Cross-Cultural Management Skills in a Business Environment - Research Paper Example

Page Cross Cultural Management: Case Study of China and the UK Table of Contents Page i Table of Contents ii Introduction 1Cross-Cultural Management and its Importance 1 Critical Look at the Models of Hofstede and Laurent 5 Applications: China and the UK 11 Summary and Conclusions 13 Reference List 14 Figures and Tables 17 Figure 1: Hofstede Cultural Dimensions for China 18 Figure 2: Hofstede Cultural Dimensions for the UK 19 Table 1: Laurent Scores for Select Countries 20 Table 2: Laurent Scores on Three Perspectives 21 Introduction This is a critical examination of the research by Geert Hofstede and Andr Laurent on the issue of cross-cultural management in relation to the national cultures of China and the UK. The paper has four parts. The first part begins with a discussion of culture and cross-cultural management, what it means, and why this is important. The second part is a critical look at the key concepts, approaches, theories, and practices based on the research studies of Hofstede and Laurent and the models they propose to approach the issues related to cross-cultural management. The third part analyses the application of these models to specific strategic and operational issues in the context of the cultures of China and the U.K. The fourth part briefly summarises the important findings on the applicability of the cross-cultural management models studied to current and future management issues. Cross-Cultural Management and its Importance The business press is full of well-known disasters where companies that are successful in one country fail in another country for cultural reasons. The fact that cultural differences exist amongst countries is highlighted by the tongue-in-cheek advertisements of a well-known UK bank, HSBC, which can be summarised as follows: what may be good and acceptable in the UK (such as wearing a dark suit for a funeral as a sign of mourning) may not be good and acceptable in China (where the grieving family members wear white). When these cultural differences are not taken into account in business dealings or in marketing decisions, the result could be disaster, as EuroDisney in France learned the hard way when it did not allow drinking of wine (which happens to be the French beverage of choice) within its premises (Hansen & Brooks, 2006). So what is culture Culture is a complex concept that is defined in many ways. A comprehensive synthesis was proposed by Gallagher (1997, pp. 22-23) who characterised "culture" as human, traditional and dynamic, evolving and spiritual, shared by and with others, involves complex visible factors, an expression of a vision, contains behavioural norms and response patterns, institutional or symbolic, adds meaning to what is ordinary, self-communicating, fallible and renewable, and rooted in human consciousness. Culture changes or evolves over time, defined and altered by interactions amongst those who make up human society Culture is not monolithic because the human agents or actors who are imbued with intelligence and freedom give culture its dynamism through interaction and co-operation, giving rise to sub-cultures that add to societal diversity (Charon 2004, pp. 158-160). Culture is therefore a feature of human society shaped by the behaviour of everyone in that society who learn and share that culture with future generations, affecting behaviour and outlook on life and determining how they think, feel, and act. Culture can be analysed using several perspectives and frameworks since it is visible to observers. Schein (2004, pp. 25-27) argued, in the context of business organisations, that these cultural manifestations range from the very tangible and overt that one can see and feel: artefacts like organisational structures and processes, products and symbols of rituals, or architecture and art, to the deeply embedded, unconscious, basic assumptions such as beliefs, perceptions, thoughts and feelings that form its essence. In between are espoused beliefs, values, norms, and rules of behaviour that members of the society use to depict the culture to themselves and to others. To understand the culture of any group and/or to change it, one has to get at its underlying assumptions and understand how such basic assumptions came to be. The best way to change a culture is to change the basic assumptions, but this is difficult, time-consuming, and highly anxiety-provoking. Thus, the central challenge for business leaders and managers is "to get at the deepest level of a culture, assess the functionality of the assumptions made at that level, and deal with the anxiety that is unleashed when those levels are challenged" (Schein 2004, pp. 36-37). Organisations are a form of society, and they too have a culture that present to those whose task is to lead and manage them the same challenges of complexity, contingency, and diversity. Schein (2004, pp. 10-11) argued that culture and leadership are