Culture Hrm Indien 160806

International Human Resource Management and the Impact of Culture

University of Bamberg; GermanyHuman Resource Management & OrganizationDodo zu Knyphausen-Aufseß

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International Human Resource Managementand the Impact of Culture

Dodo zu Knyphausen-Aufseß

August 2006

http://www.uni-bamberg.de/



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Economic Integration: trade, foreign direct investment, portfolio capital flows, and investment income Technological Connectivity: Internet users, Internet hosts, and secure servers Personal Contact: international travel and tourism, international telephone traffic, and remittances and personal transfers (including worker remittances, compensation to employees, and other person-to-person and nongovernmental transfers)

Political Engagement: member-ships in international organizations, personnel and financial contributions to U.N. Security Council missions, international treaties ratified, and governmental transfers

ATKearney‘s Globalization Index (2004)

India is No. 61!




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Asian Indians in America

• In 2000, there were about Million 1.7 American Indians

• About 250.000 live in the Silicon Valley.

• Asian Indians have outperformed all other minority groups in most measures of socioeconomic achievement.

• Indian Americans are well-represented in the fields of medicine, engineering, finance and information technology. They are overrepresented as small business owners (e.g., proprietors of hotel and motel), and cab drivers.

Source: Wikipedia




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Asian Indians in Germany

• In the end of 1999, about 30.000 Indians live in Germany, many of them students and residents without a green card

• In 2000, in initiative was started to attract IT-professionals from India

(and other eastern countries). At the end of 2000, the initiative has proved as not successful.

• Major problems: Green card was limited to five years, “Kinder statt Inder“




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The opposite direction: American and European firms find India attractive




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Germany relations to india – still potential for improvement

Trade, bill. of €

FDI, mill. of €

German-Indian firms outperformthe stock market

* Mumbai stock exchange

Source: DBResearch




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The basic question: Does culture have an impact?

• Culture-free versus culture-bound• Universalism vs. Institutionalism• Convergence versus divergence

Impact of culture on HRM?




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Culture is “the collective programming of the mind which distinguishes members of one group or category of people from another”

– Culture is not innate, it is learned– Culture is dynamic– Facets of culture are interrelated– Culture is ethnocentric

Source: Hofstede, 1991: 5




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Interacting spheres of culture

Company

Functional

ProfessionalNational

Regional

Industry

Geography, history, political and economic forces, climate, religion, language

Resources, technology, product market, regulation, competitive

Education, training, selection, socialisation

External environment, nature of task, time horizon

Founder, leader, administrative heritage, nature of product/ industry, stage of development

Other cultures, e.g., family, associations, religion, etc.




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Levels of Culture

Artifacts and behaviour

Beliefs and values

Assumptions

Methods for Discovery

Observation

Interviews and surveys

Inference and interpretation




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Hostede‘s study (1980)

Survey of more than 72.000 employees in one company – IBM – in 40 countriesFive dimensions to measure culture:• Power distance• Collectivism versus individualism• Uncertainty avoidance• Femininity versus masculinity• Long-term orientation*

* This dimension was added in a follow-up study (Franke et al., 1991).




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Power distance

= the extent to which people accept that power is distributed unequally

How frequently, in your experience, does the following problem occur: employees being afraid to express their disagreement with their managers?

Source: based on Hofstede, 1991




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Collectivism vs. individualism

= the degree to which individuals are integrated into groups

How important is it to you to have a job that leaves you sufficient time for your personal or family life?

How important is it to you to have considerable freedom to adapt your own approach to the job?





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Femininity vs. masculinityrefers to the distribution of roles between the sexes

Femininity:How important is it to you to have a good working relationship with your manager?How important is it to you to work with people who cooperate well with one another?

Masculinity:How important is it to you to have an opportunity for high earnings? How important is it to you to get the recognition you deserve when you do a good job?





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Uncertainty avoidance

= the society’s tolerance for uncertainty or ambiguity

Company rules should not be broken, even if the employee thinks it is in the company’s best interest?

How long do you think you will continue working for this company?





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Long-term orientation

= time horizon people have in mind when they think about the future

Are quarterly results more important than the long-term development of the company?

Responsibility for future generations?




