Czytaj książkę: «Managing Internationalisation»

Readers are aware of the importance of recognising and respecting cultural differences for facilitating international relations of any kind. They are able to explain and compare different frameworks for distinguishing organisational or national cultures. The awareness about their own cultural perspectives and resulting judgements is heightened and the ability to reconcile cultural dilemmas enhanced.

Knowledge about intercultural differences and their manifold effects on the building blocks of the management system is a key prerequisite for a successful internationalisation. This section explains typical pitfalls of mono-cultural thinking in a global business environment and provides different business-related frameworks for distinguishing cultures. The use of these frameworks in designing and implementing international management systems can foster an organisational climate embracing the opportunities of multicultural approaches for doing business. Figure 2-1 delivers the concept map for treatment of the key issue Cross-Cultural Competence.

Figure 2-1: Concept Map “Cross-Cultural Competence”

Culture is still one of the most iridescent concepts in science. When people first think about culture, it is usually about the obvious aspects like behaviour, traditions and customs. French people carrying baguettes, African people in colourful caftans and the formal bows in Japanese greetings – all these observations shape our perception of culture. But these observations form only the tip of the (cultural) iceberg. The famous cultural iceberg metaphor (usually attributed to Edward T. Hall from his book published 1976, although he does not use the term)¹ illustrates that the essential cultural differences lie underneath the visible spectrum, as depicted in Figure 2-2. Dissimilarities in beliefs, values and thought patterns are far more relevant for intercultural misunderstandings than different traditions that are more prominently displayed and therefore create awareness more easily.

Figure 2-2: The Cultural Iceberg

Understanding cultural-induced behaviour is a prerequisite for successful business operations in any international context. A lack of cross-cultural competence gives rise to manifold faults in information retrieval, decision making, negotiating and leading that might become disastrous for the organisation’s long-term achievements. Throughout the EFQM Excellence Model, the correct assessment of cultural beliefs and values is presumed for finding effective responses. For example, leaders can only act as role models if their ideas of how to act with integrity and how to follow high standards of ethical behaviour are in line with the respective expectations of all of their team members. As these expectations vary from culture to culture, acceptance can only be ensured by a thorough research of possible misunderstandings. In dealing with customers and stakeholders, cultural misunderstandings can be of even more dramatic consequences. A misinterpretation of customer requirements might lead to the development of non-marketable products. A violation of unspoken negotiation rules might ruin a bid for a long-term contract.

The development of intercultural sensitivity is the most effective countermeasure for this kind of intercultural conflicts. Intercultural sensitive people are able to apply skills of empathy and adaptation of behaviour to any cultural context with varying degrees of sophistication. Unfortunately, this ability does not come naturally. It is something that has to be learned and grows whenever a person is exposed to foreign cultures with an open mind. Milton Bennett describes typical stages in this very individual development process from first denial to final integration in his Developmental Model of Intercultural Sensitivity as illustrated in Figure 2-3.² People growing up in a monocultural environment accept the culture they grew up with as the only one existing. Exposure to other cultures leads first to denial of differences. When denial is no longer possible, people start experiencing their own culture as more advanced and “better” than the other, known as the defense phase. This phase is usually accompanied by the use of stereotypes in order to confirm prejudices. Both early phases of cultural development could take exaggerated forms of aggressively eliminating foreign cultures and their representatives or – on the contrary – romanticising them. After realising existing similarities between their own and the foreign culture (usually in superficial aspects like customs or food), people tend to minimise the fundamental differences, believing that there are generally recognised patterns of human behaviour that enable effortless and successful communication. With the next step, the ethnocentric stages are overcome and people enter the ethnorelative stages of intercultural development. These start with a genuine acceptance of differences in cultures and of the right to use different solutions to typical human problems. This does not include an agreement with the solutions a certain culture exhibits, which are continually scrutinised in order to accumulate more knowledge. Expanding the view of the word leads to the ability to understand other cultures and to behave appropriately in their cultural frameworks. In this adaption phase, people are able to shift their frame of reference and use empathy for the benefit of good communication. The final stage “integration” allows a person to move in and out of different worldviews at will. For these people, a specific culture is no longer a constitutive part of their definition of self.

Figure 2-3: Developmental Model of Intercultural Sensitivity³

Some people will never be able to overcome inner fears and will keep their prejudices, being stuck in the defense phase. However, for a prosperous career in the globalised economy it is imperative to reach at least the first ethnorelative stage of acceptance.

The best way to reach the higher ethnorelative stages in the personal development are intensive encounters with people from foreign cultures in agreeable and positive circumstances. This could be ensured by a high grade of open-mindedness as well as careful preparation. Knowledge about foreign cultures can be obtained through many sources like travel and culture guides, internet research and enquiries of people from the respective country or of travellers with experience in the region required. It is important to notice that these sources have to be used with a critical view on their cultural background and potential prejudices. Sometimes, a book written from an American about the French culture can be quite misleading. Therefore, the most important source of comparative intercultural information is provided by scientific research. In the next chapters, the main frameworks for distinguishing cultures in a business context will be introduced.

One of the pioneers in intercultural studies is Geert Hofstede. With the first issue of his original book “Culture’s Consequences” he revolutionized the way differences in cultures were assessed. His ground-breaking survey covered a significant number of countries and helped to create the area of comparative intercultural research and theory. Since its first publication Hofstede’s work is cited extensively in scientific articles worldwide. It influenced consultants and professionals in many areas all over the world focussing on human resource management, leadership training and varied business applications.⁴

Hofstede was fascinated by Human Mental Programming and strived to understand how people’s values and beliefs were formed. When dealing with humans, three unique levels of mental programming can be distinguished (Figure 2-4):

Figure 2-4: Three Levels of Uniqueness in Human Mental Programming⁵

The basic level, labelled “human nature”, steers the basic programmes of the mind every child inherits. The resulting behavioural patterns and reactions like fear, joy, love and the need to band together with others are universal for all human beings. The second level is specific for a certain group or category of human beings and is referred to as “culture”. The “dos” and “don’ts” of this level are learned from other members of the group. The third level forms the personality. The resulting behaviour is, by concept, partly inherited and partly learned.

Based on these levels of human mental programming culture is defined by Hofstede as “the collective programming of the mind that distinguishes the members of one group or category of people from others”⁶.

Figure 2-5: The Hofstede Onion: Manifestations of Culture⁷

Culture manifests itself on different levels that can be depicted as an onion as introduced in Figure 2-5. The innermost level consists of values, defined as “broad tendencies to prefer certain states of affairs over others”⁸ and defines if something is deemed as for example moral or immoral, dirty or clean or else evil or good. Values are hidden deeply and cannot be perceived whereas the three following levels of culture can be observed openly, forming the cultural practices. These consist of rituals, heroes and symbols. Rituals are socially essential collective activities. They serve group matters like reinforcing group behaviour or ensuring group cohesiveness and include the way greetings are carried out or the way language is used. Rituals cover far more than only official or religious ceremonies. A typical example is the French way of kissing on the cheek when greeting friends and acquaintances. Cultural heroes serve as role models for desirable behaviour. They show characteristics that are highly respected in a particular culture. Barbie’s beauty, Asterix’s cleverness or Batman’s sense of justice are typical examples. Symbols form the surface area of culture. They include all kinds of gestures, words, objects or pictures that carry a particular meaning that is familiar only to those who are part of the same culture. Typical group symbols are special expressions (“jargon”), status symbols, dresses or hairstyles. Symbols are subject to quick changes and are easily copied by others.

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Hofstede’s research dates back to the 1960s when he worked together with IBM and created a questionnaire in order to analyse the values of similar IBM employees in different countries. The “IBM Study” revealed universal problems, but with solutions that differed from country to country. The problems could be clustered in the areas “social inequality”, including the relationship with authority; “the relationship between the individual and the group”; “concepts of masculinity and femininity”, concerning the social implications of having been born as a boy or a girl and “the ways of dealing with uncertainty”, relating to the control of aggression and the expression of emotions. These four areas of basic problems were understood to represent independent dimensions of cultures.

In 1985 Chinese researchers developed a Chinese Values Survey (CVS) that produced one dimension that was not correlated with any of the dimensions Hofstede used so far. It was based mainly on typical Confucian principles and dealt with an orientation towards the future or towards the past. This concept was added 1991 as a fifth dimension to the Hofstede model, at first using only the scores for the 23 countries included in the CVS.

A “dimension” is seen as an aspect of one culture that can be measured relative to other cultures. Consequently, the discovered basic problem areas correspond to five dimensions that form a model of differences among all kinds of cultures – for example gender cultures, professional cultures, company cultures or national cultures. An overview of the five Hofstede dimensions and their measurement scales in the shape of a control panel is provided in Figure 2-6. The dark-blue controllers denote one culture, the light blue controllers another culture. Their position on each scale represents the average value of their culture concerning the contemplated dimension.

Figure 2-6: Hofstede’s Five Dimensions as a Control Panel

Hofstede’s model gains its importance from the fact that his findings were repeatedly verified in replica studies. For example, six major replications of his IBM research were carried out by different researchers from 1990 to 2002, using people from different backgrounds (elites, employees, pilots, consumers, municipals, bank employees) and comparing between 14 and 28 countries. All studies confirmed the first four dimensions of the Hofstede research as valid. Consequently, this 5-dimensional Hofstede model is currently the most renowned cultural framework in the business environment. The basis for the cultural comparison is regularly widened and the number of countries integrated broadened. In the most recent editions of the Hofstede model, more than 90 different countries are characterized by a score on each of the five cultural dimensions.

Before continuing with the application of this framework to different countries it is important to emphasize that the scores mentioned below are mean scores of all survey participants of each culture, computed of the values given for the respective survey items in defined ways. Therefore, the scores do not at all imply that all people of one culture are equal. As Hofstede remarks concerning his Power Distance Index: the correlation on the country scores on the three underlying questions are more than 0.5, providing a coherent pattern for distinguishing one country from another. At the same time, the correlation across the individual answers to these questions is nearly zero.⁹ This emphasizes that such a concept only measures characteristics of systems, not of individuals.

In the following chapters, each of the five dimensions will be explained in detail.

The Power Distance Index (PDI) measures the degree of inequality in a group or society. This concept was derived from three items of the original survey that were answered by non-managerial employees only: their anxiety to express disagreement with their managers, the perception of their supervisor’s decision-making style and their personal preference for their supervisor’s decision-making style. The PDI provides the group-specific answers to the basic question of how to handle the fact that people are unequal. Typical characteristics of countries with large power distance in comparison to countries with small power distance are depicted in Figure 2-7. It is to be noted that not every country with a high PDI shows all typical characteristics because some of these might not fit to typical characteristics of other dimensions. This is true for all tables showing key differences in opposite culture scores. This highlights the fact that countries with comparable scores in one dimension are not similar. Although they share the same basic idea, its expression in forms of cultural artefacts (as behaviour, customs and the like) is very individual. In large PDI countries, for example, the use of status symbols is very common and expected. However, the type of status symbols relevant in a certain business environment can be very dissimilar and ranges from using office-provided smartphones to driving cars from prestigious (foreign) producers, inhabiting a huge office space with windows or employing several secretaries.

