Importance of cultural factors in international assignments

How important are cultural factors as opposed to past knowledge and experience for international assignments? Discuss in detail the pros and cons of hiring an expatriate based on each criterion?

A: PREAMBLE

In this assignment, the importance of cultural factors over past knowledge & experience is highlighted with the help of surveys, case study’s & organizational examples. There are other important factors that for choosing an expatriate like gender, emotional intelligence, confidence & extraversion etc. However, in this particular answer we would focus strictly on culture & past knowledge & experience because of the demand of the question. In this answer, the meaning & definition of culture is explained followed by the reason that make cultural factors so important for the success of an international assignment. There is a comparison made in between cultural factors & past knowledge & experience with the help of some real organizational experiences which include a survey & case studies of Vietnamese worker & Cadbury’s as well. Towards the end the advantages & disadvantages of hiring an expatriate based on each factor is discussed followed by a conclusion that is drawn from the study of the topic.

What is Culture?

Culture is a term used to define a process in which members of a group or society who share a distinct way of life which has common values, attitudes & certain behaviors transmit it over time. As per Phatak(1995)

A person is not born with a given culture: rather she or he acquires it through a socialization process that begins from birth: An American is not born with an inclination towards hot dogs, or a German with a liking for beer: these behavioral attributes are culturally transmitted (Dowling, Welch & Schuler, 1999).

REASON FOR CULTURE AWARENESS IN INTERNATIONAL ASSIGNMENTS:

Multinationals nowadays are not just confined to commercial and economical enterprises but they involve political, social, scientific, athletic, religious and cultural entities as well. Organizations have employees and clients who come from different functional, cultural backgrounds and assumptions about the ways of decision making and communication (Zahedi, 2000). The impact of globalisation on managerial practices across nations has increased the interest in examining the degree to which culture impacts the effectiveness of managerial practices. Increased employee interaction with global customers in international assignments demands high cultural efficiency. Every country has a different culture and if the business people lack knowledge or sensitivity for other cultures there can be mistakes in both personal & professional interactions. Expatriates going on international assignments always think that their own country provides the best way of doing business, they behave in ways and make decisions that alienate their foreign counterparts leading to business and/or personal failure. Simple things such as gift giving or introductions can also create problems in international business if importance of culture is ignored. People’s varying beliefs, values and behavior patterns are very important for the success of an international business, including activities such as cross national negotiations, sales interactions, management of the performance of employees from different countries, the treatment & understanding of contracts between firms from various countries. All these activities require a good cultural knowledge of the host country (Briscoe & Schuler, 2004).

PROBLEMS RESULTING FROM IGNORING CULTURAL FACTORS:

In the international assignments, individuals receive poor job performance evaluation from their superiors if they do not understand cultural differences in role expectations, and do not conform to the role expectations (Stone-Romero, Stone & Salas, 2003). An expatriate going abroad experiences situations that show differences in language, dress, hygiene, food & attitude towards time and such situations can be difficult which can even lead to expatriate getting a cultural shock- a phenomenon experienced by people moving across cultures. When an expatriate goes on an international assignment, the new environment requires many adjustments to be done in a relatively short span of time which can challenge an expatriate’s frame of reference to such an extent that their sense of self, especially in terms of their nationality & culture comes into question. Cultural shock can also cause Psychological disorientation if they do not understand or misunderstand certain cues which can further lead to negative feelings about the host country & its people and a longing to return back to the home country or in severe cases failure of the international assignment. For an international assignment’s success activities such as hiring, promoting, rewarding, & dismissal must be determined as per the practices of the host country and should be based on a value system peculiar to that country’s culture (Dowling, Festing & Engle,2008).

Past Knowledge & Experience versus Culture

Expatriates with international knowledge & experience operate with the expectation that the business models & methods they use will work well in business interactions in other countries as well, however companies with long experience in the international field suggest that there is hardly any such positive overlap. MNE’s should understand that the core of success in international assignments is cultural awareness and understanding of effects of culture on day to day business operations. If a firm enters a new country and performs its activities based on prior knowledge & experience, it can cause a significant lack of trust & alienation in the host country, this can have further problems, like attaining a quality workforce (Dowling, Welch & Schuler,1999).

