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Final Project ReportCross Cultural management

Doing Business inRomania

Region: Eastern Europe & Central AsiaPopulation: 21,546,874Income category: Upper middle incomeGNI per capita (US$): 6,150.00

Done by Irfan Ali (2585)

Research oriented comprehensive Analysis of differences among the business environments of the world compared with Romania

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Acknowledgments

References:

Kwintessential.com ……………………………………….

BusinessRomania.com ……………………………………

www.investromania.ro ………………………………….

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Topics covered:

i. Facts & Figures About the country

ii. Cultural profile Using Hofstede’s 4 cultural dimensions

iii. Cultural profile Using Trompenar’s cultural dimensions

iv. Doing Business in Romania:

How to conduct business meetings, presentations, and dinner in Romania. How to conduct job interviews in Romania. How to train employees How to organize a business social event How to resolve conflict & disputes Handling subordinates and superiors in Romania Managing time & project deadlines Handling a bad or disruptive employee Delegate work to employees Presenting and selling new ideas to your superiors Handling emergencies and uncertainties

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Facts and figures:

Location: Southeastern Europe, bordering Bulgaria 608 km, Hungary 443 km, Moldova 450 km, Serbia and Montenegro 476 km, Ukraine (north) 362 km, Ukraine (east) 169 km

Capital: Bucharest

Population: 22,355,551 (July 2004 EST.)

Ethnic Make-up: Romanian 89.5%, Hungarian 6.6%, Roma 2.5%, Ukrainian 0.3%, German 0.3%, Russian 0.2%, Turkish 0.2%, other 0.4% (2002)

Religions: Eastern Orthodox (including all sub-denominations) 87%, Protestant 6.8%, Catholic 5.6%, other (mostly Muslim) 0.4%, unaffiliated 0.2% (2002)

The Romanian Language:

The official language is Romanian, and it is spoken by approximately 89% of the 23m population. Hungarian is spoken by around 7% of the population, mainly in Transylvania. There is also a population of German speakers who make up around 1.5% of the national population.

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Cultural Dimensions in the Romanian Management(Hofstede’s 4 cultural dimensions)

The success or failure of a national economy is strongly influenced by a set of cultural traits rather than natural conditions or technological factors. Within the international literature there are some models that try to point out the main factors which shape a culture and thereby differentiate the cultures all over the world. Thus, the most known and used model is the Geert Hofstede's one, which is the standard tool used for describing the cultural impact on one economy.

This work tries to emphasize the main components of the Romanian culture. I used my own questionnaire in order to detect how the Romanian culture is positioned on the bases of the Geert Hofstede's cultural dimensions.

I have found a very high level of power distance and a low rank of individualism and a medium rank of masculinity (rather masculinity than feminity); the uncertainty avoidance seems to be a high-middle one; as with the long-term orientation, things appear to reveal a moderate one.

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VS

The business Society within Romania and Trompenaar's & Hoftedes principles:

The Power Distance:

Power distance describes the degree of equality between different people within a particular society or group. Also described Hofstede, as: “power distance is the extent to which people expect and are willing to accept that power is distributed unequally. Inequality of power is a basic fact of life. It cannot be 100% eliminated. It is impossible to have no power distance, because this means that everyone is exactly equal (skills, actions, genetics etc) unless you are on about a bunch of identical lumps of rocks. Inequality can take many forms.

The differences of physical and mental characteristics, social status and prestige, wealth, political power, rights, privileges etc. All of these are somewhat independent of each other, and in fact the link between them is culturally dependant. Not to put too fine a point on it, Romania is obviously a country with a high power distance.

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First of all, Romanians seem to expect differences in power between people, yet they are often cynical about personas in positions of authority. They love to ridicule authority and people in position of power. For example, the president of the country is said to be the most popular person among the population due to his hilarious way of behaving in different situations.Furthermore, offices in Romania are ruled by formality. Subordinates are rarely allowed to call their supervisors by their first name. The same thing happens in schools too. While in American schools one can find sheer informality, in Romania is exactly the opposite. If the society wants a lower power distance level, someone should take steps to make this exaggerated formality from schools a thing of the past.

In addition, even the ways to say HELLO in Romania are bound to follow up certain rules. For example, if you are the secretary you can’t greet the same way you’re working colleagues and your boss. Greetings are subject to the same strict rules of formality and informality.Some extremely important consequences of a high power distance level are the sudden changes in government and the autocratic / absolutist governments. In days gone by, this has been more than obvious in our country. Let’s think of the 1989 Revolution when the Communist leaders were killed. In this day and age we find a certain polarization of left / right wing parties which is another consequence of a high power distance.