Figure 2-7: Key Differences between Cultures with Small and Large PDI¹⁰

Figure 2-8: Selected PDI Country Ratings¹¹

Typical large power distance countries are Slovakia, Russia, China and the Philippines. Countries with a small PDI include Austria, Finland, Germany, UK and Switzerland. An overview of selected country ratings is provided in Figure 2-8.

Hofstede’s PDI scores are of special practical relevance for the expected behaviour of leaders or members of teams in business situations. Imagine the culture clash that is likely to occur when an employee from a (very) low PDI country is delegated to a supervisor from a (very) high PDI country. The employee will feel offended by the strict rules he has to follow, the close control of routine tasks by his supervisor and the lack of (management) information provided. He expects to be seen as an expert in his own right and therefore is used to being asked about his opinion on business matters. On the other hand, the supervisor will not feel treated according to his rank. He will regard the questions his employee poses about the business development and new initiatives as something that does not befit an employee, understanding this information as classified. Requests of a flexible interpretation of the rules will be met with a lack of understanding as this is - in the supervisor’s point of view – a criticism of his higher judgement. He is not used to employees presenting their own ideas and will see this as an attitude lacking respect. Without knowledge and acceptance of intercultural differences this situation will cause both sides to react with mistrust and frustration. Appreciating the different views on equality in the workplace will enable leader and employee to adapt a stance of openness and composure without the emotional turmoil of feeling dishonoured and rejected.

As already mentioned above, Hofstede’s framework is meant to distinguish between cultures of all sorts, not only national cultures. The PDI scores proved to be interesting for profiling different attitudes of workers and managers based on their skill levels. Using IBM data from Great Britain, France and Germany Hofstede assigned PDI values for six different categories of occupations. The scores show (not surprisingly) that groups of people with high-skilled occupations generally demonstrate a lower PDI score in comparison to those with unskilled or semi-skilled occupations. This is also true for the management level. Details can be obtained from Figure 2-9.

Figure 2-9: PDI Values for Six Categories of Occupations¹²

Exercise: Familiarise yourself with Hofstede’s PDI (online)

The second dimension of Hofstede’s framework measures the ties between people. When connections between individuals are loose, the respective culture is called individualistic. When a country scores high on individualism (IND), everyone is expected to look after himself, including (only) his immediate family. The opposite is true for societies with low individualism, the so-called collectivistic cultures. From birth onward people are integrated into very strong and cohesive “in”-groups that will continue to protect them throughout their lifetime. In return the group expects unquestioning loyalty.

In the IBM survey, this dimension is measured by a set of 14 work goals. Participants were questioned about the importance of these goals in an ideal job (from 1 = of utmost to 5 = of no importance). Individualism is strongly associated with high importance of the following work goal items: sufficient time for personal or family life, freedom to adopt own approach to the job and challenging work that creates a personal sense of accomplishment. Collectivistic cultures with low scores on IND value especially training opportunities, good physical working conditions and the full use of skills and abilities. Typical characteristics of each extreme are presented in Figure 2-10.

Figure 2-10: Key Differences between Cultures with Small and Large IND¹³

High scoring and therefore individualistic countries include the United States, Australia, Hungary and the Netherlands. Truly collectivistic countries include Guatemala, Ecuador and Venezuela as well as Pakistan, Indonesia and Taiwan. An overview of selected countries is supplied in Figure 2-11.

Figure 2-11: Selected IND Country Ratings¹⁴

The third dimension measures how desirable assertive behaviour is in comparison to modest behaviour. This is strongly related to conventions about role-typical behaviour of men and women in a society. These conventions are not based on absolute biological differences of males and females but on expectations about acceptable – or desirable - behaviour in certain situations that lead to culturally-determined roles. Consequently, the dimension expressing this is called masculinity (MAS). Societies with high MAS scores favour assertiveness, but predominantly from men, that are supposed to be tough and focused on material success. Women, on the contrary, are supposed to be tenderer, modest and concerned with the quality of life. Masculine societies are therefore characterised by clearly distinct emotional gender roles. In countries with low MAS scores these emotional gender roles overlap. All members, men and women, are supposed to be modest, caring, and concerned with the quality of life. These societies are called “feminine”. Typical dissimilarities between both sorts of cultures are listed in Figure 2-12.

Figure 2-12: Key Differences between Feminine and Masculine Cultures¹⁵

The MAS dimension was measured in the IBM study by the importance attached to a set of 14 work goal items. Masculinity was strongly associated with special importance of high earnings, recognition for a job well done, advancement opportunities and challenging work. Femininity was strongly associated with good working relationship with the direct manager, good cooperation in the team, living in a desirable area and employment security.

Countries with extreme values in masculinity include Slovakia, Japan, Hungary and Austria. Typical feminine countries are Sweden, Norway, Latvia, the Netherlands and Denmark. Further examples of MAS scores can be obtained from Figure 2-13.

Figure 2-13: Selected Country Scores for MAS¹⁶

Exercise: Age-effects on MAS scores (online)

Another dimension of the Hofstede framework measures the intolerance of ambiguity in society, or in other words: the extent to which the members of a culture feel threatened by unknown or ambiguous situations. This uncertainty avoidance index (UAI) is deducted from measurements ranging from strong to weak on the following three items: job stress, agreement with “company rules should not be broken – even when the employee thinks it is in the company’s best interest” and the intent to stay with the company for a long-term career (more than five years or until retirement). Cultures with a high UAI score use all kinds of structural or organisational measures to avoid risks and vague conditions. Typical aspects of cultures with weak or strong UAI are compiled in Figure 2-14.

Figure 2-14: Key Differences between Cultures with Weak and Strong UAI¹⁷

Countries with strong UAI values comprise Greece, Portugal and Guatemala whereas countries as Singapore, Jamaica, Denmark and Sweden display only weak UAI values. An overview of selected country scores concerning UAI offers Figure 2-15.

Figure 2-15: Selected Country Scores for UAI¹⁸

The fifth dimension was originally derived from the Chinese Value Survey (CVS) carried out by Chinese researchers in 1985 by asking students from 23 countries around the world. These researchers asked questions that contrasted values without any previous equivalent in Hofstede’s IBM study. Mainly based on Confucian values, these questions were simply not asked by Westerners before. This dimension indicates a societies’ time perspective and an attitude of persevering that means, overcoming obstacles with time, if not with will and strength. A high score on this so-called long-term orientation (LTO) index combined the values persistence, thrift, ordering relationships by status and having a sense of shame. People are respected for their willingness to subordinate themselves for a purpose and to foster virtues towards future awards. Consequently, the original study found high (LTO) scores for countries of the Far East like China (118), Hong Kong (96), Taiwan (87) und Japan (80). In contrast, countries with short-term orientation were Pakistan (0), UK (25), US (29), Germany (31) and Sweden (33). Interestingly, this dimension was found to be correlated with recent economic growth and to predict future economic growth. Typical characteristics of longterm versus short-term oriented cultures are shown in Figure 2-16.

Figure 2-16: Key Differences between Cultures with high or low LTO¹⁹

The analysis of the World Values Survey (WVS) enabled the researchers to expand the database of LTO considerably. A meticulous scouring of the WVS database unearthed items that were conceptually similar and significantly correlated with the items of the LTO found in CVS: thrift as a desirable trait for children, national pride and importance of service to others. Based on these, new LTO scores for 84 (later 93) countries were calculated. A selection of these new LTO scores (based on the WVS) is presented in Figure 2-17. It is quite clear that the ideas are close but still lead to different results. This could be illustrated by looking at the scores for Germany: the LTO-CVS score for Germany was 31 which equals a short-term oriented culture. In the LTO-WVS score Germany is listed with 83 which equals a long-term oriented culture. The WVS data fits very well to the extraordinary high savings ratio in Germany and the focus on long-term business relations that can be observed. This alteration underlines that the way certain ideas are phrased has an influence on the ratings given by survey participants and that through this the culture of the survey developers and their way of expressing and understanding certain aspects has a direct impact on the findings.

Figure 2-17: Selected Country Scores for LTO (WVS)²⁰

When dealing with intercultural issues in internationalisation, the psychic distance of business partners is of high importance. According to the Uppsala Model for example, the internationalisation of enterprises follows a psychic distance chain. Generally speaking, an organisation first gains international experience on markets in foreign markets that were close to the domestic market in terms of psychic distance, meaning that on these markets exist less factors that make it difficult to understand the foreign environment. The organisations would then gradually enter others with a higher psychic distance.²¹ Some research suggests that the higher the psychic distance between business partners is, the more problems evolve in all aspects of cooperation from business setup to leadership. According to Holden and Burgess (1994)²² psychic distance is as a combination of cultural distance, mistrust und social distance. As the concept of cultural distance itself is still subject of an on-going scientific discussion it should be defined here very generally as a gap between the culture of two different groups or societies. Possible descriptions of cultural gaps are provided by Hofstede’s dimensions. Assuming that a very low cultural distance is helpful to avoid disruptive influences in management or leadership, the establishment of clusters of countries with high cultural closeness would be beneficial. In the 1991 edition of his book “Cultures and Organizations”, Hofstede included culture maps that formed cultural clusters of countries with quite similar values, each based on two dimensions of his framework. Studying these it becomes quite clear that some cultures are quite close to each other concerning two dimensions but are set widely apart in other dimensions. For example, Germany and Finland have quite similar scores on IND and PDI but differ tremendously concerning MAS – Germany being a masculine, Finland a feminine country. It is also problematic where to draw the line between clusters. A distinction of feminine cultures below a score of 50 and masculine cultures with scores above is quite academic, as this would divide countries with quite similar scores of 48 and 52. So the definition of clusters ends up to be quite subjective and should not involve the scores only but more knowledge about the expression of them in daily life in the respective countries.

However, taking the original four dimensions into account, there are a few countries that show quite similar ratings in all four original dimensions (PDI, IND, UAI, MAS) and thus could be seen to form cohesive patterns. A very consistent cluster is formed for example by Germanic countries (Germany, Austria, Switzerland) with all being low PDI, individualistic, masculine, strong UAI and short-term (CVS) respectively longterm oriented (WVS) countries, as depicted in Figure 2-18.

Figure 2-18: Cultural Cluster of Germanic Countries²³

Further clusters that could be identified on this basis include a Nordic cluster (formed by Denmark, Finland, Norway, Sweden and in addition the Netherlands) and an Anglo cluster (Australia, Canada, Ireland, New Zealand, the United Kingdom, the United States and additionally South Africa). “Added” countries show a larger variation in one of the four dimensions. Figure 2-19 provides an overview of possible country clusters based on Hofstede’s original four dimensions. As these clusters fit quite closely to the country clusters proposed by Ronen and Shenkar in 1985²⁴, the same cluster denominations are used here.

