Management in the Global Economy

Abstract

As corporations transcend boundaries and mobility of the workforce increases, business organizations around the world face changes that are unique to these times. The following paper enlists and discusses in detail the various problems that managers and administrators face in managing a globally diverse workforce. While the problems are relevant, it is more important that tailored, creative remedies be looked into to solve the issues facing different organizations as pertinent to those particular organizations facing them. Managers play a key role in strategizing such solutions and this paper seeks to identify and recommend various solutions that are part of the author’s own ideas and are derived from those found in available literature on the same topic.

Introduction

While globalization, a controversial phenomenon in terms of its advantages, has proved to be an inevitable truth in our lives, it has wrought changes in our lifestyles, thinking and most importantly the culture we adhere to. Culture has been defined as:

the set of human-made objective and subjective elements that in the past have increased the probability of survival and resulted in satisfactions for the participants in an ecological niche, and thus became shared among those who could communicate with each other because they had a common language and they lived in the same time and place. (Triandis, 1994)

Therefore culture is related to people living together in a certain community where over a period of time values and beliefs have become a norm and any deviation is seen as a deviation from the ‘rules’ of the society.

However with globalization, the context of ‘the same time and place’ has changed as boundaries have become blurred. This is especially so in organizations – whether or not they operate overseas, where foreign culture and ethos has effected them in some way or the other, be it terms of having to compete against foreign firms, adapting foreign standards of quality and production, conforming to needs of a foreign market or in terms of hiring employees from various locales that have a culturally diverse background. At the same time organizations have developed their own culture of values and social norms that employees must abide by. However the culture differs amongst various branches of the same multinational organization wherein depending on the regional cultures the behavior of employees varies. According to an article on management problems, Culture through the lens of sociology:

Organizational culture is the set of values, beliefs and understandings shared by an organization’s employees and it ranks among an organization’s most powerful tools. But the same values and beliefs that can mobilize an organization to action can be a liability if they are inconsistent with the organization’s needs. (Culture through the lens of sociology, 2007)

Moreover, in transnational organizations, where it has branches or offices in many different countries, managing a global workforce poses unique challenges that managers are oft ill-prepared for.

According to Nic Paton, in his article, global migration the new management challenge:

As the working populations of the major Western economies shrink and age over the next decades we are likely to see a global migration of workers from developing and emerging nations – a population movement that will in turn store up its own set of staffing and management problems for the future. (Paton, 2008)

Management in a Global Environment – Issues and Problems

Among the various issues that managers face in the contemporary organizations today are the issues faced with managing the human capital of the firm. Among the plethora of problems that need to be resolved on a daily basis some, to do with a heterogeneous workforce are reward and motivation concerns, incentive programs and training employees to become effective expatriate managers, communication problems across cultural and language barriers, managing a workforce located in various countries, recruiting a talented workforce from across the globe and evaluating monitoring employee performance.

Analyzing these problems in light of various cultural dimensions helps put these issues in perspective. Among the dimensions to be considered are individual or collective orientation, communication styles ranging from direct to indirect, locus of control which could either be internal or external, attitudes towards uncertainty and attitudes towards time. (Heller, 2007)

People in individualistic societies tend to be more independent and value freedom and personal recognition, and their identity is considered of their own merit rather than on the basis of their membership in a certain group. On the other hand, people belonging to collectivist society are more focused on being part of the group and group success rather than individual success.

Communications styles also differ as backgrounds and cultures differ. In cultures where there are open means of communication, people mean what they say and there are no hidden or implied meanings in the things said. While in cultures, where indirect communication is preferred, saying what is on one’s mind is not as important as saving another from losing face and sometimes there are covert meanings in expressions.

Locus of control determines to what extent a person accepts responsibility of what happens to them. People with an internal locus of control assign all blame and control to themselves whereas those individuals, who have an external locus of control, blame others for the consequences they themselves face.

In cultures where a positive attitude towards uncertainty is encouraged, people are not afraid of taking risks are able to make decisions even in cases of ambiguity, while in cultures where a negative attitude towards uncertainty prevails, people need a clear set of instructions to follow and do not appreciate ambiguity, being cautious about failing.

