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Cross Culture Management Case Study

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Updated: Dec 6th, 2019

Introduction

Culture refers to the system of “shared attitudes, values, goals and practices that characterizes an institution, organization or a group”. Culture varies from region to region, since people tend to hold different beliefs, values and attitudes across the globe. Thus, cross cultural management refers to the process through which people learn about “variations of culture, practices, and preferences of an organization’s stakeholders”.

The increase in globalization and advancement in technology in the last two decades have created growth opportunities for multinational corporations. As competition increase in domestic markets, multinational firms normally join overseas markets in order to increase their sales and market shares. Firms that operate in foreign markets (countries), usually serve customers with diverse cultural backgrounds.

Additionally, multinational firms usually employ individuals with diverse cultural backgrounds. Managing employees from diverse cultures is a challenge since people tend to think, feel and act differently in different cultures.

Besides, effective communication is normally difficult to achieve in an organization with a multicultural workforce. Thus, cross-cultural management attempts to facilitate the creation of an organizational culture that every employee can identify with. The concept of cross cultural management will be discussed in this paper by analyzing the Home Furniture case study.

Cross Cultural Management Policy

Home furniture is a multinational corporation operating in Europe, Asia, India and America. The company has adopted a polycentric approach to recruit its employees. A polycentric approach involves recruiting nationals of a foreign country to manage most of the operations of a subsidiary of a multinational corporation. Under this approach, the subsidiary tends to be autonomous and develops its own policies.

At Home Furniture, nationals of foreign countries normally hold midlevel management positions. An expatriate usually heads a subsidiary of the firm in the early years. The polycentric approach is beneficial to Home Furniture since it facilitates implementation of the firm’s sales and marketing policies. Since Home Furniture’s subsidiaries develop their own marketing policies, the company finds it important to recruit locals who have adequate market knowledge.

However, the use of a polycentric approach has also created problems for the company. In particular, there are cultural conflicts between the subsidiaries and the headquarters. For instance, the headquarters and the US subsidiary have different views on teamwork. Solving such cultural conflicts call for the formulation of policies that promote harmony between the subsidiaries and the headquarters.

Additionally, cultural conflicts can not be solved through a single policy. Thus, a multi-dimensional approach should be adopted to enhance harmony in a multinational corporation. The new CEO of Home Furniture can consider the following policies as she operates and recruit staff in different countries.

Given the autonomous nature of Home furniture’s subsidiaries, the new CEO should consistently follow the polycentric approach in hiring staff. Staff selection is fundamental when forming a multicultural workforce. The human resources department must focus on selecting the right individuals to hold key positions with the company.

Thus, it will be important to identify the desired characteristics of the workforce. For example, the firm can focus on hiring managers who can tolerate cultural differences. The identified characteristics should be used to screen all potential employees during the selection process.

Performance evaluation should, generally, be guided by the company’s overall human resource strategy. However, the actual performance evaluation process should be based on local procedures. The managers and the local staff should agree on acceptable targets and the procedure for evaluating performance. Empirical studies reveal that comparability and costs are the main determinants of remuneration and benefits in multinational corporations.

The salaries paid to the employees should be comparable, both within the firm and in the industry. Additionally, the salaries should not strain the company’s revenues. A remuneration and benefits policy that reflects the expectations of the local employees is likely to be accepted. In contrary, a remuneration policy that is based on the expectations of the headquarters is likely to be rejected since it might contravene the local labor laws, and the expectations of labor unions.

In order to promote harmony between the headquarters and the subsidiaries, the new CEO should adopt an open culture policy. An open culture policy encourages employees to accept and appreciate their cultural differences. Formulating an open culture policy requires learning about the cultures of employees in various subsidiaries. This will help the CEO and the management to identify the cultural practices that are valued by local employees.

Consequently, it will be possible to adapt the organization’s strategy to the local culture. For instance, staff and unions in the US subsidiary believed in negotiating organizational matters instead of a top-down approach to decision making. In such situations, the CEO should recognize the importance of negotiations to US employees in order to avoid conflicts.

An effective communication system within the organization is fundamental for the implementation of an open culture policy. The norms of communication should be established in advance to guide interaction among employees. According to Hofstede’s culture dimensions, individualism determines the extent to which employees can interact and share information about their cultures. Countries with high individualism scores are associated with little cohesion and interpersonal connection.

Countries with a low individualism scores, on the other hand, are associated with strong group cohesion, respect for others and loyalty to the team. In order to promote cohesion among employees in countries with high individualism scores, the New CEO should encourage the management to acknowledge accomplishments of local staff. Additionally, “debate and expression of personal opinions” should be encouraged in order to promote understanding among the employees.