Figure 2-19: Country Clusters Based on the Four Original Hofstede Dimensions

Exercise: Familiarise yourself with country clusters (online)

The above mentioned World Values Survey (WVS) included items that dealt with happiness or, as scientists prefer to label it, “subjective well-being”. Three of these items form the core of a new dimension and questioned to what extent people would say that they are happy, if they feel that they have complete freedom of choice over their lives and how high the importance of leisure time is rated. If many people of a culture answered to be very happy, felt that they have a great deal of control over their live and saw leisure time as very important, the culture is understood to show high indulgence. Indulgence stands for comparatively high happiness, describing a tendency to permit relatively free satisfaction of basic human desires related to having fun and enjoying life. The opposite pole with low scores is called restraint and reflects a conviction that such pleasure needs to be restricted and regulated by firm social norms. Basic characteristics of both poles of this indulgence versus restraint (IVR) dimension can be obtained from Figure 2-20 .Thanks to the extent of the WVS, scores for 93 countries are available for this dimension. A selection of these is shown in Figure 2-21.

Figure 2-20: Key Differences between Indulgent and Restrained Cultures²⁵

Figure 2-21: Selected Country Scores for IVR²⁶

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From a business point of view, it is not interesting to study culture per se but to use information about cross-cultural differences in order to derive a guideline for meeting the leadership challenges of the 21^st century. This view was taken by the management consultants Trompenaars & Hampden-Turner when they deduced their “Seven Dimensions of Culture” from an extensive research database. The 2012 edition of their book “Riding the Waves of Culture” comprises data from 25 years of research with a sample of 80,000 participants (75% of them managers) from a diverse range of companies spanning more than 60 countries.²⁷ Its aim is to help explain national and organisational cultural differences and to provide advice on managing (with) these.²⁸

Trompenaars & Hampden-Turner define culture based on Schein: culture is “the way in which a group of people solves problems and reconciles dilemmas.”²⁹ In a broader sense, culture is basically understood as a dynamic process of solving human problems, that can be stated as dilemmas, in the general areas of human relationships, time orientation and nature dependency. The problems posed for humans are identical everywhere but the solutions usually can be approached from two different sides. For example, some people start with a generalisation and use this to define detailed standards or others sstart with the look at an individual case and then generalise from this experience. Both approaches are in themselves logical and consistent. Even the outcome could be quite similar, but the approach from two opposite poles requires acceptance and understanding in an environment where both sorts of people have to cooperate. What starting point people take is deeply rooted in their cultural background, far below the waterline of the cultural iceberg of Figure 2-2. The implicit culture created by norms and values includes basic assumptions about the right way to approach certain problems. In easy cases, where problems posed are not of special individual relevance, different approaches are usually tolerable. But when it comes to problems that touch the core of each individual – the belief of the sacredness of friendship, for example – solutions differing from the culturally based basic assumptions are hard to accept. These special kinds of problems, where basic assumptions come to light in lack of easy solutions, are called dilemmas. Trompenaars’ and Hampden-Turner’s dilemma framework lists seven (cultural) value dimensions that describe certain situations and measure the percentage of survey participants preferring a certain specified option. The value dimensions were mainly derived from former research of other scientists, but the dilemma approach itself is unique.

Figure 2-22: Cultural differences Expressed as Normal Distributions³⁰

Trompenaars & Hampden-Turner stress that people from one culture are not at all alike in their norms and values. For each culture, however, a kind of normal distribution of norms and values based on the preferred options could be shown. This allows the depiction of a most predictable, average behaviour. Problems occur when the normal distribution of two cultures display significant differences – meaning that the “typical” behaviour differs significantly and people of one culture will most probably opt for a solution that is usually not deemed acceptable for people of the other culture. According to Trompenaars and Hampden-Turner, the values of the observed parameters that are furthest away from the normal distribution of one country also create the basis for stereotypes. This idea is expressed in Figure 2-22. US-Americans expect French people to be emotional, flamboyant and even arrogant (blue area) whereas the French see the US-Americans as aggressive, unprincipled workaholics (grey area). As this example illustrates, people tend to notice differences rather than commonalities. The observed “odd” behaviour is exaggerated and caricatured, thus creating a very limited view on the average or “typical” behaviour of people in a certain environment. Stereotyping could therefore be defined as the ascription of extreme forms of behaviour to people from other cultural groups. In any kind of international business environment, an exertion of this extreme and limited view endangers adequate managerial responses to usual challenges, be it on the individual, team or company level.

The following chapters explore Trompenaars and Hampden-Turner’s seven dimensions of culture in detail.

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The description of the first dilemma is probably the most famous of all. The vignette is called “the car and the pedestrian”: imagine you are riding in a car that is driven by your close friend. You know that the speed limit is 30 kilometres per hour as this is an inner city area. You know that he drives 50 km/h which is too fast. Suddenly, your friend hits a pedestrian. There are no other witnesses than you. This case will go to trial. The lawyer of your friend says that he will have to bear serious consequences if you do not testify under oath that he was driving only 30 km/h. The questions posed in the survey were the following:

Figure 2-23 indicates the percentage of people in the respective countries that would tell the universal truth as they witnessed it, meaning they would testify to the (correct) higher speed and not in favour of their friend. (Please note that in all figures related to the dilemma framework scores for countries indexed with “*” are not available in the main reference and might be obtained from a different source. Refer to the connected endnote for details).

Figure 2-23: Percentages Opting for Telling the Truth³¹

This dilemma sheds light on the basic assumption if the universal truth (expressed in rules, laws, codes and generalisations) takes precedence over unique relations and the needs of friends and other relationships where exceptions would be made for special circumstances. Hence the two opposing values are called Universalism and Particularism. Typical characteristics of universalistic and particularistic cultures are compiled in Figure 2-24.

Figure 2-24: Typical Characteristics of Universalistic vs. Particularistic Cultures³²

Exercise: Cultural clashes in business situations (online)

Ensuring a better life for all is a goal everybody would agree to. Again, the way to this ultimate goal can start on two different sides. Some cultures start the journey with the individual, thinking that it is obvious that if an individual has as much freedom as possible and the maximum opportunity to develop itself, the quality of life will improve. Others start at the opposite end, paying first attention to the advancement of the community and demanding from its members to take continuous care of their fellows so that the quality of life for all will improve, even if this approach might lead to obstruction of individual freedom and development. Not surprisingly, the Western countries and Israel have the highest percentage of their population choosing individual freedom, as depicted in Figure 2-25.

Figure 2-25: Percentages Opting for Individual Freedom³³

How these basic assumptions shape business solutions can be observed by the introduction of pay-for-performance systems. This will be discussed in detail in chapter 5.3.3.

One dilemma affecting all kinds of interactions deals with the extent to which people of a culture tend to display their emotions. In affective cultures people express their emotions overtly and usually seek direct emotional response. In neutral cultures the general convention is to control emotions carefully. This does not mean that people in these cultures are emotionally distant or cold; they just do not vent their emotions immediately. Figure 2-26 provides an overview of the percentage of inhabitants of selected countries that would not express the feeling of being upset openly at work (considering such behaviour as being unacceptable and unprofessional).

Figure 2-26: Percentages Opting for Not Expressing Emotions Overtly³⁴

Some cultures need to define specifically and precisely the constructs they use, putting everything in an assigned place and an exact perspective. Other cultures prefer more diffuse systems where the overall configurations are still put together as patterned wholes. Specific cultures are very analytic in what they do; diffuse cultures are more holistic in their approaches. This very general value is measured by Trompenaars & Hampden-Turner in various dilemma vignettes, each showing a distinct facet of this enigmatic concept.

When looking at the degree of (specific) involvement in relationships, this dimension shows if managers isolate task-related relationships they have with their subordinates from other matters like private relationships or if every level of personality and relationship is the same. In specific cultures, people might be addressed differently in different situations, depending on the relationship mode they want to stress in this specific moment – for example, using the doctoral title at work but not outside. In diffuse cultures, this differentiation does not exist. So a manager in a diffuse culture expects to be treated with the same respect at work and outside. This is mirrored in the vignette used for this aspect: imagine your boss comes to you and asks you to paint his house at the weekend. There were two examples for possible reactions provided. One was seen from the perspective of the colleague, stating that it is not necessary to paint the house if one does not feel like it. The boss is only the boss in the company, outside he has little authority. The second argument stems from a subordinate’s perspective. It states that despite the fact that he does not feel like it he would paint the house anyway. The boss is the boss and this cannot be ignored outside work either. Figure 2-27 shows the percentages of people taking the colleague’s perspective of not painting the house.

Figure 2-27: Percentages Not Painting the House³⁵

It is obvious, that intercultural misunderstandings are quite probable for example between a Chinese supervisor and a Finnish teammember. In case that a Chinese boss truly expects his Finnish subordinate to come to him on weekends for private domestic services, he will not only be surprised to find that his wish is ignored. Already with this request he will have lost his teammember’s trust and respect, as this is perceived as an illegitimate behaviour. Knowledge about cultural differences in diffuse and specific relationships, however, might allow them both to understand the underlying reasons for the respective behaviour and thus regain mutual trust and appreciation.

Differences in status can be observed in all cultures. Some cultures accord status to its members based on their achievements in life. Others ascribe status by virtue of what a person is and not what a person does. These ascriptions could be based on – for example - age, education, profession, social connections, wealth or gender. This dilemma is approached by measuring the importance of achievement versus the importance of the family background. Figure 2-28 shows the percentage of people in the respective country not agreeing with the statement, that the most important thing in life is to act as really suits them even if they do not get things done. So cultures with high percentages consist of a majority of people that perceive achievement or “getting things done” as vital.

Figure 2-28: Percentages Opting for Getting Things Done³⁶

In a business context, the understanding of time is crucial for many endeavours. Differences in the concept of time can be observed by several aspects that need to be investigated separately.

The main question is the relative importance of past, present and future. Cultures assign different meanings to these aspects of time that could be expressed through drawings of three circles, each representing one of these aspects. The configuration of these circles, especially their size and interrelation, provides insights into the time orientation. Distinctive examples of circle patterns for some of the countries considered above are shown in Figure 2-29.

Figure 2-29: Circle Diagrams for Past, Present and Future³⁷

It is obvious that for example in Japan all three aspects of time are viewed as fully integrated whereas in Russia there is no connection between them. Germany and the UK see a partial overlap of all three aspects with the present being the most important of the three in Germany and being the least important in the UK. This view could influence for instance the importance of strategies that is especially stressed in those countries that emphasise the future or the willingness to learn from past experience and build on that.

Typical characteristics of cultures with past orientation versus cultures with present or future orientation are listed in Figure 2-30.

Figure 2-30: Differences of Past, Present and Future Orientation³⁸

The second aspect deals with the magnitude of the time horizon. This aspect considers how long people tend to plan ahead. Participants of the survey were asked to assign scores for the duration of past, present and future in order to indicate the relative time horizons. Scores ranged from 1 = seconds over 2 = minutes, 3 = hours, 4 = days, 5 = weeks and 6 = months to 7 = years. Thus, they calculated an average score per country as depicted in Figure 2-31. In a business environment, a long-term vision spanning decades stands in sharp contrast to a short-term thinking in quarterly reports.

