international business

Cross-Cultural Analysis Models The study of culture and personality, which many experts consider a subset of anthropology and psychology during the first half of the twentieth century, concentrates on traditional and preliterate societies. Conclusions drawn from

cultural studies come from psychoanalysis.42 From 1967 to 1973, Geert Hofstede applied the subset of cultural dimensions to the field of business management. He segregated them into independent areas to be further divided in order to get a more

precise understanding.43 Not long after Hofstede began his work, Fons Trompenaars, expanded on Hofstede’s research and developed another framework for understanding the different dimensions of culture. In 1993, Robert House began a project, later called the GLOBE study, that expanded upon both Hofstede’s and Trompenaars’ work.

Through their employment in large multinational corporations, both Hofstede and Trompenaars conducted research that would lead each man to draw his own conclusions about the theories of cultural dimensions. Each postulated theories based on the research of a somewhat captive audience: the employees of the

multinational companies. Years of research led both men to their respected cultural guidelines.

Geert Hofstede developed four initial theories and later added a fifth and sixth. Hofstede’s understanding of different cultures led to the understanding that both national cultures and organizational cultures simultaneously occur within the same society. National cultures can be studied by examining the known facts. These facts will historically remain stable and very difficult, if not impossible, to change. On the other hand, organizational cultures can be quite dynamic, managed, and changed to varying degrees of difficulty. The degree of difficulty depends on how ingrained the organizational culture is within the company.

Fons Trompenaars developed a seven-cultural-factors theory model that expanded on the thinking and research of Geert Hofstede. Trompenaars’ model further explored cultural diversity on a large multinational scale. His model concentrated on intercultural diversity and how well these different cultures assimilated in the workplace.

Robert House developed a model of nine dimensions that followed the research by Hofstede in many respects with regards to understanding cultural dimensions. Six out of the nine cultural dimensions identified by House are also identified by Hofstede. His model grouped countries according to similar cultural characteristics.

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Hofstede’s Dimensions of Culture National culture relates to our deeply held values and beliefs. These values and beliefs distinguish people of one nation from those of another and are acquired when we are young. These acquisitions generally occur during the first ten years of our life and they contain most of our basic values. These basic values are obtained

mostly through our experiences in the family unit, through society, and in school.44

Characteristics that are culturally determined include the language spoken, common customs, religious observances, acceptable gender roles, occupations, and other aspects of behavior common to a group of people. National culture assists us in our values regarding what is normal versus what is abnormal, what is good versus bad, and what is rational behavior versus irrational behavior.

Research performed by Geert Hofstede led the way into a better understanding of what national culture is and how it plays an important and essential role in our daily lives. Even though occupants of nations can rarely be fitted into a one size fits all culture, there are certain characteristics that are similar to each nation that its inhabitants follow. The study of national culture was pioneered in the 1970s when Hofstede conducted a study of workers in IBM in over 120 countries. Hofstede originally identified four national cultural dimensions that can be used to help

evaluate the differences in national cultures.45 As mentioned, this research has

since been updated to include a fifth and six elements.46

These six distinct dimensions of culture are (1) power distance index (PDI); (2) individualism vs. collectivism (IDV); (3) masculinity vs. femininity (MAS); (4) uncertainty avoidance index (UAI); (5) long-term orientation vs. short-term normative orientation (LTO); and (6) indulgence vs. restraint (IND). The fifth dimension which was added to Hofstede’s original four dimensions of culture, was the result of a collaborative study with Michael Bond from the Chinese University of Hong Kong. The sixth dimension was added with the collaboration of Minkov who studied a person’s perception of life control and importance of leisure in the

respondent’s life.47 Minkov showed that measures of life control and importance of

leisure are the best predictors of happiness across more than 90 nations.48

Hofstede then invited Minkov to become part of the third edition of the book Cultures and Organizations: Software of the Mind, where the sixth dimension was duly added. These six cultural differences may help explain why some cultures favor certain things while other others do not or even why managers and employees react in certain ways. The work by Hofstede has since been augmented by work performed based on the GLOBE study to include nine national cultural dimensions, which we will discuss in the next section.

