Cultural Challenges in International Project Management illustrated by comparing Germany and the US - Research Paper Example

“Cultural Challenges in International Project Management illustrated by comparing Germany and the United States of America” Table of Contents Table of Figures 1 1.0 Introduction 2 2.0 Defining Culture 3 3.0 Influence of Culture in International Projects 4 4.0 Cultural Dimensions 7 4.1 Hofstede Model 8 4.2 GLOBE Cultural Dimensions 10 5.0 Country Profile 11 5.1 Germany 12 5.2 United States 13 6.0 Comparing Management Styles 14 7.0 Case Study Analysis 16 7.1 WalMart’s Failure in Germany 17 7.2 Challenges in Daimer and Chrysler Joint Venture 18 8.0 Enhancing Cultural understanding 19 9.0 Conclusion 21 Bibliography 22 Table of Figures Project Management integration model 5 Cultural Risks on management projects 7 Country Clusters according to GLOBE 11 1.0 Introduction The 21st century business environment is driven by the trend of globalization. Organizations have an untapped pool of global recourses in front of them and in the interest of increasing efficiency, productivity, growth and profitability they can no longer chose to ignore it. A lot of credit for this global outlook goes towards the enhancements in technology which have made it easier than ever before to communicate and travel with ease. More importantly technology have made knowledge transfer possible over geographical boundaries leading to a greater need as well as the possibility of collaborating on international projects which make use of the expertise of people situated all over the world. For aspiring organizations there are many vehicles for entering into the international arena. From simple outsourcing needs, to shifting operations to cost effective regions; joint ventures, acquisitions, green field projects multinational strategies- an organization can choose to go with the option that provides the level of interaction, cultural integration and commitment they are comfortable with. This is a critical decision as international projects, even as they are improved and convenience by the modern technology; they are also hindered by the age old human and cultural factors. Cultural challenges are proving to the biggest problem for organizations in the process of the globalization. Factors like work ethics, management styles, motivation level and commitment are all inherently linked to the national and organizational cultures and there has to be the correct balance of these factors for the human resource to work optimally. With global teams experiencing spatial distance and communication problems it can be very difficult for the top management to gauge their reception to the overall strategy and idea. It also hinders the built up of trust and honest communication, often creating problems in even the best thought of ventures. For the purpose of this paper, the two countries which will be in focus are Germany and the United States. Both are economic power houses in their own right, with distinct cultural and organizational characteristics- defining these characteristics will help shed light on the impact of cultural challenges faced by teams which attempt to work on joint projects from these countries and they may be negated. 2.0 Defining Culture The first step in any cultural study is to attempt to define what exactly is culture. Due to the varied and basic intangible nature and the existing dissimilarities in the world’s cultures it is a very difficult task to correctly define culture. In literature there are over 300 widely accepted definitions of culture, with prominent researchers like Taylor, Down, Hofstede providing their own versions. (Sennara & Hartman,pg2, 2002). However all of these definitions contain some similar elements which h can be grouped together to form an encompassing idea of what a culture is. Sennara and Hartman describe culture as sets of shared beliefs, attitudes, values and ideas which make up the core essence of a culture and are accepted by the majority of the population. These shared values then further become a part of the accepted behavior concerning family, social culture, law and other noticeable areas. There are three determinants of any culture - Human Nature which his universal and refers to biological and physiological needs, Cultural traits which are distinct for every nation and formed through traditions and history and personality which differs for every individual and may not be in direct complement to the cultural traits (pg3, 2002) The culture is also the major influence for determining the ‘work culture’ and ethics of the nation and the reason why organizations place so much importance on understanding the culture as a whole. From managements perspective, Mario Eberlein divides known culture into the three levels of National, Organizational, professional level (pg29, 2008). These are the shared elements of culture at each level of grouping and all three are of concern to the global organizations. In this regard, we get another definition of culture which is much more apt for managerial research and project management: “culture is the way in which a group of people solves problems and reconciles dilemmas”. (Eberlein, pg28, 2008). 3.0 Influence of Culture in International Projects “Cultural patterns at work reflect cultural patterns in the wider society. Project managers share the cultures of their society and of their organization with their project teams” (Anbari et al, 2009) Eberlein, M., 2008. Culture as a critical success factor for successful global project management in multi-national it service projects. Technische University Dresden, Germany. Journal of Information Technology Management, Volume XIX, Number 3, 2008.pg 39 Project Management is defined as the science and art of organizing the different parts of a project; it involves providing a clear leadership for the core team as well as coordinating the efforts of all related components to achieve one clear goal. All projects have the shared characteristics in that they have a beginning and end; resources are required and there are often limits to resources or funding available. Stages of the project include defining the scope, planning and organizing resources available, execution of the plan, control