Cultural differences in organizations

1. Cultural differences in organizations Opening academicyear Faculty of Economics and Business University of Groningen 1st September, 2009 Geert Hofstede

2. Cultural differences in organizations Mindyour level of analysis! individuals (“stranger in ourmidst”) organizations (“the way we do thingshere”) societies (“crazy guys, those Romans”)

3. Cultural differences in organizations individuals (“stranger in our midst”)

4. Culturaldifferences in organizations and the functioning of a (foreign) individual • more a matter of persons (on either side) than of culture • demands on settler’s personality • openness to new experience • emotional stability • universality of culture shock • dealing with mutual prejudices • expatriate training • cultural intelligence

5. Cultural differences in organizations organizations (“the way we do things here”)

6. Culturaldifferences in organizations and the culture of the organization • organizational level: comparing different organizations within same country(ies) • also called corporateculture but this can include different organizational cultures • organizational cultures consist of practices that adult new hires can learn on the job • in particular symbols, heroes and rituals • they can be monitored and changed • but only through what top management practises, not through what it preaches • “corporate values” are window dressing

7. Cultural differences in organizations societies (“crazy guys, those Romans”)

8. Culturaldifferences in organizations and the cultures of societies • societal level: comparing same or similar organizations across different countries • societal cultures consist of shared values • which pass from parents to children • which can change, but not be changed • for managers they are given facts • which economists have too long ignored • international organizations function through shared practices, as values are rarely shared

9. Culturaldifferences in organizations and the origin of societal culture differences • we humans are born incompletely programmed • until about age 10 we are physiologically equipped for completing our programming • which is provided by our social environment • and includes all our basic emotional values • which to ourselves remain largely unconscious • after age 10, these basic values stay with us • even if we migrate to another country

10. A case of societal cultures: the 2008 crisis

11. Culture and the 2008 financial crisis • “That things could turn as quickly as they could, I don’t think anyone saw”, said Sir Fred Goodwin • Schools of economics and business didn’t teach him one cannot have one’s pudding and eat it • Economics as a science has ideological roots in Anglo-American cultural values …. • which have blinded it to the role of other values • Goodwin and his kind still did not discover that their own values were at the root of the crisis • Ideology of privatization led to nationalization

12. Business goals around the world • How does one find out about the goals-in-useof business leaders? Asking the leaders themselves is not a solution – there is an obvious self-serving bias; moreover, real goals may be unconscious • In 1995, Hong Kong evening MBA students rated their successful business leaders on 15 goals • From 1996 to 2002, evening MBA students in 16 other countries replicated this exercise • Part-time MBA students with day jobs in business organizations may be the best objective judges of their top managers’ goals available anywhere

13. Business leaders’ goals attributed rank order:mean across 17 countries around 1998 Growth of the business Continuity of the business This year’s profits TOP 5 Personal wealth Power Honour, face, reputation Creating something new MIDDLE 5 Profits 10 years from now Staying within the law Responsibility towards employees Respecting ethical norms Responsibility towards society BOTTOM 5 Game and gambling spirit Patriotism, national pride Family interests

14. Goals of business leaders perceived by MBAs more & less important goals compared to other countries in the U.K. in the Netherlands Staying within the law Game and gambling spirit This year’s profits Responsibility tds. employees Responsibility tds. employees Continuity of the business Responsibility tds. society Honour, face, reputation Continuity of the businessResponsibility tds. society Game and gambling spirit Personal wealth Profits 10 years from now Profits 10 years from now Growth of the business Patriotism, national pride Power Family interests Creating something new Growth of the business

15. Goals of business leaders perceived by MBAs more & less important goals compared to other countries in the USA in China Growth of the business Respecting ethical norms Respecting ethical norms Patriotism, national pride Personal wealthPower This year’s profits Honour, face, reputation Power Responsibility tds. society Profits 10 years from now Family interests Responsibility tds. employees Game and gambling spirit Family interests This year’s profits Creating something newPersonal wealth Continuity of the business Staying within the law

16. Top goals of US business leaders in 1998: growth, wealth and short term gains • Growth, no continuity • Short term, no long term • Personal greed and power • No responsibility towards stakeholders • No creativity for innovation This was the recipe for a collision course The 2008 crash was predictable in 1998 – but economists didn’t see it

17. Ratedimportance of wealth vs. reputation Reputation more important Denmark, Netherlands, Germany China, Asians in Hawaii, New Zealand Aboutequal India, Brazil, Britain Personalwealth more important USA, Australia, Hong Kong

18. Don’t spill our cultural assets • The USA has played a key role in the world economy of the 2nd half of the 20th century • Civilizations rise and fall, and the American civilization is no exception – its era is fading • A Dutch cultural trait is to admire others – often forgetting to look at own strengths • Dutch universities are able to link co-European, American and Asian cultures

19. FEB after the crisis – business as usual? The University of Groningen was founded on 23rd August, 1614, and international from the beginning It always recognized the challenges of the times Desirablesforits 5th century - Studying the economics of responsibility - Studying business as a creative game - Formingmastersprepared to serve society