Cross-cultural management
Dr. Chin-Ju Tsai
MN513 International HRM and OB
Outline
• What is culture?
• Levels of culture in multinational management
• Cultural models
• Home and host country effects on IHRM
What is culture?
The layers of culture/onion metaphor:
Visible cultural
differences
Language
Housing
Food
Clothes
Norms and values
What we can do and
cannot do.
What is right or wrong.
Key beliefs
Our understandings
about what is true.
Other metaphors such as iceberg and ocean have also
been used.
What is culture?
Some definitions:
• ‘Culture consists in patterned ways of thinking, feeling and
reacting, acquired and transmitted mainly by symbols,
constituting the distinctive achievements of human groups,
including their embodiments in artefacts; the essential core of
culture consists of traditional (i.e. historically derived and
selected) ideas and especially their attached values.’
(Kluckhohn, 1951: 86 cited in Hofstede, 2001: 9)
• ‘the collective programming of the mind that distinguishes the
members of one group or category of people from another’
(Hofstede, 2001: 9)
• ‘Culture is the characteristic way of behaving and believing that a
group of people in a country or region (or firm) have evolved over
time and share.’
(Briscoe and Schuler, 2004: 116)
Why is it important to study culture
and understand cultural differences?
Levels of culture in multinational management
National Culture
Business Culture
Organizational Culture
Occupational Culture
Multinational Management
(Source: Cullen and Parboteeah, 2008: 49)
Three cultural models
Hofstede’s model of national culture
• the first cultural model
• introduced by Geert Hofstede in the early 1980s
• includes 5 dimensions of culture
• has been used extensively to understand cultural differences
Fons Trompenaars and Hampden-Turner’s 7d cultural model
• includes 7 dimensions of culture
• builds on anthropological approaches to understand culture
(humans must solve basic problems of survival)
GLOBAL national culture framework
• most recent national culture framework
• derives from the Global Leadership and Organisational Behavior
Effectiveness (GLOBE) project
• based heavily on Hofstede’s model
• includes 9 cultural dimensions
Hofstede’s model of national culture (1)
• based on 116,000 questionnaires from employees of
IBM subsidiaries
• conducted in 50 countries and 3 regions (East Africa,
West Africa and Arab countries)
• identified 5 dimensions of cultural variation in values
• for each dimension, possible origins, predictors and
consequences for management behaviour are
presented
Hofstede’s model of national culture (2)
• Power distance is the extent to which the less powerful
members of organizations and institutions accept and expect
that power is distributed unequally.
• Uncertainty avoidance is the extent to which a culture
programs its members to feel either uncomfortable or
comfortable in unstructured situations. (Unstructured situations
are novel, unknown, surprising, different from usual. )
• Individualism on the one side versus its opposite,
collectivism, is the degree to which individuals are supposed
to look after themselves or remain integrated into groups,
usually around the family.
Source: Hostede (2001: xix) and Hofstede (1985: 348)
Hofstede’s model of national culture (3)
• Masculinity, which stands for a preference for achievement,
heroism, assertiveness, and material success; as opposed to
femininity, which stands for a preference for relationships,
modesty, caring for the weak, and the quality of life.
• Long-term versus short-term orientation refers to the
extent to which a culture programs its members to accept
delayed gratification of their material, social and emotional
needs.
source: Hostede (2001: xix) and Hofstede (1985: 348)
Hofstede’s model of national culture (4)
• High levels of power distance = high levels of formality
and elitism
• High levels of uncertainty avoidance = high need for
security and fear of the unknown
• High levels of individualism = looser sense of solidarity
between people
• High levels of masculinity = high levels of assertiveness
and distinction between gender roles