and then the final result. Throughout these steps good project managers are able to create effective teams which have solidarity and a common goal to work towards together. It is essential that team members trust, respect and communicate with project managers to ensure a proficient workplace and productive attitude towards the projects. Projects are bound to be more successful when the people working on it share the same kind of sentiments, attitudes and communication rhythm. Problems can be solved more easily and consensus reached quicker. But with the trend moving towards international projects, project management has started to become a more complicated job. When people from different cultures and regions are attempting to work on one project problems with communication, professional relationships and differing attitudes make it much hard to steer the project towards success. Analyzing the definition of culture described in the last section, it is easy to understand why different cultures would make it impossible for a group of people to reach productivity in an efficient and effective manner. If the manner of thinking, negotiating, communicating and the perception of a group of people is entirely diverse and there are no proactive managerial initiatives in place to reconcile the diversity and direct the efforts in one direction then a viable solution can not be reached. It’s reflective of the old fable of the blind men who each touched a different part of an elephant and decided on his own that each was either touching a wall, a snake, a fan or a trunk. If they could have communicated with each other the ‘big picture’ would have appeared to each, but without interacting they were in the dark. The main theme in any cultural study is the importance of communication, which leads to trust and establishing interdependence. However, communication is a many faceted process, involving verbal as well as non-verbal communication and the intricacies of the process are defined by the culture. Someone who is not well learned about a culture can easily cause unintended offense during routine dealing leading to great repercussions. The problem is further complicated by language barriers; untrained managers often have no practice or knowledge of native cultures leading to communication distance and an inability to create professional relationships. Another important area of concern is employee motivation and job satisfaction. Culture plays a large role in determining the causes of motivation. A country where the people are risk averse, job security would be a very high motivator as against a nation where people are aspirers and would prefer greater monetary benefits. Nuances like these in the human nature and cultures make it essential that organizations correctly understand the culture of the people they are working with in order to design international strategies which would resonate well and provide results. When the people are motivated towards the same cause and understand the needs for collaboration and meaningful communication, nations can successfully work towards joint projects. A quick example would be the Y2K date change, when diligent multi-cultural teams worked together within a time limit to “to prepare and remediate computer systems, outdated software code, telecommunications networks, imbedded systems, and other infrastructure for the millennium date change.” (Anbari et al, 2009) But when they is no strong unifying factor behind such projects it is prudent to closely analyze cultural dimensions and work hard to smoothly merge work cultures and needs. 4.0 Cultural Dimensions Cultures have been studied in great depth just like any other area in arts, literature and management. The main purpose behind these studies has been to assign certain Sennara, M. & Hartman, F., 2002. Managing Cultural Risks on International Projects. Proceedings of the Project Management Institute Annual Seminars & Symposium October 3–10, 2002 • San Antonio,Texas, USA.pg3 dimensions to the cultures that exist in the world and categorize each nation according to these dimensions. This makes it easier not only to design organizational strategies when moving into a new region and working with a diverse group of people, it also allows organizations to identify compatible countries with the similar cultural dimensions to work with. While on an organizational and individual level, there will be some discrepancies in the described culture mostly the act as basic guiding point for the culturally unaware management team, as the foundation for building up knowledge about the other culture. 4.1 Hofstede Model One of the most critical bodies of work in the study of cultures as impacting the work environment are Hofstede’s Cultural dimensions. The first work of it’s kind the research attempted to categorize empirical data taken from 60 different countries into observable and measurable cultural dimensions. Hofstede stated in 1991 that “Although the variety in people’s minds is enormous, there is a structure in this variety which can serve as a basis for mutual understanding” There were four categories as described by Hofstede. These included Power Distance, which is the degree to which a nation accepts the difference between power levels existing in the nation and any particular organization; Uncertainty avoidance describes how risk averse a nation is and whether they prefer structured decisions and regulations. Masculinity Vs Femininity characteristics divide nations into soft and hard attributes as pertaining to humanity and social compassion or professionalism and achievement, while Individualism vs. Collectivism tells whether a nation favors the achievement of the individual as opposed to achievements and improvements of the whole society. Hofstede’s categorization of the different countries was backed by detailed research and data and was eagerly adopted by the managerial community. However, in recent years some criticisms have been leveled against the research as being too western oriented and not specific enough. Particularly there has been a lot of debate on the degree of individualism and collectivism which Hofsted ascribed to different nations and how it applies on to the social and individual level 4.2 