The Impact of Culture on Business and Management in Different Cultural Contexts - Research Paper Example

International Human Resource Management Introduction Identification of cultural diversity has opened up new avenues and challenges for business and provided wider space for management researchers and psychologists to understand human behaviour in relation to business and management. On this concept, Dowling et al’s (2008) elaboration on international HRM deals with three perspectives; firstly cross-cultural management and human behaviour; secondly, different HRM systems in various countries; and thirdly, aspects of HRM on multinational companies. Based on these elaborations, various dimensions impacting management and business explored in three main researches by Hofstede (1980), Trompenaars and Turner (1993) and House et al (2004) have been applied in this study to understand impact of culture on business and management in different cultural contexts and managerial functions. A brief of these models: Hofstede (1980) refers to culture as a collective mental programming of a group of people belonging to one region, and is difficult to change; in such settings specific culture becomes institutionalized in their family and educational structures, religious organisations, government, law, literature and even scientific theories. This is highly apparent among people belonging to one nation, in the form of national culture, which manifests itself even in organisations. Through Hofstede’s and Trompenaars’ dimensions, it has been possible to understand how cultural differences impact management and leadership styles in different regions of the world; in addition, these analyses have helped in understanding why certain HRM practices and policies have differing impacts on employees of one multinational company operating from different regions of the world. One step further, House and his associates have extensively studied cultural variations and their impact on societal functioning and leadership based on study conducted on 62 nations, resulting in development of additional dimensions. House et al.’s (2004) project emphasizes the need for effective international and cross-cultural communication, collaboration, and cooperation for effective practice of management and also betterment of human condition in order to thrive in the globalizing world markets and cultures. A thorough understanding and analysis of human resource policies and practices in 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 have been extensively explained in works of Hofstede, Trompenaars and House et al. Hofstede’s (1980) project revealed many similarities with respect to the national culture dimensions among different 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 such as 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. Trompenaars’ (1993) extensive work on similar grounds has also exposed impact of culture on business and managing people in six different ways, namely, universalism-particularism, individualism-communitarianism, time orientation, neutral versus affective, specific versus diffusive, achievement versus ascription and relationship to nature (Ahlstrom & Bruton, 2009). House et al’s (2004) nine dimensions, derived from their GLOBE project, include future orientation, gender equality, assertiveness, humane orientation, in-group collectivism, institutional collectivism, performance orientation, power distance and uncertainty avoidance. Understanding HRM through each of these dimensions is an extensive activity, however, all the three propositions have overlapping dimensions, and have been commonly explained through impact of these dimensions on management, leadership, HRM policies and practices, innovation and growth and globalization perspectives. Influence of culture on Management: To understand impact of culture on management styles, Hofstede’s (1980) work on the relationship between national culture and organisational behaviour has provided ground-setting principles to understand impact of culture on management. As stated by Hofstede (1980; p.42), ‘many of the differences in employee motivation, management styles, and organisational structures of companies throughout the world can be traced to differences in the collective mental programming of people in different national cultures.’ Hofstede’s power distance dimension explains the extent to which authoritative members in management and their subordinates are distanced, with the distance accepted from bottom to top. This distance is high in Latin, Asian and African countries and low in Germanic and Anglo-Saxon nations. Prevalence of hierarchical organisational structure in Asian and African organisations can be attributed to this dimension. Considering the individualistic-collectivistic dimension, organisational structuring based on teams and groups common in the Western and other developed countries can be explained. At the same time, management in these countries focuses more on motivation and team building than on short-term managerial functions and establishment of control systems as seen in most of the Eastern nations’ management styles (Connell, Cross & Parry, 2008). Applying Trompenaars’ findings, (Mead, 1998), Universalist cultures emphasize rules, laws and generalizations whereas particularistic cultures consider extent of relationships. For instance, Universalist nations such as Germany when negotiating with particularistic nations such as China or India will have to rely on the depth of their relationship based on trust; signing mere contracts would mean nothing more than documentation. Rowley et al’s (cited Budhwar, 2004) studies identify differences in managerial attitudes, values, behaviours, and efficacies exhibited across different national cultures. On the convergence-divergence perspective, studies in 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, labour markets, sociocultural, legal and political setup and HRM systems in these regions contribute to the hard convergence. In short, globalization brings critical challenges to managers, related to cultural contexts, which need to be identified and appreciated in their own identities. This would require the managers to gain an understanding of cultural values and practices and a flexibility to adapt. Ehrlich (2002) quotes the words of a Swedish CEO as, ‘Global managers have exceptionally open minds. They respect how different countries do things, and they have the imagination to appreciate why they do that way…Global managers are made, not born’ (cited House et al, 2004; p.5). Influence of culture on Leadership From a leadership perspective, cross-cultural research on leadership competencies, as explained by James Hunt, in his paper ‘A Comparative Analysis of the Management & Leadership Competency Profiles Reported on German, US and Australian Managers revealed about 70% differences in their approaches from each of the three nations. The US and Australian leadership is more inclined towards 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, are 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, Cross & Parry, 2008). Introduction of individualistic motivational schemes or practices in countries such as Germany or Japan may not be successful due to their communitarian cultures. Multinational teams consisting of individuals from highly neutral and highly affective