two sides of the same coin because culture determines who gets to become the leader and leadership creates and manages the culture (p. 10). Leaders have the unique talent to understand and work with cultures, destroying or changing it when needed, or building it and making it stronger (p. 11). It is important for leaders to become conscious of the culture in which they are embedded; otherwise, the culture will manage them. Understanding culture is essential to leaders if they are to lead (Schein 2004, pp. 22-23). This should extend to understanding existing sub-cultures which represent diversity and pose a threat for potential disunity and fragmentation. Thus, culture presents a dual challenge to a leader and a manager: that of understanding the culture of the people they lead and of the place where they want to do business, and to understand the culture of the people to whom they want to sell their products. This is the challenge of cross-cultural management and its dual dimension, a situation highlighted in this age of globalisation and internationalisation when business organisations are subjected to cultural differences and characteristics inside and outside. Not only should organisations learn to operate in cultures outside its home country so it could do business and sell products or services to peoples and countries whose cultures are different from their own. They too must learn to manage employees from different cultures who work for them (Grainger & Nankervis, 2001). A concrete example is a UK-based company with US-educated African managers in their subsidiary in China. Globalisation and internationalisation are two similar and often confused terms, though the first is used in a wider sense and is gaining in recent usage whilst the second is more specific to firms. Internationalisation (Porter, 1990, p. 64-65) is the opposite of localisation and is the process of adapting products for use outside the home nation (think of steering wheel locations in cars or the Chinese versions of Windows). Firms internationalise if they want to sell to markets outside their home country, because foreign markets have different cultures, needs and wants, demanding that firms make adjustments to products and services, organisational structures, leadership and people systems, and supply chains. Whitley (1994) observed that the post-war internationalisation process was primarily driven by increased foreign direct investment by transnational (or multinational) enterprises. This led to increased interdependence of industrialised economies and changes in the world economy with the following characteristics: (1) the establishment of a distinct global system of coordination and competition, (2) the denationalisation of leading firms, and (3) the international standardisation of managerial structures and practices. The natural progression from internationalisation to interdependence and greater integration of the world economy resulted in the complex phenomenon that we now call "globalisation". Globalisation is a concept best described than defined because of its complexity. A simple definition, like "globalisation is the integration of the world economy, reshaping business, reordering lives, creating social classes, different jobs, unimaginable wealth, and wretched poverty" (Micklethwait and Wooldridge, 2000, p. xvi), would not do justice to the term because it focuses too much on the economic aspect. Globalisation is much more than just money, business, and wealth. Stiglitz (2002, p. 9-10) described it as the "integration of countries and peoples, their economies and politics, their cultures and fatesbreaking down artificial barriers to the flow of goods, services, capital, knowledge, ideas, and (to a lesser extent) peoples across borderscreating new institutions that joined with existing ones to work across borders." Therefore, whilst many consider internationalisation and globalisation as synonymous terms, the former would refer to an outward process where firms adapt to and increase their presence in international markets, whilst the latter can be described simply as its natural integrating result. Globalisation is nothing new, but the inability of past generations of managers to learn and change its bad side has made it a major factor for business failures. This is how the knowledge and practice of cross-cultural management derives its importance. Critical Look at the Models of Hofstede and Laurent The decisions made by any business organisation are influenced by internal factors such as strategies, goals, operational scope, and internal resources including management systems and organisational culture, and by external factors in its business environment. Mead (1998, p. 15) identified several external factors that affect business behaviour, such as decisions made by competitors, suppliers, and customers, policies of trade unions, domestic and foreign governments, consumer groups, technology, and the national culture. Culture in both its organisational