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Cultures can be very differentHofstede‘s study

PD = Power Distance, IND = Individualisms, UA = Uncertainty Avoidance, MAS = Masculinity, LTO = Long-term Orientation

Source: Frank, R./ Hofstede, G./ Bond, M., Cultural Roots of Economic Performance: A Research Note, in: Strategic Management Journal 12 (1991), Special Issue (Summer), S. 165-173

PD IND UA MAS LTO

USA 40 91 46 62 29

EuropeGermany 35 67 65 66 31France 68 71 86 43 30England 35 89 35 66 25Sweden 31 71 29 5 33

AsiaJapan 54 46 92 95 80Taiwan 58 17 69 45 87South Korea 60 18 85 39 75

India




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Cultures can be very differentHofstede‘s study

PD = Power Distance, IND = Individualisms, UA = Uncertainty Avoidance, MAS = Masculinity, LTO = Long-term Orientation

Source: Frank, R./ Hofstede, G./ Bond, M., Cultural Roots of Economic Performance: A Research Note, in: Strategic Management Journal 12 (1991), Special Issue (Summer), S. 165-173

PD IND UA MAS LTO

USA 40 91 46 62 29

EuropeGermany 35 67 65 66 31France 68 71 86 43 30England 35 89 35 66 25Sweden 31 71 29 5 33

AsiaJapan 54 46 92 95 80Taiwan 58 17 69 45 87South Korea 60 18 85 39 75

India 77 48 40 56




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German/Indian experiences: An interview with Cornelia Schultheiss, DaimlerChrysler (1)

MM: Are there any differences in the form of communication?Schultheiss: Yes, most certainly. This is definitely where most problems arise. Mainly this is due to different basic communication needs. Germans, for example, communicate in a very direct way whereas Indians tend to use an indirect approach. As well as this, the German teams are used to an impersonal form of communication. Indians, on the other hand, talk far more often, in greater depth, for a longer time but then also more personally with each other. This comes from the fact that Indian colleagues have a greater need for communication and it’s tremendously important for them to establish a personal level. A personal level like this helps develop trust and paves the way for a good working relationship.




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MM: What role does an understanding of hierarchies play in this context?Schultheiss: Hierarchies are much more important in India than in Germany. You can observe this particularly clearly in meetings. In Germany you may well find in a meeting chaired by a person with a democratic leadership style that the conversation tends to be fairly spontaneous and comes from all directions. When Indian workers are in a meeting attended by their supervisor, they will generally wait until their supervisor has finished speaking. Yet for us Germans, this taking it in turns to talk according to the hierarchy is not always visible at first sight.




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MM: Are there any other cultural differences that affect the cooperation?Schultheiss: The feeling for time! The German sense of time has a linear nature. We work on a time line where all the different events are defined as fixed points. Indians, on the other hand, have a circular conception of time. The idea of cycles, whether for the day, year of life cycle, is a very strong feature among Indians. Indian people therefore tend to think of phases within these cycles rather than of fixed points in time. It is also matters more to Indians whether the person they’re talking to is young or old, whether the appointment is taking place in the morning, evening or at a particular time of year. The exact date or the precise time of the meeting is less important to them.




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The U.S and Japan as polar types (1)

USA Cultural context Japan

Individualistic, self-assertive, individual freedom, opposing interests

General characteristics Collective, consensus and cooperation oriented, embeddedness in society, harmony

Low power distance, low uncertainty avoidance, very high individualism and high masculinity

Geert Hofstede: Culture’s

Consequences

High power distance, very high uncertainty avoidance, low individualism and very high masculinity

Universalism, individualism, emotional relations, specific culture

Fons Trompenaars: Riding the waves of

cultures

Particularism, collectivism, neutral relations, vague culture

Source: Pudelko, M., A Comparison of HRM Systems in the USA, Japan and Germany in their Socio-Economic Context, Working Paper, University of Edinburgh, 2005




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USA Socio-political context JapanLittle government interference in the market, distrust of powerful institutions, adversarial relations among and no shared responsi-bility of all economic players

Economic system Much government interference in the market, trust of powerful national institutions, cooperation among and shared responsibility of all economic players

Job market requires little stabil-ity of socio-demographic factors, little conformity to traditional roles, strong heterogeneity of employees

Socio-demographic factors

Job market requires much stabil-ity of socio-demographic factors, high conformity to traditional roles, relative homogeneity of employees

Stress on creativity and inde-pendent thinking, top universi-ties and top-educated graduates responsible for high competitive-ness in tech sectors, neglect of mass education responsible for lower competitiveness in low tech sectors

Educational system Stress on group integration, in-sufficient top universities and top-educated graduates respon-sible for lower competitiveness in high tech sectors, good mass education responsible for high competitiveness in middle tech sectors

Source: Pudelko (2005)




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USA Economic context JapanRemuneration is based on market forces, resulting in low unemployment but also in ‘working poor’

Macro economic factors: Distribution of

work and income

Remuneration and employment for the core workforce is based on the collective will to be fair to all

Consumer orientation, pursuing the ‘American Dream’, lower average standard of product and production technologies in middle value-added industries, but high standard in high value added and service industries because of high performers, high importance of shareholder value, innovative start-ups

Market characteristics Producer orientation, promoting ‘Japan Inc.’, high average stand-ard of product and production technologies in middle value-added industries, but lower standard in high value added industries because of lack of high performers, little importance of shareholder value due to bank lending, few innovative start-ups

