National Cultures, Management Styles, and Performance - Essay Example

International Human Resource Management: National Cultures, Management Styles and Performance 2008 Human management bases on the premises that people are the key resource in an organization. According to George Henderson (1994, p.4), there are four assumptions providing basis for this approach: 1) organization exists to serve human needs, 2) organizations and people need each other; 3) when the fit between the individual and the organization is poor, one or both will suffer, 4) when the fit between the individual and the organization is good, both benefit. Organizations are as healthy and effective as people who work there. Different organizations pursue different management styles, which depends on the specific strategy chosen by a company. HRM practices must serve the purpose of aligning the company's strategy and its personnel and lead to efficient utilization of HR potential. To manage people properly one is to understand their cultural background. The task is difficult even in the conditions of diverse workplaces within one particular country. In the process of globalization and business internationalization cultural issues have acquired ever greater importance. National cultures differ, which mirrors in business practices. Entrepreneurs and employees of various countries have different perceptions and attitudes, worldviews and approaches. National cultures and mentalities are reflected in nation-wide preferences for management styles and different notions of success. Western HR management has largely relied on the researches accomplished in the English-speaking countries, especially those in the USA. However, HR practices that are viewed as 'the best' in one country often fail in another cultural context. As a result, cross-cultural issues and their impact on business operations have become one of the most heavily researched areas in management. The vast empirical research conducted in different parts of the world has accumulated evidences demonstrating that cultural values being deep seated always lead to divergence in the approaches to management, while the convergence some believe to witness is superficial and limited in effect (Stening 2006). As Bruce W. Stening suggests 'understanding cultures is becoming even more important than previously believed'. This paper examines the relationship between national cultures, management styles and performance. There are several points to be supported. Cultural intelligence acquires enormous significance in international business operations. Cultural issues tend to form preferences in management styles and performance related practices. The choice of management styles in international context should rely upon concrete local conditions and should be a hybrid of best HRM practices used in two cultural settings. The Importance of Cultural Intelligence. Cultural Intelligence is "A person's capability for successful adaptation to new cultural settings, that is, for unfamiliar settings attributable to cultural context" (Early and Ang 2003, in Stening 2006). CQ implies a set of knowledge and abilities, including knowledge of cultures and fundamental issues of cultural interactions; sensitivity to cues and ability to properly interpret what's going on in the cross-cultural situation; and behavioural skills enabling a manager to respond properly to different intercultural situations (In Stening 2006). CQ is a necessary tool for establishment of mutually beneficial relationships with the foreign party. Bruce W. Stening (2006) summarizes tricky situations in international business when CQ plays the decisive role. It is important for: negotiations with a potential joint venture partner, dealing with relationships between expatriate and local colleagues, motivation of local workforce, resolving intercultural disputes, dealing with local governmental authorities and bureaucrats, resolving ethical dilemmas, designing training and development programs for locals, developing policies and strategic plans, creating effective virtual teams, ability to effectively use local resources, - to put it in a nutshell, building truly global organization. Management Styles and Performance. Management style is a set of practices and philosophic principles helping to capitalize on the ability of human resource. It is the framework for managing people, 'a way of life operating through the enterprise' (Schelh). In terms of functions it is "the distinctive way in which an organization makes decisions and discharges various functions" (Khandwalla). Management styles vary from organization to organization, depending on organizational strategy and size, culture and heritage, on the external operational environment and situation, needs and personalities of the employees. Scholars distinguish various styles of management. The most traditional of classifications define styles placing them on the continuum from authoritarian to participative. Burns and Stalker in 1961 defined the organic (market oriented) and mechanistic (plan centred) styles of management, which are widely used in managerial literature. There are management styles characteristic with different nations, like the Japanese one, defined by lifetime employment, life long learning, seniority, collectivism, hard work, continues adaptation and improvement, cooperation ethics. Khandwalla distinguished five dimensions of management styles: risk taking, authoritarianism, technocracy, participation, flexibility (In Quang & Vuong 2002). Management styles come in and out of fashion. Today the general tendency is to move away from the authoritative and mechanistic to participative, organic management style, teamwork and empowerment. There are several patterns of participative management including Total Quality Control (TQC), Management by Objectives (MBO), Management by Walking Around, Employee Empowerment (McMillan 2006). Participative management means sharing information with employees and their involvement in decision-making. This style, based on employee leadership and empowerment, highly flexible structure, business unit autonomy, innovation and interactivity, has become the distinctly American one (McMillan 2006; Quang & Vuong 2002). It is generally believed that such a management style enhancing communication, cross-functional collaboration and joint decision making, in combination with flexible organizational structure and minimum of bureaucratic barriers to innovation should bring optimal performance level. It is viewed as the most beneficial in the constantly changing global economy, while it allows quick adaptation and re-organization of a company, providing numerous visions of the problems solutions and motivating employees to improve their performance. So the empirical research of companies in Spanish fresh industry showed that entrepreneurial organic (or participative) management style led to the highest performance no matter what strategy was pursued by the organization in general (Martinez and Poole 2004). The same results were revealed by the organizational research in Vietnam: JVs adapting participative style demonstrated the best performance results (Quang & Vuong 2002). Notwithstanding the effectiveness of the participative style, it turned out not to suit in all the national contexts. So MBO was favourably received in Germany, with its tendency to decentralization, and lesser emphasis on hierarchy importance, but was a failure in France, where hierarchy is strong and decisions are made by top management (In Kovach 1994). These evidences lead to a conclusion that besides organizational strategy and culture, effective management styles are usually conditioned by national cultures, and HR motivation is based on the core values and perceptions of the people in a particular cultural context. National Cultures and Management Styles. National cultures cause fundamentally different views on what constitutes a preferable management style and appropriate organisational hierarchy, on 'acceptable, legitimate and feasible practices and behaviours', argue researchers. Famous Hofstede's theory (1980) distinguished four major dimensions of work-related and culture-associated values playing crucial role in the success of a firm, those being: power distance, individualism/collectivism, masculinity/femininity and uncertainty avoidance (At Beaver Cute's Weblog 2008). So, one study of Anglo-French JVs compared the two cultures on two of Hofstede's dimensions - power distance and uncertainty avoidance, which strongly reflected in the management styles, to demonstrate what difficulties may emerge in the process of business interactions. The French score higher on both of the dimensions. As a result their management style is more autocratic and strongly hierarchical, which made impossible to allocate decision-making rights at the same level. The two companies had problems in setting remuneration and employee status systems. The French relied on educational qualifications, while the British based on the content of the job (Lisa Consulting Com. 2007). Some scholars argued that there exists a 'core style' characteristic with each nation and reflecting its values and norms. The reality shows that management styles vary greatly even within one particular industry. Yet, there are certain dimensions of styles prevailing in each nation. So Culpan and Kucukemiroglu (1993) developed a model containing six principal dimensions: supervisory style, decision-making, communication patterns, control mechanism, interdepartmental relations, and paternalistic orientation. Using this model they compared American and Japanese management systems to see which dimensions work effectively in each of them. The findings revealed that American managers were concerned with supervisory style, decision making and control mechanism, while the Japanese emphasized communication processes, interdepartmental relations, and a paternalistic approach (In Quang & Vuong 2002). Khandwalla distinguished 10 normal and defective styles characteristic with Indian organisations, including: conservative, entrepreneurial, professional, bureaucratic, organic, authoritarian, participative, intuitive, familial, and altruistic (In Quang & Vuong 2002). As we can see, national cultures and economic backgrounds determine the motivational factors bringing to the effectiveness of human resources. The comparative research of German-Chinese JV revealed significant differences between the sustainable HRM practices in two countries. The authors of the study concluded that knowledge of the importance of work-related goals, management-style preferences and performance-reward preferences are three factors plying crucial role in the establishment of sustainable HRM practices. They also suggest that a questionnaire survey serves as a useful instrument in collecting the necessary information on the three factors, underlining that different organizations are likely to give different results (Rehu, Lusk & Wolff 