and national forms therefore exerts an internal and external influence on business organisations and must be taken into serious consideration. The studies of Hofstede and Laurent focus on the influential role that culture plays in the management of organisations. It is important to see the impact of culture in its proper context because it can happen that a business gives cross-cultural management too much of an importance that the organisation neglects other, perhaps more important, factors such as having a good product that the market, regardless of the firm's ability to manage cross-culturally, would be willing to buy no matter what. Or, a firm may be so attractive a work place (think perhaps of Microsoft) that even if its top managers are not cross-cultural management experts, workers would continue to fight just to get in. Thus, Hofstede and Laurent present some very interesting and important insights in their models, but managing across cultures is not the single most important skill that a firm and its managers must develop. Perhaps, what would be more important is developing a unique organisational culture where people want to work or developing a product that, even if produced in Third World sweatshops (think Nike more than a decade ago), would attract buyers. What is to be avoided is to overemphasise cross-cultural management at the expense of the rest of the business. What should also be avoided is not being able to translate the understanding of the culture of the market or foreign country into the appropriate operating strategies. After all, knowing cultures is different from surviving and thriving in it. Knowledge is just the first step; actually putting that knowledge into practice is the second, perhaps more important, step. It is in the context of learning about national cultures and their influence on business organisations and their management that Hofstede and Laurent conducted their research on cross-cultural management and how to develop the managerial skills for it. First, their intentions are noteworthy, since the focus of their studies have helped managers understand the nature of culture and how it influences behaviour in the workplace, learn about specific cultures, not only that of foreigners but their own, recognise the differences between cultures, and to implement the needed structures to better manage firms and markets (Beamish & Calof, 1989). Firms who ignore the fact of cultural diversity do so at their peril, but some manage to do so on a limited basis and survive because the management lacks the skills and resources to handle diversity, or there are no opportunities to derive positive effects from cross-cultural management, the negative effects outweigh the positive effects, and the firm's refusal to recognise diversity would seem likely to minimise the negative effects. Examples are some firms in France and the U.S. that prefer not to have foreigners or non-locals who do not know the home country culture in their top management and who, like Disney, commit glaring cross-cultural mistakes to the detriment of their businesses. Hofstede (1980/1984/1991) developed a model for analysing international business environment cultures based on his observation that people tend to think instinctively that all human beings are the same, but they are not. Thus, managers in foreign countries commit the mistake of making decisions based on their own culture, which affects how they perceive the situations in which those decisions have to be made. Hofstede attributes to this basic mistake many wrong decisions made by managers when they go out of their home country. Hofstede's model provides an insight into other cultures so that foreign managers can be more effective when interacting with people in other countries. If understood and applied properly, he claims that his model would reduce the level of frustration, anxiety, and concern. Hofstede (1991) developed his model by analysing data gathered between 1967 and 1973 from more than 70 countries to determine how values in the workplace are influenced by culture. Since then, he has been updating and validating his results and adding to his model. Hofstede's model identifies four primary dimensions that differentiate cultures: Power Distance (PDI), Individualism (IDV), Masculinity (MAS), and Uncertainty Avoidance (UAI). Hofstede added a fifth dimension - Long-Term Orientation (LTO) - after conducting an additional international study with a survey instrument developed with Chinese employees and managers. As defined by Hofstede, PDI measures the distance between individuals at different levels of a hierarchy in an organisation. UAI measures the need to avoid uncertainties about the future. IDV measures the relations between an individual and another. MAS measures the division of roles and values in society. The last dimension, LTO, measures the values that the culture practices. Cultures with long-term orientation practice values such as thrift and perseverance, whilst