• High level of long-termism = high sense of need to plan for
the future
Power Distance
Arab World **
80
Argentina
49
Australia
36
Austria
11
Austria
11
Luxembourg *
Malaysia
40
104
Malta *
56
Mexico
81
Morocco *
70
Netherlands
38
Bangladesh *
80
Belgium
65
New Zealand
22
Brazil
69
Norway
31
Bulgaria *
70
Pakistan
55
Canada
39
Panama
95
Chile
63
Peru
64
China *
80
Philippines
94
Colombia
67
Poland *
68
Costa Rica
35
Portugal
63
Czech Republic *
57
Romania *
90
Denmark
18
Russia *
93
East Africa **
64
Singapore
74
Ecuador
78
Slovakia *
104
El Salvador
66
Estonia *
40
Finland
33
France
68
Germany
35
Greece
60
Guatemala
95
Hong Kong
68
Hungary *
46
India
77
Indonesia
78
South Africa
49
South Korea
60
Spain
57
Surinam *
85
Sweden
31
Switzerland
34
Taiwan
58
Thailand
64
Trinidad *
47
Turkey
66
United Kingdom
35
Iran
58
Ireland
28
United States
40
Israel
13
Uruguay
61
Italy
50
Venezuela
81
Jamaica
45
Vietnam *
70
54
West Africa
77
Japan
Uncertainty avoidance
Arab World **
68
Argentina
86
Luxembourg *
70
Malaysia
36
Malta *
96
Mexico
82
Australia
51
Austria
70
Austria
70
Morocco *
68
Bangladesh *
60
Netherlands
53
Belgium
94
New Zealand
49
Brazil
76
Norway
50
Bulgaria *
85
Pakistan
70
Canada
48
Panama
86
Chile
86
Peru
87
China *
30
Philippines
44
Colombia
80
Poland *
93
Costa Rica
86
Portugal
104
Czech Republic *
74
Romania *
90
Denmark
23
Russia *
95
East Africa **
52
Singapore
8
Ecuador
67
Slovakia *
51
El Salvador
94
South Africa
49
Estonia *
60
South Korea
85
Finland
59
France
86
Spain
86
Germany
65
Surinam *
92
Sweden
29
Switzerland
58
Taiwan
69
Thailand
64
Trinidad *
55
Turkey
85
United Kingdom
35
Greece
112
Guatemala
101
Hong Kong
29
Hungary *
82
India
40
Indonesia
48
Iran
59
Ireland
35
United States
Israel
81
Uruguay
Italy
75
Venezuela
76
Jamaica
13
Vietnam *
30
Japan
92
West Africa
54
46
100
Individualism
Arab World **
38
Argentina
46
Luxembourg *
60
Malaysia
26
Malta *
59
Mexico
30
Australia
90
Austria
55
Austria
55
Morocco *
46
Bangladesh *
20
Netherlands
80
Belgium
75
New Zealand
79
Brazil
38
Norway
69
Bulgaria *
30
Pakistan
14
Canada
80
Panama
11
Chile
23
Peru
16
China *
20
Philippines
32
Colombia
13
Poland *
60
Costa Rica
15
Portugal
27
Czech Republic *
58
Romania *
30
Denmark
74
Russia *
39
East Africa **
27
Singapore
20
Slovakia *
52
South Africa
65
South Korea
18
Spain
51
Surinam *
47
Sweden
71
Switzerland
68
Taiwan
17
Thailand
20
Trinidad *
16
Turkey
37
United Kingdom
89
United States
91
36
Ecuador
8
El Salvador
19
Estonia *
60
Finland
63
France
71
Germany
67
Greece
35
Guatemala
6
Hong Kong
25
Hungary *
80
India
48
Indonesia
14
Iran
41
Ireland
70
Israel
54
Uruguay
Italy
76
Venezuela
12
Jamaica
39
Vietnam *
20
Japan
46
West Africa
20
Arab World **
Masculinity
52
Luxembourg *
50
Argentina
56
Malaysia
50
Australia
61
Malta *
47
Austria
79
Mexico
69
Austria
79
Morocco *
53
Bangladesh *
55
Netherlands
14
Belgium
54
New Zealand
58
Brazil
49
Bulgaria *
40
Canada
52
Chile
28
China *
66
Colombia
64
Costa Rica
21
Czech Republic *
57
Denmark
16
East Africa **
41
Ecuador
63
El Salvador
40
Estonia *
30
Finland
26
France
43
Germany
66
Greece
57
Norway
8
Pakistan
50
Panama
44
Peru
42
Philippines
64
Poland *
64
Portugal
31
Romania *
42
Russia *
36
Singapore
48
Slovakia *
110
South Africa
63
South Korea
39
Spain
42
Surinam *
37
Sweden
5
Switzerland
70
Guatemala
37
Hong Kong
57
Taiwan
45
Hungary *
88
Thailand
34
India
56
Trinidad *
58
Indonesia
46
Turkey
45
Iran
43
United Kingdom
66
Ireland
68
United States
62
Israel
47
Uruguay
38
Italy
70
Venezuela
73
Jamaica
68
Vietnam *
40
Japan
95
West Africa
46
Long-term orientation
Australia
31
Bangladesh *
40
Brazil
65
Canada
23
China *
118
Czech Republic *
13
East Africa **
25
Germany
31
Hong Kong
96
Hungary *
50
India
61
Japan
80
Netherlands
44
New Zealand
30
Norway
20
Philippines
19
Poland *
32
Singapore
48
Slovakia *
38
South Korea
75
Sweden
33
Taiwan
87
Thailand
56
United Kingdom
25
United States
29
Vietnam *
80
West Africa
16
Hofstede’s model of national culture (5)
True or false??
The U.S.A. scores high on individualism, so
it is safe to conclude that all Americans are
individualists.
• Be cautious in interpreting cultural difference
using country scores!!
Hofstede’s model and management implications (1)
Management processes
High Power Distance
Low Power Distance
HRM
Management selection
Social class; elite education
Educational achievement
Training
For conformity/obedience
For autonomy
Evaluations/promotion
Compliance; trustworthiness
Performance
Remuneration
Large wage difference
between management and
worker
Small wage difference
between management and
worker
Management styles
Theory X; authoritarian, with
close supervision
Participative; less direct
supervision
Motivational assumptions
Assume people dislike work;
coercion
People like work; extrinsic
and intrinsic rewards
Decision making/
organisational design
Centralized; tall pyramids;
large proportion of supervisors
Decentralized; flat pyramids;
small proportion of
supervisors
(Source: Cullen and Parboteeah, 2008)
Hofstede’s model and management implications (2)
Management processes
High Uncertainty Avoidance
Low Uncertainty Avoidance
Management selection
Seniority; expected loyalty
Past job performance; education
Training
Specialized
Training to adapt
Evaluations/promotion
Seniority; expertise; loyalty
Objective individual performance
data; job switching for promotions
Remuneration
Based on seniority or
expertise
Based on performance
Management styles
Task-oriented
Nondirective; person-oriented;
flexible
Motivational assumptions
People seek security, avoid
competition
People are self-motivated,
competitive
Decision making/
organisational design
Larger organization; tall
hierarchy; formalized; many
standardized procedures
Smaller organizations; flat
hierarchy, less formalized, with
fewer written rules and
standardized procedures
HRM
(Source: Cullen and Parboteeah, 2008)
Hofstede’s model and management implications (3)
Management processes
HRM
Management selection
Training
Evaluations/promotion
Remuneration
Low Individualism
High Individualism
Group membership; school
or university
Focus on company-based
skills
Slow, with group; seniority
Universalistic based on individual
traits
General skills for individual
achievement
Based on individual performance
Extrinsic rewards (money, promotion)
Based on group
membership; organizational based on market value
paternalism
Management styles
Appeals to duty and
commitment
Individual rewards and punishments
based on performance
Motivational assumptions
Moral involvement
Calculative; individual
cost/benefit
Decision making/
organisational design
Group; slow
Individual responsibility
(Source: Cullen and Parboteeah, 2008)
Hofstede’s model and management implications (4)
Management processes
High Masculinity
Low Masculinity
Jobs gender identified; school
performance and ties important
Career oriented
Independent of gender,
school ties less important;
Job-oriented
HRM
Management selection
Training
Evaluations/promotion Continues gender-tracking
Remuneration
Management styles
More salary preferred to fewer
hours
More Theory X; authoritarian
Job performance, with less
gender-based assignment
Less salary difference
between levels; more time
off
More participative
Motivational assumptions Emphasis on performance and
Emphasis on quality of life, time
off, vacations; work not central
Decision making/
organisational design
Intuitive/group; smaller
organizations preferred
growth; excelling to be best; work
central to life; job recognition
important
Decisive/individual; larger
organization preferred
(Source: Cullen and Parboteeah, 2008)
Hofstede’s model and management implications (5)
Management processes
Long-Term Orientation
Short-Term Orientation
Fit of personal and
background characteristics
Investment in long-term
employment skills
Slow; develop skills and
loyalty
Security
Objective skill assessment for
immediate use to company
Management styles
Build social obligations
Use incentives for economic
advancement
Motivational assumptions
Subordinate immediate
gratification for long-term
individual and company
goals
Immediate rewards necessary
Decision making/
organisational design
Synthesis to reach
consensus; design for
social relationships
Logical analyses of problems;
design for logic of company
situation
HRM
Management selection
Training
Evaluations/promotion
Remuneration
Limited to immediate company
needs
Fast; based on skill contributions
Pay, promotions
(Source: Cullen and Parboteeah, 2008)
Contributions and limitations of Hofstede’s model
Main contributions:
• identifies cultural dimensions with hard data
• makes comparisons across countries
• shows culture’s consequences in managerial behaviours
Main criticisms:
• the conceptualization of national culture (e.g. implicit, territorially
unique)
• the representativeness of the survey respondents (i.e. IBM
employees; the average sample size per country was small)
• a mismatch between some dimensions and their measurements
• three cultures at play: national, organisational and occupational
Group Work 1
Pick any two countries in the
world. Discuss and summarize
the managerial implications of
cultural differences by applying
the Hofstede model.
