The impact of national culture on management control systems
In the contemporary business environment, there are so many enterprises transformed into global organisations. And the globalisation trend caused a huge number of companies to adopt the strategy of mergers and acquisitions for development (Busco et al, 2008). This needed corporations to operate subsidiaries in different countries. As a result, management control systems also have been influenced by more issues than before and the management control systems of these corporations have been paid much more attentions than ever. Thereby, there is increasingly number of experts and corporations managers research these influences and want to find some methods to ensure the management control systems of enterprises could exert exactitude and effective functions. In this article, the main topic is to evaluate the impact of national culture on management control system. Consequently, some correlation aspects will be included in it. These aspects are: the role of management control systems, the definition of national culture and the different dimensions or measurement of national culture, reasons why national culture could influence management control system and the impact of national culture on management control system. Next, I will discuss and explain these aspects and then gain a conclusion.
Research and analyze
Management control systems
Struggling with your essay?
In the past, there were two kinds of traditional control theories: one of them was ethnocentric approach and the other was polycentric approach (Noerreklit and Schoenfeld, 2000). The former was simple vertical management that from head office to subsidiaries. While the latter set up a claim to leave subsidiaries autonomy to manage themselves (Noerreklit and Schoenfeld, 2000). Until 1995, a more perfect control framework had been created by Simons (Noerreklit and Schoenfeld, 2000). Simons (1995) brought forward that the aim of control systems should be:
"to encourage employees to initiate process improvement and new ways of responding to customers' needs-but in a controlled way." (Simons, 1995)
Other experts also developed some theories about management control systems. For instance, there was a research about the fundamental items of the design of management control systems claimed that "management control systems are contingent on technology, competition, environmental uncertainty, and organizational size" (Chow et al, 1999). In an enterprise, the use of management control systems is to help organizations to enhance the motivation of all its employees to work with the same target which is to maximize the interests of corporation (Chow et al, 1999). Nevertheless, some researches advanced some opinions that we should treat seriously. Experts claimed that the management control systems' design and the preferences for them are different cross different countries (Chow et al, 1999). And the cross-national variation did not be explained by the contingency variables (Chow et al, 1999). Then, researchers found some particular factors impacted the management control systems' design and the preferences for them in a specifically country. These factors were also relevant nation-specific (Chow et al, 1999). If companies false to design management control system of it such as adopt unsuitable performance evaluation tools, this could cause companies to make wrong decisions that may be inconsistent with corporations' objectives and interests. And the conflict yet may erode the morale of companies and lead to negative influence on local managers and employees (Devine and O'Clock, 2003). Therefore, we need to research the national factors and how they impacted on management control systems.
Nowadays, there are a good number of literatures about the manifold culture' definitions and taxonomies (Seaman and Williams, 2001). Among of these, the most typical and successful research was the findings of Hofstede. The definition Hofstede gave to culture was:
"the collective programming of the mind that distinguishes the members of one category of people from those of another" (Seaman and Williams, 2001).
As the most popular theory served for researches about comparative cross-country and the broadest and the most regular used by other researchers when they researched on the culture differences, the five dimensions of culture identified by Hofstede were another great findings (Devine and O'Clock, 2003). The five dimensions are: "power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity, and Confucian dynamism" (Devine and O'Clock, 2003). First, the mean of power distance is the extent that a society accepts about the unequal distribution of power in social organizations (Seaman and Williams, 2001). Second, the definition of uncertainty avoidance is the degree of acceptance of a society holds about risk, ambiguity and uncertainty (Seaman and Williams, 2001). Third, the individualism versus collectivism refers to the extent members of a society treat themselves as individuals but not a part of a group, and the kind of society members more likely accept: a loose or a tight society (Devine and O'Clock, 2003). Forth, masculinity versus femininity represents the degree that the values of achieve-oriented such as "assertiveness, ambition, independence, competitiveness and male dominance" are broader identified with than the values of modest and need-focused like "nurturing, interdependence, service motivation, quality of life, and equality between sexes" (Devine and O'Clock, 2003). Fifth, Confucian dynamism indicates "the relative importance of persistence, perseverance, ordered status, and thrift" (Devine and O'Clock, 2003). Hofstede researched more than fifty countries about the five dimensions of culture and assigned marks to them respectively (Devine and O'Clock, 2003). In particular, Hofstede's theories about the definition and the dimensions of culture were extensively utilized in researches on impacts of national culture on organizations (Soeters and Schreuder, 1988).