Different cultures have different attitudes towards time and time management. People with a polychronic attitude towards time consider that time is limitless and unquantifiable whereas people with monochronic attitudes consider time are quantifiable and prefer to focus on one thing at a time.

These cultural dimensions help give a more profound perspective, into global management problems.

For example, the Japanese rank very high in uncertainty avoidance – that is their tolerance towards ambiguity is low. Simultaneously, they consider the feelings of the other person in a social context and avoid embarrassing other people even though the other person might be incorrect. Thus people belonging to a culture with direct communication who are ignorant of the Japanese culture are often taken aback by the euphemisms and circumlocution that the Japanese resort to in order to protect other people and group’s interests. According to an article on the Cultural Aspects of Japan, the United States and Europe:

Further to the case of Japan is the culture of the European union, where a survey undertaken by the Ashridge Management College in the United Kingdom (Durcan, 1994) took into consideration the views of senior managers in 14 European countries, and found that ‘Such is the cultural diversity of Europe, that at this moment there is no single model which is capable of taking into account the complete range of national values. (Cultural Aspects of Japan, the United States and Europe, 2007)

Viewing the first issue of reward and motivation in detail, the main decision for managers lies in the deciding on the structure of the reward and incentive systems that lay a key role in allying efforts made by employees to management objectives. These systems are essential in determining employee motivation levels as Arun Kottoli (2006) states:

Poorly designed reward systems can result in opportunistic behavior or in decisions that fly in the face of corporate goals. Many organizations particularly when they are large or complex – will try to standardize their systems as much as possible, to allow for consistency and comparability across equivalent business units. However, such an approach could fail to take into account the impact that cultural differences may have on behavior in the workplace. (Arun Kottolli , 2006)

Thus it is essential for managers to decide on a reward system that takes into consideration all their employee’s needs and formulate a strategy wherein monetary rewards are standardized so that in case an employee is transferred from one branch to another, he does not feel that the organization is being unjust to its employees based on their geographic locations. Further, the monetary rewards can be accompanied with recognition or encouragement depending on the needs of the employee as observed and evaluated by the manager.

With regards to motivational concerns, managers generally face the problem of deciding on stimulus hat will help and instigate the employee to perform well and to meet organizational goals. The problems can be multi pronged when managers do not realize the kinds of motivation that people form diverse backgrounds need. For example people with high need for achievement may want a more challenging job or more control over their work, and a manager not recognizing this might instead reward his good work by assigning him a helper which he will be ill-at ease to manage as people with high achievement needs generally tend to lack in human skills. Further, an employee with high needs for affiliation might be posted to a different location within the organization but in a different country hence forcing him to leave his comfort zone and the company of his affiliates. To illustrate, a case in point being the American management cultures which encourage a high need for achievement and reward individual achievement, which is valued very highly. Thus American corporations place a high premium on recruits with a high need for achievement as they realize that they will be better able to gel in with organization’s culture and contribute more progressively and productively to the organization’s goals which does not need for the group to be cohesive.

Referring to the training of employees, a centrally headquartered Human resources department in a firm, with no particular knowledge of local cultures might enroll employees in programs that employees feel are not needed or are offensive to their ethical and moral values. For example, taking an employee belonging to a monochromic mindset might feel that a course in time management and multi-tasking is irrelevant to him as he cannot alter his thinking to align with that taught in a one day course.

With regards to training managers to become effective expatriate managers, several issues are faced both by the manager and the company. For example in America employees are given autonomy to make decisions are they are less averse to uncertainty in situations. Thus the decision-making in American companies is decentralized and ‘employees are empowered wherever possible. As a consequence, companies have increasingly flat hierarchical structures with US workers being more comfortable with autonomy and as a result managers in the US may find that their job consists more of setting targets rather than give instructions in minute detail to employees. However, manager from America, may have to alter his/her management style when working abroad. To illustrate, Asian employees find that following clear directions and rules easier and more liberating than American employees who like autonomy better than having their work ‘spelled’ out for them. In this situation the expatriate US manager in an Asian division may spend more time giving directions than setting goals and being a coach, instructor and mentor rather than a person who is responsible for setting goals and strategizing. This is one reason why in many US based multinational companies strategy formulation is done in the United States where managers have more discretion to make strategies and it is up to their local counterparts to make a detailed and clear set of instructions for teams to follow.