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Power Distance Index

Power distance is defined as the “extent to which less powerful members of organizations within a country expect and accept how power is distributed

throughout the organization.”49 A high power distance ranking means the power relations are paternalistic and autocratic, and where there is centralized authority. In other words, there is a wide gap or emotional distance which is perceived to exist among people at different levels of the hierarchy. There is considerable dependence of people on power holders, which, in psychology, is known as counter-dependence (denounce, but with negative sign). In the workplace, the subordinates are willing to accept their inferior positions. The boss, in turn, may be not asked for broad participation in the process of decision making.

A low power distance ranking means the emotional distance is relatively small. There are more democratic or consultative relations between expecting and accepting power. People are relatively interdependent to the power holders, and there is almost equal amount of power distributed among the people. Under these circumstances, the decentralized authority and flat management structure universally exists. It means that both managers and subordinates will be less concerned with status, and the distribution of decision-making responsibility is extensive. Thus, the ‘open door’ policy is easily used, which means the individuals in superior positions are not only open to listen to those in inferior positions, but

subordinates are also willing to challenge or give suggestions to their superiors.50

The United States experiences a relatively low score on this dimension which is evidenced by the principles of equal rights, liberty and justice for all that this country was founded on. Within the American organization, hierarchy is established for convenience such that communication between managers and non- managers is informal, direct and participatory. Lower power distance fosters communication and openness within members of the organization.

Countries where high scores on the power distance scale are seen are those who, as a general rule, are not readily willing to discuss matters outside of their job functions because they do not believe that they have the necessary qualifications. A

prime example of a high power distance country is France. In France managers are considered more knowledgeable about management due to their education. Hofstede explained that managers in the United States tend to advocate participation by subordinates; whereas in France, there is little concern with participative management and more concern over who has the power within the organization.

Hierarchy is another dimension of power distance. In countries that scored high on the power distance scale, inequalities are accepted and hierarchy is viewed as needed and necessary. The ideal organization within the high power distance

cultures is one where a pyramid scheme is used.51 A pyramid schematic explicitly shows the organizational hierarchy, with managers on the top of the pyramid and non-managers on the bottom. This type of system is also evident in many Asian countries, such as Japan and China, where a high power distance score was also achieved. Exposing weaknesses of local Chinese managers in front of their own subordinates, for example, should be avoided as the concept of saving face is an important element for the Chinese.

Individualism vs. Collectivism

Individualism can be defined as individuals looking after themselves and only their immediate family versus people belonging to in-groups that look after them in exchange for loyalty. Individualism focuses on the degree to which the society reinforces individual or collective achievement and interpersonal relationships. A high individualism ranking indicates that individuality and individual rights are paramount within the society. Individuals in these societies may tend to form a larger number of loose relationships. An individualistic culture stresses independence and individual initiative. A tight social framework in which people expect others in their groups to look after them and protect them when they are in

trouble characterizes collectivism. Individualistic cultures are more loosely knit social frameworks in which people are expected to look after their own interests. The United States ranked at the top on this cultural dimension. A low individualism ranking typifies societies of a more collective nature with close ties between individuals. These cultures reinforce extended families and collectives where everyone takes responsibility for fellow members of their group.

Masculinity vs. Femininity

Masculinity focuses on the degree to which a society reinforces, or does not reinforce the traditional masculine work role model of male achievement, control, and power. The dominant values in a masculine society are achievement and

success. Femininity represents the dominant values of caring for others, quality of life, modesty, and cooperation. Performance and achievement are highly valued in a masculine society as such achievements must be evidenced by the wearing or endorsement of affluent and high-status brands or products. In masculine cultures male and female roles are differentiated; whereas, in feminine cultures, roles overlap. While household work is less shared between husband and wife in masculine cultures, more household shopping is done by men in the feminine cultures.

