CHALLENGES IN MANAGING CULTURAL DIVERSITY A MANAGERS PERSPECTIVE

TALLINN UNIVERSITY OF TECHNOLOGY
School of Economics and Business Administration
Department of Business Administration
Chair of Organization and Management
Pietro Usai
CHALLENGES IN MANAGING CULTURAL DIVERSITY
A MANAGERS PERSPECTIVE
Core study Research Paper in Organization and Management
Supervisor: M.Sc Ergo Metsla
Tallinn 2012

I declare to have written the research paper independently.
All works and major viewpoints of the other authors, data from other sources of literature and
elsewhere, used for writing this paper have been referenced.
Pietro Usai (digital signature given)
Student’s code: a122929
Student’s e-mail address: Pietro@denz.nl
Supervisor M.Sc Ergo Metsla
The paper conforms to the requirements set for research papers.
Signature Date: 10/17/12

Table of Contents
ABSTRACT ........................................................................................................................................... 3
INTRODUCTION ................................................................................................................................. 4
1 MANAGING MULTICULTURAL TEAMS IN LITERATURE ................................................ 5
1.1 Anthropology ....................................................................................................................................... 5
1.2 Multicultural education .................................................................................................................... 6
1.3 The sharing principle ........................................................................................................................ 7
1.4 Multicultural management .............................................................................................................. 8
2 PERSONAL EXPERIENCE ON MANAGEMENT IN MULTI-CULTURAL
ORGANISATIONS ............................................................................................................................ 11
2.1 The Baltics ........................................................................................................................................ 11
2.2 Holland .............................................................................................................................................. 12
2.3 Germany ............................................................................................................................................ 13
2.4 Estonia, Russia, Balkan ................................................................................................................ 15
3 RECOMMENDATIONS TO HANDLE CULTURAL ISSUES ............................................... 17
REFERENCES .................................................................................................................................... 19
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ABSTRACT
Multicultural management is a result of globalization and the movement of people
around the globe. As the international trade worldwide increases more and more companies
will go global. Going global is equal to establishing local offices and coming into contact with
individuals who have different national and corporate cultures. The challenge for managers is
how do we create a performing mix out of all those different people with different languages
and different opinions, perceptions and biases.
The goal of this research was to find out what has been written about Multicultural
Management, how it is managed, taught and what are interesting approaches to manage a
team of cultural diversified individualists. Some examples of Multicultural issues out of own
experience are also given as to complement the theory of sharing in managing multicultural
teams.
Looking through articles the main issue noticed and mentioned by several Authors is
that there is no sufficient research done to enable a manager to study on the best in class
methods to manage a multicultural environment. Therefore any sharing of experiences with
other managers is a key to create a management force able to cope with managing
multicultural corporations.
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INTRODUCTION
Being a manager in this ever-changing world poses a lot of challenges. The world is
getting smaller, people are moving around more often from one country to another. The time
that a manager only had to work within one country, one culture is long gone and
developments as the European unification, the globalization of the economies and the work
field of the companies exposes managers to an ever increasing amount of cultural mixes.
Each and every team member brings in a vast background of learned behaviours, skills,
opinions, and biases. The challenge is how to create teams out of such a vast array of unique
individuals. Even though a lot of effort is put in education managers to be open minded to
cultures and to earn the sensitivities of each culture there is no one universal handbook for the
manager on how to manage a complete culture set of a group of individuals. With complete
cultural it is meant the cultural background not only from ones culture but also the formation
of ideas, skills, biases, working methods imposed and learned over the years. It is a
unification of corporate working cultures mixed with national cultures.
Comprehensive research among literature shows that not enough has been done to find
out what is really needed to be a top performer in a multicultural environment and this study
does not imply to be a full research on this but more of an outline what has been written by
others on multicultural problems or peculiarities with an additional chapter on field
experience.
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1 MANAGING MULTICULTURAL TEAMS IN
LITERATURE
Before we start about discussing what literature states about “How to manage a
multicultural team” we need to look at the perspectives and views on cultural issues and how
is multicultural management taught.
1.1 Anthropology
An interesting perspective on cultural issues in the Business World is given by
Michael P. Lillis and Robert Guang Tian in their piece Cultural Issues in the Business World:
An Anthropological Perspective (2010). In this piece they describe that the core of
anthropology is the relation between culture and human behaviour.
Culture is described as a set of patterns, explicit and implicit, of and for behaviour
acquired and transmitted by symbols, constituting the distinctive achievements of human
groups, including their embodiments in artefacts (Kroeber and Kluckhohn, 1952). Translated
this means that culture means the visions, biases, beliefs, skills, customs, language and art
which one grows up with in a specific society.
