Cross Cultural Management

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Assignment

"The Influence of Culture on Managerial Functions of BAUR Company"

Extended Course Dornbirn, Module Cross Cultural Management

FH Liechtenstein, FH Dornbirn

Prof. Dr. Hans-Rüdiger Kaufmann

Submitted by

Gernoth Dobianer

Köhlerstr. 1

681 Meiningen

Words 18 (excl. Table of Content and Literature)

Table of Content

1 Introduction

The Company's International Situation, Challenges and Problems

Relevant Theory to overcome cultural differences 5

4 Recommendations derived from comparison of theory and practice 8

5 Conclusion 10

6 Literature 11

Abbreviations

PCN Parent Country National

TCN Third Country National

1 Introduction

Globalisation has brought about certain advantages in the past three decades to the workplace including accelerated communications and economic interactions. It has also allowed closer interactions between people of different cultural backgrounds beyond mere acquaintances into playing important roles in adding value to efforts to promote the business organization.

This paper looks into the various attempts by people (practitioners and academics) from various disciplines to shed light on the issue of management of diversity within the company. It also looks into some notable endeavours to provide a workable framework that would give managers and business administrators better sense and better management tools when confronted with the many aspects of cultural diversity, including the negative aspects that could undermine the bottom line.

As a way of explanation and guide to readers of this paper, the concept of cultural diversity here is treated in a general manner which includes both cultural differences exhibited by employees coming from different national background and differences exhibited by employees coming from different companies and would now be sharing a common workplace (the firm).

The Company's International Situation, Challenges and Problems

Clarkson et al (18) state that "Firms will exist whenever cooperative or joint group effort results in a larger product than the sum of the products of individual isolated efforts."

Like any business firm, BAUR Test Equipment, a market leader in very low frequency Cable Testing and Diagnostics on highvoltage cables, sought and made management decisions in its objective to strengthen the firm through the complementary process of recruitment and hiring of highly competent production and sales personnel. To further describe the firm, BAUR`s headquarters is located in Austria, with distribution network set up through independent representatives in some seventy countries worldwide. BAUR operates subsidiaries in Germany, Spain, UK and Brazil. The company also employs mid-level and sales people from seven different countries, both in the headquarters and in its overseas subsidiaries.

The headquarters develop, produce and distribute test equipment. It also makes all recruitment. Most of the staff are PCN`s, but due to a lack of workforce in the year 000, BAUR has started to employ TCN`s to look after distribution matters.

BAUR envisioned its decision to cast outward its recruitment and hiring processes' net to include people from different cultural and national backgrounds and attract and retain the best available human resources. Particularly in the sales division in its overseas subsidiaries, hiring of local people, or people of their various nationalities who would have a thorough knowledge of the market, would enhance marketing efforts towards more diversified and effective marketing strategies. Cross-cultural diversity is also seen to promote creativity and innovation and facilitation in problem solving brought on by different perspectives in approaching problems and providing solutions thereto. As such, the flexibility of the firm is enhanced.

The main objective is to attract the best competences from practically among all available human resources in the field where BAUR operates. This would correlate with the believe that "One of the major sources of potential competitive advantage for business is the effective management and development of people" (Higgs 16). To further expand its operations, the company begun recruiting competent people for key overseas position. As an example, BAUR hired the services of a British manager with extensive international background to manage its subsidiaries in the UK and North America. The British facility with the English language to promote the company's products in the English-speaking countries was seen as one of the primary considerations for his employment. His professional vision and work ethics and that of BAUR's strategic vision and operations protocols were found to be compatible.

BAUR's experience in hiring non-Austrians to key positions proved quite beneficial, practically a flexible structure providing autonomy to independent country operations. The British Sales Manager, in addition was given wide latitude to address issues under his geographical responsibility. On the matter of costs, the British Sales Manager was paid in a scale according the pay scale existing in the UK which by simple computations was 0% higher than in the Headquarters. However, no cost was involved for training, health and life insurance which are facilities and privileges enjoyed by those in the Headquarters.

Relevant Theory to overcome cultural differences

In an abstract about conflict management across cultural boundaries Darling et al (1, p.8) state that "As long as organizations are composed of and operated by human beings, there will be conflict" .Conflict arises due to many factors such as personal differences, expectations, values, etc.. Changes in personnel, clientele, product line, financial climate and even corporate philosophy contribute to the wide extent of the theory of culture.

A survey of available literature on the theory culture yielded a constant reference to the original work of Hofstede (18), who in this seminal paper identified four key dimensions which impact on national cultural differences. These are

§ Individualism/collectivism. This dimension reflects the extent to which individuals value self-determination as opposed to their behaviour being determined by the collective will of a group or organization

§ Power-distance At the core of this dimension lies the question of involvement in decision making. In low power-distance cultures, employees seek involvement and have a desire for a participative management style. At the other end of this scale, employees tend to work and behave in a particular way because they accept that they will be directed to do so by the hierarchy of the organization.