Since perfect harmony can not be achieved in a multicultural organization such as Home Furniture, the new CEO should adopt a conflict resolution policy to help in solving any conflicts that might arise between the local staff and the headquarters. The conflict resolution policy should address the following issues. First, there should be consensus on how various conflicts should be handled. Second, it must identify the parties to be involved in the resolution process.

For instance, in China and Tunisia non-governmental organizations are actively involved in employees’ issues such work conditions and remuneration. In such countries, employees are likely to accept a conflict resolution team that includes members of organizations that fight for their rights. Third, the local employees and the management at the headquarters should agree on the communication channel to be used when resolving a conflict. The selected communication method should reflect the employees’ cultural make-up.

Empirical studies revel that cross-cultural competency can be enhanced through effective employee training and development. Such training programs help in creating organizational cultures that take into account the cultural make-up of the local staff and the perspectives or expectations of the headquarters. A widely accepted organizational culture facilitates consistent implementation of strategy across all subsidiaries.

Thus, an effective policy should be put in place to guide cross-cultural training programs at Home Furniture. The cross-cultural training policy should address the following issues. First, the policy should encourage the managers to value the cross-cultural training programs.

The top managers at the headquarters should understand that training foreign employees on the parent country’s (Finland) business culture is an important strategy. Thus, accountability and ownership should be promoted in order to effectively implement the training strategy. Second, cross-cultural training should be a team effort that involves all stakeholders.

Outside experts, employees’ leaders, managers from subsidiaries and managers from the headquarters should be involved in developing the training model. Team effort will not only improve the quality of the training, but will also improve its acceptance. Third, cross-cultural training should be bilateral.

This means that the employees in overseas subsidiaries should be trained on the business culture of the parent country. The employees from the parent country, on the other hand, should be trained on the business culture in foreign countries where the subsidiaries are located.

Fourth, cross-cultural training should be incorporated in the process of employee orientation. New recruits at the headquarters should be trained on the business cultures in overseas subsidiaries. New employees in the subsidiaries should also learn about the business culture in Finland where Home Furniture’s headquarters is located.

Finally, cross-cultural training programs should be reinforced with mentoring initiatives in order to ensure success. Mangers from both Finland (headquarters) and the foreign countries where the subsidiaries are located should be involved in the mentoring program. Mentoring programs promote high performance through commitment to the organization’s expectations and culture. Thus, it will encourage teamwork and tolerance to cultural differences among employees.

Communication Strategy

Cross cultural communication is concerned with how individuals from different cultures communicate among themselves and in other cultures. From a business perspective, cross culture communication “refers to interpersonal communication and interaction across different cultures”. Cross culture communication attempts to overcome cultural differences that prevent interaction in a multicultural workforce.

Competency in cross cultural communication can be achieved through training, culture immersion and learning new languages. As a multinational corporation, Home Furniture should have an effective communication strategy to enhance interaction among the employees and to facilitate implementation of its business strategies. In developing a communication strategy for Home Furniture, the new CEO can consider the following guidelines.

To begin with, developing a communication strategy starts with the formulation of the organization’s communication objectives. In this case, the objectives describe what the organization intends to achieve through its communication strategy. For instance, Home Furniture’s communication objectives could be to achieve cultural tolerance or to improve performance. The communication strategy should be driven by the needs of the organization rather than the employees’ need to communicate with each other.

This means that the communication activities at Home Furniture should be a means of achieving strategic goals and objectives. This calls for aligning the communication objectives with those of the organization. Such alignments form the basis for justifying the need for a communication strategy and facilitate the success of the business.

Once the communication objectives are set, the audience must be identified. In this context, the audience refers to the employees that the new CEO and other managers need to communicate with in order to achieve the objectives of Home Furniture. Identifying the correct audience helps in answering the question, ‘who should be consulted with what decisions’? Integration and cooperation in a multicultural workforce requires effective reporting relationships.

Such relationships facilitate contribution of every employee towards achievement of the organization’s goals. In order to establish reporting relationships, decision rights should be identified and explained to every employee. Decision rights specify the authorities entrusted with the task of making decisions. The decision rights and reporting relationships should reflect the cultures of the local employees.

According to Hofstede’s power/distance culture dimension, some cultures tolerate inequality while others do not. A country with a high power/ distance score is likely to have citizens who tolerate uneven distribution of power. However, citizens in countries with low power/distance scores prefer equal distribution of power.

Thus, in countries with high power/distance scores, decisions can be unilaterally made by the management since consultations are not valued. In this case, the management will be the audience. In countries with low power/distance scores, the management must consult as many employees as possible before making a decision. In this case, the audience may include the management and junior employees.

The communication strategy should help the CEO to identify the messages to send to various managers and other employees. Strategic targeting, as well as, consistency should be emphasized when creating and conveying messages within the organization.