Another problem mentioned previously is that if evaluating and monitoring the performance of a globally dispersed work force which not only requires standard procedures but objective evaluators, who can also take the subjectivity of cultures into consideration. Take the case of a Chinese versus an American manager. If a Chinese manager is asked to evaluate his employee’s performance, he will view most achievements as the team’s achievements and might not even be aware of the exact contribution of the employee to a particular task or goal. This is because in order to save a social loafer from embarrassment the employee might understate his own contributions to the achievement. Hence the Chinese manager will evaluate his employee as lower compared to an American manager hailing from a culture where individual achievement is values above all and direct patterns of communication enable the American manager to know the exact contribution of his team member to the organization’s goals.

Thus a system needs to be in place where all employees are assigned tasks and are asked to fill out a daily form based on the percentage of work completed in a particular time span. Further, even though some people might not want to blow their own horn, certain rewards must be made available to those who have worked more and have taken more efforts in completing assigned tasks. The problems of evaluating and monitoring employee performance becomes increasingly relevant when considering personnel for promotion as the management needs to pinpoint those who truly care about the company and have contributed in real terms to the firm’s benefit.

Setting aside the motivation, rewards, incentives and evaluation problems, one major problem that companies face today are recruiting the right mix of talented individuals to help move the company forward. In this regard, many companies have introduced recruitment programs in colleges and universities in countries hey operate in to recruit graduates who are fresh out of school and train them according to their needs. However such individuals are required to have a certain set of traits that the company deems prerequisite to any hiring decisions. Thus recruitment programs are more difficult and more challenging to design given the peculiarities of various cultures. However, if the company determines a certain set of traits that it desires in people, it risks hiring a homogenous workforce which thinks and acts alike or not hiring the correct mix of individuals with the different sets of skills that are required in making all the functions run smoothly as one organization.

Intercultural communication is also one aspect of managerial issues that poses problems for a company where global managers belong to different backgrounds and a foreign manager tries to communicate with his counterpart in another country where values and communication norms are different:

There are two aspects to communication with global managers. Global managers might share similar values regarding work ethics and professionalism. Hence, communication at the workplace may not pose a problem. On the other hand, the cultural underpinnings of communication may manifest themselves when relationships at the personal level are attempted. And of course, skills in intercultural communication become of the essence when, one, expatriates attempt to integrate into a foreign culture, and two, a corporation has to operate in a foreign culture and market its products there. (Intercultural Communication, 2007)

Keeping this in view, intercultural communication where local adaptation is necessary can indeed prove to be a difficult and challenging task. Especially if the ways of communicating differ in terms of indirect or direct. If a manager resorting to indirect means of communication agrees to an idea proposed by his foreign counterpart who takes things at face value, the foreign manager may be in for a surprise if he finds out through some other means that the agreement merely meant that the manager had wanted to avoid argument and he really didn’t give his consent.

In such cases a written for of agreement become necessary as any ambiguity can be cleared and implied meanings are aired out in the open for all to understand. For example:

In Korea, the importance of ‘face’ also means that public criticism of any kind is avoided. At the same time, Korean nationals often have an indirect way of communicating, so that the real meaning of “yes” and “no” may be different in different situations. (Intercultural Communication, 2007)

Edward T. Hall’s article ‘The silent language in overseas business’ (1960) describes a situation in relative context of the American, Hispanic and the Arab world. The article states that an American manager will treat his most valued client first and prioritize his needs over the rest without a second though. On the other hand a Hispanic or an Arab manager will give due attention to all his clients, being more people oriented culturally. The article gives the case of a valuable client waiting to meet the manager in line with other clients and not taking offence at not being waited upon immediately as might be in the American case.