Figure 2-31: Average Time Horizon³⁹

The third aspect of cultural differences concerning time covers whether time is seen as a sequential process, expressed by a series of linear continuing events, or of a synchronic nature where many things can happen in parallel. People with sequential (or monochronic) orientation prefer to engage in only one activity at a time, they follow the original plans and favour to be evaluated based on goals to be reached by a certain time. These people schedule meetings and strictly keep appointments. Organisations with a sequential culture idealise the efficient, most direct route to reach their goals that could be symbolised by a straight line. In contrast, people with a synchronic (or polychronic) orientation have a more flexible and diffuse view of time. They subordinate schedules to relationships and are inclined to spend time with significant others although they might be expected at an arranged meeting. These people prefer to do several things at once and assess their own achievements in context of their whole history with the company and their future potential. Companies with a synchronic culture idealise the interaction of past experience, present opportunities and future potentials, which could be symbolised by an interacting circle. This aspect causes cultural clashes on the staff level, as sequential people judge others doing several things at once as being distracted, unreliable and chaotic whereas synchronic people judge the one-at-a-time maxim as narrow-minded, inflexible and restricting.

Separating the aspect concerning the handling of schedules leads to the wider-ranging differentiation of clock time cultures (where punctuality and keeping schedules is cherished and time is money) versus event time cultures that “give time to time”.⁴⁰

The seventh dilemma deals with the relationship of people and the natural environment. The two opposing views constitute that nature should be (and is) controlled by people – men subduing the earth – or that humans are only a part of nature and therefore have to go along with its forces and laws. The belief that the environment can be controlled stems from a mechanistic world view that stresses the possibility to influence the outcomes and is therefore described as inner-directed perception in opposition to its outer-directed counterpart.

Figure 2-32: Percentages Agreeing to What Happens to Me is My Own Doing⁴¹

In order to find out about their inclination, people were asked to choose between “what happens to me is my own doing” and “sometimes I feel that I do not have enough control over the direction my life is taking”. As all people are quite aware that both positions hold true elements, having to choose between them poses again a dilemma that could be used to reveal their basic assumptions. Figure 2-32 provides the percentages of participants from selected countries opting for the inner-directed view.

The seven dilemmas of culture are designed to help leaders to gain a broader understanding of the range of possible solutions to common problems. For a successful leadership practice, however, understanding these dilemmas is not enough. Trompenaars & Hampden-Turner postulate transcultural competence as the primary leadership competence in an international business environment and define it as the propensity to reconcile seemingly opposing values to a higher level. This propensity follows a three step approach from Recognition through Respect to Reconciliation as depicted in Figure 2-33. First, (inter) cultural issues have to be recognised as such, which requires an awareness of one’s own cultural perspective. This should be followed by respecting and appreciating the culturally different views without prejudice or minimisation. Finally, these differences have to be resolved in a reconciliation process.

Figure 2-33: The Three-Step-Approach⁴²

The reconciliation of any kind of dilemma is an innovation process that requires the willingness to challenge and change existing solutions continuously until a higher level is reached. Trompenaars & Hampden-Turner depict this process in a two-dimensional map of cultural space (sometimes also called dilemma grid) where each axis represents one side of the dilemma. The differing positions of the two dilemmas are found at the highest point of each axis (position 10/1 or 1/10). A compromise solution that could be depicted as a point in the middle of the map (5/5) is not beneficial as only a very limited value would be achieved and both sides still feel that they gave up something precious. So a true reconciliation of both dilemmas should discover an innovative and truly unique approach that enables the involved parties to combine the underlying values of both positions to achieve a higher level (position 10/10). Such a solution is never made by a single decision but involves a continuous improvement process instead. This process will start from one perspective and requires an unremitting search for better ways to achieve the desired solution, moving in the direction of the opposing dimension (taking some ideas of this position and incorporating them into the existing processes or solutions) and then swinging back towards the original viewpoint. This development process is depicted as a spiral that moves upwards towards the 10/10 point. It could rotate clockwise when starting with the x-dimension or anticlockwise when choosing the y-dimension as starting point. A reconciliation of the classical business challenge of globalism versus localism based on the first Trompenaars & Hampden-Turner dilemma of universalism versus particularism is presented in Figure 2-34. This dilemma could be reconciled by creating an innovative solution that uses transnational specialisation – so that each nation (or subsidiary) within the global corporation specialises in a field where it excels. Leadership of these particular functions would then shift to the respective nation/subsidiary as a “transnational centre of excellence” that guides the global organisation in this defined field of expertise.

Figure 2-34: Reconciling Globalism and Localism⁴³

The journey to reconciliation starts with an understanding of the complementarity of both seemingly opposing values, the use of humour to make dilemmas “digestible” to all participants and the deliberate use of language to pose the right questions. Practical advice provided by Trompenaars & Hampden-Turner concerning the reconciliation process includes mapping out a cultural space through interviews or questionnaires in order to find the basic dilemma in the problem provided. This helps to gain a deeper understanding. Other useful techniques include drawing meta frames of the dilemma with text and pictures, accepting waves and cycles as a natural way to resolve difficult issues and appreciate synergy of two values as mutually enhancing.⁴⁴ Further examples will be discussed in the suitable chapters.

VIPs

The influence of culture on business issues is still a favourite topic for many researchers worldwide. One truly international approach was endeavoured in the so called GLOBE study. The acronym GLOBE stands for “Global Leadership and Organisational Behaviour Effectiveness” and was conducted as a multi-method and multiphase research programme. It was designed to conceptualise, operationalise, test, and validate a cross-level integrated theory of the relationship of culture and societal, organisational, and leaders effectiveness. During the phases 1 and 2 in the middle of the 1990s altogether 170 researchers throughout the world combined their efforts to collect and analyse survey data from 17,300 (middle) managers in 951 organisations and 62 societies. The first omnibus publication edited by House et al. (2004) provided findings about culture, leadership and organisations on 800 pages.⁴⁵ Additional in-depth studies of 25 societies were published by Chhokar et. al. in 2008.⁴⁶

The GLOBE research project defined culture as “shared motives, values, beliefs, identities, and interpretations or meanings of significant events that result from common experiences of members of collectives that are transmitted across generations.”⁴⁷ This definition was applied on the societal and organisational level. Culture was examined based on practices and values. Practices were defined as “the way things are done in this culture” whereas values were defined as judgements about “the way things should be done”.⁴⁸ The methodological approach followed was very sophisticated and based on multiple methods and checks. The research was designed by multicultural teams with the clear intention to bypass typical cultural biases already in the setup of the survey.

Finally, GLOBE used nine major attributes or dimensions of culture, several of them based on Hofstede’s research. An overview of these is provided in Figure 2-35. Special emphasis was laid on the analysis of the cultural dimensions and several dependent variables, for instance the Human Development Index, Gross National Product per capita, measures of welfare of society members as well as certain leadership dimensions. Details of these findings will be discussed in the respective chapters dealing with these issues.

Figure 2-35: GLOBE: Nine Cultural Dimensions⁴⁹

The GLOBE study grouped 62 participating societies in 10 distinct country clusters, based on previous empirical studies and other factors such as common language, geography, religion, and historical accounts. These are depicted in Figure 2-36.

Figure 2-36: GLOBE: Country Clusters⁵⁰

VIPs

The three previously introduced models of culture are subject to profound criticism concerning the defined concepts of culture, the measurement of culture “per se”, the dimensions utilised in comparison to alternative dimensions used by other scientists and the applied methodology.

All cross-cultural research is subject to various criticisms based on typical challenges arising from the extremely complex and opaque research topic itself. These include:⁵¹

1 Definition problems of all terms used. These concern the definition of “culture” itself as well as all terminology used in questionnaires or interviews. A special problem is the translation of the defined concepts in other languages.

2 Assuming incorrect equivalencies concerning functions, concepts, instruments, and measurement. People from different cultures might have a different understanding of certain (business) functions, of concepts like loyalty or might interpret the scales in the questionnaires in different ways.

3 Choosing non-representative participants. If all participants of the survey originate from the same background, for example one organisation or one profession or one company level, it is possible that these do not represent a fair sample of the countries studied. Their views might be influenced by a very distinct (sub-)culture.

4 Methodological simplicity, as the methodology is for example often based on one ethnocentric pattern and one timeframe, providing bias, misinterpretation and inaccuracies. Therefore, many critics claim the basic principle that a cultural research should be based on a multi-disciplinary approach.

Many scientists, especially psychologists and sociologists, claim that cross-cultural research providing country scores only produces stereotypes, which is not an appropriate way to deal with cultural issues. Fons Trompenaars defends the usefulness of crosscultural models by arguing that all models categorise and are therefore in fact stereotypes. Using models for cultures can be acceptable if the people dealing with this kind of stereotype meet two conditions. The first is that they are conscious about it and the second is that they postpone judgement. For example, the sixth dilemma illustrates that Asians are more polychronic and Westerners are more monochronic. This is obviously an exaggeration. There certainly are polychronic Westerners and sequential Asians. This stereotype mainly warns that the chance that there are people with the other inclination is higher when meeting people from the other culture.⁵² This warning might lead to negative consequences if people immediately put a critical judgement on it. When they are able to postpone judgement and treat this issue as a reminder to accept different solutions with an open mind, the knowledge about this stereotype can facilitate all kinds of international encounters.

The criticism concerning the Hofstede model is based on some of the points cited in 2.5.1.⁵³

To 1.: The level of culture researched is not clearly defined, as Hofstede tries to approach values by questioning behaviour. There is a controversy concerning the legitimacy of such an approach, as the basic assumptions that are seen to form the most important (and hidden) parts of culture are not touched.

To 3.: All participants of the study are employees or managers of IBM. Some argue that the strong company culture of IBM leads to uniformity of their personnel in certain aspects, which provides a bias to the study. Hofstede argues the opposite and explains that just because of this certain homogeneity he is able to ascribe the differences observed to country cultures. Also, the IBM background enables him to avoid equivalency problems (as defined in 2.)

To 4.: Hofstede’s methodology is criticised in several aspects. His dimensions are not seen as appropriately selective and their denomination as not completely accurate. His comparison of different cultures is seen as superficial as it is not based on a thorough analysis of the culture described. Especially the equalisation of culture and countries is criticised, as many countries have within their borders several (sub)cultures that should be researched separately. Another critical aspect (also referred to by Trompenaars & Hampden-Turner in 1997) concerns the questions he employed that were seen as mainly an imitation of questions used in various US-based psychological profile tests.

The existence of a cultural bias in the setup of the original study was proven impressively in the findings of the Chinese Value Survey. However, Hofstede acknowledged these findings willingly and added them to his framework. It is natural for research issues that corrections and additions occur over time, given the willingness of more researchers worldwide to contribute to the original findings. In this respect Hofstede managed to induce many following studies.

