School of Economics and Business Administration

TALLINN UNIVERSITY OF TECHNOLOGY

School of Economics and Business Administration

Department of Business Administration

Chair of Organization and Management

Pietro Usai

Challenges in Managing Cultural Diversity

A managers perspective

Core study Research Paper in Organization and Management

Supervisor: M.Sc Ergo Metsla

Tallinn 2012

I declare to have written the research paper independently.

All works and major viewpoints of the other authors, data from other sources of literature and elsewhere, used for writing this paper have been referenced.

Pietro Usai (digital signature given)

Student’s code: a122929

Student’s e-mail address:

Supervisor M.Sc Ergo Metsla

The paper conforms to the requirements set for research papers.

Signature Date: 10/17/12

Table of Contents

ABSTRACT

INTRODUCTION

1MANAGING MULTICULTURAL TEAMS IN LITERATURE

1.1Anthropology

1.2Multicultural education

1.3The sharing principle

1.4Multicultural management

2PERSONAL EXPERIENCE ON MANAGEMENT IN MULTI-CULTURAL ORGANISATIONS

2.1The Baltics

2.2Holland

2.3Germany

2.4Estonia, Russia, Balkan

3RECOMMENDATIONS TO HANDLE CULTURAL ISSUES

REFERENCES

ABSTRACT

Multicultural management is a result of globalization and the movement of people around the globe. As the international trade worldwide increases more and more companies will go global. Going global is equal to establishing local offices and coming into contact with individuals who have different national and corporate cultures.The challenge for managers is how do we create a performing mix out of all those different people with different languages and different opinions, perceptions and biases.

The goal of this research was to find out what has been written about Multicultural Management, how it is managed, taught and what are interesting approaches to manage a team of cultural diversified individualists. Some examples of Multicultural issues out of own experience are also given as to complement the theory of sharing in managing multicultural teams.

Looking through articles the main issue noticed and mentioned by several Authors is that there is no sufficient research done to enable a manager to study on the best in class methods to manage a multicultural environment. Therefore any sharing of experiences with other managers is a key to create a management force able to cope with managing multicultural corporations.

INTRODUCTION

Being a manager in this ever-changing world poses a lot of challenges. The world is getting smaller, people are moving around more often from one country to another. The time that a manager only had to work within one country, one culture is long gone and developments as the European unification, the globalization of the economies and the workfield of the companies exposes managers to an ever increasing amount of cultural mixes.

Each and every team member brings in a vast background of learned behaviours, skills, opinions, and biases. The challenge is how to create teams out of such a vast array of unique individuals. Even though a lot of effort is put in education managers to be open minded to cultures and to earn the sensitivities of each culture there is no one universal handbook for the manager on how to manage a complete culture set of a group of individuals. With complete cultural it is meant the cultural background not only from ones culture but also the formation of ideas, skills, biases, working methods imposed and learned over the years. It is a unification of corporate working cultures mixed with national cultures.

Comprehensive research among literature shows that not enough has been done to find out what is really needed to be a top performer in a multicultural environment and this study does not imply to be a full research on this but more of an outline what has been written by others on multicultural problems or peculiarities with an additional chapter on field experience.

1MANAGING MULTICULTURAL TEAMS IN LITERATURE

Before we start about discussing what literature states about “How to manage a multicultural team” we need to look at theperspectives and views on cultural issues and how is multicultural management taught.

1.1Anthropology

An interesting perspective on cultural issues in the Business World is given by Michael P. Lillis and Robert GuangTian in their piece Cultural Issues in the Business World: An Anthropological Perspective (2010). In this piece they describe that the core of anthropology is the relation between culture and human behaviour.

Culture is described as a set of patterns, explicit and implicit, of and for behaviour acquired and transmitted by symbols, constituting the distinctive achievements of human groups, including their embodiments in artefacts (Kroeber and Kluckhohn, 1952). Translated this means that culture means the visions, biases, beliefs, skills, customs, language and art which one grows up with in a specific society.

But how does this relate to Business? There the term Business anthropology is used which is described as exploring the culture and social framework of a business organization. We all know that culture has a significant impact on an organization but how do we understand the real impact of culture. Even though many attempts have been made to do this, the majority finds that it is an “ideational” concept (Allaire and Firsirotu, 1984) meaning that it is a group of people sharing the same ideals. Another main concept is the “adaptionist” perspective, which comes down to the way a company does things and what it does. (Keesing, 1974).