Other aspects of contrast between Americans on the one hand, and Hispanics and Arabs on the other, which are found at different places in Hall’s piece, are:

US managers appraise the importance of managers by comparing the size of their office to that of other managers in the company. The CEO has the best and biggest office, and so on down the pecking order. In the United States, from middle management levels upwards, people are accustomed to having considerable space around them. By contrast, in Arab and Hispanic countries people like to work in close proximity to each other. There is little space around a person. Often, a man might lay his hand on another man, or a woman might lay her hand on another woman. (Hall, 1960)

Different cultures may be distinguished by their communication patterns and intercultural communication can benefit from mutual understanding and respect of each other’s cultures that can help put a problem in its perspective and help managers in avoiding communication problems that can hinder the smooth working of the organization and create differences that are difficult to repair.

Language is another factor that can lead to problems in intercultural communications. Even though English is an international language and more or less of the world’s population is conversant in the language. However across the world proficiency in English is significantly different in different countries. Additionally, even if global managers can speak in English, expatriates working in other parts of the globe need to know the regional language in order to survive beyond work hours and in day to day dealings with the locals.

Furthermore native speakers of English are comfortable with the slang and the jargons used in the language that non-native speakers might not understand. Thus problems might arise in understanding and sending across messages.

Another problem that has become apparent in recent times is the fact that the physical locations of people are separated by great distances which makes it impossible for managers to have normal meetings in order to discuss issues and strategies. In some cases a team comprises of a senior manager located at the headquarters with brand managers being present at different countries of operations. Thus, deprived of physical proximity, managers find themselves facing the issue of using communications technology to communicate across countries. While this may be a done scenario in many organizations today, the drawbacks of using another medium of communication might have its own disadvantages. In less developed countries where the telephony and communications infrastructure does not provide a good streaming speed, conversations may be hindered by breaks and static that makes it difficult to concentrate on the discussions going on at hand. Further, teleconferencing might not be a viable option at all times and telephone and other mediums limit communications by either depriving the communicators of visual accompaniments or of two-way communications. For example a presentation conducted with all attendees in a room will have more of a chance of leaving a greater impact and having a fruitful discussion compared to one where different branches are logging in to communicate from different countries. Moreover, time difference might make it impossible for two managers from two mismatched time zones to communicate effectively and in a timely fashion, in case an emergency situation arises.

Further to these pertinent issues are the issues of ethnocentricity and stereotyping that people face not only on an organizational but also at a personal level. Ethnocentricity can be described as a feeling of superiority of one culture over another. Ethnocentric people generally believe that those belonging to other cultures are out groups and that they are inferior to them. Their values and morals are considered incorrect and the superior culture is supposed to correct them in this regard. Further, those belong to the inferior cultures are supposed to remain subordinate to those following the superior one. Ethnocentricity has long been the root cause of problems faced by minority and oppressed groups. Therefore if it permeates the work place problems are bound to occur where ethnocentric individuals might refuse to work with or create obstacle for those they consider inferior, managers will then have t realize how to handle these problems of harmony among the group. Furthermore ethnocentricity is generally discouraged in organizations, but if it prevails due to personal convictions of individuals it could cause conflict even among top management.

Yet another problem closely associated with ethnocentricity is stereotyping the traits of people who belong to certain groups due to their membership in that group. This would be equal to saying that all Americans are selfish based on previous interactions with some members of the group. Stereotyping is a common phenomenon in everyday life. However if it cause team members to differentiate and distrust the stereotyped individuals it will be bound to cause management problems.

Management in a Global Environment – Potential Solutions

According to Bernard Salt, a partner with KPMG in Australia:

The face of the international workforce is changing. Labor and talent will flow between countries. Generation Y already has a global perspective thanks to the Internet and the relative affordability of international travel. They are taking this mindset into the workplace and are looking for global opportunities for migration and career advancement. (Paton, 2008)

More importantly, when the strategy of many multinational corporations tends to be consumer focused and given to local adaptation, and a standard quality of services and products has to be maintained customer preferences have to be understood impeccably. And in order for these companies to understand consumer demand it is essential that their work force be local or at least in tune with local needs. Keeping this in perspective, the problems faced by contemporary managers are many. However with careful consideration and study these can be eliminated or at least reduced to a considerable degree.