A survey done on executives from around the world, showed the importance of intercultural understanding & highlighted that countries in which people have greater cultural understanding are the one’s that have an advantage in international business.

Survey: As per a survey of more than 3,932 executives from around the world, rated countries in between 1 to 10 based on how well developed ” intercultural understanding” is there in their business. The higher the intercultural understanding the greater is the competency & success(Briscoe & Schooler,2004).

Intercultural Understanding:

Switzerland: 8.02 Egypt:6.48 Hungary: 5.18 Denmark: 6.94

China: 3.10 Israel: 5.89 Russia: 3.10 France: 5.08

Singapore: 8.02 India: 6.23 Poland: 4.57 Spain:5.42

Australia: 6.15 Malaysia: 7.30 Mexico:4.65 Korea: 5.35

Germany: 5.95 Hong Kong: 7.37 Turkey: 5.89 Italy: 5.04

Ireland: 5.30 US: 5.22 Taiwan:6.44 Brazil: 5.71

Example to prove importance of Cultural factors over Past knowledge & Experience:

For international assignments, if a MNE decides to take the “enterprise culture” forward it can create certain problems for e.g., MNE’s originating from US & UK feel that women should be assigned senior management positions but they cannot carry this culture for an enterprise in a country that is against women empowerment for e.g., Saudi Arab. Similarly a MNE originating from Asia gives importance to group loyalty & discussion, with deference to senior employees in their operation however same practice cannot be carried forward while starting an international assignment in countries where individual decisions are more important (Dowling, Welch & Schuler,1999).

As per a study done to determine the affects of cultural factors on job performance it was indicated that after accounting for control variables, gender, length of stay in host country and language fluency, Cultural factors significantly related to job performance ( Ang et al.,2004).

Pros & Cons of Hiring an Expatriate based on Past Knowledge & Experience:

In order to have access to qualified staff at the required time and place required, most of the MNE’s are becoming aware of a need to develop international experience across a wide range of their employees, not only from host locations but from the home country as well (McPherson & Roche, 1997).

PROS:

If a MNE hires expatriates based on past knowledge and experience in the home country, it can be beneficial for the control & maintenance of the policies & culture of the parent firm.

It leads to organizational Co-ordination & Control is better facilitated & maintained. It also helps promising managers with past knowledge & experience in home country get international experience. People with past knowledge prove to be the best people for the job because of special skills & experience. It provides an assurance that during international assignment, subsidiary will comply with company’s policies, objectives etc.

It has been found that researchers generally consider previous international experience to be of advantage because such experience teaches an individual the ability to generate strategies for adaptation in new situations, so the chances of assignment failure are minimized (Tye and Chen, 2005 cited in Avril & Magnini,2007). As per Searle & Ward(1990) having host country experience or friendships with host nationals greatly improves the expatriates ability to learn social skills and behaviors. Greater experience with the host culture produces greater cross-cultural adjustment. The theorists state that prior foreign experience with the host culture is positively related to adjustment provided that the experience does not serve to foster negative, unrealistic expectations of the foreign culture. There is very little evidence that previous experience abroad does not always facilitate adjustment to a new expatriate environment (Cui & Awa, 1992; Dunbar, 1992).

CONS:

If an expatriate is hired based on his past experience, it can lead to high expenditure because of providing additional cultural & language training in foreign assignments. Employee with past knowledge are often chosen because of the difficulty in providing adequate training for foreign assignments, however, this can lead to problems with adjustment for the expatriate and his family. Such expatriates often have pre mature return leading to failure of the assignment. The Promotional opportunities of host country nationals get restricted as someone from parent country with experience comes to supervise them. Apart from all these problems the adaptation to host country may take a really long time for the expatriate. Parent company national’s may impose an inappropriate headquarter style in the host country. Compensation & benefits for Parent company nationals & Host country nationals may differ, causing conflicts in between the two(Dowling, Welch & Schuler,1999). One of the most important reason for the expatriate’s failure international assignments has been the use of technical skills, rather than intercultural skills, as the most important factor in US selection for overseas assignments (Gregerson & Black 1990, cited in Stephan, Helms & Haynes,1995).

