Organisational Issues in Project Managed Environments: IKEA - Case Study Example

 Title: Organisational issues in project managed environments: emphasis on the issue of multiculturalism at the workplace with reference to IKEA Abstract The following is a study into the issue of multiculturalism in organisations with reference to the concept of diversity management as a vital element of effective organisational performance, and also as a means of achieving competitive advantage on a global scale, for a firm’s international operations. With the help of relevant literature, and with reference to a case study on the IKEA Group, the report has reached a few conclusions, which identify the importance of the study of ‘culture’ in society as well as in organisations, for effective diversity management. The report also addresses the advantages of Host Country National recruitment over expatriation of Parent Country Nationals to better perform in the international realm. I.INTRODUCTION: The following is an integrative report on the issue of multiculturalism in organisations with specific emphasis on the concept of diversity management in relation to organisational culture. With the help of a case study on IKEA, the international chain of home and office furniture stores, the report will attempt to analyse the challenges faced by international managers in the process of keeping up with the demands of multiculturalism, a direct consequence of globalisation. Although the values and practices of IKEA’s corporate culture will be discussed in general, in order to narrow the geographic area of research, the report will focus more on IKEA’s franchisee in Dubai, UAE. The report will make extensive use of relevant literature in order to understand the issues in question by applying the literature to the organisation and by doing so, will attempt to make further recommendations and meaningful conclusions. I.1 IKEA Background: IKEA is well known for having a rapid internationalisation process from its Swedish origins as a result of globalisation and its rapid expansion into countries with cultures very different from its original Swedish national culture (Hollensen, 2007 see case study). With 265 stores worldwide, where 235 are owned by the IKEA group while the remaining 30 by franchisees outside the group, the extent of IKEA’s expansion is obvious (IKEA, 2007). Although owned by franchisees in some countries, the IKEA concept and trademark are solely owned by Inter IKEA Systems B.V in Netherlands. This means Inter IKEA Systems B.V is the franchiser for all IKEA stores within or outside of the IKEA group, ensuring uniformity of corporate values right from the centre (IKEA, 2007). IKEA had initially employed an ethnocentric approach of management where only Swedes were recruited for management positions so as to ensure the original ‘Swedishness’ of the organisation. But this approach eventually met with criticism and a temporary setback in IKEA’s overseas operations, where the organisation was faced with the task of revising its overseas recruitment policies in order to meet the demands of local cultures and employment laws (Kling and Goteman, 2003; Kochan et al, 2002). And according to Bjork (1998), every time IKEA was faced with a struggle due to internationalisation, new cultural management policies would be implemented, the latest being Diversity Management. IKEA has had to rapidly transform itself from an ethnocentric corporate culture to an organisation that embraces people of all backgrounds, and has in many communiqués expressed the importance of having a culturally diverse workforce in order to obtain competitive advantage on the global scene. This is evident from the organisation’s recruitment websites in various countries, where emphasis is given for potential employees to ‘be themselves’, but at the same time adhere to shared corporate values such as ‘simplicity’, ‘cost-consciousness’, ‘hard work’ etc, and almost all of the websites show a picture of a man and woman of Scandinavian origin (see case, also Bjork, 1998). This has created a paradox within the IKEA Group’s core values, where there is still a strong emphasis on the company’s Scandinavian background. This is found more on the websites of stores directly owned by the IKEA Group, whereas the stores owned by outside franchisees are more receptive to their local environments. IKEA in Dubai is franchised by Al Futtaim Group, which acts as the main recruiting agency for the company. Since its opening in 1991, the Dubai franchise has been a major success story in terms of recruitment and organisational performance, which led to its expansion into neighbouring Abu Dhabi (http://www.ikeadubai.com/content/careers.asp and http://www.afuturewithus.com/careers/al-futtaim/home.aspx). II. LITERATURE REVIEW: The purpose of this section is to acquire a deeper understanding of culture and its characteristics by means of metaphorical representation of organizations with the help of relevant literature. This may help us understand the significance of diversity, not just to gain competitive advantage, but for the very survival of an organization in an ever-changing