Overview of Hofstede model of national culture

Critical assessment of Hofstede model of national culture

Hofstede model of national culture is also known as the Hofstede’s cultural dimensions theory. In this model, social psychologist Geert Hofstede presented the result of his research on the ways that the businesses are conducted between different nations and how the cultural differences impact the businesses. This model is the result of one of the most comprehensive studies about impact of culture on the workplace values. Hofstede defined culture as mind’s collective programming that distinguishes the individuals of one category or group from the others (Hofstede 2018). Hofstede carried out the research on this subject over 100,000 employees of IBM, working across the world. He categorized the cultures of people belonging to different nationalities to evaluate the impact of culture on the working environment. The aspects of culture are divided into six dimensions, namely, Power Distance Index (PDI), Individualism versus Collectivism (IDV), Masculinity versus Femininity (MAS), Uncertainty Avoidance Index (UAI), Long Term Orientation versus Short Term Normative Orientation (LTO) and Indulgence Versus Restraint (IND). The cultural dimensions stand for the independent preferences for one type of affairs over the other, which distinguishes the countries and not the individuals from each other (Hofstede Insights 2018).

 

Figure 1: 6 dimensions of Hofstede model for national culture

(Source: Hofstede 2018)

The dimensions of the model are as follows:

Power Distance Index (PDI): this measures the extent to which the inequality in power or hierarchy is tolerated and if there is a strong sense of status and power among the people. In other words, it represents the degree to which the members of a society, who are less powerful, expect and accepts the unequal distribution of power. This shows how inequality among the people is treated by the society. The hierarchy has more importance in countries with more PDI score (Fang 2012). A higher PDI score indicates that the culture accepts and encourages the national bureaucracy and pays high respect to the authority and rank in the system, while a culture with a lower PDI score encourages a flatter bureaucracy with equal distribution of power and more emphasis on autonomy and personal responsibility.

Individualism v Collectivism (IDV): This aspect focuses on the importance of individuals and the societies. Higher IDV score represents the emphasis on the individual efforts more than that of the group effort. It has bigger implications for the financial rewards at the workplace, in terms of individual bonus versus the profit sharing for the larger groups (Taras, Steel and Kirkman 2012).

Common criticisms of the model

Masculinity versus Femininity (MAS): The aggressiveness and competitiveness of a culture to achieve something is measured by this score. This mainly focuses on decision making style of a culture. The nation with a high MAS score is focused on aggressiveness, competitiveness, assertiveness and material rewards for accomplishing success, while the nation with a low score adopts cooperation, modesty, quality of work and life and compassion while making a decision.

Uncertainty Avoidance index (UAI): This score measures the risk aversion nature of the culture. A low score indicates that people are willing to accept more risk and ambiguity and embrace the change, representing entrepreneurial nature, while a high score indicates a rigid and orthodox society, not much willing to take risk or adopt the entrepreneurial nature.

Long-term orientation versus Short Term Normative Orientation (LTO): LTO score indicates how much the nation puts emphasis on long term planning and perspective in regards to the business objectives, planning and performance and investment decisions.

Indulgence versus Restraint (IND): This score indicates how much the society indulges in the free living and enjoys fun. Restraint stands for a culture, which suppresses the gratification of needs and imposes strict social norms to restrict it.

The most common criticisms of the Hofstede model address the assumptions of homogeneity of the country culture, simplicity due to one company approach, factors of national culture versus non-cultural factors, inclination towards the western culture and assuming that culture is constant. The Hofstede model assumes that the domestic population of the country is homogeneous (Mazanec et al. 2015). It ignores the fact that the population belongs to different ethnic units having different dimensions of culture. One nation does not have one particular culture pattern, language, customs and norms and the model does not consider that. Even the difference between the culture and the subcultures is also ignored in the model.

The model is too simplified. Hofstede took the employees of one particular company to conduct his study. According to Taras, Steel and Kirkman (2012), few employees of only one organization cannot represent the entire culture of a nation. It is also said that, in the Hofstede model, the non-cultural factors were ignored, which have significant impact on the national culture. There are economic, political, institutional and many social factors that have influence on the national culture and the critics say that, studying only one company and making conclusion based on that is not justified (Minkov and Hofstede 2012). Apart from that, using survey as the only research instrument for constructing a theory has faced criticism too. According to Dartey-Baah (2013), there should be other methods or strategy also to support the results of the survey and make the theory more grounded. The study also does not take into account the rapid changes in the global environment, that is, impact of globalization and convergence. Due to these factors, there is a rapid change in the business environment and organizational cultures, which also reflect the changes in the society and cultures. Cultures are dynamic and these are changing very rapidly. These are not addressed in the Hofstede model of national culture, and hence, in the modern world, which is largely dominated by the globalization, the Hofstede model does not hold significance in many cases.

