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International Management

Culture, Strategy, and Behavior

Fred Luthans | Jonathan P. Doh

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R Chapter 6

ORGANIZATIONAL CULTURES AND DIVERSITY

The World of International Management

Managing Culture and Diversity in Global Teams

A ccording to many international consultants and manag-ers, diverse and global teams are one of the most con- sistent sources of competitive advantage for any organization. Deloitte Touche Tohmatsu, the international accounting and consulting firm, has embraced a global mindset when building its teams. According to the company, “strength from cultural diversity is one of Deloitte’s shared values.” With more than 200,000 employees spread across offices in 150 countries, the company has implemented a corporate culture that regards diversity as a key competitive advantage.1

At Deloitte, as with most multinational organizations, global teams are also virtual teams. According to a study by Kirkman, Rosen, Gibson, and Tesluk, virtual teams are “groups of people who work interdependently with shared purpose across space, time, and organization boundaries using technology to commu- nicate and collaborate.”2 These teams are often cross-cultural and cross-functional. Furthermore, Kirkman and colleagues explain that virtual teams allow “organizations to combine the best expertise regardless of geographic location.”3 To manage a global team, international managers must take into consider- ation three factors: culture, communication, and trust.

Culture At Deloitte, leadership is trained to adapt to the cultural differ- ences that their globally located employees exhibit. Leveraging the experiences of one of their global teams, the company conducted a three-month study into how cultural dynamics impact performance and success. The team included employ- ees from Spain, Germany, Australia, the United States, and Japan. Through this study, Deloitte identified four key findings regarding culture and global leadership:4

1. “Cultural and/or personality diversity is in the eye of the beholder.” Despite prior assumptions that cultural differ- ences would have the largest impact on the team’s final deliverable, the team members in the study were split as to whether culture or personality led to a greater

The previous two chapters focused on national cultures. The overriding objective of this chapter is to examine the interac- tion of national culture (diversity) and organizational cultures and to discuss ways in which MNCs can manage the often inherent conflicts between national and organizational cultures. Many times, the cultural values and resulting behaviors that are common in a particular country are not the same as those in another. To be successful, MNCs must balance and integrate the national cultures of the countries in which they do busi- ness with their own organizational culture. Employee relations, which includes how organizational culture responds to national culture or diversity, deals with internal structures and defines how the company manages. Customer relations, associated with how national culture reacts to organizational cultures, reflects how the local community views the company from a customer service and employee satisfaction perspective. Although the field of international management has long recognized the impact of national cultures, only recently has attention been given to the importance of managing organiza- tional cultures and diversity. This chapter first examines com- mon organizational cultures that exist in MNCs, and then presents and analyzes ways in which multiculturalism and diversity are being addressed by the best, world-class multina- tionals. The specific objectives of this chapter are

1. DEFINE exactly what is meant by organizational culture, and discuss the interaction of national and MNC cultures.

2. IDENTIFY the four most common categories of organiza- tional culture that have been found through research, and discuss the characteristics of each.

3. PROVIDE an overview of the nature and degree of multi- culturalism and diversity in today’s MNCs.

4. DISCUSS common guidelines and principles that are used in building multicultural effectiveness at the team and the or- ganizational levels.

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better, stronger cross-cultural teams. Through the program, individuals are identified as having one or more of the four types of “chemistries”: Pioneer, Driver, Integrator, or Guardian. By sharing their “chemistry” with the team, team members can adapt their style of delivery to better communicate with each other. Deloitte delivers “Business Chemistry” to external clients as well as to its internal teams. To date, more than 90,000 people in 150 countries have used the program.6

In her article “Tips for Working in Global Teams,” Melanie Doulton provides helpful suggestions for good communication in a global team:

∙ When starting a project with a new team, hold an initial meeting in which all members introduce themselves and describe the job each one is going to do.

∙ Hold regular meetings throughout the project to ensure everyone is “on the same page.” Follow up conference calls with written minutes to reinforce what was discussed and what individual team members are responsible for.

∙ Put details of the project in writing, especially for a new team in which everyone speaks in different accents and uses different idioms and colloquialisms.

∙ Communicate using the most effective technology. For example, decide when e-mail is preferable to a phone call or instant messaging is preferable to a videoconfer- ence. In addition, try to understand everyone’s communi- cation style. For example, for a high-context culture such as India’s, people tend to speak in the passive voice, whereas in North America, people use the active voice.7

Moreover, while acknowledging the challenges of communica- tion in virtual teams, Steven R. Rayner also points out that written communication can have an advantage. He states, “The process of writing—where the sender must carefully examine how to communicate his/her message—provides the sender with the opportunity to create a more refined response than an ‘off-the-cuff’ verbal comment.”8

impact. In many instances, the individual personalities of the team members, irrespective of national origin, were shown to be equally as differentiating.