But how does this relate to Business? There the term Business anthropology is used
which is described as exploring the culture and social framework of a business organization.
We all know that culture has a significant impact on an organization but how do we
understand the real impact of culture. Even though many attempts have been made to do this,
the majority finds that it is an “ideational” concept (Allaire and Firsirotu, 1984) meaning that
it is a group of people sharing the same ideals. Another main concept is the “adaptionist”
perspective, which comes down to the way a company does things and what it does. (Keesing,
1974).
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The anthropologist approach is therefore entirely based on the fact that we shape an
organizational culture on the basis of the values that we have been instilled while growing up
in a certain region, society, social group. We install our identity on the company and try to
find people that share this same identity and where they feel a sense of belonging to the group
where they can relate to the same ideals. The organizational culture can take many forms such
as a Power culture where one strong leader dominates the way things are done. Other forms
are an Achievement culture where results are the main key, a Support culture where harmony
is key, and a Role culture, which states clear expectations on the expectations of the role one
performs.
Summarizing the anthropologist approach we can say that without an organizational
culture influenced by our own values, biases, customs and believes there would be chaos in
our Business world.
1.2 Multicultural education
Now we know the ruling vision on organization culture we should ask ourselves then
“why in our schools we teach the future managers about organizational cultures based on
researches done on national levels where one can find only average national characteristics
and this taught only in International Business”? (Mary Lou Egan, Marc Bendic 2008).
Additionally we should reflect on the fact that Business Schools mainly teach stereotypes
about cultures coming from research conducted on limited amount of focus groups.
Research is mainly focused on national average characteristics, high distance, and low
distance, individual, collective and this is then in turn taught in school as the way to predict
how an individual will behave in a business situation. There is no detailed research done
among a wide variety of countries and cultures to establish a clear and detailed view on “How
things are done in practice” from one country and company to another.
The way it is done currently means that managers are not prepared for the real
situations. In my own experience I rarely deal with a person who has no international
experience and is formed only in one culture and myself I am a Dutch/Italian national, raised
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in Holland, educated in France, worked in German, France, Holland and currently in Estonia.
How does the traditional education of multicultural fit to me?
Egan and Bendick state in their article that the focus should switch from averages to
teaching cultural competence, to regard each group of people as individuals and not as
averages. It is of critical importance that you build up a relation with the people you work
with; gain experience abroad as to get a higher cultural intelligence. So in short it is vital that
current managers become educated by experience in order to be able to educate future
managers by the sharing principle in Multicultural Management as described by Maxwell and
Rijamampianina in their article “The sharing principle: a way of managing multicultural
organizations (2002)”.
1.3 The sharing principle
This article mainly tries to answer the question how managers can better manage an
organization in todays world where globalization is forcing managers to be more culturally
intelligent as to use cultural diversity as a means to increase performance.
Rijamampianina (1999) suggests that managers should focus on internal organic
processes as these are inter related as in figure 1 and that successful management of these
processes leads to higher levels of performance.
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In a study aimed at enhancing multicultural learning Rijamampianina proposed that a
sharing principle is the best guideline for managing a multicultural team. Share business
successes or in other words involvement and participation in success of the company, a big
part in this is to empower via training so that employees feel confident enough to share. One
part of this training can also be a one-language corporation. E.g. Many multinationals use
English as the corporate language for all global locations (motivation), share mental models,
networking, building up long term relations to facilitate communication and allow
constructive conflicts (interaction), support vision creation. Mutual creation of a vision
(visioning) and encourage core competence development, the learning organization (learning).
We have now looked at what is organizational culture, how is multicultural thought in
schools and how can should we manage of cultural diversity. In addition to the theory the
following pages will offer examples on multicultural management of teams.
1.4 Multicultural management
There are basically three different forms of multicultural teams (Marko Mäkilouko
2003). The first form is a project team where team members with different backgrounds work
together in the same country. The second form is a project team where the members meet
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egularly but they are divided partly or completely over different countries. The third form is
a project team where the members work together in a so-called virtual environment and where
most members are divided over many countries.
Mäkiluoko researched among Finnish companies mainly the second form and found
three distinctive leadership styles as per figure 2.
Leadership Dimensions
Polycentric Leadership Style
Initiating Structure, including
staffing, planning, delegating
and Reporting
Synergistic
Leadership
Style
Ethnocentric
Leadership
style
+
Personal Human
Relationships
+
Internal Negotiation
People oriented
leadership
dimensions
Task oriented
leadership
dimensions
Figure 2: Conceptual relations between leadership styles.
