Improve efficiency in your HR capital:

managing people across cultures is now more urgent than ever

Huib Wursten, Fernando Lanzer , Tom Fadrhonc

Executive summary

In times like these it is more important than

ever to get the most out of our investment in HR
Capital. Taking different cultural backgrounds
into account will increase motivation, reduce
turnover, and help keep your best people.
Managers can be more effective in coping with
the global economic crisis if they simplify the
way they manage their staff, taking into
account the different cultural backgrounds of
their team members and the different cultures
in which their business operates. Global
practices need to be adapted to local cultural
values to increase efficiency.

Managers all over the world are in for a tough time

during the global economys first truly global
downturn. Managing in a global marketplace is
already quite a challenge, managing during a global
downturn even more so. For the first time we are
experiencing the true interdependence of markets all
over the world, in every sense. The crisis in the
financial markets spread out globally in a matter of
days. It spilled into the consumer markets, the labour
markets, the production cycles of just about every
industry you can think of, and is affecting everyone
from Arkansas to Abu Dhabi.
Operating in global interdependent markets means
operating in a series of hugely diverse landscapes.
(see Cummings, Tom & Keen, Jim: Leadership
Landscapes, Palgrave, 2007). Globalization does not
equal standardization, but rather selling to and
managing very different people. As Peter Drucker
said, what managers do worldwide is about the
same, but how they do it is different from culture to
culture. (Drucker, Peter: The Essential Drucker,
Harper Business, 2003).

What does that mean for Human Resources

Management, and how is it different in tough
economic times? When all costs are scrutinized over
and over again, how do we improve efficiency in the
biggest and most important cost of all, our Human
Resource capital? Naturally we can claim that people
will be an abundant resource in times of high
unemployment, but we know better. Good people are
scarce. Period.
Finding, recruiting, inspiring, coaching and keeping
great people is an art. And now this is more
important than ever. We can no longer afford to roll
out head office rules and habits across all markets
where we do business and expect to have the
greatest contribution from employees everywhere.
No doubt we do adjust to local customs in a
superficial way. But do we really make the best
impact with all our different employees? Do we
manage and motivate on their terms, in their beliefs
of what is right and wrong? We can gain hugely from
the contribution we get from our Human Resources.
By managing and motivating differently from culture
to culture.
Let us look at how we can manage very different
people, from different cultures, all over the world,
and get the global economy going again by being
more effective and more efficient.

Managing people is not easy, but

it is simple
Many things in life are difficult to do, but they are
actually simple to figure out. We have a tendency to
over-complicate things. It makes us feel proud when
we can solve an apparently complex issue. So we tend
to take simple issues and describe them in a
complicated way. By doing this, we can pose as
experts when we solve seemingly unsolvable
problems. Thus lies the challenge of keeping simple
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things simple. We must avoid the temptation to

complicate them.
Managing people is actually about carrying out
several steps in a process and repeating them over
and over again, as John Humble set forth in his
seminal
work
Managing
By
Objectives
(Management Publications Ltd, 1972) Hopefully,
getting better at it each time you repeat the
sequence. We learn from experience, we adapt and
improve continuously. In this article we refer to the
five steps, gathered in an acronym: R-STAR.
These are the R-STAR steps in the cycle of managing
people:
1.
Recruiting can be subdivided into many
interlinked aspects, highly sophisticated when talking
about a multinational organization operating in 20
countries or more. But it boils down to getting the
people I need in order to get the job done.
2.
Setting targets can be dressed up as
sophisticated processes such as Strategic Planning,
and it can be as simple as setting short-term goals. It
all boils down to does everybody know what theyre
supposed to do?, does everybody know what is
expected of them?
3.
Training implies that you need to teach
somebody how to do what needs to be done. If the
people already know how to do it, you can skip it and
go to the next step. In a typical modern organization,
people prefer to talk about Learning, and Career
Development, and other buzz words.
4.
Appraising involves correcting direction, by
providing feedback in order to improve performance.
A common mistake made by organizations is to think
of appraisal as a way of judging people as good or
bad. That is not the purpose of performance
appraisal. The purpose of any appraisal scheme is
essentially to improve performance. . It can be
dressed up, or it can be as simple as having an