those with short-term orientation practice respect for tradition, fulfilling social obligations, and protecting one's "face." Hofstede measures each dimension for each country and the measurement provides a quantified graph (see Figure 1 for a sample) that he claims to be a measure of a country's culture. Aside from the observation that LTO is difficult to pin down because both sets of values could be observed in several Asian countries, an analysis of Hofstede's model also point out a few other weaknesses. First, it assumes that geography is the only limiting factor for culture since the data came from people who were in their home country at the time of the experiment. Thus, it does not take into account that an American (or a Japanese) is influenced by his culture regardless of whether is he is in New York or Tokyo. Second, those who participated in Hofstede's experiments worked in the same company (IBM) and in the same local office (e.g., Tokyo). These would certainly have an effect on the findings because how a local, much less one who does not work for a company like IBM, behaves when at home may not necessarily be the same way he behaves when abroad, say in London or Paris. Third, putting a fixed score on each dimension assumes that cultures are static and may not go forward or back. However, as already seen in the definitions of culture, it is dynamic and can change depending on several factors such as a change in government, a national traumatic experience, or the evolution of social modes of behaviour when influenced by a more powerful culture. An example would be China that, in the last thirty years, has developed so radically that some of Hofstede's values may not hold. Note, for example, China's low IDV score that Hofstede attributed to the emphasis on a collectivist society by the Chinese Communist Party, and to the high LTO score to signify their thriftiness, both of which are not supported by current evidence too numerous to mention. Nevertheless, Hofstede's insight has certain notable strengths, the first of which is its simplicity, giving a new manager without any basic knowledge of a foreign culture a good starting point towards learning more about that culture. Although seemingly too simplistic, having numbered scores for each of the five dimensions also allow for a comparison of different cultures, which is also a good starting point for the manager to be more curious and analytical. The model's five dimensions also summarise key aspects of every culture that would be helpful in analysing the nuances of different cultures and finding ways to bridge the gaps where they exist. Thus, knowing that a country culture has a high PDI score would make the manager more cautious in dealing with workers who place their managers on a high pedestal, and thus avoid any behaviour (like getting drunk at the office party) that would damage his sense of authority. Laurent (1983/1986/1991) recognised the complexity of managing people from different cultures and argued that business organisations must learn to manage with greater consistency in a variety of cultural environments (1986, p. 97). He proposed that international business firms must recognise that the parent organisation's peculiar ways of management are neither universally better nor worse than others, only different and likely to exhibit strengths and weaknesses particularly abroad. He added that preferred ways of managing people in other cultures may be more effective locally and, therefore, should be acknowledged and allowed even if these are remarkably different (e.g., in the ways that erring workers are disciplined and even punished without making the worker lose "face" if the office is in an Asian country). Laurent (1986, p. 100) emphasised that cross-cultural management issues have more to do with states of mind and mindsets than with behaviours, and that what would be more interesting to know is how the organisational and national cultures interact instead of focusing solely on the national culture as a determinant of managerial behaviour. He proposed (1986, p. 80-89) four parameters of organisational cultures that he measured to predict how cultural interactions would take place depending on how the organisation is perceived: as a (1) Political system; (2) Authority system; (3) Role formulation system; and (4) Hierarchical relationship system. Using these parameters, he analysed different cultures on: (1) how far the manager carries his/her status into the wider context outside the workplace; (2) the manager's capacity to bypass levels in the hierarchy; and (3) attitudes towards the manager as an expert in contrast to the manager as a facilitator. Laurent (1986; with Adler et al., 1989) then measured, using a scientific survey, the agreement of different countries to each of the following attitudes: (1) "through their professional activity, managers play an important role in society"; (2) "in order to have efficient work relationships, it is often necessary to