In finding a solution to reward and motivation problems, as discussed, it is essential that monetary rewards are standard across the board in all countries while encouragement and recognition should be awarded based on cultural norms. Taking a lesson from Japanese management styles:

The centerpiece of the Japanese approach is the recognition that creating new knowledge is not simply a matter of ‘processing’ objective information. Rather it depends on tapping the tacit and often highly subjective insights, intuitions, and hunches of individual employees and making those insights available to testing and use by the company as a whole. (Problems with Global Strategy, 2007)

In doing so and building upon the feedback from employees companies can identify cultural problems early on and alleviate them as they become apparent.

According to Nic Paton, quoting Bernard Salt, a partner with KPMG in Australia:

Multinational corporations can and should begin preparing for this new environment by establishing leadership groups, exposing staff to international cultures and drawing on local staff to manage country offices. These and other steps have proven to be effective strategies that have eased the transition in several global corporations. (Paton, 2008)

In problems associated with expatriate managers, various steps can be taken to mitigate the issues. Intercultural training can prove to be a sound investment where, managers can learn the basic communication rules of a foreign culture, and can learn the mannerisms associated with those cultures. Some basic background on the culture being dealt with can go a long way in avoiding clashes arising due to cultural differences. In Korea for example, it is considered disgraceful to openly argue with an elder thus a manager knowing this will be careful in trying not to offend the elder person by being too argumentative or being contradictory in his views to him.

Further to recruitment problems a global recruiting strategy can be in place to familiarize potential candidates with the kinds of situations that they will. In the case of L’Oreal, the company has introduced a business strategy game in which teams from all over the world compete and the winners are offered jobs in the company. Such a global talent hunt can help the company get the best of talent from across the globe.

Keeping in views he communication and cultural barriers, managers:

Do not believe that a single, universal approach to communication, irrespective of culture, is appropriate. On the other hand, they do not believe it is necessary to go completely native, and adopt the entire gamut of communication mannerisms of another culture. What is recommended is an appropriate blend of both approaches. In some situations, it may be necessary to adopt the host culture’s norms of communication more vigorously than in others, especially when interacting with persons typical of that culture. (Culture-specificity versus pan-culturalism, 2007)

In finding solutions to communication problems, especially those to do with language and cultural symbolisms, it is imperative, as mentioned before that some amount of training be conducted so that orientation with norms of the culture are taught.

Similarly in case of communication problems occurring due to technology or physical constraints, a leaf can be taken from EMC a storage equipment manufacturer which creatively solved their problem. The company launched a wiki website for their scientists and engineers to develop software and concepts together. This not only means breaking the bonds of time zones where once when done with their parts, employees from one locale can upload the development for employees to view at another. However, in cases of emergency it is important the employees are given to understand the significance of a red-alert situation and have a code that signals them to meet immediately.

Moreover, in cases where a company faces difficulties of ethnocentricism, lectures on ethnorelativism can be undertaken. Ethnorelativism teaches that ‘cultures can only be understood relative to one another; there is no absolute standard of rightness or goodness that can be applied to cultural behavior; cultural difference is neither good nor bad; it is just different. (Culture-specificity versus pan-culturalism, 2007)

Stereotypes can only fade with employees experiencing different cultures and coming across people from diverse backgrounds where the organization can aid by sending employees to foreign places so hat they may be able to see the incorrectness of their categorizing people unfairly into groups for traits they don’t necessarily possess.

In conclusion, if senior managers want to mitigate issues associated with managing a global workforce they needed to establish certain measures that exposes employees to various global cultures, placing a priority on cultures they deal with most closely and pursue a policy of workplace diversity and develop tailored career plans suited to the unique needs of their employees.

References

Arun Kottolli. (2006). Web.

Cultural Aspects of Japan, the United States and Europe. (2007). Web.

Culture through the lens of sociology. (2007). Web.

Culture-specificity versus pan-culturalism. (2007). Web.

Global Strategy and Local Adaptation. (2007). Web.

Hall, E. T. (1960). The silent language in overseas business.

Heller, B. (2007). Applications of Cross Cultural Psychology for Global Organizations. Web.

Intercultural Communication. (2007). Web.

McGregor, J., & Hamm, S. (2008). Managing the Global Workforce. Web.

Paton, N. (2008). Global migration the new management challenge. Web.

Problems with Global Strategy. (2007). Web.

Triandis, H. C. (1994). Culture and Social Behavior. New Yprk: McGraw Hill.