2006). Another comparative study of four countries (the USA, China, the Philippines and India) revealed that despite cultural relatedness of Asian countries they are not similar to one another in management orientation (Neelankavil, Mathur & Zhang 2000). Cultural vulnerability of management is so strong that, as in the case with MBO in France, "the best HRM practices" often fail in particular cultural context. So post-socialist environment of such courtiers as Hungary or Lithuania constrained the implementation of 'miraculous American management techniques' (Kovach 1994, Cesyniene 2005). The prevalence of bureaucratic, familial, conservative and authoritarian styles of management was registered in Northern Vietnam, with its heritage of a centrally planned system (Quang & Vuong 2002). Robert Kovach (1994) warns that practitioners and researchers must be sensitive of these facts and consider them when deciding on management systems. "The Best HRM Practices" in Diverse Cultural Contexts. Milliman, J., Taylor, S. and Czaplewski, A. J. (2002) demonstrate that HR practices implemented in cross-cultural contexts of MNEs can often lead to misunderstanding, which "often creates a cycle where cross-cultural conflict, frustration, and possibly anger lead to communication breakdowns and lower morale resulting in lower team performance and potentially higher turnover". This and other studies underline the importance of appropriate HR practices in intercultural contexts. Yet, it remains unclear what those practices are and how to define them. The major suggestion is that a firm should not ignore cultural differences but rather build on them. At that, MNEs should find s balance, providing an opportunity to build, maintain and develop their corporate identities in a new cultural setting, adopting its norms and customs. This balance presupposes a dualistic approach: "while the global nature of a business may call for increased standardization, diverse cultural environments may call for differentiation" (Beaver Cute's Weblog 2008). Evanz and Doz offered a set of balancing opposing dualities to be considered for effective management of MNEs. These include: thinking global/acting local, decentralization/centralization, planned/opportunistic, differentiation/integration, change/continuity, top-down/bottom-up, delegation/control, competition/partnership. They explain that these forces should be viewed not as binary either/or decisions but as complementary forces to be balanced. As Rima Cesyniene (2005) summarizes that idea, "instead of maximizing anything, an organization should ensure that it maintains a minimal threshold of desirable attitudes." Researchers have created numerous models of strategic IHRM. The classic ERPG model distinguished four states of mind: ethnocentric, polycentric, regioncentric and geocentric. Taylor et al. (1996, in Osland and Osland), basing on this framework, defined three major approaches: exportive, adaptive and integrative. The exportive approach involves the implementation of the parent company's HRM policies and procedures in new cultural contexts. The advantages of this approach include high integration, standardization, and internal consistency. The disadvantages are lack of fit with local conditions and rejections, inflexibility. This approach bases on ethnocentrism and belief that parent company's practices are more effective than local ones. Characterized by high external consistency with the local environment and low internal consistency with the rest of the firm, the adaptive approach (based on polycentrism and regioncentrism) is the differentiation and utilization of local HRM practices. Being suitable for local conditions, it tends to result in fragmentation and duplication of efforts. Finally, the integrative approach presupposes the implementation of the best practices regardless of their origin and their transfer throughout the organization. With primary emphasis on global integration, this approach allows some local differentiation and leads to high internal consistency and moderate external consistency in limited local adaptations. The disadvantage of the approach is still that some practices may not work in the concrete cultural context. Empirical research in Central America and Panama suggests that the integrative approach works the best. Yet Osland and Osland (2005) propose to broaden it. In the Taylor et al. model, the integrative approach involves the transfer of HRM practices solely between headquarters and affiliates. Osland and Osland suggest that it is necessary to look "beyond the boundaries" of affiliates. There are different types of enterprises operating in each country and using HRM practices that are even more effective. A good HR manager should look for local best practices and adapt them. The sustainability of business in foreign cultural context is appropriate is provided by the alignment between the external environment and a firm's internal strategies, structures, and managerial practices. "The congruence between managerial practices and the national culture is likely to produce better performance outcomes" (Neelankavil et al 2000). Conclusion and Recommendations. People remain being the key source of competitive sustainability in MNEs. Successful performance of an organization can be achieved only in the conditions of the alignment of the corporate strategy with the needs and motifs of the employees. Management styles, representing a set of HR principles and practices, are to serve the