MGMT 620

Leadership in an International Environment

Cory Olson 3/3/2011

Contents
Abstract ............................................................................................................................................ 3 Introduction ...................................................................................................................................... 4 Globalization ................................................................................................................................ 4 The Hofstede Framework ................................................................................................................ 5 Power Distance Index .................................................................................................................. 5 Individualism ................................................................................................................................ 6 Masculinity .................................................................................................................................. 7 Uncertainty Avoidance Index ...................................................................................................... 9 Long Term Orientation............................................................................................................... 10 When Cultures Clash ..................................................................................................................... 11 References ..................................................................................................................................... 14

Abstract

Today the business world continually grows smaller with even small companies beginning to have global factors playing into successful operations. Because of this, to be a truly high-performing leader today, one must be able to lead across the cultural boundaries that typically divide those of different nationalities and backgrounds. Be it managing teams in overseas offices or operations, working for a foreign national company or simply getting along with peers from a different cultural background, differences can affect every level of the leadership structure.

This paper will first examine common cultural factors and the general characteristics of various nationalities to define a framework of traits which can have a strong effect on leadership. Second, it will examine common problems which can arise in an international environment which a leader will have to deal with to be successful. Finally, this paper will outline some basic strategies and best practices for the prospective international leader to follow. Cross-culture management presents its own unique challenges and problems. Being prepared for and able to deal with such situation not only allows a leader to gain the great rewards and satisfaction of leading across cultures, but also has our world continues to get smaller this ability will become more and more a necessity.

Introduction
Globalization
Globalization is a buzz word that seems to be getting thrown around more and more these days. Business schools have discussions, if not entire classes, devoted to it and dozens of writers, pundits and politicians have taken turns both deriding it as the root cause of all the bad in the world today and as savior that will bring peace and prosperity to the planet. The questions are, however, do we really understand what globalization is and are we prepared to handle it? According to a recent article in Fortune Magazine online, the answer may be no. According to the author, a common conversation between CEOs and business school deans could be going something like this; "A recent grad we hired got up to give a presentation to our senior management and had simply no appreciation for the challenges of globalization: no feel for the country or region; no anticipation of corruption or socialism in-country; no grasp of the supply chain difficulties; no appreciation for the differences in rule of law and property rights; and the proposed brand name translated into an unmentionable body part. The pitch was an embarrassment." While this imaginary quote itself may be somewhat overly dramatic to prove a point, recent research is backing up the point the author is trying to make, that todays business school grads coming out unable to cope with the challenges presented by globalization. This is especially important considering that most graduates with advanced business degrees are brought into organizations to be the future leaders and in the opinion of many, the problems of a global business environment are the primary issues successful leaders will have to manage in the future. While the end results of these issues can be varied, typically the root cause will come down to

people and culture. Therefore it is of key importance that leaders understand the cultural differences and issues facing the world today. With that in mind, this paper will first look at the cultural differences across nationalities as defined by the Geert Hofstede Cultural Dimensions.

The Hofstede Framework

In the late 1970s Geert Hofstede, a Dutch organizational sociologist, in articles such as The Poverty of Management Control Philosophy in the Academy of Management Review and books such as Beyond Culture, began to state that within national and cultural groupings, there are factors that can strongly affect the behavior of the behavior of societies and organizations. Over time he developed these factors into the five Hofstede Cultural Dimensions. The dimensions include the Power Distance Index (POI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO). These cultural differences describe the averages and tendencies within a nationality or cultural group and can be compared to another cultural norm to discover what problems may occur within an organizational relationship. Such knowledge is important for a leader as is may help them understand the root of cross-cultural issues and perhaps prevent them before they can begin. To that end, we will now take a closer look at each of the dimensions and the problems they can cause.

Power Distance Index

Hofstefe described Power Distance as follows; Power Distance Index (PDI) that is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. This represents inequality (more versus less), but defined from below, not from above.
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It suggests that a society's level of inequality is endorsed by the followers as much as by the leaders. Power and inequality, of course, are extremely fundamental facts of any society and anybody with some international experience will be aware that 'all societies are unequal, but some are more unequal than others'. In other words, this factor can greatly affect how a person from a certain culture perceives power within an organization and how willing they are to accept the control of a higher power position. This can be of strong importance to how a leader derives their power and how to present that power to their followers. As we can see in the map above, cultures from South American, Asian and Middle-Eastern countries tend to have moderate to high power distance. This can suggest that Legitimate Leaders, or those who have their position appointed from above, stand the best chance to have their power recognized within such a culture and perhaps is how they should display their power to be best considered a leader. In addition, this cultural factor can indicate how cultures will respond to inequalities in things such as work, pay and benefits as well as expectations within a culture.

