Culture in Organizations - Lehrstuhl für Wirtschaftsinformatik

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Culture in Organizations - Lehrstuhl für Wirtschaftsinformatik

Technische Universität München

Überfachliches Seminar

Intercultural Aspects of Working in

Global Teams

Lecture 2: 5 Mar, 2010 (SS 2010)

Dr. Suparna Goswami

Technische Universität München

Lehrstuhl für Wirtschaftsinformatik


Technische Universität München

2

Contents

• Introduction

• Objective of this Seminar

• Organization Details

Culture Defined

• Models / Theories

– Hofstede’s model of national cultures

– Sh Shalom l Schwartz’s S h t ’ value l di dimensions i

• Cultural Stereotypes

Culture in the Organization

– Case Studies

• Organizational Culture

• Intercultural Encounters

© Prof. Dr. H. Krcmar


Technische Universität München

Culture in Organizations

Organizations are symbolic entities that function according to the mental models of

their employees

Cultural Context

3

• These models are often culturally derived

C

C C

C

C

C

C C C

The Organization

Source: Smircich (1983)

© Prof. Dr. H. Krcmar


Technische Universität München

4

Culture in Organizations

Implications for

– Planning & Control

– Corporate Governance

– Motivation & Compensation p

– Leadership & Empowerment

© Prof. Dr. H. Krcmar


Technische Universität München

5

Cultures in Organizations

Planning and Control

The 2 most important dimensions of culture that impact organizational models:

Power distance

– Who decides what

Control

Uncertainty Avoidance

– How to assure that what needs to be done will be done

Planning

Impose norms on organizations related to planning and control

© Prof. Dr. H. Krcmar


Technische Universität München

6

Culture in Organizations

Planning and Control

• Higher PDI

– supports political rather than strategic thinking

– supports personal planning and control rather than impersonal systems (the higher in the

hierarchy, the less formal the planning and control)

• Lower PDI

– control co o sys systems e s pplace ace more o e trust us in subo subordinates d a es

• Higher UAI

– makes it less likely that strategic planning activities are practiced because they may put

question marks on the certainties of today

– more detail in planning, more short-term feedback

– leaving planning to specialists

– more limited view of relevant information

© Prof. Dr. H. Krcmar


Technische Universität München

7

Culture in Organizations

Corporate Governance

• Close historical link between Individualism and capitalism

– Relationship between individual and organization – calculative and based on self-interest

– In collectivist societies such relationships are moral by tradition

– Hire and fire approach is ill-percieved (Walmart case – US opposed to Germany)

• Combination of power distance, distance uncertainty avoidance and masculinity correlates

with corporate ownership

– Explains concentration of ownership

– Mindsets of directors, employees & investors

– Formation & implementation p of economic ppolicy y

Some observations

In high PDI countries, large organizations are often state-owned (e.g., France)

In countries low on masculinity, y, cooperative p form of ownership p can be observed ( (Denmark, ,

Finland, Norway, Sweden)

© Prof. Dr. H. Krcmar


Technische Universität München

8

Culture in Organizations

Motivation & Compensation

• Uncertainty avoidance and masculinity were the best predictor of need for achievement in

different cultures

– Motivation by success (Low UAI) as opposed to motivation by security (High UAI)

– Ego needs (high Masculinity) to Affiliation needs (low Masculinity)

• Personnel policies will have different effects in different countries

Low UAI, High MAS – USA, UK, Asian countries (India, Singapore, etc.)

– Personal, individual success

High UAI, High MAS – Germany, Austria, Japan

– Personal, , individual securityy

High UAI, Low MAS – France, Spain, Portugal, some Asian countries (e.g., Thailand)

– Security & relationship: Individual wealth less important that mutual solidarity

LLow UAI UAI, LLow MAS – SScandinavian di i countries, t i NNetherlands th l d

– Success & relationships

© Prof. Dr. H. Krcmar


Technische Universität München

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Culture in Organizations

Compensation

• Different countries have different compensation packages

– Employees & employers compare themselves against others in the same national market

• Various aspects of compensation packages were found to be related to the culture dimensions

