Case of Asea Brown Boveri Company

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Introduction

Cross-culture management is complicated for multinational companies. Differences in cultures across countries make it necessary for companies to adopt various strategies to counter the impacts since they can affect the overall firm performance. These differences across countries exist in various aspects, namely, power distance, individualism, masculinity, uncertainty avoidance, and long-term orientation (ClearlyCultural, n.d.) as one of the cultural differences models posited by Hofstede (1980).

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Leadership holds a crucial role in handling various challenges arising as a result of cultural differences. This paper will analyze a case of Asea Brown Boveri (ABB) Company reported in the media, involving an interview of the Chief Executive Officer of the company regarding multicultural issues and they affect its operations and management.

Introduction to the Case

Asea Brown Boveri (ABB) is a global company started in 1988 by the coming together of BBC Brown Boveri and Asea AB. The two companies are originated from Switzerland and Sweden respectively. They were both dealing with electrical engineering and equipment when they came to merge. ABB Ltd. is now based in Zurich, Switzerland. After the merger, each of the subsidiaries did not seize to perform, but there was an effort to link each to the local culture, customers, and labor forces.

Cross-Cultural Issues for ABB

Reed has reported the cross-cultural implications which have faced the company. He has engaged Joseph Hogan, the ABB’s Chief Executive Officer in an interview to explore various cross-cultural challenges for such organizations. This interview is presented in the case study under consideration. He points out cultural challenges are hardly avoidable for large companies of the size of ABB, operating across various countries.

In the quest for determination of how companies deal with such challenges, he carried out his reported interview. The company recognized the need for management of different cultures since its inception, according to Reed. The company has since expanded to operate in more than 100 countries around the world according to the report. It has undergone six reported decentralization efforts since its inception.

The company is run by executives on the top who have come from different cultures, namely a German, Swiss, Belgian and an American. This means that the company has been conscious of cross cultural leadership from history, which has been expressed as an important factor towards cultural diverse leadership and expansion across the globe.

According to Reed, one of the pivotal factors for the company’s success has been its approach to leadership and employee organization. The leadership has adopted a collaborative style of managing employees, which, according to Reed, has worked well to integrating different employees from different cultures through self-organizing teams. Reed’s interview of Joseph Hogan concentrates on the multicultural challenges facing leadership of global companies like ABB, the impact of cultures on employees’ activity and general issues touching cultures and their implications on global companies as compared to domestic firms.

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Case Analysis

Hogan admits that when organizations start expanding across various countries, it brings various implications and challenges for leaders. The complications are diverse in nature, ranging from marketing, cultural, financial, and logistics, among others.

One of the challenges for cross cultural environment is the need to have efficient styles of leadership and governance systems to manage multicultural issues.

Research admits that the model of leadership in an organization can have a great impact on team performance and overall organization’s results from a general perspective (Feng and Gayle, 2008), and one of the ways it affect is the ability or inability of leadership to organize performance teams across cultures. Some of the leadership styles which can help organizations in multicultural environments include transactional, transformational and visionary leadership. Trompenaars and Voerman (2010) have explored the adoption of servant leadership across cultures. Different cultures are eminent in personal goals and objectives pursued by individual employees.

A company must link these personal goals with corporate goals in order to succeed in multi-cultural environments. Transformational leadership can, for example help a company to improve on commitment of employees to company goals and objectives, by motivating and inspiring the employees (Bass, 1985). Companies can survive in new environments by adopting visionary leadership, according to Zhu et al (2005). Handling various cultural needs for people requires servant leaders to truly be concerned about helping others, as a principle. It is important for leaders to not only recognize these differences, but also to avail the necessary tools various employees require in order achieving personal goals.

Differences in roles and responsibilities for leadership are also caused by differences in legal requirements across various countries. For instance, various countries have different legal definitions for roles and responsibilities of top executives (e.g. CEO and Chairman), and this has impacted the way leadership is employed by ABB. Various countries also carry various requirements and regulations for union leadership. For instance, according to the case study, company operations would largely be affected by union relationships in France and Germany.

Board decisions and communications are affected when laws allow union members to sit with them, and this has happened in Germany. Management implications may arise when leaders fail to understand how the people and legal institutions define the various roles and responsibilities. For instance, Chairman and CEO are treated as different roles in UK and Switzerland, which is different with the American style. This may make it hard for organizations to understand it competitors, according to Hogan.

Another implication regarding cross cultural management is the setting of goals and objectives for the organizations, which is supposed to cut across various cultures. Company leadership needs to set goals in consideration to the differences of approaches among employees in various countries. Adjustment is important for management in regard to this. ABB leader Hogan has found out that while saving face is the major motivation for people to seek to achieve certain set goals and objectives in countries such as China, India and Japan, it is easy for people in America to respond to stretch goals and seek towards achieving them to win.