2. “Cultural diversity can positively contribute to people’s professional and personal enjoyment of the project, as well as a project’s outcome.” The team members in the study universally expressed an enhanced experience from working with others of differing cultures. A few fac- tors seemed to lead to this. Genuine curiosity about their fellow team members, learning how to build new types of relationships, and being challenged to think differently were all found to be enjoyable by the employees.

3. “Cultural diversity can indirectly encourage project mem- bers to rethink their usual working habits and expecta- tions, behave with fewer assumptions about the ‘right’ way to address an issue and promote linguistic clarity.” Unexpectedly, the lack of a common first language between team members actually enhanced communica- tion. Employees spent more time ensuring that the con- tent of their communication was clearly understood by the team, and team members reported that they actually found themselves transforming into better listeners.

4. “The dominance of cultural diversity amongst team mem- bers reduces the bias to interact with people who have common characteristics and create a unique bond.” With each employee bringing a different set of perspectives to the table, the playing field among the team members was more level. The employees expressed a sense of synergy, with many stating that they felt better prepared to overcome challenges by having such a diverse set of skills at their disposal. Ironically, the lack of similarities between the employees in the study actually led to greater personal connections to each other, with team members expressing a familial feeling among the group.5

Communication Communicating without face-to-face interaction can have its drawbacks. Being consciously aware of the way that both you and your teammates communicate can increase the chances of success for your team. To help team members gain a better understanding of each other’s communication styles, Deloitte developed “Business Chemistry,” a program that identifies the pre- ferred business behaviors of team members to help build

Likelihood of Message Getting Interpreted Correctly

Source: Adapted from Steven R. Rayner, “The Virtual Team Challenge,” Rayner & Associates, Inc., 1997.

Fax/Letter

LOW HIGH

E-mail Telephone Video

Conferencing Face-to-Face

Interaction

184 Part 2 The Role of Culture

Trust Kirkman and colleagues emphasize that “a specific challenge for virtual teams, compared to face-to-face teams, is the dif- ficulty of building trust between team members who rarely, or never, see each other.”9  Rayner notes that “by some estimates, as much as 30 percent of senior management time is spent in ‘chance’ encounters (such as unplanned hallway, parking lot, and lunch room conversations). . . . In a virtual team setting, these opportunities for relationship building and idea sharing are far more limited.”10

How can managers build trust among virtual team mem- bers? From their research, Kirkman and colleagues discovered that “building trust requires rapid responses to electronic com- munications from team members, reliable performance, and consistent follow-through. Accordingly, team leaders should coach virtual team members to avoid long lags in responding, unilateral priority shifts, and failure to follow up on commit- ments.”11 In addition, Doulton recommends that virtual team members “exchange feedback early” and allow an extra day or two for responses due to time zone differences.12

Team building activities also build trust. According to Kirkman and colleagues, as part of the virtual team launch, it is recom- mended that all members meet face-to-face to “set objectives, clarify roles, build personal relationships, develop team norms, and establish group identity.”13  Picking the right team members can help the teams become more cohesive as well. When Kirk- man and colleagues interviewed 75 team leaders and members in virtual teams, people responded that skills in communication, teamwork, thinking outside the box, and taking initiative were more important than technical skills. This finding was surprising, considering most managers select virtual team members based on technical skills. Having people with the right skills is essential to bring together a successful virtual team.14

At Deloitte, training employees to trust and harness the ben- efits of global, diverse teaming starts at the intern level. Through Deloitte’s Global Project Challenge, interns cross-collaborate with other Deloitte employees across the world to solve real business problems. Employees learn strategies to cope with both the logistical challenges, such as time zone differences, and cultural challenges that arise when working in a virtual team.

Advantages of Global Virtual Teams In addition to its challenges of overcoming cultural and com- munication barriers, global virtual teams have certain advan- tages over face-to-face teams. First, Kirkman and colleagues concluded that “working virtu- ally can reduce team process losses associated with stereotyp- ing, personality conflicts, power politics, and cliques commonly experienced by face-to-face teams. Virtual team members may be unaffected by potentially divisive demographic differences when there is minimal face-to-face contact.” Managers may even give fairer assessments of team members’ work because managers are compelled to rely on objective data rather than being influenced by their perceptual biases.15

Second, Rayner observes that “having members span many different time zones can literally keep a project moving around the clock. . . . Work doesn’t stop—it merely shifts to a different time zone.”16

Third, according to Rayner, “The ability for an organization to bring people together from remote geography and form a cohesive team that is capable of quickly solving complex prob- lems and making effective decisions is an enormous competi- tive advantage.”17

For an international manager, this competitive advantage makes overcoming challenges of managing global teams worth the effort.