A high masculinity ranking indicates that the country experiences a high degree of gender differentiation. Males dominate a significant portion of the society and power structure, including females. Japan scored high on the masculinity scale. This ranking helps us understand why males are viewed as dominate in business interactions. This cultural dimension may need to be considered when doing business in Japan since sending over a female to conduct business negotiations or participate in management meetings may not be readily accepted by male counterparts. A low masculinity ranking indicates the country has a low level of differentiation and discrimination between genders. In these cultures, females are treated equally in all aspects of the society.

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Uncertainty Avoidance Index

Hofstede discussed the dimension of uncertainty avoidance as the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid them. 52 Uncertainty avoidance focuses on the level of tolerance for uncertainty

and ambiguity within a society. A high uncertainty avoidance ranking indicates that the country has a low tolerance for uncertainty and ambiguity. Members of high uncertainty avoidance cultures try to minimize the level of stress by creating strict laws, and rules. In countries that experience high uncertainty avoidance, feelings of “what is different is dangerous” prevails; “what is different is curious” is

the feeling in societies with weak uncertainty avoidance.53

People who are part of high uncertainty avoidant countries are less open to change and innovation than people of low uncertainty avoidance cultures. Managers are hesitant about implementing anything new. High levels of anxiety are felt within an organization where a high score in the dimension of uncertainty avoidance is felt. A low uncertainty ranking indicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions and changes. This low ranking reflects a society that is less rule-oriented, more readily accepts change, and takes more and greater risks.

Long-term vs. Short-term Normative Orientation

Hofstede’s fifth dimension of national culture was derived from a values inventory

suggested by Asian researchers and is reminiscent of the teachings of Confucius.54

This dimension was added independent of the four identified in the original IBM studies conducted by Hofstede. The long-term versus short-term dimension expresses the extent that virtuous living is a goal, independent of any religious justification and is related to the ability to solve well-defined problems. The Confucian work of dynamism value that is reflected in this dimension has been identified as almost exclusively an Asian value. Long-term versus short-term orientation is the extent to which a society exhibits a pragmatic future-oriented perspective rather than a conventional historic or short-term point of view.

The long-term orientation dimension focuses on the degree to which the society embraces or does not embrace, long-term devotion to traditional, forward thinking values. A long-term orientation implies the willingness for investment in the future. Values included in long-term orientation are perseverance, ordering relationships by status and observing this order, thrift, and having a sense of shame. High long- term orientation ranking indicates that the country prescribes to the values of long- term commitments and respect for tradition. This orientation is thought to support a strong work ethic where a society expects long-term rewards as a result of today’s hard work. However, businesses may take longer to develop in this society, particularly for an “outsider.”

The opposite view is short-term normative orientation, which includes personal steadiness and stability, respect for tradition, and the pursuit of happiness rather than pursuit of peace of mind. A low long-term orientation ranking indicates that the country does not reinforce the concept of long-term traditional orientation. In this culture, change can occur more rapidly as long-term traditions and commitments do not become impediments to change.

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Indulgence vs. Restraint

This cultural dimension refers to the happiness, leisure, and control over one’s life. The prevailing values of East Asian cultures would constrain speakers not to hurt one another’s feelings and not to impose themselves on one another; this is an

example of restraint society. A society that precluded toward indulgence do not suppress gratification with regard to the basic and human drives of enjoying life and having a good time.

As with any generalized study, the results may or may not be applicable to specific individuals or events. Although Hofstede categorized his results by country, more than one cultural group often exists within that country. Therefore, the results of a multicultural country may deviate significantly from the study’s typical results. An example is Canada where the English speaking majority and the French speaking minority have moderate cultural differences. Another example would be Switzerland where the differences between the French speaking and German speaking parts of the country are as quite evident.

Hofstede’s dimensions analysis can assist the business person or traveler in better understanding the intercultural differences within regions and between countries. The dimensions of national culture are not limited to research just in the social sciences. National culture has been researched and shown to be involved in many different aspects of business practices. The dimension of national culture influence management practices because the dimensions are brought to an organization by

its employees and therefore become part of the organization’s culture.55 Therefore gaining an understanding of a host country’s national culture would be beneficial for any organization desiring to do business internationally. Learning local customs and beliefs while establishing managerial practices and organizational rules is vital.