Ethnocentric management was the most common where the team leader is
culturally blind, focuses on formal negotiation within the team and where the
teams are split up in local and foreign.
One can say that Ethnocentric is a defensive approach as described by Robert Day
2007, an organization that adopts the defensive approach treats cultural and racial differences
as hazards – a series of weak links and mismatches between people in which there is great
potential for misunderstanding, mistrust, conflict and even resentment. One can reasonably
argue that such organizations have many problems with people from other cultures or people
who do things in a different way.
Cultural Synergy management, which describes a willingness to learn and
understand other cultures, informal and direct interaction.
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Polycentric management where the leader does not create one team but
allows team members to work in their old ways and acts as a link between the
members according to the cultural division.
Both Cultural and Polycentric can be considered more a of Development approach
(Robert Day 2007). These types of management consider cultural differences as something
that people bring to the team as a collective result of the experience gained. A good
expression is culture is ‘‘the way in which a group of people solves problems’’ (Trompenaars,
1993).
When companies take into account the different backgrounds that people bring into
the organization and accepts them as a given then there is a possibility for each member of the
team to start sharing and talking about differences, constructive conflicts and compromise.
Companies that truly look beyond cultural diversity see every person as an individual
with its own specialized skills that can be applied to special business situations. Getting an
insight in these skills of your team is the key point in managing a multicultural team. The
most important is that as a manager you should be willing to learn the skill of analysing the
cultural diversity of each member of your team. (Jinsoo Terry 2007) A multicultural
workforce brings to a company the invaluable creative input of diverse cultures and
backgrounds, particularly at the manager and supervisor levels. Carefully channelled, this is a
major asset.
For companies to be able to fully understand the concept of managing a multicultural
work force there must be a willingness to change from top to bottom. (Jinsoo Terry 2007)
From the CEO down to every worker there should be a focus on and positive attitude towards
multicultural issues and one should become aware of differences. Communication between
employees needs to be fostered and if necessary train employees in a uni-language to facilitate
better communication. Learn about different leadership styles to fit expectations of people
from different background. Open communication and people who understand each other will
take away a lot of the distrust between different cultures and will help employees to speak up
and be involved in decision-making and idea sharing.
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2 PERSONAL EXPERIENCE ON MANAGEMENT IN
MULTI-CULTURAL ORGANISATIONS
The examples described over the next pages are some extracts of personal experience
gathered while working in and with different corporate and national cultures. During this time
I have worked in 5 different regions. The cultures exposed to, range from American to
European to Asian cultures. The main thing learned has been that even though there are many
differences between people and nations the one thing they have all shared was a passion for
what they do.
2.1 The Baltics
A first example of a multicultural exercise was in an advertising Agency in Estonia.
My first position was Account Director foreign accounts. During this period a foreigner was
an exception in an Estonian agency and anybody with a degree was manager.
One of the first problems was my own perception of the Baltic States being three
countries in close cooperation. Being the Account Director responsible for managing the pan
Baltic accounts from a lead office in Tallinn was a major frustration as what Latvia did
Estonia and Lithuania did not want and every single other version that you can find did not
work. It was completely impossible to coordinate anything over three Baltic States and every
single campaign idea failed.
As failing was no option I had to find out and see what was so different. Discussions
followed with all team members and the management of the agencies. In short the result was
that the management teams favourite statement was: “we are different then the other countries
and we know better what is needed for our market”. The creative teams had only one goal in
mind and that is to avoid anything from other countries no matter what it was because “what
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works in one country does not work in another country”. The account teams were influenced
by the creative and management teams and mostly were to young to form an unbiased opinion.
During all conversations I also showed them many different options of advertising for
the brands made in cooperation between the Tallinn office and a creative team from London. I
did not say however who made it.
In short I saw that the three Baltic States are three different countries but they are
actually very close in what they thought was working advertising and what not. The national
cultural difference was not so much the problem. It was the biases and the perception created
by the corporate cultures installed by senior management.
The solution proposed to each country was that I made a selection on fixed teams of
account and creative people and they form together a Baltic Business Unit that works as
separate units, Polycentric management. Each country got its turn in being the lead agency for
a campaign under my supervision resulting in a unit cooperating and working smoothly on
new business with each other with shared success, borders were lifted.
2.2 Holland
My next position was in Holland managing the newly acquired Pan European Canon
Account, doing the same what I did in the Baltics but then for whole EMEA. Besides having a
new multicultural team, I was responsible for implementing in every single country the
advertising campaigns through local account teams often consisting also of 2 or 3 nationalities.