GLOBE Cultural Dimensions In 1991, Robert J. House of the Wharton School of Business, University of Pennsylvania envisioned the Global Leadership and Organizational Behavior Effectiveness" (GLOBE) Research Program in an attempt to build up on hofstede’s dimensions and update them for the modern world. The findings were published in 2004, with data taken from over 160 countries, introducing 5 more dimensions and describing the types of managers or leader styles most suited for each nation. Some of the new dimensions introduced included humane orientation vs performance orientation, whether work place compassion and employee satisfaction was more important or the worker performance and productivity. Collectivism was also divided into Social collectivism and Individual unit collectivism- did the nation celebrate achievements on the level of families and small groups or on an organizational level? and future orientation- how concerned is a nation with building up and saving for the future. These additional dimensions help to describe culture in a more thorough way. Two important features of the GLOBE study were the clusters of countries, designed by similar dimensions or similarities in culture and the value and practices scale which describes both how much these dimensions were ranked in real life work environments and till what rank the people would have ‘liked’ them to be- the values. These gave a more in depth look of the nature of these cultures and more factors to consider when constructing strategies for international projects. While there are some problems with these cultural studies such as the apparent disparity in data for ‘uncertainity avoidance’ a dimension which both the studies describe (Venaik & Brewer, pg9, 2008) and the lack of agreement over some of the assigned rankings for nations, they are never the less very important tools in determining the challenges which organizations face with different cultural settings and how to overcome these. 5.0 Country Profile When comparing any two countries for cultural cohesion and collaboration, the cultural dimensions can be extremely helpful as a basis of study. USA as one of the remaining super powers of the world has enormous economical clout and a distinctive work culture which is both appreciated and criticized for its mannerisms in the rest of the world. Germany is a potent European and global force who have built an economy on the principles of providing precision quality and a work environment that favors competency with reliability to follow orders. Discussion their respective cultural dimensions can shed more light over whether their work styles are conductive toward joint projects and ventures. Hoppe, M.H., 2007. Culture and Leader Effectiveness: The GLOBE Study, pg2 5.1 Germany According to the Globe study Germany is ranked as a nation which is individualistic with collectivist element, individual achievements are appreciated and workers are directed to be competent and proficient in their respective fields but as a nation there is still a sense of collectivist growth, specially on organizational level where loyalty is a most desired trait (Brodbeck et al, pg 20-22, 2002). This is included with a sense of high assertiveness and high uncertainty avoidance which leads to structured decisions and a high regard for the superiors in organizations. The Germans prefer stability as opposed to rapid change; an attitude developed from the economic breakdown after the two world wars and hyper inflation of 1920s. (Gudrun Smith, 2008) Recent trends in Germany show that there is a moderate decrease in acceptance of Power Distance but the workplace remains low on humane orientation. The focus is on performance not on employee satisfaction and welfare even as the society as a whole places a lot of emphasis on welfare benefits for the nation. It is a paradox which shows the strength of the very formalized German work culture. However, with regards to controlled time and performance orientation, the societal and organizational cultures overlap significantly with great importance given to schedules, punctuality and effective use of time to achieve better performance. 5.2 United States The United States as the centre of management studies and research work is always in the focus of any new cultural study. Hofstede determined US to be one of the most individualistic countries of the world and the GLOBE study further verified this claim. While the organizational cultures rank equally high on the humane and performance orientation scales, the individual worker is encouraged to seek out his own achievements and to provide creative solutions even if they are different from those ascribed by the top management. This attitude is also reflected in the low desire for power distance. The American worker prefers an environment where respect is given equally to all and the open communication is encouraged. Another distinctive feature of the US culture is their comfort with change and low uncertainty avoidance. “Americans are fundamentally optimistic and place faith in the future” (Carteret, 2011). This leads to higher acceptance of change and new ways of doing old work; it also generates interest in innovative ideas and fosters creativity. However, taking risk can go either way and the culture sometimes breeds rash decisions. Time is an important commodity for the workers however, while formal procedures and communication is not their style, time management is considered to be one of the top qualities required in employees. 