Power Distance negatively related to

– Workplace childcare for managers, technical & professional staff

– Stock options and ownership for non-managerial non managerial employees

Uncertainty Avoidance

– Positively related to pay based on seniority and skill

– Negatively relate to pay based on performance

Individualism

– Security & relationship: Individual wealth less important that mutual solidarity

Masculinityy

– Negatively related to flexible benefits

– Positively related to paying commissions to non-managerial employees

© Prof. Dr. H. Krcmar


Technische Universität München

10

Culture in Organizations

Leadership & Empowerment

• A leader is a cultural hero – a model of bheavior

• Appropriate leadership in one country will not necessarily be appropriate in some

other country

• Imposing foreign leadership can result in the destruction of “cultural capital”

• Survey y of CEO’s in different countries revealed the followingg

– Feminine cultures believe in modest leaders (e.g., Consensus-based in the Netherlands)

– High PDI cultures have leaders taking more autocratic initiatives (e.g., France)

– Uncertainty avoiding (Low UAI) cultures stress on training and responsbility (e.g.,

Germany)

– In High LTO cultures, leaders stress on practicing patience (e.g., Japan)

– Collectivist societies stress on the importance of families (e.g., Taiwan)

© Prof. Dr. H. Krcmar


Technische Universität München

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Culture in Organizations

Leadership & Empowerment

• A cross-country (Japan, China, USA, Russia) comparison indicated that managerial

work values differed significantly across countries which differed on the

Individualism Individualism-Collectivism Collectivism scale. scale

• Similarly, manager’s interpretation of business ethics and ethical norms in likely to

be correlated with the Power Distance and Individualism-Collectivism

© Prof. Dr. H. Krcmar


Technische Universität München

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Globalization and its implications

TTechnological h l i ladvances d iin th the past t2d 2 decades d hhas resulted lt diin….

– Flattening of the world

• Less expensive and efficient communication channels

• Differences & distances between different countries are becoming smaller

– BBusiness i expansion i

• Entering new markets, such as in India, China, Brazil…

– Global supply chain

• Offshoring & outsourcing arrangements

• Globally dispersed work teams

– This results in increasing intercultural interactions and exchanges

© Prof. Dr. H. Krcmar


Technische Universität München

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Globalization and its Implications

• Id Ideas & theories th i often ft exported t d to t other th context t t without ith t taking t ki into i t account t the th

values context in which they were initially developed

• Cross Cross-cultural cultural research suggest that management theories need modification

for different national contexts

– However, this does not mean that countries cannot learn from one another

– Looking g across the border is often the most effective way y of ggetting g new ideas for

management

© Prof. Dr. H. Krcmar


Technische Universität München

14

Globalization and its Implications

Th There are no universal i l solutions l ti tto organization i ti and d management t problems bl

However, organization leadership often forget this

– AAssume that th t business b i models d l and d practices ti can be b replicated li t d without ith t any

modification or adatation

Resulting in misunderstanding misunderstanding, unsatisfactory results results, and downright failures

Walmart Debacle in Germany

The EuroDisney Case

© Prof. Dr. H. Krcmar


Technische Universität München

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Walmart in Germany

BBackground k d

A success story without precedence

– Started in 1962 by Sam Walton

World’s 2nd – World s 2 largest company by revenue largest retailer

nd largest company by revenue, largest retailer

– First store outside USA, in 1991 (in Mexico City)

Attributed success factors

– Everyday low prices due to extensive use of IT

– Sophisticated logistics & inventory management techniques

– A strong emphasis on customer service

– Highly motivated personnel (a “quasi-religious” corporate culture)

© Prof. Dr. H. Krcmar


Technische Universität München

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Walmart in Germany

EEntered t d the th GGerman market k t in i 1998, 1998 exited it d iin 2006

Reported a loss of $1 billion

Imported the US business model – “Everyday low prices at an excellent

service”

Among g other things g ( (sluggish gg German retail market, , strategically g y wrong g

acquisitions), some of the reasons attributed to the debacle are

– Not ot ab able e to de deliver e oon tthe e ppromise o se oof low o pprices ces

• Existing discount retailers (Aldi, Lidl) matched or offered lower prices

– Excellent Service in US Excellent Service in Germany

© Prof. Dr. H. Krcmar


Technische Universität München

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Walmart in Germany

“The e co company’s pa y s cu culture tu e does not ot ttravel, a e , aand d Wal-Mart a a t does not ot understand u de sta d tthe e Ge German a

customer,” - Hans-Joachim Koerber, Metro’s CEO (2000).