Assessment of alternative national culture theories

There are some other theories formulated by other eminent scholars in response to the criticism of the Hofstede model. Those theories are Trompenaars’ model of national culture differences, Hall’s theory of cultural context, World Values Survey and the GLOBE research project.

In the Trompenaars’ model of national culture differences, a cross cultural communication framework was designed and applied to the general business and management. This model has seven dimensions, namely, Universalism versus Particularism, Individualism versus Communitarianism, Neutral versus Emotional, Specific versus Diffuse, Achievement versus Ascription, Sequential versus Synchronic and Internal versus External control (Beugelsdijk, Maseland and Hoorn  2015). This theory focuses on the more detailed approach towards cultural dimensions while keeping some similarity with the Hofstede model. Individualistic natures and approach towards the cultural aspects are addressed in this theory.

Hall’s theory of cultural context addresses the high-context and low-context cultures and the way of businesses done in those two types of culture. According to Hall, in the high-context cultural countries, there is implicit meaning of the messages that carries more information than the actual spoken words, while in the low context countries, messages carry transparency in meaning and information to be conveyed. Hence, context is relative and plays a major role in measuring the cultural metrics of the country. High–context cultures are relational, intuitive, collectivist and contemplative (Crane, Kawashima and Kawasaki 2016). With increasing globalization and migration across the world, the contexts of the countries are changing, for example, Finland, has a high-context culture, but with the influence of western culture, it is becoming a low-context one. The organizational cultures are often influenced by the culture context of the host countries, while individuals belonging to different countries will display attitude of different context cultures (Deephouse, Newburry and Soleimani 2016). This theory is similar to the universalism and particularism dimension of context, introduced by Trompenaar.

The World Values Survey (WVS) is an international research project, focusing on the values and beliefs of people, and the way those change overtime and the political and social impacts of those (Stonefish and Kwantes 2014). It is carried out in more than 100 countries in the world. This survey has demonstrated over the years that peoples’ beliefs play a crucial role in the economic, social and political changes and development of the nation, emergence and growth of democratic institutions, efficient government and rise of equality (Cowley and Smith 2014). For example, motivations of various events in the past, such as, 2005 French civil unrest, 1994 Rwandan genocide can be best explained by the results of this survey, while that cannot be explained by applying the Hofstede model (Lee-Ross 2015).

Discussion of business expansion and national cultural characteristics

GLOBE research project is the acronym for “Global Leadership and Organizational Behavior Effectiveness” research program, developed by Robert J. House in 1991. This program includes nine dimensions of culture to capture the similarities and/or differences in cultural norms, beliefs, practices, and values among different societies. This program is based on the theories by Hofstede (1980), Schwartz (1994), Smith (1995), Inglehart (1997) and many more authors. The nine dimensions of this theory are, Power Distance, Uncertainty Avoidance, Humane Orientation, Collectivism I, Collectivism II, Assertiveness, Gender Egalitarianism, Future Orientation and Performance Orientation (Minkov and Blagoev 2012). The nations are categorized into different clusters based on the cultural similarities and the differences in culture increases based on how far one cluster is from the other. These have influences on the leadership styles, which in turn has immense effect on the organizational environment.

All these theories are made in response to the Hofstede model of national culture. Majorly these are expansion of the Hofstede model. The extra or the modified dimensions of culture aim to address the cultural aspects in much detail. These not only focus on the national cultural aspects, but also on the individualistic aspects, which have significant impacts on the organizational culture.

Impact of cultural diversity on cross border business: Example of Daimler Chrysler merger

Cultural diversity plays a very significant role in the cross-cultural merger and acquisitions. The cultural characteristics of the companies involved in the mergers often influences the way of businesses and on the features of the products or services, which could be successful or failed based on the dominance of the diversity (Fitzsimmons and Stamper 2014). The merger between Daimler and Chrysler is one big example of a failed merger, for which cultural clash is responsible. The chairmen of these two big automobile companies signed the merger deal and termed it as the ‘Merger of Equals’ in 1998. However, there was no equality, and after few years, it was called a fiasco (Devine, Lamont and Harris 2016). Clashes occur due to difference in corporate cultures and national cultures. These two are interrelated. The executives of Daimler and Chrysler announced that they would merge the best aspects of each company for more superior products. However, the lack of cooperation and true sharing became evident soon. For example, the executives in Daimler refused to use the Chrysler auto-parts in the Mercedes vehicles. DaimlerChrysler was the name of one company, but they maintained two separate headquarters, one in Stuttgart, Germany and another in Michigan. Differences of cultures emerged in terms of level of formality and maintaining hierarchy, philosophy on the issues like operating styles, expenses and pay. The German culture became highly dominant and the employee dissatisfaction level decreased considerably. After two years of the merger, Juerge Hubbert, Chief of Passenger Car’s of Daimler said that the merging of two big automobile companies had one company, one chairman and one vision but two different cultures (Tracy 2017). By 2000, the companies projected huge losses and after another year, layoffs started. Daimler sold Chrysler for $6 billion in 2007 to Cerberus Capital Management (Daimler.com 2018). It can be inferred that culture clashes had led to the fall of one of the biggest cross border mergers of the 1990s. To mention the cultural clashes, it can be mentioned that Daimler imposed Materials Cost Management initiative on Chrysler to reduce the cost of the interiors of the cars. It also imposed Voluntary Termination Incentive Program, which led to mass exit of many talented engineers of Chrysler (Pascall 2015). Although, the merging deal had produced some of the best cars during that time, the cultural differences did not lead to long term success. The amalgamation of the European and American culture did not enjoy success due to the high level of cultural differences.