Case Study:

Experience & past knowledge that works at home does not necessarily work abroad

In a South Korean textile firm a Vietnamese worker was once kicked and slapped by his South Korean boss because the worker did not respond as he could not understand when his boss told him that he was in the wrong place in the factory. In South Korea it is common for employers to scold & beat employees if they make mistakes. But this home practice led to a mass retaliation in kind by ten workers and the manager was hospitalised. It further led to a four day strike & pay rises of ten to fifteen percent for workers. So the textile firm had to pay a lot for not considering cultural factors & following past experiences in Vietnam.(Dowling, Welch & Schuler,1999).

Hiring on the basis of Cultural skills:

Hofstede (1980,p. 398) suggests that the key cross-cultural skills are the ability to communicate, the ability to be non-judgemental, the ability to accept the shortcomings of one’s own knowledge, the ability to display empathy, the capacity to be flexible, the ability for turn-taking (letting everyone take part in discussions), tolerance for ambiguity. As per Fishmayr (2004), all the attributes must be viewed in the context of the host country’s culture. Each culture has its own criteria of the importance of characteristics required for success.

The major pros & cons of hiring expatriate with cultural understanding are

PROS:

If an expatriate is hired on the basis of his cultural competence, language & other barriers of traditions are eliminated. Hiring cost is tremendously reduced, no work permit is required if a host country national is selected. Continuity of management improves if host country nationals(HCN’s) are chosen as they can stay longer in position. No government interference as the host country nationals gets employment opportunities. Morale & dedication of expatriate increases as they see career potential (Briscoe & Schuler, 2004).The expatriates who understand the social cultural environment of the host country, will be more efficient in understanding the culture of the host company. For example in individualistic cultures the organizations give importance on rewarding individual contributions, whereas in collectivists cultures the shared objectives, common interests, interdependence and communication is given more importance(Chatman et al; 1998). Demographic differences affect expatriate performance, creativity, motivation turnover intentions and many other job related outcomes. Amongst these “creativity” is the most tangible and employee specific resource of MNE’s, lack of which, may retain multinationals from keeping in touch with technological changes and development in related industries & good cultural knowledge ensures good creativity(Avril & Magnini,2007).

CASE STUDY CADBURY SCHWEPPES:

In 1993 Cadbury Schweppes took the decision of building a factory and developing a new confectionery business in Poland. For this assignment it chose local candidates of Poland who had good cultural knowledge. After selection they were brought to the UK to provide an overview of the Group’s global operations & an introduction to the company’s philosophies, values and history. This gave Polish expatriates a sense of freedom to manage their business according to local needs, supported by resources and experience from other parts of the Cadbury Schweppes global company. Giving importance to cultural factors led to the success of Cadbury products in the Polish confectionery market (The Times100, Poland – a developing market).

CONS:

If a host country national gets selected for an assignment based on cultural factors the control & co-ordination of headquarters(parent country) may be spoilt as it is unlikely that the expatriate will be fully aware of the way MNE in the parent country operates, until & unless he gets full training & information about the headquarters policies. Moreover, it becomes difficult to bridge the gap in between managers chosen on the basis of culture & the managers based at corporate headquarters. Barriers such as language, conflicting national loyalties & cultural differences may isolate corporate headquarter staff from the foreign subsidiaries. After the completion of the assignment the expatriates will have limited growth opportunities outside the subsidiary, as it will be outside their comfort zone(Dowling, Welch & Schuler,1999). Hiring host country nationals (HCN’s) may limit the opportunity for parent country nationals (PCN’s) to gain foreign exchange, which is a huge source of income. It can lead to formation of a federation of national rather than global units (Briscoe & Schuler, 2004).

