The Impact of Cross Culture on People and Their Performance in Organisations - Term Paper Example

What does the research which compares human resource policies and practices in different countries tell us about why there are cross-national similarities and variations in approaches to managing people? Abstract The topic following discusses the impact of cross culture on people and their performance in organisations. In the process, we discuss impact of culture on management, effect of cultural differences on organisations, types of communication in different cultures and their perspectives, international negotiations for successful business, impact of policies on parent companies and their subsidiaries, and managing performance in cross-cultural and cross-national teams. The paper highlights key role played by HRM team in creating cultural synergy, and the extensive research carried out by various scholars in the field. Introduction A thorough understanding and analysis of human resource policies and practices n different countries based on the similarities and variations of national and organisational cultures are required for effective management of people. Extensive research work and evidences in the areas of human resource policies and practices with respect to approaches used in managing people are attributed to various determinants of cross-national similarities and variations. As explained by Professor Hofstede (in 2007) about the interrelations between corporate cultures and national cultures, and their link to the personality traits and national cultures in an exclusive interview with Fink, G, organisational cultures within the same area differ from national cultures in great proportion and had no pattern of correlation with any culture. Hofstede’s explanation was based on a research conducted by his team in various organisations in Denmark and Holland involving people at all levels and categories. A very interesting conclusion made by the team is the relationship between levels of human learning with respect to various stages of their lives, which can be attributed to the existing differences between nations and organisations; where, the study relates organisational cultures to practices being followed upon links with organisations and national cultures to the values that are acquired from childhood. Their project revealed many similarities with respect to the national culture dimensions among the countries such as power distance, uncertainty avoidance, individualism/collectivism, masculinity/femininity, long/short term orientations. However, the project arrived at six mutually independent dimensions of organisational cultures that were already explained-they were process-oriented versus result- oriented, job-oriented versus employee oriented, professional versus parochial, open systems versus closed systems, tight versus loose control, pragmatic versus normative. (Hofstede, G & Fink, G. 2007) Hofstede’s analysis, with respect to culture, states that organisations’ and nations’ economic activity and management are largely influenced by social values. The studies proposed that different contingency variables such as focus on similarities between societies and focus on differences between societies, rather than ‘culture’ explain differences between organisations in different societies. His study revealed that work-related values between management and organisation are culture-bound and can be used to mediate ‘social norms’ of an organisation between the people and their behavioural outcomes. (Rowley, C & Lewis, M (ed) 1996 p 121) A very important point stressed by Hofstede (2007), in this regard, is the influence of national culture reflecting on the corporate culture of its founders. Nationality, in the form of values of founders gets converted into practices of the followers. National culture and organisations Also, Hofstede and Usunier quoted (2003) that ‘it is essential that negotiators share the national culture and values of the country they represent, because otherwise they will not be trusted by their own side’ The core component of national culture are values which are preferences of individuals, with their roots embedded in their background, upbringing, learning, education, societal norms, traditions, and customs; and hence, the inherent character of values that exist cannot be influenced or easily adopted, either, by people of different set of values. Other set of national culture are the habits or rituals, ways of behaviour and are more inclined towards feelings, and have the scope of adoption. Other than national culture, ‘professional culture’ component is said to exist in international organizations and their negotiations. The professional culture includes the common symbols learned and understood by all parties involved, and are more superficial. These form a ‘requirement’ in the negotiation factor in order to progress, and vary with the discipline involved such as for diplomats, bureaucrats, politicians, business and media persons etc. (Hofstede, G & Usunier C, J 2003. p138) Influence of cross cultures on leadership Cross-cultural research on leadership competencies, as explained by James Hunt, in his paper ‘A Comparative Analysis of the Management & Leadership Competency Profiles Reported by German, US and Australian Managers’ emphasizes the differences in Leadership as perceived through about 91 management and leadership competency items across three nations. His studies revealed about 70% differences in their approaches from each of the three nations. A broad difference was seen among managers of Germany, and managers of USA and Australia. The US and Australian leadership was more inclined to motivation and team-building than to managerial functions such as short-term planning and establishing control systems. Conversely, sensitivity towards national differences and avoiding spontaneous decisions where appropriate, were more highly regarded as central to managerial effectiveness by German executives. These variations in leadership were assumed to be adopted from the inherent national culture that had been deeply