Next to that the client was Japanese.
The major challenge was here to find out how to mix this melting pot of different
people, different countries into one operating a performing unit. The biggest issues were:
Forming a team out of 7 individuals where you have 4 nationalities. E.g. the
Dutch are very direct which can be perceived as rude, problems in showing up for
meetings, people not being able to adjust to a Dutch working culture.
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Misunderstanding what can be done in one culture and not in another. E.g.
separate photo-shoots for Middle East and Africa, certain wording that need to be
translated.
Biases mainly from local agencies “This does not work in our country!”
Asian expatriates being your client taking a very long time to decide after
meetings on the concepts.
In this position getting the performance got a whole different meaning. I was busy
managing cultural opinions, biases, cultural egos and I thought that it was just all about
languages and shooting some options on how to show a camera in the right way. A solution to
this problem was never really found as there were just to many different perceptions to come
into one. The home team was basically managed traditionally as Ethnocentric so other
nationalities were expected to adapt to the Individualist culture. The client was managed
however with a respect for its collective culture and the need to build long term relations,
conflicts were avoided as much as possible. For the other 32 countries the only way to get the
job done was us a Polycentric approach and to travel continuously to negotiate all conflicts
between what is locally wanted and needed and what the Japanese client wants to say.
2.3 Germany
I was responsible for a short list of European accounts with an international team of
people ranging from the north to the south of Europe but for the most part the team was
German. The goal was to increase the profitability of the team.
The team was very professional they had worked together a long time but after some
weeks the frustration was felt as I noticed that things were just getting done to slow. Account
Managers were hours at the clients and after that wrote elaborate briefings and had
enormously long meetings with their teams.
I analysed the project numbers on accounts and saw that every single project was
under budgeted and making losses. I gathered the teams together and asked why all these
processes were followed so rigidly as clearly they caused the losses. The feedback was that it
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was the way it was done and top management wanted that these processes be followed to the
letter.
The processes were implemented to provide a continuous stream of information to the
clients to be able to steer the agency as closely as they could. It was all to thought out and left
no room for creativity of the managers in getting the job done in time and profitable.
Processes that were dictated by the client were taken further into the agency and were
determining the way international teams were working with each other.
I made a thorough analysis of the situation and called it over-germanisation of the of
the organization causing many talented international people to loose faith in their jobs and
leaving due to an enormous flow of paperwork to be done to keep management of the agency,
the client and the Account Direction in the loop. An Account manager spent on average more
then 80% of its time to make briefings, do meetings with superiors and clients and do
administrative work.
I decided that my team needed to change this and I forbid them to spend more then
50% of their time in formal meetings. Management was to be done by discussing informal
with their teams in quick on the desk meetings. I informed management and account direction
that I change the rules, as these are the problems to causing the losses. I knew it would end up
on a pile anyway so I guessed I had about one month before the action would be noticed.
In one month we handled more campaigns then any other teams did and the projects
actually even made some money. Everybody was happy in the team, less meetings, less
paperwork and full concentration on creative campaigns. Complements came in from every
side on the same level except from management and the clients.
The cultural mind-set of the German client and the management was so focused on the
information flow that the first thing they did was to fire me and restore “ordnung” even
though we succeeded in getting even a new client from the UK which had not happened for
years. It was a typical case where management could not perceive that the corporate culture
had overshot the successful German national culture.
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2.4 Estonia, Russia, Balkan
After working in Europe for many years I had the possibility to work in Estonia again.
My responsibility for a private equity investor was to evaluate new projects and assist
management of local companies in solving problems. I came in contact with managers from
The Baltics, Russia and the Balkan mainly. Over the years I have seen many projects grow
big and go bankrupt but there were two extreme cases that showed to me an overall mentality
of the soviet era educated self made managers in former CIS countries. We have used the
term “soviet legacy management” internally in the organization.
Soviet legacy management's definition is the “I know better syndrome”. It has been
also the reason why I have evaluated many opportunities as non-commercial because when
the management has this syndrome then you know you deal with a person who thinks that the
organization cannot exist without him or her.
When evaluating mainly eastern European countries for investments I have
encountered the most interesting case where I as a representative of an investor interested in
forming a joint venture was informed, “this is the way it works in Estonia, Russia, Serbia”,
“what do you know about our culture”!
As the owners were ethnocentric and lacked any real international or multicultural
experience they had never experienced that there are people out there that could do the job
better then they could.