CONCLUSION

Thus it can be said that the role of culture is very important in the success or failure of an international assignment. If a MNE ignores this factor it has to face serious consequences, like failure of the assignment, bad reputation, financial losses & so on. However, this fact cannot be overlooked that other factors like past knowledge & experience are also important and they should also be considered while choosing an expatriate. The only way to ensure that an assignment gets successful is to make sure that the expatriate chosen has good knowledge about the host country, its culture, tradition, values & not just past knowledge & experience, as a famous saying goes ‘HISTORY REPEATS ITSELF’ if we remain confined to past knowledge the history of South Korean boss would definitely be repeated & that wouldn’t be what MNE’s desire from an international assignment.

Q: In what way is repatriation proving to be a major problem for MNEs? Critically discuss what should be the essential features of an expatriate training programme designed to assist the western expatriates adjusting to life and work in another continent.

A: PREAMBLE :

In this assignment, the repatriation issue is dealt with in detail. The major problems faced by the MNE’s are discussed followed by the problems faced by expatriates, as the problems that expatriates face have a severe impact on the MNE’s in terms of productivity staff turnover & attainment of future expatriates. A literature review has been used to study the past practices of MNE’s that made repatriation a problem. Later on, the essential features of an expatriate training program designed for western expatriates are discussed in detail like cultural training, language training, technical & management training, the importance of including preliminary visits to the host country as a part of training program has also been stated. In the end the critical review/conclusion is given reflecting the total understanding of the topic.

Definition: Repatriation is a process of returning back home at the completion of an international assignment (Rugman & Collinson,2006).

WHY IS REPATRIATION BECOMING A PROBLEM?

The major reason that repatriation becomes a problem for MNE’s is because of its belief that returning home of expatriates should not be difficult, however, researchers have found returning home to be a really challenging and complicated process (Cox, 2004). The main concern for the MNE’s is the repatriation turnover i.e. number of repatriates leaving the job on return (Lazarova and Cerdin, 2007). Repatriates are more likely to resign and look for other employment opportunities as compared to other executives with same domestic experience ( Stroh et al, 1998). As per Black & Gregersen, a multinational spends a huge amount of money on each expatriate over the duration of international assignment and if the employees exit the MNE within a short duration of time, it can result in huge financial & human capital losses (Dowling, Welch & Schuler,1999). Bossard and Peterson (2005) state that if the repatriates get frustrated due to unfulfilled expectations and lack of appreciation, they will leave the MNE. The costs of pre mature repatriation also includes losses like damaged corporate reputation and lost business opportunities. If a repatriate leaves the home organization soon after coming back from an international assignment it causes a financial setback & also forces the company to lose the repatriates recently developed international experience and competence (Hyder and Lo¨vblad, 2007).

SURVEY:

As per the Global Relocation Trends 2003/2004 Survey (GMAC, 2004) 13 percent of the US repatriates leave the company in one year after returning from an international assignment, another 10 percent leave the following year. Baruch and Altman (2002) found that 50 percent of people left the company within a few years of their return from an international assignment.

LITERATURE REVIEW:

Researchers have highlighted the fact that organisational support and training are important for expatriates to perform a good job in international assignments (Hurn, 2007; Osman-Gani and Tan, 2005; Selmar, 2005;Osman-Gani, 2000; Brewster, 1993; Harvey, 1989 cited in Ahad & Hyder,2008). The literature has concentrated on the role of training and development for successful performance in international assignments, however little attention has been paid to the repatriation issue. Repatriation, which is the final step of the expatriation cycle, has remained an under-researched dimension of international assignments (Harvey, 1989; Black, 1992; Suutari and Brewster, 2003 cited in Ahad & Hyder,2008), although its importance has been mentioned in international business and international HR literature time & again (Allen and Alvarez, 1998; Caligiuri and Lazarova, 2001 cited in Ahad & Hyder,2008).