The impacts of national culture on management control systems
As the globalisation becomes an inevitable trend and multinational companies become the main body of the current business world, managers paid increasingly attention on the effectiveness of management control systems in different countries. Specially, managers were interested in the transferability of management practices across different national cultures (Chow et al, 1996). Whether management control systems of a corporation used in one country could be equally useful in another country or not is the main question managers meet. Because different people of different countries have different national culture, they have different preferences for and reactions to management controls (Merchant et al, 1995). Therefore, management control system worked smoothly in one country may fail to operate normally in a different country.
This essay is an example of a student's work
At first, we research a case about the comparison between Norway with Australia and Singapore. Everyone knows that Norway is a country of European continent, and is a region which has very different cultural and geographical compared with Australia and Singapore (Buckland and lau, 2000). Because the populations of Norway are relative more ethnically homogenous than Australia and Singapore which are more like heterogeneous societies, Norwegian culture seems to be more homogeneous, and Norway has more centralized, formalized and democratic industrial relations than Australia and Singapore (Buckland and Lau, 2000). According to prior studies, in both Australia and Singapore, there is a significant three-way interaction between budget emphasis, participation and task difficulty, and the interaction has an obvious impact on managerial performance (Buckland and Lau, 2000). The question is whether this interaction yet exists in Norway. This needs to consider the differences of national culture between Norway and Australia and Singapore. The theories adopted to research this question were Hofstede's culture definition and five dimensions. Two dimensions of the five: power distance and individualism, were theoretically supported to have impact on subordinates' budgetary participation (Lau et al, 1995). In high power distance societies, power were concentrated on superior and subordinates nearly no opportunities to participate in affairs. Workers were used to obey managers' orders and seldom interact and communicate with managers. Thereby, the budgetary participation degree in high power distance societies seems to be quite low (Harrison, 1992).But, in low power distance, power was distributed from superior to subordinates and an inequality was minimized (Buckland and Lau, 2000). Subordinates usually communicate with superiors equally. Consequently, the extent of budgetary participation in low power distance societies is likely to be high (Harrison, 1992). In low individualism societies, people pay more attention on organizations' interests than on interests of individuals (Buckland and Lau, 2000). The characters of low individualism societies were collectivity-orientation (Buckland and Lau, 2000). People concerned the operations of companies and depended on companies to feed themselves. They saw organizations as their lives' background. Thus, the degree of budgetary participation of subordinates in low individualism societies is likely to be high (Harrison, 1992). However, in high individualism societies, people put more emphasis on individuals but not on organizations. The character of high individualism societies yet changed to self- orientation (Buckland and Lau, 2000). People were relatively independent to organizations and superiors insisted plans made by themselves without negotiation with subordinates could be more perfect (Buckland and Lau, 2000). As a result, the extent of budgetary participation of subordinates in high individualism societies is likely to be low (Harrison, 1992). The Norwegian national culture influenced managers 'budgetary participation on both the degree of participation and the range of participation (Buckland and Lau, 2000). According to Hofstede's findings, the score of power distance of Australia is 36 that is higher than the score of Norway at 31 (Buckland and Lau, 2000). In contrast, the mark of individualism of Norway is 69 which is at the middle order and lower that the mark of individualism of Australia which is 90 (Buckland and Lau, 2000). Because Norway has lower power distance and individualism than Australia has, the degree of managers' participation of Norway is higher than the extent of Australia (Buckland and Lau, 2000). As far as the impact of Norwegian national culture on the range of budgetary participation, due to the historical and geographical reasons, Norway has more homogenous culture compared with Australia and Singapore, and thereby variations in the range of budgetary participations in the Norway seem to be smaller than in Australia and Singapore (Buckland and Lau, 2000).
