The impact of Cross Cultural Management

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Hofstede's model is well known as a significant standard to distinguish different cultures in the field of business. With the rise in globalization of businesses, many people are working with, or managing, individuals and groups from cultures other than their own. Due to many criticisms of Hofstede's cultural model, this paper has analysed, to an extent, the effectiveness of Hofstede's model in the current business scenario. The paper has critically evaluated the model's five dimensions on the basis of two main aspects i.e. the biasness and the validity with respect to time. Firstly, this paper analyses the impact of subcultures within a national territory and how Hofstede's model ignores that aspect. The report has explained, with the help of examples, how within a country there are different subcultures which impacts people's personality and behavior. The model can be said outdated since some countries are no more in existence and there are some countries that did not exist at the time of the survey. The number of respondents that were surveyed by Hofstede is also an issue as it wasn't in any particular pattern or balance. Moreover, Hofstede used a single company as a base of his survey for the cultures of the world. The report has put forward criticisms on Hofstede's model and has concluded that his model still might be useful to managers on a very basic level, depending on the purpose of usage, but it may not be of any use at all in the near future. Considering these problems, suggestions have been made on how culture could have been analyzed by Hofstede or how it can be studied for the future.

Table of content

Executive Summary

Table of contents

Table of figures

1 Introduction 1

2 Hofstede´s Methodology 2

3 Critical Analysis of Hofstede´s Model 3

3.1 National Culture vs. Sub-culture 3

3.2 Geographical Location 4

3.3 Language and Number of Respondents 6

3.4 Single Entity 7

3.5 Cultural Evolution 8

3.6 Validity of the Surveys 9

4 Conclusion 9

5 Recommendations 11

Appendix 12

Bibliography 16

Table of figures

Table 1: Comparison between Australia and Indonesia in Hofstede´s model 4

Table 2: Working days lost in industrial disputes per 1000 employees 8

Relevance of Hofstede's Model in the Current Scenario

In the beginning of our assignment, we want the reader to understand implications of cultures along with Hofstede's points and methodology. Following this, we will evaluate critically the arguments made by Hofstede and his research methodology. Finally, we will state our conclusion and some recommendations about future cultural research.

"Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often disaster." (Hofstede, no date; cited in Itim, 2009, a).

1. Introduction

There is no universal definition of culture. According to Hornby (2009), cultures are "customs and beliefs, art, way of life and social organization of a particular country and group". From the statement, we understand that there are several things that affect cultures. Culture plays an important role in understanding people traits. People from different regions have different ways of living; this includes business. Therefore, it is important to understand the traits of people from different cultures in order to make business more effective and efficient.

A Dutch researcher, Geert Hofstede initially came up with a cultural model in which he continued to develop (Mead and Andrews, 2010). This model was attained by distributing questionnaires to IBM employees in 66 different countries. The survey was conducted in 1967 and 1973; and he came up with four main dimensions (McSweeney, 2002, a).

Power Distance

It is the extent to which people can accept and expect the unequal distribution of power.

Uncertainty Avoidance

It is to measure how people from different countries can endure ambiguity and contingency.

Individualism vs. Collectivism

It is the degree whether people in a particular country are more likely to be associated with a group or more individualists.

Masculinity vs. Femininity

It is the classification of people residing in particular country as to whether they are more focused on success or on harmony and peace.

But then later on Hofstede came up with a final dimension:

Long term orientation vs. Short term orientation

Not as commonly used as the earlier dimensions, it considers temporal orientation towards life (Mead and Andrew, 2010).

This assignment will now critically evaluate whether "Hofstede's model is dated and biased and to what extent it is of use to the contemporary business executives".

2. Hofstede's Methodology

Hofstede's cultural model is widely used for cross cultural research by international companies and corporations (Jones, 2007). As mentioned above, Hofstede distributed 117,000 questionnaires to IBM employees from 66 different countries. Initially, the questionnaires were made in English but then due to translation problems, the questionnaires were subsequently translated into local languages. Hofstede involved only one company - IBM- which he called 'HERMES´ as IBM was not comfortable with its identity being made public. The research was done on employees solely from sales and marketing departments of IBM. The reason why Hofstede chose IBM as the single company was because of homogeneous corporate and occupational culture (McSweeney, 2002, a). According to Hofstede IBM has a strong corporate culture and the purpose of his survey was to analyse the traits, characteristics, and behaviors of people from different countries (Hofstede, 2001). He basically relates a selection of societal characteristics (for example, GNP, economic growth, latitude of the capital city, population size) to each of the four indices. His main method of use was the stepwise regression. Finally he uses his ecological findings to predict individual behavior (Robinson, 1983).