Strongly adversarial, formalised and standardised industrial relations

Industrial relations Cooperative, little formalised and standardised industrial relations





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The U.S and Japan as polar types (4)USA Managerial context JapanHigh importance of short-term financial objectives in order to increase shareholder value, management strategies, structures, systems and techniques as well as top- managers of importance

Management principles Financial and non-financial ob-jectives of importance in order to secure long-term survival, inde-pendence and growth of the company which is in the interest of all stakeholders, all those in the production process are valued

High importance of top-management and individual decision making responsibility allows for quick strategy changes, functional specialists, pyramid corporate structure

Organizational structure

Top management mediates between various proposals, status quo and stability orientation, cross-departmental thinking, network-like corporate structure

Low importance of HR depart-ment compared to other depart-ments and compared to line management, stress on management, less on the human resources themselves

Significance of HRM for overall

management

High importance of HR depart-ment compared to other depart-ments and compared to line management, stress on both management and on the human resources





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The U.S and Japan as polar types (5a)


USA HRM Japan

Finding the best qualified person for a specific job (job-oriented), high labour turnover

Recruitment and release of personnel

Finding the person who fits best for the company (people-oriented), lifelong employment

Training focused on specific, limited knowledge for individuals for narrowly defined tasks (specialist training)

Training and development Widespread, extensive and group-oriented training for broadly defined tasks (generalist training)

Individual achievements and quantifiable criteria of importance (results oriented), specialist career path

Employee assessment and promotion criteria

Seniority and contribution to collective achievements of importance (behaviour-oriented), generalist career path




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The U.S and Japan as polar types (5b)


USA HRM Japan

Primarily material incentives, pay based on individual achievements, significant pay differences

Employee incentives Material and immaterial incentives, pay based on seniority, little pay differences

Primarily vertical, structured and efficient

Communication within the company

Primarily horizontal, unstructured and extensive

Top-down, authoritative, individual, confrontational and based on hard facts

Decision making within the company

Bottom-up, participative, collective, consensus-oriented and based on soft facts

Specific, task-oriented, based on regulations

Superior-subordinate-relationship

Holistic, person-oriented, based on common values




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The U.S and Japan – and Germany and India in-between?

Recall, for example, Hofstede‘s dimensions!




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Industrial Relations in Germany: Legal framework

- The German constitution (“Basic Law“; Grundgesetz) guarantees the right to free collective bargaining as well as freedom of association

Trade Unions, Employer‘s organizations- No uniform regulation under German labor law: no statutory minimum wage nor a statutory right to strike- Bunch of different laws which protect the employees (e.g.,

statutory sick pay, employment protection law)




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Industrial Relations in Germany: Wage and work conditions negotiations

- Level of wage negotiations: Collective bargaining can take

place only between trade unions and individual employers

or employer‘s associations.- Two kinds of collective agreements: Blanket collective agreements (usually on a long-term basis) and wage agreements (usually on an annual basis)- Strikes: Collective agreements also include a “peace clause” that prohibits industrial action during the lifetime of

an agreement and for a period thereafter.




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Industrial Relations in Germany: Trade unions

The German Trade Union Federation as a federation of 8 member unions in all major industries. Biggest union: “Ver.di“

0

2000000

4000000

6000000

8000000

10000000

12000000

1994 1995 1996 1997 1998 1999 2000 2001 2002

2005:6,78 Mill.




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Industrial Relations in Germany: Work Councils

- Work councils (Betriebsräte, i.e., committees of employee-representatives) must be formed in all companies with five or more employees if the employees request so. Members are elected for four years and need not be union members.- The rights of the works council, as set forth in the Works Constitution Act (Betriebsverfassungs- gesetz, BetrVG), range from information rights to codetermination rights in organizational, social and other matters.




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Industrial Relations in Germany: Co-determination

- The Co-determination Act 1976 requires that all companies with more than 2,000 employees must give employees equal representation with shareholders on the supervisory board.- The chairman (usually a representative of the shareholders) has the deciding vote in the event of a tie.- Management board must include at least one management employee representative.- Companies with less than 2,000 employees: “One-third-parity“




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Corporate Governance: An American Definition

“Corporate Governance deals with the ways in which

suppliers of finance to corporations assure themselves of

getting a return on their investment.

How do the suppliers of finance get managers to return

some of the profits to them?

How do they make sure that managers do not

steal the capital they supply or invest it in bad projects?

How do suppliers of finance control managers?”

Source: Shleifer, A./ Vishney, R., A Survey of Corporate Governance, in: Journal of Finance 52 (1997), pp. 737-782 (737)

Very different mindset in Germany!!




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Culture Hrm Indien 160806