Altogether, Hofstede’s framework and the range of his data collection for nowadays more than 90 countries has an outstanding effect on academics and practitioners dealing with cultural issues worldwide. As his model was the first to allow not only the classification of countries based on different criteria but also a sound comparison of them, it highly contributed to the inclusion of intercultural issues in the research of strategy, leadership, organisation, marketing and finance. It was also instrumental in the implementation of business systems for international companies, for example in the definition of compensation practices, training design, leadership styles and management control systems.

After their early publications, one of their main critics was Hofstede himself in 1996 who argued, that Trompenaars & Hampden-Turner essentially measure Hofstede’s dimensions Individualism and Power Distance by using dilemmas that were interrelated. He also accused Trompenaars & Hampden-Turner of tuning their messages to what they think their customers like to hear, being more interested in commerce than in scholarship.⁵⁴ The first edition of their dimensions was mainly tailored to the needs of professionals and consequently lacked detailed information about their methodological approach. This was the main area of criticism from other scientists. In a very measured response in 1997, Trompenaars & Hampden-Turner defended their approach and provided detailed information about their research methodology.⁵⁵

Notwithstanding, the dilemma approach of Trompenaars & Hampden-Turner is subject to intense criticism based on the typical problems reviewed in 2.5.1.⁵⁶

To 2.: The findings of Trompenaars & Hampden-Turner are visibly subject to incorrect equivalencies. One very obvious example is mentioned by Trompenaars & Hampden-Turner themselves concerning the percentages for not painting the house in their dilemma “specific versus diffuse”. They mention that the figures provided for Japan are probably based on a cultural misunderstanding of concept, as Japanese people generally do not paint houses, preferring wooden houses anyway.⁵⁷

To 3.: The selected respondents where all participating in Trompenaars and Hampden-Turner’s management trainings that should sensitise for cultural issues. Some argue that these people were in the preparation of visiting a foreign country and hence already unusually self-conscious to intercultural issues. This would not be representative for inhabitants of a country in general.

To 4.: It remains unclear how Trompenaars & Hampden-Turner arrived at the identified 7 dimensions. As they rely heavily on former research from other scientists, they chose some of the dimensions at random from mainly a literature analysis. Also, the operationalisation of the dilemmas is criticised. It is not seen as proven, that the chosen statements really measure what they should measure. Some of the dimensions are even measured by different constructs, which could be seen as constituting different sub-dimensions that are not clearly defined. Trompenaars & Hampden-Turner provide differing dimensions and findings in different publications – some of them only with slightly changed denominations, some with differing contents. As a result, a claim to absolute right concerning the 7 dimensions is not accepted.

Despite the criticism, the dilemma approach of Trompenaars & Hampden-Turner is widely used in international management trainings and research. Their basic claim, that the behaviour in and of companies is affected by culture, is an important counterpoint to the predominant US-based notion of universally valid management approaches. The generally understandable language and the abundance of practical examples allow an easy use for practitioners. The database offers detailed information on countries that are not explicitly covered in Hofstede’s research, especially concerning Eastern Europe. They vehemently promote an increased awareness of cultural diversity within countries based on ethnic differences, for example within the US. This is complemented by the consequent consideration of differing cultures of companies (in mergers, for example), business sectors, professions and genders. Their detailed reconciliation process constitutes one of the few practical step-by-step approaches for prevalent leadership challenges in international organisations.

Apart from that, the success of the framework could partly be ascribed to Fons Trompenaars outstanding achievements as consultant and speaker.⁵⁸

The designers of the GLOBE study considered many of the above mentioned points of criticism in their research approach:⁵⁹

1 The definitions were discussed extensively with an international research team. The questionnaire was scrupulously tested by translation and retranslation as well as content analysis of documents, thus minimising definition problems.

2 In order to achieve certain equivalencies, all respondents were middlemanagers. This should ensure a certain comparability of the results for different cultures. The testing of terms also helped to prevent differences of understanding of the concepts used.

3 The respondents came from more than 900 different companies and 3 different business sectors of more than 60 different cultures, thus avoiding the influence of a distinctive company or business culture.

4 The concept includes a clear distinction of two cultural levels: the value level (how it should be) and the behaviour level (how it is), mirroring the state-of-the-art differentiation of percepta-level and concepta-level that are not always in harmony. As the approach was defined by 170 researchers from different nations and regions and from different professional backgrounds, the GLOBE study represents an outstanding multicultural effort. The dominance of an ethnocentric pattern can therefore be eliminated completely. The applied research and analysis methodology was highly sophisticated and thoroughly challenged.

Despite these efforts, several points of criticism still remain. Some critics stress for example the possible distortions due to the sole use of middle managers as respondents. The equalisation of countries and cultures is still a point for heated discussions, although GLOBE made some allowance for relevant sub-cultures as for example the separation of South Africa in a black sample and a white sample.

Hofstede criticised the multitude of inter-correlated dimensions that could have been condensed to fewer meta-dimensions. As nearly all dimensions show positive correlations of national welfare, these dimensions are influenced by the national welfare itself and do not have to be explained by cultural peculiarities.⁶⁰ The GLOBE authors argue with exactly the opposite train of thought: the correlation shows that cultural peculiarities influence the national welfare; therefore the correlations of the differing dimensions are of special interest for researchers.

The objection of the maximisation of the number of countries studied instead of detailed analyses of single countries was met with the publication of the second GLOBE volume concerning the in-depth analysis of 25 countries by Chhokar, Brodbeck and House in 2008.

Due to the open publication of the compiled data and the number of researchers and research institutes involved, GLOBE could be expected to induce additional cultural research over the next decade. As its findings constitute a unique basis for country and (intercultural) leadership development their further inclusion into management theory and practice can be predicted.

¹ Hall, E.T. (1976). He uses instead the terms “hidden dimensions of unconscious culture” or “cultural/collective unconscious”.

² Bennett, MJ. (1993)

³ Adapted from Bennett, M. J. (1998)

⁴ All of the following information in this chapter is taken from: Hofstede, G.H., Hofstede, G.J., & Minkov, M. (2010). A more detailed and scientific description of the Hofstede framework could be found in Hofstede, G.H. (2006).

⁵ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 6

⁶ Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 7

⁷ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 8

⁸ Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 9

⁹ Hofstede, G.H. (2006), pp. 87-88

¹⁰ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 72-83

¹¹ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 57-59

¹² Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), p. 65

¹³ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 117, 124

¹⁴ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 95-97

¹⁵ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 159, 170

¹⁶ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 141-143

¹⁷ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 203, 208, 217

¹⁸ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 192-194

¹⁹ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 243, 251

²⁰ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 255-258

²¹ Johanson, J., & Vahlne, J.-E. (1977), pp. 23-32

²² Holden, N., & Burgess, M. (1994), p. 33

²³ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 59, 95-96, 141, 193, 255-256 and Hofstede, G. J. (2001), pp. 256-257 (CVS)

²⁴ Ronen, S., & Shenkar, O. (1985). Their research revealed the following clusters: Anglo, Arabic, Germanic, Latin American, Latin European, Near Eastern, Nordic and Far Eastern. The countries Brazil, India, Israel and Japan were considered as independent from others.

²⁵ Based on Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 291, 297

²⁶ Scores from Hofstede, G.H., Hofstede, G. J., & Minkov, M. (2010), pp. 282-285

²⁷ Trompenaars, F., & Hampden-Turner, C. (2012), pp. 1-2

²⁸ All following information was derived from Trompenaars, F., & Hampden-Turner, C. (2012). This book is highly recommendable as it combines research and practical examples on doing business with different cultures. Also recommendable are the older books providing more insights into the practical relevance of the defined dilemmas, especially Trompenaars, F., & Hampden-Turner, C. (2004); Trompenaars, F., & Woolliams, P. (2003); & Trompenaars, F., & Prud’ homme, P. (2004).

²⁹ Trompenaars, F., & Hampden-Turner, C. (2012), p. 8

³⁰ Based on Trompenaars, F., & Hampden-Turner, C. (2012), pp. 33-34

³¹ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 56. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³² Based on Trompenaars, F. (2004, November 16), p. 12 (A9)

³³ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 66. Percentages for countries marked with “*” derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³⁴ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 88. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³⁵ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 109. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015. For Japan (marked with #) please note that this figure is based probably on a cultural misunderstanding of concept, as Japanese people generally do not paint houses, preferring wooden houses anyway.

³⁶ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 129. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

³⁷ Based on Trompenaars, F., & Hampden-Turner, C. (2012), p. 156

³⁸ Based on Trompenaars, F., & Hampden-Turner, C. (2012), p. 170

³⁹ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 158; for countries marked with “*” no percentage was made available.

⁴⁰ Inspiring insights into the differentiation of clock time and event time cultures are provided in Levine, R. (1997).

⁴¹ Percentages from Trompenaars, F., & Hampden-Turner, C. (2012), p. 176. Percentages for countries marked with “*” were derived from the connected Trompenaars database, access usually granted via the website http://ridingthewavesofculture.com. Due to problems with the website, the scores were provided via email by Trompenaars Hampden-Turner/KPMG People & Change, 10.03.2015.

⁴² Based on Trompenaars, F. (16 November, 2004)

⁴³ Based on Trompenaars, F., & Wooliams, P. (2003), p. 41

⁴⁴ Details and examples concerning successful reconciliation processes are provided in Trompenaars, F., & Hampden-Turner, C. (2012), pp. 247-261 and in Trompenaars, F., & Hampden-Turner, C. (2004), pp. 267-294.

⁴⁵ House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (Eds.). (2004). This volume is the basis for all following information about the GLOBE study.

⁴⁶ Chhokar, J. S., Brodbeck, F. C., & House, R. J. (Eds.). (2008)

⁴⁷ House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), p. 15

⁴⁸ House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), p. XV

⁴⁹ Based on House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), pp. 11-13

⁵⁰ Based on House, R. J., Hanges, P. J., Javidan, M., Dorfman, P.W., & Gupta, V. (Eds.). (2004), p. 190

⁵¹ University of Wollongong (Ed.). (2007); Kutschker, M., & Schmid, S. (2011), pp. 731-734

⁵² Trompenaars, F. (2011, Jully 11)

⁵³ For an overview of criticism on Hofstede refer to Kutschker, M., & Schmid, S. (2011), pp. 731-734 or Jones, M. L. (2007). For criticism on his methodology and analysis refer to, amongst others, McSweeney, B. (2002); in defense of Hofstede refer to Søndergaard, M. (2002). Please note: So far the criticism published refers to the outdated versions of Hofstede’s research and not his most recent publication.