3. Critical Analysis of Hofstede's Model

Many researchers have argued on Hofstede's methodology and findings. In the following paragraphs some examples of criticisms will be evaluated.

3.1 National Culture vs. Sub-culture

Hofstede argues that every national population shares common culture despite of acknowledging that it is not the only culture or totality of cultures. Culture is territorially unique (McSweeney, 2002, a). For example: India and China are very vast countries which have many subcultures depending on the geographical locations. Hofstede has taken these countries as a single entity, which means that every Indian and Chinese, regardless of which part of the country they come from, have similar cultures, which is not correct. He also considers Great Britain as a single entity, whilst it is actually comprised of different nations. Does this mean that people from England, Scotland, Wales, and Northern Ireland have single national culture? Studies have shown that compared to these three countries, Wales has the most diverse population in terms of individuals born outside the country. (Drinkwater and Blackaby, 2004). This influences individuals' personal traits. From these points, we can state that Hofstede is biased, as he considered the country as a single entity regardless of different regions within the country.

To strengthen the above argument, O'Leary and Levinson (1991, as cited in Baskerville, 2003) stated that culture cannot be equated with nations. For instance in Africa 98 different cultures exist in 48 countries, whereas Western Europe has 81 identified cultures in 32 countries. In North America, 147 native cultures are recognized. Wildavsky (1989, as cited in Baskerville, 2003) also mentioned that cultures are not countries and there are many different cultures within the same country.

3.2 Geographical Location

As a result of globalization and advancement in technology, Hofstede's model is dated. Nowadays, people have become more mobile. Hofstede model fails to identify those people; for example: people who were born in Indonesia but spent most of their lives in Australia. This can be disastrous for international managers as people from Indonesia and Australia have different cultures and behaviors. According to the model, Australians are very individualist, masculine and have low power distance whereas Indonesians are very collectivist, feminine and have high power distance (refer table 1) (Brewster et. al., 2007). Reliance solely on Hofstede's model may misguide international managers in working with personnel of such mobile backgrounds.

Table 1: Comparison between Australia and Indonesia in Hofstede´s model

(as cited in Jones, 2007)

Another example is Hitler who was born in Austria and moved to Germany as an adult. According to Hofstede, Austria has very low power distance and high on uncertainty avoidance (Brewster et. al., 2007). However, Hitler was very dominant person by nature and he believed in the idea of dictatorship (McSweeney, 2002, a). Hitler's personality was contrary to the Austrian culture.

Another case where Hofstede has ignored this aspect is that people in Hong Kong and the majority of people in Singapore are Chinese, but Hofstede explains their power distances using different explanations. The higher power distance values for Hong Kong and Singapore are because of the fact that they were a part of the British colony. The British did not practice equality values between themselves and the colonised population (Yeh, 1988).

The model is out-dated because it still has Yugoslavia, whereas in present world the country does not exist anymore. The country has been divided into Serbia, Montenegro, Bosnia, Slovenia, Kosovo, Croatia and Macedonia. Also, the survey was conducted when Germany was still split up into two different countries (Cahill, 2007).

Lithuania, Latvia and Estonia have been ignored in Hofstede's cultural research and are still treated as a forecourt of Russia. Many publications consider them as a common block, not only because of their geographical proximity and location but also because they were all a part of Russia when the research was held. A very small number of scholars focus on cultural differences among former Soviet-Union states and/or CIS (Commonwealth of Independent States) countries (Vadi and Meri, 2005 as cited in Huettinger, 2008). Latvia looks westwards to Sweden and Germany, to continue its traditional ties (Manning and Poljeva, 1999 as cited in Huettinger, 2008). Hofstede has noted that the national culture of a particular country is the dominant mental program, which is predominant (Romm and Hsu, 2003 as cited in Huettinger, 2008). Several studies have proven that nations are significant cultural institutions on their own (Smith and Peterson, 2005 as cited in Huettinger, 2008). Hofstede also defines culture as, "the collective programming of the mind which distinguishes one group or category of people from another" (Hofstede and Hofstede, 2005 as cited in Huettinger, 2008). We can clearly see that Hofstede's model is dated regarding this aspect, and perhaps even biased, as he considers them as one culture whereas he might not have had anyone from Lithuania, Latvia and Estonia in his studies.