§ Uncertainty avoidance This dimension is concerned with employees' tolerance of ambiguity or uncertainty in their working environment. In cultures which have a high uncertainty avoidance, employees will look for clearly defined, formal rules and conventions governing their behaviour.

§ Masculinity/femininity This is possibly the most difficult dimension to use in an organization context. In practice, the difficulty is more to do with terminology and linguistics, in Hofstede's work the dimension related to values. In highly "masculine cultures" dominant values relate to assertiveness and material acquisition. In highly "feminine cultures" values focus on relationships among people, concern for others and quality of life.

Hofstede's work provided the importance of looking at different dimensions, individualism collectivism, power distance, uncertainty avoidance, masculinity/femininity as possible scenarios brought into the workplace by cultural diversity. The scenarios accruing from the dimensions gave the decision-maker an observatory to make better assessments on how to approach the problem even before being faced with the persons involved in the conflict.

Based on the aforementioned four dimensions, Hofstede proposed a general framework for building the competences required for operating in cross-cultural basis. This may be summarized as follows

1. Building awareness

§ of own culture

§ of cultural differences

. Developing knowledge

§ of the impact of cultural differences

§ of the relative strengths and weaknesses of different cultures in a managerial setting

. Building skills

§ identifying the impact of different cultural settings for managerial problems adapting behaviours to achieve effective results in different cultural settings

Through the years, as seen from available literature on the subject, Hofstede's framework has gained wide acceptance as a framework to be applied in full, or applied with variations to address a firm's particular situation. The framework has posited the importance of comprehensive awareness and the flexibility in the application of approaches to address the issue of diversity. Managers and academics, through the years, have recommended variations to conflict management of cultural flavour but still use Hofstede's dimensions and framework as the reference points.

The theory of culture, from the standpoint of the economic discipline, presented another perspective. Movando et al (00, p. 41) defined culture as "a set of broad tacitly understood rules and procedures that inform organizational members on what and how to do under a variety of undefined situation." In that sense, organizational culture is conceived as economic functionalism, and among other things, a solution to a managerial problem.

This perspective postulates the belief that cultural artefacts "can be used to build organizational commitment, convey a philosophy of management, rationalize and legitimise activity, motivate personnel and facilitate socialisation" (Smircich, 18, p. 45). The economics of culture minimizes the costs of drawing up employment contracts and minimizes the details necessary for controlling employees. Expected behaviour is conveyed through corporate culture which can be used as alternative to written contracts.

As an economic concept, culture and similarities in culture, can be more effective in communication than most alternatives available to management. "Cultural consistency creates economies of horizontal and vertical coordination since subordinates know their boss would like things to be done. This economizes on time for consultations, i.e. timeliness of decision making. Subordinates can act quickly in the knowledge that their boss would approve. Finally, the visibility of culture can create economies as it may lead to lower labour turnover because employees know what to expect before joining the firm" (Movando et al 00, p. 41).

Conversely, diversity in culture could provide dichotomies for the firm. Fleury (1, p. 110) quoting Thomas (16) contend that "management of cultural diversity implies a holistic focus in order to create an organizational environment that allows all the employees to reach their full potential in pursuing the company goals." Stated simply, managing cultural diversity would entail costs to the individual, to the management and to the firm.

Management of cultural diversity is neither a paradigm with ready solutions, nor a program to solve discrimination issues. Cox (14) stated that "management of cultural diversity means to plan and implement organisational systems and practices to manage people so that potential advantages of diversity are maximized while its disadvantages are minimized". An effective manager would look at conflict to creatively stimulate personal development, internalise the problem, increase critical vigilance and self- appraisal and examine conflicting values when making decisions (Darling et al, 1, p. 84).

4 Recommendations derived from comparison of theory and practice

The general framework advanced by Hofstede (18) called for building awareness from within and without, developing knowledge of the cultural differences particularly on its impact on the workplace and building skills to address managerial problems adapting behaviours to achieve effective results in different cultural settings

For many firms, this need will entail thinking more clearly about cross-cultural issues and more overtly and systematically understanding and valuing the benefits of diversity in the workplace. Achieving this requires the integration of theory and practice relating to team building and understanding the benefits of differing personal styles and behaviours.

In this scenario, managers are asked to look at cross-cultural diversity as a positive force for change within the organization. In order to ensure that diversity remain positive for the firm, the manager must recognize the existence and value of conflict, encourage discussion of different points of view and provide an effective plan to manage diversity.