Personal adaptations for working in cross-cultural teams

An analysis of the Daimler-Chrysler deal in regards of the Hofstede model of national culture brings out some potential explanations of the failure of the deal. The Hofstede country comparison score of Germany and the USA is depicted below.

 

Table 1: Hofstede model country comparison, Germany and USA

(Source: Hofstede Insights 2018)

In terms of power distance score, a country with a high PDI score enjoys more privileges for the people in the higher level compared to the country with a lower scores, who prefers egalitarian system. In this example, Germany scores 35 and USA scores 40. Thus, it can be said that, with a higher score, the level of equal power distribution in the organization is quite low. Daimler preferred hierarchy and formality in the organizational decision making process and the employees are also required to follow hierarchy and formal management channels. Along with that, the German managers follow autocratic style of leadership and the subordinates follow the managers without any question. Hence, the power distribution is mostly equal in the German company Daimler while it is more flexible in the American company Chrysler. Chrysler followed more flexible leadership as well as organizational culture. Daimler was extremely bureaucratic and rigid with the Chrysler way of working rather than being informal (Dikova, D. and Sahib 2013).

It is seen that, in the dimension of individualism versus collectivism (IDV), Germany scores 67 while USA scores 91. It makes the USA a highly individualistic country compared to Germany. it is seen that Daimler followed collectivism in their organizational culture while Chrysler preferred importance in individualism. The Germans preferred to look after and protect each others’ interests and hence, less individualistic. They perform best while in groups. On the other hand, being an American company, Chrysler give emphasis on individual performance and achievements, and this brings a big clash in organizational culture (Kaynak, Fulmer and Keys 2013).

According to the figure, the Masculinity versus Femininity (MAS) score is 66 for Germany and 62 for the USA, which is almost similar, however, Germany is relatively aggressive and competitive than the USA. Daimler emphasized on more competition than Chrysler. However, the sense of achievement and rewards were almost similar in the two companies.

As per the uncertainty avoidance index (UAI), Germany scores 65 while USA scores 46. This indicates that the Germans are much more cautious about taking any risk in the business process, while the Americans are not scared to take risks. This aspect was reflected in the Daimler Chrysler merger. The executives in Daimler followed complex decision making process with great detail, and hard discussion with partners and stakeholders and doing much cost benefit analysis before implementing any decision or strategy. On the other hand, the employees and management of Chrysler favored an open and free discussion process without following much rules and formalities. Casual approach, with less stress was followed by the management which is quite opposite of what Daimler used to follow. Risk taking attitude was more common among the Americans than the Germans.

Use of ‘competencies’ as a model for individual behavior

In the long term orientation (LTO) dimension, Germany scores 83 and USA scores 26. There is a huge gap between the two countries. This indicates that, the Germans prefer to take decisions based on the long term goals and plans while Americans think about short term goals. This is a big cultural difference that can have a significant impact on the organizational process. The employees of the German company Daimler were more focused on building a long term relationship with the company and planning for achieving success in the long run, along with calculating the financial report on an annual basis. On the other hand, Chrysler was more focused on accomplishing short term goals with financial reporting system built for quarterly basis (). This cultural dimension also created problem for the Daimler Chrysler merger.

Lastly, the indulgence (IND) score is much higher for the USA (68) as compared to Germany (40). This cultural dimension addresses the attitude of people towards the indulgence and practice of restriction on life. According to the scores, the Americans prefer to take life in a funfilled way and prefer to live freely and easily and therefore enjoying life. On the other hand, the Germans prefer to practice restriction on their lives and therefore follow rules and regulations. This attitude is reflected in their way of working too. Thus, in the merger of Daimler and Chrysler, it can be seen that, the employees of Daimler were more rigid about following rules in the business, while the American employees of Chrysler preferred to follow an easy and flexible way of working that would not impose restrictions in the way of living.