As can be seen from Deloitte’s experiences, there are both benefits and challenges inher- ent in multinational, multicultural teams. These teams, which almost always include a diverse group of members with varying functional, geographic, ethnic, and cultural back- grounds, can be an efficient and effective vehicle for tackling increasingly multidimen- sional business problems. At the same time, this very diversity brings challenges that are often exacerbated when the teams are primarily “virtual.” Research has demonstrated the benefits of diversity and has also offered insight on how best to overcome the inherent challenges of global teams, including those that are “virtual.”

In this chapter we will explore the nature and characteristics of organizational culture as it relates to doing business in today’s global context. In addition, strategies and guidelines for establishing a strong organizational culture in the presence of diversity are presented.

■ The Nature of Organizational Culture The chapters in Part One provided the background on the external environment, and the chapters so far in Part Two have been concerned with the external culture. Regardless of whether this environment or cultural context affects the MNC, when individuals join an MNC, not only do they bring their national culture, which greatly affects their learned beliefs, attitudes, values, and behaviors, but they also enter into an organizational culture. Employees of MNCs are expected to “fit in.” For example, at PepsiCo, personnel are

Chapter 6 Organizational Cultures and Diversity 185

expected to be cheerful, positive, and enthusiastic and have committed optimism; at Ford, they are expected to show self-confidence, assertiveness, and machismo.18 Regardless of the external environment or their national culture, managers and employees must under- stand and follow their organization’s culture to be successful. In this section, after first defining organizational culture, we analyze the interaction between national and organi- zational cultures. An understanding of this interaction has become recognized as vital to effective international management.

Definition and Characteristics Organizational culture has been defined in several different ways. In its most basic form, organizational culture can be defined as the shared values and beliefs that enable members to understand their roles in and the norms of the organization. A more detailed definition is offered by organizational cultural theorist Edgar Schein, who defines it as a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, and that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to per- ceive, think, and feel in relation to those problems.19

Regardless of how the term is defined, a number of important characteristics are associated with an organization’s culture. These have been summarized as

1. Observed behavioral regularities, as typified by common language, terminol- ogy, and rituals.

2. Norms, as reflected by things such as the amount of work to be done and the degree of cooperation between management and employees.

3. Dominant values that the organization advocates and expects participants to share, such as high product and service quality, low absenteeism, and high efficiency.

4. A philosophy that is set forth in the MNC’s beliefs regarding how employees and customers should be treated.

5. Rules that dictate the dos and don’ts of employee behavior relating to areas such as productivity, customer relations, and intergroup cooperation.

6. Organizational climate, or the overall atmosphere of the enterprise, as reflected by the way that participants interact with each other, conduct themselves with customers, and feel about the way they are treated by higher-level management.20

This list is not intended to be all-inclusive, but it does help illustrate the nature of organizational culture.21  The major problem is that sometimes an MNC’s organizational culture in one country’s facility differs sharply from organizational cultures in other countries. For example, managers who do well in England may be ineffective in Germany, despite the fact that they work for the same MNC. In addition, the cultures of the English and German subsidiaries may differ sharply from those of the home U.S. location. Effec- tively dealing with multiculturalism within the various locations of an MNC is a major challenge for international management.

A good example is provided by the British-Swedish MNC AstraZeneca PLC, the seventh-largest pharmaceutical company in the world. With operations in over 100 coun- tries on six continents, AstraZeneca’s 13-member senior executive team includes leaders from the United Kingdom, France, Australia, the United States, and the Nether- lands.22 Over 23 percent of the company’s employees work in North America, and about 31 percent are employed in Asia.23 To unite such a diverse set of employees under a common corporate culture, AstraZeneca’s Global Steering Group has focused on three universal cultural pillars: “Leadership and Management Capability,” “Transparency in Talent Management and Career Progression,” and “Work/Life Challenges.”24 Further- more, the company introduced a new cross-cultural mentorship program, called Insight Exchange. By pairing senior- and junior-level employees from different cultural and professional backgrounds, AstraZeneca hopes to create a more open culture.

organizational culture Shared values and beliefs that enable members to understand their roles and the norms of the organization.

186 Part 2 The Role of Culture

In some cases companies have deliberately maintained two different business cul- tures because they do not want one culture influencing the other. A good example is provided by the Tata Group, the giant conglomerate based in India, which has made multiple transnational acquisitions in recent years. When its automobile subsidiary, Tata Motors, bought control of Daewoo, a Korean automaker, it used a strategy that is not very common when one company controls another. Rather than impose its own culture on the chain, Tata’s management took a back seat. To emphasize this approach, Tata Group chairman Ratan Tata publicly stated that “Tata Motors will operate Daewoo as a Korean company, in Korea, managed by Koreans.”25  Tata maintained the Daewoo brand name, appointed a Korean as the new CEO, and operated as a Korean business. The union vice president even remarked that “Though Tata is a foreign company, we were able to confirm that it recognizes and respects Korea in many aspects.” In the first four years after the acquisition, revenue doubled, operating profit grew sevenfold, and trust between the employees’ union and management improved.26   

Tata Chemicals took a similar approach when it purchased British soda ash producer Brunner Mond and its Kenyan subsidy Magadi Soda. To maintain the existing company culture at Brunner Mond and Magadi Soda, Tata Chemicals did not change the companies’ names or logos, kept all existing senior executives in place, and made it clear that all major decisions would be made jointly between Brunner Mond, Magadi Soda, and Tata Chemi- cals. To ensure a smooth ownership transition, executives from all three companies jointly created a plan of action for the first 100 days post-acquisition. Since then, Tata Chemicals has leveraged resources from all three companies to build strong relationships with exter- nal suppliers, expand global growth opportunities, and coordinate sales and operations.27 

■ Interaction between National and Organizational Cultures There is a widely held belief that organizational culture tends to moderate or erase the impact of national culture. The logic of such conventional wisdom is that if a U.S. MNC set up operations in, say, France, it would not be long before the French employees began to “think like Americans.” In fact, evidence is accumulating that just the opposite may be true. Hofstede’s research found that the national cultural values of employees have a significant impact on their organizational performance, and that the cultural values employees bring to the workplace with them are not easily changed by the organization. So, for example, while some French employees would have a higher power distance than Swedes and some a lower power distance, chances are “that if a company hired locals in Paris, they would, on the whole, be less likely to challenge hierarchical power than would the same number of locals hired in Stockholm.”28

Andre Laurent’s research supports Hofstede’s conclusions.29 He found that cultural differences are actually more pronounced among foreign employees working within the same multinational organization than among personnel working for firms in their native lands. Nancy Adler summarized these research findings as follows:

When they work for a multinational corporation, it appears that Germans become more German, Americans become more American, Swedes become more Swedish, and so on. Surprised by these results, Laurent replicated the research in two other multinational cor- porations, each with subsidiaries in the same nine Western European countries and the United States. Similar to the first company, corporate culture did not reduce or eliminate national differences in the second and third corporations. Far from reducing national differ- ences, organization culture maintains and enhances them.30

There often are substantial differences between the organizational cultures of dif- ferent subsidiaries, and, of course, this can cause coordination problems. For example, when Lucent Technologies, Inc., of Murray Hill, New Jersey, merged with Alcatel SA of Paris, France, both parties failed to realize some of the cultural differences between themselves and their new partners. Leadership concerns due to cultural misunderstand- ings arose from the very beginning of the merger. Frenchman Serge Tchuruk was

Chapter 6 Organizational Cultures and Diversity 187

appointed chair of the combined company, while American Patricia Russo was appointed as CEO. In France, the chair is often seen as the company’s leader, while in the United States, the CEO is viewed as the person highest in command. This cultural difference led to confusion as to whether Russo or Tchuruk was actually in charge.31 Additionally, Patricia Russo did not speak French, despite leading a now-French company, resulting in additional confusion.32   

When the combined company faced financial crises, the cultural response differed greatly between the American and French executives, leading to further disagreement. In the United States, jobs are often cut when finances are pressured, whereas in France, companies tend to reach out to the government for assistance. As a result, Alcatel-Lucent was unable to cut costs, but also unable to secure government assistance.33 Local restric- tions, overlooked before the merger, further hindered the combined company’s success and added to the financial strain; in Bonn, Germany, for example, the company was required to keep both Lucent’s and Alcatel’s original offices open, despite employing only a combined 75 employees.34 After just a few years, both top executives were forced to step

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