purpose of this alignment. However, the problem is that needs and motivational factors of employees differ in various cultural contexts. Thus special importance is attributed to three factors - work-related goals, management-style preferences and performance-reward preferences. These three factors provide basis for the choice of the appropriate HR practices and procedures in each concrete organization. It is necessary to consider that though core values do unite nations, each organization, having its specific goals and focus, requires different HR practices. A questionnaire survey should be used as a simple-to-administer and relatively inexpensive instrument in collecting the necessary information. The choice of management style depends on a number of factors. Yet, one may trace a tendency of passing away from authoritative and mechanistic to participative and organic management styles throughout the world. This transition is viewed as preferable due to the advantages provided by participative market-oriented management system. These advantages include enhanced communication between different levels of organization, cross-functional collaboration, multiple solutions, structural flexibility, openness to innovations, and possibility to act quickly to potential risks and in change periods. Participative management style is possible in case of an integrative, geocentric approach to HRM decisions, which involves careful balancing of two cultures and integration of best HR practices and procedures available in these cultural contexts. Such a balance allows building and strengthening the initial corporate identity together with the adaptation of the partner's culture norms and values. This balance is based on dualistic approach, where opposite forces serve as complementary. There are certain restrictions to be minded when setting management systems in a new cultural context. In countries with high scores in power distance, collectivism and uncertainty avoidance enterprises tend to pursue an authoritative, highly hierarchical, conservative and bureaucratic management styles. The practices of participative management usually meet resistance of managers and employees. While national cultures play a crucial role in preferences of management styles and performance related practices, a great significance is attributed to cultural intelligence, which is a vital prerequisite at all the stages of international business operations. Cultural Intelligence should and can be developed with the help of training. Learning and continuous improvement acquire special significance in dealing with cross cultural issues. Managers should use the vast managerial literature on the empirical research and cultural contexts, while it provides insight into the factors leading to effective managerial practices and successful job performance. On the other hand, managers should be able to learn in day-to-day work, make conclusions and be open to new cultures and criticism. Managers should understand themselves and others. To make best decisions on HRM practices a managers should integrate the experience of his and local cultures. A manager should be aware of his cultural values and make sure whether his subordinates share them. In case they do not share his values, a manager should seek to create an environment favorable for effective management. Special emphasis should be done on selective recruitment, training and motivating of expatriate managers and employees. Understanding motivational factors of local human resources provides opportunities for best decisions on HRM practices. It is necessary to remember that though self-enhancement is universal, different things make people feel good. As Neelankavil et al. (2000) put it: "An American worker may feel that 'I have made it all by myself', while a Chinese worker may feel that 'I couldn't have made it without others,' when mesmerizing the joy of achievement." Knowledge of cultural specificities helps to choose appropriate performance appraisal practices. References: Beaver Cute's Weblog 2008, Human resource management, pertaining to the varied concepts over people management, January 28, Available at: beavercute.blogetery.com/.../ - 53k Cesyniene, R. 2005, 'The Most Recent Trends and Emerging Values in Human Resource Management Comparative Analysis', Engineering Economics, vol. 4, no. 44. Available at: http://internet.ktu.lt/lt/mokslas/zurnalai/inzeko/44/1392-2758-2005-4-44-50.pdf. Henderson, G. 1994, Cultural Diversity in the Workplace: Issues and Strategies, Praeger, Westport, CT, 268 pgs. Kovach Jr, R. C. 1994, 'Matching Assumptions to Environment in the Transfer of Management Practices: performance Appraisal in Hungary', International Studies of Management & Organization, Vol. 24. Lisa Consulting Com. 2007, Category: International Joint Ventures, Weblog, August 9, Available at: http://lisaconsulting.com/en/weblog/categories/international_joint_ventures/ Martinez, M., G. and Poole, N. 2004, 'Analysing Linkages between Strategy, Performance, Management Structure and Culture in the Spanish Fresh Produce Industry', International Food and Agribusiness Management Review 7 (4), Available at: http://ageconsearch.umn.edu/bitstream/123456789/28674/1/0704ma02.pdf McMillan, A. 2006, 'Management Styles', The Encyclopedia of Management, Thomson Gale, Available at: www.referenceforbusiness.com/management/Log-Mar/Management-Styles.html - 35k Milliman, J., Taylor, S., Czaplewski, A. 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