by-pass the hierarchical line"; and (3) "it is important for a manager to have at hand precise answers to most of the questions that his subordinates may raise about their work." Tables 1 and 2 show Laurent's measures of perceptions and attitudes in different countries to organisational culture based on their agreement with these statements. Comparing the models of Hofstede and Laurent would show their differing views on the relative importance of organisational and national cultures. Hofstede (2001, p. 394) argued for the importance of national or societal culture because organisational culture has little influence over values and assumptions. This means that corporate culture can only influence attitudes or behaviour but cannot change the values and assumptions of employees, and that rather than being mutually exclusive, corporate and national cultures are complementary. Despite this basic difference in viewpoints, regardless of which model is used, national culture would have a stronger influence on organisational culture, but not the other way around, which means that organisational efforts to change the values of workers are useless and that organisations would attract most those workers whose personal values conform with that of the organisation. Applications: China and the UK These theories are now applied to the UK and China on two very basic issues: how an erring local employee is disciplined in the UK and in China, and the kind of business organisations that would develop in the culture. Figure 2 shows Hofstede's scores for the UK, whilst Laurent's scores for China and the UK are shown in Table 1. The differences in scores allow for a comparison to be made between the two cultures. Summarising Hofstede's scores for the two countries, it can be observed that UK and China differ substantially in all dimensions, with the greatest differences in IDV and LTO. Thus, British managers are highly competitive and focused on results whilst Chinese managers are consensual, more open to co-operation, and place greater value on long-term relationships. Dimensions UK < China PDI 30 < 75 IDV 90 > 10 MAS 60 > 50 UAI 30 < 35 LTO 20 < 95 Source: Hofstede, 2003 Applied to the hypothetical case, the British would discipline an erring worker in a tough and straightforward manner, focusing on the nature of the violation and the personal responsibility of the worker to correct the mistakes committed out of respect for the rule of law and social order that had just been threatened. British managers are likewise motivated by personal and individual success in the form of wealth, recognition, and self-activation. In contrast, the Chinese manager would make use of the organisational hierarchy to carry out the disciplinary action, going down the ranks until the erring worker is reached. The purpose of the system would be to emphasise the serious social nature of the mistake and the threat that it posed to the whole organisation. However, this would be done in a quiet way without making the person concerned lose "face." Managers in this and similar cultures are motivated by collective success and belonging to a group, and success is measured as a collective in the quality of human relationships and the social environment. Abstracting from Laurent's scores for the two countries gives the following summary: Political Authority Formal Hierarchical Roles Relationships Leaders UK 32 48 80 36 40 31 27 China 67 65 85 67 75 66 74 Source: Laurent (1986); Adler, Campbell & Laurent (1989) Consistent with the Hofstede scores, these Laurent scores predict that UK companies are characterised by competition on the basis of personal and professional merit, typical of cultures with low PDI, high IDV and MAS, and low UAI and LTO scores. In the UK organisational culture, employees have a "winner-take-all" attitude where personal competence counts more than the ability to work with a team and share the accomplishments. A Chinese company, in contrast, is like a family organisation where loyalty and hierarchy, formality and respect for authority, and compromise and consensus are the way to get things done and to advance up the ladder. This observation shows that Laurent's scores provide consistent results with that predicted by Hofstede's scores for this country that is high on PDI and low on IDV. Thus, companies in China have powerful internal groups and informal political networks and highly paternalistic leaders who are at the same time humane and genuinely concerned with each member of the collective organisation, where one's behaviour in preserving the cohesion of the team and one's connections and networks are more important than personal competence and hard work. With this knowledge, the manager must learn to navigate the whole organisation to get things done and to avoid undue stress. Summary and Conclusions The performance of a business is affected by the decisions made by those who manage it. However, management decisions are also affected by the culture of the society