environment. II.1. Organization and Society: Drawing the Parallels Within the process of cultural evolution there is a significant amount of similarity in the manner in which culture is manifested in business organizations and in society in general (Rollinson, 2005; Morgan, 1998). To understand cultural diversity in organizations, it would be helpful to understand its roots at a sociological level. Cultural diversity at the workplace is a direct result of ‘multiculturalism’ in the society. A multicultural society simply denotes a society in which there exist several cultures (Watson, 2002). Culture is defined as, “A pattern of shared assumptions a group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you think, perceive, and feel in relation to those problems” (Schein, 2004). So, a multicultural society has in it different groups, which have learned different ways of thinking, perceiving, and tackling problems that exist in the society. Each group taken individually is a society on its own, with its own individual culture. When all these individual societies are brought under one single core society, the culture of such a society becomes the core culture, with the individual cultures as its subcultures (Watson, 2002). Culture is a sensitive term and it has the ability to invoke an emotional and nostalgic association with an individual’s distinctive way of life, and speaks directly to their sense of identity and belonging (Watson, 2002). A general view of cultural differences is that they affect intercultural encounters, usually by leading to misunderstanding or conflict, at both the individual and group levels (Larkey, 1996). Larkey explains that at the individual level, as different values, beliefs or worldviews are manifested in communication behaviours and as culture creates differing expectations and differing styles or patterns of speech, interpersonal misunderstanding and conflict can arise. At the group level, inter-group processes can be triggered by, for instance, an individual’s non-verbal behaviour or ways of speaking which stereotypically represent a group (1996). It then becomes the responsibility of the leadership of the core society to introduce a culture and/or change its existing core culture to accommodate the various differences brought in by the subcultures in an integrated manner, where these differences are acknowledged and valued (Neuliep, 2008). When the above sociological aspects of culture are compared to a business organization, the organization is the core society, and its culture, the core culture. We all refer to this as organizational culture. Analogically speaking, the organizational (core) culture should be designed in such a way that the employees of the company share a basic set of values and assumptions, which tie them to that particular organization. But, on the individual or group levels, each employee has his/her own cultural norms and practices beyond those they share with other members of the company, which can be safely termed as the subcultures within the organization (Bate, 1995). II.2 Cross-Cultural Communication: “We all have an internal list of those we still don’t understand, let alone appreciate. We all have biases, even prejudices, toward specific groups” (Lantieri & Patti, 1996). The above phrase sums up the main challenge in cross-cultural communication, the fact that we still don’t understand the people we talk to on a daily basis. Communication is an intrinsic part of our daily lives, whether it is at our homes, at the workplace, in the groups we belong to, or in the community, and we can identify that it’s hard (DuPraw & Axner, 1997). According to DuPraw and Axner (1997), ‘culture’ is often at the root of communication challenges, and our culture influences how we approach problems and participate in groups and in communities. The authors also say that exploring the ways in which various groups within one’s own society have related to each other over the past is the key to opening channels for cross-cultural communication. Anthropologists Avruch and Black expand the above views and argue that “One’s own culture provides the ‘lens’ through which we view the world; the ‘logic’ by which we order it; and the ‘grammar’ by which it makes sense” (1993). DuPraw and Axner (1997) suggest that, becoming more aware of our cultural differences, as well as, exploring our similarities, can help us communicate with each other more effectively, and that cultural differences do not necessarily have to divide us from each other (1997). People’s different communication styles reflect deeper philosophies and worldviews, which are the foundation of their culture. Understanding these deeper philosophies gives a broader picture of what the world has to offer us (DuPraw & Axner, 1993). Morgan explains the significance of effective communication and concludes that every organization is composed of individuals with different cultural traits and individual personalities, and these people are ‘organised’ in some way or the other through these traits in order to achieve set objectives. Thus individuals are the basic building blocks around which an organization