The Business of Culture: How Culture Affects Management Around the World

Originally published Sep 30th, 2010 [Update September 6th]: Since we published this blog post, more and more people are looking at the importance of organizational culture and the role your talent management programs can play.

The Hofstede Centre continues to conduct research into how values in the workplace are influenced by culture. They’ve added more countries to their national culture research and a new dimension called “indulgence versus restraint” in 2010.

You can learn more about their research and findings on their website and in the 2010 edition of Cultures and organizations.

When in Rome, talent management practices may need to be modified in order to suit local conditions. When it comes to international business, it is remarkable to see how different cultures approach management. There is certainly no one way of doing business and as technology narrows borders and globalization integrates the world’s economies, developing a sensitivity to how other cultures operate, generally and in business, is becoming essential.

Geert Hofstede carried out one of the most comprehensive studies on how values in the workplace are influenced by culture. Hofstede is a renowned Dutch organizational sociologist who conducted detailed interviews with thousands of IBM employees in 53 countries from 1978-83 and has continued to develop his research since. Through his large database of statistics he was able to determine five dimensions of culture.

Hofstede’s five dimensions of culture include:

·         Small vs. large power distance (PD) – This refers to how a society handles inequalities and the extent to which the less powerful members of organizations and institutions (like family) accept and expect that power is distributed unequally.

·         Individualism vs. collectivism (IDV) – Behavior towards community. The degree to which individuals are integrated into groups or are expected to look after themselves and self-actualize.

·         Masculinity vs. femininity (MAS) – Behavior and roles distributed according to gender. (This dimension is often renamed by users of Hofstede’s work to Quantity of Life vs. Quality of Life because one of the notable findings in the IBM studies revealed that in ‘masculine’ cultures, people (whether male or female) value competitiveness, assertiveness, ambition, and the accumulation of wealth and material possessions whereas in ‘feminine’ cultures, people (again whether male or female) value relationships and quality of life.

·         Weak vs. strong uncertainty avoidance (UA) – This refers to the level of need for structure. Cultures with low uncertainty avoidance tend to accept risk and change and prefer implicit or flexible rules and guidelines.

·         Long vs. short term orientation (LTO) – How much society values long-standing, as opposed to short term, traditions and values. Cultures with high long-term orientation place strong importance on family, discipline and social obligations. (Note: This fifth dimension was added in a study that took place in 23 countries around the world, using a questionnaire designed by Chinese employees and managers.)

Of course, no society is homogenous and there are surely subgroups that may deviate from the results Hofstede found. However, this article will look at five different countries: Japan, China, Germany, Sweden and the United States, and how they scale according to Hofstede’s five dimensions of culture (updated in 2003). It’s always interesting to see how cultures compare and certainly a good first step towards becoming a well-rounded Manager of the World.

Japan

The results of Hofstede’s study show that Japanese culture wields a business ethos that places high value on fixed gender roles (MAS), an importance on structure (UAI), and a focus on long term goals (LTO). Power distance (PD) and individualism (IDV) are relatively low, as equality is seen as a way of maximizing cohesion and in turn, productivity.

Japanese firms invest an enormous amount in their employees’ training and development. New employees train for six to twelve months in each of the firm’s major offices or divisions so that within a few years they know every facet of the company operations.

In Japanese organizations, supervisors and employees have a largely egalitarian relationship where consensus on both parts is required for making decisions. Rather than being a source of authority, top management is seen as a facilitator/consensus builder and has the responsibility of maintaining harmony so that employees can work together. Top management takes cues from middle management, who base policies on the information forwarded by subordinates.

“Hourensou” and “genchi genbutsu” are at the core of Japanese management and the terms often referred to in Jeffrey K. Liker’s book The Toyota Way, which outlines 14 principles that underlie the company’s managerial approach and production system. The Toyota Production System (TPS) (despite recent issues) is probably the most famous and successful example of a Continuous Improvement (CI) culture (CI is the ongoing effort to improve products, services and processes). Toyota’s founder, Kiichiro Toyoda, is a firm believer that “each person fulfilling his or her duties to the utmost can generate great power when gathered together, and a chain of such power can generate a ring of power”.

“Hourensou” (hou = report, ren = inform, and sou = feedback) means to report out to other’s frequently and keep those necessary informed of your work, while remaining open to feedback and direction from peers. “Genchi genbutsu” means “getting your hands dirty, to identify or solve immediate problems and leaders are not exempt from this”.

In North America a person can bounce from career to career, from being a chartered accountant to a band roadie, but in Japan, similar to other Asian cultures, employees are expected to stay with one company for their entire working careers.