and nation where the business operates and the culture of the business organisation itself. Cross-cultural management is the set of skills that a manager must develop in order to make the right decisions, minimise anxiety, and deliver the best performance for the whole organisation by knowing how to manage people and processes that are shaped by societal and organisational culture. Learning the models of cultural analysis, such as those by Hofstede and Laurent, would help managers develop cross-cultural management skills. Whilst these two models have limitations and are neither perfect nor comprehensive, they nevertheless provide basic perspectives that allow for comparisons and prepare the manager to acquire a deeper understanding of and a better appreciation for working in a multicultural business environment. Reference List Adler, N.J., Campbell, N. C. & Laurent, A. (1989) In search of appropriate methodology: from outside the People's Republic of China. Journal of International Business Studies, Spring, pp. 61-74. Beamish, P. W. & Calof, J. L. (1989) International business education: A corporate view. Journal of International Business Studies, Fall, pp. 553-64. Charon, J. (2004) Society. In Symbolic interactionism: An introduction, an interpretation, an integration (pp. 157-174). Upper Saddle River, NJ: Pearson Prentice-Hall. Gallagher, M. (1997) Clarifying the concept. In Clashing symbols: An introduction to faith and culture (pp. 11-23). London: Darton, Longman and Todd. Grainger, R. J. & Nankervis, A. R. (2001) Expatriation practices in the global business environment. Research and Practice in Human Resource Management, 9(2), pp. 77-92. Hansen, C.D. & Brooks, A.K. (2006) A review of cross-cultural research on human resource development. Human Resource Development Quarterly, 5(1), pp. 55-74. Hofstede, G. (1980) Culture's consequences: Comparing values, behaviours, institutions, and organizations across nations, 2nd ed. London: Sage. Hofstede, G. (1984) Culture's consequences: International differences in work-related values, Abridged ed. London: Sage. Hofstede, G. (1991) Cultures and organizations: Software of the mind. New York: McGraw-Hill. Hofstede, G. (2003a) Cultural dimensions: China. Updated 2003. Retrieved 13 November 2007, from: http://www.geert-hofstede.com/hofstede_china.shtml Hofstede, G. (2003b) Cultural dimensions: United Kingdom. Updated 2003. Retrieved 13 November 2007, from: http://www.geert-hofstede.com/hofstede_united_kingdom.shtml Laurent, A. (1983) The cultural diversity of western conceptions of management. International Studies of Management and Organization, 13 (1-2), pp. 75-96. Laurent, A. (1986) The cross-cultural puzzle of international human resource management. Human Resource Management, 25 (1), pp. 91-102. Laurent, A. (1991) Managing across cultures and national borders. In S. Makridakis (ed), Single market Europe: Opportunities & challenges for business. San Francisco: Jossey-Bass. Mead, R. (1998) International management: Cross cultural dimensions, 2nd ed. London: Blackwell. Micklethwait, J. & Wooldridge, A. (2000) A future perfect: The challenge and hidden promise of globalization. New York: Crown. Porter, M.E. (1990) The competitive advantage of nations. New York: Free Press. Schein, E. (2004) Organisational culture and leadership defined. In Organisational culture and leadership (pp. 1-23, 25-37). San Francisco: Josey-Bass. Stiglitz, J.E. (2002) Globalization and its discontents. London: Allen Lane. Whitley, R. (1994) The internationalization of firms and markets: Its significance and institutional structuring. Organization, 1 (1), 101-124. Figures and Tables Figure 1: Hofstede Cultural Dimensions for China Figure 2: Hofstede Cultural Dimensions for the UK Table 1: Laurent Scores for Selected Countries Table 2: Laurent Scores on Three Perspectives Figure 1: Hofstede Cultural Dimensions for China (Source: Hofstede, 2003a) Figure 2: Hofstede Cultural Dimensions for the UK (Source: Hofstede, 2003b) Table 1: Laurent Scores for Select Countries Political System Authority System Formal System Hierarchical System High 68 Italy 68 France 87 Germany 69 Italy Low 26 Denmark 30 United States 57 Sweden 25 Sweden Mean 44 47 76 41 China 67 65 85 67 UK 32 48 80 36 Difference 35 17 5 31 (Source: Abstracted from Laurent, 1983) Table 2: Laurent Scores on Three Perspectives Do managers play an important role in society For efficiency, is it necessary to bypass the hierarchy Is it important for a manager to be an expert or have precise answers Denmark 32 Sweden 32 Sweden 10 UK 40 UK 31 Netherlands 17 Netherlands 45 USA 32 USA 18 Germany 46 Denmark 37 Denmark 23 Sweden 54 Netherlands 39 UK 27 USA 52 Switzerland 41 Switzerland 38 Switzerland 65 Belgium 42 Belgium 44 Italy 74 France 42 Germany 46 China 75 Germany 46 France 53 France 76 Italy 75 Italy 66 China 66 Indonesia 73 China 74 Japan 78 Source: Laurent, 1983, p. 80 Source: Laurent, 1983, p. 86 Adler et al., 1989, p. 64 Source: Adler et al., 1989, p. 69 Read More