⁵⁴ Hofstede, G. (1996)

⁵⁵ Hampden- Turner, C., & Trompenaars, F. (1997)

⁵⁶ For an overview of criticism on Trompenaars and Hampden-Turner refer to Kutschker, M., & Schmid, S. (2011), pp. 740-744 or Browaeys, M. J., & Price, R. (2008), pp. 87-88

⁵⁷ Trompenaars, F., & Hampden-Turner, C. (2012), pp. 109-110

⁵⁸ According to the Trompenaars and Hampden-Turner website Trompenaars Hampden-Turner. (2014) (http://www2.thtconsulting.com/about/people/fons-trompenaars/), Fons Trompenaars was mentioned as one of the top 5 management consultants in a Business magazine in 1999, voted one of the top 20 HR Most Influential International Thinkers 2011 by HR Magazine and ranked in the Thinkers50 to be one of the most influential management thinkers alive in November 2011.

⁵⁹ For an overview of criticism on the GLOBE study refer to Kutschker, M., & Schmid, S. (2011), pp. 761-765

⁶⁰ Hofstede, G. H. (2006)

3	Leading the Internationalisation Process

Readers are familiar with classical concepts and the latest research findings concerning good and successful leadership behaviour. They understand the inner logic of the first EFQM criterion as well as its view on the role of leaders and their most important activities. They know how to define a core purpose, create and formulate a compelling vision and responsibly guide an organisation with core values and discernible ethics. Improving leadership behaviour based on feedback processes is seen as an integral part of leadership ability. The pitfalls of common concepts for driving performance are understood, so that they can be avoided in particular organisational settings. Readers comprehend different organisational cultures and embrace diversity as an indispensable aspect of excellence in international environments. They theoretically know how to design effective change processes that avoid eight typical mistakes.

Behind the backdrop of the knowledge gained about cross-cultural issues, this section deals with the challenges for leaders to fulfil the manifold requirements of their demanding role. An overview of relevant aspects is provided in Figure 3-1.

Figure 3-1: Concept Map “Leading the Internationalisation Process”

3.1	Good Leadership

Leadership can be defined roughly as “the ability to influence a group toward the achievement of (…) a set of goals.”¹ The views on good leadership differ tremendously from culture to culture and from person to person. The EFQM model uses a people-oriented leadership approach which is expressed compellingly in the following definition: leadership is the “art or process of influencing people so that they will strive willingly and enthusiastically towards the achievement of the group’s mission and purpose.”² Even scientific research does not supply the one and only definition of a good leader nor does it offer conclusive information about characteristics that create one. This chapter provides an overview of the most recent views on good leadership behaviour and excellent leadership activities.

3.1.1

The Coherent Leadership Approach

Examining the quality of leadership requires the consideration of several aspects or dimensions, namely the personality of the leader itself, the leadership behaviour, the leadership situation including the organisational context and the subordinates as well as a clear definition of leadership success. This interrelated chain of aspects is diagrammed in Figure 3-2.

Figure 3-2: Aspects Influencing Leadership Success

Many leadership theories or related recommendations for successful leaders focus only on one of these aspects and neglect the influence of others. One of the most recent additions to leadership theory strives to combine these aspects in a coherent leadership approach. It is based on a three-step-analysis: first a thorough examination of the situation in order to determine potentially successful leadership behaviour, second an introspection of the leader concerning acceptable alternatives and third an individual negotiation of approaches with team members that is enhanced by continuous feedback.³ This non-normative approach is especially relevant for an international environment.

Leadership in any organisation is tied to a very special context. Determinant factors are the organisation’s (management) system with its culture, rules and regulations and the stakeholders, especially the subordinates, the fellow leaders and the supervisors inside the organisation but also external stakeholders like owners or regulating authorities.

The organisational culture comprises a certain view on favoured and acceptable leadership behaviour (compare also chapter 3.4.1). In large organisations, this view is recorded in guidelines, for example leadership principles or code of ethics. The framework for each leader is also set by the processes of people management, mainly concerning the leader’s authority and rules for performance appraisals and feedback. In addition, the organisational system has a very direct influence on leadership success as the targets set for the leader constitute its main criterion.

Good leaders are able to live up to the expectations of all stakeholders involved. Looking for an optimal way of leading therefore requires a profound analysis of the stakeholder’s targets and their emotional requirements. These expectations can differ considerably. Whereas supervisors might expect from a leader a firm stand towards the subordinates in favour of enhancing orders the subordinates might expect an open attitude and freedom to find their own way of working. As conflicting expectations occur frequently, leaders are recommended to orient themselves towards the achievement of their leadership objectives. When leadership success and related objectives are clearly defined it should be possible to determine the behaviour needed from the staff members in order to achieve the goals. The leadership approach should then be tailored to these circumstances in a way that elicits the desired behaviour from the subordinates.

Alternative approaches to choose from are provided by scientific research. “Classic” as well as “new” approaches rival with each other about providing the best solutions to the general question of good leadership. So far, extensive research was not able to find the philosopher’s stone in form of one outstanding approach for all circumstances. Correlations between standardised approaches and certain success criteria were always lower than correlations between specifically chosen leadership approaches for certain targets and their success criteria.

Approaches to choose from are manifold and highlight the same dimensions as presented in Figure 3-2.

Trait Theories searched for personality traits that form great leaders (for example the Great Man Theory). Most recent characteristics identified as being positively related with leadership success include body height as well as self-confidence, emotional maturity, integrity, assertiveness, high power need, distinct performance motivation and openness.⁴

Behavioural Theories search the most effective leadership behaviour. A typical and permanent behavioural pattern of a leader is defined as leadership style.⁵ Different theories distinguish different styles, sometimes in a one-dimensional, sometimes in a multi-dimensional approach. Four classic studies are depicted in Figure 3-3 and Figure 3-4.⁶ None of the presented leadership styles were proven to be optimal for all circumstances. Depending on the operationalisation of success (e.g. measured by performance or by satisfaction of team members) very different results were achieved in empiric studies. Despite the heterogeneous results, knowing these leadership styles present leaders with arguments in favour or against certain behaviour and allows choosing and assessing different alternatives.

Figure 3-3: One-Dimensional Behavioural Leadership Theories Based on Participation⁷

Figure 3-4: Two-Dimensional Behavioural Leadership Theories⁸

Based on the shortcomings of the behavioural theories the scientific research focused on more complex patterns by taking situational factors into account. The resulting contingency theories consider different aspects to describe the situation and try to define an optimal leadership style for certain specifications of these aspects. They can be distinguished based on the number of leadership styles they use and the situation variables they assess. Three established contingency models are displayed in Figure 3-5. Other important contingency theories to be considered are House’s Path-Goal-Theory and Reddin’s 3D-Model. Although all of these models made an important contribution to the overall understanding of leadership dynamics none of them is comprehensive. The immanent simplification of any model leads to the need to focus on chosen variables, thus limiting their relevance.⁹

Figure 3-5: Contingency Models¹⁰

Recently, the relationship between leader and subordinates was established as the most relevant aspect for leadership success. The resulting leadership approaches rely heavily on the personality of the leader as they require certain traits in order to realise their full potential. The basic full range leadership model, as depicted in Figure 3-6, states that transactional leadership based on leadership concepts of reward exchanges leads to average performance of the subordinates that could be augmented by exerting transformational leadership. This kind of leadership is mainly emotion-based and closely related to traits like charisma. Transformational leaders stimulate and inspire their followers to exert extra-effort that leads to extraordinary success. Certain studies attest this leadership approach a higher leadership success, although the theoretical constructs used are debatable and the effects are closely related to the US-American culture.¹¹

Figure 3-6: Relationship-Based Leadership Approaches¹²

All of the above mentioned models can be extremely helpful if used for broadening the choice of leadership behaviour alternatives in certain circumstances. They can be ominous if used as a panacea for how to lead. The first problem is the correct assessment of the situation. More often than not the right way to lead a team would present itself if the leader was able to assess correctly if the subordinates are truly unwilling or only unable. Also, a daily change in leadership behaviour leads to mistrust as this contrasts with the need for reliability and authenticity. The main problem of the successful implementation of those theories lies in the personality of the leader himself. A recommended leadership style that is not in line with the leader’s character will not be perceived as genuine and will therefore not elicit the results required.

Consequently, the coherent leadership approach requires the leader to perform a thorough introspection in order to find out which leadership behaviour or style matches the leader’s personality and motives for taking over a leadership position. Another important factor is the leader’s implicit theory of his subordinates. This implicit theory can be described as the attitude towards subordinates. Leaders with positive attitudes that believe that their subordinates are competent and committed are more willing to delegate tasks or use a transformative leadership style.¹³

Assessing a leader’s personality should be supported by a reliable personality inventory. Fortunately, the different original approaches of assessing personality lead to an internationally accepted “gold standard”, the so-called Five Factor Model (FFM). It consists of the “Big Five” personality factors that account for differences in normal adult personality and which further research found were measurable without overlap. The Big Five factors consist of Neuroticism (N), Extraversion (E), Openness (O), Agreeableness (A) and Conscientiousness (C).¹⁴ These five factors, also referred to as five domains, do not represent an exhausting description of personality as they represent the highest level of trait description and therefore characterise a person at a global level. Hence, each of these factors is further defined by a cluster of six more specific and intercorrelated traits that are called facets. The domain descriptions and related facets are depicted in Figure 3-7. Global domain scores for a person could be obtained by a brief and comprehensive personality inventory called NEO-FFI. This test comprises 60 items that have to be answered and is widely used in recent research projects where personality factors are involved. As the domains proved to be relevant and reliable in intercultural settings a number of different language versions and related cultural-based scales for statistical interpretation are available. The more detailed and comprehensive NEO PI-R personality inventory is also available in different language/cultural versions. It consists of 240 items to be scored and represents all 30 facets.¹⁵

Figure 3-7: The Big Five Personality Factors and Their Facets¹⁶

As already explained, the definition of a good leader is dependent on the expectations of the relevant team members concerning appropriate leadership behaviour. According to the Leader-Member-Exchange Approach (LMX) the practical leadership behaviour will be negotiated individually between leader and subordinate. As depicted also in Figure 3-6 the negotiation process requires an initial offer of the leader by delegating a major task to his/her subordinate in order to test his/her ability and trustworthiness. If the subordinate proves to be reliable and fulfils this task successfully the resulting trust and emotional bond will lead to a good leader-member-relationship and increased freedom for the subordinate. In case of a negative experience the leader will lead more directly and follow the subordinate’s moves more closely. This approach leads to the conclusion that a leader could use a trial-and-error technique to optimise the leadership approach on an individual basis if there is the willingness for a leap of faith on the leader’s part. It is important to note that a risk for this kind of behaviour lies in the distinction of an in-group (with team members who are trusted) and an out-group. This might result in tensions between the team members. Consequently, a central element of a successful leader-member-exchange is leadership feedback. Optimising leadership behaviour requires the leader to understand the effects of his behaviour on others. Using different ways and methods of feedback and including all main stakeholders into the process is therefore a major prerequisite for a successful and individualistic leadership approach.¹⁷

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3.1.2

Excellent Leaders: EFQM Criterion 1

The EFQM Excellence Model provides very tangible advice concerning the activities of successful leaders. As the questions posed in chapter 3.1.1 are more concerned with the personal aspects of good leaders, the EFQM Criterion 1 “Leadership” defines activities needed to ensure that the members of the (top) management team of an organisation fulfil their leadership roles successfully and provides guidance and direction for the organisation as a whole.