Next, Let us transfer our eyes to China. In Chinese national culture, a good social relation is a key item to evaluate the performance of superior (Wong, 2009). In China, society afforded a close network for people to protect and safeguard their members' interests (Wong, 2009). And this kind of networks could influence collectivism and group harmony (Wong, 2009). So managers in China usually see dealing with social networks as the basic management issues (Wong, 2009). Through the research done by Meiling Wong in 2009, a clear finding had been found that the social network of companies has considerable impacts on five areas: "turnover rate decrease, ROE increase, financing/liquidity, performance efficiency, and productivity" (Wong, 2009). Consequently, in Chinese national culture, the social relation networks had impacts not only on building interpersonal relationships and reinforcing teamwork aiming to improve management performance, but also could help managers to deal with external uncertainty (Wong, 2009). To date, there are more than fifty thousands multinational enterprises join in the Chinese market every year (Hartmann et al, 2010).For these companies, the management control systems of them must be designed after fully and carefully considering the Chinese national culture, especially the social relation networks of companies.
Freelance Essay Writing Vacancies
Looking to become a writer?
Due to high demand for our services we're always looking for new writers. If you're interested in becoming a freelance writer then why not read more about our freelance writer jobs.
In the era of globalization, nearly all enterprises enter the international markets for maintaining and developing (Kidger, 2002). With respect to many US-based multinational enterprises, the main question for them is how to evaluate their foreign strategic business units (Devine and O'Clock, 2003). Multinational companies usually engage local managers to supervise a foreign subsidiary. This required the management control systems should be effective. Also the impacts of national culture on management control systems should be pay attention to. For instance, according the theory of Hofstede, one dimension of uncertainty avoidance in five dimensions influenced the control systems. A country's culture which has high mark of uncertainty avoidance prefer to the control systems have detailed and unambiguous performance evaluation items (Devine and O'Clock, 2003). In contrast, a country's culture which has low mark of uncertainty avoidance is willing to adopt the control systems are more loosely with discretionary bonus (Devine and O'Clock, 2003). Equally, the dimension of Confucian dynamism also has impacts on management control systems. The managers of subsidiary in a country with the culture has high score of Confucian dynamism will be encouraged by a long-term business plan which could lead to well develop rather than short-term of financial data (Devine and O'Clock, 2003). However, a manager in a country with the culture has low score of Confucian dynamism usually focus their eyes on the current financial performances. Meanwhile, all of other dimensions of culture have different influences on management control systems. Companies should design different management control systems according to the culture of country their subsidiaries were operate in.
In this article, the academic background is the definition of culture and five dimensions of culture established by Hofstede. We used the theories of Hofstede to research the impact of national culture on management control systems. Firstly, the understanding of the roles of management control systems had been presented and we found management control systems played a significant role in operations of companies. Next, we researched the definition of culture and the measure to classify culture. After that, we began to analyse the relationship between national culture and management control systems. Through the research of the comparison between Norway, Australia and Singapore, clear differences could be found about budgetary participation of managers and subordinates in the countries. This was translated by the different national cultures. Thus, the first evidence of the impact of national culture on management control systems was found. Then, an example of Chinese national culture about social relation networks was advanced to check the impact of culture on management. We found that the social relation network in Chinese environment had influences in both companies' inter governance and external communication and negotiation. At last, through the use of Hofstede's theories, Devine and O'Clock researched all of five dimensions of culture influenced the management control systems of foreign strategic business units of US-based multinational corporations. To conclude, the national culture has obvious impacts on management control systems. So managers of multinational enterprises should carefully design the control systems for subsidiaries according to local national culture.
If you are the original writer of this essay and no longer wish to have the essay published on the UK Essays website then please click on the link below to request removal: