Hofstede Approach to Measuring Cultural Differences

Discuss about the International Human Resource Management for Australian Technology.

The present report provides an overview on the cultural issues faced by the subsidiaries of the Australian technology enterprise after expanding its business internationally. Enterprise culture mainly encompasses behaviors as well as values which contribute to unique psychological as well as social environment of a business. The host nation culture strongly affects the enterprise performance that engages in the international business. There are different aspects of culture that is central for conducting international business involving religion, language, education and social structure. Although the organizations expanding internationally bring them huge opportunities in business, it faces several challenges relating to enterprise culture. Enterprise Culture mainly influences the business operation in three main areas that involves- communication, organizational hierarchy and etiquette. This study highlights on the situation where the subsidiaries of Australian enterprise’s’ HR (Human Resource) policy of rewarding outstanding performance by employees have negative effect on the team performance and cohesion (Muqaj, 2016). The cultural dimensions of Hofstede and the issues faced by this enterprise are also discussed in this study. In this paper, this scenario has been related with cultural dimensions of Hofstede.

Home – Hofstede Insights (2018) opines that multinational enterprises can be effective if they take into account domestic impact of nations they are currently operating and the existing cultural boundaries. The Hofstede approach of the cultural dimensions is one of the valuable measurements of the cultural differences, which several entities utilize while deciding to expand the business internationally and take on these global endeavors. In addition to this,  Hofstede’s theory also aids in smooth transition of organization into the foreign lands. However, by utilizing this theory, the Human Resource managers as well as policy innovators have the ability to identify the appropriate HR policies for local and base nation’s employees. It has been cited by, Taras, Steel & Kirkman (2012) that, the significance of adapting to the corporate as well as international cultural differences has been immense.

Hofstede proposed that both regional as well as national factors have huge contribution to the enterprise culture and thus it eventually affects the employee’s behaviors and attitudes in the enterprise. Hofstede states that there are mainly five factors that affect the enterprise culture. These factors are explained below:

Power distance relates to difference in work cultures based on the power delegated to the workers. There are few enterprises where the power is equally distributed among all employees irrespective of their various designations. However, every individual in the enterprise hierarchy enjoys equal benefits as well as rights. On the contrary, there are some enterprises where the superiors enjoy special treatment and other team leaders are allotted more responsibilities in comparison with other team members.

Factors Affecting Enterprise Culture

Australia and New Zealand scores in this dimension is 36 and 22 respectively, which is very low as compared to Indonesia scoring 78. This reflects that within Australian and New Zealand enterprise, hierarchy is well established and managers mainly rely on the employees and thus all employees are given equal rights. But Indonesia scoring high means that unequal right exists between non power and power holders and managers are directive.

There are few enterprises that mainly rely on the team work. In this situation, the employees work together with common interest (Stahl, Björkman & Morris, 2012). These entities basically believe that output becomes larger when employees exchange their own ideas in order to bring about creative ideas. But there are some enterprises that follow culture where the individuals do not work as single unit and thus prefer to work individually.

Australia’s score in this dimension is 90 which is highest with respect to New Zealand and Indonesia scoring 79 and 14 respectively. This means that New Zealand and Australia has individualist culture in which employees are self reliant while Indonesia has collectivist culture.

This uncertainty avoidance index relates to the culture where the workers know the way to respond to unforeseen situations (Minkov & Hofstede, 2012). It mainly deals with tolerance level of workers in uncomfortable as well as comfortable situations. Moreover, this enterprise tries to prepare their workers to face difficult situations.

Indonesia scores low in this dimension which is 48 in comparison with Australia and New Zealand scoring 48 and 49. This means that Indonesia has low preference to avoid uncertainty but the other two nations do not avoid uncertainty.

This index relates to the impact of differences in value of female and male on the enterprise culture. Still there are some enterprises where male workers dominate the female workers and hence follow different rules or policies in comparison with other enterprise where female counterparts dominate the enterprise. In addition, the female workers are not assigned all kinds of task as that of males.

Australia scores high in this dimension scoring 61 with respect to New Zealand and Indonesia scoring 58 and 46. This highlights that Australia and New Zealand have male dominated culture but Indonesia does not have so.

There are few enterprises that concentrate on building relationship with their employees for long term. In such enterprises, individuals have steady approach as well as makes huge effort for living up to the expectations of management (Home – Hofstede Insights,. 2018). However, the workers do not look for short term objective and thereby gets attached to enterprise. On the other hand, there are few enterprises where the employees are highly concerned with their image as well as position. Therefore, these employees basically focus on targets and better opportunity.

Challenges Faced by Multinational Enterprises in Managing Cultural Diversity

 Australia and New Zealand scores low in this dimension with respect to Indonesia, which means that both these countries have normative culture but Indonesia has pragmatic culture.

The HR management of this organization has faced several complex issues relating to development of management such as – recruitment of skilled employee, adoption of staffing policy, implementation of rewards and remuneration system and so on (Hollenbeck & Jamieson, 2015). These issues mainly occurred owing to difference between legal systems, cultures, and the economic systems in this nation such as – difference between compensation types, labor laws and so on. In addition to this, another issue that the HRM of this enterprise faces while operating in Indonesia is properly understanding as well as maintaining of cultural diversity. Moreover, as the laws in Indonesia tend to be complex, this company faces several issues relating to this and hence it becomes difficult for them to operate in this country. The shortcomings of education system in this nation also create problems for the HRM of this enterprise. In fact, this enterprise had to invest huge amount of money in training and development of employees owing to shortage of skills in this nation (Briscoe, Tarique & Schuler 2012). The hierarchical mindset of people in this country also adversely influences the work environment of this enterprise. This Australian company also faces issues regarding understanding of the Indonesian views about culture. Apart from these issues, this enterprise faced problems regarding absenteeism, high employee’s turnover and productivity. As a result, the financial performance of the company also declined over the past few years.

The present scenario highlights that adoption of same Australia’s HR policies and practices in the Indonesian subsidiary of this enterprise has been ineffective. The varied cultural dynamics usually dominates the Indonesian enterprise culture. Besides this, power as well as hierarchy mainly influences the business culture of this nation. The Hierarchy principles of this country are similar to most of the Asian countries. The Hofstede cultural dimension reflects that Indonesia has high value in power distance with respect to that of Australia and New Zealand (Home – Hofstede Insights,. 2018). This signifies that the employees are not considered as equal in the enterprise operating in Indonesia. In other words, some of the employees have less power while some other has more power due to these Hierarchy principles. On the contrary, the enterprises operating in Australia and New Zealand do not face this issue. The managers are dependent on their team members and thus the employees are considered as equal. Additionally, it has been reflected from other dimensions of Hofstede approach that Indonesian culture also varies from the other two countries. As the Indonesian business is dominated by females while Australian and New Zealand enterprises are dominated by males, the foreign companies operating in Indonesia also faces huge problem regarding this. However, the HR policies and practices of an enterprise operating in Australia and New Zealand are generally different from that of Indonesian enterprise. In this case, it has been seen that the HR managers of this enterprise has adopted same HR policies and practices of Australia in NewZealand and Indonesia.

Recommendations

As the enterprise culture in New Zealand is the same as that of Australia, adoption of same HR policies does not create any issues within the New Zealand subsidiary (Brewster, 2017). On the contrary, Indonesian culture being different from that of Australia, this subsidiary faces several problems owing to adoption of same HR policies and practices. However, the HR policy of rewarding outstanding performance of employees appears to be having adverse impact on team performance and cohesion (Belak & Milfelner, 2012). The main reason behind this problem is high power distance culture value in Indonesian enterprise. The policy of giving reward to employees based on performance signifies that the employees are provided equal rights. Therefore, implementation of this policy in Indonesian subsidiary creates problems since their business culture do not support equal rights among employees (Registration, 2012). Thus, it is evident from this fact that the foreign enterprise expanding its business in this nation often faces problems regarding cultural diversity.

For example, Nestle is one of the biggest food and beverages organization that have its subsidiary in Indonesia. While operating in Indonesia, Nestle faces several problems regarding this nation’s culture. It has been evident from the recent studies that labor conditions in Indonesia have adversely affected Nestlé’s supply chain operations.  For this reason, this enterprise has committed to conduct particular training with the industry partners which reaches beyond its direct suppliers and also work with other enterprises for engaging with smallholders to implement proper practices. However, Nestle management has changed its HR policies in order to improve their business operations in this nation.

The following recommendations will help this enterprise to mitigate these issues faced by this enterprise-

• As Indonesian business culture depends on hierarchical concept, it is necessary for this enterprise to adopt HR policy of referring the employees with utter respect rather than giving name recognition (Jackson, Schuler & Jiang, 2014)
• As Indonesian usually likes to build strong bonding with the people, it is suggested that the HR managers must adopt a new policy of team bonding in their operations.
• It is suggested that the managers must avoid agreements with the employees during their first contact (Vance & Paik, 2014).
• Local representation service will also facilitate to navigate better culture and thus it will help to avoid bureaucracy.
• The enterprise must also understand the present culture of this nation before recruiting any employee.

Conclusion

From the above study, it can be concluded that proper navigation of business culture will help a company to successfully expand its business in that nation. Moreover, proper understanding of employee’s behavior and attitude will also help the enterprise to implement HR policies and practices. However, effective adoption of HR policies and practices will help to improve business culture and increase total productivity.

References

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Taras, V., Steel, P., & Kirkman, B. L. (2012). Improving national cultural indices using a longitudinal meta-analysis of Hofstede’s dimensions. Journal of World Business, 47(3), 329-341.

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