The first and most important task of any management team defined in criterion point 1a is the development of mission, vision, values and ethics, thus creating a purpose and reference point for the organisational development. This also includes that they act as role models for the defined ethics and values. Important subsequent activities are defined in the following criterion points, as depicted in Figure 3-8. This includes the definition, monitoring and improvement of the management system (1b), a systematic engagement with relevant external stakeholders (1c), the reinforcement of a culture of excellence together with all of the organisation’s people (1d) and the effective management of changes (1e).

Figure 3-8: EFQM Criterion 1 “Leadership” and Its Criterion Parts¹⁸

3.2	Developing the Mission, Vision, Values and Ethics

The EFQM Excellence Model uses guidance points to provide direction concerning good practices that allow excellent organisations to successfully address the postulated issues, as explained in chapter 1.3.3. The four guidance points that exemplify the statements described in criterion part 1a are depicted in Figure 3-9. These guidance points are addressed in detail in the following corresponding subchapters 3.2.1 to 3.2.4.

Figure 3-9: EFQM Criterion Part 1a and Its Guidance Points¹⁹

3.2.1

Defining and Communicating the Core Purpose of an Organisation

In the classical Anglo-American management theory, the purpose of the organisation is “shaped by vision, stakeholders and ethical issues and delivered by mission and objectives”.²⁰ The vision is understood as the overarching document. It paints a picture about a possible and desirable future and explains what the organisation wants to have created or achieved by then. The mission statement outlines broad directions for the organisation’s development and summarises the underlying reasoning and values.²¹

In Germany, for example, vision and mission statements are not a common part of the organisation’s documents. Some organisations issue a so called “Leitbild” or management philosophy which comprises elements of both vision and mission. The combination of the most important elements into one – usually the mission – statement is becoming increasingly popular in the recent strategy literature and is used for example by Wheelen and Hunger.²² The benefits of these statements are disputed among management experts. Some argue that often these statements constitute wishful thinking and do not mirror the reality of the organisation. The intuition and rhetoric talent needed for verbalising an engaging and powerful vision is also closely related to the concept of charismatic leadership personalities.²³ Many general visions and missions provided in the internet by different international companies make a compelling case against the significance of formulating them.

Nonetheless, it is indispensable for any kind of organisation to discuss, define, and follow a clear purpose. Otherwise, all choices and decisions could be called random at best.

According to Peter Drucker, one of the most renowned management experts, any assessment of an organisation and the path it follows should start with asking “what is our mission?” From this point of view, the mission defines the overriding purpose of the organisation and therefore answers the question what kind of business a company is in. It is closely related to the value proposition and the question of what would be lost for customers or other interested parties if this organisation would not exist. A mission statement says why an organisation does what it does (but not how to do it as this part belongs to the strategy). The mission’s definition might be general or timeless but it has to be able to inspire all members or stakeholders of the organisation. An effective mission statement can be so sharply focused that it fits on a T-Shirt. It is important to note that it serves as the overriding principle and should therefore never be subordinated, even not in order to gain more money.²⁴ In order to serve as a clear direction, a mission statement has to be combined with the purpose the organisation pursues in order to serve its (chosen, relevant) stakeholders and backed up by clearly defined objectives. Leaders should be aware that this statement strictly commits the organisation to pursue a certain direction and thus limits the available strategic choices. The formulated strategy (as discussed in chapter 4.4) and all related decisions are to be aligned with the defined purpose and serve to transmit it into practice.

Depending on the phrasing of its mission statement, Great Jeans (GJ) can have very different future development paths. A mission statement like “we are a producer of Jeans” limits its business to production, which excludes opportunities like the focus on brand development with outsourced production or a focus on design to attract more customers. According to this statement, any kind of Jeans production everywhere (also outsourcing to other parts of the world) would be acceptable. This statement does not help to distinguish GJ from other producers, as it does not state any purpose creating special value for its customers or other stakeholders. Small additions would already provide more directive power. For example “we are a European producer of Jeans”. In this case, outsourcing opportunities could only be used within Europe or within pre-defined limits. This is the point, were a mission statement provides guidance only if backed-up by clearly stated objectives. A management team is far more involved in sharing the same mission if they discuss the boundaries it presents. To be a “European producer” could mean to limit 100% of the production activities to countries that are part of the EU. Alternatively, a management team might decide that Europe includes more than the EU countries and that a maximum share of 20% of production in developing countries still fits in this category as long as the respective companies are 100% owned by European companies.

GJ would take a totally different development path with the following mission statement: “We deliver the world its basic all-day garment”. In this case, the statement is clearly customer focused. This claim would be backed up for example by defined sales targets for markets all over the world. It would also need a clear definition of “basic all-day garment” from a customer perspective. This could for example mean that in customer surveys people give high satisfaction ratings of 90% for the jeans being comfortable to wear and ratings of 80% for the jeans fitting for all kinds of circumstances. In order to appeal to all kinds of people, GJ would probably need to design different product lines or brands for different countries and different income groups in order to satisfy the majority of tastes. In this case, the focus would shift from production to sales and design. The management team might also decide that certain groups of customers only wear a certain type of jeans every day if they can trust its origin and its contents. Such reasoning would lead to objectives concerning 100% use of organic cotton, 100% environmentalfriendly dye, production without child labour and only in companies with acceptable work standards. On the other hand, a luxury line of designer jeans would not fit to this mission statement.

The possible interpretations of the mission statement and related choices of objectives should be guided additionally by the definition of values. Defined values facilitate decisions in cases where new opportunities arise and other statements do not provide suitable direction because they do not (explicitly) cover the affected aspects. An organisation usually chooses between three to five values and publishes them as part of its mission statement or as separate value document. These values are closely related to the company culture, so they might be derived from the actual culture or might be used to guide a change process. Their function as a beacon in stormy or changing times explains why the final choice has to be up to top management, although the development process itself is often accompanied by a value survey with a random sample of employees. Typical values that are used in corporate statements include accountability, commitment, diversity, flexibility, integrity, loyalty, openness, passion, profitability, quality, readiness to help others, reliability, success or sustainability. This non-exhaustive enumeration clearly illustrates the need to interpret and define the meaning of these values for the organisation.

The value statement of Great Jeans includes the values “courage, sustainability and cooperation”. Possible definitions could start like that: “We believe that courage of people and organisations is needed to change the world. All members of GJ are committed to speak up against organisational practices that are not in line with high ethical standards and openly share mistakes so improvements can be made. Sustainability is the key to delivering long-term value to society and customers. We strive to avoid all negative impacts of our production process on the environment and find justifiable ways to ensure our positions on our target markets. Only a close cooperation with our suppliers and customers will enable us to meet their high demands concerning fairness and quality.”

Staying true to their values would not allow them to accept extraordinary low pricing offers of cotton producers with disputable colouring practices and a bad reputation concerning work conditions. This might look very different in case of a value statement declaring the values “performance, success and competition”.

One intention of all above mentioned documents is to provide orientation for employees, customers and other stakeholders about the self-conception of the organisation. This should create trust and enthusiasm and gain commitment.²⁵ Distributing brochures or providing these statements on websites is not enough to achieve these goals. A successful communication of purpose includes at least verbal and observable enforcement from (top) management. According to the Global Workforce Study 2012, only 63% of all participants state that they understand the business goals and only 55% understand the steps the organisation takes to reach its goals. The relevance of providing this kind of orientation for an organisation can be derived from the fact that 88% of the highly engaged employees declare to understand the business goals but only 54% of the detached and 36% of the disengaged.²⁶

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3.2.2

Acting as Role Models for Ethical Behaviour

3.2.2.1

Corporate Ethics and Social Responsibility

Corporate Social Responsibility (CSR) is a term widely used for standards and codes of conduct an organisation sets itself to ensure that it provides sustainable value to all its stakeholders. There are numerous definitions of this subject highlighting different aspects. Recent definitions congruently centre on a voluntary stakeholder-based approach with special reference to environmental, social and economic aspects.²⁷ According to the EU commission CSR is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”²⁸ Thus, CSR encompasses voluntary corporate behaviour above legal requirements that is closely linked to the idea of sustainable development. It should be intrinsically motivated and defines a way in which an organisation is managed – in contrast to a separated programme adopted for publicity reasons. The underlying principles are also relevant for other kinds of organisations, not only for legal corporations. CSR could therefore be defined as the voluntary, continuous commitment of any kind of organisation to behave ethically and contribute to the development of its stakeholders, the environment and society at large by adopting corresponding operational targets and practices.

CSR programmes are manifold and comprise actions that range from the development of a code of ethics and the sponsorship of community events to business-related society development projects. Increasingly, these practices include adoption of the accounting concept of a triple bottom line (TBL) by adding a social and environmental bottom line to the standard economical one. All three bottom lines together are also referred to as the three pillars “Profit, People, Planet”.²⁹

The crucial role of leadership in CSR is generally recognised. Companies in Australia and New Zealand that were seen as frontrunners in CSR were, for example, mainly acknowledged for the integration of CSR with their core business activities and strategies. This encompassed making sustainability a part of the company’s business proposition and integrating it with its products or services. Furthermore their approaches combined the strong integration of sustainability practices in operational processes and convincingly living and promoting CSR values. This was seconded by communicating CSR performance. The act of promoting CSR values and activities as well as showing and calling for commitment on all levels of the organisation is a leadership task that cannot be delegated. It is therefore not astonishing that the main problem for successful implementation of CSR initiatives is consistently found to be a lack of organisational buy-in and commitment to CSR. The willingness and know-how to find logical links between CSR and the business strategy as well as creating a corresponding business case appeared to be far more important to success in CSR than just providing more time or money.³⁰ The positive long-term effects on the company itself were proven in different studies, for example by Collins & Porras. They found out that companies that survived major changes including the impact of various business cycles were companies found to pursue a long-term core mission where all corporate activities were based on. Interestingly, the most successful companies like for example Patagonia Inc. did not focus on profitability as their main goal but created a strong ethical culture.³¹

Exercise: CSR programmes (online)

3.2.2.2

Ethical Behaviour in International Business

Defining ethics in an international business context is not an easy task. The general field of ethics deals with morality, understood as activities and practices that are considered right or wrong based on certain values and governed by rules. In some definitions, this is deemed equivalent to ethics, in others ethics is a step further in so far as it is seen as a systematic attempt to give meaning to our moral experiences in order to define the rules that ought to govern human conduct. Business ethics, therefore, can be understood as the study and moral evaluation of any kind of business actions on a company and individual level.³² An important aspect in this context is the ethical quality of decision-making. An ethical evaluation of business decisions has to take four levels – the individual, the company, the national and the international level – into account. All of these levels provide their own set of values as a basis for evaluation, depending on the involved personalities, cultures and business frameworks governed by general norms as well as laws. Consequently, leaders of transnational corporations (TNCs) have to choose between different approaches of ethical behaviour. They can choose to conform to the norms of the host country (“foreign country type”) by following the old proverb “when in Rome, do as the Romans do”. In this case, there is no general rule for the company. The opposite “empire type” applies the norms of the TNC’s home country to all subsidiaries and parts of the organisation. Both include high reputation risks for the company as the actions taken will be evaluated by people of other cultures using their ethical frameworks as reference points. Many organisations therefore prefer a hybrid approach (“interconnection type”) where they pragmatically evaluate possible alternatives in a supranational view, taking for example norms of wider entities like the EU into account. This approach uses everything that might work for the TNC in a constant process of balancing universal moral limits (“hypernorms”) with individual considerations. The idea of a fourth approach – the “global type” - is highly theoretical as it means to interpret business ethics from a global citizen’s perspective. Unfortunately, a universal framework for business ethics is not (yet) available.³³ Nonetheless, universal norms for certain kinds of ethical behaviour relating to business were established over the last years by supranational organisations like for example the OECD, UN or G20. They form a rough guide to some of the most relevant issues in international business ethics, currently with a focus on preventing corrupt practices.