informal conversation. The more often it can be done,

the better.
5.
Rewarding is about providing consequences,
good or bad, to reinforce desired behaviour and avoid
repetition of undesired behaviour. It can be done in
financial terms, such as merit increases, bonuses,
incentive schemes, profit sharing, and it can be nonfinancial recognition, such as employee of the
month, deal of the year contests, Presidents
Award, or just being praised (in public or in private).
It also involves negative consequences to avoid
repetition of undesired behaviour, including written
warnings, suspensions, admonishments, demotions,
transfers to a less rewarding role, or firing. The
important thing here, so often overlooked, is that
people will do what they are rewarded for, and not
necessarily what they are asked to do. Its amazing
how often companies ask people to do one thing
(such as cooperate with colleagues and cross-sell) and
yet reward them for something different (such as
selling their own products and managing the costs of
their own unit). When Reward is not aligned with
the other components of the cycle or does not fit with
the whole picture, it can lead to the failure of the
organization.
All this is easier said then done. Especially when we
get into applying the R-STAR cycle across different
cultures.

The culture thing - the R-STAR

cycle from a cultural perspective
Managing people is difficult enough (albeit simple)
when everybody shares a common culture. With this
we mean: everyone shares a common general
understanding of what is right and what is
wrong, what is accepted behaviour and what is
considered inappropriate or unacceptable. When
people in the team have different cultural
backgrounds, or the managers background differs

from the teams, that is when serious

misunderstandings can arise. By the way, managing
across cultures and dealing with diversity is not
something applicable to big companies only. Every
company, no matter how small, may be a
multinational, simply because its customers and its
current and future employees are multi national.
Before we start discussing this diversity issue into
detail, lets go back to the need to reduce complexity.
Is diversity endless? And how do I know what
elements
of
diversity
are
superficial
or
circumstantial? Happily, extensive research has been
done by Geert Hofstede and others comparing
cultures. (Hofstede, Geert: Cultures Consequences,
Sage, 2003) In his research he found 5 fundamental
value dimensions that are used in order to explain the
cultural diversity in the world. The 5 Dimensional
model is the most validated by research, perhaps the
only model based on rigorous culture research (rather
than on somebodys opinion).
The five dimensions are:
1.
Power Distance (PDI) the degree to which
people accept and expect that power is distributed
unevenly within a group or society
2.
Individualism (IDV) the degree to which
taking responsibility for yourself is more valued
rather than belonging to a group, who will look after
their people in exchange for loyalty
3.
Masculinity (MAS) the degree to which
people value performance and status deriving from it,
rather than quality of life and caring for others
4.
Uncertainty Avoidance (UAI) the degree to
which people develop mechanisms to avoid
uncertainty
5.
Long-Term Orientation (LTO) the degree to
which people value long-term goals and have a
pragmatic approach, rather than being normative
and short-term oriented.
Those who would like to go deeper into the model,
and how the dimensions relate to one another in
different cultures, are advised to read one of Prof.
Hofstedes books or assess the consulting site
www.itim.org.
For the purpose of this article, we just want to point
out the need to take cultural differences into account
and to customize your approach to managing people
according to the culture you are operating in. The 5-D

model is the best way of understanding different

cultures and adjusting your actions to be more
effective. Ignoring cultural differences is one of the
biggest mistakes a manager can make. And yet it is so
easy to avoid making that mistake, by using the 5-D
model.
Once again, what is simple is also difficult. For some
reason, many managers prefer highly sophisticated
models, rather than the simple 5-D Model. And many
managers prefer to pretend that culture is not that
relevant. They think that managing people is done (or
should be) the same way all over the world. For such
managers, recovery from business downturns is likely
to take much longer.

