Welcome to Class 15

1. Welcome to Class 15 Research: Qualitative Domain Part 2 Chapter 7

2. Culture: A Driver of Qualitative Performance

3. "Culture" is a Primary Driver of Qualitative Performance National Culture + Corporate Culture = Impact on firm performance "Culture" is characterized as the mental programming of people. Wherever several people are gathered together for an extended period of time – a unique culture will emerge. TMTs should:   • Assess their corporate culture • Study the national cultures of countries in which they compete

4. 1. Looking Inward – Corporate Culture

5. Corporate Culture • Corporate Culture is a reflection of a firm’s personality, character, and attitude. Other terms for corporate culture include: “Organizational DNA” and “Organizational Soul.” However, while these terms are thought provoking, they may be unnecessarily pessimistic. They suggest corporate culture is fixed, rigid, and unchangeable. “DNA” AND “SOUL” terms imply there is no potential for growth and improvement . This is NOT TRUE of corporate culture.

6. Healthy Corporate Culture: A management mandate Corporate Culture: 1. Determines whether employees support each other or work against each other. 2. Affects the manner in which employees interact with customers, creditors, competitors, shareholders, and other stakeholders. 3. Determines the extent to which the interests of multiple stakeholders will be considered and balanced. Nurturing and supporting a healthy corporate culture is a challenging task!

7. TMTs need to ask questions such as:  Are we lacking in efforts to promote the value of diversity of thoughts, ideas, and cultures?  Do we have dual standards of behavior, one for executives and another for all other employees?  Do our systems inadvertently reward indecision and/or incompetence?  Do we tolerate arrogance and condescension?  Do we discourage openness and truthfulness?  Do we really understand the interaction of corporate and national cultures?

8. Corporate culture and National culture ARE SYMBIOTIC. They influence each other. Capable corporate TMTs recognize – to fully understand either requires understanding both.

9. 2. Looking Outward – National Culture

10. National culture is: • The mental programming of a group of people • Comprised of the values, customs, and belief systems shared by a group of people National cultures occasionally clash with Corporate cultures Clashes usually occur when employees of one nation work in another nation.

11. National Culture & Corporate Culture:  Potential Clash! TMTs who have cultural myopia… Lack the ability to recognize potential conflicts between corporate culture and national culture. Inability to recognize the conflicts Potential for irreparable damage to a firm’s reputation. =

12. National cultures alien to the corporation can present formidable challenges. They require flexibility and creative management thinking. Challenges include understanding the value systems of: 1. New customers; and 2. New employees from the local culture.

13. TMTs can guard against cultural clashes by developing a better understanding of the national culture of the “new” country in which they wish to compete. TMTs need to DO THEIR HOMEWORK and study the new culture before they begin making decisions. The overriding objective is to strike a harmonious and productive balance between corporate and national cultures. Striking this balance begins with understanding the unique characteristics and subtleties of national cultures.

14. The groundwork for corralling the characteristics and subtleties of national cultures was provided by Dr. Geert Hofstede. He organized various national cultures into “dimensions” which facilitate the understanding of and appreciation for the unique cultural characteristics of individual countries.

15. Hofstede’sCultural Dimensions • Five dimensions: • Power Distance • Individualism • Uncertainty Avoidance • Masculinity • Short and long-term orientation The following slides are directly from Hofstede’s data

16. Power Distance Index (PDI)…The degree of equality, or inequality, between people in a country’s society 1. High Power DistanceThe imbalances of power and wealth that have been allowed to grow within the society. (Rich are powerful)  These are more likely to follow a caste system that does not allow significant upward mobility of its citizens. 2. Low Power DistanceA society de-emphasizes the differences between citizen’s power and wealth.  In these societies equality and opportunity for everyone is stressed.

17. Uncertainty Avoidance Index (UAI)… The level of tolerance for uncertainty and ambiguity within the society – i.e. unstructured situations. 1. High Uncertainty AvoidanceIndicates the country has a low tolerance for uncertainty and ambiguity.  A rule-oriented society that institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty. 2. Low Uncertainty AvoidanceIndicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions.  A society that is less rule-oriented, more readily accepts change, and takes more and greater risks.

18. Individualism (IDV)…The degree society reinforces individual or collective achievement and interpersonal relationships. 1. High IndividualismIndicates that individuality in these societies may tend to form a larger number of looser relationships. 2. Low IndividualismTypifies societies of a more collectivist nature with close ties between individuals.  Reinforced extended families and collectives where everyone takes responsibility for group members

19. Masculinity (MAS)… The degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control, and power. 1. High MasculinityIndicates the country experiences a high degree of gender differentiation.  Males dominate a significant portion of the society and power structure, with females being controlled by male domination. 2. Low MasculinityIndicates the country has a low level of differentiation and discrimination between genders.  Females are treated equally to males in all aspects of the society.

20. Long-term Orientation (LTO)…The degree to which a society respects cultural traditions and the value it places on long-term commitments. 1. High Long-Term OrientationIndicates the country prescribes to the values of long-term commitments and respect for tradition.  Supportive of a strong work ethic where long-term rewards are expected as a result of hard work. Business may take longer to develop in this society, particularly for an “outsider.” 2. Low Long-Term OrientationIndicates the country does not reinforce the concept of long-term traditional orientation.  Change can occur more rapidly as long-term traditions and commitments do not become impediments to change.

21. Summary… Culture, both corporate and national, play a significant role in a firm’s qualitative performance. Qualitative performance should be the everyday concern of every manager. The global nature of business increases the risk of clashes between corporate cultures and national cultures.

22. End: Research: Qualitative Domain – Part 2 Very Important: Review Appendix B of your text (pages 170 – 172) “Hofstede’s Cultural Dimensions.” You are responsible for this information and IT WILL BE ON THE TEST! Assignment: Read Chapter 8 Research: Issues & Challenges