functions, and communication is the effective cement which holds the organization together (1998, italics mine). Thus we can argue that understanding the individual level is essential to understand the collective level of a person’s, and consequentially, an organization’s mental programming. II.3 Organization as a Living Being: Adapting to Change, by Aligning with the Environment It can be inferred from the preceding sections that change is necessary in order to promote peaceful existence between different culture groups, in the societal realm. Considering this, it may be safe to assume that similar changes need to be implemented in the organizational realm as well (Robbins and Judge, 2009; Pettinger, 1996). The question that may arise, however, is whether changing the existing culture means changing the entire organization. Culture is such an intrinsic quality of a human being at the individual level, and of a group at the societal level, that even though it may take time to change, it may end up changing more than just a few characteristics (Bate, 1995; Hofstede, 1997). This means that changing an organization’s culture implies changing the very behaviour in which it expresses itself. Morgan (1998) interestingly likens an organization to an organism, and explains that, "The image of an organism seeking to adapt and survive in a changing environment offers a powerful perspective for managers who want to help their organizations flow with change." (Pg 35) He argues that this analogy encourages us to learn the 'art of corporate survival' by developing active 'organic systems' that remain open to new challenges. In other words, as Brooks (2003) says, it helps us form a more 'proactive' organization with a 'prospector' philosophy of operation. Prospectors, he explains, see their environment as ever changing and seek continual strategic and structural adjustments to cope with those changes. These organizations are continually searching for new opportunities and in the process they may create change and uncertainty for others in their competitive environment. The opposite of prospectors, known as 'defenders', are more 'reactive' in nature, as they act only when environmental changes force them to do so. This kind always sees stability and continuity all around (2003). Research shows that reactors are more prone to misperceptions of their environment than are prospectors. According to Morgan (1998), this is because different environments favour different 'species' of organisations based on different methods of organising and that congruence with the environment is the key to success. So it is evident that organisations are facing the enormous challenge of changing their internal environments in accordance with the external. II.4 The International Human Resources Function: “...the International Organisation will be called on to operate across a wide variety of competitive environments and yet somehow balance these diverse social, political and economic contexts with the requirements of the original home context.” (Dowling et al, 2008, pg25) The above statement re-iterates all the topics discussed in this report so far, namely, the task of the organisation to be able to operate in different environments whilst staying true to its original corporate objectives. The international human resources management (IHRM) function, a recent extension to the normal HRM function in an organisation, aims to achieve this global competitive advantage by employing innovative recruitment strategies. The three main issues for IHRM are: the management and development of expatriates; the internationalisation of management throughout the organisation; and, creating a new corporate culture that would reflect on internationalising the whole organisation, by focusing on increasing the international experience of staff, to be able to effectively counter the frequency of cross-cultural interactions as a result of investing abroad (Hendry, 1994). As a result, IHRM covers a much wider spectrum of worldwide management of people (Dowling et al, 1999, 2008), and is concerned with how MNC’s manage their ‘geographically dispersed’ workforce by being able to dispose their resources to obtain and maintain ‘local’ and ‘global’ competitive advantage (Schuler et al, 2002). This clearly indicates IHRM as a means of strategic importance for MNC’s, as it is a key element in achieving a balance between “the need for control and coordination of foreign subsidiaries, and the need to adapt to local environments” (Adler and Ghadar, 1990 & Milliman et al., 1991, cited in Scullion, 2001, pg5). In other words, the need is for the organisation to implement common practices, like structure and technology that transcend national differences and form a commonality as to how the business operates across cultures (Kerr et al, 1973 & Hickson et al, 1979 cited in Mullins, 1999), whilst not ignoring the essential differences in how these practices are communicated and applied to the local workforce of a given foreign subsidiary (Hofstede, 1997; Keeley, 2003). Recruitment in the international context takes many dimensions, as it deals with the processes of