Multinational Corporations: Cultural Implications and Employee Voice

Introduction

For multinational organizations, the cultural implications of the host country play an essential role in decision making. As with any other business domains, for example, communications with partners, management of employees, and their expectations differ depending on their culture. For instance, in the United States, the use of informal names in business communication is acceptable. At the same time, in most European states, one has to use titles when addressing a person at work (Reynolds, 2017). With employee voice, the personnel has different expectations about their involvement in the firm’s management and inclusion of their viewpoints, either directly or through representatives when making arrangements.

MNCs is an abbreviation for a ‘multinational corporation,’ a business that operates across several countries. Culture does not have a unified and agreed-upon definition. According to Hofstede, one way to view it is as a ‘collective mental programming of the human mind’ (Compare countries, no date, para 1). From a business viewpoint, culture shapes the customs and expectations of the employees, for example, their attitudes towards involvement in the firm’s decision making. Next, employee voice is a set of structures and processes that allow the staff to contribute to the decision-making process of a company (Boxall and Purcell, 2013).

These three terms are interlinked because MNCs operate across several countries with different cultures, which shapes the expectations of the employees and outsiders regarding the meaning of employees’ voice and the involvement of the personnel in the firm’s decision making. This paper will discuss the role of culture in the context of employee voice for MNCs.

Employee Voice

There are different perceptions of employee voice, in some countries, it is considered essential, while in others, employee voice is viewed as something that does not contribute to the excellent decision making and management of a company. An alternative definition to the concept of ’employee voice’ to the one included in the introduction of this paper is offered by Wilkinson, Barry, and Morrison (2020, p. 100677)—’employee voice refers to all of the ways and means through which employees attempt to have a say about, and influence, their work and the functioning of their organization.’ The examples include involving employees in the planning process for the company, communicating with employee unions to reflect on the existing policies and other ways of communicating.

Apart from decision-making, employees often have insights about the onsite problems, for example, illegal actions of their colleagues or unethical business practices. CIPD (2020, para. 5) explains that one instance of employee voice has become ‘whistleblowing’ when an employee raises concerns about an issue to either the management or a regulator. The problems that employees may want to speak about can include illegal actions or dangerous work conditions.

This is a manifestation of the so-called ‘speak up culture,’ where employees are encouraged to talk about problems instead of ignoring them. Legally, these whistleblowers are under protection according to the Public Interest Disclosure Act 1998 (CIPD, 2020). Hence, employee voice is an involvement in the firm’s decision-making and a form of control for the ethical and legal practices a firm uses.

Different Types of Employee Voice

There is a distinction in the way the employee voice can manifest, for example, it can take a direct or indirect form or be individual or collective. Apart from these categories, which are linked to the cultural differences between nations, in some states, employee voice is not accepted as a necessary element of corporate governance. For example, traditionally, India and China do not value the inclusion of personnel into management due to the social hierarchy of these countries (Warner, 2018). Hence, giving employees a voice is not considered necessary in these states.

With direct and indirect representation, the focus is on how the employees communicate their opinions. Either each individual does this on their own, or the personnel chooses representatives of their collective opinion. Cvenkel (2020) defines direct voice as an employee’s access to a two-way communication channel with their management. Examples include open-door policies, where each staff member can approach a manager or team briefings. Different types of appraisals, such as the 360 reviews and performance evaluations, as well as team briefings, also provide an opportunity to talk about concerns (Ruck, 2017).

Direct voice is favored in most Anglo-Saxon countries, including the United Kingdom, Australia, and the United States. Indirect voice involves a representative who communicates with the employer instead of each individual (Kwon and Farndale, 2020). Examples include work committees, councils, such as the European Work Council, or trade unions. Some European states still favor this form of representation, for example, France, Sweden, or Germany.

Employee voice can relate to different elements of a corporation’s operations. Some examples include work conditions, compensation, policies and methods, and other factors (Wilkinson, Barry, and Morrison, 2020). For instance, in some countries in Germany, a work council titled EWC has to sanction the decisions that will affect the employees (What is the difference between a german- and a french-type EWC? no date). Due to these councils’ substantial involvement in the firm’s management, many MNCs have resisted their regulatory power.

Cultural Implications

First and foremost, in the states where employee voice is considered integral for corporate decision making, the belief is that it contributes to the success of the company. According to Ruck, Welch, and Menara (2017, p. 904), ‘employee engagement is recognized as important for organizational effectiveness and a factor in achieving innovation and competitiveness.’