Although much can be achieved by working with a framework, the truly successful global players are likely to be those which incorporate the change through integrated changes to selection, development, reward and recognition policies and practices. In doing this the value of effective cultural-diversity management can be availed of at various levels in the organization towards high performance levels, more rapidly and consistently.

However, if there is a best way to challenge dominant cultural patterns when they exist to negatively affect the workplace, available literature on the theory of culture do not provide clear answers on their effectiveness. Several human resources policies like training programs, aiming at the creation of awareness and changes in people's behaviour are achieving no more than a relative success.

And if the theory of culture could not provide adequate perspective to address the issue of managing diversity, the question of costs comes into the forefront of discussions.

O'Neil (00, p.8) argued that diversity management is seldom rationally defended and its merits simply assumed to the point of unquestioned orthodoxy. He went on to say that the complication of this state of affairs is that "when given enough attention, each culture becomes obsessed with its proper share of the resources with the less successful culture demanding equality of results."

Instead of defining cultural differences and making particular management policy decision to address these differences, O'Neil, in the same paper recommended a closer look at the historical and cultural experiences of the United States which allowed 0 million migrants from Europe during the period between 1880 110 to progress on to be the world's leading political and economic powerhouse.

"The traditional American approach to culture was one of assimilation or the melting point. It was based on a Lockean contractual orthodoxy rather than on biological credentials. The United States, in terms of its needs, welcomed millions of migrants, but they were expected to assimilate to the core culture. The public school system served as the primary tool of assimilation and Americanization. "

…..the "immigrant could come to the USA but the decision to come was a decision to assimilate culturally."

In the workplace, the American experience would translate into an employee coming into the firm with the understanding and conviction that he would conform to the firm's existing culture. Management would concentrate with maintenance protocols to deepen this understanding and strengthen conviction and continuing oversight.

5 Conclusion

Modern firms take it as conventional wisdom that one of the major sources of potential competitive advantage is the effective management of people. Indeed, there is a growing trend for the development of effective management teams in every company wishing to expand its business frontier beyond its national borders. Towards that objective, management of cultural diversity is now gaining respect as an area where considerable attention and resources are required to achieve the full potential of the firm's human resources.

However, the theory of culture is still evolving. A uniform or at least a compelling general definition of what "culture" is in the workplace has even met contrary comments and opinions. The process of building a consensus on how the theory is supposed to operate is way too slow to be of immediate value to firms trying to catch that all-important business high point towards profit.

More so with small firms operating globally but who do not have large Human Resource Management Divisions to deal with the many steps and intricacies to achieve the rewards of conflict management based on cultural differences.

Nonetheless, the foregoing discussions on the theory of culture, the costs of managing cultural diversity, and the practical experiences of firms, provided the insight that the key to managing diversity is not to allow the differences as a separate factor needing a separate managerial attention and decision. It is even emphasized that understanding and awareness of cultural diversity should happen at the front door, even before the employment contract is signed, and not at the workplace.

6 Literature

(Clarkson et al. 18) Clarkson, Kenneth W.; Miller Roger L. Industrial Organization, Theory, Evidence and Public Policy. Mcgraw-Hill Book Company, 18

(Cox 14) Cox, T. Cultural diversity in Organsiations Theory, research and Practice. Berrett-Koehler Publishers, San Francisco, CA, 14

(Darling et al. 1) Darling, John R.; Fogliaso, Christine E. Conflict management across cultural boundaries a case analysis from a multinational bank. European Business Review, Volume , Number 6, MCB University Press, 1

(Fleury 1) Fleury, Maria T.L. The management of culture diversity a lesson from Brazilian companies. Industrial Management & Data Systems /, pp. 10-104, MCB University Press, 1

(Hofstede 18) Hofstede, Gert Dimensions of national cultures in fifty countries and three regions; in Deregowski, J.B., Dziurawiec, S. and Annis, R.C. (Eds) Explications in Cross-Cultural Phsychology, Swets and Zeitlinger, Lisse, The Netherlands, 18

(Higgs 16) Higgs, Malcolm. Overcoming the problems of cultural differences to establish success for international management teams. Team Performance Management An International Journal Vol. , No. 1, MCB University Press 15-75, 16

(Movando et al 00) Movando, Felix; Farrell, Mark. Cultural orientation its relationship with market orientation, innovation and organizational performance. Management Decisions 41/, pp. 41-4, MCP UP Limited, 00

(O'Neil 00) O'Neil, Daniel, J. Caveats concerning multi-culturalism. International Journal of Social Economic, Vol. , No. , pp. 8-50.

(Smircich 18) Smircich, L. Concepts of Culture and Organisational Analysis.

Administrative Science Quarterly, Vol.8, p. 45, 18

(Thomas 16) Thomas, D.A. . Making differences matter a new paradigm for

managing diversity. Harvard Business Review, Vol. 74, No.5,

September/October, Boston, MA, 16

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