Cross Culture Management at IKEA - Case Study Example

 Cross Culture Management Explain and discuss the distinction between the concepts of 'organisational culture' and 'national culture' drawing on material from the IKEA case study for illustration. In the modern business environment, expansion and global reach is as common as the computer technology which companies have to use in order to get a competitive advantage (Hampden-Turner & Trompenaars, 1997). A Company can have a head quarters in London while the production work is carried out in Beijing, the research and development of the product is undertaken in Germany and the the sales take place in America. As discussed in the case study, the cultural differences between the countries can certainly make the management of the business a difficult process and a similar situation was experienced by IKEA when it expanded its business into America, Germany and Spain. Essentially, the organisational culture followed at IKEA in Sweden was very different from the Spanish culture which was experienced to be more hierarchical, more rule bound, and more aware of status than the Swedish culture. While the company appears to be very aware of culture and even uses differences in cultures to its advantages as reflected by its advertising campaign for the British, it found itself in a bind when it tried to export its organisational culture to branch offices of the company in different countries. As per the case study, The culture at IKEA is essentially Swedish in nature where decisions are made with the consensus of others, mistakes are a part of the learning process and creative approaches to problem solving are rewarded. Red tape is frowned upon and status barriers are discouraged while managers like to work closely with co-workers. It is essentially a culture of equality when business cards do not carry titles and employees are supposed to work their way up the company without any formalised training. In fact, any education given to the employees is through discussion and explanations which explains the philosophy of IKEA. The company seeks employees with open minds, positive communication skills, a good work attitude more than it seeks employees who have degrees in sales and marketing. This particular organisational culture came into direct conflict with the national culture of Germany where hierarchical systems are important and personal initiative is discouraged. Even something as simple as using the managers’ first name created issues and risk assessments procedures showed that the German employees functioned differently when it came to making choices from a set of given options. Similarly, informality in France was seen as a sign of weakness and indecision which was taken to mean that the employees could do whatever they wanted to. A non-recognition of status meant that the French had identity problems and felt lost in the crowd of employees. The Americans were totally confused by the organisational culture of IKEA where individuals did not seek self-promotion and had an apparent lack of emotion. Conflict was avoided and since managers did not give exact instructions and did not provide long term plans, the Americans felt lost at sea with the Swedes being seen as indecisive. The American culture had groomed American managers to expect quick promotions based on their high level of output but since the Swedes culturally avoided large instances of pay discrimination, the American managers became unsure about their future with the company and left when they were disheartened by their slow progress. As discussed by Bartlett & Ghoshal (1998) as well as French & Knapp (2007) the simplest tools available to an HR manager in order to control cultural conflict and the differences between cultures with regard to international operations is through the use of human resource management policies. In essence, different locations and countries where the company operates will need different HR policies that are created and adjusted depending on the cultural needs of the location. The basic reason for this is that globalisation has made the world speak more or less one language, use one currency but it has not made the world follow one corporate culture. While products may have become easier to export, exporting culture still remains a difficult process. Therefore, just as products may require some adjustments before they can be used in different countries, the organisational culture of the same company may change when it operates in different locations. This effort can be made more difficult by the fact that international companies by their nature may have origins in countries which are very culturally distant from their base of operations (Edwards & Kuruvilla, 2005). For example, Microsoft originated in the U.S. yet the bulk of their software development is done in India. Wipro took its start from India, and it has now established offices in Sweden and London. The case of Sweden is also a prime example of conflict between organisational and national culture which forced the HR managers of IKEA to rethink their global nature and understand the diversity of the employees. As recommended by Faulkner et. al. (20002) expansion into an alien culture will require careful planning before the expansion can be successful. HR managers may try to create a universal human resource policy which they hope will fit every employee across the world but Jackson (2002) notes that this might be impossible and could make the policies too vague to be applicable anywhere. Differences in national cultures and the organisational culture of the company make it vital that companies create individual HR policies depending on the location (French, 2007). Of course it does not mean that every office and branch of the company should follow its own set of HR policies and an independent culture but it does mean that cultural differences have to be understood and taken into account before a company seeks expansion and entry into foreign markets. However, in many cases companies overlook this important aspect of the creation of HR policies and even the world’s top rated companies such as GE have had issues with managing culture (Welch, 2005). As discussed by Kidger (1991) Laurent (1986) problems can develop when managers based in one country try to apply their national culture to the organisational culture of the company offices based in other locations. Awareness of local cultures, customs and cultural elements become essential if the company is to successful transfer itself from one location to another. Laurent (1986) suggests that while a company may push its organisational culture on to the national culture of their branch office in a different country, this effect will be temporary at best and the national culture would eventually win out when there is a prolonged conflict between national and organisational culture. This idea adds to the points made by Edwards & Kuruvilla (2005) who suggest that strategic management and human resource decisions should not be made in isolation by the managers from the home country since when these decisions are applied to the branch office in a different country, cultural conflicts are bound to come up quickly. There are some managers who think that employees can adapt to the culture of the company and give up their national culture or the values they have been raised with in order to bring their personal cultures in line with the organisational culture but as discussed by Welch (2005), this is a rare chance. What is more likely is that the culture in which they have been born and raised in would never be completely taken out. Personal and societal norms of various countries and different cultures can in fact be used to the advantage of the company and can lead to further benefits of the company operating in a different location. Therefore, it is easy to agree with the arguments presented by analysts such as Laurent (1986) who recommend that the national culture of a country deserves to be understood by the HR managers of an international company before the company starts doing business there. The cultural elements should be made a part of the HR policies of the company in the region and this idea lies at the very heart of international human resource management. Understanding this difference is the key to international success without which a company would be unlikely to retain and develop its HR in foreign lands. In conclusion, the difference between the national culture and the organisational culture when it comes to global companies is essentially the difference in culture of two countries. The managers who understand this difference and can appreciate how to make this difference work for the advantage of the company are more likely to be successful as compared to managers who try to enforce an organisational culture. As the world develops and we come closer to a more unified corporate culture of the world, such differences may perhaps be eradicated but for time being, they exist and must be managed in accordance with the principles of International HRM. Word Count: 1,648 Works Cited Bartlett, C. & Ghoshal, S. 1998. Managing Across Borders: The Transnational Solution to Managing Across Borders, 2nd ed. Hutchinson, London. Edwards, T. and Kuruvilla, S. 2005. ‘International HRM: national business systems, organizational politics and the international division of labour in MNCs’, International Journal of Human Resource Management, vol. 16, no. 1, pp1-21. Faulkner, D. et. al. 2002. ‘International Mergers and acquisitions in the UK 1985–1994: A Comparison of National HRM Practices’, International Journal of Human Resource Management, vol. 13, no.1, pp106–22. French, R. and Knapp, C. 2007, Cross-cultural Management in Work Organisations, CIPD. Hampden-Turner, C. and Trompenaars, F. 1997, Riding the Waves of Culture, McGraw-Hill. Jackson, T. 2002, International HRM: A cross cultural approach, Sage. Kidger, P. 1991. ‘The emergence of international human resource management’, International Journal of Human Resource Management, vol. 2, no. 2, pp149-163. Laurent, A. 1986. 'The Cross-Cultural Puzzle of International Human Resource Management', Human Resource Management, vol. 25, no. 1, pp 91-102. Welch, Jack. 2005. Winning. HarperCollins: New York. Read More