– Unable to understand Shoppers

• Smiling at shoppers (misconstrued as flirting)

• Friendly Store Assistants

• Grocery baggers not appreciated

– Unrealistic expectations from employees

• Closing down a location headquarter

• Underestimating the German resistance to move (as opposed to the US)

• Walmart chant every morning (later abandoned)

– Lack of understanding of legal details

• Restrictive labor laws (unable ( to hire and fire easily) y)

• Conflict with unions

© Prof. Dr. H. Krcmar


Technische Universität München

18

EuroDisney Case

© Prof. Dr. H. Krcmar


Technische Universität München

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Implications

Cultural Intelligence

– At firm level

– At individual level

© Prof. Dr. H. Krcmar


Technische Universität München

20

Organizational Culture

• Distinguishes between organizations while holding their national

environments constant

• Shared norms norms, values and assumptions amongst members organizations

regarding how organizations function

• Provides a framework for interpreting situations – social construction of

meaning

• Determines patterns p of interactions among g ppeople p

• Deciding on future and current actions

© Prof. Dr. H. Krcmar


Technische Universität München

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Organizational Culture

• Sh Shared d kknowledge l d

• Stories, myths and symbols

– IInformally f ll ttold ld stories t i are an excellent ll t iinformation f ti about b t an organization’s i ti ’

culture to its members, especially new-comers

– Gives concrete example of what would otherwise be a general, and perhaps

meaningless g statement

– Can provide an overarching philosophy that defines the organization

E.g. 3M “Never kill a new product idea” – orientation towards innovation

AT&T “The system is the solution” – orientation towards problem solving

© Prof. Dr. H. Krcmar


Technische Universität München

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What Determines Organizational Culture

• EEnvironment i t within ithi which hi h th they operate t

– Institutional forces and pressures

– National resource bases

• Economic factors

Culture of the Founder / Subsequent leaders

• Industry

• National Culture

– Even when the parent company tries to impose a “global culture”, there exist

significant differences in managerial choice among subsidiaries

– Different HRM practices between parent company and subsidiaries

© Prof. Dr. H. Krcmar


Technische Universität München

23

Organizational, National & Professional Cultures

CCertain t i professions f i hhave a strong t ‘professional ‘ f i l culture’ lt ’

Examples include:

– Medical profession (Doctors)

– Legal profession (Lawyers)

– Accountants

Providing client service through use of ‘specialized knowledge’

– Involves abiding by code of conduct or standards

Similarities among professional cultures across nations

– E.g., Ethical code of conduct among doctors

Country-specific differences

– Accounting principles vary from country to country

Organizations are made up of one or more professional groups

– Conflict between professional culture & organizational culture

© Prof. Dr. H. Krcmar


Technische Universität München

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Organization Culture in MNC

• With iincreasing i globalization, l b li ti MNC MNCs are bbecoming i stateless t t l players l ddetached t h d ffrom

individual nation states “MNC Culture

• However, even within MNCs, differences in organizational g

cultures are observed

• These can occur from two sources:

– Country of origin effect

– National culture of the country in which the subsidiary is located

• Differences are reflected in:

– Extent to which decision-making g is centralized and formalized

– Career progression paths, HR policies

US MNCs show more direct influence over the HR policies of the subsidiaries,

While for Japanese MNCS MNCS, the HR policies of the subsidiary is fairly similar to local companies

© Prof. Dr. H. Krcmar


Technische Universität München

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Intercultural Encounters

OOccur when h individuals i di id l or groups are exposed d tto a fforeign i cultural lt l environment i t