One of the most influential independent organisations working on establishing effective measures to tackle corruption in government, business and civil society is Transparency International (TI). Since 1993 they support the international fight against corruption with surveys, publications and guidance using their national chapters in more than 100 countries worldwide.³⁴ TI defines corruption as “the abuse of entrusted power for private gain”³⁵ and encompasses with this definition corrupt practices in the public as well as the private sector. Typical forms of corruption in the business sector to be addressed are according to TI the following: insider trading, corporate fraud, commercial bribery, collusion and cartels as well as regulatory and policy capture, as depicted in Figure 3-10.36

Figure 3-10: Corruption Risks Within Domains of Corporate Activities³⁷

With the “OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions”, signed 1997, a first international milestone in condemning bribery was achieved. Until the end of 2012 40 countries established legally binding standards to criminalise bribery of foreign public officials in international business transactions. The convention was amended 2009 with a Recommendation of the Council for Further Combating Bribery.³⁸

The UN Convention against Corruption of 2003 provided the first effective international legal instrument that defined a universal view on actions perceived as acts of corruption both in the public and the private sector. Until September 2013 the convention achieved global coverage with 140 signatories. It criminalises a wide range of corruption issues ranging from generally accepted basic forms such as bribery and the misuse of public funds to more elaborated forms like trading in influence, concealment and laundering, including money-laundering. The ratifying states were required to establish criminal offences or in some cases at least to consider doing so. The latter cases provided flexibility for those countries, where the cultural perspectives on the respective behaviour differ relevantly.³⁹ The convention was supported by the G20 Anti-Corruption Action Plan of 2010. This plan was set up to encourage the governing bodies of international organisations to operate with high standards of ethics and integrity while being transparent and using effective internal safeguards. The aim is a public-private partnership to develop initiatives that engage the business as essential stakeholder in the fight against corruption.⁴⁰ Since 2013 the related working group’s progress reports are available at the G20 website. They provide interesting information on the state of corruption combat and its most recent focus. In 2013 sectors that were seen as particularly vulnerable to corruption were discussed, for example construction, the extraction of natural resources or sectors organisation of sporting, cultural and other major international events.⁴¹ The B20 Task Force on Improving Transparency and Anticorruption recommended in 2012 amongst other things to set up reliable ethics and compliance programs and to develop mechanisms to assess and increase their effectiveness. They further suggested joint public-private actions as “integrity pacts”, whereby all bidders and government agencies agree to neither pay nor solicit bribes to public contracts or sectoral integrity initiatives aiming at defining precise rules of governance and behaviour.⁴² Transparency International recommends the establishment of a comprehensive corporate integrity system. From the company side this includes two spheres: the norms & culture sphere (covering ethical leadership, codes of conduct and corporate citizenship) and the governance mechanisms (covering the corporate compliance system, whistleblowing, corporate governance, accountants and auditors). In order to ensure a high level of integrity this has to be enhanced by rules, regulations and enforcement of governments which covers regulatory oversight, civil and criminal liabilities as well as law enforcement. The system is completed by broader checks and balances for further incentivising ethical behaviour. This covers investors, public reporting, civil society watchdogs, investigative journalism and consumer campaigns.⁴³ In 2013, the UN provided a practical guide for an “Anti-Corruption Ethics and Compliance Programme for Business”.⁴⁴ This guide addressed the visible support and active commitment from senior management towards zero-tolerance of corruption as the deciding prerequisite for the successful development and implementation of an anti-corruption programme.⁴⁵

In a multinational corporation the task of setting up an anti-corruption programme requires a sensitive approach to certain issues as the view on certain acts of corruption is influenced by cultural value systems. For example, gift giving is seen in Asian cultures as an important process in the establishment of trusting relationships and is usually an act of reciprocity. This could be misconstrued as bribery.⁴⁶ Consequently, the corporate definition has to draw a clear line between bribery and acceptable exchange of presents. This is usually achieved by defining the kind of present as well as the maximum cost for it that are deemed appropriate for establishing business relations. The success of the implementation of this ethical standard is highly dependent on the extensive communication of the underlying reasoning and top management role modelling.

Research also suggests that a propensity towards certain practices generally labelled as corrupt is correlated positively to high levels of Hofstede’s power distance, masculinity, and collectivism. Countries with a high power distance for instance are more likely to accept a lack of equality regarding power and authority, a basic prerequisite for acceptance of the misuse of personal power.⁴⁷

Only 58% of all participants of the 2012 Global Workforce Study judged their organisation to conduct business activities with honesty and integrity. This leaves considerable room for improvement.⁴⁸

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3.2.3

Communicating Direction and Uniting the Organisation’s People

Setting a clear direction and a consistent strategic focus is one of the most important tasks of leaders. The technicalities of defining and communicating a strategy are dealt with in the EFQM criterion 2 “strategy” and therefore explained in detail in chapter 4. The contribution of the leader goes far beyond the initiation of the strategy development process. According to the EFQM model, excellent leaders unite their people and thus enable them to share the organisation’s mission and goals and achieve their implementation. This is very relevant for the engagement of an organisation’s people. The 2012 Global Workforce Study revealed that 86% of highly engaged employees indicated to understand the business goals and how their own job contributes to them. In contrast, only 36% of the disengaged employees indicated the same understanding.⁴⁹

Uniting the organisation’s people is especially challenging when they come from different cultural backgrounds. According to Trompenaars and Hampden-Turner, a high performing international leader has to possess transcultural competence, which could be defined as the propensity to reconcile seemingly opposing values or “the capability to connect different points of view through the elicitation of dilemmas and their reconciliation”⁵⁰. In a very practical sense, international leaders spend a relevant amount of their time continually reconciling (cultural) dilemmas as defined in chapter 2.3.9.

3.2.5

Developing and Reviewing Leadership Culture

3.2.5.1

Developing and Supporting a Shared Leadership Culture

Behaviour in organisations circles around leadership behaviour. Employee commitment, their sense of being valued with their unique contributions to overall success as well as their willingness to contribute on a wide front is mainly influenced by their perceived relationship with their supervisors. A shared leadership culture is therefore paramount for ensuring a consistent approach to (goal) communication, performance evaluation and employee appreciation. Defining and supporting a leadership culture is more than creating job descriptions, determining responsibilities and developing rules for acceptable leadership behaviour like a “leadership code of conduct”. It requires a constant communication and discussion process in order to shape a uniform understanding of leadership roles and desirable leadership behaviour. Organisations with a strategic focus on innovation and development for example tend to foster employee freedom, team building and self-directed work-sharing. This requires a relationship-based leadership approach where the leader accepts an emphasis on being a motivator, coach and communicator. In an organisation concentrating on extremely structured production processes the leadership role model accentuates taking responsibility for continuously improving the work flow as well as inspiring people for challenging zerodefect-programmes and technological change.

Figure 3-11: Percentages Opting for Blaming an Individual⁵¹

In chapter 3.1.1 research revealed that the ability to show certain leadership behaviour has a personality component. In addition, the acceptance of certain leadership behaviour is also based on cultural perspectives. Trompenaars & Hampden-Turner investigated a leadership dilemma where a leader has to deal with a trainee worker that made a very serious error, causing considerable correction efforts and a relevant loss of time. Depending on the (culture-based) interpretation of the situation this could be seen as a mistake of a single person or alternatively as a failure of the whole team that was responsible for supervising, training and coaching the new member. Figure 3-11 provides an overview of the percentages of respondents of chosen countries opting for blaming an individual. Especially in Russia but also in China, France, Germany, UK and the USA it is quite probable that a leader will blame and punish the individual whereas leaders from Finland, India and Japan will more likely blame the team.

An important contribution to the question of a universal endorsement of specific leader actions or characteristics was made by the GLOBE study introduced in chapter 2.4. Differing ideas of effective leadership were researched by a multitude of attributes or behaviours. The leadership definition used is quite close to the leadership definition of the EFQM Excellence Model. According to the GLOBE study, leadership is “the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organizations of which they are members.”⁵² Based on the so-called implicit leadership theory (ILT) the study extended the focus from differences on an individual level to a cultural-level theory (CLT). ILT states that each person holds a set of beliefs about behaviours, skills and characteristics that contribute to or obstruct effective leadership. These belief systems or mental models were assumed in the GLOBE project to be shared by members of a certain (societal or organisational) culture. The relevance of theses mental models stems from the idea that they influence the extent to which someone accepts and responds to other persons as leaders. The GLOBE project found out that there are statistically significant differences among cultural groups concerning leadership beliefs. Six global culturally endorsed implicit leadership dimensions (or global leader behaviours) were finally identified that are presented in Figure 3-12. They were derived from 21 CLT leadership subscales. Each global dimension consists of one or several of these subscales. The team oriented leadership style for example comprises the subscales collaborative team orientation, team integrator, diplomatic, malevolent (reverse scored) and administratively competent. Participants of the GLOBE project evaluated the six leadership dimensions based on a 7-point scale, where evaluations of 1 or 2 were seen as inhibiting outstanding leadership, an evaluation of 3 was perceived as neutral and evaluations from 4 to 7 were understood as contributing to outstanding leadership. As Figure 3-12 shows, only the first three of the six leadership dimensions – charismatic/value based, team oriented and participative leadership – were generally understood as contributing to outstanding leadership, receiving values in all 62 countries between 4.5 and 6.5. Humane oriented leadership was perceived as being neutral in some societies and moderately contributing in others. The view on autonomous leadership varies widely – from being seen as impeding to slightly facilitating outstanding leadership. The selfprotective leadership style was mainly reported as an impediment. Further research revealed that certain cultural values are linked to certain leadership dimensions. A positive view on charismatic/value based leadership is for example closely related to the cultural values performance orientation, in-group collectivism and gender egalitarianism as well as low scores on power distance. Self-protective leadership is seen as a positive approach by cultures with high values of power distance and uncertainty avoidance and low scores in gender egalitarianism.⁵³