of professional advisors, Journal of World Business, vol. 36, No.1: pp. 32-57. Bhattacharyya, DK 2010, Cross cultural management: Text and cases, PHI Learning, Pvt Ltd, New Delhi. Boyd, HM, Hofstede’s cultural attitudes research- cultural dimensions, viewed 15 May 2011 Case Profile: Mitsubishi law suit, Business and Human Rights Resource Centre, viewed 15 May 2011 Kerber and F Buono 2009. 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Veiga, J., Lubatkin, M., Calori, R., & Very, P 2000, “Measuring Organisational culture clashes: A two-nation post-hoc analysis of a cultural compatibility index”, Human Relations, vol. 53, No. 4: pp. 539-557. Wall, SJ 2001 Making mergers work, Financial Executive, March-April: 34-35, 67, viewed 15 May 2011< http://www2.financialexecutives.org/magazine/articles/3-4-2001_mergers.cfm> Zahra, SA., Ireland, RD & Hitt, MA 2000, “International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance”, Academy of Management Journal, Vol. 43, No.5: pp. 925-950. Read More