The anthropologist approach is therefore entirely based on the fact that we shape an organizational culture on the basis of the values that we have been instilled while growing up in a certain region, society, social group. We install our identity on the company and try to find people that share this same identity and where they feel a sense of belonging to the group where they can relate to the same ideals. The organizational culture can take many forms such as a Power culture where one strong leader dominates the way things are done. Other forms are an Achievement culture where results are the main key, a Support culture where harmony is key, and a Role culture, which states clear expectations on the expectations of the role one performs.

Summarizing the anthropologist approach we can say that without an organizational culture influenced by our own values, biases, customs and believes there would be chaos in our Business world.

1.2Multicultural education

Now we know the ruling vision on organization culture we should ask ourselves then “why in our schools we teach the future managers about organizational cultures based on researches done on national levels where one can find only average national characteristicsand this taught only in International Business”? (Mary Lou Egan, Marc Bendic 2008). Additionally we should reflect on the fact that Business Schools mainly teach stereotypes about cultures coming from research conducted on limited amount of focus groups.

Research is mainly focused on national average characteristics, high distance, and low distance, individual, collective and this is then in turn taught in school as the way to predict how an individual will behave in a business situation. There is no detailed research done among a wide variety of countries and cultures to establish a clear and detailed view on “How things are done in practice” from one country and company to another.

The way it is done currently means that managers are not prepared for the real situations. In my own experience I rarely deal with a person who has no international experience and is formed only in one culture and myself I am a Dutch/Italian national, raised in Holland, educated in France, worked in German, France, Holland and currently in Estonia. How does the traditional education of multicultural fit to me?

Egan and Bendick state in their article that the focus should switch from averages to teaching cultural competence, to regard each group of people as individuals and not as averages. It is of critical importance that you build up a relation with the people you work with; gain experience abroad as to get a higher cultural intelligence. So in short it is vital that current managers become educated by experience in order to be able to educate future managers by the sharing principle in Multicultural Management as described by Maxwell and Rijamampianina in their article “The sharing principle: a way of managing multicultural organizations (2002)”.

1.3The sharing principle

This article mainly tries to answer the question how managers can better manage an organization in todays world where globalization is forcing managers to be more culturally intelligent as to use cultural diversity as a means to increase performance.

Rijamampianina (1999) suggests that managers should focus on internal organic processes as these are inter related as in figure 1 and that successful management of these processes leads to higher levels of performance.

In a study aimed at enhancing multicultural learning Rijamampianina proposed that a sharing principle is the best guideline for managing a multicultural team. Share business successes or in other words involvement and participation in success of the company, a big part in this is to empower via training so that employees feel confident enough to share. One part of this training can also be a one-language corporation. E.g. Many multinationals use English as the corporate language for all global locations (motivation), share mental models, networking, building up long term relations to facilitate communication and allow constructive conflicts (interaction), support vision creation. Mutual creation of a vision(visioning) and encourage core competence development, the learning organization (learning).

We have now looked at what is organizational culture, how is multicultural thought in schools and how can should we manage of cultural diversity. In addition to the theory the following pages will offer examples on multicultural management of teams.

1.4Multicultural management

There are basically three different forms of multicultural teams (Marko Mäkilouko 2003). The first form is a project team where team members with different backgrounds work together in the same country. The second form is a project team where the members meet regularly but they are divided partly or completely over different countries. The third form is a project team where the members work together in a so-called virtual environment and where most members are divided over many countries.

Mäkiluoko researched among Finnish companies mainly the second form and found three distinctive leadership styles as per figure 2.

Figure 2: Conceptual relations between leadership styles.

• Ethnocentric managementwas the most common where the team leader is culturally blind, focuses on formal negotiation within the team and where the teams are split up in local and foreign.

One can say that Ethnocentric is a defensive approach as described by Robert Day 2007, an organization that adopts the defensive approach treats cultural and racial differences as hazards – a series of weak links and mismatches between people in which there is great potential for misunderstanding, mistrust, conflict and even resentment. One can reasonably argue that such organizations have many problems with people from other cultures or people who do things in a different way.

• Cultural Synergy management, which describes a willingness to learn and understand other cultures, informal and direct interaction.
• Polycentric management where the leader does not create one team but allows team members to work in their old ways and acts as a link between the members according to the cultural division.

Both Cultural and Polycentric can be considered more a of Development approach (Robert Day 2007). These types of management consider cultural differences as something that people bring to the team as a collective result of the experience gained. A good expression is culture is ‘‘the way in which a group of people solves problems’’ (Trompenaars, 1993).

When companies take into account the different backgrounds that people bring into the organization and accepts them as a given then there is a possibility for each member of the team to start sharing and talking about differences, constructive conflicts and compromise.