7d cultural model (Trompenaars and Hampden-Turner)
• based on results of a large-scale study (over 15,000
employees from 55 countries)
• like Hofstede, also proposed comparing countries
using cultural dimensions
• all cultures have to deal with 3 basic problems:
--social interactions
--passage of time
--relationship to the environment
7d cultural model
Relationships with people:
• Universalism vs. Particularism (the choce of dealing with other people
based on rules or based on personal relationships)
• Individualism vs. Collectivism (the focus on group membership versus
individual characteristics)
• Specific vs. Diffuse (the type of involvement people have with each other
ranging from all aspects of life to specific components)
• Neutral vs. Affective (the range of feelings outwardly expressed in the
society)
• Achievement vs. Ascription (the assignment of status in the society based
on performance vs. assignement based on heritage)
Perspective on Time:
• Sequential vs. Synchronic (the orientation of the society to the past, present,
or future or some combination of the three)
Relationship with the Environment:
• Internal vs. External Control (nature viewed as something to be controlled
vs. something to be accepted)
(Trompenaars and Hampden-Turner, 1998)
GLOBAL National Cultural Framework (1)
• the GLOBAL project involves 160 researchers
• data collected over 7 years from 18,000 middle
managers in 62 countries
• based on Hofstede’s model and developed 9 cultural
dimensions (only 2 are independent of the Hofstede
model)
GLOBAL National Cultural Framework (2)
9 cultural dimensions
• Assertiveness
• Gender egalitarianism
• Institutional collectivism
• In-group collectivism
• Future orientation
• Power distance
• Uncertainty avoidance
• Performance orientation (the degree to which the society
encourages societal members to innovate, to improve their
performance, and to strive for excellence)
• Humane orientation (the extent to which individuals are
expected to be fair, altruistic, caring, and generous.)
(House, Hanges, Javidan, Dorfman, and Gupta, 2004)
Institutional effects too…
Apart from culture, different countries have different
institutions and legal systems
National Culture
Institutions
Common values, norms of
behaviour & customs;
assumptions that shape
manager’ perceptions…
National labour laws; trade unions;
educational & vocational training;
labour market/ professional
bodies; employer’s federation;
consulting organisations…
National HRM
Recruitment & selection; training &
development; career development;
performance management; pay &
benefits; communication…
Which has the greatest influence on an MNC?
The national culture and institutions of the
home country.
Or
The national culture and institutions of the
host country.
Home and host country effects
• Country of origin effects: the greatest influence on
the MNC is the national culture and institutions of the
country from which it originated
• Host country effects: the greatest influence on the
MNC is the national culture and institutions of the
country from which it is located
Country of origin effects (1)
Sources of the effect:
• the concentration of assets, sales and
employment: on average around half of the
operations of the largest 100 MNCs are located in
the home base
• The dominance of home country nationals in
senior managerial positions
• Main policies dictated by HQ
Country of origin effects (2)
Example: Country of origin effects in US MNCs
McDonald’s
• The chain has over 31,000 outlets in 119 countries
• McDonald’s is known for exporting its HR practices rather than
adapting to local customs
--McWork (standardisation, supervision…)
--Part-time/ flexible working
--Anti-union
• Overall, McDonald’s retains US business culture as much as possible
• But evidence of adaptation too (e.g. increasingly responsive to
consumer tastes in different countries)
• Country of origin effects, therefore, do not cover all complexities, major
influences come too from host country effects.
Host country effects (1)
Also known as ‘societal effect’ or ‘national business systems approach’.
Sources of the effect:
• different countries have different national cultures, institutions,
and legal systems
• subsidiaries have to conform to local social norms and legal
regulations
• policies to reduce number of expatriates in favour of locals
Host country effects (2)
Example: lean production
• Lean production: so-called as it uses less of everything (manpower,
time, raw materials)
• Also known as ‘Toyotism’, or ‘Japanisation’
Characteristics of lean production
• Team working with team leaders
• Quality circles: workers spot own defects
• Workers responsible for own discipline
• Worker feels part of process
• ‘Just in time’ supply systems
• Dealers integrated into process
Host country effects (3)
Example: lean production
• Impact of host country culture/ institutions on lean production
Country
National
culture/institutions
Impact on lean
production
Germany
--heavily legislated
--apprenticeship system
--adapted to German law
--skills hierarchy permitted
UK
--hierarchical
--worker/ manager suspicion
--team leader as ‘foreman’
--quality circles ignored
• But lean production was still broadly recognisable in all national
contexts (e.g. focus on teamwork and consensus)
• Picture actually very complex… Home and host influences interact to
create new hybrid cultures…
Group Work 2
You have been hired as a consultant to three
MNCs: an American high-tech firm opening a new
site in China; a British retail bank setting up in
India; and a German car manufacturing firm
relocating its production to Japan.
You have been asked by all three firms to advise
them on the desirability and feasibility of
transferring HRM practices to their new locations.
How would your advice differ in each situation?
Summary
• The study of management differences across countries has
been conducted from cultural and insititutional perspetives
• International management can be affected by three levels
of culture (i.e. national, business, organizational and
occupational culture)
• Cultural models help us understand cultural differences
across countries through using cultural dimensions
• An MNC can be influenced by the national cultures and
institutions of its home country and host country