An evident difficulty that arises from the cultural differences and varied views on employee voice between host countries and home states is a misunderstanding between the management and the personnel. For instance, if an executive comes from a culture where employee voice is valued, but they work in China, where this concept is irrelevant, they may fail to make adequate decisions since the employees will be unwilling to contribute to the planning.

Apart from the different views on the relevance of employee voice, there are different approaches to representing the employees in corporations. In essence, there can be a direct or direct representation of an employees’ voice and a difference between a favored form of the host and home states. Indirect representation involves one or several employees selected by the others, who voice the majority’s opinion, and examples include munitions, trade committees, and work councils.

States where indirect voice is favored are France, German, and Sweden (Cvenkel, 2020). Attitudes towards trade unions and work councils differ on a state by state basis. Cullinane et al. (2017) present a case study based on the 2002/14/EC Directive, which regulates the communications in a company. The intent of this directive was to establish a status of communications between the employer and employer for the United Kingdom and Ireland, and previously there was no such framework. This directive contributed to the improvement of non-union communication since previously, the employee voice regulations were mostly voluntary and controversial.

Consequently, direct representation involves hearing each individual’s and their opinion separately. This form of employee voice is becoming more and more relevant, and more states accept this form. For example, ‘South Africa has moved from autocratic racial Fordism to more inclusive paradigms that combine collective bargaining with direct forms of voice’ (Wilkinson et al., 2018, p. 711). This transition is similar to the one that China has made, which involves integrating Westernized practices with local traditions.

From a perspective of theory, Hofstede’s Cultural Dimensions help explain the variations in employee voice perception and different types of representations. This framework was developed on the basis of a cross-cultural communications theory. According to it, there are five distinct domains that help one appraise a culture, including ” Power Distance (PDI), Individualism versus Collectivism (IDV), Masculinity versus Femininity (MAS), Uncertainty Avoidance (UAI), Long-Term Orientation (LTO)” (National culture, no date, para. 1).

Each of these dimensions refers to the independent preferences people in this state have. For example, in states where individualism is favored over collectivism, the individual representation will be preferred over trade unions and work commissions and vise versa. Similarly, power distance may explain why some states, such as India or China, do not favor the use of employee voice.

This model’s strength is that since culture is collective programming that creates specific mind patterns, allowing to distinguish one group of people from the other, Hofstede’s culture dimensions can be applied to analyze the preferences of employee voice manifestation in different states. However, its weakness is the changing nature of international business and globalization.

Case Studies

In the United States and most European countries, employee voice is a significant contributor to decision making within a firm. In contrast, in China or India, however, the concept of employee voice is not as relevant as in Western states. A case study from these countries, which helps illustrate how using employee voice within a culture that does not accept this concept can harm the business, is discussed by Huang, Weng, and Hsieh (2016) in their description of the hybrid model.

According to the authors, ‘missing employee voice has become a salient topic in China’ (Huang, Weng, and Hsieh, 2016, p. 19). This factor may suggest that the global corporate culture impacted China, showing the local businesses different approaches to corporate governance. According to the authors’ research, in recent years, the perception of employee voice in China has been transformed, and a more Western model was adopted by many.

As a result, a hybrid model called ‘democratic management’ emerged in an effort to merge the global and local corporate and national cultures, which allows the inclusion of the employees in the decision making of the MNCs. Clearly, this is a result of the global influence and a need to adapt to governance strategies used globally, which does not mean that local specifics were illuminated completely.

The nature of employee voice preferences is changing in the European states and in the US alike. Bryson et al. (2019) discuss the Anglo-American perspective, where historically, indirect representation of employees in the form of unions has been favored. The trade unions that were popular during the industrial era are now in decline in Canada, the US and the UK. Bryson et al. (2019) speculate that this is a result of a shift in the employee’s preferences, favoring indirect representation to a tendency towards the direct voice. Instead, in these Anglo-Saxon countries, the ‘never-memberships’ and alternative voice models are adopted by firms and their staff.

Interestingly, the theory of employee voice and human resource management suggests that in some countries, for example the United States or the United Kingdom, indirect employee voice is still favored. However, some changes in the perception of employee voice are happening since the recent research by Bryson et al. (2019) shows a steady decline of the unions’ power.

Hence, one should be aware of the cultural specifics, such as a preference for indirect representation and involvement, while having an understanding of the new forms of employee voice. For example, Holland, Cooper, and Hecker (2016, p. 2621) point to social media as a new form of worker representation since social media sites have become ‘powerful communication tools both inside and outside of the workplace.’