It starts already in Recruiting. What defines a good

candidate? In Individualistic societies, good
candidates are people who are outspoken and
express strong opinions. In Collectivist societies, good
candidates are people who are relatively modest and
who demonstrate they are well connected. In
Masculine societies, people who express selfconfidence and a can-do attitude. In a Feminine
society, people who are modest, who avoid standing
out and who ask intelligent questions without
appearing too critical.
You can quickly see that if the recruiter comes from a
different background than the candidate is coming
from, big mistakes can be made by foregoing
excellent candidates who do not match the culturally
biased expectations of the recruiter. To position
yourself as an employer in the US (high on the
Masculinity dimension) is done very differently than
in the Netherlands and the Scandinavian countries
(low on Masculinity). You need to understand the
impact of culture, both on the recruiters and on the
candidates you are considering.
Setting targets can be a very different exercise in the
Netherlands and in Belgium, two bordering countries
which share very little besides a mutual border.
Failure to recognize such significant cultural
differences between neighbouring countries has led
to many acquisition failures, most notably and
recently the take-over of ABN AMRO by Fortis, which
resulted in the virtual bankruptcy of Fortis and the
nationalization of both by the Dutch and Belgian
governments.
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In low power distance cultures like the USA, the UK,

the Netherlands , Scandinavia and Germany, targets
are negotiated, rather than set by senior managers
like in Belgium, France and Italy (high power distance
cultures). But in the Netherlands and in Scandinavia
the targets have a tendency to be re-negotiated and
adjusted due to increasing insight. In Masculine
societies like the UK and the US this is seen as
unacceptable. Targets are supposed to be
operationalised and challenging to be overcome by
motivated staff. In Belgium and France negotiating
targets is de-motivating. In Scandinavia and the
Netherlands, targets set by senior managers are
perceived to be an abuse of authority (and therefore,
de-motivating). Setting targets or delegating in
countries other than your own needs to be adapted to
the culture in question, otherwise this quickly
becomes a mess.
Lets consider Training (and all its derived
formulations, as previously mentioned). In societies
with a high Power Distance, learning happens very
much centred on the instructor. Pupils tend to
participate less in debate, avoid challenging the
instructor, and expect the instructor to tell them how
to do things. In societies with low Power Distance, on
the other hand, learning experiences should be more
interactive and learner-centric, with stimulating
debates and case studies.
The expectations around Career Development and
Talent Management are very different in AngloAmerican companies when compared to LatinAmerican firms. In collectivist (Latin-American)
cultures people expect in exchange for their loyalty a
boss behaving like the father (or mother) in the
family: taking care of them. So what happens when
an American company tries to implement its global
Talent Management program in Guatemala, exactly
the same way as it was done in Chicago? It wont
happen as smoothly, to say the least It might

actually backfire and cause a lot of people to leave

the company, having the exact opposite effect from
what was originally intended. This does not mean
that you should not have Talent Management
programs in Guatemala. It means that they need to
be adapted and positioned in a customized way, in
order to be effective. Otherwise, they are counterproductive. For instance: development opportunities
should be offered to all staff, and identified talent
(according to clear criteria) should be offered
special development programs.
Appraisal is another clear example of how the
extension of Anglo-Saxon models to different
cultures can go completely wrong. Most of the
existing management literature is actually written in
the US and in the UK, a product of the cultures of
these two countries. As a result of their low Power
Distance and in combination with high individualism
they promote the idea of providing frank, direct
feedback, as the right way of improving
performance anywhere on the planet. This notion
fails to acknowledge that in Collectivistic cultures
with high Power Distance (which are present in much
more countries in the world) such procedures are
seen as disgraceful and disrespectful. Providing
feedback without being perceived as shamefully rude
and insensitive and at the same time being able to
engage people to improve performance, needs a
different approach in different countries.
Another example of the difficulty in appraisal is that
in Anglo-Saxon cultures appraisal is done by checking
if employees reached their fixed targets. The focus is
therefore on output. In Scandinavia and in The
Netherlands, on the other hand, not output but
outcome tends to be measured. It is much more
common that the manager takes into account what
has been achieved and not necessarily what has been
set as a target beforehand. A very big international
consultancy company once had the problem that they