Hence, following this analysis, it can be said that, according to the Hofstede model of national culture and its scores of the six cultural dimensions for the two nations, there were many cultural differences between the German and the American automobile companies. These differences could not be sorted out and had led to fall of one of the biggest cross-border mergers.

Role of individual behaviour in enhancing and improving the chances of success in cross border business development

The success of cross border businesses depends on many internal as well as external factors. The external factors include the social, economic and political conditions of the nations (Deresky 2017). On the other hand, as the name suggests, the internal factors are those that can influence the organizational culture and motivate the employees to put the best productivity to achieve the goals of the cross border business (Adekola and Sergi 2016). As stated by Gomes et al. (2013), among the internal factors, the skills of the managers and leaders are very significant in achieving success of the cross border businesses. The human resources of the merger companies must be motivated and inspired by the managers, senior executives and technicians in the most appropriate manner and policies should be made in such a way so that the issues in cultural differences can be mitigated.

Cross cultural training is very essential in such business events. The management needs to develop some skills in their portfolio to bring success to the cross border mergers and acquisitions and those are improvement in communication, understanding the cultural aspects, thorough knowledge about the cultural diversity and particular cultural aspects of the alliance company following its national cultures, openness, systemic thinking, empathy, self-confidence, creativity (Ahammad et al. 2016). These are behavioural changes that need to be adopted by the executives, managers and technicians to bring success in any cross border business development.

Through the training programs, the managers and the executives should enhance their skills and knowledge on cultural awareness and competency. It helps in learning about the cultures, their similarities and differences and reduces their preferences for stereotypes. The executives should not only gain knowledge about the cultures and differences, but they should also increase their level of competencies for working in different locations or countries (Stahl and Tung 2015).

The managers in any cross border business should enhance their capability of openness, that is, no matter what culture they belong to, they must be able to be open and accept a different culture in the workplace and be respectful towards that. Briscoe, Tarique and Schuler (2012) highlight that with a good knowledge about the cultures and the factors of diversities, the managers are expected to be more tolerant and open about a different culture in the workplace and business relations and that would help in establishing a successful business relationship.

Empathy is another aspect that the managers should develop in cross border business developments. They should feel the problems and challenges faced by the other subordinates while working in such businesses. This will help in understanding the employees’ problems and formulate the strategies accordingly (Patel, Pieper and Hair Jr 2012). This behavioural aspect of the managers will also help in establishing a healthy, cooperative and harmonious working environment within the organizations.

Business training should be given to enable the executives and managers to reap the benefits of the cultural diversities. They should learn about the way of businesses are done in respective countries and must be able to adapt to the new system for exploiting the business opportunities of that country. It would also help them to understand the shared goals of the cross border alliances and be respectful towards each other and provide necessary support for the success of the venture (Deresky 2017).

Understanding of the national culture helps in increasing the efficiency of the people as it helps in improving the skills required for working successfully in a cross culture and cross border business. Competency, followed by some international companies as a model for individual behaviour is very much relevant in these situations. Individual competencies include technical competencies and behavioural competencies and organizational competencies include decision making abilities, risk taking abilities, problem solving abilities, innovation, integrity, team work and leadership, and these are influenced by the individual competencies (Penbek, Yurdakul ?ahin and Cerit 2012). These indicate that if individual competencies can be enhanced by training, education and development, which would have a positive impact on the cross border businesses.

From the above report, it can be said that, cultural diversity is one of the biggest challenges for the cross border businesses. According to the Hofstede model of national culture, he listed 6 dimensions of cultures, based on which, the countries of the world are given a score. The scores indicate the position of the country in terms of the cultural dimensions and against other countries. However, there are some criticisms of the model, where the authors have either expanded the Hofstede’s model by including more and detailed cultural dimensions, or they have provided a new aspect of measuring the cultural aspects of a country and the way it influences the business operations of cross border alliances. The example of Daimler and Chrysler merger showed how the cultural diversity can have a significant negative impact on the deal. The cultural clashes had led to the breakdown of the business deal. Within a decade of the partnership, the business deal was broken as Daimler sold off Chrysler to Cerberus Capital Management. The huge difference in German and American cultures had resulted in the failure of this merger. From this, it can be inferred that, competencies of the managers and senior executives are very crucial, as that can help in establishing a cordial working relationship and coordination among the business units located in different regions. The managers and the executives must enhance their skills and competencies through education and training to face the challenges of the cross border alliances. They should be able to understand the cultural differences and handle those accordingly by applying their knowledge and skills. They should increase their knowledge about cultural diversities, and enhance the behavioral aspects such as, empathy, openness, confidence, tolerance and understand the difference in the way of businesses to establish a successful cross border business development.

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