rooted in their values (Connell, J, Cross, B & Parry, K p 141). Rowley et al’s (cited in Budhwar, P (Ed) p 4) studies identify differences in managerial attitudes, values, behaviors, and efficacies exhibited across different national cultures. Studies in the Asia-Pacific region show ‘soft convergence’ due to globalization. Evidences of implementation of global standardized HRM practices and policies with local adjustments due to pressures of globalization are also seen. According to Budhawar and Sparrow (2002), the other factors such as population, geography, economies, economic development phase, labor markets, sociocultural, legal and political setup and HRM systems in these regions contribute to the hard convergence. Consequences of cross-culture, HRM perspective Human resource scholars Budhwar and Debrah in their paper on Fourth Asia Academy of Management Conference have discussed regarding the developments specific to the Asia-pacific region with a HRM perspective. The same is being extensively studied by various management researchers like Japanese management system (Sano et al, 1997), HRM in Singapore, Hong Kong, Taiwan and Korea (Rowley, 1998), aspects of Chinese management (Warner et al, 2002) viewing Asia-Pacific regions as the emerging markets of the World owing to the number of goods and services produced in these regions(cited in Economist, 2003). Considering these facts, and keeping in mind the differences and similarities that exist in cross-cultural nations and organisations, HRM practices and policies need to be standardized to meet the global standards. Research has found evidences of successful implementation of global standards and failed situations due to differences. For example, Kidd et al (2001) detected failure of foreign firms in trying to implement their head-quarters’ HRM practices in their Chinese subsidiaries. Gradually, there was transition in the Chinese HRM practices. A framework of Chinese HRM practices was designed which had ten dimensions such as rules, behaviour, managerial role, key managers, selection, pay, conditions, labour management, job design and training. Each dimension was defined with respect to personnel management /industrial relations and HRM perspective. A detailed survey on various groups of Chinese organisations also revealed a possible progression from past divergence to future convergence. (Rowley, C, 1998 p 26-29). It can thus be seen that convergence/divergence is not static, but dynamic phenomenon. Impacts of societal culture on management in Indian contexts can be seen on functions such as staffing, communication, leadership, motivation and control. Staffing for top managerial positions, especially in private sector, is generally from familial, communal, and political considerations. The strength of this impact can be seen through generations. Sparrow and Budhawar (1997) attribute motivational tools for people in these setups to be social, interpersonal, and even spiritual sometimes. (Schuler, R & Jackson S, 2007 p 295) Once explained by Budhawar and Sparrow (2002) that high degree of convergence was seen in research conducted in few Indian and British firms in the manufacturing sector in terms of strategies related to increased integration between HRM and business strategies of both the nations’ firms, increase in level of development to line managers; while both the sides followed different strategies depending on different sets off cross cultural influences. As a result, differences present in the strategies of different cross-national contexts were revealed. When similar HRM solutions were implemented in different set of cross-cultural contexts, the results produced were entirely different. The resulting outcomes are attributed to the type of industrial relation systems, operation of labour markets, and changes in business systems (Budhawar, P & Sparrow, P. 2002. pp 599-638) After this, evidences of increased success rates have also been seen upon successful implementation of global standards of HRM practices. Similar concept is clearly explained as a ‘neo-institutionalist’ theory in defining Greater China for understanding the nature of HRM which outlines three categories of explanation i.e., culturalist, traditionalist, and technology-fit HRM, the theory laying stress on behaviour, technology and structure emerging in organisations and these being accepted and widely used in organisations and nations. A minute emergency of such perspective gets widely accepted as it helps to identify developments in organisations and nations (Rowley, C & Lewis, M, 1996 p 12). A few nations had developed their own unique HRM practices based on their business groups which had deep roots in core institution such as family business, Confucianism, and socio-cultural background of their respective societies (Rowley, C 1998 p 11). Similar patterns of business management and human resource personnel placement can be seen in the Indian traditional family businesses. However, competition and economic crisis of late 1990s challenged success of such institutions, and this gave birth to rationalized HRM being adopted (Tsui-Auch and Lee, 2003; Tu et al., 2002). Diffusion and reverse diffusion Another aspect of existing multinational cultural influence on organisations has been seen in diffusion of human resource management practices from one organisation to another. This process has been observed in two ways: one being ‘forward diffusion’ explained as transfer of practices from home country to plants in other countries (explained in works of Edwards 1998, 2000 & Ferner/Varul 1999, 2000) and another being reverse-diffusion (RD) wherein practices from foreign subsidiaries were transferred to native organisations. In either case, deliberate transfers happen as a part of best practice sharing, leading to mutual benefit of all the organisations and people involved in terms of enhanced efficiency, improved initiatives, adapting to international markets-thus, making organisations stay in tune with globalization and confidently face the challenges thereby. Sometimes, the practices adopted may even have negative