The message should be comprehensive, informative and sent to the right individuals within the organization. Hofstede developed the uncertainty avoidance index (UAI) to measure the level of anxiety under uncertain situations in different cultures. In the context of a multicultural organization like Home Furniture, uncertainty can arise if messages are not clear to the recipients.

According to Hofstede, a high UAI score means that members of the society will try as much as possible to avoid ambiguous situations. Law, order and a collective truth tend to prevail in countries with high UAI scores. A low UAI score implies that citizens appreciate differences, and are less concerned with ambiguity. Thus, in countries with high UAI scores, messages should be planned, prepared and communicated regularly.

Additionally, the messages should be communicated to the employees in time in order to avoid anxiety. The messages should be concise and clearly specify the expectations of the management. Societies with high UAI scores tend to prefer formal business conduct and policies. Thus, all messages should be based on existing policies. Additionally, a formal structure will be necessary to convey messages in a country with high UAI scores.

Societies with low UAI scores tend to prefer informal business attitudes. Risks and change are also accepted in such societies. Thus, creating and sending messages within the organization should not be based on strict rules and structures. Given the differences in uncertainty avoidance levels, the process of creating and sharing messages should be aligned to the business cultures of the subsidiaries.

Appropriate tools and activities for communicating the organization’s messages should be identified. Home Furniture’s new CEO should identify the communication channels and activities that are suitable to convey important messages to the targeted audiences.

The selection of appropriate communication channels is determined by the message to be conveyed and the targeted audience. For instance, audiences from societies with a high UAI score tend to prefer formal communication channels. Audiences from societies with low UAI score, on the other hand, tend to be comfortable with informal communication channels.

Understanding and embracing cross cultural differences require elimination of cultural barriers that hinder effective communication. Thus, there should be flexibility when choosing a communication channel or the communication activities to be used to convey important messages. The importance of flexibility is based on the premise that long term commitments to traditions vary across cultures.

According to Hofstede, a high long term orientation (LTO) score means that people have long term commitments to their traditions. In such situations, focusing on the traditional communication channel will be beneficial to Home Furniture.

However, societies with low LTO scores do not value traditions. In such situations, Home Furniture can easily change the communication channels in order to meet its strategic objectives. The CEO and the managers of Home Furniture should be open-minded and able to adapt their communication channels to prevailing cultures.

Adequate resources must be allocated for the implementation of the communication strategy. Additionally, the communication strategy should be implemented within the set timelines. The idea is to avoid overspending in implementing the communication strategy.

Finally, the communication strategy should be evaluated and amended accordingly over time. Communication audits should be performed in order to measure the effectiveness of the strategy. Communication audits can be performed through surveys or interviews that involve internal, as well as, external audiences of the firm.

An independent or external party can be contracted to perform the audit in order to avoid biases in the evaluation process. The evaluation results should be discussed by the relevant stakeholders and used to improve the communication strategy.

Conclusion

Cross culture management attempts to enhance understanding and appreciation of cultural differences in organizations. Managing a multicultural workforce is usually a challenge to multinational corporations such as Home Furniture. The disagreements between the management of Home Furniture and its employees in subsidiaries across the globe are attributed to cultural conflicts.

Consequently, the New CEO at Home Furniture must develop policies that will help in reducing cultural conflicts. Appropriate employment policies will help the New CEO to select employees who tolerate cultural differences. An effective cross cultural training policy will help in creating awareness about cultures of various stakeholders at Home Furniture.

Additional, the training programs will encourage culture tolerance. The new CEO should also adopt an open culture policy in order to promote integration and cooperation among employees. Promoting harmony and achievement of the organization’s objectives requires implementation of an effective communication strategy. In order to achieve success, the objectives of the communication strategy should be aligned to those of the organization.

References

Holden, N., 2002. Cross-Cultural Management. New York: McGraw-Hill.

Johann, R., 2008. Cross-Cultural Management. New York: John Wiley and Sons.

Majur, K., 2010. Positive Organizational Culture as a New trend in Cross-Cultural Management. Journal of Positive Management 1(2), pp.65-74.

McCalman, J., 2009. Lateral Hierarchy: The Case of Cross-Cultural Management Teams. European Management Journal 14(5), pp.509-517.

Shimoni, B., 2011. The Representation of Culture in Interactions and Cross Culture Management. Journal of International Management 17(1), pp.30-41.

Thomas, D., 2008. Cross-Cultural Management. New York: Cengage Learning.

Tjosvold, D., 2003. Cross-Cultural Management. New York: Ashgate Publishing.

Usanier, J., 2011. Lenguage as a Resource to Access Cross-Cultural Equivalence in Quantitative Management Research. Journal of World Business 46(3), pp.314-319.

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