Impact of Culture

• What is it? Measures?

• General management activities

• Communication and meaning

• International strategy

• Multi-cultural management

• Entry modes and alliances

• HRM (Lincoln Electric)

Culture…What is it?

• Value system

• Norms, beliefs, behaviors

• Common way of thinking

• Society’s communicable knowledge

• Society’s characteristics passed on generation by generation

Power Distance• Small - trusting, less formal organizations• Large - mistrusting, hierarchical organizations

Uncertainty Avoidance• Weak - risk is non-threatening; diversity is appreciated• Strong - risk averse, diversity is threatening

Individualism• Collectivist - belonging to groups ideal; group decision making• Individualist - individual initiative and achievement; leadership is the ideal

Masculinity• Feminine - quality of life; people and relationships come first• Masculine – results-oriented; performance; assertiveness

Implications for ManagementINTERPERSONAL

• Punctuality• Interpersonal distance• Tempo of business• Negotiations• Bribery• Linear vs. circular

communication• High vs. low context

communication

ORGANIZATIONAL• Organizational structure• Decision making• Leadership• Adaptation of products• HRM policies• Entry mode choice• Location of value-

creating activities

Multicultural Management:Japanese-American Context

CulturalDifferences

?• Job dissatisfaction• Lack of commitment

towards company• Propensity to quit

Evidence of a Problem?• “If Americans ‘fail’ on a project, they are never

given another chance. Yet, Americans are rarely explicitly told what their authority is.”

• “In Japan, formal job descriptions don’t exist. This can lead to role ambiguity in the U.S.”

• “One source of frustration for Americans is the lack of input in decision making.”

• “Our engineers leave because of the constraints placed on innovativeness and flexibility”

• “I seem to have several bosses, which can be confusing.”

• “My supervisor doesn’t spend enough time preparing me for this position.”

• “There’s a lack of open, honest communication.”

• “I can’t make your meeting, Wally, because two of our middle managers just quit.”

Evidence of a Problem?

NegativeAttitudinalOutcomes

How to Address Cultural Problems

CulturalDifferences … basics commonly understood.

IntermediatePerceptions …”teachable”?

SupervisorySupervisoryBehaviors … receive scant attention inBehaviors … receive scant attention in most training programsmost training programs

“Chain of causality” often neglected

Supervisory Behaviors• MentoringMentoring

– Psycho-social– Career-related

• DelegationDelegation– Authority-specific– Task-related

• CommunicationCommunication– Effectiveness– Formalization

• MonitoringMonitoring

– General– Corrective– Intrusive

• Interpersonal ExchangeInterpersonal Exchange

– Exchange Quality– Acculturating Exchange– Abusive Exchange

Delegation Model

Procedural Justice

Trust

RoleAmbiguity

RoleConflict

JobSatisfaction

Commitment

LowPropensity

to Quit

CulturalDifference

AuthorityDelegation

TaskDelegation

Mentoring Model

Procedural Justice

Trust

RoleAmbiguity

RoleConflict

JobSatisfaction

Commitment

LowPropensity

to Quit

CulturalDifference

Psycho-social

Mentoring

Career-related

Mentoring

Job-related

Feedback

Culture and Organizations

• Organizing demands answers to two questions:– Who has the power to decide what?– What rules or procedures will be followed to

attained desired ends?

• Power Distance and Uncertainty Avoidance are most important

National and Organizational Culture

Low Power Distance High Power Distance

Autonomy Need for Authority

Results-oriented Process-oriented

Low Uncert. Avoid High Uncert. Avoid

Ambiguity OK Needs security

Open-system decisions Closed-system decisions

Leadership

• Perceived levels of power

• Quality/characteristics of exchange with subordinates

• Communication patterns

• Trust (both ways)

• Delegation of tasks

Organizational Structures/Systems

• Formality of policies and rules• Hierarchical vs. “flat” organizations• Mechanistic vs. organic• Authoritative vs. consensual decision

making• HRM systems• Accounting systems

Motivation and Reward

• Formation/role of setting goals

• Achievements

• Compensation system

• Job satisfaction

• Organizational commitment

Communication and Meaning(Hall & Hall)

ME

AN

ING

Explicit:Written/Spoken

Context:Surroundings/

Non-verbalHigh

Context

LowContext

Impact of Culture on Strategy and Entry Mode

U.S.

Germany

Mexico

Malaysia

Adaptation vs. Standardization• Product• Marketing• HRM

Entry• Resources• Control• Risk

Entry, Alliances ,and Culture

• Entry: JVs preferred when:– Target country-market culturally different (CD)– Initiating firm high UA

• Structure: Majority ownership preferred when:– Initiating firm high PD

BuyoutBuyout DissolutionDissolution

EquityAlliance

External Forces

Internal Forces

Impact of Culture on Alliances:A Strategic Option View

BuyoutBuyout DissolutionDissolution

EquityAlliance

Strategic Option View of Alliances

High MarketValue

High PD

ValueUncertainty

& Risk

High UA

External Forces

Internal Forces

Culture and Alliances as Options• Partnership buyouts more likely when:

– Initiating firm high PD

• Alliance portfolios (U.S. vs. Japan):– Japanese hold equity alliances longer– Japanese hold larger number of smaller alliances– Japanese more likely to invest further/acquire

partner– Americans more likely to spin off partners (success)– Americans faster to terminate alliance (failure)

• Longevity: JVs terminate faster/earlier when:– Partners are culturally different (CD)

• Mistrust: Suspicions of poor performance when:– Initiating firm high UA

• Trust: Expectations of good performance when:– Partners are culturally similar

Alliances and Culture cont.

Managing Overseas Assignments

• High Failure Rates…US Expatriates:– 25% are recalled– 30-50% under perform– 77% get “demoted” after returning

• Higher Costs (+ 100-200%):– Base salary– Housing, school, travel, spousal allowances

EXPATS LOCALSC

ON

SP

RO

S

Knows company & products

Strong links to HQ

Has technical skills lacking in local market

Rare

Expensive, spouse problem

High failure rates

Short-sighted focus

Likely to leave upon return

Knows country, local market

No spouse problem

Cheaper

Steep learning curve for high- tech products

Weak links to HQ

Dual pressures: company AND country