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According to Hogan, such differences may for instance, cause teams from India and Japan push for compliance in various legal acts and recognition, as compared to teams from other countries. This means that the management must understand the differences and adopt various strategies to cope and make decisions in various settings, according to Hogan. According to Mickan and Sylvia (2000), company leadership must develop workable goals and objectives, strategize how they can be achieved by leveraging on the power of employees, and serve as examples to employees to achieving them. Another important rule recognized by research regarding organizational goals and visions is that the company must be able to effectively communicate the organizational goals and visions to its employees.

Another implication for multinationals is management of cross cultural employees who have different approaches to management ideas, innovation and team work. According to Katzenbach and Douglas (2005), such differences may arise in teams because of cultural differences. Different company leaderships respond to cross cultural challenges in various ways. Some of the techniques employed by ABB include the top executive being sensitive to the differences in cultures among the various employees. For instance, various countries are differences in the way employees’ view or approach leadership decision making. While some favor top down approach, some like to be involved in decision making.

In the interview, Reed gives an example of a difference between the style employees in Northern Europe and those from Latin countries and India, pointing out that the latter expect directions from the top management and do not want to be engaged in making important decisions as compared to the former. Reed seeks to know the differences in expectations for Hogan as an executive following these differences in cultures.

According to Hogan, the company has also dealt with this challenge by having various people in the different countries, who are familiar with differences in cultures and these help by directing the leadership appropriately.

Different employees from various countries pose different challenges for management in regard to innovation. While heterogeneous teams are unavoidable across various countries, organizations may minimize conflicts by employing people with similar characteristics (Mickan and Sylvia, 2000). But every organization cannot avoid differences among employees, since differences are sometimes difficult to find, as some may be represented in inexpressible forms such as values, wishes, preferences and tastes.

These differences embraced in various cultures make various employees behave differently, and respond differently to various issues. According to Hogan, new ideas and programs are well received and responded to, in countries such as the United States as compared to European countries. The latter are skeptical and have intense security against new ideas and conviction is important to have them follow new ideas. Once this happens, employees continue pushing for the goals without looking back. For the United States, employees may accept new ideas and programs easily, but they may not be motivated at all once it gets tough according to Hogan. This requires that you keep on convincing them why they are doing what they accepted to do. Management must respond differently to these needs according to Hogan.

Another aspect of cross culture management of employees is that employees across various countries have different motivations. ABB had had to adopt various incentive systems for various employees based on the cultural differences. Hogan admits that this may result from differences in cultures, although tax issue may also affect it. The company uses financial incentives for all countries, but modification according to various regions and countries is important. For instance, financial incentives based on personal rewards are best fit for American employees as compared to those employees in the Asian and European countries.

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The latter adore team recognition and different rewards. ABB handles these differences by rewarding employees using, for example, more stock than cash and use of formal recognition. The Chief Executive recognizes that Europe has many implications for incentives, as more diverse cultures having more Gross National Products spread across them exist in the region than any other. The company has also used Hay Group as a consultant to ensure that they achieve industrial standards for all regions through bench-marking.

Conclusion

Multinational organizations are affected by a variety of cross cultural issues. ABB has been affected by various cross cultural issues as can be seen in the case. These includes having culturally diverse employees, need to adopt leadership strategies that fit various cultures across various countries of operation, and need to employ various incentives according to cultural differences among employees. ABB is aware of the differences between cultures among employees and seeks to manage them by offering suitable solutions that recognize the differences. Organizations need to adopt efficient leadership styles which recognize the need to link personal goals (of culturally different employees) with organizational goals.

References

Bass, M. (1985) Leadership & performance beyond expectations. New York, NY, Free Press.

ClearlyCultural. (n.d.). Making sense of cross cultural communication: Geert Hofstede cultural dimensions.

Feng, F., and Gayle, C. (2008) Missing links in understanding the relationship between leadership and organizational performance. International Business & Economics Research Journal, 7(5), 68-78.

Hofstede, G. (1980) Cultures and organizations, software of the mind. London, McGraw Hill.

Katzenbach, J., and Douglas, S. (2005) The discipline of teams. Harvard Business Review, 1-10.

Mickan, S., and Sylvia, R. (2000) Characteristics of effective teams: A literature review. Australian Health Review, 23(3), 201-208.

Reed, E. (n.d.) The international leadership of ABB Ltd. Web.

Trompenaars, F., and Voerman, E. (2010) Servant-Leadership across cultures, New York, McGraw-Hill.

Zhu, W., Chew, I.K.H. and Spangler, W.D. (2005) CEO transformational leadership & organizational outcomes: The mediating role of human-capital-enhancing human resource management. The Leadership Quarterly, 16(1), 39-52.

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