The Chinese are very proud and loyal people. Their loyalties lie with their families and less so to non-family organizations. The Japanese, however, do not have any problems with shifting their loyalties from their family to their work place. Thus, even though both Chinese and Japanese have low individualism, the systems are very different. From a societal or the firms' perspective, the Chinese are very individualistic. Which are in contrast to Hofstede's findings for Taiwan, Hong Kong and Singapore, where the majority of people living are also originally Chinese (Chen and Chieu, 1984 as cited in Yeh, 1988). Furthermore, even the meaning of the word "household" is quite different between Japan and China. Chinese people face problems when they have to show their loyalties to the company and their family at the same time, whereas this conflict does not exist in Japan. Hofstede's argument is that Mao Zedong's anti-individualistic or pro-collectivistic ethos is evidence of the deeply rooted Chinese tradition. This on the contrary was one of the reasons why Mao´s Cultural Revolution failed. The tradition of the family coming first is deeply rooted in the Chinese society (Yeh, 1988), where Hofstede's studies have not considered the Chinese majority countries having any ties with china.

3.3 Language and Number of Respondents

Initially, there were problems in understanding the questionnaires as it was written in English. However, later the questionnaires were translated into the relevant local languages and redistributed, again to the same employees of the 'HERMES company to conduct the survey again. Differences in translation of language can be minimized but not completely eliminated, as some words cannot have the exact same meanings in the local language. For example: the word "achievement" is difficult to be translated, and was therefore avoided (Hofstede, 2001). He used 362 managers with different backgrounds from 30 different countries to respond to the questionnaires. Whilst the managers received and answered the questionnaires in their own native languages so as to avoid mistranslation in interpreting the data. The result was similar to the result of questionnaires written in English (Hofstede, 2001, 2002). However, the number of respondents representing a country is small. .

The use of questionnaires had also been doubted. Hofstede used 117,000 questionnaires for 66 countries. A large number of respondents itself does not guarantee the validity of the result, as the average number of respondents he obtained per country is not statistically significant so as to be reflective of a whole country. Out of 66 countries only six countries have respondents more than 1000; others were less than 200. This numbers are too small to represent a country (McSweeney, 2002, a).

According to McSweeney (2002, a), the survey covered 66 countries but Hofstede only used data obtained from 40 countries. But if we look at Hofstede's model, he has used 53 countries in the table (Brewster et. al., 2007). Therefore, should the data for the 13 countries mentioned in the model be questioned?

3.4 Single Entity

The survey was conducted on a single company, IBM; and the data which he used for his analysis was based on responses from marketing plus sales executives. Hofstede argued that it was deliberate. Hofstede believes that by this, he will get data from people who has homogeneous corporate and occupational culture; therefore, the difference he gets was due to national culture. Based on Hofstede's argument, we can say that every German machinist has the same occupational culture with every Greek machinist; which might not be true. Hofstede also has ignored dissenting, multiple, and emergent cultures in organization which are plausible to occur due to local circumstances. The survey should have involved people with different backgrounds and different companies; as IBM only deals with the service industry. For example: tennis clubs, political parties, students, manufacturing companies should be considered. This is also pointed out by Tan and Chee (2005) as people are exposed to different heritages, customs, religions and traditions which are deeply embedded within them (as cited in Huettinger, 2008). Hofstede did not differentiate these diverse groups.

3.5 Cultural Evolution

Ten years after his first publication, Hofstede agreed that there are 'considerable differences' in culture among different units within the same organization (as cited in McSweeney, 2002, a). This means that over the years, cultures evolve and there are differences in occupational culture within a company and its subsidiaries. Thus, Hofstede's research was biased, as only those from the marketing and sales department were surveyed.

Table 2: Working days lost in industrial disputes per 1000 employees (annual averages)

(McSweeney, 2002, b)

The table shows that masculine countries have become more feminine and vice versa. The world is now converging due to globalization; individualism and collectivism orientation can co-exist in every individual depending on the situation. The situations will influence the orientation, for example: importance of the matter, urgency, etc. (Browaeys and Price, 2008). We can say that Hofstede model is outdated, as cultures do change over the years.