Implications for MNCs

The culture of the host country should shape the approach that the MNCs take towards management. This is important because, as illustrated in the previous sections, there are significant differences in how employee voice is perceived by different nations, which can result in corporate decision-making issues. According to CIPD (2020), studies show that the use of employee voice contributes to a firms’ performance because it affects the well-being and motivation of the employees and improved productivity and innovation, and reduce workplace conflicts. Tsang and Yan (2018, p. 3) provide similar conclusions by arguing that employee voice contributes to a ‘discretionary verbal communication of ideas, suggestions, or opinions with the intent to improve organizational functions.’

Changing a governance system on a country-by-country basis may be problematic for the MNCs. This creates a challenge of developing a unified system that would consider the national differences of the employee voice attitudes or that would be flexible enough to allow room for changing these practices. There are two widely accepted methods of managing employee voice for MNCs: global standardization and local responsiveness, which were defined by Bartlett and Ghoshall (Cvenkel, 2020).

The former implies creating an alignment between branches in different states with a common goal of having a transparent system. This approach is market-efficient and creates a sense of equality across different sub branches. The latter means adjusting the system on a country by country basis. Local responsiveness helps maintain the commitment of the employees because the basis of it is respect for the local values and traditions.

There is a model that explains the MMC’s work in this domain: Perlmutter’s’ ERPG model. Perlmutter’s’ ERPG model consists of the following dimensions: ‘ethnocentric, polycentric, and geocentric’ (Cvenkel, 2020, p. 67). The first element implies using employee voice practices referenced in the host country, the second the ones used in the MNCs motherland, and the last option allows choosing the best-suited approach.

Hence, MNCs face the issue of balancing the global standardization and local responsiveness with their employee voice strategies.

Case Studies

To understand the value of employee voice, one should review case studies that illustrate the difficulties management faces when misinterpreting employee voice. Hyman (2018) discusses employee voice views in China, where trade unions are joint, but there is no real communication between the representatives and the management. Moreover, legally, the Chinese ACTFU is the only trade union that can exist in the state, and other unions have to have an affiliation with it. Hence, for a manager from an Anglo-Saxon country who understands trade unions as independent structures, this approach may be unusual.

Another case study is by Belizon (2018), who collected a sample of responses from 240 MNCs working in Spain to determine the issues they faced. Firstly, the researcher notes that many companies from the United States refuse to engage with the employee representation systems. This causes problems because in some states of the European Union, companies have to engage with unions, which is reflected in laws, and refusal to o so results in fines (Belizon, 2018).

Hence, in many of these Westen European states, including Spain, companies employing over fifty people have to establish a formal relationship with a union or a representative body because it is a statutory provision.

Based on the author’s research, Belizon (2018) concludes that British MNCs working in Spain typically adopt a localized approach and follow an employee voice structure that is accepted in Spain—formal cooperation with indirect representatives. MNCs from the United States tend to avoid collaboration with unions in host countries, but they face issues since, in Spain, they are legally obliged to cooperate with unions. Still, Belizon (2018) concludes that US-based MNCs favor direct representation even in Spain.

This case study suggests that employee voice is affected by multiple factors, including the culture of the host state, legislations, and the preferences of the MNC’s home state, as shown by the example of companies from the United States.

Conclusion

In summary, this paper discusses the concept of employee voice, its relevance for the MNCs, and different views on employee voice applicable in different nations. The various case studies examined in this paper help understand the importance of employee voice and its contribution to the corporate governance of MNCs. Notably, the reviewed case studies show that the idea of the employee voice is changing globally. For example, China that historically has been culturally opposed to employee representation, is adopting models where employees have some voice.

Anglo-Saxon states, traditionally characterized by strong indirect expression through unions, are now adopting new models with direct representation, for example, social media. These changes are natural as globalization and the evolution of technology progresses, and regardless of the form that employee voice takes, human resource managers should foster and support the ability of the personnel to voice their opinions on important matters.

In relation to broader globalization discussions about the management of employee relations, one can state that there is a general trend of moving towards a globalized model of employee voice, based on the examples of China and the abandoning of the trade unions by Anglo-Saxon states. These trends support the approaches to employee relationships: economic, institutionalist, and integrated by Bamber et al. (2014), integrated management system appear to be more valid. Most MNCs adapt to representation systems favored in the host states, although there is a tendency for favoring direct representation.

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