expatriation, where parent country nationals (PCN’s) are recruited, trained and transferred to a firm’s foreign locations; recruitment of host country nationals (HCN’s), where a firm’s foreign subsidiary is operated by nationals of that country; and third country nationals (TCN’s), where individuals of a third country are recruited to work in a firm’s foreign location (Scullion, 2001; Torbiorn, 1997). The first two (PCN’s and HCN’s) however, are the most common options used by international staffing as they reflect the main challenge of ‘central versus local’ cultures in relation to the corporate and social culture of the parent company, and that of the host company of a foreign subsidiary, with the main dilemma being which of these cultures are to be used for the firm’s overseas operations (Dowling et al, 2008; Trompenaars and Hampden-Turner, 1997; Torbiorn, 1997). III. APPLICATION TO IKEA In light of the above discussions, and from the case study of IKEA, the company seems to be in the right direction in terms of its emphasis on multiculturalism at the workplace, especially amongst its independent franchisees. IKEA in Dubai working along with Al Futtaim has been successful in achieving this objective by recruiting local, talented individuals reflecting the diverse cultural demographics of the United Arab Emirates. However, the IKEA Group itself still needs changes, as the case study suggests that non Swedish nationals need to learn Swedish in order to be eligible for management positions, although English is the group’s corporate language. Also, even though staffs are encouraged to ‘be themselves’, they are to be themselves within the framework of IKEA’s core cultural values, and leaders are to develop themselves within the walls of these values (Kling and Goteman, 2003). This again brings us to the rigidity of IKEA’s corporate culture and also shows that the organisation’s ethnocentric worldview is yet to change. However, one can also assert that such rigidity is the very key for effective diversity management, as it addresses the differences within the organisation, but also incorporates these differences into a coherent structure (see Case; also Robbins, 2003). This is in line with earlier literature discussion of societal and organisational cultures where the core culture needs to be designed to accommodate individual personal differences, but should also give employees a common framework. Another feature to consider is IKEA’s recruitment strategies, where the IKEA owned branches are quite similar in their recruiting literature with strong Scandinavian emphasis, whilst the franchises are more careful to consider local demographics in their recruitment efforts. This clearly confirms the law of requisite variety, in this case, the need for the employee base to reflect the customer base. As the case suggests, the company may benefit by recruiting minority candidates for middle management positions to reach out to the minority customer base. In this light IKEA may benefit by recruiting HCN’s for their overseas operations as this may reduce occurrences of misunderstandings and strife between management and workforce (Keeley, 2003). Keeley suggests that, “Competitive advantage in a global economy requires that a MNC be able to tap the talents of local HCN managers; to do this the MNC’s must be able to attract, retain and develop talented HCN managers” (2003, p9). This may also help reduce the costs and grief associated with the repatriation of expatriates who in many cases find their jobs less challenging when they are brought back home and eventually look elsewhere for jobs (Allen and Alvarez, 1998 & Hammer et al, 1998 cited in Scullion and Linehan, 2005). The main issue when the paradox in IKEA’s corporate culture is concerned may not be that shared corporate values are encouraged to be followed by all diverse groups represented in the organisation, but the fact that IKEA is and has always been trying to impose Swedish national culture as an integral part of its corporate culture to all of its local operations. This is evident from the fact that in almost all IKEA owned stores across the globe, the IKEA restaurant places more importance on serving Swedish food rather than cuisines that would cater to a wider local customer base. But when individual franchisee owned stores are considered, the ownership places equal importance on both Swedish and other cuisines locally popular. This is evident from the literature on IKEA Dubai’s website in their effort to market the IKEA restaurant (http://www.ikeadubai.com/content/restaurantMenu.asp). As the case study suggests, it may prove beneficial for IKEA to ‘negotiate’ their shared values according to demands and differences posed by local environments (case, p13). IV. CONCLUSION In conclusion, diversity management can now be safely coined as a field in itself in modern businesses, especially in multinational organisations. Considering the law of requisite variety, more and more organisations would benefit from being prospectors rather than defenders, as this would prepare them to stay in tune with their market environments. The same application goes to IKEA, and