PROBLEMS FACED BY REPATRIATES WHICH IMPACTS MNE’s

1. Readjustment Problem: When expatriates come back they might feel that the home office job lacks the high degree of responsibility & authority they had in the overseas assignment, if domestic employees observe this problem then their own willingness to go abroad will diminish which means MNE’s won’t get people for other international assignments(Vidal, Valle & Aragon,2007)

2. Delay in Career Progression: Repatriates can also feel that the MNE do not value their international experience in decisions regarding career advancement. It tends to lessen the

eagerness to take work initiatives, which ultimately inhibits the development of

MNE’s capability (Oddou and Mendenhall, 1991).

3. Loss of status & Pay: The repatriates when overseas enjoy generous living allowances & benefits abroad that cannot be matched by the MNE’s when they come back home so repatriates get demotivated(Dowling, Welch & Schuler,1999).

4. Reverse Culture Shock: Expatriates can get a reverse culture shock as after spending years in a foreign country, they forget their own culture. It can be problematic as the MNE’s generally do not provide reverse cultural training(Berman & Beutell,2009).

5. Increased Prices of fixed assests: Expatriates who sell their houses when going on a long international assignment for two or three years find it very difficult to purchase a new house because of increased rate of property (Dowling, Welch & Schuler,1999). MNE’s are burdened with an additional responsibility of providing some kind of accommodation to repatriates.

6. Technological Advances: When the expatriates are abroad numerous technological advancements keep happening in the head quarter which might make the knowledge & skills of expatriates obsolete. Thus the repatriates can’t perform as per the MNE’s desired standard (Rugman & Collinson,2006).

7. Conflicts: Con¬‚ict arises in MNE’s because of the existence of incongruent rules and orders, misunderstandings, ineffective working procedures or lack of resources. Therefore, repatriation is expected to reduce the harmony in MNE (Black et al.,1999).

8. Role clarity & Role discretion: Role discretion means the freedom to adjust the work role to fit the individual (repatriate), making it easy for him to utilize the past international experience & familiar behavior. For most of the North American MNE’s, role clarity & role discretion remains a major repatriation issue as they do not provide role clarity & discretion to returning expatriates (Dowling, Welch & Schuler,1999).

9. Social Factors: As per Linehan and Scullion (2002), individuals experience personal changes in attitudes and behavior and this can alter their previous social lives & friendships, this will affect their mood & motivation towards work.

10. Effect on Partner’s career: If the repatriate’s partner had never worked before in the home country but got some job when he/she was abroad with his partner on international assignment, it becomes really difficult to start the career from the scratch once again when the partner returns back to the home country(Dowling, Welch & Schuler,1999).

Essential Features of a Western Expatriate Training Programme:

Because of globalisation, there is an increasing challenge to send western expatriates on international assignments to complete critical tasks (Gregersen & Black 1996, Brewster 1998, Downes & Thomas 1999). MNE’s use expatriates for corporate control and expertise reasons in major global markets & also to facilitate entry into new markets or to develop international management competencies (Bird & Dunbar 1991, Boyacigiller 1991, Rosenzweig 1994, Shaffer, Harrison & Gilley 1999, Forster 2000 cited in Chew,2004)

A western expatriate going to another continent finds it really difficult to adjust because of several reasons like climate, culture, eating habits of people from other continents & so on.

Hence, it is very essential that the expatriate gets proper training before he leaves on the assignment. The different types of training programs required by a Western expatriate can be broadly classified as:

1. Technical Training:

The technology used by western countries is not same as that used in other continents so the expatriate should be made familiar with the technologies used by that foreign organization to which he is going. Technical needs is changing the way organizations educate and train their expatriates. MNE’s must provide the expatriate’s real-time access to data, and share it efficiently across the enterprise. Technical training can help the expatriate in knowing internal policies across geography, providing up-to-date country information and providing safety briefs. In addition, computer-based technical training (CBT) lets employees learn effectively and at their own pace. Services such as Craighead Global Knowledge can provide worldwide access to important data–via desktop, laptop or even hand-held PC. This data might range from safety concerns for business travellers to detailed tips on business culture and customs(Greengard,1999).

