Day 6, Mgmt 446 Fall, 2011 Sully Taylor Ellen Devlin

Agenda  The Role of Culture in International Management Why and how does culture affect the way people act? Why does it matter to global companies and managers? Understanding our own cultural tendencies  International news report  Return Test 1  The Role of Culture in Organizations – Different Types of Cultures  International news report

National culture and its Effect on the Individual and Corporate Culture The Role of Culture in International Management Why and how does culture affect the way people act? Why does it matter to global companies and managers?

Socio-Economic Context Legal Context Culture Political Context Stability Local & regional political tensions Corruption Political & governmental influence on operations Cultural values & assumptions Local laws Regulations concerning expatriates, marketing Labor relations rules Rules regarding employee contracts Size Composition Educational level Geographical distribution Class divisions Income levels E.g. Labor Market Forces Influencing Global Organizations Management of Business Operations Firm Characteristics Strategy

Societal culture Individu al values Behavior in organizatio ns National variables (laws, government, economy, technology) Societal variables (language, ethnic origin, religion) Profession al culture Corporate culture Cultural/National Variables and Organizational Behavior

Socio-economic environment  the combination of external social and economic conditions that influence the operation and performance of an organization. The socioeconomic environment is part of the overall business environment. E.g. technological trends/levels; literacy levels; satisfaction with quality of life; educational system; importance of work; societal stratification; income levels or changes in income distribution; history and its influence; infrastructure; importance of different groups (e.g., family, work group); religious traditions, etc.

Culture (“National”)  A system of values, beliefs, assumptions and norms, shared among a group of people. Provides two functions:  Software for interaction - e.g. decision criteria (e.g., speed or minimizing risk?); ways of social interaction (maintaining harmony; respecting elders; getting all the good ideas out).  Identity for people within the culture – who we feel we are as people!

Three Levels of Mental Programming Culture Human Nature Personality Universal (true of all people) Biological Specific to groups (neither) Learned Specific to individuals (idiosyncratic) Inherited and learned Source: People Skills for Global Business, Cultural Intelligence, D. Thomas and K. Inkson

Culture Attitudes BehaviorValues Influence of Culture on Behavior and Behavior on Culture

 Four Dimensions of Culture (one framework): Individualism Power Distance Uncertainty Avoidance Gender Role Differentiation/materialism

Six Cultural Orientations: Questions That Every Culture Must Answer  Environment: What is our basic relationship with the world around us? Harmony, Mastery, Subjugation  Relationships: To whom and for whom do we naturally have responsibility? Collective, Hierarchical, Individual  Activity: What is our basic or natural approach to activity? Being, Doing, Thinking  Human Nature: What is the basic nature of humans? Good, Evil, Mixed or Neutral  Time: How do we think about time? Past, Present, Future; Monochronic, Polychronic  Space: How do we think about and use space? Public, Private, Mixed The first three have the biggest impact on business interactions. Based on Kluckhohn & Strodtbeck (1961), Variations in Value Orientations

Cultural Orientations – Relations Among People  Collective Members of a group look after each other. Promote the welfare of whole group. Look to others as a way of judging their actions and think about how their activities relate to the consequences for their work group. E.g. Japan.  Individualistic People are responsible mainly for themselves. People are self-focused, and look to themselves to judge their actions, are introspective and think about their personal goals and actions. E.g. USA.  Hierarchy Those at the top of the hierarchy have both responsibility for and authority over those below (hierarchy can be of either group or individual). People from a low-hierarchy culture do not believe that is acceptable for one person to order another about, and they expect to have input concerning company policies that are important to them. A person from a high hierarchy society will not question an order from a superior even if the order is unexpected and places a heavy burden on the employee. E.g., India.

How Important is Responsibility to the Group vs. Responsibility to Oneself Individually Collective more important than individual Individual and collective about the same Indiv Equal Collective

How Acceptable/Desirable is Hierarchy as a Way to Determine Responsibility and Authority? Prefer very strong hierarchy Totally against hierarchy Anti- hierarchy Neutral Strong hierarchy

An example of how culture can affect management practices: Finland versus US Where are they different on cultural dimensions?  Power distance : Finns prefer flatter organizations and smaller wage differentials  Uncertainty avoidance : Finns higher, so have more formal written rules and procedures. Emphasize HR policies for stability and security.  Gender role/materialism: role of leader in Finland is to safeguard employee’s well-being, social responsibility.  Individualism : Finns favor teams, group level bonuses.  But not a drastic difference between the two countries!

 Major components that influence culture: Language, ethnicity, and religion  Other ways to look at cultural differences Complexity: Amount of implicit information (high context, low context) Heterogeneity: Variations in language, ethnicity and religion (no dominant culture, more difficult to adjust to).

Some other dimensions along which cultures differ….  Work and material gain (is work a good thing or not?)  Informality  Joking and Fun  Attitude toward time (scarce resource)  Time perspective (monochronic/polychronic)  Age and gender (e.g., venerate youth; women as equals)

Cultural Intelligence starts with understanding your own cultural ‘self’ Cultural values are central tendencies, not absolutes. Cultures can be ‘loose’ or ‘tight’ in any particular group/nation (heterogeneous). We are of course affected by other values and traits, such as religious, regional or our personality types. In addition to national culture, our behavior can be shaped by organizational culture.

Cultural values are central tendencies, not absolutes.

Remember, Individuals Within Cultures Vary Greatly from Each Other! Taiwan N = 426 USA N = 503

 Cultural Paradox – different dimensions are sometimes ‘in conflict’.  Cultural Shock – the anxiety and psychological stress a person experiences before adapting and adjusting to a new cultural environment. Caused by lack of knowledge, limited prior experience, and personal rigidity. Honeymoon stage Crisis stage Recovery stage Adjustment stage

Corporate Culture  The belief about how to manage internally and how to compete externally  Organizationally shared: Values Beliefs Assumptions Understandings  Simplified Definition “The way things work around here”. Basis for relevant corporate norms and behaviors patterns.

Incubator (Fulfillment Oriented) Country: Sweden Business: Small Guided Missile (Project Oriented) Country: U.S., U.K. Business: Large Family (Power Oriented) Country: France, Spain Business: Small Eiffel Tower (Role Oriented) Country: Germany Business: Large Personal/Informal Task / Formal Egalitarian/ Decentralized Hierarchical/ Centralized Types of Corporate Culture

Cultural Typology of the Organization  Categories of Business Organizations: Monolithic, Plural, and Multicultural  Factors for examining organizations: Acculturation Structural Organization Informal Organization Cultural Bias: prejudice and discrimination Organizational identification Inter-group Conflict

Cultural Typology of the Organization  MONOLITHIC ORGANIZATION Firms at early stage of internationalization One dominant culture group (homogenous) Lack of structural integration Lack informal integration Discrimination against minorities To survive one must adopt the existing cultural norms No room for inter-group conflict

Cultural Typology of the Organization  Plural Organization Includes workforce from the host country Partial structural integration The home personnel are still dominant The top managers are still ethnocentric  Multicultural Organization Culturally heterogeneous; recognize the value of cultural heterogeneity Full structural and informal integration

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Benefits of Multiculturalism  Reduced costs: Lower absenteeism & turnover  Resource acquisition: Well qualified pool of mgrs  Marketing advantage: Multicultural personnel help MNC adopt cultural perspectives in multiple mkts  Creativity is encouraged when there is less emphasis on conformity  Better problem solving  Organizational flexibility: bilinguals have higher level of divergent thinking & cognitive flexibility Would you describe PSU as monolithic, plural or multicultural?