Companies that truly look beyond cultural diversity see every person as an individual with its own specialized skills that can be applied to special business situations. Getting an insight in these skills of your team is the key point in managing a multicultural team. The most important is that as a manager you should be willing to learn the skill of analysing the cultural diversity of each member of your team. (Jinsoo Terry 2007) A multicultural workforce brings to a company the invaluable creative input of diverse cultures and backgrounds, particularly at the manager and supervisor levels. Carefully channelled, this is a major asset.

For companies to be able to fully understand the concept of managing a multicultural work force there must be a willingness to change from top to bottom. (Jinsoo Terry 2007) From the CEO down to every worker there should be a focus on and positive attitude towards multicultural issues and one should become aware of differences. Communication between employees needs to be fostered and if necessary train employees in a uni-language to facilitate better communication. Learn about different leadership styles to fit expectations of people from different background. Open communication and people who understand each other will take away a lot of the distrust between different cultures and will help employees to speak up and be involved in decision-making and idea sharing.

2PERSONAL EXPERIENCE ON MANAGEMENT IN MULTI-CULTURAL ORGANISATIONS

The examples described over the next pages are some extracts of personal experience gathered while working in and with different corporate and national cultures. During this time I have worked in 5 different regions. The cultures exposed to, range from American to European to Asian cultures. The main thing learned has been thateven though there are many differences between people and nations the one thing they have all shared was a passion for what they do.

2.1The Baltics

A first example of a multicultural exercise was in an advertising Agency in Estonia. My first position was Account Director foreign accounts. During this period a foreigner was an exception in an Estonian agencyand anybody with a degree was manager.

One of the first problems was my own perception of the Baltic States being three countries in close cooperation. Being the Account Director responsible for managing the pan Baltic accounts from a lead office in Tallinn was a major frustration as what Latvia did Estonia and Lithuania did not want and every single other version that you can find did not work. It was completely impossible to coordinate anything over three Baltic States and every single campaign idea failed.

As failing was no option I had to find out and see what was so different. Discussions followed with all team members and the management of the agencies. In short the result was that the management teams favourite statement was: “we are different then the other countries and we know better what is needed for our market”. The creative teams had only one goal in mind and that is to avoid anything from other countries no matter what it was because “what works in one country does not work in another country”. The account teams were influenced by the creative and management teams and mostly were to young to form an unbiased opinion.

During all conversations I also showed them many different options of advertising for the brands made in cooperation between the Tallinn office and a creative team from London. I did not say however who made it.

In short I saw that the three Baltic States are three different countries but they are actually very close in what they thought was working advertising and what not. The national culturaldifference was not so much the problem. It was the biases and the perception created by the corporate cultures installed by senior management.

The solution proposed to each country was that I made a selection on fixed teams of account and creative people and they form together a Baltic Business Unit that works as separate units, Polycentric management. Each country got its turn in being the lead agency for a campaign under my supervision resulting in a unit cooperating and working smoothly on new business with each other with shared success, borders were lifted.

2.2Holland

My next position was in Holland managing the newly acquired Pan European Canon Account, doing the same what I did in the Baltics but then for whole EMEA. Besides having a new multicultural team, I was responsible for implementing in every single country the advertising campaigns through local account teams often consisting also of 2 or 3 nationalities. Next to that the client was Japanese.

The major challenge was here to find out how to mix this melting pot of different people, different countries into one operating a performing unit. The biggest issues were:

• Forming a team out of 7 individuals where you have 4 nationalities. E.g. the Dutch are very direct which can be perceived as rude, problems in showing up for meetings, people not being able to adjust to a Dutch working culture.
• Misunderstanding what can be done in one culture and not in another.E.g. separate photo-shoots for Middle East and Africa, certain wording that need to be translated.
• Biases mainly from local agencies “This does not work in our country!”
• Asian expatriates being your client taking a very long time to decide after meetings on the concepts.

In this position getting the performance got a whole different meaning. I was busy managing cultural opinions, biases, cultural egos and I thought that it was just all about languages and shooting some options on how to show a camera in the right way. A solution to this problem was never really found as there were just to many different perceptions to come into one. The home team was basically managed traditionally as Ethnocentric so other nationalities were expected to adapt to the Individualist culture. The client was managed however with a respect for its collective culture and the need to build long term relations, conflicts were avoided as much as possible. For the other 32 countries the only way to get the job done was us a Polycentric approach and to travel continuously to negotiate all conflicts between what is locally wanted and needed and what the Japanese client wants to say.