If we now summarize, it stands to reason that Romania has a high power distance level.

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INDIVIDUALISM:

This dimension focuses on the degree to which a society reinforces individual or collective achievement and interpersonal relationships. If a country has a high Individualism score, this indicates that individuality and individual rights are dominant. Individuals in these societies tend to form relationships with larger numbers of people, but with the relationships being weak. A low individualism score points to a society that is more collectivist in nature. In such countries, the ties between individuals are very strong and the family is given much more weight. In such societies members lean towards collective responsibility. In my opinion, Romania is among the most individualistic countries in the world.

First of all, the combination of this individualism with the communist emphasis upon engineering and task skills has resulted in a nation with almost no sense of what the sociologist Ulrich Beck refers to as “the other”. People do not give much consideration to their group needs when making decisions. Witness the selfishness if the political class, or the greed of the national business elite, both on the back of great poverty and exploitation.Too frequently do Romanians show little concern for pride in their own work?

This leads the task element of leadership being measured in quantitative rather than qualitative terms. For example, people often ask themselves “Did I finish all my paperwork” rather than “How much value did I add by doing so?” Journalists, for example, complain every day about their subjects (politicians) but they do not take personal responsibilities for their own actions. Whilst such complaints can be heard the world over, the scale of the problem is more widespread, deep rooted and damaging here than anywhere else.

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Apart from this, there is another issue to present. Whenever something goes wrong in Romania, there is a strong tendency for people to consider themselves as victims of circumstance, which leads to two subsequent effects. First of all, they exhibit passivity in the face of gross public abuses. Secondly, they have the tendency to find outsiders to blame. This can be proved by a very good example: the Emma Nicholson scandal over children’s homes. Rather than face the issue, the country seemed to unite in outrage at how this foreign woman dared to expose the things that we don’t speak about. This, of course, underlines the weakness of the society.

UNCERTIANTY AVOIDANCE:

This dimension concerns the level of acceptance for uncertainty and ambiguity within a society. A country with a high uncertainty avoidance score will have a low tolerance towards uncertainty and ambiguity. As a result it is usually a very rule-orientated society and follows well defined and established laws, regulations and controls. A low uncertainty avoidance score points to a society that is less concerned about ambiguity and uncertainty and has more tolerance towards variety and experimentation. Such a society is less rule-orientated, readily accepts change and is willing to take risks.

Another definition is given by Hofstede: “uncertainty avoidance is the extent to which the members of a culture feel threatened by uncertain or unknown situations”. The essence of uncertainty is that is a subjective experience. But according to Hofstede, feelings of uncertainty are not only personal, but may also be partly shared with other members of society. Risk taking is an important factor, which is usually associated with entrepreneurial activity. When a cultural distance between countries increases, also will the uncertainty and the perceived risk.Romania is part of the group of countries with a high uncertainty avoidance score.

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A good example to prove this fact is to use Sanna Sundqvist’s study, entitled “Cross-cultural adoption of wireless communications: effects of cultural distance and country characteristics”.

The study tries to analyze the cultural differences in adoption of wireless communications. In order to test the effects of cultural similarity, the study groups some countries on the basis of their cultural dimensions. Based on Hofstede indices, the 48 countries were classified using hierarchical cluster analysis into five segments. For example, cluster five contained countries like Denmark, Finland, Norway, Sweden and Netherlands, cluster four: China, Hong Kong, Singapore, cluster two: USA, Austria, U.K., Australia etc, cluster one: Argentina, Italy, Japan, Brazil, Germany etc. while cluster three had countries like Chile, Baltic countries, ROMANIA, Venezuela, Taiwan, Thailand, Peru etc.

The results proved that cluster V has adopted wireless communication earliest while cluster three has adopted significantly later. This proves the fact that Romania, situated in cluster 3, is a country that does not accept changes easily.

Another reason for this high level of uncertainty avoidance could be the fact that the Romanian nation is very old, and it has survived numerous wars, political upheavals and economic changes. Hence, Romanians have a greater fear of the unknown.

Moreover, it is known that a country with a high uncertainty avoidance level will adopt due to imitation or in order to diminish risks and uncertainty, in Romania’s case, F the integration in the E.U. We are among the last countries to make this step. While it is true to say that we don’t have the necessary economic standards to join the E.U. I nevertheless think that from a different point of view this delay is also due to the high uncertainty avoidance level.

Citizens being critical of their own nation are another characteristic feature of a country with a high uncertainty avoidance level. Romania’s population is never satisfied by any performances of the country. They always find a reason to put the negative part of an achievement in front of the positive one.