Actually talking non-owners/senior managers it showed clearly that the problem was a
manager from an old fashioned, out-dated era. A highly educated person thinking that he is
the only one qualified, others are stupid. A culture was created where the owner pulls
important work to himself, does not invest in education and does not delegate but even worst
of all is not open to re-educate him self.
In this case national culture was not a dominant factor in the corporate culture but it
was more a perception formed by an out-dated social system. Over the years I have seen
many of these companies come into trouble as a bad corporate culture could not cope with
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growth of the company. Basically as seen in Germany, the problem of low performance often
is not created by a team but it starts with senior management that are not capable of looking
beyond the numbers. The opinion is “that is the way we have always done this and why
change?”
Often this works in good times but during bad times these weaknesses come afloat and
problems start. They change out individuals in teams that often are long time together and
have overcome cultural differences already. The new person needs to solve the performance
but when he follows the old ways or has the same perception as management then the new
person makes the situation only worse.
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3 RECOMMENDATIONS TO HANDLE CULTURAL ISSUES
Managers in a multicultural environment are dealing with so many factors and it is
impossible to solve every single problem that you encounter. The most important is the
attitude to the problems.
My biggest asset was I am a very good listener and I think before I speak. Female
characteristics tend to work better when dealing with Cultural diversity at any level in an
organisation being it Senior Management or Team management.
Working in a multicultural environment means that you need to be sensitive to
perceptions for the most part as you are not dealing with cultures in the form of clothing and
dancing but your are dealing with opinions, characters, influences given forward through
generations and corporate cultures often build up over many years.
Even though these perceptions are changing due to education and internationalization
of people, as more and more people work and live outside of their home countries, you will
still find that a lot of the old biases are existing. You cannot go around this but you can deal
with it by listening and trying to find a way to get everybody to work together.
In managing teams there are some basic truths that will fit to any team wherever in the
world. A team is a mix of individuals with different skills but they all share the same two
things and that is a passion for what they do and the wish to get it done.
The basic principles of doing business are not different from country to country. A
company makes a product and must sell this, financial documentation is worldwide pretty
similar and a company that handles its cash flow sloppy will end up in bankruptcy or
reorganizations no matter how good the product is, the people are or the position on the
market or what the product is.
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The key idea is to get the job done and make a profit. The way to get the job done is to
manage a diversity of perceptions of a group of humans by assuring that the passion for the
work and the will to get it done comes first without that you let differences prevail.
When looking beyond issues then to all future managers prepare by sharing
experiences, networking and develop your cultural intelligence!
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REFERENCES
Marko Makilouko, (2004), “Coping with multicultural projects: the leadership styles of
Finnish project managers”, International Journal of Project Management 22 (2004) 387–396
Jinsoo Terry, (2007), “New Techniques for Training and Motivating YourCompany’s
Multicultural Management Team”, Wiley Periodicals, Inc.
Robert Day, (2007),"Developing the multi-cultural organisation: managing diversity or
understanding differences?", Industrial and Commercial Training, Vol. 39 Iss: 4 pp. 214 – 217
Michael P. Lillis and Robert Guang Tian, (2010), “Cultural Issues in the Business World: An
Anthropological Perspective”, New York Journal of Social Sciences 6 (1): 99-112, 2010
R. Rijamampianina, T. Maxwell, (2002), “The sharing principle: a way of managing
multicultural organisations”, Received June S.Afr.J. Bus.Managc.2002,33(2)
Mary Lou Egan, Marc Bendick Jr, (2008), “Combining Multicultural Management and
Diversity Into One Course on Cultural Competence”, Academy of Management Learning &
Education, 2008, Vol. 7, No. 3, 387–393.
Chen, Ying-Chang, Wang, Wen Cheng, Chu, Ying Chien, (2011), “Infiltration of the
Multicultural Awareness: Multinational Enterprise Strategy Management”, Intemational
Joumal of Business and Management Vol. 6, No. 2; February 2011
Dave Hanson, Conway Lackman, (1998), "MANAGING THROUGH CULTURAL
DIFFERENCES", Competitiveness Review: International Business Journal incorporating
Journal of Global Competitiveness, Vol. 8 Iss: 2 pp. 46 – 53
Jakob Lauring, Jan Selmer, (2012), “International language management and diversity climate
in multicultural organizations”, International Business Review 21 (2012) 156–166
Jinsoo Terry, (2007),"Motivating a multicultural workforce", Industrial and Commercial
Training, Vol. 39 Iss: 1 pp. 59 – 64
E.G. Ochieng, A.D.F. Price, (2010), “Managing cross-cultural communication in
multicultural construction project teams: The case of Kenya and UK”, International Journal of
Project Management 28 (2010) 449–460
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