International Management, 5th ed. Part Two: The Role of Culture

International Management, Organizational Cultures and Diversity Hodgetts and Luthans International Management, 5th ed. Chapter Seven Organizational Cultures and Diversity

Objectives of the Chapter DEFINE exactly what is meant by “organizational culture,” and discuss the interaction between national and MNC culture IDENTIFY the four most common categories of organizational culture that have been found through research, and discuss the characteristics of each PROVIDE an overview of the nature and degree of multiculturalism and diversity in today’s MNCs DISCUSS common guidelines and principles that are used in building multicultural effectiveness at the team and the organizational levels

Nature of Organizational Culture Pattern of basic assumptions that are developed by a group as it learns to cope with problems of external adaptation and internal integration and that are taught to new members as the correct way to perceive, think, and feel in relation to these problems An MNCs organizational culture in one country’s facility may differ sharply from those in other countries Companies sometimes maintain two different business cultures to avoid the influence of one culture on another

Characteristics of Organizational Culture Observed behavioral regularities Philosophy on treatment of employees/ customers Norms Rules of employee behavior Organizational Culture Dominant values Organizational climate

Nature of Organizational Culture Interaction Between National and Organizational Cultures National cultural values of employees have a significant impact on organizational performance Cultural values that employees bring to the workplace are not easily changed by the organization Substantial differences may be observed among subsidiaries that cause coordination problems Diagnosing Organizational Culture for Strategic Application (DOCSA) Proprietary cultural analysis technique based on five cultural dimensions

Figure 7-1 Europeans’ Perceptions of the Cultural Dimensions of U. S Figure 7-1 Europeans’ Perceptions of the Cultural Dimensions of U.S. Operations Activities Outputs Job Person Corporate Professional Open Closed Tight Loose Conventional Pragmatic 30 32 34 36 38 39 40 41 42 31 33 35 37

Figure 7-1 Europeans’ Perceptions of the Cultural Dimensions of European Operations of the Same MNC Activities Outputs Job Person Corporate Professional Open Closed Tight Loose Conventional Pragmatic 30 32 34 36 38 39 40 41 42 31 33 35 37

Organizational Cultures in MNCs Integration of organizational cultures is crucial following mergers and acquisitions Integration process consists of: Establishing a common purpose, goal, and focus Identifying important organizational structures and roles Determining who has authority over resources Identifying the expectations of all involved parties and facilitating communication between the parties MNC organizational culture affected by three aspects of organizational functioning General relationship between employees and the company Hierarchical system of authority Employees’ views about MNC’s purpose, destiny, and goals

Organizational Cultures in MNCs (cont.) Family culture Strong emphasis on hierarchy and person orientation Power-oriented with paternalistic leader Leader looked to for guidance Can catalyze and multiply employees’ energy Reliance on intuition rather than rational knowledge Eiffel tower culture Strong emphasis on hierarchy and task orientation Employees know what to do Coordination from the top Methodic approach to motivating and rewarding people and resolving conflict

Organizational Cultures in MNCs (cont.) Guided missile culture Strong emphasis on equality in the workplace and orientation to the task Work typically undertaken by teams or project groups Low priority attached to hierarchical concerns Employs a “cybernetic” structure Culture may change quickly Incubator culture Strong emphasis on equality and personal orientation Organizations are secondary to the fulfillment of individuals Organization is an incubator for self-expression and self-fulfillment Participants have intense emotional commitment to their work

Figure 7-2 Organizational Cultures Equity Fulfillment-oriented culture INCUBATOR Project-oriented culture GUIDED MISSILE Person Emphasis Task Emphasis FAMILY Power-oriented culture EIFFEL TOWER Rule-oriented culture Hierarchy

Managing Multiculturalism and Diversity Phases of Multicultural Development Effect of multiculturalism and diversity depends on the stage of the firm in international evolution International cultural diversity has minimal impact on domestic organizations Cultural diversity has a strong impact on the external relationships of international firms Global firms need both an internal and an external diversity focus

Figure 7-4 Location of International Cross-Cultural Interaction Phase 1 Domestic Firms Phase 2 International Firms Phase 3 Multinational Firms Phase 4 Global Firms

Managing Multiculturalism and Diversity (cont.) Types of Multiculturalism Domestic Multiculturalism There is considerable multicultural diversity domestically in organizations throughout the world Group Multiculturalism Homogeneous groups - members share similar backgrounds and perceive, interpret, and evaluate events in similar ways Token groups - all members but one have the same background Bicultural groups - members represent each of two distinct cultures Multicultural groups - members represent three or more different ethnic backgrounds

Managing Multiculturalism and Diversity (cont.) Potential Problems Associated with Diversity May cause a lack of cohesion that results in the unit’s inability to take concerted action, be productive, and create a work environment that is conducive to both efficiency and effectiveness Potential problems are rooted in: People’s attitudes Preconceived stereotypes Inaccurate biases Inaccurate communication

Managing Multiculturalism and Diversity (cont.) Advantages of Diversity Generation of more and better ideas Prevention of groupthink Social conformity and pressures on individual members of a group to conform and reach consensus Building Multicultural Team Effectiveness Multicultural teams are potentially very effective or very ineffective Effectiveness depends on team leadership

Figure 7-5 Group Effectiveness and Culture Cross-cultural groups Single culture groups Highly ineffective effective Average effectiveness

Managing Multiculturalism and Diversity (cont.) Building Multicultural Team Effectiveness (cont.) Understanding the Conditions for Effectiveness More effective when facing tasks requiring innovativeness Stage of team development determines the activities that the team can perform effectively Using the Proper Guidelines Members must be selected for their task-related abilities Members must recognize and be able to deal with differences Leader must help group to identify and define its overall goal Members must have equal power Members must respect each other Managers must provide positive feedback to the team