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MASCULINITY:

This dimension pertains to the degree societies reinforce or do not reinforce, the traditional masculine work role model of male achievement, control and power. A high masculinity score indicates that a country experiences a higher degree of gender differentiation. In such cultures, males tend to dominate a significant portion of the society and power structure. A low masculinity score means a society has a lower level of level of differentiation and inequity between genders. In these cultures, females are treated equally to males in all aspects of the society. The IBM studies revealed that (a) women’s values differ less among societies than men’s values; (b) men’s values from one country to another contain a dimension from very assertive and competitive and maximally different from women’s values on the one side, to modest and caring and similar to woman’s values on the other side. The assertive pole has been called masculine and the modest, caring pole feminine.

It stands to reason that Romania has a high masculinity score.

To begin with, most of the VIP’s in Romania are men. The president is a man, the prime minister is a man, most of the other ministers are men, and the secretaries of the state are men and so on.I would like to analyze the administration board of BNR, the national bank of Romania, to prove my point. This board has the following structure:

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Governor: Ph.D Mugur IsarescuFirst Deputy Governor: Ph. D. Florin GeorgescuDeputy Governor: Ph.D. Eugen DijmarescuDeputy Governor: Ph.D. Cristian PopaMember: Ph.D. Silviu CernaMember: Maria EneMember: Agnes NagyMember: Ph.D. Napoleon PopMember: Ph.D. Virgiliu Stoenescu

As we can see, 77.77% of the members are men while only 22.23% are women.Another important fact is that the inequalities between men and women in Romania are structural, rather than merely contingent, and pervasive phenomena rather than temporary consequences of the transition. It is a fact that the rising of unemployment has constantly affected women more than men, while women are over-represented in the lowest wage sectors of the economy (especially agriculture, healthcare and education).

Furthermore, even the legislation from this country encourages masculinity. The best example to list here is the age of retirement which is not the same for men and women. Women have lower retirement ages than men. Fewer years of contributing to the system combined with the data that indicates that women earn on average 83% of men’s earnings will result in lower average pensions for women. More worrying is the increase number of women moving from formal, paid employment to the informal sector or into unpaid family labor, situations in which it is unlikely that contributions will be made into the social, health or pensions system, resulting in a growing number of women potentially facing old age without pensions at all.

The employers in Romania often regard the aspect of gender when hiring new people. For example, they prefer men engineers rather than women engineers, which are, of course, discrimination as the only difference between men and women should be made when a job implies physical effort.

By and large, I think that these characteristic features of Romania are really clear and that they are not unchangeable. In my opinion, each feature of each country varies in time. Maybe in some decades, the high level of masculinity and power distance will be a thing of the past, and we shall live in a better country with better people and smarter rules.

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Business in Romania:

Organizing a business social event&

Resolving conflict & disputes

Like other countries in the region, Romania has worked to create a legal framework consistentWith a market economy and investment promotion. Gradually it is moving to strengthen taxAdministration, enhance transparency and create legal means to reach expeditious resolution of contract disputes. In spite of progress, the unpredictability of the legal framework continues to undermine investor confidence. It is, therefore, recommended that any prospective investor consult appropriate legal counsel to get the most up-to-date information. Successful foreignCompanies tend to share a common approach to investing in Romania. Firstly, they establishThemselves in Romania so that they are able to analyze the local situation and develop the most effective corporate strategy. Secondly, they come with a strategy that communicates long-term commitment to the Romanian market and government. This often paves the way for successful negotiations with economic ministries, the Privatization Authority, labor unions, and local partners.

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Investments that involve the government of Romania, either through sovereign guarantees or by the involvement of entities such as the Privatization Authority, are generally more complicated than Greenfield investments or joint ventures with private Romanian companies. Large deals involving the government of Romania frequently become stymied by vested political and economic interests and bogged down by indecision within governmental ministries. Greater success has been encountered with less complex deals involving small to medium-sized private and state enterprises.

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Handling subordinates and superiors&

Managing time & project deadlines in Romania

Romanians are sociable and love to talk, so mobile phones are a must for doing business in theCity. People are extremely friendly and a surprising number speak excellent English, although the older generation may prefer French or German. However, Bucharest natives are also extremely formal, in the old European sense, and business visitors should respect this tradition, making appointments for meetings well in advance. Punctuality is important and suits are expected. Although their partners are expected to be punctual, Romanians have a relaxed attitude towards time keeping.

Meetings often start late and run over the allocated time. On greeting it is customary to shake hands and business cards are often exchanged. Business lunches may take two hours, with wine or beer the most popular tipple. Work colleagues may socialize together in the evening at a local bar, although this tends to take place more among those working in multinational companies.