Hofstede’s approach to interpreting cultural dimensions is not without its share of criticism. That his research was originally conducted at IBM between 1968 and 1973 raises questions about whether the information can still be applicable today. Another criticism is the narrow scope of his research being that it involved only one company. Others have said that Hofstede’s data is not concrete enough to

warrant granting assumptions on societies and cultures. Hofstede responded to much of the criticism against his research by stating that even though surveys are not the only way to obtain information, they provide a solid tool for gathering data. He pointed out that cultures do not change their ways of life rapidly, so information that is a few decades old should not be dismissed as inaccurate. The addition of the GLOBE study that has confirmed Hofstede’s six dimensions, should give credence to Hofstede’s research.

Fons Trompenaars’ Model of Culture

Fons Trompenaars conducted extensive research, with Hampden-Turner, on different countries. From this they developed the “Seven Dimensions of Culture

Model.”56 The model was published in their 1997 book, Riding the Waves of Culture.

Trompenaars and Hampden-Turner developed the model after spending 10 years researching the preferences and values of people in dozens of cultures around the world. As part of this, they sent questionnaires to more than 46,000 managers in 40 countries. They found that people from different cultures are not just randomly different from one another; they differ in very specific, even predictable, ways. This is because each culture has its own way of thinking, its own values and beliefs, and different preferences placed on a variety of different factors.

Trompenaars and Hampden-Turner concluded that what distinguishes people from one culture compared with another is where these preferences fall in one of the following seven dimensions (each dimension is detailed below):

1. Universalism versus particularism.

2. Individualism versus communitarianism.

3. Specific versus diffuse.

4. Neutral versus emotional.

5. Achievement versus ascription.

6. Sequential time versus synchronous time.

7. Internal direction versus outer direction.

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Applying the Model

A look at each of the dimensions in detail, and exploration of some of the strategies that can be used with people who fit the characteristics highlighted in each dimension.

Note 1: Included for each dimension are some of the national cultures that Trompenaars and Hampden-Turner identified as having a preference at each extreme of that particular dimension. This can be used as a general guide, but it is important that people are treated as individuals, and stereotyping is avoided.

Note 2: The cultural dimensions do not take into account people’s personal experiences or differences between sub-cultures within the country; this should be kept in mind when the model is applied. This is especially relevant in today’s global environment, where people can be influenced by many different cultures.

Note 3: Being sensible in how these strategies are applied, is crucially important. In practice, there will be many other factors that will have a bearing on how one manages people and communicates with them.

Universalism vs. Particularism (Rules vs. Relationships)

Universalism: People place a high importance on laws, rules, values, and obligations. They try to deal fairly with people based on these rules, but rules come before relationships.

Typical universalist cultures include the U.S., Canada, the U.K., the Netherlands, Germany, Scandinavia, New Zealand, Australia, and Switzerland.

Particularism. People believe that each circumstance, and each relationship dictates the rules that they live by. Their response to a situation may change, based on what is happening in the moment, and who is involved.

Typical particularistic cultures include Russia, Latin-America, and China.

Help people understand how their work ties into their values and beliefs.

Provide clear instructions, processes, and procedures.

Keep promises and be consistent.

Give people time to make decisions.

Use an objective process to make decisions yourself, and explain your decisions if others are involved.

Give people autonomy to make their own decisions.

Respect others’ needs when you make decisions.

Be flexible in how you make decisions.

Take time to build relationships and get to know people so that you can better understand their needs.

Highlight important rules and policies that need to be followed.

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Individualism vs. Communitarianism (The Individual vs. The Group)

Individualism. People believe in personal freedom and achievement. Individualists believe that you make your own decisions, and that you must take care of yourself.

Typical individualist cultures include the U.S., Canada, the U.K., Scandinavia, New Zealand, Australia, and Switzerland.

Communitarianism. People believe that the group is more important than the individual. The group provides help and safety, in exchange for loyalty. The group always comes before the individual.