Individualism
In the Hofstefe Dimensions, Individualism, and its opposite Collectivism, looks at the degree to which individuals integrate into groups. In highly individualistic cultures, one is expected to more or less look after oneself and immediate connections or family. In more

collective cultures, the ties of connections are extended further and tightened to broaden the number of people one is expected to protect or take care of. Beyond the extent of connections, individualism vs. collectivism also determines the strength to which one is held to their group and the expectation of conformity to the procedures and practices of that group. In a highly individualistic society, such as the United States, it can be seen that those who take initiative for themselves and make effort to stand out are the ones most often rewarded for their achievements and these rewards are kept for the most part to themselves. Compare this to a country such as South Korea, where from birth people are integrated into strong in-groups and are highly accepting of placement into groups within an organization. Here, a thought process can be seen of The nail that stands out is the one that is hit type where efforts are to maintain the status quo and cohesion within the group. Success extends beyond the individual to all those surrounding them and rewards also.

Masculinity
The Hofstefe Dimension of Masculinity measures the strength of traditionally male or female values, from a Western sense, within a culture. In the more masculine cultures, high value is placed on such things as competitiveness, assertiveness and ambition as well as the accumulation of wealth and material possessions. On the opposite, in so-called feminine cultures, the emphasis is relationships and quality of life factors such as happiness and a sense of fulfillment. To better describe this aspect of culture, some researchers have reclassified this

dimension as Quantity of Life vs. Quality of Life, to separate the values from specific genders as both males and females within a culture can exhibit these traits. To the left, we can see the dimensional scores for Japan. Immediately we can notice a high peak in Masculinity which, at 95, is actually among the highest in the world. This carries the meaning that within the Japanese culture, the norm is to place high values on defined and quantifiable success measured in such things as wealth and power. Many stages within life and organizations are seen as a competition and therefore the expectation is to put in a great deal of time and sacrifice in order to win. To this end, it is considered a cultural norm for those within Japanese organizations to put in longer hours and less vacation time than Western counterparts. In exchange, greater financial reward is expected to come eventually to allow individuals to view themselves as a success. While it is true that masculine and feminine traits can be displayed by both genders within a culture, it is also important to note that the level existing within a culture can have bearing on the on gender roles traditionally assigned to females, which in turn can have a great affect on organizational structure. We will discuss this further later in common problems that can arise in cross-cultural leadership.

Uncertainty Avoidance Index

From Geert Hofstede, Uncertainty Avoidance deals with a society's tolerance for uncertainty and ambiguity; it ultimately refers to man's search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, and different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; 'there can only be one Truth and we have it'. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative, and not expected by their environment to express emotions. From an organizational point of view, uncertainty avoidance can help describe how one may respond to an out of the norm situation or sudden change in operation. Additionally it can greatly affect how likely one is to accept change itself within the organization. Generally speaking those within this culture may respond to such situations negatively and emotionally. Therefore the emphasis is on the society to control the situation and tends to be very adverse to change and risk which may lead to an out of control situation. By the numbers, Greece had the highest score in UAI. Last year, the world saw great change and uncertainty within the country as its financial systems collapsed and the response of the populace to government efforts. It seemed that the only way the populace could respond to
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the uncertain times was through anger. While many factors played into what happened within the country, it isnt going too far to say that on the whole the issues were not very well dealt with on all levels and the cultural significance of uncertainty avoidance may have played a part.

Long Term Orientation

After the establishment of the initial four dimensions, studies in primary Buddhist, Taoist and Confucian cultures in Asia lead to the inclusion of a fifth dimension looking at a groups time horizon, or the importance of the future as opposed to the past or present. In such long-term societies, people value that which has the greatest affect on the future, such as persistence, thrift and shame. It is thought that time more than anything else can overcome obstacles. In contrast, short term cultures tend to look at normative statements, a judgment of how things ought to be, immediate stability, saving face and reciprocation of gifts and favors. Within the twenty-three countries surveyed to make up this dimension, these factors combined to create a unique profile for each country, however, in general long-term orientation tended to be stronger as compared to Western cultures. The bellwether of LTO in Asian cultures is China, which while officially atheist by state, is strongly influenced by the teachings of Confucius, an ancient Chinese scholar. In high LTO cultures such as China, the trust between two parties is paramount and this is something that is expected to be developed over time.