Hofstede's model uses a quantitative method which, among other things, is characterized by its carefully selected sample consisting of a group of well-educated white middle class men working for the same company and sharing identical or similar occupations. The problem with this sample as a norm for national culture is that it misleads one to believe that Hofstede perceives of culture as equally-distributed among men and women. However, as has dedicated one of his five dimensions to gender and constructed his model on a bipolar distinction between masculinity and femininity, this is clearly not the case. On the contrary, his masculinity/femininity dimension (MAS) shows that he has a very clear and distinct understanding of the differences between masculinity and femininity, which he takes advantage of for his construction of national cultures. Hofstede argues that men, as a general rule, will be more achievement-oriented and women more care-oriented. Hofstede's assumption raises several questions; for example, for what reason(s) were women excluded from his survey and his construction of culture (Moulettes, 2007)?

3.6 Validity of the Surveys

The validity of the surveys can be questioned. Hofstede used questionnaires as his methods of survey and sent them to different countries. Hofstede cannot guarantee that the person who filled the questionnaires is actually his target respondents. For example, the target respondents might be busy or reluctant to fill the questionnaires and may instead delegate the task to their subordinates. Questionnaires were also mainly about the workplace and therefore, cannot be related to define a national culture (McSweeney, 2002, a).

There are many factors that may have affected the respondents and the way they complete the questionnaires which have not been taken into consideration. Also, that the respondents had not been told about the purpose of the questionnaire and hence they might not have been able to fill the questionnaire with the seriousness or the attitude required or expected and assumed by Hofstede.

4. Conclusion

This paper has provided a critical evaluation of Geerts Hofstede's ground-breaking work on cross-cultural differences. In the field of international business, cross-cultural conflict can result in includes international business activities, business management failure and stalled business negotiations. Understanding diverse cultural values is an essential success factors in international business activities. Cultural values and differences are a pivotal issue in international business for all stakeholders. Influenced by politics, society economics and technology, cultural values are constantly evolving, and therefore it is logical that cultural theories should be updated and re-evaluated over time.

Now to conclude and come up with an answer to "Hofstede´s model is dated and biased and, as such, is of no use to the contemporary international business executive. How far do you agree?" We cannot say that Hofstede's model is completely ineffective as we cannot quantify the matter. Nevertheless, he should be appreciated for his contribution work in this field. Hofstede´s model might be valid in past decades when the world was less globalized.

International business executives may use the model to investigate cultural differences and how different cultures impact on international business. Hofstede's research results represent a reasonable starting point, however it is outdated and biased for the current international business scenario.

As such, we should utilize the model with caution, since these results are not very accurate. International managers should not fully depend on the model for the simple reason that Hofstede uses a mere generalization, and huge multinationals cannot go into a market just on the basis of a simplification. He also claimed that his research on IBM´s employees can be used as a benchmark for all kinds of people around the world, without considering other companies, societal clubs, etc.. Moreover, he thinks that his proposal is still up to date due to the fact that he did not work on it if even countries later separated.

The world today is now converging to have a global culture. In the near future, Hofstede's model may be of no use at all. In conclusion, Hofstede´s cultural model is dated and biased.

5. Recommendations

Study of culture should not be based on national territory but it should be on regions. As we discussed there are many sub-cultures within a national culture. As the world is globalizing rapidly, it is essential to have a cultural model that is constantly updated to reflect these changes caused by globalization. The survey should also involve people from diverse range of social and employment classes so as to be more representative of a culture. China, an emerging economic super power, has not been considered by Hofstede´s five dimensions. Therefore we would recommend that the Chinese market needs to be considered in future research more thoroughly.

Appendix 1

Hofstede´s: Individualism vs. Collectivism

(as cited in Brewster et. al., 2007)

Appendix 2

Hofstede´s: Power Distance

(as cited in Brewster et. al., 2007)

Appendix 3

Hofstede´s: Uncertainty Avoidance

(as cited in Brewster et. al., 2007)

Appendix 4

Hofstede´s: Masculinity vs. Femininity

(as cited in Brewster et. al., 2007)

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