6.0 Comparing Management Styles The cultural dimensions of these two countries have led to the development of management styles which share some similarities but with significant differences in the communication styles achieving cultural synchronism can be a challenge. In Germany direct communication is greatly appreciated, with a formal code of conduct already in place for convenient, effective yet respectful interaction. The word of the boss is always given priority because the workers respect his technical capabilities and knowledge. On the other hand the boss also gives consideration to his employees abilities by providing clear, precise, and unambiguous instructions and then leaving them to their own devices. The culture holds a “Respect for competence” (Gutterman, 2012) which requires that workers take the time to become exceptional in their respective fields. This also reflects in their high need for job security and lifetime employments which are facilitated through specific work unions. “Some analysts refer to Germany's rule-oriented, hierarchical focus on task accomplishment as an example of an Eiffel Tower management style” (Workman, 2008), suggesting top down instructions and a distant relationship style between supervisors and employees, which may seem cold and impersonal to managers from other cultures- but in reality shows the ‘dignified’ position of the boss in the organizational structure. The competency of the workers and their structured culture also has a tendency towards an ethnocentric style of management, with low tolerance for other forms of leadership style or informal management.  This attitude clashes with the American management style which can be described as individualistic in approach. The communication approach is informal, cordial but very straight forward. Most American manager’s donot have the time or patience for formal negotiations and practices. As far as the attitude of the employees goes American managers are viewed as facilitators who guide the employees to make decisions which are oriented with the organizational direction. “A distinction is often made between management style (around organization and process) and leadership style (more strategic and inspirational.” (Kwintessential, 2012) As par with the individualistic nature of the management, it is very common for workers to switch jobs as according to their needs and ambitions. They are taught to be cautious about protecting their professional opportunities and similarly the organizations also do not provide excessive job security. Employees are changed along with organizational needs. Moving into the global arena the American negotiating style tends to be a "hard sell", with a focus on dazzling the opponent with a charismatic personality and innovative ideas along with forceful arguments. American businessmen often make a very friendly, informal and self-confident impression on their German counterparts (Bizshift trends, 2011) however that does not always mean that the deal is signed as the formal intricacies still form a very important part of German work culture. Currently Germany and US are involved in a number of joint projects. According to the Federal Ministry of Education and Research, Germany the USA is Germany's most important scientific and technological cooperation partner among all industrial nations. These include research and knowledge trade in areas such as medicine, environmental sciences and technical sciences. These collaborations have a decentralized structure with independent organizations at the helm, and without any regulatory helping body it is essential that these organizations have a good grasp of the cultures of the other country. But it is not as easy as it sounds; in the practical ventures things often go wrong because of communication problems, American hubris and German ethnocentrism. The main problems come from the uncertainty avoidance and Job security requirement differences in each culture. When one favors quick result with rapid innovation and the other wants steady progress with long term job relationships the strategies are often incompatible and even ventures which looked profitable on paper fail due to the involvement of differing cultures. (Gudrun Smith, 2008) 7.0 Case Study Analysis It would be easier to discuss the problems between German and US work styles through case study analysis. Stories of failures are always more intriguing than stories of success as they have a lot to teach in terms of what can go wrong and help in understanding those subtle cultural differences which are unnoticeable until they destroy some very well thought out plans. The following two cases involve major corporations in the US and Germany and what they experienced when working in the other culture 7.1 WalMart’s Failure in Germany Walmart is one of America’s best success stories; the retail chain achieved double digit growths since its conception in 1962. Based on the strategy of providing the best service with the lowest prices, currently Walmart operates 8,500 stores in 15 countries. In December 1997,Wal-Mart decided to enter into Germany retail business through acquisitions. it acquired 21-store Wertkauf chain (revenues: €1.2 billion) for an estimated $1.04 billion, and a year later Walmart bought Interspar’s 74 hypermarkets The operations were in trouble from the start. Things like a flawed entry strategy which made it impossible to provide unified service in all their outlets, coupled with cultural clashes proved fatal for Walmart. Encouraged by their success in the US and Canada, Walmart tried to enforce the same strategies in Germany. They overlooked factors like the union’s involvement and high degree of job security required by their employers. Staff cuts and closures, accepted in US work environment were not readily accepted in Germany (Knorr & Ardnt, pg20, 2003) They had to change Four CEOs in one year, the first three of whom were unaware of the German language and hence couldn’t communicate with staff and instill the trademark work loyalty required to survive in the German retail industry. Problems with Union and suppliers arose because of the harsh bargaining style of the management and ultimately in 2006 Walmart withdrawled from at a cost of $1bn (£540m) proving that their One-size-fits-all model couldn’t work everywhere, especially with a linguistically challenge management. (Foley & Mesure, 2006) 7.2 Challenges in Daimer and Chrysler Joint Venture In 1998 Detroit based Chrysler announced its merger with Daimer. The merger was considered a superb match where the firms would be treated as partners, with Chrysler benefitting from the superior vaunted engineering of Mercedes and in return introducing greater financial efficiency for the German auto manufacturers. This was not the case as it turned out. From the start Daimer treated Chrysler as a side project instead of a partner, enforcing their own culture and policies without regard to the sentiments of Chrysler’s original team. “Operations and management were not successfully integrated as “equals” because of the entirely different ways in which the Germans and Americans operated: while Daimler-Benz’s culture stressed a more formal and structured management style, Chrysler favored a more relaxed, freewheeling style” (Weber & Camerer, pg401, 2003) The policies designed by Daimer damaged the 20 years of good will that Chrysler had developed with the public with the help of its dealers (Wallace, pg4, 2009). Lack of honesty about the future organizational goals and a reluctance to accept a different culture, caused Daimer to destroy any profitability Chrysler had maintained and in 2007 the division of sold off. This was a trademark case about cultural clashes at a national and organizational level which showed that fault can be from the side of either of the organizations involved and the results can be pretty distressing. 