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It is relatively uncommon for Romanians to invite foreign businesspeople to their homes. Should this occur, gifts such as flowers, chocolates or high quality Scotch will always be appreciated.

Summertime is not good for doing business as many companies go into hibernation. Easter and Christmas are also difficult, as companies and shops close down for an indefinite period.

How to conduct job interviews in Romania:

Be ready for two job interviews. Usually the first job interview is with the HR manager and the next one with your future supervisor and/or company manager.

Romania is a very punctual society, so arrive 5 -10 minutes before the job interview. Prepare yourself - find out information about the company you want to work for. Bring with you copies of diplomas and letters of reference from former employers. An extra CV can be handy too. You will never get a second chance to make a first impression!

Usually the job interview starts with introductions, handshakes with everyone present. When introducing yourself use your last name without your title. Use professional titles, or Mr., Mrs., Miss with the last name when addressing someone and maintain eye contact.

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Do not sit until invited. Talk effectively demonstrating your knowledge of the industry and/or the company, do not interrupt the interviewer and criticize former employers.

Prepare for all kinds of questions about yourself, your qualifications, skills, experience and hobbies. Answer questions as fully as you can, avoiding yes and no answers. Mention several reasons why you are the right candidate for the position for which you are applying.Romania Job Interview Dress Code

Dress neatly and formally. Women may wear dresses or skirts and blouses. Suits and ties are appropriate for men.

Other Romania Job Interview Info:

If you received an invitation to a job interview, you may look at job interview techniques and other job search skills.

Follow up the job interview with a thank you letter. Employers regard this as an indication of your final interest in the position.

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Business meetings & presentations in Romania:

* In general, the code of business conduct in Romania is similar to that in the rest of Europe and the USA. A handshake at the beginning and end of a meeting is the accepted custom. Close friends embrace and kiss each other.

* The accepted form of dress for a business meeting in Romania is a business suit for men and women are recommended to dress fashionably but not loudly.

* It is very important at a business meeting to indicate your colleague's title first and then his surname. Use of first names is intended only for private meetings, after a personal relationship has been established. For example, if you meet a doctor address him by the title Doctor Schmidt. In no circumstances should first names be used other than among close friends.

* If you are invited to your colleague's home in Romania, it is customary to bring a small gift, such as a selected wine, a box of chocolates, etc. If you give flowers, be careful to give an uneven number; an even number of flowers is customary at funerals.

* Most business people in Romania have a good command of English.

* In some large concerns, expect that the bureaucracy required will slow down the progress of building business connections. When fixing a meeting, it should be confirmed 2-3 weeks in

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advance. It is advisable to arrive at important meetings with an interpreter whom you have hired beforehand. It is also advisable that one side of your business card is in Romanian.

* Romanians are very proud of their historical heritage. Be very careful in relation to comments that relate to political subjects.

* You are recommended to avoid making business appointments for the months of July and August as well as around the dates of national holidays in Romania.

Handling or dismissal of bad or disruptive employees:

Labor relations can be terminated in a lawful manner (retirement, certain interdictions etc.), resignation or dismissal by the employer.

The dismissal performed by the employer can be disposed for reasons related to the employee or other unrelated reasons. The employer is able to dismiss for reasons related to the respective employee in the following situations:

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a) When the employee has gravely or repeatedly breached the regulations of labour discipline established through the Individual or Collective Labour Agreements or internal regulations, as disciplinary sanction;

b) When the employee is arrested for a period exceeding 30 days;

c) When a medical authority decides that the employee is physically/mentally unfit for the position;

d) When the employee is not professionally trained for the position;

e) When the employee fulfils all conditions for a pension but has not requested retirement.

Dismissal for reasons unrelated to the employee can be disposed in the case of dissolving the position occupied by the respective employee.

Through Collective Dismissal it is to be understood dismissal of personnel in a period of 30 days for reasons unrelated to the employee of a number of:

a) At least 10 employees, if the employer has over 20 employees and below 100 employees;

b) At least 10% of employees – if over 100 employees and below 300 employees;

c) At least 30 employees – if over 300 employees.

It is important to be noted that the employer has the obligation to provide all relevant information and to notify the syndicates or employee’s representatives in regards to total number and employee categories, motives for the future dismissals, criteria, measures to limit dismissals etc. For both individual and collective dismissals, the employer shall not be able to hire new personnel for the same positions for a period of 9 months, without written notifications to the dismissed personnel for re-hiring. These employees have a term of 10 days to express their interest for the positions.

The employees dismissed for their own physical/mental unfitness as well as persons not corresponding professionally to the position as well as those dismissed for motives unrelated to the employee, beneficiate from a notification period of at least 15 days.

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