consequences if they are not verified with respect to existing organisational culture. (Edwards, T & Ferner, A. 2004 p 49-51) Impact of culture on innovation An extensive hypothesis regarding culture’s consequences on innovation in global versus multidomestic nations is explained by Allred, B and Swan Scott, K developed from data involving about 536 companies across ten countries competing in global and multidomestic countries identified by Ghoshal and Nohria (1993). The tests based primarily on Hofstede’s (1980) national culture dimensions, and examined their behaviour to requirements of innovation in global and multidomestic nations. Innovation, which is described as one of the determining factors of success of an organisation at the national level, is determined by demands of consumers, existing competition and availability of advanced systems at the international level. Culture, on the other hand, as explained by Hofstede (1980) and others, refers to learned behavioral standards, influenced by personal values, norms, activities, attitudes, cognitive processes, feelings, ideas, reactions and moral values. These factors, viz a viz cultural dimension identified by Hofstede play a role in both global and multidomestic industries to a large extent. (Allred, B & Scott Swan, K 2004 pp 81-105) Storey’s (2001) perspectives on organizational culture revolve around minimizing cross- national variations in order to level cross-cultural objectives in multinationals which play a vital role in their success, and require high effort in managing culture, bringing an integrated action on selection, communication, training, rewards and development, and restructuring and job re- designing to allow developed responsibility and empowerment. All these put together would be the challenges in contexts of cross-national and cross-cultural management operating in multinational companies, thus enforcing HRM to establish, reinforce and transmit organisational culture (Thomson, R. p11) Role of human resource management in multinationals Three main roles of HR function in multinational setup have been identified: first is to identify the roles HR function needs to carry out against the ambiguity and tension given by other departments to HR department, secondly to strike a balance between centralized and decentralized processes, and thirdly to explore newer avenues of operating in international firms while adding higher value to their function. In the context of cross-national and cross-cultural organizations, the role of corporate HR function in supporting globalizing strategies as recognized by Ghoshal and Bartlett (1990) argued that the recruitment, training and management development of managers was crucial to MNC success and infuse organizational culture. Brewster et al (2002) identified four major roles: talent management, management through global networks, development of intellectual integration through the management of knowledge, and global e-enablement of HR Processes. Scullion’s work on international management (1995) also emphasizes development of senior management teams with international experience as a prime responsibility of the corporate HR, who will then be able to drive a similar culture among the people The abilities to capture and promote diversity and to have a clear understanding of cultural issues have been seen as key HR disciplines (Stahl, G, & Bjorkman, I, p 51). Many international HR operations have stressed on reducing variations between the operating units of various setups, in terms of finance, business, rewards or sanctions. To achieve this, they proposed to create appropriate functions suitable for the parent company and subsidiaries, and the parent organization acquiring its control, and others acting in coordination. Scullion and Starkey emphasized role of corporate HR in international firm to be able to decide situations of integration and differentiation and in turn be able to cascade this learning to the other units of the organization appropriately. As explained by Ghoshal and Bartlett (1990), the process of formalization and centralization will aid in reducing variation in practices, and will strengthen function of corporate HR (Stahl, G, & Bjorkman, I, p 54) Performance management and feedback in multinational companies Implementation of global performance management system is difficult as it depends on factors such as nature of overseas job, support from and interaction with the parent company, nature of environment, and degree of expatriate and family adjustment (Cascio, p. 178) According to Triandis (1998), culture has its impact on people’s social behaviour and their actions. It has embedded assumptions that in turn influence thinking, emotions and the actions without their knowledge. For organisations and nations who fail to recognize and appreciate this fact, international business would be disastrous. He also states this in contexts of vertical and horizontal individualism and collectivism, which emerge as a result of the type of society and culture influence on individuals’ behavioural trends. According to him four universal dimensions of cultural impact are ‘definition of the self,’ ’structure of goals,’ emphasis on norms versus attitudes’ and ‘emphasis on relatedness versus rationality.’ The two important implications and patterns of variations present in the differences of culture are goal setting and reward systems with respect to individual versus team-wide or organisation-wide, and communications with respect to gestures, eye contact and body language in high-context cultures versus precision with words in low-context cultures. Studying these variations, Cascio, W (p186) has made a few interesting propositions- managers in individualistic and collectivist cultures find excuses for poor performance; Individualistic and Collectivist cultures prefer individual goals and rewards and team goals and rewards, respectively; participative approach in performance management is more common in horizontal culture than vertical culture; methodology of performance feedback will be different at different levels, though the frequency may be the same. For example, some cultures (in India) view it disrespectful to question one’s supervisor’s decision. Self-appraisals were used more frequently in Western than in Eastern cultures. Though self-appraisal systems have been introduced in many multinational companies in the East, their validity considered to be lower in Eastern than in Western cultures (Cascio, W. p 184-186). Performance feedback is yet another important aspect of performance management, and is undoubtedly influenced by culture. While, a two-way performance feedback is given high importance in individualistic cultures such as US, UK and Australia, collectivist nations such as Korea, Guatemala, and Taiwan treat it as an unacceptable behaviour and they use indirect methods such as communication through intermediary source to deliver feedback. A high level of sensitivity has to be applied to the process of performance management and feedback by understanding local customs and appropriately using the methods suitable, and this is a challenge for the parent company as it would involve many modifications and adjustments from their end for implementation of these processes. From a corporate point, the corporate principles and core programme should be reflected in human resource management practices throughout the company but with adaptations depending on local culture and institutions. Other factors influencing globalization Evidences of failure of Human Resource policies in a few cross national diffusions have been reported, particularly influenced by the differences in opinions of socio-cultural forces and governmental involvement. While contribution of multinational companies to the improvement of nation’s economy cannot be ignored, the situation also requires great support from national government in acquiring a macro-economic development. This point can be explained in context of Shell, which was a part of corporate social responsibility, and was operating in Nigerian areas to alleviate poverty. On one hand they are aimed at addressing the disadvantages of the economy, on the other hand they may be heading towards damaging the community, politically, socially and economically, depending upon the government’s performance at the macro- economic level (Thomton, J. 2001). Another such observation can be made from the Mexico- IBM proposal of 1985 which was later rejected by IBM of Mexico’s control. While this was a result of kind of negotiations that were made, nevertheless a matter of multinational enterprise- government relations, international corporate strategy, contemporary government attitudes towards national computer industries, and bilateral US-Mexico relationship. While international business negotiations involve components such as multinational enterprise bargaining power and governmental review of foreign investments, a thorough research on the issue revealed cultural aspects of negotiations also played a role in this dismissal. It was learnt that Mexicans placed greater emphasis than Americans on quality of relationships which could have laid foundation for considering IBM and Mexico’s strategies, relationships, and behaviours. However, success in accomplishing the objective was reported, in both IBM and Mexican favor, after a lot of debate and policies laid down for mutual benefit of all parties involved, considering the competition and challenges involved, corresponding with the interests of the groups inside and outside and more concerned with local industry. (Weiss, S 2003 p 327-362). Conclusion and way ahead In conclusion, an incorporated scaffold demarcating the significant aspects associated with national cultures, conditional differences, and organisational and HR policies and practices is required to highlight different roles human resource management needs to play in people management. The arbitrary element of leap for Hofstede’s ultimate research related to culture’s influence on nations organisations that came from his analysis on IBM’s data and lead to his employment, which paved way for his insights into the patterns of responses and his further research thereon, has been the fundamental essence of bringing globalization to its present status. This awareness has given a different outlook to ‘cultures’ of different nations and have from then on been aligned, like iron filings along the magnetic lines of the cultural dimensions. For the future, propositions related to connection between culture and personality is yet to be discovered (Bing, W. 2004, pp 80-87). Whatever be the situation, fact that culture and communication are inseparable cannot be ignored. For example, American’s view of negotiation to resolve conflicts is highly appreciated in the US, whereas Japanese or Chinese do not appreciate it (Zhang, T & Hui, Z 2008 pp 103- 109). Intercultural communication involving different nations and cultures should consider differing perceptions, attitudes and interpretations. A thorough awareness and research in these fields will help in tackling the difficult negotiation issues involved influenced by intercultural communication. Compositions of negotiations need to be understood by all parties involved in order to achieve the objective at the cross-cultural or international levels. References Budhwar S, P (ed.), Managing Human Resources in Asia-Pacific, Routledge Taylor and Francis Group. Retrieved from : http://books.google.co.in/books?hl=en&lr=&id=4DMrY3D7wGMC&oi=fnd&pg=PA269&dq=Budhwar,+Pawan+S.+and+Khatri,+Naresh+(2001)+HR+practices+Britain+India+the+international+journal+of+human+resource+management&ots=asQtqBc7Nc&sig=EYXbTas9U5J0YezYkFPWxY5Vp54#PPP1,M1 Cascio F, W. 2006. Global Performance Management Systems. 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Viewed 26 December 2008 http://www3.interscience.wiley.com/journal/107629416/abstract?CRETRY=1&SRETRY=0 Zhang, T and Zhou, H. February 2008. The Significance of Cross-cultural Communication in International Business Negotiation, International Journal of Business and Management, Vol 3 No 2. pp 103-109. Viewed 28 December 2008 http://www.ccsenet.org/ijbm/IJBM200802.pdf Read More