8.0 Enhancing Cultural understanding In both the cases discussed, the inability of managers from both sides to relate to the sentiments and attitudes of the workers from the other country leads to the failure of these projects. In the Walmart case, from the management’s point of view the project failed because of an inability of the first CEO and top management to work alongside their German counterparts. Instead of assimilating into the culture and taking into consideration the motivations of the local employees they tried to force their own ideas and method of working onto them. This not only led to major employee-manager conflict but also made it impossible for the retail chain to offer top quality service to their customers. Furthermore they were unable to establish good relationships with their key suppliers as their brusque, to-the-point management style was not compatible with the formal methods proffered by Germans. As a joint venture, Walmart should have taken German retail experts on board for project management and tried to modify their strategies to better suit the culture. With Daimer and Chrysler the problem was not just the national culture but also the organizational culture. With such dynamically different methods of management and doing work, the project managers should have expected some problems and clashes to arise. However, the hubris of the German company (much like Walmart) kept them from trying to understand and incorporate Chrysler’s policies and culture within their own organization. The result was a merger which had shown good potential but ended up ruining Chrysler’s profitability. People who are used to a certain culture find it hard to provide the same creativity and efficiency in a marginally different culture- the human factor was the reason that the merger didn’t work out. If the steps had been taken to better train the people about what to expect and managers from both sides had equal control over the strategies, the results could have been different. Even though the two cases discussed show the negative consequences of cultural integration between two countries which valued differing aspects of management, the outlook is positive for the future. The better understanding of cultural aspects mean that organizations can empathize with other cultural and manager on the whole are more tolerant and experienced with multi cultural teams. Organizations are increasingly looking for managers who are well travelled and have knowledge of more than one culture; bilingualism is becoming a sought after trait. These changes are being implemented as globalization is no longer a foreign concept but a truth of life for firms all over the world. Establishing trust through communication is the most effective way to ensure workplace compatibility and productive teamwork. It also helps to achieve compromises which are acceptable to both parties and incorporate aspects of the work culture most important to each. For Germany and US, their cooperation is becoming ever more important and cultural challenges have been overcome for that to happen. Their history of failed and successful ventures mean there are many examples for the future organizations to learn from and incorporated with culture studies can help them design better strategies and approach towards joint projects. 9.0 Conclusion Culture plays an unavoidable in the world business environment. People behave, believe and value according to what their culture teaches them and they cannot separate their culture from their workplace. Effective global enterprises are those who not only attempt to understand the cultures they are working in but actively utilize their findings to create a motivated workplace for their employees. Walmart has hence learned it’s lessen about cultural diversity, operating under 55 different names they can form differing strategies and better cater to the employees and customers of the different regions they work in. For car companies, international projects are accompanied by cultural training and importance of having local people on board the team has been understood by organizations. International projects have to be carefully thought out and managing the human resource correctly is what will decide the eventual success of the project; a motivated and coordinating team can overcome most of the strategic problems which can arise. Management schools of thought have adopted culture and diversity studies as a part of the science as the world moves towards even greater international collaboration. Cultural dimensions and definitions go a long way towards helping define strategies and tactical planning for global organizations and international projects, when ignored they can spell catastrophe for participating firms. Studying Germany and US in the context of cultural dimensions provides examples in favor of incorporating cultural studies into the execution of joint strategies as simple things like effective communication and respect for traditions can go a long way towards achieving success in joint collaborations. Bibliography Sennara, M. & Hartman, F., 2002. Managing Cultural Risks on International Projects. Proceedings of the Project Management Institute Annual Seminars & Symposium October 3–10, 2002 • San Antonio,Texas, USA. Eberlein, M., 2008. 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