Typical communitarian cultures include countries in Latin-America, Africa, and Japan.

Praise and reward individual performance.

Give people autonomy to make their own decisions and to use their initiative.

Link people’s needs with those of the group or organization.

Allow people to be creative and to learn from their mistakes.

Praise and reward group performance.

Do not praise individuals publicly.

Allow people to involve others in decision making.

Avoid showing favoritism.

Specific vs. Diffuse (How far People get Involved)

Specific. People keep work and personal lives separate. As a result, they believe that relationships do not have much of an impact on work objectives; and although good relationships are important, they believe that people can work together without having a good relationship.

Typical specific cultures include the U.S., the U.K., Switzerland, Germany, Scandinavia, and the Netherlands.

Diffuse. People see an overlap between their work and personal life. They believe that good relationships are vital to meeting business objectives, and that their relationships with others will be the same, whether they are at work or meeting socially. People spend time outside work hours with colleagues and clients.

Typical diffuse cultures include Argentina, Spain, Russia, India, and China.

Be direct and to the point.

Focus on people’s objectives before you focus on strengthening relationships.

Provide clear instructions, processes, and procedures.

Allow people to keep their work and home lives separate.

Focus on building a good relationship before focusing on business objectives.

Find out as much as you can about the people that you work with and the organizations that you do business with.

Be prepared to discuss business on social occasions, and to have personal discussions at work.

Try to avoid turning down invitations to social functions.

Neutral vs. Emotional (How People Express Emotions)

Neutral. People make a great effort to control their emotions. Reason influences their actions far more than their feelings. People do not reveal what they are thinking or how they are feeling.

Typical neutral cultures include the U.K., Sweden, the Netherlands, Finland, and Germany.

Emotional. People want to find ways to express their emotions, even spontaneously, at work. In these cultures, it is welcome and accepted to show emotion.

Typical emotional cultures include Italy, France, Spain, and countries in Latin- America.

Manage your emotions effectively.

Watch that your body language does not convey negative emotions.

“Stick to the point” in meetings and interactions.

Watch people’s reactions carefully, as they may be reluctant to show their true emotions.

Open up to people to build trust and rapport.

Use emotion to communicate your objectives.

Learn to manage conflict effectively, before it becomes personal.

Use positive body language.

Have a positive attitude.

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Achievement vs. Ascription (How People View Status)

Achievement. People believe that you are what you do, and they base your worth accordingly. These cultures value performance, no matter who you are.

Typical achievement cultures include the U.S., Canada, Australia, and Scandinavia.

Ascription. People believe that you should be valued for who you are. Power, title, and position matter in these cultures, and these roles define behavior.

Typical ascription cultures include France, Italy, Japan, and Saudi Arabia.

Reward and recognize good performance appropriately.

Use titles only when relevant.

Be a good role model.

Use titles, especially when these clarify people’s status in an organization.

Show respect to people in authority, especially when challenging decisions.

Don’t “show up” people in authority.

Don’t let your authority prevent you from performing well in your role.

Sequential Time vs. Synchronous Time (How People Manage Time)

Sequential Time. People like events to happen in order. They place a high value on punctuality, planning (and sticking to your plans), and staying on schedule. In this culture, “time is money,” and people don’t appreciate it when their schedule is thrown off.

Typical sequential-time cultures include Germany, the U.K., and the U.S.

Synchronous Time. People see the past, present, and future as interwoven periods. They often work on several projects at once, and view plans and commitments as flexible.

Typical synchronous-time cultures include Japan, Argentina, and Mexico.

Focus on one activity or project at a time.

Be punctual.

Keep to deadlines.

Set clear deadlines.

Be flexible in how you approach work.

Allow people to be flexible on tasks and projects, where possible.

Highlight the importance of punctuality and deadlines if these are key to meeting objectives.

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Internal Direction vs. Outer Direction (How People Relate to Their Environment)

Internal Direction: This is also known as having an internal locus of control. People believe that they can control nature or their environment to achieve goals. This includes how they work with teams and within organizations.