cultures, like that of Japan, will have to be very careful while dealing with each other to avoid any misunderstandings and misinterpretations of expressionless dealing due to their nature. Managers of specific cultures such as Denmark should be careful while dealing with people of diffuse cultures such as Russia as a face-to-face feedback by the former may be regarded as loss of face by the latter party. East-Asian nations have 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 & Lewis, 1996). In such settings, equipping managers with the cultural aspects of the company will not help unless cultural paradigms are adopted in the completeness. In countries such as India, where hierarchal culture predominates, a young manager from the native company of a multinational corporation could face challenges in handling the business and people in a style that is influenced by his/her own culture. Lawler, Walumbwa and Bai (2007) sum up different researchers’ observations indicating culture influences leader behaviour and determines what is acceptable and effective in specific contexts. One of the researches found that different leadership behaviours yielded varying results in a group of six countries; charisma, contingent reward system and supportive leadership had similar impact whereas participative, directive and contingent punishment leadership behaviours yielded distinct results. House et al.’s (1999) GLOBE project also revealed similar trend of differing patterns on specific leadership behaviours across different nations. HRM Perspective: Considering HRM, developed nations have recognized the potential of emerging markets in Asia-Pacific regions and thus carried out extensive research to understand implications of culture on business prospects. HRM perspectives specific to Asia Pacific region has received much attention from developed and developing nations; noted works in this area include Japanese management system, HRM in Singapore, Hong Kong, Taiwan and Korea, aspects of Chinese Management (Warner et al. 2002). Considering these facts, and keeping in mind the differences and similarities that exist in cross-cultural nations and organisations, standardization of HRM practices and policies can help globalizing businesses to a large extent. Research has found evidences of successful implementation of global standards and failed situations due to differences. For example, Ferner (2009) points at failed instances of foreign firms in trying to implement their head-quarters’ HRM practices in their Chinese subsidiaries; also attempts to gain centralized control in foreign subsidiaries hinders sustenance of business relations in the offshored countries. Issues related to performance appraisal system emerged when applied to Chinese subsidiaries because of low accountability and ownership of goals by Chinese counterparts; this is attributed to lack of involvement in goal-setting , hierarchical structures, and unfavorable feedback processes. These issues thrust formation of Chinese HRM practices with dimensions aligned to Chinese way of working: such as rules, behaviour, managerial role, key managers, selection, pay, conditions, labour management, job design and training. Each dimension had to be 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. (Budhwar, 2004). 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. (Mayrhofer & Brewster, 2007). Budhawar and Sparrow (2002) pointed that high degree of convergence was seen between 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; however, both the sides followed different strategies depending on different sets off cross cultural influences. 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 & Sparrow, 2002). Nevertheless, successful implementation of global standards of HRM practices have also been evidenced based on neo-institutionalist theory; here, the behaviour, technology and structure in organisations come to being, become accepted and then are widely used in different organisational and national settings. A minute emergence of such perspective gets widely accepted as it helps to identify developments in organisations and nations (Rowley & Lewis, 1996). On globalization: From a globalization perspective, cultural differences play a significant role in business and management. Culturally-conditioned interpretations are inevitable in the current economic and organisational context (Thiry-Cheques, 2005; p.590). The contemporary principle operating on all markets is globalization, and managers are required to focus on changing markets, labour market behaviour, economic behaviour etc. However, what is more important according to Mead (1998) is a focus on the cultural shift that further triggers market behaviour. Mead asserts that ‘the company that recognizes the interactive processes between environment and culture is well-placed to out-distance competitors, because cultural shifts present opportunities for growth depending upon the company’s business’ (1998; p.53-54). House’s (2004) contention is that globalization of corporations does not intertwine their national cultures; on the contrary, these differences in cultures pose newer challenges and opportunities in business. Conclusions In conclusion, national culture has emerged as a critical element of business management in the context of multinational organisations and its impact compounded in the process of globalization. The three models of cultural impact on HRM studied in this process, i.e. Hofstede, Trompenaars and House et al.’s, focus on explaining these differences from different dimensions. These models focus on explaining how conditional differences and national cultures impact HRM in various nations. This wakeful knowledge has provided ground for a different viewpoint of human behaviour and business performance impacted by societal and cultural norms and beliefs. From a globalization perspective, organisations that acknowledge differences communication, attitudes, perceptions and behaviour, defined by culture, will be in a better position to tackle issues hindering overseas businesses in the contexts of international HRM. References Ahlstrom, D and Bruton, G.D. 2009. International Management: Strategy and Culture in the Emerging World. Ohio, U.S.A: Cengage Learning. (Ch: 2, pp: 34-66) Budhwar S, P. 2004. Introduction: HRM in the Asia-Pacific Context. In Managing Human Resources in Asia-Pacific. Oxon: Routledge Taylor and Francis Group Budhawar, P and Sparrow, P. 2002. Strategic HRM through the Cultural Looking Glass: Mapping the Cognition of British and Indian Managers. Organisation Studies. 23(4), pp 599-638. Connell, J, Cross, B & Parry, K. 2008. Leadership in the 21st Century, where is it leading us? International Journal of Organisational Behaviour. 5(2). pp 139-149. Dowling, P.J, Festing, M and Engle, A.D. 2008. International human resource management: managing people in a multinational context. 5th ed. U.K: Cengage Learning EMEA. Ferner, A. 2009. HRM in Multinational Companies. In Bacon, N.A, Wilkinson, A, Redman, T and Snell, S (Eds.) The SAGE Handbook of Human Resource Management. London: SAGE Publications Ltd. (Ch: 32, pp: 541-560). House et al. 2004. Culture, leadership, and organisations: the GLOBE study of 62 societies. SAGE. Lawler, J.J, Walumbwa, F.O and Bai, B. 2007. National Culture and Cultural Effects. 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