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When Cultures Clash

As we can see there is a wide variety of cultural differences between various nationalities and despite the world growing smaller, these cultural dimensions have remained quite stable over time. As cross-cultural business continues to grow, however, issues can and will arise due to these cultural differences. An article in the Feb. 2005 edition of Business Mexico took a look at the cultural affect on an American manager working in Mexico, focusing specifically on power distance.

Bob is a distribution manager for a U.S. automobile manufacturer in Mexico City. His boss, Juan, is Mexican, as are most of his peers and all of his subordinates. Bob has been in the big city for only a few months and he has a problem, actually a bunch of problems. He recalls that only a few weeks ago he felt he could have taken on the world and won. Now, he questions his ability to sell peanuts to passing motorists. So what was the primary cause of Bobs breakdown and loss of confidence? His assumption that the management style successful for him in the US would apply equally in Mexico. In the US, many managers have found success in a democratic leadership style, encouraging ideas and inputs from subordinates where as in Mexico, higher power distance has led to the expectations of followers that the manager take a stronger lead and direct from a position of authority. In Bobs case this caused him to be viewed as weak and indecisive by his subordinates when he was trying to involve them and disrespectful and insubordinate by his boss for disagreeing with his position in front of others. Being aware of these differences beforehand and adjusting his leadership style somewhat to fit expectations could have saved Bob a lot of frustration during his transition.

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Outside of a manager/employee relationship, cultural differences can also have a strong affect on an organizational leaders ability to conduct business with the leadership of another organization from another country. Examples of such clashes can be found in the book Changing Face of Japanese Management by Jackson and Tomioka. In a meeting between a Japanese negotiation team and UK managers, the Brits were constantly frustrated by the seemingly inability to get contracts down on paper and consistent silence during formal meetings. Such issues can be explained in terms of the Hofstede Dimensions. First, with the Japanese managers, very high Masculinity scores meant that they feared appearing weak in front of others. Their silence was not out of disrespect, but rather because the meetings were being conducted in English, they felt making mistakes would make them appear weak and therefore it was better to not speak at all. In addition, high Uncertainty Avoidance made the Japanese team less willing to jump into agreements without full understanding of what effect and changes this would have on their organization. Finally, the general long-term orientation held by many Asian cultures made hard contracts difficult to get signed until the managers felt strongly about the relationship and connection between themselves and the Western counterparts. By approaching negotiations with this knowledge before hand, the process could have been a less frustrating experience and lead to more positive results.

So what can a leader really do to be successful in a cross-cultural situation? The most simple answer is that they have to adapt. Adaptation to a specific situation is always a requisite for success in any leadership scenario, but gains even greater importance when different cultures are involved. By understanding the cultural norms an organization holds, the leader can then select and incorporate a leadership style that best fits with that organization. We can see in the

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chart below a quick glance at four different styles, the cultural dimensions controlling them and the counties where they may best be used.

By no means is this an end all be all solution and one cannot simply take the cultural assumptions at face value and feel all within that culture will operate the same way. However, by having a greater understanding of the cultural averages, a leader can approach possible cultural differences with better understanding of the situation and possible solutions to produce the best outcomes.

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References
Bruner, Robert. (2011, February 25). B-schools: it's time to globalize. Fortune, Retrieved from http://management.fortune.cnn.com/2011/02/25/b-schools-its-time-to-globalize/ Rutherford, Don. (2005, February). Whos in charge? Cultural value differences. Entrepeneur, Retrieved from http://www.entrepreneur.com/tradejournals/article/129814158.html Jackson, K, & Tomioka, M. (2004). The changing face of japanese management. Psychology Press. Sungmin, Ryu. (2005). The effect of lto culture on international supply chain contracts. The Journal of Applied Business Research, 21(4), Retrieved from http://www.cluteinstituteonlinejournals.com/PDFs/2005258.pdf Clark, Don. (n.d.). Long-term vs short-term orientation. Retrieved from http://www.nwlink.com/~donclark/leader/culture2.html Hostede, Geert. (2009). Hofstede cultural dimensions. Retrieved from http://www.geerthofstede.com/ Cross cultural communications.. (n.d.). Retrieved from www.clearlycultural.com

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