as we have seen examples of IKEA’s independent franchisees adapting the prospector ideology, the IKEA group itself still needs to break away from its traditional approaches to better their international operations even more than they already are. It seems the group needs to live up to their own professed comments when they say, “We see the diversity issue as a matter of creating a more challenging business atmosphere and of course expanding the recruitment base - including everyone and not just Swedish men. It also gives us a diverse workforce with a lot of positive business possibilities” (Kling and Goteman, 2003). Bibliography Adler, N.J. and Ghadar, F. (1990) ‘Strategic Human Resource Management: A Global Perspective’, Human Resource Management: An International Comparison. De Gruyter: Berlin, 235-60 Allen, D. And Alvarez, S. (1998) ‘Empowering Expatriates and Organisations to Improve Repatriation Effectiveness’, Human Resource Planning, 21(4): 29-39 Avruch, Kevin and Peter W. Black. “The Culture Question and Conflict Resolution”. Peace and Change 16 (1991): 22-45 Bate, P.S. (1995). Strategies for Cultural Change. Butterworth-Heinemann, UK Björk, S. 1998. IKEA. Ingvar Kamprad og hans imperium. København: Børsen Brooks, I. (2003). Organisational Behaviour: Groups, Individuals and Organisation. 3rd ed. Pearson: Harlow Dowling, P.J., Festing, M., and Engle, SR, A.D. (2008) International Human Resource Management. Thomas Learning: London DuPraw, M., & Axner, M. (1993). Working on Common Cross-Cultural Communication Challenges. Alexandria, VA: Public Broadcasting System Hammer, M.R., Hart, W. And Rogan, R. (1998) ‘Can You Go Home Again? An Analysis of the Repatriation of Corporate Managers and Spouses’, Management International Review, 38(1): 67-79 Hendry, C. (1994) Human Resource Strategies for International Growth. Routledge: London Hickson, D., McMillan, C., Azumi, K. And Horvath, D. (1979). ‘Grounds for Comparative Organisation Theory: Quicksands or Hardcore?’ in Lammers, C. And Hickson, D. (eds) Organisations Alike and Unlike, Routledge and Kegan Paul Hofstede, G. (1997). Cultures and Organisations: Software of the Mind. McGraw Hill, London Hollensen, S. 2007. IKEA: Expanding through franchising to the South American market? - Case Study III.1, Global Marketing - A decision-oriented approach, 4 ed. Essex, England: Financial Times Press IKEA. 2007. Facts & Figures, IKEA Group 2007: Corporate PR, IKEA Services AB Keeley, T.D. (2003). International Human Resource Management in Japanese Firms. Palgrave, London Kerr, C., Dunlop, J.T., Harbison, F. And Myers, C.A. (1973). Industrialism and Industrial Man. Penguin, USA Kling, K., & Goteman, I. 2003. IKEA CEO Anders Dahlvig on international growth and IKEA's unique corporate culture and brand identity. The Academy of Management Executive, 17(1): 31-37 Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi, A., Jehn, K., Leonard, J., Levine, D., & Thomas, D. 2002. The Effect of Diversity on Business Performance:: Diversity Research Network Lantieri, L. and Patti, J. (1996). Waging Peace in our Schools. Beacon Press, USA Larkey, L.J. (1996). “Toward a theory of communicative interactions in culturally diverse workgroups”, Academy of Management Review, 21:463-91 Milliman, J., Von Glinow, M. And Nathan, B. (1991) ‘Organisational Life Cycles and Strategic International Human Resource Management in Multinational Companies: Implications for Congruence Theory’, Academy of Management Review, 16: 318-39 Morgan, G. (1998) Images of Organisations. Sage Publications, London Mullins, L.J. (1999). Management and Organisational Behaviour. Pitman Publishing, London Neuliep, J.W. (2008). Intercultural Communication: a contextual approach. Sage Publications, USA Pettinger, R. (1996). An Introduction to Corporate Strategy. Palgrave MacMillan, USA Robbins. S.P., and Judge, T.A. (2009) Organisational Behaviour. 13th Edition, Upper Saddle River, NJ: Pearson/Prentice Hall, Pearson Education International Rollinson, D. (2005). Organisational Behaviour and Analysis. 3rd edition. Pearson, England Schein, E.H. (2004). Organisational Culture and Leadership. 3rd edition. John-Wiley, San Francisco Schuler, R.S., Budhwar, P.S. and Florkowski, G.W. (2002) ‘International Human Resource Management: Review and Critique’, International Journal of Management Reviews, 4(1): 41-70 Scullion, H. (2001) ‘International Human Resource Management’, Human Resource Management. International Thompson: London Scullion, H. And Linehan, M. (2005). International Human Resource Management. Palgrave-Macmillan, New York Torbiorn, I. (1997) ‘Staffing for International Operations’, Human Resource Management Journal, 7(3): 42-51 Trompenaars, F., and Hampden-Turner, C. (1998) Riding the Waves of Culture: Understanding Diversity in Global Business. 2nd edn. McGraw-Hill: New York Watson, C.V. (2002). Multiculturalism. Open University Press, Philadelphia Online Resources http://www.ikeadubai.com/content/careers.asp (accessed on 08/03/2010) http://www.afuturewithus.com/careers/al-futtaim/home.aspx (accessed on 07/03/2010) http://www.ikeadubai.com/content/restaurantMenu.asp (accessed on 20/03/2010) Read More