Typical internal-direction cultures include Israel, the U.S., Australia, New Zealand, and the U.K.

Outer Direction: This is also known as having an external locus of control. People believe that nature, or their environment, controls them; they must work with their environment to achieve goals. At work or in relationships, they focus their actions on others, and they avoid conflict where possible. People often need reassurance that they’re doing a good job.

Typical outer-direction cultures include China, Russia, and Saudi Arabia.†

Allow people to develop their skills and take control of their learning.

Set clear objectives that people agree with.

Be open about conflict and disagreement, and allow people to engage in constructive conflict.

Provide people with the right resources to do their jobs effectively.

Give people direction and regular feedback, so that they know how their actions are affecting their environment.

Reassure people that they’re doing a good job.

Manage conflict quickly and quietly.

Do whatever you can to boost people’s confidence.

Balance negative and positive feedback.

Encourage people to take responsibility for their work.

Key Points

KP 1: Hofstede’s Cultural Dimensions is another model that can help you to understand different cultures. The advantage of Hofstede’s model is that his research included only employees from one organization (IBM) so his findings are unlikely to be affected by differences in company culture. The disadvantage is that the culture of this company may skew more general results.

KP 2: You can use the model to understand people from different cultural backgrounds better, so that you can work with them more effectively, and prevent misunderstandings. Be sensible in how you apply the model. Treat people as individuals, and remember that there are many factors that will have a bearing on

how you communicate and interact with other people.57

The GLOBE Study GLOBE is an acronym that stands for the Global Leadership and Organizational

Behavior Effectiveness. The GLOBE study was a project conceived by Robert J.

House in 1991 and begun in 1993.58 The GLOBE study consisted of more than 17,000 participants who were middle managers from the financial services, food processing, and telecommunications services industries. The data that was accumulated from over 800 organizations in 62 countries identified nine dimensions on which national cultures differ. With 170 co-investigators in 62 countries, the GLOBE project may be the largest international management research project that has ever been undertaken.

The major premise of the GLOBE study was that leadership effectiveness is contextual and is embedded in the societal and organizational beliefs, norms, and values of the people being led. The researchers identified nine cultural dimensions: (1) power distance, (2) uncertainty avoidance, (3) humane orientation, (4) in- group collectivism, (5) institutional collectivism, (6) gender egalitarianism (similar to masculinity versus femininity), (7) assertiveness, (8) performance orientation, and (9) future orientation (similar to long-term versus short-term orientation). The nine dimensions resemble Hofstede’s work regarding the understanding of cultural dimensions. The main difference is the GLOBE framework added dimensions such as egalitarianism (the degree to which an organization or a society minimizes gender role differences while promoting gender equity and equality of genders), humane orientation (the degree to which a society rewards individuals for being altruistic, generous, and kind to others), performance orientation (the degree to which a society encourages and rewards group members for performance improvement and excellence), and assertiveness (the degree to which individuals in organizations or societies are assertive, confrontational, and aggressive in social relationships).

Two books have been written about the GLOBE study. In 2004, the first book Culture, Leadership, and Organizations: The GLOBE study of 62 Societies was published. This book was the result of a ten-year research project that studied

societal culture, organizational culture, and the attributes of effective leadership in 62 cultures. A team of 160 scholars worked together to conduct this study. A second book was published entitled Culture and Leadership across the World: The

GLOBE book of In-Depth Studies of 25 Societies was published in 2007.59 The second book complements the first book by providing country specific data on leadership theory and leadership behavior in 25 countries.

In the GLOBE study, countries were grouped according to similar cultural characteristics which were called clusters. Cultural similarity is greatest amongst societies that constitute a cluster. The GLOBE study has several distinguishing features that do not exist in Hofstede’s or Trompenaars’ work. First, the GLOBE study was a cross-cultural research project where the data collected in each country was accumulated by investigators who were either native to that culture, or had extensive knowledge and experience in the culture. Second, there were several industries selected for participation. The study was not restricted by one industry or company. Third, a large number of participants were surveyed, the largest research project of this nature, in order to get a more representative sample of each

culture.†