Thursday, July 2, 2015

For Corporations, Is It a Small (Global) World, After All?

In one of my overseas assignments some time ago, the global company I was working for had just hired Steve to run its IT center in Hong Kong.  Steve was a Singaporean who had worked at IBM for over twenty years, and had deep functional expertise and experience.  What struck me most about him when I met him, however, was his attire:  a pinstriped suit, white button-down shirt, rep tie and wing tip shoes.  Even though he had left IBM the month before, he (and others like him from IBM in those days) could not quite shed the IBM “uniform” he had worn for so long. 
Most of us are aware of the various practices that organizations implement to try to instill a common corporate culture.  Many Japanese companies with overseas subsidiaries used to require employees to wear uniforms and participate in morning calisthenics.  Wal-Mart had employees in many overseas locations gather around every morning for the Wal-Mart cheer.
These corporate artifacts and behaviors are at the tip of the iceberg that is above the water.  Corporate culture, like national culture, has visible and invisible aspects.  Edgar Schein refers to three levels of culture:  artifacts, values and basic assumptions.  At the tip of the iceberg are rituals and organizational practices, while underneath the water are those less visible attitudes, values and assumptions.
Most organizations, especially those that have a presence in many countries, are constantly looking to create the “glue” that will bind employees’ hearts and minds together.  And many of them focus on such practices.  Talk to managers in some of these multinational companies, and you will refer to the Ford Way, or the Unilever Way, or the Toyota Way.  Do these work?  Every corporation, like every individual, is to some extent a product of its national culture.  It makes assumptions especially around management practices that are in part based on values and beliefs of the national culture of its founders and executives.
Can a global corporation today create a culture that somehow transcends or trumps national culture?   Yes, but only if it focuses on what’s underneath the iceberg – on those values and traits that cut across cultures.

One of the most intriguing pieces of work in this area is by Professor Dan Denison and his colleagues.  Through their research, they have identified four organizational cultural values, or traits (as they put it), that are strongly related to organizational performance.  These are:
·      Involvement – empowering employees, building teams, and developing human capability at all levels to build a sense of commitment and belief that their work is connected to the goals of the organization.
·      Consistency – having leaders who “walk the talk” by role modeling core values, and a set of processes that are aligned with these values.
·      Adaptability – an organization that listens to its customers, takes risks, learns from its mistakes, and is constantly improving.
·      Mission – having a clear sense of purpose and direction, along with a vision of how the organization will look in the future.
Using data from this organizational cultural model that they have collected from 200 organizations in Europe, North America and Asia, along with other data from 218 organizations from seven countries (including Canada, Australia, Brazil, U.S.A., Japan, Jamaica, and South Africa), Denison et al. found generally high correlations between overall performance and these cultural indices:  “The link between company cultures and effectiveness appears to be both strong and consistent.  In addition, the scores for the culture measures are essentially the same for the samples of organizations in each of these … regions.” (p. 106)
What about practices, those behaviors that are above the water of the iceberg? Shouldn’t there be a relationship between these practices and cultural values?  In an interesting study, Fischer et al. surveyed 1239 employees from various organizations in six countries (Argentina, Brazil, Malaysia, New Zealand, Turkey and the United States) to analyze the impact of cultural dimensions on perceptions of organizational practices.  They focused on 71 practices, factor analyzed the data, and identified three factors:  employee orientation, formalization, and innovation.  Sample items for employee orientation included:
·      Managers give employees freedom to express their ideas
·      Employees have a say in matters that directly involve them
·      Managers encourage employees to speak up when they disagree with a decision.
Sample items from the formalization factor include:
·      Everything in the organization is done according to a previously defined procedure
·      What employees have to do is strongly determined by formal procedures
·      Control and centralization are important.
Finally, sample items for innovation include:
·      People are always searching for new ways of approaching problems
·      There is a lot of investment in new products in this organization
·      This organization frequently searches for new markets for existing products.
What they found were significant effects of cultural differences (e.g., individualism) on the degree of implementation of these organizational practices.  In general, cultural effects for their sample were significantly and consistently larger than any industry effects. 
There are two take-aways from these studies that I’d like to emphasize.  Number one, organizational cultural values at the abstract or “principle” level can generalize across cultures – which is good news for global organizations that are looking for this glue.  Specifically, taking Denison’s model into account, organizations that are attempting to create a culture of empowerment, consistency of word and deed among their leaders and with their processes, continuous improvement and risk-taking, and clarity of vision will find that these principles can resonate with their employees in different countries.  Not only that, but perhaps even more importantly, having these values in place seems to help companies gain competitive advantage.
Number two, organizations should be careful not to assume that these cultural values will translate into the same behaviors and practices in different countries. To build a universal corporate culture, organizations need to focus on corporate values such as the ones identified by Denison rather than specific practices that may be need to be adapted from culture to culture.  For example, “involvement” for companies based in North America might mean giving employees more freedom to make decisions.  For companies based in Asia, it might mean giving employees information about the company’s plans which will make them feel more included and part of the company – an important consideration especially in collectivist cultures.  “Adaptability” for companies based in North America might mean allowing individual employees to make mistakes and encouraging them to take risks.  For companies based in Asia, this might mean asking groups to find ways to continuously improve their processes.  
            Denison and his colleagues put it this way:  “ … a concept like empowerment is important around the world, but we would not argue that this means the same behaviors would necessarily constitute empowerment in a different national context … (this cultural) model probably says much more about the presence of a desirable set of traits than it does about how those traits are expressed.”

Denison, D., Haaland, S., & Goelzer, P.  (2004).  Is Asia different from the rest of the world?  Organizational Dynamics, 33 (1), pp. 98-109.

Fischer, R., Ferreira, M., Assmar, E., Baris, G., Berberoglu, G., Dalyan, F., Wong, C., Hassan, A., Hanke, K., & Boer, D.  (2014).  Organizational practices across cultures:  An exploration in six cultural contexts.  International Journal of Cross Cultural Management, 14 (1), 105-125.

Schein, E.  (2010).  Organizational culture and leadership (fourth edition).  San Francisco:  Jossey-Bass.