Intercultural contact does not automatically breed mutual understanding

– It may y confirm groups g p involved in their own identities and pprejudices j

– Members of another group maybe perceived in a stereotyped fashion

– May focus on the ‘differences’ rather than the similarities

– It is easier to learn the symbols and rituals by observing, more difficult to understand the

underlying y g values behind them

– A foreigner judging a new culture using old values may find it to be lacking

– Lack of adaptation may result in problems:

• Communication breakdowns

• Loss of effectiveness

• Complete failure

Both for individuals and organizations

© Prof. Dr. H. Krcmar


Technische Universität München

26

Intercultural Encounters

Source: http://internal-relations.de/index.php/category/intercultural/

© Prof. Dr. H. Krcmar


Technische Universität München

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Intercultural Encounters

IIntegration t ti across cultural lt l divide di id li lines iis often ft diffi difficult lt ( (especially i ll iin collectivitist ll ti iti t

societies)

Uncertainty avoiding cultures are likely to be prone to xenophobia

Integration among members in culturally different groups requires environment where

people can meet and mix as equals

Increase the ‘culture overlap’ situations

– Universities are a good example example. Sports clubs clubs, work organizations also serve this purpose

Places where people can meet & interact as equals

– Allows trust and friendship to develop between culturally diverse people

– Reduces culture gap and the threat that it poses

© Prof. Dr. H. Krcmar


Technische Universität München

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Intercultural Encounters

Positive

Feelings

Negative

1

Euphoria

2

Culture

Shock

Time

3

Acculturation

Source: Culture’s Consequences, Geert Hofstede

© Prof. Dr. H. Krcmar

4

Stable state

Phase 1: Honeymoon period –

excitement of travelling, seeing a

new place

Phase 2: Culture Shock – when real

life starts in the new

environment, coping with

different ways of doing things, a

different languages

Phase 33: Acc Acculturation lt ration – slo slowly l learnt

to function in the new

environment, adopted some of

the local practices, becomes

somewhat integrated in the new

social network

Phase 4: a Stable state is achieved. It

may remain negative in

comparison to home, it may be

as good as before or even better

than before


Technische Universität München

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Intercultural Encounters

IIntercultural t lt l competence t comprises i three th phases: h

– Awareness: Recognitions that values systems and their manifestations are

different – different ‘mental softwares’

– Knowledge: g Additional knowledge, g , in order to interact with people p p from a

different culture, we need to know about their cultures

• We may not share their values, but at least recognize where their values differ from

ours

– Skills: Awareness + Knowledge + Practice – the satisfaction of getting along in

a new environment

Intercultural competence (cultural intelligence, intercultural sensitivity)

• A practical necessity in a globalized workplace

• Can be taught, however some people are better at it than others

• Motivation and ability to gain some distance from their own cherished beliefs

• Ability to modify specific behaviors so that they are more appropriate in the other

culture

© Prof. Dr. H. Krcmar


Technische Universität München

30

Intercultural Encounters

SSome traits t it id identifying tif i people l who h are likely lik l to t be b more effective ff ti in i intercultural

i t lt l

interactions

– Open-mindedness

– Empathy

– Interest in local culture

– Flexibility

– Tolerance

Effectiveness of intercultural interactions

– The foreigner feels good about interactions with locals

– The locals feel good about interactions with the foreigner

– The task requiring cross-cultural interaction between the foreigner and the local in

completed effectively

– The foreigner does not suffer from any invisible stress stress-related related symptom

© Prof. Dr. H. Krcmar


Technische Universität München

31

Intercultural Encounters

CCultural lt l competence t trainings t i i

Culture-specific

Culture-general

It is difficult to be multi-cultural, ‘biculturalism’ is more likely

– Ability to function in two cultures – one’s own culture and the host culture

– Adapt host culture in the work environment

– Retain one’s own culture at home, during leisure and in social settings

This is the most commonly observed form of biculturalism among foreigners

© Prof. Dr. H. Krcmar


Technische Universität München

32

References

(1) Smircich Smircich, L L. “Concepts of Culture and Organizational Analysis”, Analysis” Administrative Science

Quarterly 28 (1983): 339-358.

© Prof. Dr. H. Krcmar

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