China

China ranks high for both power distance (PD) and long term orientation (LTO). The high ranking for LTO is indicative of a society that preserves tradition, places high value on education and training, and is inclined to overcome obstacles with time. In terms of individualism (IDV), the Chinese rank lower than any other Asian country. China’s strong collectivist mentality sets a precedent where everyone takes responsibility for fellow members of their group, but these groups are clearly defined within the hierarchy.

Confucian philosophy is sensitive to hierarchy and the teachings of Confucius are tightly woven into the society at large. Relationships are deemed to be unequal and these inequalities are respected. Elders automatically receive respect from those who are younger, and the same goes for the relationship between seniors and subordinates.

Chinese management style is authoritative and directive, and managers are expected to make decisions on behalf of the group. Unlike Japanese organizations, instructions are always delegated from the top down. Senior management gives orders to those reporting directly to them, and the chain of commands systematically gets passed down the hierarchy. This is both expected and desired of both workers and managers.

The decision making process within Chinese firms is based on respect, evasiveness, hierarchy and discipline. Open conflict is avoided at all costs, even if upper management is clearly making a wrong decision.

When it comes to signing contracts, the Chinese see this agreement as a start of a relationship rather than an official business accord. One reason for this is that the Chinese language is a very pictorial and an often metaphor-like language. It can be difficult to write very precise and accurate meanings to contracts, so the real business gets tinkered with after the contract is signed. Also, gift-giving, dinners and doing favors are common ways of doing business in the People’s Republic, and nurturing contacts is not seen as something wrong.

Germany

German companies concentrate intensely on product quality and product service (think: Mercedes-Benz, Porsche, BMW…) German managers describe this as Leistungswettbewerb, i.e., competition on the basis of excellence in their products and services. German managers and employees are often close, (reflected in the medium to low power distance (PD) in German culture) because they believe that they are working together to create a good product.

In fact, management courses offering many of the management techniques you’ll find in American business schools only started being offered in the 1980′s, as Germans believed that management as a separate discipline bredselfishness, disloyalty, bureaucratic maneuvering, short-term thinking, and a dangerous tendency to neglect quality production.

German industries tend to work closely with governments, adhering to government standards, policies, and regulations. Virtually all German products are subject to norms established through consultation between industry and government, with strong inputs from the management associations, chambers of commerce, and trade unions.

Unlike our previous Asian counterparts, individualism (IDV) is significantly higher in Germany, with a much higher valuation on people’s time and freedom. The masculinity index (MAS) also ranks quite high, not because men are particularly dominating the workforce but rather, Germans as a people, value competitiveness, assertiveness, ambition, and the accumulation of wealth and material possessions.

Sweden

Swedish companies tend to have a flat and team-oriented structure with few management levels, (reflected in the moderate power distance index (PDI)). When looking at Sweden’s performance appraisal, like other Scandinavian countries, they rank very high for individualism (IDV), indicating its population is for the most part self-reliant, enjoys challenges, and respects and values privacy. Sweden is also known to be a very open, nurturing and egalitarian society, and this is clearly reflected in the low masculinity (MAS) ranking. Again, this is a manifestation of a culture that embraces and values quality of life rather than quantity of possessions and achievements.

In Sweden, as in most egalitarian cultures, the uncertainty avoidance index (UAI) is moderate, which suggests that in order to avoid uncertainty, there are rules, laws, policies, and regulations to cover almost any problematic situations or circumstances that could arise. The result is a simple and direct decision-making process.

Swedish organizations tend to be informal, pragmatic and open. Managers and executives are considered to be specialists in their field, leading with a sense of personal responsibility but also making sure not to dominate discussions or the generation of ideas.

Praise is given to the entire group as well as to individuals. The role of the leader is to harness the talent of the group assembled, and cultivate any ensuing synergies.

United States

Out of all the countries analyzed in Hofstede’s research, only seven have individualism (IDV) as their highest dimension including the U.S. (91), Australia (90), the United Kingdom (89), the Netherlands and Canada (80), and Italy (76).

Power distance (PD) and uncertainty avoidance (UAI) in the United States are relatively moderate, which means that the interactions across power levels are generally cooperative in order to create more stable cultural environments. This also connotes that the society as a whole values fewer rules and does not aim to control all outcomes and results.

The next highest Hofstede dimension the U.S. ranked for is masculinity (MAS) indicating that the country experiences a higher degree of gender differentiation of roles, or rather, that the population as a whole values qualities deemed ‘masculine’. This situation generates a female population that is more assertive and competitive. Women tend to shift toward the male role model and away from the conventional female one.

The U.S.’ lower LTO ranking indicates the country does not reinforce the concept of long-term, traditional orientation. Change can occur rapidly and risk-taking is generally accepted.