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could not identify potential partners in Sweden. They

discovered in the cultural analyses that they failed to
recognize the outcome driven results of the
Swedish consultants.
Another potential problem is fit. Many brilliant
people get fired, people who on paper were real
champions or who had a good track record. But they
ended up being fired because they did not fit. Often
because of a national cultural misfit, or sometimes
because of an organizational culture misfit. The result
is enormously costly, i.e. the time the function is
open, having to get/train another person, the
severance pay, the fee for the Executive Search
agency, each situation can easily cost thousands of
euros. So the question is how do you make sure the
fit is right from the start? It goes back to the
Recruiting step in the cycle, and to putting your
appraisal in perspective in terms of your own culture
bias.
Reward, the component that can often ruin
everything else, and often does, is totally culturesensitive. The cash-oriented approach of individual
performance-related bonuses hailed in the US and UK
as the only way to get people going (pay-forperformance schemes are promoted globally from an
Anglo-Saxon perspective), falls on its face when it
reaches countries with a more Feminine culture, in
which greater responsibility, larger span of control,
wider territories, are perceived to be more relevant
than cash rewards (which are considered petty,
mercantilist, reductionist and narrow-minded).
Wouldnt it be great if we could just solve people
motivation issues by throwing money at them,
anywhere in the world? If it works in the US and the
UK, why wouldnt it work everywhere? Well,
adaptation is required, again. Bonus plans will work
in other cultures, but they need to be tied to other
criteria. In some cultures, team incentives work much
better than individual rewards. Managers need to
find out more about the culture they will be
operating in, before assuming that what works well
in Place A has got to work equally well in Place B.

The Global Solution

There isnt one. Or rather there are many, different
solutions for different cultures. One can manage
people by applying the R-STAR cycle anywhere in the
world, but in each culture the cycle needs to be
adapted. Different tools are effective in different
cultures, for each step in the cycle. In order to be
more effective, managers need to start by finding out
more about the values of the culture (or cultures) in
which they will be operating. Where do the people in
the team come from? What is their cultural
background? Doing research and preparing
accordingly is of the essence.
A true success story involves a manager who turned
around a manufacturing plant in Eastern Europe from
loss making to profit, simply by applying his scarce
knowledge of Hofstedes Five Dimensions of Culture
model, putting it into practice. His company thought
he was a miracle maker and promptly transferred
him to Mexico, to deal with another problem-ridden
plant. Voil! New miracle. The manager again
applied his knowledge of the model (different culture,
different approach) and suddenly the business was
viable. In both cases, his predecessors were good
managers, but they only knew how to operate in the
environment they were coming from. This hero
simply took the time to read about the culture he was
coming into and adapted his approach in a way that
made him understood and appreciated by the team
he was leading. Everybody won.
The same can be done in any company, with any
team (present and future). In times of stress, such as
periods of economic downturn, people naturally turn
to regression of behaviours which worked for them in
the past. They hide under the bed because that
worked for them when they were kids. They repeat
whatever got them a promotion five years ago.
Actually, such behaviour should be avoided. It would
be counterproductive.
Rather, managers should try to look at the situation
theyre facing, with fresh eyes. What is the culture
background that underlies the operation? What is the
managers own culture background? Do these things
match? Does the manager understand that he/she
has been taught a right way to manage which is
completely biased by his/her own culture? There is no
right way to manage per se, only ways that are

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effective in some cultures and not effective in others.

Managers will do well to begin by understanding
their own culture, their own culture bias. That will
make it easier to understand other cultures and other
biases, and to bridge the gaps. If we all had a better
understanding of each others cultures and of the
impact this has on how business happens around the
world, we might be closer to effectiveness in global
markets.

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