Organisational Cultures in Multinationals – Same Same?

 

When we look at organisational cultures, we usually identify the influences as coming from the surrounding environment, the size and maturity of the organisation, the ownership, the organisation’s approach to technology, and the sector and markets it operates in. And, typically, an organisation’s culture is set initially by its leaders, perpetuated by these leaders’ followers and then modified by new leaders and new organisation members. There are lots of different metaphors and models for these cultures, but by and large, so far so uncontroversial. But what happens when the organisation expands overseas into new territories, opening up branches and subsidiaries? Should HQ work to ensure that its home culture permeates every office of its operations around the world or should it let each of its local entities have their own culture and practices?

Beyond the often opposing pressures of operating internationally and locally, the situation is complicated further if we agree that companies with strong organisational cultures typically outperform those with weaker, less defined cultures. In the global market, it’s a bit like branding…

In an interesting case study, Hajro and Pudelko identify three types of organisations operating internationally. They call Type 1 companies partnership organisations. Such companies see host countries as partners, valuing the exchange between them and the HQ. There is two-way traffic of managers between the HQ and host countries with the hope of stimulating multiculturalism and to consciously exploit differences in order to encourage innovation, etc. These managers are then repatriated after their assignments as a way of further strengthening links and transferring knowledge in the form of approaches and practices.

Type 2 companies are centralised organisations. Typically, there is a top-down, HQ-driven imposition of best practices throughout the organisation to set a common corporate culture. Beyond this wish for commonality, the practices are exported ideally because they are seen as valuable resources or competences. This provides a strong shared frame of reference for all employees wherever they are located. As such, the concept of one system for all leads to a perception of equity and procedural justice in the organisation. However, the flow outwards from the home country reduces the knowledge share from host countries, typically leading to more critical incidents and less innovation. Furthermore, if these practices are not perceived as useful, then they will not be fully integrated and internalised, leading to distancing and discontent.

Decentralised organisations are the third type. These are more autonomous and loosely connected to the home HQ. With a poorly disseminated organisational culture, the employees often derive their culture more from their profession than from their company. Any compliance with central directives will be largely ritualised and little more than lip service, as Trompenaars and Voerman have noted. Yet this freedom also allows such companies to react faster to their external environments and change rapidly. Knowledge transfer with the HQ (and other subsidiaries) occurs mainly through virtual teams and occasional conferences.

All three types have their pros and cons, so maybe we should add a fourth concept – essentially an extension of Type 1 above. Trompenaars and Hampden-Turner propose the following model for how international organisations operate:

Although their model closely lends itself to the cultural dimension of universalism–particularism (typically exemplified by the speeding car dilemma – note), with multi-local being particularistic and global representing universalism, the transnational (or transcultural) approach aims to reconcile and leverage all cultural orientations. Functions are based in the worldwide network where experience shows it can best be done akin to Ulrich’s HR centres of excellence model. Through this, these companies are aiming to make the best use of their resources globally. It also takes us out of the pattern of repeated waves of centralisation and then decentralisation followed by centralisation and then…The writers identify organisations such as Philips, Ericsson, and IKEA as moving in this direction.

How idealistic is all of this? Perhaps the answer is another question – how can we afford not to take this approach? In a global marketplace with a global workforce, leveraging the best of your talent has to be the goal of any organisation. Cultural diversity is part and parcel of this talent equation. The technology and mechanisms exist to allow this. We just need to ensure our organisational cultures encourage the full expression of this diversity for the common good. All for one and one for all…?

Note:  ‘You are in a car driven by a friend when you are stopped by the police for speeding in a 30 mph zone. You know your friend was driving 45 mph. Does your friend have the right to expect you to back him up?’

FURTHER READING

  • I. Bjorkman and J.E. Lervik (2007). Transferring HR practices within multinational corporations. HRM Journal, Vol. 17, No. 4.
  • A. Hajro and M. Pudelko (2009). Multinational teams in the context of organisational culture. Academy of Management.
  • C. Hampden-Turner and F. Trompenaars (2000). Building cross-cultural competence.
  • J. Symons and C. Stenzel (2007). Virtually borderless: an examination of culture in virtual teaming. Journal of General Management, Vol. 32, No. 3.
  • F. Trompenaars and E. Voerman (2009). Servant leadership across cultures.

About Julian King

Julian King is an international HR consultant and certified executive coach with a keen interest in intercultural matters.