The Cultural Context of Business and Management Practices
Undoubtedly, companies around the world operate in a global context. In his highly successful book, The World is Flat, Thomas Friedman highlights the processes underlying globalization and discusses the implications of the increasing interdependence of countries and companies. He points out that, in addition to considering the economic, political, and technological components of the global business environment, understanding cultural characteristics and their impact on business and management practices is critical to effectively operating in a global context.
For example, many Americans might think that the cultural differences between Germany and the U.S. are relatively small. However, the differences are substantial enough to result in significant differences in management and business practices. An American company that recently created a joint venture with a German company has been facing numerous challenges in integrating the two companies. Most of the challenges are a result of the cultural differences between the two countries. Among others, the American company identified the following issues:
– Structure – German firms typically have a much more rigid organizational structure and hierarchy than American firms. The need to follow the hierarchical lines for communication and decision-making is cumbersome and causes inefficiencies.
– Technical Emphasis – German employees emphasize the technical aspect of everything. Although technical aspects do play a primary role in the U.S., Germans consider technical issues as most important to the exclusion of everything else.
– Timelines – In the U.S. “time is money” and decisions must be made as quickly and efficiently as possible. The primary concern is with speed as opposed to quality and effectiveness. Hence, American customers have much less “patience” with respect to delivery times, communications, and service issues than German customers
These three challenges can be attributed to cultural differences between Germany and the U.S. with respect to expectations about risk-taking and the need to avoid uncertainty. As opposed to the American culture, the German culture is characterized by a relatively high level of uncertainty avoidance. Societies high in this cultural characteristic tend to create processes, rules, and systems that increase the predictability of behaviors and outcomes. High uncertainty avoidance cultures, such as Germany and Japan, place a strong emphasis on quality and technical aspects of products in order to minimize the potential for unexpected results at all cost. Similarly, rigid organizational structures require employees to follow preset procedures and rules that provide guidance and must be adhered to by all. Finally, the time required for making decisions is much longer in high uncertainty cultures than in low uncertainty cultures as in high uncertainty cultures all possible options and potential consequences must be considered before a course of action can be chosen.
Although some commentators on globalization have promoted the idea of cultural convergence among countries, the evidence does not seem to support this idea. Norms and values are deeply rooted and are the foundation on which societies are built; they give them their identity. I do not believe that cultural convergence and, hence, common management and business practices will become reality in the foreseeable future. However, I do agree that on the macro-level rather than on the micro-, the interpersonal, level similarities are prevalent. These similarities are driven by the global legal and technological conditions. Therefore, companies in different countries may have similar technological processes (macro-level) but the impact on behaviors in the work environment (micro-level) will continue to differ by culture.
In conclusion, knowing and understanding cultural differences will facilitate effective international business endeavors by allowing companies to anticipate and effectively address issues with their global business partners.
Yvonne Stedham, Ph.D.
Yvonne Stedham is professor of management, a 2010 University of Nevada, Reno foundation professor, and co-director of the Center for Corporate Governance and Business Ethics in the College of Business. She received a Ph.D. in business and an MBA from the University of Kansas, Lawrence, Kansas and undergraduate degrees in economics and business from the Rheinische Friedrich Wilhelms University, Bonn, Germany. She teaches undergraduate and graduate courses in international management and human resource management at the University of Nevada, Reno and the School of Management in Ingolstadt, Germany.
Her research focuses on cross-cultural aspects of management and business ethics. Stedham serves on the State Council for the Society for Human Resource Management (SHRM) as well as on the Nevada World Trade Council (NEWTRAC). She provides consulting and training services to many companies, locally, nationally, and internationally.