2. Management Training:

The western expatriate holds a particular designation so it is very important that he is made aware of the administrative responsibilities for the post. He should be told about policies regarding ethical issues, the company’s organizational structure, strategies & opportunities for change, organizational climate, informal structure etc. He should also be trained on conflict management. The western expatriate should be trained on the business environment of the host country, a description of local & international markets should be given along with information about competitors, distributors, tariff & other barriers. He should be well trained in marketing issues & strategies, pricing strategies, advertising & promotional strategies that work in other continents. The expatriate needs to have knowledge about human resource issues, labor relations & policies, salary & reward structures & other policies followed in the host country(Mead,1994).

3. Cross-cultural training:

Such training aims at achieving three major outcomes (Black & Mendenhall,1990 cited in Mead,1994) for western expatriates:

a) It teaches them about the other culture, values & practices within that culture. It also helps the expatriate & his spouse in learning about different situations that they might encounter.

b) It also helps them to develop non-evaluative attitudes towards other culture, teaches them how to express cultural values in their behavior & to predict when culture will be a factor in determining behavior.

c) Cross-cultural training teaches western expatriates how culture affects attitude towards work; motivation, organizational climate, degree of personal involvement etc. It teaches them how culture influences relations between organizations & how it influences formal interactions(Mead,1994).

As per Treven (2003) the most important part of western expatriate training is cross-cultural training. It helps to prepare expatriate managers to live, work & survive in a different cultural environment. It is important as dealing with new culture & surroundings appears to be even more difficult than the assignment itself. Treven (2003) also underlines that it is important to train managers & their families – both before leaving for the other country and during the assignments. Tsang (1994) identified six types of cross-cultural trainings, which are used by the US, European and other western countries, they were:

(1) Environmental briefings in order to provide information about climate,

geography, housing, schools & surroundings.(2) Orientation on culture in order to familiarize him with cultural institutions and value systems of the host country. (3)Cultural assimilators using approaches that aim at exposing members of one culture to ideas, approaches, role perception and habits of the other culture.(4) Sensitivity training to increase the western expatriate’s attitudinal flexibility. (5) Field experience, which sends the person to the country of assignment in order to help him deal with emotional stress of living and working with people who differ culturally. (6) Language training

Cultural training programs can be very helpful for western expatriates and their families, particularly if they are being sent to a country where women are excluded culturally from doing a variety of things during the day. For example, in Saudi Arabia women have many restrictions about dress and proper behaviours(Jun, et al., 2001).

4. Language training:

Treven (2003) states that the language training for the expatriate family provides them the recognition of a new culture, including elements such as history, economy, politics, religion, social atmosphere and business practices. Without language training survival becomes difficult (Karcz, Liu & Adamska,2006). Language training is recommended for use in developing skills that help in interpersonal communication and the day-to-day dealings that the western expatriate’s family will face in the host country. In a study of 12-country including 3,000 executives, respondents from a huge number of countries viewed foreign language training important for a MNE’s competitive advantage (Tung, 1998).

5. Preliminary visits & family considerations:

It is one of the most important technique that helps to introduce the expatriate to the business context in the host country & also helps in pre departure preparation and initial adjustment. As per Price waterhouse survey in 1997-1998, 53 percent of the MNE’s always provide preliminary visits to its expatriates (Dowling, Welch & Schuler,1999). Family members must be involved in relocation decisions and preparation (Hogan and Goodson, 1990). Stress and culture shock can effect the family and if not addressed in time can become a negative force in an overseas assignment. Black and Stephens (1989) found spouse adjustment in the host-country was directly correlated with the expatriates’ intentions to complete the assignment. Researchers including Gregersen and Black (1990) stress the importance of developing the intercultural skills of both expatriates and their families (Stephan, Helms & Haynes,1995). Many MNE’s for example, Federal Express sends future expatriates and their families on such preliminary trips, which also serve as “realistic job previews.” Gillette is a leader in sending its employees on familiarization trips for international assignments (Lubin, 1996).

CRITICAL REVIEW

As per research done by Gregerson & Black(1996) there were significant differences in the motivation & expectations of the expatriate & those of the MNE. The expatriates accepted international assignments for career progression, compensation & adventure however the MNE sought it as a means of expanding business in global markets. Most of the MNE’s were ex